ROI & PAYBACK GUIDE

A Savings Number Is Only as Useful as the Assumptions Behind It.

Use a disciplined chain from inputs and assumptions through calculation, economics, context, and decision.

Framework

  1. Inputs
  2. Assumptions
  3. Calculation
  4. Economics
  5. Context
  6. Decision

Name the Number for What It Actually Measures.

Use precise terminology.

  • Annual kWh Reduction
  • Annual Energy Cost Reduction
  • Project Cost
  • Potential / User Entered Incentive
  • Net Project Investment
  • Simple Payback

Baseline and Evidence

  • Baseline

    The existing condition must be described well enough to support the calculation.

  • Evidence

    Distinguish Observed, Customer Provided, Documented, Assumed, Estimated, and Verified information.

kWh vs Dollars

Energy reduction and energy-cost reduction are different quantities.

Annual kWh Reduction

A quantity of energy.

Annual Energy Cost Reduction

A quantity of money.

Connected Load and Hours

Fixture count, system wattage, and annual operating hours drive the basic lighting-energy model.

Electricity Rate

The calculator uses the applicable rate you enter.

Project Cost and Incentive

Commercial Lighting Incentives Guide

Simple Payback

Calculated only when the approved edge conditions are satisfied.

What Payback Does Not Tell You

Simple payback does not by itself model any of the following, or every capital consideration.

  • Financing
  • Discount rates
  • Escalation
  • Taxes
  • Lifecycle replacement
  • Demand charges
  • Maintenance
  • Controls
  • HVAC interaction
  • Carbon

Precision About What Is Being Measured

  • ROI Is Distinct

    ROI is not interchangeable with simple payback. A payback calculation is not labelled as ROI.

  • Cash Flow and First-Year ROI

    Used only when specifically defined with appropriate inputs. They are not inferred from the basic calculator.

  • Other Savings Categories

    Demand, maintenance, controls, HVAC interaction, carbon, financing, and lifecycle economics require separate evidence and methodology if used.

Reference Calculator Scenario

A worked example, shown so the arithmetic is inspectable. These are illustrative inputs, not a result for any building.

Quantity Value
Inputs
Fixture count 100
Existing wattage 100 W per fixture
Proposed wattage 50 W per fixture
Hours per day 10
Days per week 5
Weeks per year 52
Electricity rate $0.10 per kWh
Project cost $10,000
Incentive entered $2,000
Results
Annual operating hours 2,600
Connected load 10 kW existing / 5 kW proposed
Annual energy 26,000 kWh existing / 13,000 kWh proposed
Annual kWh reduction 13,000 kWh
Reduction 50%
Annual energy cost reduction $1,300
Net project investment $8,000
Simple payback About 6.15 years
Open the calculator

Sensitivity

Changing any of these can materially change the result.

  • Runtime
  • Rate
  • Wattage
  • Project cost
  • Incentive

Estimate vs Verification

Decision View

Place the calculation inside the broader building decision.

  1. Existing
  2. Proposed
  3. Impact
  4. Decision

Portfolio Context

Comparable assumptions can support portfolio prioritization, but building differences remain important.

Portfolio Planning

Questions Before Relying on the Number

  1. What is the baseline?

  2. What is measured?

  3. What is assumed?

  4. What is the runtime source?

  5. What rate is used?

  6. What project cost is included?

  7. Is the incentive potential or approved?

  8. What savings categories are excluded?

  9. What evidence supports the wattages?

  10. Are controls separate?

  11. Is the result estimated or verified?

  12. What decision is the number intended to support?

How to Use This Guide

This is educational guidance. It is not financial, tax, investment, accounting, or legal advice. It contains no hidden savings, no default utility rate, no square-foot shortcut, and no generic reduction percentage.

Calculator methodology and disclaimer

Name the Number for What It Actually Measures.

Open the Calculator Request a Building Performance Review