Simple Payback

*T*his example is a calculation of the simple payback (SPB), based on the examples in Lighting Energy Savings and Heating Load Analysis and Cooling.

Your SPB is the time, in years, it will take for your savings (in present value) to equal the cost of the initial installation (in present value). The following formulas do not account for interest rates.

A. Compute your SPB using the following formula:

(Cost of Installed Equipment – Deferred Maintenance – Rebates)/(Total Energy Dollar Savings per Year) = SPB

ExampleCosts to replace a T12 lamp magnetic ballast system with a T8 lamp electronic ballast system:

New fixtures (includes fixture, two T8 lamps, and electronic ballast) cost $30 per fixture.

Installation costs $10 per fixture.

Deferred cost of cleaning existing fixtures is $5 per fixture.

MTDC receives its power from The Montana Power Company, which offers a one–time $8 per fixture rebate when replacing magnetic–ballasted T12 lamps with electronic-ballasted T8 lamps.

Total project cost for 100 fixtures = ($30 + $10 – $5 – $8)(100 fixtures)

= $2,700

Total Energy Dollar Savings per Year = Lighting Energy Savings + Cooling Savings – Heating Costs

= $1,459 + $120 – $262

= $1,317 per year

SPB = $2,700/($1,317 per year) = 2.05 years

ConclusionsRetrofitting an existing lighting system that uses F40T12 lamps and magnetic ballasts with F32T8 lamps and electronic ballasts can provide a very attractive payback.