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The
payback period is the most commonly used measure to assess the cost
effectiveness of incorporating energy efficiency into rehabilitation
decisions.
When
determining the payback period of an energy efficiency method, the
following information is helpful:
- Purchase
price of the measure;
-
Installation cost of the measure;
-
Cost of energy (e.g. residential electric rate in cents per
kilowatt hour); and
-
Amount of energy saved by using the energy efficiency measure.
Specifically,
the payback period is the amount of time it takes for an
energy efficiency measure's energy cost savings to cover its purchase,
installation, and operating costs.
If
an energy efficiency measure will not result in enough energy cost
savings to pay for its purchase, installation, and operating cost
within the life of the measure, it should not be installed. Operating
costs may include periodic replacement of parts, e.g. filters or
belts. To estimate a simple payback period for a particular energy
measure, a payback
period calculation can be used. However, precise payback
calculations for energy efficiency measures can be obtained using
a computer and the specialized software
packages discussed later in this module.
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