Payback Years

What do the Payback years represent in the cove.tool Optimization

Patrick Chopson avatar
Written by Patrick Chopson
Updated over a week ago

One of the categories in the Optimization result Graph is the Payback Years column. Using payback years can be incredibly useful category to compare one bundle package over another. This especially comes in handy when using it as a ROI (Return on investment) talking point to a client/ building owner, as it best illustrates the benefit of running a building simulation to save big on energy and cost.

What is Payback Years?
Payback Years is the amount of time it takes [in years] for the cost premium [Additional $ as compared to the base minimum] to equal the energy cost savings. It is calculated by taking the cost premium [in U$D] divided by how much you save every year on energy costs. cove.tool calculates the Simple Payback. For Example;

  • If a building has a cost premium of U$D 100,000.00 and the energy savings reduce the annual energy bills in U$D 10,000.00 per year; then you will have paid back your cost premium in 10 years

  • U$D 100,000.00 / U$D 10,000.00 per year = 10 years [payback period]

The simple payback period begins at substantial-completion and ends when you reach the Payback Year end-target. After this point, energy cost savings will continue to stack up and building owners will have made back all the money initially invested on the building energy bundle and continue to save because of their early date-driven investment.

50 year cutoff period
Every optimization bundle is calculated, however in order to show only the best bundle options which have noticeable benefit over the baseline package, some parameters are set to eliminate the lowest-performing bundle options. One such parameter is the 50 year cutoff period. This rule automatically eliminates from the possible tens-of-thousands of bundles, any options which have a Payback Period greater than 50 years. Since the average building life is at 50 years, a payback year higher than that is not considered "cost optimal".

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