Cooling System ROI Calculator

Example Data

Formula Used

• Net upfront cost = (equipment + installation + engineering) − incentives.
• Baseline energy cost (year y) = baseline kWh × price × (1 + escalation)^(y−1).
• Effective savings (year y) = savings% × (1 − degradation)^(y−1).
• Energy savings (year y) = baseline cost − baseline cost × (1 − effective savings).
• Net cashflow (year y) = energy savings + maintenance savings + other benefits (plus residual at final year).
• ROI = (total benefits − net upfront) ÷ net upfront.
• NPV = Σ cashflow_t ÷ (1 + discount rate)^t.
• IRR is the rate where NPV = 0 (solved numerically).
• Payback is the first year cumulative cashflows reach zero.

How to Use This Calculator

1. Enter total upgrade costs (equipment, installation, and engineering).
2. Enter any rebates or incentives applied upfront.
3. Add your baseline annual cooling energy and electricity price.
4. Set expected savings, energy price escalation, and savings degradation.
5. Adjust maintenance costs and other annual benefits (can be negative).
6. Choose project life and discount rate, then press Calculate.
7. Review ROI, payback, NPV, IRR, and the year-by-year table. Use downloads for reporting.

Energy Baseline And Opportunity

Cooling loads are often a top driver of operating spend in commercial buildings and process sites. Start by quantifying baseline annual cooling electricity in kWh and multiplying by the blended tariff. For example, 180,000 kWh at 0.18 per kWh equals 32,400 in year one energy cost, before escalation.

Investment Structure And Assumptions

Upfront cost combines equipment, installation, and engineering, then subtracts incentives to produce net upfront cost. The model allows price escalation, savings degradation, and a start delay to reflect commissioning months. Maintenance inputs capture service contracts and parts, and other annual benefit can include downtime avoidance.

Cashflow Mechanics And Payback

Annual energy savings are calculated as baseline cost minus post-upgrade cost, where post-upgrade cost equals baseline cost times (1 minus effective savings). Effective savings can taper each year using the degradation rate. Net cashflow adds maintenance savings and other benefits, then payback is the first year cumulative cashflow reaches zero.

Discounted Metrics For Decision Makers

To compare projects with different timing, the calculator discounts each yearly cashflow using the discount rate to compute net present value. A positive NPV indicates value creation at the chosen hurdle rate, while discounted payback shows when the investment recovers in present-value terms. The internal rate of return is estimated numerically as the rate that drives NPV to zero. When you include residual value at end of life, add it to the final year cashflow. A conservative discount rate in the 6 to 12 percent range is common for efficiency projects, but match your organization’s capital policy. IRR is most useful when cashflows are conventional. and benefits are measured consistently each year.

Practical Sensitivity Checks

ROI results can change materially with tariff assumptions and verified savings. Run sensitivity cases by varying savings percent, escalation, and maintenance. If electricity prices rise faster than expected, long-life projects often look stronger, while shorter horizons emphasize fast payback. Use the year-by-year chart to validate that benefits stay realistic and to communicate the business case.

FAQs