Find your retrofit payback with clear cashflow modeling. Include rebates, inflation, and discounting for accuracy. See the break even year and act with confidence.
Use annual values. If you only have monthly savings, multiply by 12.
A sample scenario to show typical inputs and outputs.
| Scenario | Cost | Incentives | Annual savings | Discount rate | Horizon | Break even (disc.) |
|---|---|---|---|---|---|---|
| Lighting + controls | $18,000 | $2,500 | $4,200 | 8% | 12 | Year 5 |
| Insulation upgrade | $26,000 | $3,000 | $3,900 | 9% | 15 | Year 8 |
| HVAC optimization | $42,000 | $6,500 | $7,800 | 10% | 15 | Year 6 |
Break even is the first year when cumulative net cashflow turns positive. A retrofit costing 25,000 with 3,000 incentives starts at −22,000. With 5,200 energy savings plus 600 maintenance savings, net annual benefit is 5,800 before growth. Simple break even may appear near year 4, while discounted break even often shifts to year 5 or later.
Discounting recognizes that a dollar saved next year is worth less today. At an 8% discount rate, the present value of a 5,800 saving in year 5 is roughly 3,950. Because early years dominate value, projects with long paybacks can look weaker under strict capital screening. Align the rate with financing costs or required returns.
Energy prices rarely stay flat. The calculator escalates savings using the growth rate you enter, such as 3% per year. That means a 5,200 first‑year energy saving becomes about 6,579 by year 10. When combined with stable maintenance savings, compounding can lift NPV materially. If growth is uncertain, test low, base, and high cases.
Postponing work can erode returns. If you delay two years and costs escalate 4% annually, a 25,000 project becomes about 27,040 before incentives. Meanwhile, the savings stream starts later, pushing both payback metrics outward and reducing present value. Delays also increase exposure to equipment failure, tenant disruption, or lost rebate windows.
NPV sums discounted cashflows, including any residual value at the horizon. A positive NPV suggests the retrofit beats your discount rate and creates economic value. IRR is the implied annual return; if cumulative discounted cashflows never overcome the initial cost within the horizon, IRR may not be available. Use the chart to confirm where cumulative PV crosses zero and whether results are sensitive to small input changes. For portfolio planning, prioritize measures with short discounted payback and scalable savings, then sequence deeper retrofits later.
Simple break even uses undiscounted cashflows, so future savings count the same as today. Discounted break even uses present value and reflects the time value of money, so it usually occurs later when discount rates are positive.
Use a rate consistent with your cost of capital, financing rate, or required return for similar projects. Public entities may use a lower social discount rate, while private firms often use higher hurdle rates for risk and liquidity.
If utility rates tend to rise, use a positive growth rate to reflect escalating savings. If savings are contractually fixed, set growth near zero. For uncertainty, run multiple scenarios to see how payback and NPV shift.
IRR requires cashflows that produce an NPV sign change across rates. If projected savings never recover the initial cost within the chosen horizon, or cashflows are unusual, the algorithm may not find a meaningful IRR.
Delay pushes savings later and can increase the effective upfront cost through escalation. Both effects reduce present value, often extending discounted payback and lowering NPV, especially when discount rates are moderate to high.
Residual value helps when the horizon ends before equipment life ends. It increases the final-year cashflow and NPV, but it rarely changes early payback as much as annual savings, incentives, or the discount rate.
Important Note: All the Calculators listed in this site are for educational purpose only and we do not guarentee the accuracy of results. Please do consult with other sources as well.