Last edited 26 Jun 2018

Simple payback

According to approved document L of the building regulations, in relation to the conservation of fuel and power, the term 'simple payback' refers to:

The amount of time it will take to recover an initial investment through energy savings, calculated by dividing the marginal additional cost of implementing an energy efficiency measure by the value of the annual energy savings achieved by that measure taking no account of VAT.

When making this calculation, the following guidance should be used:

  • The marginal additional cost is the additional cost (materials and labour) of incorporating, for example, additional insulation, not the whole cost of the work.
  • The cost of implementing the measure should be based on prices current at the date the proposals are made known to the building control body (BCB) and be confirmed in a report signed by a suitably qualified person.
  • The annual energy savings should be estimated using an energy calculation tool approved by the Secretary of State pursuant to regulation 24.
  • For the purposes of the approved document, the energy prices that are current at the time of the application to building control should be used when evaluating the annual energy savings. Current energy prices can be obtained from the Department of Energy & Climate Change (DECC) website.

Typically, an initial investment, in for example the achievement of U-values, will be considered economically feasilbe if the simple payback period is not greater than 15 years. However, other periods may be considered economically feasible for other elements.

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