Simple payback for energy savings
According to Approved document L, Conservation of Fuel and Power, Volume 2: Buildings other than dwellings, 2021 edition incorporating 2023 amendments, 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 when the application is made to the building control body and be confirmed in a report signed by a suitably qualified person.
- The annual energy savings should be estimated using the National Calculation Methodology Modelling Guide.
- The energy prices that are current when the application is made to the building control body should be used when evaluating energy savings. Current prices are given on the BEIS website, at: https://www.gov.uk/government/collections/quarterly-energy-prices.
Typically, an initial investment, in for example the achievement of U-values, will be considered economically feasilble 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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