Start by naming the decision
A regional market estimate helps decide where to research. A portfolio estimate helps screen a set of facilities. A retrofit model helps decide whether to commission an audit or approve a specified project. Moving between those decisions requires new evidence.
The original ReEx study expressly distinguishes overall opportunity from immediately penetrable market. Preserve that distinction: an attractive national estimate does not mean the building owner has budget, consent, a reliable service provider or a financeable contract.
Read the diagram as text
Baseline: Metered energy + operations → Intervention: Equipment + responsibility → Cash flow: Savings less recurring costs → Verification: Measure and explain changes
Build a five-column assumption register
| Boundary | Which facilities, processes and fuels are included? Record excluded activities and the reporting period. |
| Reference indicator | Use metered energy and production where available. Document any GDP or floor-area proxy and its limitations. |
| Physical saving | Express the change in kWh or another defined energy unit before multiplying by a price. |
| Investment and recurring costs | Separate equipment, installation, downtime, verification, maintenance and financing items. |
| Commercial access | Identify the owner, decision rights, procurement route, available finance and implementation timetable. |
A worked example with stated assumptions
Illustration only: a facility uses 1,000,000 kWh annually. An intervention is assumed to reduce consumption by 20%, at an unchanged electricity price of USD 0.12/kWh. Gross annual savings are 200,000 kWh, or USD 24,000. With USD 4,000 of recurring expense, net annual savings are USD 20,000.
If initial cost is USD 100,000, simple payback is five years. With constant net savings for ten years and an 8% discount rate, the simplified NPV is approximately USD 34,202. This example uses invented assumptions to show the calculation, not measured results or a customer case. The interactive calculator below allows you to change every input.
Make the next test useful
If the result is sensitive to the tariff, obtain the actual tariff structure rather than a regional average. If it is sensitive to operating hours, collect schedules and meter data. If savings require an equipment change, validate its scope, compatibility and service requirements.
Record a lower-savings case and a delayed-start case before discussing finance. Show both the result and the evidence still missing. A screening model should help choose the next study; it should not disguise uncertainty behind a precise headline.
Your efficiency screen
Edit the assumptions. Results update locally. All monetary inputs use USD for this illustration.
View the formula and exclusions
Gross savings = baseline kWh × reduction / 100 × USD/kWh. Net savings = gross savings − recurring expense. Payback = initial cost / positive net savings. NPV = net savings × [1 − (1 + r)−n] / r − initial cost. At r = 0, use n as the annuity factor. No tax, debt, inflation, degradation, replacements or residual value is modelled.
Sources & further reading
- Original definitions · pages 21–22
- Industrial estimation · pages 24–25
- Building estimation · pages 42–43
- Detailed report reading guide
Source dates and reporting periods apply. External publishers do not endorse this website.