What is included
Annual gross savings equal baseline annual electricity consumption multiplied by the assumed reduction and electricity price. Recurring project expense is deducted to give annual net savings. Simple payback divides initial cost by net annual savings.
NPV discounts the same annual net saving over the selected term and subtracts the initial cost. These deliberately simple assumptions make the calculation inspectable. Costs, electricity prices and performance can change; the model does not fetch a live tariff.
Read the diagram as text
Baseline: Metered energy + operations → Intervention: Equipment + responsibility → Cash flow: Savings less recurring costs → Verification: Measure and explain changes
What needs a deeper model
Taxes, grants, financing, degradation, inflation, replacement costs, working capital and residual value are excluded. A full investment appraisal should address them where relevant. Check the baseline and the proposed savings with technical evidence.
If net savings are zero or negative, the tool reports no positive simple payback. A positive result is an illustration of your inputs, not a promise of actual savings or an investment recommendation.
An example you can reproduce
For a baseline of 1,000,000 kWh a year, a 20% reduction and USD 0.12 per kWh, gross savings are USD 24,000. Deducting USD 4,000 of annual expense gives USD 20,000 net savings. Against USD 100,000 initial cost, simple payback is five years.
At 8% over ten years, the simplified NPV is approximately USD 34,202. Change the inputs to see which assumptions dominate the result, then document where your real values came from.
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
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