An Easy Guide to Efficiency ROI

By Michael DeCaluwe

When I’m working with a client who’s new to energy efficiency, the first question they ask is:

What’s the ROI of this project?

To help clients decide which project to pursue first, we’ve created an easy guide that outlines the payback period for each type of energy efficiency project. Projects can be placed in the following groups based on their anticipated ROI:

1-2 Years

3-5 Years

6+ Years

Read on to discover which projects fall into each category.

1-2 Years

Compressed Air

Repairing leaks in your air system is the quickest way to increase the efficiency of your air compressor. Since air compressors typically have a 10-15% efficiency rating, locating and fixing leaks in your air lines typically has a payback of less than one year. Some states and utilities have programs that will completely cover the costs of testing to locate leaks.

Steam Traps

For those with a steam-based system, many utilities have excellent rebate programs that will either pay for a steam trap study on your site or will even pay outright for the replacement of steam traps. If capital is required on these projects, a typical payback will be under 1 year.

Water

For larger users of water (and depending on the size of pipe for your water feed), water-flow devices installed on the customer side of the water meter have a typical payback period of 1-2 years. These projects have an excellent long-term payback potential as the cost of water continues to rise for most water utilities.

Variable Frequency Drives (VFDs)

Some motors are constantly running at full speed, which can lead to unnecessary energy costs. VFDs vary the power input and frequency of the motor, which results in energy savings. Depending on the size, horsepower, and hours of usage, installing VFDs on your pumps and motors will have a payback of 2 years or under for most projects.

3-5 Years

Lighting

One of the most popular efficiency upgrades is lighting. Typical payback for an LED lighting project is 2-4 years. The payback on your lighting project depends on:

the efficiency of your current lighting,
the number of hours that your facility has its lights on,
whether you do a bulb-only retrofit or a full ballast replacement, and
utility rebates.

Burners

Check the amount of excess air in your boiler system. If your system contains more than 15% excess air, you could benefit from installing a low excess air burner. Upgrading the burners or the controls on a boiler can have an expected payback period of about 3 years, depending on the age and efficiency of your current burner or controls.

Building Automation Systems (BAS)

Installing a building automation system (BAS) helps you use your building’s equipment fore efficiently. If you do not currently have a BAS system, you can anticipate a payback period of 3-4 years. If you have an older BAS system or it only controls some of your equipment, payback is closer to 5 years.

6+ Years

Roof Top Units (RTUs)

Roof top units (RTUs) have an average life span of 20-25 years. Utilities will often pay for engineering studies on your current unit to determine its efficiency. If you decide to replace an older, functioning unit, you can expect rebates to cover 10-15% of the project costs. If you wait until your unit fails, rebates are not available. The efficiency of the newer units typically yields a 9-year payback period, including rebates.

Boiler Replacement

Boilers typically have a life expectancy of 25 years before they need to be replaced. Some utilities offer 10-15% rebates for replacing your old boiler. However, there are no utility incentives if your boiler is not functional. Not sure if your facility needs a new one? Check to see if your boiler is exhibiting any of these 7 signs. With utility rebates, you’ll likely experience a 10-year payback for replacing your boiler.

Increase your efficiency to decrease your energy costs.

Completing an energy efficiency project is a great way to reduce your overall energy spend. Although fast paybacks are a focus for many facility managers, don’t let a multi-year payback keep you from doing necessary upgrades. And paying for a project doesn’t have to be a large up-front cost – utilities and suppliers have rebates and on-bill financing options to help you cover the cost over time.

Ready to talk strategy? Call me to discuss your efficiency needs and to develop your project blueprint.

About the Author

Michael has served as the VP of Commercial & Industrial Sales at Nania Energy Advisors since 2007. He believes that listening to and understanding clients’ energy needs is vital to becoming a thought leader in the industry and forming a mutually beneficial business relationship. In his spare time, Michael enjoys being a dad, staying active and playing basketball.