# “Investing in energy efficiency is better than money in the bank.”

This section is dedicated to providing some ways to look at how money invested in energy efficiency is working for you. We know that the money spent on a home energy upgrade that will reduce energy bills, increase comfort health, safety and durability is good for the planet... but how does it compare to money invested elsewhere? And is it possible for the savings on utility bills to actually pay for the upgrade investment? Simple Payback Period and Return On Investment calculations give us the answers to these questions.

## Simple Payback Period (money in your pocket?)

The cost effectiveness of an energy retrofit can be calculated using a ratio called the simple payback period (SPP). Divide the cost of the project by the annual savings to find the number of years it will take to pay back the initial cost. For example, if an upgrade initially costs $2000, and saves $250 per year, 2000/250 tells us that its payback period is 8 years. After the 8 years the utility bill savings are money in your pocket. Available rebates and credits that lower your initial investment amount will reduce your payback period even more.

## Return On Investment

Dividing the annual savings of an upgrade project by its initial cost will give the annual return expressed as a percentage. For example if a retrofit costs $2000 and saves $250 per year, its annual return is 12.5%. Energy efficiency investments can deliver better returns than a savings account or money market fund.

## Effect of Rebates

When rebates and tax credits are factored in, doing an energy upgrade becomes an even more attractive proposition. For example, if a rebate of $400 reduces your project cost from $2000 to $1600, the payback period is also shortened to 6.4 years. And the annual return is increased to 15.6%. Much better than a savings account.

##### “Even after employing just the simplest of energy remedies - reducing the phantom power draws on our electronics - we saw a 20% decrease in our energy bills.”

*— Paul M.*