What is the process of determining simple payback?

The process of determining simple payback is accurately represented by dividing the modification cost by the annual monetary savings. This method provides a straightforward way to assess how long it will take for an investment in energy efficiency or other modifications to pay for itself through the savings generated. By calculating the payback period in this way, you can evaluate the financial viability of the investment, helping you make informed decisions about energy upgrades or improvements.

In contrast, calculating the total cost of energy used annually does not provide insights into the payback period but rather gives a snapshot of current energy expenses. Estimating future energy prices over time may be useful for long-term planning but does not directly relate to the return on investment for a specific modification. Multiplying the cost of installation by energy efficiency rated is not a standard approach to finding payback, as it conflates costs with efficiency metrics rather than relating to actual savings achieved. Thus, the method of dividing modification costs by annual savings is the most effective way to establish the payback time for investments in utility projects.