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What do we mean by payback?
There are two types of payback we could consider:
- Financial return on your own investment (ROI) e.g. via lower energy bills
- Environmental benefits (carbon payback) e.g. cleaner and more sustainable planet due to your investment
The payback time for an energy saving retrofit can vary depending on a number of factors. These include the type of retrofit, the cost of the retrofit, and the amount of energy saved.
For example, a simple retrofit such as installing energy-efficient light bulbs may have a payback time of just a few months. But a more expensive retrofit such as installing solar panels may have a payback time of several years.
Other factors that can impact payback time include the cost of energy in your area, the size of your home, and the amount of energy you use.
In general, energy-saving retrofits can be a smart investment in the long run. They can help you save money on your energy bills and reduce your carbon footprint. However, it’s important to carefully consider the costs and benefits of any retrofit before making a decision.
While many of us are very concerned about the environment and the current energy crisis, we often need to be realistic and look at this from both points of view. It is also good to bear in mind that the more you save, the more you can spend on other energy saving retrofit projects.
Ideally the two go hand in hand but not always as we shall see.
Return on your own investment (ROI)
We will look at payback as meaning the point at which your investment in renewable energy “breaks even,” ie your return on investment (ROI).
For most of us, our reasons for investing our time and/or money in energy generation or conservation basically boils down to two main motives:
- A desire to preserve and improve the environment we live in. If you are reading this no doubt you are aware of the very real danger from issues caused by climate change and diminishing resources. This is about wanting a cleaner environment as well as a sustainable one.
- To save money on ever increasing energy bills.
Unfortunately in most cases it is impossible to easily predict in advance what the payback time will be for any one project.
Payback (ROI) all depends on two main factors
- Initial costs
- How much you save on your energy bill or how much actual money you might receive (e.g. selling excess energy for solar back to the grid)
All or some of these can be variable. As we know energy prices have rocketed. For most people more than doubled which means it could halve the payback time.
The initial costs can also vary enormously, consider loft insulation possibilities.
- Installed by a contractor: very approx calculation based on averages = 13.5 years based on 2017 energy price, much quicker payback now!
- Installed for free under a grant scheme: immediate payback = 0 years
- DIY installation (cost of product only) = something between the two
Environmental payback time
Environmental payback (or carbon payback) refers to the time it takes for the environmental benefits of a particular installation to offset the environmental costs associated with it.
For example, the production and installation of double glazed units or secondary glazing require energy and resources. These all have an environmental impact. However, once installed, these products can significantly reduce the amount of energy needed to heat or cool a building. This results in lower greenhouse gas emissions and energy consumption.
The environmental payback time for double glazed units or secondary glazing is typically longer than the financial payback time. This is because it takes into account the environmental impact of the production and installation of these products. The specific environmental payback time for double glazed units or secondary glazing can vary depending on factors. These include the materials used, the energy mix of the region, and the level of insulation required.
It is always worth thinking about both our own ROI and the environmental payback. It may be fair to say that we might all like to consider the future of the planet along with our bank balance. It can often be a difficult choice if the environmental option costs us more. Not everyone can afford what can often be more expensive options. However it is something that we can all perhaps consider and ask questions:
- Are the materials manufactured locally or shipped half way round the world? Most solar panels are made in China and are much cheaper than more local options. These obviously have a much lower carbon footprint. However as well as the cost considerations, we may also be constrained by the supply chain.
- Are the materials recyclable? It is worth considering that there may be long term disadvantages to using PIR insulation compared to natural products such as sheepswool.
Here are some more specific examples of payback times:
This is an area where in some cases you can work out reasonably accurately what your payback time might be, if there is a part of your house that you light consistently. For example a typical installation 20 years ago might have included 10 x 50W halogen GU10 downlight spotlights, ie 500 watts. You might use a kitchen for 4 hours per day. In the winter those whole 4 hours would need lighting, but in summer it may be 2 hours so a rough average we could say 3 hours per day. By replacing those 500 watts of halogen with equivalent 7 watt LEDs you would use 70 watts to get a similar amount of light, ie 14% of the energy cost.
So lets look at when you recoup that invest meant in the LEDs (assuming you buy a 10 pack for £20)
Suppose the price per kW is £0.35 per hour (maybe not for much longer!) then the cost of 500w (ie 0.5kW) halogen spotlights is:
£0.35p x 0.5 per hour = £0.175 per hour
At 21 hours (£0.175 x 21 )the weekly costs = £3.68 (ie a staggering £191.10 per year!)
But if you had LED lights at 14% of that it would cost £0.51 per week (£3.16 less than the halogen equivalent) or £26.75 per year
This is a saving of £164.35 p.a or £3.16 per week so your payback time on that pack of LEDs at £20 is just over 6 weeks. Of course it may not be that simple because you would need to replace the bulbs from time to time. However you would also need to have replaced the old halogen bulbs anyway. So we can assume this might be quite a good guide to how investing in something as easy to do as changing a lightbulb. And don’t forget this is just the saving to you, just think about the saving of carbon emissions to the planet.
According to The Heat Project typical double glazing installation with sealed units at £5000 would save £120 per year. This means a payback time of forty years. However secondary glazing at £1500 would pay back in half of that. This might mean that if you have a finite budget, it may be better to choose secondary glazing and then still be able to afford other energy saving solutions.
As you might imagine there is a big difference in heat loss between single and double glazing. If we look at the u-values:
- Single glazing 5.0-6.0 W/m^2K
- Double glazed units 1.2-1.6 W/m^2K
- Secondary glazing 2.0-3.0 W/m^2K
So although we might say double glazing is a huge improvement, secondary is not far off. So given the initial costs it is actually a much better return on your investment.
3: Solar installation
This is much harder to get an accurate calculation because there are so many variables including the angle of the panels, the shading, the amount of sun in your actual geographical location etc., but luckily there are some online calculators to help:
It is further complicated by the fact that you may not be able to use all the generated energy. Most houses use may less electricity than a solar installation generates. You might think that if you have electric heating (e.g. a heat pump) then you would be making better use of solar. However this only applies during the colder months when you use heating and of course, those months are when solar is not generating so much energy.
Even if you have a battery or sell back to the grid, then the calculation is complicated because there are so many variables to think about:
- If you are not at home during the day then your house would most likely not be using most of the electricity being generated. You would need to factor in the the amount you are getting back from selling excess to the grid.
- Alternatively you could store excess in a battery. In that case you then need to factor in the cost of the battery and the fact that batteries degrade over time.
Comparing payback times for various types of retrofit.
We can see that ease of calculation varies. Some factors such as property insulation value, drafts etc. are not possible for the average householder to monitor or analyse, and so it can be useful to look at the search which has been carried out.
Some examples of energy-saving retrofits and their approximate payback times:
- Energy-efficient lighting – Payback time of a few months to a year, depending on the cost of the bulbs and how often they are used.
- Programmable thermostats – Payback time of about two years, depending on the cost of the thermostat and how much energy is saved.
- Insulation – Payback time of around five years or less, depending on the cost of the insulation and how much energy is saved.
- Energy-efficient windows – Payback time of around ten years or less, depending on the cost of the windows and how much energy is saved.
- Solar panels – Payback time of around 7 to 20 years, depending on the cost of the panels, how much energy is generated, and the cost of energy in your area.It’s important to keep in mind that these are just rough estimates, and the actual payback time for any retrofit will depend on a variety of factors. It’s a good idea to consult with a professional to help you determine the best retrofit options for your home and budget.
Note that any published data such as this should probably be taken only as a very rough guide. The crucial factors are the cost of the installation which can vary, and the price of energy, which is currently changing a lot as we know. The table above was based on 2017 energy prices.
What we can think about though is how the different types of retrofit compare with each other so that if, like most of us, you have a finite budget you can get an idea of what your priorities might be. As you may have noticed replacing doors and windows would most likely take a lot longer than insulation.