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Payback is Not Linear: What Not to Miss in Life Cycle Assessments

Posted by Iain Robertson on Jul 17, 2012 8:09:00 PM

Payback is Not Linear: What Not to Miss in Life Cycle AssessmentsMaking informed decisions about retrofit projects for energy reduction or efficiency improvements doesn’t stop at simple payback. To provide a truer outlook of a retrofit project, LCA or Life Cycle Assessments, present a 7-10 year window and provide the best steps for clarifying real payback in the fullest of terms. In some instances, such as renewable energy projects, LCA could stretch to 20 years or more! 

The details matter; this is the point of the LCA.  Because of its longevity, new factors can show up that were not initially considered. While a lighting retrofit is a simple project, payback calculations supported by energy savings alone would be incomplete. Efficient lighting produces less heat, and in some instances, a lot less heat.  For example, replacing metal halide lamps with fluorescent will result in about 50% electricity demand reduction.  If the building is in a colder climate, there will now be additional heating costs due to the lost heat generated by the metal halides. However, if the building is air conditioned, cooling costs are reduced and the payback improves as a result.  Naturally, climate factors are dependent on geographic location but nonetheless need to be addressed in the LCA.

The maintenance cycle of the new lights must also be considered in the LCA.  Many companies have scheduled replacement programs that swap out every metal halide light bulbs to maintain the efficacy of the lamp. The replacement fluorescent light efficacy lasts 3-4 times as long as metal halide and therefore, fluorescents would not need to be replaced as frequently. Again, payback improves.

Energy cost is the caveat of any retrofit LCA.  Let's say today, the price of electricity is $X but 5 years from today, the cost will definitely not be $X.  On paper, increasing energy costs polish a retrofit payback but the LCA shows the cash flow perspective. Less electricity is consumed but the cost is higher. Although a less than expected cash flow savings from a retrofit project over a 5 year window, the LCA should indicate the mitigation of the increase in energy cost. A thorough and thought out LCA prepared by a certified energy professional will tell the decision makers all the factors of a project but most importantly, it will show a true payback!

Did you enjoy this post? The author of this article is Iain Robertson. Learn more about him here.