Moving Beyond Simple Payback

Moving Beyond Simple Payback: The Language of Financial Analysis Richard Donnelly Planning & Development Manager Tim Perrin Business Development

Overview ,[object Object],[object Object],[object Object]

Efficiency Vermont: Who We Are ,[object Object],[object Object],[object Object]

Efficiency Vermont: What We Do ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],Efficiency Vermont: How We’re Funded

Efficiency Lowers Operating Expenses

Efficiency Reduces Carbon Emissions ISO-NE Margin Supply 1 kWh = 1.26 lbs CO2

Efficiency: Our most cost-effective energy resource

[object Object],[object Object],[object Object],[object Object],Colleges & Universities Market

The Role of College & University ,[object Object],[object Object],[object Object],[object Object],[object Object]

Identifying Barriers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Seeking Alignment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Initial Cost – A Common Barrier ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Financial Terms

Financial Terms – Simple Payback How long will it take to recoup my initial outlay? Initial Cost / Periodic Benefit = Payback Cost = $100, Benefit (annual) = $50 Payback = $100 / $50 = 2 years

[object Object],[object Object],[object Object],[object Object],Issues With Simple Payback

Financial Terms - ROI Ratio of money gained (or lost) relative to investment Benefit / Initial Cost = Return on Investment Cost = $100, Benefit = $50 ROI = $50 / $100 = 50%

+ + – – Cumulative Annual Internal rate of return = Equivalent interest rate to achieve return

Time Value of Money ,[object Object],[object Object],[object Object],[object Object],[object Object]

+ + – – Cumulative Annual Net present value

Economic Analysis ,[object Object],21.4% 4 years $25K $100K Rate of Return Simple Payback Annual Savings Project Cost

Spend Someone Else’s Money ,[object Object],[object Object],[object Object],[object Object]

Spend Someone Else’s Money ,[object Object],[object Object],5 years 6% $25K $100K Term Length Interest Rate Annual Savings Project Cost

The Cost of Waiting ,[object Object],[object Object],[object Object],[object Object],[object Object]

Thank You! ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[email_address]

Moving Beyond Simple Payback

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Moving Beyond Simple Payback

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