Question

An energy-saving measure reducing lighting demand by 24.5 kW costs $11,000 to install. Given 4,000 annual operating hours and $0.085 per kWh, what is the simple payback?

A. 0.8 years
B. 1.3 years
C. 3.8 years
D. 4.3 years

Answer 1

The simple payback for the energy-saving measure is 1.32 years.

Step-by-step explanation:

To calculate the simple payback, we need to determine the annual savings from the energy-saving measure. The lighting demand reduction is given as 24.5 kW. So, the annual savings in kWh can be calculated by multiplying the lighting demand reduction by the annual operating hours:

Annual savings (kWh) = lighting demand reduction (kW) * annual operating hours

Annual savings (kWh) = 24.5 kW * 4,000 hours = 98,000 kWh

The annual cost savings can be calculated by multiplying the annual savings in kWh by the cost per kWh:

Annual cost savings = annual savings (kWh) * cost per kWh

Annual cost savings = 98,000 kWh * $0.085/kWh = $8,330

The simple payback is then calculated by dividing the installation cost by the annual cost savings:

Simple payback = installation cost / annual cost savings

Simple payback = $11,000 / $8,330 = 1.32 years (rounded to one decimal place)