"Break-even savings": What is the minimum a measure has to save in order to pay off?
A break-even analysis determines the point at which an investment generates an economic advantage. In relation to the energy modernisation, the "break-even savings" give the minimum energy cost savings that must be achieved by the measure in order to cover the expected construction costs. The "break-even savings" can be calculated statically or dynamically. For a static calculation, it is also necessary to know details about the period under consideration. The thereby determined (static) "break-even savings" can be compared to the (expected) energy cost savings of the measure. If the expected energy cost savings are greater than the "break-even savings", the additional measure pays off even without an increase in energy prices. For a dynamic calculation, the adequate target rate and the future energy price increase must also be determined.
Calculation of the break-even savings (static)
- Step 1 – Determining the expected construction costs:
The determination of the modernisation costs is independent of the chosen method of efficiency calculation. Different procedures are described under the menu item Modernisation costs. Cost functions for frequent measures are summarised under the menu item Examples of modernisation. One must differentiate between the full costs and the energy-related additional costs of a measure. If necessary, it should be determined whether and what costs additionally arise from operation, inspection, maintenance, or repair and, in part, also for insurance.
- Step 2 – Determining the minimum required energy cost savings of the measure(s):
The minimum energy cost savings that are necessary so that the measure/measure bundle just pays off are determined ("break-even savings"). To do so, the construction costs determined in step 1 (energy-related additional costs) are divided by the selected period under consideration. For example, the period under consideration can be based on the lifetime of the measure. Details about the lifetime of frequent measures can be found in the table under the menu item Technical lifetime.
- Step 3 – Estimating the (current) energy cost savings per year:
Next, the expected energy savings must be determined. The determination of the modernisation costs is independent on the chosen method of efficiency calculation. Different calculation methods are described under the menu item Energy savings. The result is the planned/predicted saving of delivered energy in kilowatt hours per year (kWh/a). The energy cost savings are calculated by multiplying the savings of delivered energy by the price of delivered energy per kilowatt hour. This can be determined for individual sources of delivered energy or as an average value. For grid-bound energy (e.g., gas, district heat, local heat, electricity), the kilowatt-hour-rate and the (basic-) kilowatt-rate have to be considered. The current energy price can be taken as a basis for a static determination of the annual costs. Thus, the annual cost savings amount to:
Cost savings (€/a) = savings of delivered energy (kWh/a) x energy price (€/kWh)
- Step 4 – Comparison and evaluation:
The calculated "break-even savings" can be compared to the expected energy cost savings. If the expected energy cost savings are greater than the “break-even savings”, the measure is economically efficient.