Simple payback is common economic analysis method and is understood by most business owners. Simple payback is the amount of time it will take to recover installation costs based on annual energy cost savings. The equation for simple payback is annual energy cost savings per year divided by the initial installation cost.
If two different lighting projects have different economic "lives," then do not use simple payback to compare the two. Simple payback won't provide information about a project's profitability; only how long it takes to recoup the investment. However, a simple payback of two years or less usually suggests a profitable project. A longer simple payback requires more study.
