Simple Payback: Uses and Limits

Simple payback, the project cost divided by its annual saving, is the most-used number in energy management, and for good reason: everyone understands it, it needs no assumptions about interest rates, and it sorts obvious winners from obvious losers in seconds. It is also the number that quietly kills good projects and waves through bad ones, because it ignores everything that happens after the money comes back. This lesson covers where payback earns its place and where it misleads, so you know when to reach for the heavier tools in the rest of the course.