RETURN ON INVESTMENT
How is it calculated?
In its simplest form, we divide the yearly savings by the total investment: Eg. $1,000 of energy savings per year, divided by $2,000 total investment, equals 50% R.O.I.
To create a more accurate picture, we then factor in maintenance costs and equipment depreciation.
Are lights REALLY an investment?
Stocks. Bonds. Lights...?
Of course, lights don't pay you. But, given the fact that electricity costs are as much of a certainty as rent and taxes, any measure to reduce them can in fact be called an 'investment'. After all, savings and earnings come down to the same thing: money in the bank.
What if I don't have capital to invest?
Chances are that the funds in your bank account are not unlimited... Furthermore, everyday operations place an unrelenting demand on what's there. Why should you dig into your capital to pay for new lights?
You don't have to. Rather, you can apply the age-old strategy of capital leverage, ie. making money with someone else's money. An equipment lease can pocket you cash every month when the lease payment is smaller than the electricity costs savings.
Why does it sound too good to be true?
While your RRSPs and TSFAs are accruing modest interest on your hard-earned money at single digit rates, we are talking about astronomical returns on investment in lighting upgrades. What's the catch?
Not every lighting upgrade will realize those fabled numbers. The reality is often more sober than what's being advertised. Having said that, the opportunities for awesome savings do exist, if approached with knowledge and strategy.