Glossary · Energy, bills & ratings
Return on investment (ROI)
Also called: simple return · annual return on investment
The yearly savings from an upgrade as a percentage of its cost; a 4-year payback is roughly a 25% annual return.
What it means
Simple ROI is annual savings divided by net cost, the flip side of simple payback. It lets you compare an efficiency upgrade with other uses of money, but a fair comparison also accounts for the upgrade's lifespan and upkeep (see lifecycle cost).
Why it matters in an audit
Seeing upgrades as investments makes it clearer when financing such as on-bill or PACE can still leave you ahead.
Typical numbers
Reference values with their sources. Your energy advisor’s report gives the figure for your own house.
| What | Value | Source |
|---|---|---|
| Formula | ROI = annual savings ÷ net cost × 100% | Arithmetic |
| Example | $300 a year saved on a $1,200 project = 25% a year | Arithmetic |