Combining Multiple Retrofits Leads to Get a Better ROI
- chkzhao
- 6 days ago
- 3 min read
Understanding the “Blended Payback Period” in Energy Retrofits
In our previous article, we explained how incentives—such as the IESO Save on Energy Retrofit Program and Enbridge Gas rebates—help shorten the payback period for individual retrofit projects.
But in real buildings, retrofits rarely happen in isolation. A building may replace boilers, upgrade lighting, install a building automation system, and improve ventilation all within the same project. Each of these upgrades has its own cost, energy impact, and payback time.
When these measures are evaluated together, the project’s overall return is calculated as a blended payback period—an average payback that reflects the total investment and total annual savings.
Reduce your utility bills and building emissions with an energy retrofit.
What Is a Blended Payback Period?
Typically, every upgrade is evaluated separately:
Payback = Investment ÷ Annual Savings
But when multiple retrofits are combined, we can also total all costs and all savings to calculate one integrated return:
Blended Payback = ( Total Upfront Cost ) ÷ ( Total Annual Savings ).
This simple adjustment allows high-impact but slower-payback items—like HVAC or hydronic upgrades—to be financially. As an example, assume a property owner plans a combined retrofit for a mid-size residential building. (the costs and savings are assumed for demonstration):
Measure | Cost ($) | Annual Savings ($) | Individual Payback |
LED Lighting and Controls | 65,000 | 30,000 | 2.2 yrs |
Building Automation System (BAS) | 75,000 | 20,000 | 3.8 yrs |
Boiler Upgrade (Condensing) | 190,000 | 25,000 | 7.6 yrs |
Hydronic MUA with VFD | 100,000 | 25,000 | 4 yrs |
Totals / Blended | 430,000 | 100,000 | 4.3 yrs |
Individually, some measures—like lighting and automation—may pay back within four years, while others, such as boiler or ventilation upgrades, might take seven or eight. But when combined, the overall blended payback becomes just over four years, well within the investment range most owners consider acceptable.
When government and utility incentives are added, such as Enbridge rebates, tax credits or Save on Energy Program that payback can shorten to under four years
Building owners often use loans to cover the cost of building upgrades. This eliminates the upfront cost, and the loan is paid with the savings achieved. However, A blended project with strong short-term savings generates stable annual cash flow, which helps cover loan repayments while still providing net positive savings.
Assume a loan is used for the measures in the example above. Building owners can access a 3 % yearly interest rate through CMHC’s Greener Affordable Housing program, with a repayment period of five years.
A loan of $430,000 would result in annual payments of $93,892. These payments can be easily covered with savings of $100,000, leaving a net saving of $6,107 at zero upfront cost.
A loan of $100,000 for the MUA with VFD upgrade resulted in annual payments of $21,835. With $25,000 in savings, only $3,165 is left after paying the debt.
Even when loan financing is used and the payback period is zero, energy efficiency measures with longer payback periods can be combined with others to make the project easier to finance.
Why You Shouldn’t Only Choose “Fast ROI” Projects
Buildings can save more energy by implementing a larger number of energy efficiency measures, Enbridge pilot program and Save on Energy Program can offset most or all debt service in the first five years. However, focusing only on measures with quick payback periods may seem financially conservative, but it often limits total energy savings.
For example, Lighting and controls can cut lighting energy use by 50%, yet lighting typically represents only about 15% total building energy consumption. Heating and ventilation systems, by contrast, account for more than half of a building’s usage—and their upgrades offer larger long-term savings.
If a building owner upgrades only lighting, they might achieve quick savings but miss the opportunity to reduce overall energy costs by 30–40%.
The blended payback approach addresses this imbalance. By combining short- and long-term measures, property owners can achieve a financially sustainable mix of improvements, enhancing both energy efficiency and asset value
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