Pillar 3: Highest Value, Lowest Cost
Building owners can expect IEPC to generate significant value for them: value that is economic, social, and environmental.
An effective method for valuing projects from a financial perspective employs net present value (NPV). This approach takes into account different quantitative parameters – including savings, construction costs, asset renewal, and subsidies – and translates them into an easily grasped single dollar value.
This single number represents the value in today’s dollars of the future cash flows of a project, normally calculated for a period of 15 or 20 years. A higher NPV signifies higher value for the client.
Using a project’s net present value to determine its merit has several advantages:
- Deeper Energy Savings: To obtain a high NPV, firms are incentivized to find opportunities for deep energy savings which address all energy systems and go beyond conventional equipment replacement.
- Highest Value rather than Lowest Bidder: Lowest bidders drive down internal costs to win business, meaning they are unable to dedicate sufficient time to complex design. NPV-based bidders devote more time to efficient design in order to develop the project with the highest value.
- Ease of Comparing Projects: In a proposal submission, firms may submit very different projects with different measures, costs, and payback periods. The NPV criteria allows owners to compare these projects side-by-side using a common variable (“apples-to-apples”).
In addition to NPV, social and environmental benefits must also be taken into account when evaluating projects. Parameters to measure these are both qualitative and quantitative.
In short, it is important to consider all major parameters to ensure that the project achieves the highest overall value possible.
Try the NPV simulator
Net Present Value (NPV) Simulator
Enter financial parameters and see the NPV that is generated.All fields are required.
15-Year Period Project Net Present Value: $
20-Year Period Project Net Present Value: $
25-Year Period Project Net Present Value: $
Interested in a project that generates a high NPV? Contact us.