ArchWeek - Teaching Climate

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ArchWeek - Teaching Climate

Postby Kevin Matthews » Wed Mar 28, 2007 11:30 pm

<i>This forum thread is for discussion of the <a href="http://www.ArchitectureWeek.com/today.html">ArchitectureWeek</a> article:</i><br>
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Kevin Matthews
 
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First teach payback analysis!

Postby estrid » Tue Jun 12, 2007 1:58 am

We recently extended the building lease for our small business and negotiated some tenant improvements. The first thing we did was replace the aging carpet, then we repainted all the walls. After well over $100,000 I asked what the payback was on these improvements. Of course, they had no payback analysis.

I've asked them to consider spending on energy conservation measures. For $100,000 we can significantly reduce the power required for our lighting, which also reduces the heat load on our HVAC; and update our HVAC system so that it's not cooling all the air to 55 degrees and then heating it back up with electric heaters. But for any energy improvements we are compelled to calculate the payback period, which is of course done with the shortest possible period because we want a quick payback.

Yet a discounted cashflow analysis will quickly demonstrate that you make money on almost any long-lived energy-saving investment (like 15+ years) as long as the cost of capital is lower than the expected increase in energy costs. (If you want a sobering discussion of future energy costs, not even including costs of global warming, visit www.lifeaftertheoilcrash.net)

So what is the payback on new carpeting? Why do we buy $100,000 cars but think that $50,000 is too much for an energy-efficient car? Why are all home energy improvements subjected to payback analyses (with the most conservative estimates), while architectural fluff is added at the whim of the cllient? Are our aesthetics so short-sighted that we'd rather have pretty carpeting over losing 50% of the planet's species? How many times must we replay the tragedy of the commons?

So we must include the externalities when we run a payback analysis. Let's see, how much is a planet worth?
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