Payback Period

An accounting term indicating the time required to recoup an investment. It is expressed as a ratio of investment cost to savings or income (usually annually). For example, if a new high-efficiency boiler costs $10,000 to install and saves $2500 per year in fuel, the payback period is four years. Payback periods are critical to environmental and energy efficiency. Currently, conventions of short-term business thinking look at time periods less than common payback periods for alternative energy and other sustainability improvements. Until business people consider longer-term periods of time or new technologies reduce the payback period of “green” technologies, there will continue to be lackluster interest in many sustainable solutions.