10 Best Energy Efficiency Upgrades by ROI

Energy efficiency upgrades compete for capital dollars with every other building need. To justify these investments, you need to understand which upgrades deliver the best returns. This guide ranks ten common energy efficiency measures by ROI, covering typical payback periods, savings potential, and key implementation factors.

How to Evaluate Energy Efficiency ROI

Before diving into specific upgrades, understand how to calculate and compare returns:

Simple payback period:

Payback (years) = Upgrade Cost / Annual Energy Savings

Key factors affecting ROI:

• Current energy costs and rates
• Building usage patterns and hours
• Climate and weather conditions
• Existing equipment age and efficiency
• Utility incentives and rebates
• Installation complexity

Important note: ROI varies significantly by building. The rankings below represent typical commercial scenarios. Your specific returns depend on your building conditions and local factors.

10 Energy Efficiency Upgrades Ranked by ROI

1. LED Lighting Retrofits

Typical payback: 1-3 years Annual savings: 40-60% of lighting energy costs

LED retrofits consistently deliver the fastest payback of any energy upgrade. The technology is mature, installation is straightforward, and savings are immediate and measurable.

Why LED leads:

• Dramatic efficiency improvement (60-75% less energy than fluorescent)
• Long lifespan reduces maintenance costs
• Instant on/off with no warm-up
• Better light quality improves occupant satisfaction
• Utility rebates often available

Implementation tips:

• Start with high-usage areas for fastest payback
• Consider controls (occupancy sensors, daylight harvesting) for additional savings
• Look for utility rebate programs before purchasing
• Group properties for volume pricing

2. Building Automation System Optimization

Typical payback: 1-3 years Annual savings: 10-30% of HVAC energy costs

Many buildings have automation systems operating below their potential. Optimization costs little but saves substantially.

Optimization opportunities:

• Correct scheduling errors (HVAC running when building is empty)
• Reset supply air temperatures based on demand
• Fix sensors providing incorrect data
• Tune control loops for stability
• Eliminate simultaneous heating and cooling
• Implement optimal start/stop

Why this ranks high:

• Low implementation cost (mostly programming and commissioning)
• Immediate impact on energy consumption
• Often reveals other problems to address
• No capital equipment purchase required

3. Smart Thermostats and Controls

Typical payback: 1-2 years Annual savings: 10-25% of HVAC energy costs

For buildings without sophisticated automation, smart thermostats provide similar benefits at lower cost.

Features that save energy:

• Programmable scheduling
• Occupancy detection
• Remote monitoring and adjustment
• Usage analytics and recommendations
• Integration with utility demand response programs

Best applications:

• Smaller commercial properties
• Multi-tenant buildings with individual HVAC units
• Properties without building automation systems
• Retail and restaurant locations

4. Variable Frequency Drives (VFDs)

Typical payback: 2-4 years Annual savings: 20-50% of motor energy costs

Motors running at constant speed waste energy when full output isn't needed. VFDs match motor speed to actual demand.

Common applications:

• Supply and return air fans
• Chilled water and hot water pumps
• Cooling tower fans
• Exhaust fans

Why VFDs deliver strong ROI:

• Fan and pump energy follows the cube law (half speed = 1/8 energy)
• Most HVAC systems run below design load most of the time
• VFDs also reduce motor wear and extend equipment life
• Utility incentives often substantial

5. Recommissioning Existing Systems

Typical payback: 1-3 years Annual savings: 5-15% of total energy costs

Recommissioning identifies and corrects operational issues that cause energy waste. It's not an upgrade—it's restoring systems to design intent.

What recommissioning addresses:

• Dampers stuck open or closed
• Sensors out of calibration
• Control sequences not functioning as designed
• Simultaneous heating and cooling
• Economizer malfunctions
• Air balance problems

Why recommissioning first:

• Low cost compared to equipment replacement
• Often reveals problems that would undermine new equipment performance
• Quick payback from operational improvements
• Establishes baseline for future upgrades

6. HVAC Equipment Replacement

Typical payback: 5-10 years Annual savings: 20-40% of HVAC energy costs

Replacing aging HVAC equipment with high-efficiency alternatives delivers substantial savings but requires significant capital.

High-impact replacements:

• Rooftop units (RTUs) with variable-speed compressors
• Chillers with improved part-load efficiency
• Boilers with condensing technology
• Heat pumps replacing electric resistance heating

Factors improving ROI:

• Replacing equipment at end of life (avoid paying twice)
• High operating hours and cooling/heating loads
• Utility incentives for high-efficiency equipment
• Combined with controls upgrades

7. Building Envelope Improvements

Typical payback: 5-15 years Annual savings: 10-30% of heating/cooling costs

Reducing heat transfer through the building envelope lowers HVAC energy consumption. Payback varies widely based on scope and building type.

High-ROI envelope measures:

• Air sealing (often very fast payback)
• Cool roof coatings (1-3 year payback in cooling-dominated climates)
• Window film (2-5 years in sunny climates)
• Insulation improvements during other work

Lower-ROI but sometimes necessary:

• Window replacement (rarely justified on energy alone)
• Major wall insulation retrofits (usually require renovation trigger)

8. Demand-Controlled Ventilation

Typical payback: 3-6 years Annual savings: 10-30% of ventilation energy costs

Standard ventilation provides the same outdoor air regardless of occupancy. Demand-controlled ventilation (DCV) adjusts based on actual occupancy using CO2 sensors.

Best applications:

• Spaces with variable occupancy (conference rooms, auditoriums, gyms)
• High ventilation requirements (laboratories, restaurants)
• Extreme climates where conditioning outdoor air is expensive

Implementation considerations:

• Requires CO2 sensors and controls integration
• Works best with variable-speed air handling
• Consider combining with economizer optimization

9. Economizer Repair and Optimization

Typical payback: 1-3 years Annual savings: 5-15% of cooling costs

Economizers use outdoor air for free cooling when conditions allow, but many are disabled or malfunctioning. Repair and optimization often delivers quick payback.

Common economizer problems:

• Dampers stuck or binding
• Actuators failed
• Sensors out of calibration
• Controls disabled
• Incorrect setpoints

Why this matters:

• Free cooling replaces mechanical cooling for hundreds of hours annually
• Most buildings have economizers, few work properly
• Repair costs are modest compared to savings

10. Solar PV Installation

Typical payback: 6-12 years Annual savings: Varies by system size and utility rates

Solar photovoltaic systems don't reduce energy consumption but offset purchased electricity. ROI depends heavily on local factors.

Factors improving solar ROI:

• High electricity rates
• Favorable net metering policies
• Strong solar resource (sunlight hours)
• Available incentives (federal, state, utility)
• Roof condition supporting 25+ year installation
• Tax appetite for investment tax credit

Considerations:

• Requires suitable roof space and structural capacity
• May need roof replacement coordination
• Power purchase agreements (PPAs) reduce upfront cost but share savings
• Battery storage extending self-consumption (evolving economics)

How to Prioritize Efficiency Investments

Start with the best ROI:

• LED lighting and controls optimization first
• These provide quick wins and free up capital for larger projects
• Success builds momentum for additional investments

Sequence logically:

• Reduce loads before replacing equipment
• Fix controls before adding automation
• Address envelope before sizing new HVAC

Consider co-benefits:

• Maintenance savings (LED longevity, VFD motor protection)
• Occupant comfort and satisfaction
• Reduced carbon footprint for ESG goals
• Equipment reliability improvements

Stack incentives:

• Utility rebates can cut payback by 30-50%
• Federal tax credits for qualifying equipment
• State and local incentives vary widely
• Timing matters—some programs expire or have limited funds

Common Mistakes in Efficiency Investments

Chasing shiny technology: New isn't always better. LED and VFD technology is mature and proven. Novel approaches may not deliver.

Ignoring operations: The best equipment underperforms if operated incorrectly. Invest in commissioning and training, not just equipment.

One-off projects: Ad hoc efficiency projects miss economies of scale and strategic sequencing. Develop a multi-year efficiency plan.

Ignoring maintenance: Efficiency degrades without maintenance. Factor ongoing maintenance into ROI calculations.

Not measuring results: Verify savings against projections. Measurement and verification identifies problems and proves value for future investments.

Frequently Asked Questions

What's a good payback threshold for energy projects?

Many organizations target 3-5 year simple payback for energy projects. Projects under 3 years are typically approved easily. Projects over 7 years face scrutiny. Consider including non-energy benefits (maintenance, comfort, reliability) in the analysis.

Should I wait for equipment to fail before replacing?

Not necessarily. If equipment is old and inefficient, planned replacement often beats emergency replacement. Planned projects get better pricing, allow for incentive capture, and avoid business disruption.

How do I account for utility incentives?

Reduce project cost by confirmed incentive amounts. "Confirmed" is key—get pre-approval before assuming incentives in your analysis. Incentive programs change frequently.

What about energy audits?

Professional energy audits identify opportunities and estimate savings. They're valuable for complex buildings or comprehensive programs. For simpler situations, focus on the proven high-ROI measures first.

Key Takeaways

• LED lighting and controls optimization deliver fastest payback
• Recommissioning and optimization before equipment replacement
• Payback varies by building—run your own numbers
• Stack utility incentives to improve returns
• Sequence projects logically (reduce loads before replacing equipment)
• Measure results to verify savings

Related Articles

• Capital Budgeting Best Practices — Integrate efficiency into capital planning.
• Justify Capital Projects to Leadership — Make the case for efficiency investments.
• Capital Project KPIs — Track energy project performance.