Annual Energy Cost Forecast
For a purchase that affects both electricity and gas costs, like a full electrification project, this uses one blended escalation assumption rather than tracking each fuel separately, for a simpler combined forecast.
At your inputs, this purchase, forecast forward under rate escalation has an NPV of -$3,877 over 10 years once escalation is included, with a discounted payback of no discounted payback within this horizon.
| Net cost after confirmed incentives | $10,000 |
|---|---|
| Year-one annual savings | $700 |
| Final-year annual savings (escalated) | $913 |
| Net present value | -$3,877 |
Breakeven: No discounted payback occurs within the selected horizon.
- This uses planning estimates you entered, not a contractor quote or guaranteed savings.
- Future rate escalation is inherently uncertain; treat the assumed rate as a planning estimate.
What this also tells you: Your annual savings grow from $700 in year one to $913 in the final year of your horizon, purely from the assumed rate escalation.
This is a planning estimate based on your entries. It does not size equipment, determine electrical or building-code compliance, verify incentive eligibility, or replace a contractor quote or professional energy audit.
Why this decision comes up
A homeowner planning a purchase that touches both electricity and gas costs benefits from one combined forecast rather than juggling two separate escalation assumptions.
How this is calculated
Each year's savings grows by your assumed blended escalation rate from the prior year, then gets discounted back to today's dollars, summed against the net cost to produce an NPV.
A worked example
With the defaults ($10,000 net cost, $700/year savings in year one, 3% annual escalation, 10-year horizon, 5% discount rate), savings grow from $700 in year one to $913 in year ten. The NPV comes out negative at about $3,877, showing that even with escalation, this particular purchase does not clear its cost at these defaults, and needs a lower cost, bigger savings, or a confirmed incentive to close the gap.
Common mistakes
A common mistake is treating a multi-fuel forecast as automatically more favorable than a single-fuel one without checking whether the blended assumption actually reflects your real situation.
Limitations
This uses one constant blended escalation rate rather than modeling each fuel type's own volatility separately.
Common questions
Why use one blended rate instead of separate electricity and gas escalation?
For a purchase spanning both fuels, tracking two separate escalation paths adds complexity without necessarily adding accuracy, given how uncertain any escalation assumption already is. A blended rate keeps the forecast simpler.
When should I use the fuel-specific escalation tools instead?
If your purchase affects only one fuel type specifically, like a furnace-only upgrade, the electricity or gas rate escalation tools give a more precisely scoped result.
How far forward should I forecast?
Match your ownership horizon to how long you realistically plan to own the home or the equipment, not an arbitrarily long period.
Does this work for a purchase that only saves electricity, not gas?
Yes, enter zero for the unaffected fuel's contribution to your blended savings figure, or use the electricity-specific escalation tool for a cleaner single-fuel view.
Can the escalation rate be negative?
In principle yes, if you expect rates to fall, though sustained rate declines are historically uncommon. Use a rate that reflects a defensible, conservative planning assumption in either direction.