What Really Drives the 48.7% TCO Cut?

What Really Drives the 48.7% TCO Cut?

Ada re-derives this chapter’s own numbers step by step, at full precision

ADA · CALCULATION AUDIT

What Really Drives the 48.7% TCO Cut?

A campus facilities manager weighs two illustrative proposals for replacing 50,000 aging fixtures: buy the LEDs outright for a $92.59M 15-year total, or take a service proposal for $47.52M. That $45.07M gap is a 48.7% TCO reduction under the stated assumptions. Proposal B's 50% lower electricity use than Proposal A's LEDs is an illustrative model assumption, not the reported Schiphol comparison. Which inputs drive the result?

Companion to the chapter Business Model Case Studies — every number here comes from that chapter.

See the relationship before changing it

Set the input, apply the rule, then read the result with its unit.

Derive the baseline in four named moves

1. 1

   Name the input. The chapter baseline is 9 million USD.

2. 2

   Name the relationship. share = energy savings / 45.07 million x 100

3. 3

   Substitute with units. 39.42 / 45.07 x 100 = 87.46%

4. 4

   Read the result. Keep the unit beside the value. Use it only inside the technical boundary on this page.

Predict, then change energy savings

Try Predict the direction of share = energy savings / 45.07 million x 100. Test another energy savings, then compare share of total savings.

Energy savings

9 million USD

Chapter baseline

Share of total savings

Observe Energy accounts for about 87.46% of modeled savings under these inputs. Reset energy savings to 39.42 and compare its share.

Explain Energy's contribution depends on the illustrative 200 W baseline and the assumed 50% reduction relative to Proposal A's LEDs.

Check yourself

What should you do before trusting a moved-control result?

Answer: Predict its direction, apply the shown relationship, keep the units, and reset to the worked baseline.

What does this small model leave out?

Answer: Only energy savings moves here. Field effects named in the technical boundary stay fixed.

Honesty note. This teaching model changes only energy savings. It is not a field prediction.

TryCompare the $92.59M purchase case with the $47.52M service case for 50,000 fixtures, then activate Check derivation.

ObserveThe total-cost gap is $45.07M, or about 48.7%; modeled energy savings account for about 87.46%.

ExplainThe result follows the illustrative energy baseline and the assumed 50% reduction relative to Proposal A's LEDs.

Ada: Under the illustrative 200 W scenario, the comparison gives a 48.7% TCO reduction. I’ll confirm the sums, then split the $45.07M savings into the energy and other cost contributions.

Totals first:

• Proposal A: 10 + 3.75 + (5.256 x 15) = 10 + 3.75 + 78.84 = $92.59M
• Proposal B: (0.540 x 15) + (2.628 x 15) = 8.1 + 39.42 = $47.52M
• Savings: 92.59 - 47.52 = $45.07M
• Reduction: 45.07 / 92.59 = 48.7%

Now decompose the $45.07M difference:

• Energy: 78.84 - 39.42 = $39.42M saved, which is 39.42 / 45.07 = 87.46% of the total
• Everything else (A’s $10M hardware plus $3.75M maintenance = $13.75M, against B’s $8.1M service fee): 13.75 - 8.1 = $5.65M saved, which is 5.65 / 45.07 = 12.54%

Energy is the larger modeled share, subject to the assumptions used for this illustrative comparison.

Proposal B’s 50% energy reduction relative to Proposal A’s LED installation is an illustrative model assumption. The reported Schiphol reduction was relative to conventional lighting; this comparison does not establish a guaranteed efficiency clause for the university scenario.

Technical boundaries
The TCO comparison deliberately does not simulate discounting, inflation, tax, failure risk, demand growth, depreciation, or uncertainty in energy prices; it totals the chapter's fixed fifteen-year line items.

Work the audit first, then check the displayed derivation.

Every number above is taken from the chapter’s own material and re-derived step by step.