Amortisation period

Amortisation generally means writing an asset off over time. This term is also used to describe the process by which an investment yields more money than was initially expended on the purchasing or manufacturing costs. Consequently, the amortisation period or payback period refers to the time an appliance takes to save as much on running costs as it cost in the first place. For example, a photovoltaic system pays for itself through the remuneration for the power generated, whereas replacing an old boiler with advanced condensing technology pays for itself through the reduction of heating costs. The amortisation period depends on the manufacturing and purchasing costs, any subsidies received, and the difference between the previous running costs and the running costs following modernisation.