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Home energy efficiency: no surprise, very fast paybacks to be expected

November 23rd, 2010 · 1 Comment

Very simply, across the economy, energy efficiency is almost certainly the top investment option — as individuals, businesses, communities, government … The rate of return possibilities are tremendous and unlike gambles to grow business or play the stock market, this is ‘guaranteed’ cash in the bank.

And, it is ‘cash in the bank’ in terms of cost savings. It is ‘cash in the bank’ in terms of job creation. It is ‘cash in the bank’ due to improved resiliency in the face of (manmade or natural) disaster. It is ‘cash in the bank’ due to reduced pollution impacts and reduced GHG emissions. It is ‘cash in the bank’ many times over in many different ways.

Sadly, too many people buy into the concept that we need some great invention to do anything meaningful on climate change.

Sadly, too many people falsely believe that there is some great unaffordable cost to Energy Smart practices.

We need to push those false notions aside to enable transformational opportunities toward a prosperous, climate-friendly future.

Comments from two recent conversations seem relevant prior to jumping into a discussion of a just released report on the payback periods for improved residential building energy efficiency codes.

  • In a discussion about energy / energy efficiency / energy security, a (rather) senior person who focuses on business processes commented to me “it seems like this is really all about technology” after I had, perhaps, spent too much time speaking rhapsodically about some Energy COOL systems and concepts. No, no, no … in fact, a tremendous share of our challenges in developing a prosperous, climate-friendly society derive from misguided incentives, procedures/policies/habits that work against Energy Smart practices, etc … With (relatively) minor shifts in building codes, standards, tax codes (and financial accounting practices), we could drive tremendous changes that would improve the economy while reducing our fossil-foolish dependencies.
  • An acquaintance bought a ‘green show home’ where, almost literally, no expense was spared. While there were reasons for this no-holds barred approach, a simple fact: the money that was poured (almost literally) into the house was well beyond the legitimate market value and it sold at a substantial discount to the construction price. The acquaintance: “while this green stuff is great and I love it, I guess it is just too expensive for the marketplace”. On hearing that, I spent some time walking through how a normal (rather than over-the-top) investment in energy efficiency (and ‘green’) not only improves the home’s livability and not only reduces the damage on the environment, but also has incredibly fast payback periods better than anything a (reasonable) person could expect from Wall Street.

A few days ago, the BCAP online code environment and advocacy network (OCEAN) released an “incremental cost analysis” on residential energy efficiency that I will share with these two. That discussion begins

One of the major barriers to energy code adoption is the concern from some in the residential building community that the cost of upgrading to the latest model energy code would be prohibitive. To address this issue, BCAP undertook a study to quantify the incremental construction cost of upgrading to the 2009 IECC in each state where such an analysis was feasible.

The IECC is the International Energy Conservation Code and see here for an overview of the 2009 IECC. For more about building codes and their status, the Department of Energy (DOE) Building Energy Codes site is a good place to begin.

Back, however, to the BCAP OCEAN analysis (full report). Across 29 states for which analysis was possible, the BCAP found that the average additional construction cost due to upgrading to the 2009 IECC from the 2006 IECC (about a 15 percent increase in energy efficiency) would be $818.72 for the national average 2,400 square foot home selling for $267,451. The annual utility savings: $243.37.

Wow!

That does sound tremendous, doesn’t it. On average, due to upgrading from 2006′’s building standards, a homeowner would pay a bit more upfront but get the costs paid back in less than four years (actually about 40 months … 3.36 years to be exact) and the savings would keep on coming.

However, that is actually the pessimistic way of looking at things. How many people pay 100%, upfront, for a home? We don’t need to look it up to arrive at the answer: not many. A 20 percent downpayment would go up by $154.78 and, with a 4 1/8th percent 30-year mortgage, that monthly payment would go up by $3.01. Between that higher down payment and the increased monthly payment, the homebuyer would pay $180.90 in additional mortgage related costs in the first year while have $243.37 of lower utility bills. A $62.47 savings in that first year. And, $36.12 in higher mortgage payments from then on with annual savings of $207.25. Over a 30-year mortgage, buying that 15 percent more energy efficient home would save the average American well over $6000 (without even counting inflating energy costs).

“A home is usually an individual or family’s biggest lifetime investment, so it makes sense to protect and maximize the value of that investment by building in energy efficiency from the ground up - and reaping the benefits of lower energy bills from day one.” (BCAP Executive Director Aleisha Khan)

Please note, however, that the 2009 IECC isn’t some revolutionary, PassivHaus-like, concept that maximizes energy efficiency — it is a moderate improvement over existing codes rather than something that pushes the edge in terms of available supplies or building industry practices. E.g., while we could do far better than this (which is something that DOE, BCAP, and others are seeking to do), the 2009 IECC is clearly a minimum of what we should expect in our homes.

Technology Invention vs Process and CtB vs CtO

Going back to my opening discussion.

  • The challenge isn’t inventing technology, pulling rabbits out the house, but moving processes, practices, financial incentives, and otherwise away from favoring fossil foolish choices toward enabling Energy Smart paths toward a prosperous, climate-friendly future.
  • Yes, it will (often) cost more to build that more energy efficient house. (Of course, as long as the ’size’ remains the same.) That is, however, a “cost to buy” question. The real question is how much it will cost to own. And, in this case, that upfront investment drives a notably lower cost to own — a lower cost that is apparent from day one, with the true incremental cost to the homeowner paid back in less than eight months. More to buy, (far) less to own.

Very simply, the best single ’societal’ investment would be taking steps to break through the logjams that inhibit Energy Smart practices that would enable job creation, drive down our fossil foolish tendencies, improve economic performance, and reduce pollution.

The payback — that return on investment — is tremendous across so many arenas that it is actually quite difficult to get to a true total return on investment. All I know, anyway you slice it, this does look to be “The BEST investment” we could make.

Hat-tip: Green Building Advisor and American Solar Energy Society.

For a related, excellent discussion, see Celebrating a historic week for building energy codes highlighting how the 2012 IECC will be even better than the 2009 IECC.

Last week, members of the International Code Council (ICC) approved changes to building energy codes – the CAFE standards of the buildings world – that will require new and renovated homes and commercial buildings to use 30 percent less energy than those built to current standards.

The votes are truly historic. Never in the history of the ICC have such enormous gains in energy efficiency been made in such a short time.

The changes, which will occur in the 2012 version of the International Energy Conservation Code (IECC), leverage sensible and cost-effective strategies to reduce energy, …

An average home that’s 30 percent more energy-efficient than the current standard returns more than $500 annually in energy cost savings to homeowners even after factoring in the capitalized cost of the improvements

Tags: Energy · architecture · business practice · energy efficiency

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