energylogic | homeowners | builders | commercial | provider | resources | training | calendar | blog | contact | home


www EnergyLogic


Economic Considerations

It is easy to measure energy efficiency. Using an energy rating tool, we can predict how much energy a home should use. With that information, we can examine a number of economic means to assess an improvement or a set of improvements.

However, before we do that, it is important to discuss things that are more difficult to measure. How do we put a price tag on comfort? What is the rate of return for greater durability? What is the simple payback for a safe home?

All of these things are part of a high-performing home. It is peace of mind that is difficult to quantify.

Energy Efficiency Economics 101

Factors

Money spent on improvements = Increase in monthly payments

Money saved by improving home = Decrease in utility bills

Some people ask about the payback on an efficiency-improvement measure. From our perspective, that's an odd question to ask. What is the payback on a fancy countertop or a jetted tub? We do know that, with the documentation of an energy rating, an appraiser may add value to the appraisal of your home.

Perhaps a better question to ask is about the rate of return on a given improvement or set of improvements. This allows you to compare the investment of improving the efficiency of your home with any other investment.

For example, consider a $250,000 home with a $2500 investment in energy efficiency which yields a modest $25 reduction in energy bills each month. Let's use a 30-year mortgage at 6%.

Initial purchase price $250,000
High-performance cost $2500 (a 1% increase in price)
Utility Savings $25/month
Monthly payments
with no improvements		 $1500 + $100 = $1600
Monthly payments with improvements $1515 + $75 = $1590

You have a positive cash flow of $10 from the first day.

We know of no other feature that you could select for your new home that could make a similar claim.