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Economic Considerations

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

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

All of these things are part and parcel 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

Many people will ask what the payback on an efficiency improvement measure. From our perspective, it's an odd question to ask. After all, what is the payback on a fancy countertop or a jetted tub? What we do know is that an appraiser may add value to the appraisal of your home with the documentation of an energy rating.

A better question to ask is what is my rate of return on a given improvement or set of improvements? This allows you to compare an investment in improving the efficiency of your home with any other investment.

For example, consider a $250,000 home with a $2500 investment in energy efficiency that yields a very modest $20 reduction in energy bills. 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. It just makes sense.