Invest In Efficiency

by P. Horton and D. Murray

Reprinted with permission from the newsletter of the Energy Outreach Center, Olympia, Washington.

Looking for a solid investment opportunity with little or no risk, and a substantial return?

You may not have to look any further than your own home for this incredible, chance-of-a-lifetime investment. Opportunities probably exist to provide you with a return comparable to or greater than those of mutual funds, stocks, bonds, certificates of deposit, or other traditional investment strategies. By increasing the energy-efficiency of your home, you may receive cost savings as valuable as these investments, but without the risk involved, Additionally, the “earnings” are tax-free!

Stewart Brand said there are only two ways to create wealth: you can earn more, or you can spend less. When you invest money in a mutual fund or CD, you are hoping to earn more money, to increase your income. Most of us employ this method to create wealth.

On the other hand, the goal in investing in energy-efficiency is to obtain cost savings on heating, cooling, lighting, and other energy costs- You end up with more money because you spend less money. Initial investments can be made for little cash plus a fair amount of time, but they are virtually risk free. Moreover, you have more control over your investment and can better manage the resources involved. Unless the price of energy drops over the next few years (doubtful) you can count on a high return for your investment. You also gain the added benefit of greater comfort and livability, for example, increasing insulation or weather-stripping to eliminate drafts and cold spots ,saves you money and makes your home a more comfortable, pleasant place.

Some home energy investment opportunities also result in a more easily maintained home. If you replace your existing incandescent porch light (or, another heavily used incandescent light) with an energy-efficient compact fluorescent lamp, the fluorescent will use less energy to produce a comparable level of illumination and will last two or three times longer. That is two or three light bulbs you won’t have to buy, install, change, and discard. Not only can you save money, you can simplify your life.

The Washington State Energy Office has compiled a list of energy conservation steps and the expected payback period for each one. By using a simple investment rule of thumb, you can determine the equivalent rate of return you would have to receive on a traditional investment in order to match the cost savings you receive on an energy conservation measure. The “Rule of 72” says that you divide the payback period into 72 in order to determine the equivalent annual rate of return.

The following investment opportunities are listed in order of payback periods:

Immediate Payback: No Cost or Low Cost Actions

Equivalent rate of return: FREE MONEY! Rate of return approaching 70 per cent per year.

Lower your space heating thermostat (at night and whenever house is unoccupied)
Lower the water heater thermostat to 120 degrees F
Install a shower flow restrictors
Install gaskets behind electric outlet and switch plate covers

Less Than Two Years Payback

Equivalent rate of return: Incredible! You would have to earn thirty-six percent a year to match a two year payback on these measures.

Automatic setback thermostat (minimum 8-hour setback of 10 degrees F).
Do-it-yourself weather-stripping
Do-it-yourself caulking
Do-it-yourself storm windows (loss than $1 per square foot, e.g. flexible vinyl glazing)
Sheet metal furnace cover
Oil furnace annual tune-up
Hot water tank and hot water pipe insulation

Two to Five Years Payback

Equivalent rate of return: Outstanding! A mutual fund would have to pay out 14.4% yearly for five years in a row to match the savings possible with the items on this list.

Attic insulation to R-38
Under floor insulation to R-19 (over unheated spaces)
Furnace duct or boiler pipe insulation in unheated spaces
Do-it-yourself storm windows (less than $3 per square foot, e.g., rigid acrylic glazing)
Do-it-yourself insulated window covers (minimum R-3 and less than $5 per square foot)
Low-cost fireplace modifications (e.g.., flue top damper, inexpensive glass, doors)
Passive solar design in new construction
Solar heating of pools

Greater Than Five Years Payback

Equivalent rate of return: Very good! A certificate of deposit at my credit union returns about 5.5% right now on the initial investment. You can better that rate with measures from this list and make the world a greener place as well.

Insulated window covers (minimum R-3 and greater than $5 per square foot)
Commercially installed storm windows or insulated glass
Wall insulation
Replace conventional oil burner with flame retention burner
Fireplace inserts and wood stoves
Solar or wood domestic water heating
Energy-efficient appliances (especially refrigerators, freezers, and air conditioners)

It is a wise investment to make your home more energy-efficient. Where do you begin? Start small. How about buying that compact fluorescent lamp and replacing your most heavily used incandescent bulb? It will cost about fifteen dollars for the new lamp and, depending on use, you can count on the solid energy savings you will experience reduced hassle in your life. If you are interested in a more systematic approach to home energy investment opportunities, you should consider arranging for a comprehensive energy audit. A detailed documentation and analysis of the house – both the shell and mechanical systems – can point out those specific areas which provide the greatest return on investment, By targeting your efforts on these areas, you start saving energy dollars right away, and you build a base of cost-savings for the future as well.

Resources

The Energy Outreach Center provides a home energy audit service for residents of the Puget Sound area. Call Paul Horton at the EOC (360-943-4595) for more information about this service. Discounts are available to Olympic Renewable Resources Association (ORRA) EOC members.

The following publications contain valuable, detailed information on energy savings in the home. All may be found at the Energy Outreach Center library:

Albright, Roger. 547 Tips for Saving Energy in your Home. Storey Communications, Inc., Pownal, VT, 1990.
Javna, John, 30 Simple Energy Conservation Things You Can Do to Save the Earth. The Earth-Works Group, 1990.
US. Department of Energy, Oak Ridge National Laboratory, Weatherization Works: an interim report of the National Weatherization Evaluation – Report ORNL/CON-373, 1994.
McClintock, Michael. Homeowner’s Energy Investment Handbook., a guide to energy efficient home improvements that pay off, Brick House Publishing Co., Inc., Andover, MA, 1982.
Washington State Energy Office, Energy Extension Service. A Priority List of Energy Conservation Steps. Pamphlet RHC-1, 1992.