by Don Ames
Government and Utility based programs that offer weatherization and other energy saving retrofits are concerned about the cost-effectiveness of the program. Simply stated, how many months or years will it take for the cost of the work to pay us back in energy savings.
You and I should also be concerned with the length of the payback period. We need to decide how we are going to handle the decision to spend money on a retrofit that will not pay us back in energy savings for a number of years - especially when the payback period is longer than the life expectancy of the product.
You have an 80% efficient gas furnace that is 20 years old. You decide to upgrade the furnace with a 95% model that will cost $3,500.00. The new furnace will save you $120.00 per year in heating costs. At that yearly payback amount, it will take about 29 years to get the $3,500.00 back in energy savings. The life expectancy of the new furnace is 25 years. Does this make energy saving sense?
The question remains, is it cost effective to replace the furnace? The simple answer, considering just the dollars and cents, is no - it is not cost effective.
Now let's look at a few things that may effect your decision concerning the cost-effectiveness of a energy retrofit.
The old furnace, beyond it's life expectancy, may give-up-the-ghost on a very cold winters evening and the new furnace would have been worth it's weight in gold. The life expectancy of the old furnace is a consideration for keeping warm, but not necessarily a consideration for justifying the additional cost for energy efficiency.
The cost of gas will go up in the coming years and shorten the payback period. In the initial calculation, increased fuel cost were not factored in. It is difficult to forecast how much fuel costs will rise and therefore, fuel cost are usually not part of the payback calculation, but should be.
A new efficient furnace will contribute less carbon to the atmosphere and have less impact on global warming. Some might look at just the dollars and cents and decide the cost of the new furnace is not worth it, the payback period is too great. Others will look at the reduction of carbon and figure - the heck with calculating just a financial payback period, in carbon credits, the new furnace is cost effective right now.
Energy we don't use is energy we don't have to produce. The higher efficient furnace will use less power, which means the world will have to produce a little less power, which means the world can reduce carbon production and conserve natural resources. These are things that even a moderate environmentalist will use to effectively shorten and justify any payback period.
Yes, I know it takes power and natural resources to manufacture a new furnace. Realistically, the power and resources used to make a new furnace should be considered in the payback calculation. There is even a difference if the furnace is made in the U.S. where there are EPA guidelines or made in China without restrictions.
A work force is needed to build a furnace. Putting people to work is a great idea and important if people are going to be able to pay their power bills. For the person who is out of work, the heck with payback periods, just buy a new furnace.
It is my opinion that replacing a furnace or undertaking any other home energy saving work is a little more cost effect if the following items are true:
Now that we have recognized a number of things, besides dollars and cents, that effect the cost-effectiveness of energy efficient retrofits, let's take a closer look at some additional determining factors.