I am new to this forum. and I am impressed by the technical knowledge, and the fervor most hold for the green movement. What I haven't seen is any supported discussion of the economics of whatever option is being discussed. Or any discussion of how many dollars beyond the cost of standard methods is worth spending to achieve your goal. The main reason mass housing remains stuck in the 1980's design is that the public has not been made to see an economic advantage to more efficient design. Look at energy cost escalation since 1990. Costs are likely to increase at a higher rate in the future. Estimate costs above normal to add a feature; I love passive solar thermal mass. The cost to build this way is minimal. Show the consumer present value of energy and maintenance cost savings vs. cost to add the feature, and people will buy. All these great discussions of double studs, super-insulation, air-sealing; without financial facts to back it up, the public's first and last reaction is "why should I spend more money?" Without a cost discussion and performance metrics, how is a person supposed to make an informed decision? I welcome your responses.

I think you will find lots of discussion about cost effectiveness here - there are many ways to build green, the difficulty and debate revolves around what is the most bang for the buck. Modeling programs and standard metrics help - and they are discussed here too.

The other issue is that even though something has a reasonable 10 year payback, it may not be cost effective because most people move before that and don't get a higher price for the home when they sell. It might help if banks factored in Manual J calculations.

jonr hit the nail on the head. If 'green' features offer no contributory value when your home is compared to the one down the block there will be no incentive to your average home buyer/builder. I'm building my last home (good Lord willing) so I wanted to do it right and make it efficient. At the current utility rates the payback for me is more like 25 years. Hopefully I'll be around that long! I think that the recent changes to local building/energy codes will help but there is more work to be done by policy makers to spur green building.

Posted By jonr on 12 Dec 2010 02:53 PM
I think you will find lots of discussion about cost effectiveness here - there are many ways to build green, the difficulty and debate revolves around what is the most bang for the buck. Modeling programs and standard metrics help - and they are discussed here too.

The other issue is that even though something has a reasonable 10 year payback, it may not be cost effective because most people move before that and don't get a higher price for the home when they sell. It might help if banks factored in Manual J calculations.

Most people buy homes based on their ability to afford a mortgage. Most mortgages in my area are based on income and cost of heating. If the house I am selling requires 300 less a month to heat, a person with lower income can afford it. I think that will translate into higher value.

It should but the appraisers generally say otherwise.

"It should but the appraisers generally say otherwise."

Jon; I appraise for a living; appraisers don't make the rules and appraisers do not determine value. Appraisers merely put on paper what is going on in the market.So it is not the appraisers saying otherwise, it is the market. If an energy efficient house saves money and people are willing to pay for it, appraisers will reflect that. The problem in that preceding sentence is "if people are willing to pay for it". The general public has not yet understood the savings and the value today of larger saving tomorrow.

RE; a payback period longer than expected home ownership; a pool takes longer to pay back than 5 to 7 years, but people pay for one because they expect the next buyer to pay for it too. They recoup the capital output at the end of their ownership period. Builders need to do a better job explaining the value of the feature they build in.

"I think you will find lots of discussion about cost effectiveness here - there are many ways to build green, the difficulty and debate revolves around what is the most bang for the buck."

I see lots of hyperbole; the typical " my system is better than yours." I am guilty on that front as well. But I see no hard numbers; what is the cost of a double stud wall vs single 2x4 and how much does it save annually? I've read through 15-20 pages here and haven't seen 1 hard numerical example.

Even builders whose business it is to know can't give you the facts. I 've asked more than 20 different contractors how much to build a dome. They all say 20%+ over typical house. They say there is way more money in concrete and steel than wood frame. But there is 35 yds of concrete in a 6 inch slab for 1900 sf floor of a 2 story 3200 sf structure. There is only 45 yds of concrete in the dome for the same 1900 sf footprint, 3200 sf living space. Apples to apples, the dome is 50% of the cost of the frame house to build when comparing shell to shell. So not only does the dome have numerous energy advantages but it is cheaper. This is the type of numerical discussion that gets peoples attention and convinces them.

So I'll get off my soap box now. I do hope that more discussions here in the future will offer numerical analysis , costs and benefits.

my math says that a energy efficient house can be built for the SAME or CHEAPER price as a regular house built these days and people should not ask or expect any help from financial institutions or appraisers. it's all about switching the money from mechanical systems to improving the envelope. it's about switching the money from expensive foams to cheaper cellulose or even blown in fiberglass. it's about switching money from granite counters and oak stairs to efficient lighting and efficient ventilation but even without the lifestyle changes an energy efficient house can be competitive. the list can go on. everybody assumes a house has to be more expensive if it's energy efficient but I do not think so. hopefully I'll have the proof soon enough.

there are also some other guys outhere with the same wrong math and that give me hope

http://www.solartoday-digital.org/solartoday/20081112/#pg26

adi
http://torontonetzerohouse.blogspot.com/

"At the current utility rates the payback for me is more like 25 years"
Thats the kicker - when has the cost of fuel remained constant for 25 years? At the average rate of inflation over time (3%?) the cost of fuel will be more than double your current cost (what was your cost of fuel in 1985?) so the "payback" will be far less than 25 years. In the meantme you are more comfortable. I don't know the formula offhand, but what to look at is not the "payback" but the interest rate you will earn on your money over that period, and I will guarentee it is going to be far more than you can get in a bank. Or you can always invest in the stock market where you get quarterly statements showing how much you've lost.

If you want the best prices on building a dome, I think you'd have to get quotes from dome builders. When a builder is outside their comfort zone they will want to pad in some safety margin. I wouldn't want to pay someone to learn a new system. The builder who knows their costs down to the nuts can come in competitively and prevent any nasty surprises. I saw an episode on "this new house' about dome homes and the dome builders association spokesman did say an entire dome home as about the same concrete content as a comparable foundation of traditional home. Interesting tidbit.

Homes in general it will take higher energy prices and better consumer education on better home construction for it to be valued at time of purchase. Especially here in MN where it is 20 below zero windchill and oil prices at $90 barrel and climbing. Heating bills will be a wakeup call for folks! The only DEflation we will have will be the temperature and the metrodome!!!

I think w/ the downturn and lack of easy credit will result in people staying in their homes much longer. The longer you have your home the longer you can justify an investment for payback. Especially in the environment we have now with fewer ways to invest your money for a decent yield. There is little opportunity cost when you get .5% at the bank. 10-15-20 yr paybacks on a more efficient home might start looking much better.

Posted By Bob I on 13 Dec 2010 12:43 PM
"At the current utility rates the payback for me is more like 25 years"
Thats the kicker - when has the cost of fuel remained constant for 25 years? At the average rate of inflation over time (3%?) the cost of fuel will be more than double your current cost (what was your cost of fuel in 1985?) so the "payback" will be far less than 25 years. In the meantme you are more comfortable. I don't know the formula offhand, but what to look at is not the "payback" but the interest rate you will earn on your money over that period, and I will guarentee it is going to be far more than you can get in a bank. Or you can always invest in the stock market where you get quarterly statements showing how much you've lost.

Average electricity and natural gas prices in the US have actually fallen from 1980s levels, when adjusted for inflation. Predicting future energy prices is a fools game (played out daily in the commodities markets .)

That said, if we're anticipating carbon taxation and import-duties on fuel in the US on a par with what's happening in the EU, a super-efficiency house in the US may look like a real bargain in 10 years.

Net present value (NPV) inflation/deflation and discount assumptions dramatically affect the cost-effectiveness in a financial analysis, but they rarely catch the kinds of tectonic shifts that can occur in marketplaces.   R-values and efficiencies specified in building codes are typically done with a 25year NPV analysis on utility cost savings, and while they tend to work on AVERAGE, in the particulars the numbers are all over the place.  In high fuel/utility cost areas it'll go NPV+ much sooner, but in the lowest cost areas it may never happen. The quality of air-sealing on a place isn't built into codes in most places, but would be one testable detail in ANY utility-cost environment that would be cost-effective on a much shorter term basis. SFAIK outside of a few municipal codes and (IRRC) California Title 24 it's still legal to build leaky sieves of buildings, as long as they met the letter of R-value minimums.

It terms of the total construction cost, going with 1.5x or 2x code-minimum on R value and bringing the ventilation rate under 0.5 ACH/50pa isn't very expensive at all, and if done with cost in mind can be rationalized easily in terms of the lower cash flow.  The mortgage for installing it at a higher R is tax deductible, whereas your utility costs are not. The ROI can be quite good if you're careful at the design & construction phases, even if it's not reflected in the house value to an assessor.  But most homeowners balk at anything that isn't NPV+ in 2 years, let alone 25 or 50. Even code-minimums don't have anywhere near that kind of return, which is probably why code minimums are necessary in the first place. 

Anything over ~R7 walls meet a comfort-minimum for most of the US, even if it's still wicked expensive to heat & cool. But the installed cost delta between R8 batts and R13 batts in 2x4 construction is nothing like a 2x adder. But adding R20 in foam to the exterior, well...  (let's just say the financial analysis breakdown is a little different.)  Most people aren't even going to add R5 unless it's required by code (though still viable in a 25year NPV analysis in many areas.

"Average electricity and natural gas prices in the US have actually fallen from 1980s levels, when adjusted for inflation"
The cost of insulation you spend today that will save money in the future goes down over time when adjusted for inflation.

Posted By Bob I on 13 Dec 2010 01:25 PM
"Average electricity and natural gas prices in the US have actually fallen from 1980s levels, when adjusted for inflation"
The cost of insulation you spend today that will save money in the future goes down over time when adjusted for inflation.

Yep, the annual maintenance cost on already-installed insulation is near zero, no doubt.

And the higher the R and lower the air infiltration, and lower U-value on the windows, the smaller/cheaper the mechanical systems to support the HVAC loads become too.  Taken to the logical limits, you end up at PassiveHouse, which isn't a bad place to be. 

Trying to spec R-values on some sort of NPV analysis on utility costs or home valuation is just silly, but that's the first-instinct of many/most home builders & buyers. For new construction it boils down to those who actually care about the thermal design & performance, and those who only build to code minimums (often failing even at that modest standard in practice.) The difference in up-front costs isn't usually very dramatic, but it takes a (to now) unconventional attitude to get it designed &  built.  In some markets it's easier to sell a spec house by spending the money on energy-pig upgrades like deluxe master-bathrooms w/ spas & side-spray showers than a 2x-code-R insulation + air-sealing package.  Even amongst greener buying crowds it's easier to sell solar roof-ornaments like thermal panels or radiant floors than a high-R envelope & drainwater heat recovery with a much higher impact on total energy use.  It's only human to be attracted to the parts you can see & feel.

Cutting the heating & cooling costs by half or more with the building envelope just isn't that all expensive when done up-front, by design.  And putting it into the envelope is generally a better value than highest-efficiency mechanical systems that require much more maintenance, and aren't free of upfront costs either.   The electric resistance heating of a PassiveHouse isn't very efficient from a source-fuel point of view (~30% on a fossil-fired grid), but the loads are so low that the efficiency of the system is irrelevant, while the up-front cost of a higher-efficiency system is.  If one is considering spending $25-30K on something like a geothermal heating system that will cut heating/cooling costs in half, one should really be doing the math on the cost-adder of going super-insulated, cutting the heating/cooling costs by 3/4 or more with minimalist mechanical systems might be, and don't forget to factor in the maintenance & replacement costs on a 25year NPV analysis.  Not every house would hit PassiveHouse load levels with even a well-placed $25-30K on the building envelope, but it's a substantial fraction.  And where you can, it's essentially cost-neutral up front, and net-positive from day 1.

In some places (notably Austin TX) codes are ratcheting up on new construction toward  "net-zero-capable", meaning it's designed built & oriented that it's at least possible to make it energy net-zero on an annualized basis by adding active solar. The cost of getting there isn't proving to be very egregious at all.  When it's demanded by code, the designers & builders can and DO figure out a way.  On any custom home design, there is also usually a way. The costs of a whole bunch of solar can be prohibitive in comparison to an even deeper cut in the load with envelope upgrades, but it's at least a step down the right road.  The amount of solar technology it would take to offset the loads of typical code-minimum homes in the US won't come close to even fitting on the building.

Trying to spec R-values on some sort of NPV analysis on utility costs or home valuation is just silly,

I disagree with at least one way this could be interpreted. You do want to choose R values based on economics. Utility costs and valuation are just two of the numbers that you need to plug in. What those two numbers should be is very open to debate - personally, I would use energy rising at the inflation rate and no effect on home valuation. But if you think otherwise, use different numbers - but still do the calculations and choose accordingly.

In some markets it's easier to sell a spec house by spending the money on energy-pig upgrades...than a 2x-code-R insulation + air-sealing package.

I would say in most markets.

Yep, the annual maintenance cost on already-installed insulation is near zero, no doubt.

when I said The cost of insulation you spend today that will save money in the future I was referring to saving money on energy useage in the house, not on maintaining the insulation. I agree that there are other reasons for improving the energy efficiency of homes, common sense being one, rather than trying to prove that there is a "payback" in X number of years. But for those that insist on an economic argument, I still believe that the value of the investment in energy efficiency is higher than most other returns available today.

If you're doing a net-present-value calc at ANY (within plausibility) discount or inflation rate, in a 2-6 year calc (the relevant range that would explain homeowner investment behavior) even code-minimum insulation would come out NPV-negative. Just make it reasonably air tight and crank up the burners/compressors. The difference in heating & cooling costs for an uninsulated barn vs. a code-min house over a handful of years is less than what it would take to insulate to code-min. By year 6 the average US homeowner has moved on, and the utility costs are the next owner's problem.

You just can't do it by the most-simple economic analyses that most people prefer. Taking a WAG on the 25 or 40 year inflation & interest rates, and downsizing factors on the mechanicals, and how much R/$ either make it work, or not. Going to R40 solely with closed cell SPF will never make sense, but it's not too tough in 7000-8000HDD climates to make the 25 year argument for R40 with a combination of EPS or iso + cellulose with modest amounts of SPF for sealing, using a pessimistic (but still plausable) projection on energy inflation.

In CA under Title 24 they don't really give much of a choice- if you own a drafty uninsulated shack it HAS to meet an upward-ratcheting energy efficiency minimum, enforced at the time of sale. If you don't upgrade on your own while living there, it has to meet the current spec for existing buildings for the year it's sold. It's more lax than the new-construction specs, but you can't get away with selling an uninsulated goat shed as a house anymore (at least as written into the code.) Minimum specs all went through extensive long term cost-effectiveness analysis arguments before becoming enshrined in Title-24, yet it still has it's detractors/complainers.

Posted By Bob I on 13 Dec 2010 04:34 PM

Yep, the annual maintenance cost on already-installed insulation is near zero, no doubt.

when I said The cost of insulation you spend today that will save money in the future I was referring to saving money on energy useage in the house, not on maintaining the insulation. I agree that there are other reasons for improving the energy efficiency of homes, common sense being one, rather than trying to prove that there is a "payback" in X number of years. But for those that insist on an economic argument, I still believe that the value of the investment in energy efficiency is higher than most other returns available today.

But the heating/cooling cost differences going from an R15 clear wall to an R40 clear wall aren't often as commensurate with the energy savings the way going from R7 to R15 is.

But looking at the after-tax ROI of going from R15 to R40 clear walls and assuming it's paid for with interest-subsidised dollars, and also assuming you'll live there for 20-40 years it beats most Wall Street averages over similar time periods.  If you're selling in 5 years and it adds no resale value, well... maybe not- takes a sharp pencil to find out.  But the statistical noise of housing pricing on what the house eventually fetches on resale is still probably bigger than the cost-adder of a high-R envelope.

But for those that insist on an economic argument, I still believe that the value of the investment in energy efficiency is higher than most other returns available today.

Up to some point - but there is an infinite selection of different investments in energy efficiency - so pick the most efficient ones. Every dollar you spend on green project A is a dollar you no longer have to spend on green project B (which might have a better return).

Thank you all for your wonderful participation and comments. You have just reinforced my concerns. Everyone here has a great interest in the greening of America. Yet not one of you has said " do this at this cost and it saves this much money over the next 10 years."

"But looking at the after-tax ROI of going from R15 to R40 clear walls and assuming it's paid for with interest-subsidised dollars, and also assuming you'll live there for 20-40 years it beats most Wall Street averages over similar time periods. If you're selling in 5 years and it adds no resale value, well... maybe not- takes a sharp pencil to find out. But the statistical noise of housing pricing on what the house eventually fetches on resale is still probably bigger than the cost-adder of a high-R envelope." Great statements; I don't disagree with you. But where are the numbers?

"Not every house would hit PassiveHouse load levels with even a well-placed $25-30K on the building envelope, but it's a substantial fraction. And where you can, it's essentially cost-neutral up front, and net-positive from day 1." If it takes 25-30k to turn an unbuilt new spec standard house to PH standards through insulation and air-tight, you're going to have a very tough sell.

" In CA under Title 24 they don't really give much of a choice- if you own a drafty uninsulated shack it HAS to meet an upward-ratcheting energy efficiency minimum, enforced at the time of sale. If you don't upgrade on your own while living there, it has to meet the current spec for existing buildings for the year it's sold. It's more lax than the new-construction specs, but you can't get away with selling an uninsulated goat shed as a house anymore (at least as written into the code.) Minimum specs all went through extensive long term cost-effectiveness analysis arguments before becoming enshrined in Title-24, yet it still has it's detractors/complainers." I live in Ca and work in Real estate; I have never seen any evidence of this nor any type of enforcement. Sure, a new house must meet Title 24, but there is no requirement I know of to update an existing building. Please identify your information source so I can be in compliance when I sell.