great discussion! Something that isn't discussed much in general. I hear people get all excited that they are going to cut their bill 10-40 bucks a month after putting in thousands of dollars. They are too ignorant and not informed by the industry. I tell those same people I know how to cut your mortgage payments down by hundreds or even to zero!!!! Just pay off your house Another is people will justify long paybacks because they will live in their homes for 15-30 years. They are ignoring opportunity cost of money where they'd be money ahead had they invested the money elsewhere more than making up for the energy savings. Are there any data that higher efficiency homes actually sell for more? My anecdotal evidence is not really. Until the public gets educated and the future utility savings get factored in through a present value calc, I doubt it will effect prices much. The comfort factors probably factor more than anything.

I think Slenzen framed the discussion nicely. I would like to see the data as well. His point about education is a very valid argument to put forth. But where does the public go for such an education?
I worked with farmers on big financial matters all my working career. As one Farm Management Specialist put it, "farmers are not necessarily profit maximizers but profit satisfiers." I think that is true of John Q Public as well. As long as there is a positive balance in the checkbook all is well.

All of the cost details are provided at http://www.residentialenergylaboratory.com/costs.html . Payback times are estimated for each of the energy-related improvements.

I find it interesting that in this case, insulation upgrades had a considerably worse ROI than PV solar. And if I had to convince a prospective buyer about the value of my energy upgrades, I think PV solar would be easier to explain than insulation hidden in the walls.

Another is people will justify long paybacks because they will live in their homes for 15-30 years. They are ignoring opportunity cost of money where they'd be money ahead had they invested the money elsewhere more than making up for the energy savings.

If you assume that your after tax ROI on other investments and energy cost inflation are equal, then straight-line works. Ie, just figure out how long it will take to pay back (simple division) and if you are sure you will be there that long, do it. Even if it is 20 years. But returns on other investments, taxes, how long you will stay and energy price increases are hard to predict.

Posted By jonr on 26 Apr 2014 07:37 PM
I find it interesting that in this case, insulation upgrades had a considerably worse ROI than PV solar. And if I had to convince a prospective buyer about the value of my energy upgrades, I think PV solar would be easier to explain than insulation hidden in the walls.

I was also surprised by those results. However, keep in mind that these insulation upgrades were on top of code-minimum insulation values in 2010. It makes me think that current code-minimum values might be pretty close to optimum values from a financial tradeoff. I am planning on investigating this in more detail in the future.

Concerning your comment, about the solar PV being an easier sell, indeed, when I sold some land that had an RV with a very small solar PV system on it, the solar PV had appeal to some of the potential buyers.

Posted By jonr on 26 Apr 2014 08:14 PM

Another is people will justify long paybacks because they will live in their homes for 15-30 years. They are ignoring opportunity cost of money where they'd be money ahead had they invested the money elsewhere more than making up for the energy savings.

If you assume that your after tax ROI on other investments and energy cost inflation are equal, then straight-line works. Ie, just figure out how long it will take to pay back (simple division) and if you are sure you will be there that long, do it. Even if it is 20 years. But returns on other investments, taxes, how long you will stay and energy price increases are hard to predict.

Jonr, that was also my conclusion after looking at general and energy inflation rates compared to invest returns, as documented at http://www.residentialenergylaboratory.com/comparison_of_pv_systems.html, Figs. 18-21.

"I think Slenzen framed the discussion nicely. I would like to see the data as well. His point about education is a very valid argument to put forth."

I hope part of the "education" we refer to is that the value of high performance houses is not just a math problem. How about comfort. How about low monthly utility bills once retired, turning the heat up higher because of blood thinners and being able to afford to live in your home. Which would you rather maintain? A larger heat plant that works harder or insulation?

Conservation is supposed to be a virtue as well right?......and let's not forget the folks that play the "I use less KW's than everybody else game". They derive satisfaction from conservation.

Other things don't add value on the surface. During the last building boom, we only did custom homes because we couldn't compete with the lowest bidders on a furnace and ducts for spec homes. Code minimum duct systems have entire neighborhoods where everyone thinks it's normal for the second floor to be hotter in the summer and colder in the winter than the first floor......well the fix is about a $500 difference when the house is built and a multi thousand dollar difference after the fact. Instead people see a Marble counter top or a wood floor paid for by their discomfort. Could we determine the "pay back" for my duct system with math?

Does one purchase a high performance or luxury car simply because of good gas mileage or added resale? Sometimes people are willing to pay more for comfort, and others bought a Chevy Volt.

I think that assumption that the "payback" we are discussing is a linear equation suggests that further education is required.

"I find it interesting that in this case, insulation upgrades had a considerably worse ROI than PV solar. And if I had to convince a prospective buyer about the value of my energy upgrades, I think PV solar would be easier to explain than insulation hidden in the walls."

Much like the marble counter top versus the hidden duct work comment I made above Jonr.

During three geo bids this week I refered potential clients to an energy auditor. With closed loop geo each incremental ton after the first is in the $2,500 range. That will by a lot of insulation if we can get the load down with it and it reduces our duct and electrical requirements (as well as first cost and operating cost).

As I said, I think it's folly to look at this as a simple math problem.

the ideal would be to eliminate air sealing and insulation all together and simply install 25 kw solar systems, right?

After building three 3000-3500 sf houses in 2002-4; all of which had granite counters and brass faucets which would likely all end up in the dumpster in 25 years, and no interest in upgrading to better insulation systems (which would be permanent) . I vowed never to build homes like that again. They can dispose of their money any way they see fit, but I do not have to be part of it. Should have made that decision earlier.

Posted By Bob I on 27 Apr 2014 07:18 PM
the ideal would be to eliminate air sealing and insulation all together and simply install 25 kw solar systems, right?
...snip...

I don't think there are many of us on the forum that would support that approach. From both a financial and comfort standpoint, I like the philosophy expressed behind NREL's BEOpt simulation program. If your goal is to achieve the best financial payoff over whatever time period that you desire, you keep adding insulation and other energy improvements to minimize the overall initial investment plus operating expenses over the desired time period. If your goal is net-zero source energy, then more insulation might be required, plus energy generation will be required. So add extra insulation until the financial tradeoff would be better spent on providing more solar panels instead of more insulation.

BEOpt allows the user to make assumptions as to energy inflation rates, cost of money, etc., so the results can be customized to fit the philosophy of the user.

In my particular case, building a house in 2010, the minimum insulation levels required by IECC code in zone 6 were already significant, including R-19 in the walls, R-38 (with a raised heel) in the ceiling, and R-10 in the crawl space walls. I increased these insulation levels, but the savings asymptotically approach zero, so there are limits to what makes good technical sense. In my area of high solar insolation, using passive and active solar made excellent technical and financial sense.

keep in mind that 'CODE" is like a D- in school - not good, but still a passing grade. Not exactly a strong recomendation for the ideal insulation levels.

As a code official, I remind folks that "Code" is the bare minimum standard. So when someone builds something to code (as Bob points out) it's closer to mailing in your homework than studying hard at school.

Posted By joe.ami on 28 Apr 2014 09:03 AM
As a code official, I remind folks that "Code" is the bare minimum standard. So when someone builds something to code (as Bob points out) it's closer to mailing in your homework than studying hard at school.

I like that analogy better.

Pulling a D isn't really a passing grade in most schools anymore unless it's in phys-ed.  With a D in my local public school district you'd have to go to summer school to pull those grades up to a C-.

That said, a lot of code-min construction is truly D work, work that is all too often given the "gentleman's C" by inspectors if they "promise to do better next time."

Great discussion with truly great information for consideration.

We have always felt that for green building to successful, there must to be both a benefit to the environment and a cost incentive to the home owner. There is often a cost incentive that can be achieved during new construction that simply can’t be achieved during renovation. For example, if you are building a new home that has slab-on-grade, you can have HR floor heating for several hundred dollars. If you want to add HR floor heating to an existing home, you are looking at several thousand dollars. An order of magnitude acquisition cost difference is significant to a ROI analysis. It is also much more cost effective to have a well insulated and sealed building envelope during new construction, then attempting to achieve this via renovation. Frankly, we would rather see more well insulated/sealed homes heated with inexpensive electric baseboard heat, than lousy insulated/sealed homes heated with expensive heating systems. Wasting money that can be better put to use is simply waste and the only green associated with this practice are the dollars going to the folks who advocate this practice.

ROI must always be considered and does matter to folks who have more brains than dollars, which needs to be the majority of the population. The environmental practices of the majority of the population will have a larger impact than those of the minority.

What Lee has shown is that code min insulation + solar can (depending on specifics) provide lower net energy use at less cost than better than code insulation and no solar. So code minimum insulation might be the A+ smart move (financially and maybe environmentally). Don't assume, run the numbers....

Again it is not a linear equation, you must factor in comfort or all your money is wasted.

It would be interesting to see actual data regarding the comfort differences between well insulated/sealed houses and super insulated ones. For example, is it "the average person is able to achieve equivalent comfort with the thermostat down one degree because of the increased mean radiant temperature"?

Jonr, I speak in terms of HVAC because that is the main scope of my experience. Code minimum housing generally has code minimum duct work and large temperature disparities throughout the home.
Superior insulation and superior duct systems achieve greater balance throughout a home.......
Obviously much more to consider, I was just reiterating that the value of a higher performing home is not just a financial ROI it may be a comfort ROI or perhaps partially resale ROI or enviromental impact ROI etc.

Bob I..... Voted Best answer!  " They can dispose of their money any way they see fit, but I do not have to be part of it."

Posted By joe.ami on 29 Apr 2014 10:09 AM
Again it is not a linear equation, you must factor in comfort or all your money is wasted.

True dat!  From a sheer comfort-factor point of view there is more to super-performance windows than there is to super-performance walls.  Measured solely against energy cost savings it's a crappy investment, but that's not to say it isn't "worht it".

The PV solar vs. envelope efficiency issue is becoming more pointed, now that PV solar is rapidly evolving  from being the most expensive possible energy source to becoming the absolute cheapest energy source (which will be within a decade. ) The energy cost will no longer be as big an issue as grid reliability and access will be.  A higher performance/lower energy building is a good hedge, even if in simple net-metered current conditions dollars and cents it may seem like just adding more PV is the "right" deal. Net metering at retail is too simple a model to survive even the lifecycle of a PV array, let alone that of a house.  And if the regulators screw it up, leading to a too-expensive or unreliable grid, the higher performance house wins big.

When the building envelope has sufficient performance that PV necessary to hit annual net zero energy with an array that fits on the roof (leveraged by heat pumps), there is a school of thought that says the building performance is "enough".  From a pure energy use point of view it is, if you had sufficient storage to turn late-summer photons into mid-winter heat, but that's a heluva lot of battery, unaffordable with any technology.  Net Zero Energy has been a good design target for bringing the building envelope up to snuff,  but it really isn't important at all from a grid operations and energy source point of view.  The net isn't nearly as important to the grid operator as the peak, and while PV does a great job of shaving the cooling load peaks, heat pumps add to the wintertime load peaks. (A combination of micro-cogenerators and heat pumps is a more ideal mix for managing wintertime peaks, but micro-cogens are still pretty rare in the US, far rarer than heat pumps.)

In the next 27 minutes (or maybe that's 27, months, but certainly not 27 years :-) ) the net-metering deals going forward are going to change- they simply have to, or you won't have enough people paying for the grid to have reliable mid-winter power for all o' them Net Zero Energy houses.  The electric utility business is at a severe tipping point- the grid in 2025 will work very differently than in 2015, and the fees for hooking up to or drawing from it will be different.  The form it takes in Hawaii will likely be different from how it irons out in Minnesota (under it's recently approved VOST process), or from New York, which just last week through open the doors to stakeholders on how to equitably change the utility regulations to ensure the ratepayers don't get screwed and the utilities (but not necessarily all generators) can still stay in business, while providing affordable & reliable power to those who don't have the solar access or capital, and the ability for small distributed generators like PV & storage equipped homes to participate in capacity markets so that the grid operator can count on (paid) use of storage on the other side of the ratepayers meters, etc.  

This is a big big deal, a paradigm shift this big has not seen since Westinghouse first implemented the AC grid, and it's coming faster than most folks think, and faster than most utility companies are equipped to handle.

I agree, the days of selling sunny hours power at the same rate as other times is limited. And without this, PV solar economics don't look as good. It's probably wise to think more about heating/cooling storage systems. For example, air to water heat pump based systems where you could use water or even ice tanks as storage.

One bright spot for PV is that grid-tie inverters can be designed to provide power factor correction. Such power is worth a more to the utility than normal power.

On another subject, I absolutely agree that there is an energy ROI beyond just financial. But it's a understandably hard sell (for most buyers) unless you can quantify it.