Every day you probably hear ads about how much you can save by making energy improvements to your home.  Whether it’s a new air conditioning unit, double-pane low e windows, insulation, weatherization, radiant barrier, new LED or CFL light bulbs, the list goes on and on.

Yes, we all know that these improvements will save money, but are they a good investment?  Here is a quick and easy way to figure out how much to invest in energy savings using the cost of money and return on investments.

Let’s say our home averages $200 per month in utility bills.  Given an average home, it is pretty easy to drop a bill by 20% or $40 per month.  This is pretty basic stuff like air sealing, switching to a programmable thermostat, installing a radiant barrier, better attic insulation, duct sealing, changing light bulbs and new air filters just to name a few projects.

So, if you could drop your bill by $40 per month it would put an extra $480 in your pocket over the course of a year.  It’s not retirement money, but I’m sure you will find something to do with it.  If you have a higher bill then the total will be even larger.

This is just like getting an extra $480 bonus at work, but it’s actually BETTER?  Why?  This is AFTER TAX MONEY.  Which means if you were in the 20% tax bracket, you would have to EARN about $575 to end up with $480.

Now the REAL value is $575 per year.  Ask yourself “How much would I be willing to invest to get a $575 bonus EVERY year”?  Currently, in the investment world a 10% GUARANTEED RETURN is impossible.  However, if you were to invest up to $5,750 in energy improvements and generate $575 in savings you would get a 10% return on your investment. In fact, on most homes you could probably get this much savings with less than $3000 worth of improvements which would result in over a 20% return on investment.  During a tough economy, this is a SPECTACULAR RATE OF RETURN.

This is why so many people are spending (investing) the money to increase the energy efficiency in their homes.

Finally, all these numbers and assumptions are based on energy rates staying exactly the same.  Over the long haul, do you REALLY think rates will stay the same?  If rates go up then the payback and return on investment is even greater.

Is it worth it to invest in energy efficiency improvements?  Unless you can guarantee at least a 10-20% return on your investments the answer is YES.

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9 Comments to “Do Energy Efficiency Improvements Really Payoff?”

  1. Kathy says:

    I need a new roof and I’m looking at roofing material with reflective granuals (e.g. GAF Cool Roof). Is this as efficient as radiant foil barrier? Is one preferable to another. Should they be used together? Any help would be appreciated.

    • Ed Fritz says:

      Kathy,

      “Cool” roof shingles are starting to gain in popularity. I would be willing to pay some additional for these shingles. Are they as efficient as polished aluminum foil? No, not until they make a polished aluminum foil shingle.

      I would use the shingles a the first line of defense and radiant barrier in the attic as a second line of defense. Yes, they can easily work together.

  2. Carl says:

    I was wondering if this would be worth while money wise being we live in Roanoke, VA. It appears it is very worth while further South or in much hotter climates. Just not sure if it would be here. Thanks

  3. Carl says:

    I was wondering if this would be worthwhile money wise being we live in Roanoke, VA.
    It appears attic foil is very worthwhile further South or in much hotter climates. Just not sure if it would be here. Your opinion? Thanks

    • Ed says:

      Radiant barrier foil helps in cold climates is the reduction of radiant heat loss from the living space. It’s like when you wrap a potato with foil to keep it warm. The potato will not “emit” as much radiant heat. This is called “Emissivity” or the ability NOT to release heat. By laying the foil on top or your insulation, you help keep the heat “IN” by not releasing it in the form of radiant heat. So for you – you will be able to retain heat inside the home better in the winter months with a radiant barrier, since you’ll be reflecting that heat loss back into the home. Of course this is all based on the assumption that there is heat in the home and the home stays warmer than the outside. To reap these particular benefits, the recommended installation method would be laying the AtticFoil Radiant Barrier on your attic floor, over existing insulation.

      Here is more information, and a video, about adding radiant barriers in cold climates to increase the efficiency of warming the home: http://www.atticfoil.com/cold_climate.htm

      • Bob Mariani says:

        Ed — A few questions I have on your solution. My research and understanding shows that you need an air space around the radiant barrier for it to work. so how is laying it on the insulation going to help?
        And they also claim to help reduce cooling loads. But laying it horizontally will eventually give no benefit after dust accumulates on the shinny surface.
        In CT the government shows the actual yearly savings to be about 5 dollars. So a $4K investment on this product would not make sense.

        • Ed Fritz says:

          Bob,

          The airspace is only required on ONE side. Depending if the airspace is on the HOT or COOL side of the foil will determine if the foil works off emissivity or reflectivity. Here is video explaining How The Radiant Barrier Air Space Works.
          As for dust, here is complete information on The Effect Of Dust On A Radiant Barrier.
          Finally, I’ve dealt with the “Government” type people on this stuff before. They LOVE to use computer models instead of real homes. I asked them why they don’t use date from real homes and the response was “too many variables”. It may not produce steller results on a computer model, but in real life I’ve got thousands of happy customers who see a significant difference, tell their friends and neighbors and new customers keep coming!! As for the $4,000.00 cost??? The material for typical home is between $200-$500 and I would think you could find a couple of hungry college kids to install it for a few hundred bucks and a pizza!

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