We bought our home in the summer of 2011, but it was built in 1962, so energy efficiency was not something that was part of the design. As soon as we were able, we started looking toward ways to reduce our energy costs on our home.
While this was initially driven by a desire to live in a more sustainable home, the changes we made save money in the long run as well. I’m a LEED AP in my day job, which means my work days revolve around sustainability in housing, so it only made sense that we made these changes to our personal home as well.
We bought our home at just 23 when my husband was in school full time and I was in the very entry level position at my job, so we didn’t initially have the funds to make big changes. We began with switching out our plumbing fixtures, because they have a very short return on investment if you do the work yourselves (just 17 months in our case) and the total cost is well under a thousand dollars.
After that, we replaced our light fixtures and paid attention to vampire energy. Again, our first focus was on the low hanging fruit – things that didn’t cost much to change nor did it require our roommates to live differently.
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No New Windows
What we didn’t do next then, which seems to be a pretty popular choice for many people, is replace our windows. We have older, double pane windows with metal frames, and as much as I would love to install the great triple pane windows that we spec at work, they don’t make financial sense to replace when you have much bigger energy leaks at play. I see so many people replacing their windows, especially since companies tend to push them as a great 0% option, but unless you live in a century home with original windows, it’s probably not the best place to start.
Since our home was built over fifty years ago, we clearly had much bigger energy problems than our windows – namely our baseboard heaters and the air leaking outside, requiring those heaters to work harder.
Air Sealing and Weather Stripping
The very best, cheapest place to start to reduce your energy bill beyond the beginning step of changing out light bulbs is to pay attention to the air leakage happening throughout your home. Extra insulation and fabulous windows are great, but if the cracks in the walls are leaking like a window is left open at all times, then the insulation and windows do almost nothing. Like a ship with a very thick hull, it still sinks if it springs a leak.
While we haven’t done a perfect job air sealing our home, we’ve done a few things that have sealed up the very worst offenders, and the fix is pretty straightforward to do. We replaced the weather stripping around our door to the back deck with a new door sweep and foam seal around the frame. These get worn out over time, so if you live in a home that is more than ten or twenty years old, there is a good chance they need to be replaced. Doors should sit firmly when closed, with no noticeable air flowing through.
Next, we used air sealing foam to seal up leaks around windows, venting, etc. Here is a good introduction to air sealing and a reminder that most utilities offer a free home energy audit to help you get started. Since we do the equivalent of energy audits at work already, we skipped that stage, but it is a great resource if you aren’t intimately familiar with the process.
Furnace and Hot Water Heater Replacement
After we sealed up the basic air leaks, it was time to turn to the big update: replacing our baseboard heaters with an energy efficient furnace and updating our old electric water heater with a gas one. Our home did not have gas plumbed to the house before we got started, so we also had to have the utility company run piping to our home, and then our bid from the HVAC company included full ducting through out home, venting to the roof, and gas stubs to multiple locations.
If you are simply replacing an older gas furnace or you have the gas piping through your home already, your cost will be significantly less – a good half of our cost was for that labor and material. Another option is a ductless mini split, but we chose to go with a York Affinity 98% efficient gas furnace for a number of reasons. We also went with an upgraded Honeywell thermostat to allow us to program the furnace, but we would likely go with the Nest Thermostat if we were doing this work now (it had not yet come out when we put in our furnace).
Our electric water heater needed to be replaced as well, so we had that installed at the same time. We had considered a tankless hot water heater, but ultimately decided to go with a Rheem 50 gallon gas water heater. The cost was significantly less, and we don’t have enough people in the home to worry about running out of hot water, but the reason that settled it for us was the preparedness aspect of a water tank instead of a tankless system.
In the case of an emergency (here, mostly likely, a large earthquake), a 50 gallon water heater becomes a 50 gallon fresh water reserve. Of course we also have iodine water treatment tablets as well as a Lifestraw, camping supplies that double as emergency preparedness supplies. But a large freshwater holding tank is just one more security that we appreciate having in place, and also hope that we never have to use it for that.
Utility Rebates
Now, for the numbers. this is to note that we made this change in October of 2012, so these numbers would be higher now due to the increase in the cost of construction in our area. Depending on where you live, the numbers will look different. We didn’t have the cash to pay for the upgrades out of pocket, but the company we worked with set us up with 0% financing for two years, and we paid it off before the interest kicked in.
Our utility company has a significant rebate program, which we took full advantage of. They also installed the natural gas to our house for free as part of the process. Odds are decent that you have something similar in your area, at least within the United States. Utility companies are very willing to pay customers to make energy upgrades to their homes, as counter intuitive as it may seem on its face.
They are tasked with keeping up with the energy demand for a growing population, and when they run out of capacity, they have to build new systems to keep up with that demand. The best way they can protect their capital improvement costs is to reduce the demand per customer, and that comes in the form of rebates for upgrades.
For some context, our area’s water utility recently had to install a $2 billion water treatment plant because the population and usage outstripped the capacity of the existing treatment plants. By reducing the utility use of each customer, fewer of these very large capital projects are needed to be built, which benefits everyone.
Return on Investment: Home Energy Updates
A quick note here: my husband did the air sealing and weather stripping updates, so there is no labor factored into these numbers, just straight material costs. We had also already updated our plumbing fixtures and lighting etc like I mentioned above, so our “pre install” energy bills are lower than they were when we initially moved in.
Our home is also just 1,350 square feet, so the numbers would look more extreme if we were in a larger space. Washington State also has lower utility costs than many areas of the country, so our returns are lower than if we lived in an area with high utility costs.
Air sealing cost: $62.57
HVAC contractor cost: $11,694.31
Utility rebate: $3,950
Final cost: $7,806.88
Utility Costs (before and after the home energy updates):
| Pre Upgrade (Nov ’11-Oct ’12) | Post Upgrade (Nov ’12-Oct ’13) | |
| November | $248.27 | $138.53 |
| December | $287.87 | $173.24 |
| January | $328.35 | $184.05 |
| February | $305.47 | $171.17 |
| March | $355.02 | $196.24 |
| April | $298.79 | $167.26 |
| May | $153.66 | $86.53 |
| June | $72.32 | $59.27 |
| July | $90.38 | $82.60 |
| August | $99.24 | $86.57 |
| September | $166.50 | $95.69 |
| October | $208.90 | $116.41 |
| Total | $2,614.77 | $1,557.56 |
*I am also subtracting out an annual cost of $58 for the use of our natural gas stove and grill, per the estimates here as that part of our utility bill changed slightly with those upgrades (we use the grill a lot through the year, and that cost would otherwise be seen in propane / other costs not shown in our utility bill).
$7,806.88 (upgrade cost) / $1,115.21 (annual utility savings) =
Return on Investment of 7.0 years
Long Term Savings
Since this install was completed in October of 2012, we are approximately three months out from our estimated payback period of 7 years, which means we will be saving an average of $93 a month over our utility bills prior to the upgrades. I really appreciate the security of our very low fixed monthly costs, and low utility bills is another piece of that. When money gets tight, we can live off very little compared to most families in our high cost of living area.
Again, if you live somewhere with utility costs that are double ours (very possible – according to this site, Washington has the lowest rates in the entire country), your payback could be much faster. Regardless, I feel that a seven year ROI is very reasonable considering we plan to live in our home for much longer than that. We also would likely have needed to replace the system by this point anyway, and basic home and water heating upgrades are something that every homeowner is going to deal with if they live in one place for long enough.
While I expected a reasonable payback to exist with this decision, I have to admit I hadn’t actually worked through the numbers until now. Our decision to upgrade started with a sustainability mindset as well as a look to overall comfort, and then only then to the money saving aspect.
A high efficient central HVAC system and a new water heater are both significant improvements to the comfort and livability of our home. Baseboard heat is finicky and uneven, and an older water heater has a propensity to run out of hot water at the most inopportune times (like in the middle of a shower). But, as this analysis has shown, these upgrades have also made sense financially.
So far, we haven’t seen utility costs here change much (they’ve gone slightly up and down but mostly tracked inflation). However, at the point our utility needs to put their money into new capital construction for more energy production, our utility rates will eventually go up. Our efficient furnace and water heater are a hedge against future spikes, because when those rates go up, they can go up high and fast.
By using fewer kilowatts and therms, we are buffered against those increases. If our annual costs go up by 50%, for example, we would pay an extra $778.78. If we hadn’t made the switch, those costs would go up to $1,307.39, or another $44 a month.
Have you made any home energy upgrades? Were they to save money, to increase comfort, or for some other reason?