The Financial Case for Improving Your Home’s Energy Efficiency

When I was speaking with John Bell about the energy efficiency upgrades he made to his home, he didn’t even flinch when he told me he spent an additional $28,000 for the upgrades. That amount included solar panels, a more efficient furnace than what the building code calls for, a gray water system, a solar-operated heating unit, and extra, better quality insulation than what might be used in a standard renovation. He said the upgrades were a no-brainer because with energy prices constantly rising, the energy and water upgrades insulate him from price increases far better than if he’d just renovated to the Ontario Building Code.

It got me to thinking that one of the best ways to appeal to people about why increasing a home’s energy efficiency is important is through their wallet. When I asked John who I should talk to about the financial case for increasing a home’s energy efficiency, he pointed me in the direction of Craig Backman, Chairman of the Sustainable Housing Foundation. The Foundation’s mandate is to convert as many of the existing Canadian home stock to the most energy efficient dwellings as possible, and to help today’s builders learn green building techniques. But the foundation also help builders learn how to better communicate those green building features to potential customers. Yes, green building can cost more upfront, but rising energy prices mean that the payback gap is continually narrowing.

Craig told me that when energy prices were cheap the only people who were investing in energy efficiency were true environmentalists — the price premiums versus payback were too significant for most consumers to buy in to. However, with the recent and real trend in rising energy prices, both globally and at home, making the case for energy efficiency is easier. Craig points to a Scotiabank report on the Sustainable Housing Foundation’s website that makes the case for homeowners spending their money on energy upgrades. The report notes:

High energy costs have dampened spending on other ‘less discretionary’ purchases. Energy demand is inelastic, at least in the short-term, due to the limited ability of households to substantially alter their driving patterns and other daily activities. Household expenditures on energy totaled roughly $60 billion in 2010, or about $4,500 per household. We estimate that higher energy costs will add about $6 billion to this bill in 2011 — spending dollars that could otherwise have been allocated to other retail purchases, saved or used to pay down debt.

Renovating your home using green building principals, particularly with respect to energy efficiency, will save you money down the road, especially as energy prices rise.  Home heating oil and gasoline prices have increased approximately 40% in the last two years and are only predicted to continue their upward trend. Currently, energy expenses range between 6-7% of total household expenditures, and will likely take up a larger share of a household’s total expenditures if the inflation rate remains lower than the rise in energy prices.

Craig notes that energy efficient renovations don’t have to be dramatic to make a difference. Changing light bulbs from incandescents to CFLs and LEDs, caulking around leaky windows and doors, adding insulation in the attic are all easy and inexpensive changes that will have lasting effects over time. The next time you need appliances look for Energy Star certified ones. Air conditioners and furnaces also have Energy Star certified models.

If your home is really drafty and you’re thinking of doing a major energy upgrade, before you do anything call in an energy auditor. An energy auditor will identify what needs to be done first (ie., furnace or insulation) and where you can get the biggest bang for your buck.

For more information on the Sustainable Housing Foundation and its work in green building visit the website: http://www.sustainablehousingfoundation.com.

Scotiabank’s ecoliving website has some great information and tips on financing your next green renovation.