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The Profitability of Energy Efficiency Upgrades
Application of these 10 energy efficiency measures in a
typical home yields nearly $600 in annual bill savings, and an
impressive 16% overall return on investment. More...
This diagram provides a representative view of the high
profitability of energy efficiency upgrades. Note that the
home evaluated here is located in an average U.S. climate and
has a heat pump, electric water heater, clothes washer,
clothes dryer, and dishwasher.
The example cost-effectively surpasses the 30% savings
target for existing homes under PATH (The Partnership for
Advancing Technology in Housing). In fact, all of these
measures yield a higher return on investment than an ordinary
bank account, and most are as or even more profitable than the
stock market has been in recent years! The efficiency savings
shown above include the effect of income taxes. This makes the
savings even more attractive, because you can keep all the
money you save on your energy bills, but have to pay hefty
taxes on most ordinary investment income.
| Energy Efficiency
Upgrade |
Purchase Price1 |
Annual Bill
Savings2 |
Simple Payback
(yrs) |
Rate of Return |
| Fluorescent Lamps &
Fixtures |
$200 |
$80 |
2.5 |
41% |
| Duct sealing |
$250 |
$95 |
2.6 |
41% |
| ENERGY
STAR® Clothes washer |
$194 |
$66 |
2.9 |
37% |
| ENERGY
STAR® Programmable Thermostat |
$107 |
$29 |
3.7 |
30% |
| Water Heater Tank Wrap
(R-12) |
$85 |
$23 |
3.7 |
28% |
| ENERGY
STAR® Refrigerator |
$97 |
$23 |
4.2 |
27% |
| ENERGY
STAR® Heat Pump |
$692 |
$126 |
5.5 |
19% |
| ENERGY
STAR® Dishwasher |
$29 |
$5 |
5.5 |
18% |
| Air sealing to 0.5 air
changes per hour |
$522 |
$38 |
13.7 |
9% |
| Increase wall and attic
insulation |
$1,784 |
$111 |
16.1 |
8% |
| Total |
$3,960 |
$597 |
6.6 |
16% |
| Total bill savings as
% of baseline bill 3 |
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36% |
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NOTES:
Assumes typical house with air-source heat pump, electric
water heating, clothes washer, clothes dryer, dishwasher.
Purchase prices and annual bill savings for efficiency
measures are in nominal 1997 dollars. The rate of return
assumes 3% annual inflation in residential electricity prices.
After-tax rates of return assume a 28% marginal income tax
rate.
1Purchase price of clothes washer, dishwasher,
thermostat, and heat pump measures is incremental to the price
of existing "NAECA" appliance standards. All other
prices reflect the full cost of the measure, including
installation.
2 Bill savings assume average electricity cost of
8.8¢ per kilowatt-hour. Bill savings of equipment measures
are relative to a NAECA standard unit.
3 Heating and cooling consumption values are from
LBNL energy modeling using DOE-2; other end-use consumptions
are from the U.S. Department of Energy's Residential Energy
Consumption Survey (RECS).
Developed
by the Environmental
Energy Technologies Division at the Lawrence
Berkeley National Laboratory
Sponsors: DOE
and EPA
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