Payback

by Heather Rae
for cleantechblog.com

A $517.47 invoice for the installation of a rented 120 gallon propane tank arrived with disturbing alacrity. The service person had done an excellent job digging a trench, drilling the hole through the house wall, installing the (unobtrusively brown) regulator, connecting the gas line to the new on-demand water heater and explaining the multiple shut-off valves. For this stellar install, I am appreciative (whopper bill aside). The propane tank invoice trailed the $999 cost of the water heater itself. The cost of labor to install the latter is a bit murky, since “the guys” (The Balsam Group) did the install in stages, coordinating it with the replacement of all the copper plumbing with PEX.

There is no way I will ever see payback for replacing an old, leaky electric water heater tank with this on-demand system, no matter how energy efficient the new system. I’ve run the numbers through building modeling software. It won’t happen, no matter how much I play with the future price of propane and electricity or combine the system with energy-efficient air sealant measures that do have positive payback.

This scenario with the domestic hot water heater gets me thinking some more about marketing and selling energy efficiency to homeowners, so I had a chat with Bob Knight of Bevilacqua-Knight, Inc. in California.

Bob forwarded a 2006 paper that he and Lutzenhiser Associates wrote for the American Council for an Energy Efficient Economy (ACEEE): “Why Comprehensive Residential Energy Efficiency Retrofits are Undervalued.” In this paper, he and Lutzenhiser discuss comprehensive “whole house” residential retrofit programs, not single measures like my hot water heater, and they focus on California’s utility metrics for cost/benefit analysis; nonetheless, their arguments are relevant to my musings, my shrinking bank account, and the (very) satisfied feeling I get when I turn on a hot water faucet.

“In California law, the funding for energy efficiency programs must be justified solely by energy supply savings. The result is a systematic undercounting of the actual value of any programs that generate significant non-energy benefits, and particularly those NEBs realized by the participating homeowners, including examples such as comfort, health, safety, home durability and value, and environmental consciousness — for which the homeowners demonstrate their support by voluntarily paying more than can be justified solely by energy savings…

“The viewpoint of the buyer, moreover, has been largely ignored in the existing tests despite the fact that the buyer’s judgment of the the full set of benefits — rather than only energy savings — of a project determines whether that project is to be done or not…

“Classical economic theory holds that rational choices are made among bundles of goods on the basis of the value or utility that they promise. The uses of technologies determine their values to persons and influence what the technologies ought to cost in the marketplace. Other social scientists have elaborated this model by reference to how individuals perceive in different ways what they value, and how the actions and opinions of others influence perceptions (e.g., regarding style, status, and so on). So when an individual makes a significant choice regarding their home, they consider how well the new refrigerator will preserve their favorite foods, how it will fit in to their decor, and what it will contribute to their standing (in their own eyes and those of others). The same is true of a new dishwasher, washer/dryer, bathroom remodel, window replacement, or major addition. These things all cost money, and are imagined to return value and utility along a variety of dimensions. They have energy efficiency implications — which are sometimes actually taken into account. However, they are not processes that can be captured in the energy accounting schemes of supply-side avoided cost.”

Bevilacqua-Knight and Lutzenhiser discuss a small-sample survey that supports the importance of homeowners’ NEB motivations for expensive home performance (“whole house”) retrofits. “The survey included a battery of carefully structured questions to elicit information on the relative strengths of a list of possible motivations.” It found that “as much as three-fourths of the average (surveyed) buyer’s motivation arose from the desire to gain combinations of the non-energy benefits, with something like the remaining quarter possibly attributable to energy cost savings.”

“While the motivation to ‘reduce energy bills’ was frequently reported, it was far from the only reason given. Certainly, homeowners hope for some bill reduction if they are paying for energy-savings measures and higher efficiency equipment. However, other sources of value and utility are clearly the dominant rationale. Persons were clearly engaged in upkeep (e.g., replacing poorly-functioning equipment) and buying comfort, convenience, cleanliness, and a sense of doing the right thing (e.g., being efficient in energy and resource usage). In many cases, (about 40%) bill reduction was not mentioned at all among the ‘top three very important reasons’ to purchase home testing and retrofits.”

The Director of Efficiency Maine, Denis Bergeron, told me recently that he works in a building full of people (the Public Utility Commission) whose daily activities are predicated on rational economic choices, but that the world and homeowners are not rational in the same way.

Nope, we aren’t. When asking people to cough up major dough for energy efficiency home improvements that may or may not have financial payback, simply marketing the energy component of the improvement won’t cut it. But marketing non-energy benefits, if positioned well, will.


Heather Rae, a contributor to cleantechblog.com, manages a ‘whole house’ home performance program in Maine and serves on the board of Maine Interfaith Power & Light. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she began renovation of an 1880 farmhouse using building science and green building principles.

2 replies
  1. Martin Meah
    Martin Meah says:

    Our award winning products are proven with full accreditation from one of the world top universities.This may be of use to you or your associates, please do not take this comment as a company looking for sales, this is just for your information.www.conditionaire.org.uk

  2. lamarguerite
    lamarguerite says:

    Heather,You and I must be on the same wavelength. I just wrote a post along similar lines ("More Excuses"). We as well intentioned green wannabe citizens need a whole economic/policy system to support us in our desire to do well. Right now all the incentives in place support non green alternatives, from an individual perspective. Marguerit ehttp://lamarguerite.wordpress.com"The Daily Sins of a Green Girl Wannabe"

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