Can You Afford -Not to Save Energy?

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Economic Outlook

"To put it another way, each of us has a small oil, gas, or electric 'well' right in our house, one that can be tapped fairly cheaply. In fact, such investments offer some of the highest rates of return available in the entire economy. "

These two sentences—from this issue's Plowboy Interview with Amory and Hunter Lovins—make a whole lot of financial sense. No standard investment, whether it be money market certificate, bond, stock, or collectible, is likely to pay you as much for a small outlay as a good home energy improvement. The money you save this way is also the equivalent of tax-free income. Why, it's often even better than that: In many cases, you can claim federal—and possibly state—tax credits for the work. The Internal Revenue Service currently allows you to deduct 15% of the cost of conservation measures (and 40% of active solar systems) straight from the bill you pay Uncle Sam.

In other words, can you afford not to save energy?

In order to put some meat on these fine sounding statements, we offer you a simple formula for calculating the payback of an energy conservation investment. There are, of course, more sophisticated—and meaningful—ways to make financial judgments, but the following approach will give you a general idea of whether a particular conservation step is economical.

In the following savings and payback formula, we've used some symbols to keep the equations from appearing too cluttered. Here's what they mean:

RO: Old R-value, the existing R-value of the area to be improved

RN: New R-value, the new R-value of the area after it's improved

DD: Degree-Days, the heating degree-days at your location (check a solar energy book or call your local weather service to find this out)

SE: Saved Energy, in units of 1,000 Btu per square foot per year (kBtu/ft. 2 /yr.)