Part of the intent of this blog is to lay out the process we are muddling through to take this house off of fossil fuels and towards low carbon energy sources. At some point in every workshop or seminar I teach, whether it's on Zero Net Energy Homes, or Deep Energy Retrofits, or Passive House principles, someone stands up and makes an impassioned speech about how all this is well and good but what's the payback?
I'd like to get this one out of the way up front. In the make-over of this house, I, who have never been known as one loose with a buck, am spending what is mostly my own money (with the exception of various incentives and tax credits, and let's do discuss them, but not right now). So I don't expect to spend it foolishly or without due consideration. However, here are my responses to the payback question, in order of how much I think they matter in the whole cosmic scheme of things:
1 - The quickest response I have is, if you predict the future price of energy over the lifespan of these improvements, I'll tell you the payback. My habit when pushed to actually do some financial analysis is to present it in the form of scenario planning - I'll often select three rates of energy inflation and do the calcs showing the Net Present Value of the investment in each inflation scenario. The longer you project it out, the more dramatic are the differences. The usual result of this exercise is that those who are the decision makers begin to act from a position of risk avoidance, because the highest inflation rates in fuel costs get scary.
2 - The second response is to poll the building and design professionals assembled to see how many in the past year or two had a (residential) project in which they installed a 10 kW automatic generator, or they did a kitchen that cost over $100,000. Usually most of the hands in the room slowly go up. How rigorous was the payback analysis on each of those purchases? My observation is that people spend money on what makes them feel good, and just because what makes me feels good (and fortunately, many of my clients through the years) is seeing my ecological footprint shrink. Why does that expenditure draw so much more scrutiny than the money spent on the magazine kitchen or the BMW?
3 - The serious response is that the situation with the climate is likely already past dire and to have a tolerable planet (hat tip to Hank Thoreau here) we need to cut carbon emissions by a factor of 5 to 10, so payback is irrelevant, but least cost strategies are very important. However, least cost strategies are best implemented at larger scales (let's fix the worst houses that the most people live in first, maybe) but these need political agreement, and that's hard to come by in the country blessed with the best government money can buy. Each of us can choose (without convening the US Senate) to make changes in our own house and behavior (well, now I live in cohousing, it's not quite that simple, as you'll learn) so that's where we act.
Besides - if you're not selling drugs (as the former chief probation officer of the state of MA apparently was) how great is the return on your investments otherwise? I'd rather have my dollars on the roof making kWh than playing the slots in the Goldman Sachs-supercomputer rigged casino called the stock market.
Are we done with payback and can we move on to more interesting things?
Marc,
"In the country blessed with the best government money can buy." What a great expression!
I'm saddened at thinking of the obstacles involved in "fix(ing) the worst houses that the most people live in first". It certainly would be a "duh" to make some headway on the issue and I'm not going to give up on it! More data needed to present ad nausuim!
Posted by: Smallplanetworkshop | 03/29/2011 at 04:49 AM
As Ted and I plan our passive-ish house in Vermont, I almost never think in terms of payback. I suppose it helps that we're building it ourselves and are therefore getting a steep discount.
Frankly, I hope we never achieve payback; I'd much rather they discover a cheap and carbon-friendly form of energy and turn climate change around. We'll still have the luxury of a house that stays comfortable year-round, without the discomfort of dry overheated air or over-chilled AC.
Posted by: Andrea Lemon | 03/29/2011 at 04:51 AM
Andrea, I was being quizzed by a friend the other day about the subsidies and incentives for solar electric and thermal, and I pointed them to our sales expert at South Mountain (Rob), because I said, you know, I'd be doing this anyway, so I haven't paid as much attention to these details as I maybe should have.
Posted by: Marc | 03/29/2011 at 07:49 AM
I was delighted to see you address the issue of payback so soon in your blog, but I think you left out one of the most critical aspects of this topic. We can’t properly measure the payback of air sealing, additional insulation and renewable energy, until we have accurately assessed the true costs of building any other way.
In one of his essays, Wendell Berry notes that the defenses of “technological progress” are invariably quantitative and “always kept carefully apart from the related statistics of soil loss, pollution, social disintegration, and so forth.” He goes on to invoke the image of the “responsible bookkeeper,” someone who will accurately note in the ledger book, right next to the gains, the corresponding losses, even if they’re happening half way around the world or 100 years in the future.
It is painfully ironic that, in my part of Connecticut, the same people who fight for local zoning ordinances to protect ridgelines will mindlessly adopt a lifestyle dependent on mountain-top removal for coal mining. I keep thinking, perhaps naively so, that many people would behave differently if they could just see the connection, so carefully hidden by corporations and government, between their lifestyle and the destruction it causes.
The question of payback becomes laughable once you have a responsible bookkeeper.
Posted by: Kevin Ireton | 03/30/2011 at 11:24 AM
Kevin, I think you put it more clearly than I did. Payback is irrelevant if you don't do a full accounting, and the things that matter the most to both our spirit and survival are hard to assign a dollar value to (thank goodness, I guess.)
Posted by: Marc | 03/30/2011 at 01:09 PM
Marc,
I have never really "gotten" the payback perspective. I usually answer such questions about the 5.3 kW peak, grid-tied PV system we installed last spring by saying that the simple return on the investment (3$/kW peak installed, after federal and state incentives) starts at about 5% and rises with future increases in electric power rates. That seems to me like a more understandable metric than "payback." If you have any assets you're willing to tie up in long term commitments, and you find a better and more hedged investment, take it.
These figures are for a roof mounted system tilted at about our latitude (43 degrees) and pointed about south (azimuth 160 degrees), which yields about 1,200 kWhr/yr/kW peak in often cloudy NH.
But I agree that these decisions are fundamentally more individual than pragmatically economic. We installed our system because we had wanted to for a long time, and it made us feel good. I enjoy monitoring the daily performance (TED system), and I exalt in sunny days. I also now actively participate in the process by trying to reduce loads and conserve. We've installed a lot of LED lights - expensive but durable and 1/4 the power per lumen - and Terryl hangs the wash on an outdoor clothesline in the summer and on a drying rack in front of the (propane) "wood" stove in the winter.
One last thing we've realized about PV in our region: if your house has a roof surface facing within 20 degrees (+/-) of south and pitched somewhat related to your latitude, substantially covering that surface with PV panels in a grid-tied system will likely zero out your annual power bill.
Dodd
Posted by: Dodd Stacy | 04/01/2011 at 10:03 PM
Oops - the installed system cost in my 03/30 post should have been expressed in units of $/W peak, not $/kW peak.
Posted by: Dodd Stacy | 04/02/2011 at 11:32 AM
Hi Marc -
This particular post caught my eye - payback. Economists pretend that the Net Present Value approach really works, when selecting the discount rate could just as well be done with a ouija board than any other "science-based" approach.
My graduate work was in Resource Economics and I was nearly thrown out of more than one class when I challenged the underlying assumptions of classical economic theory. Ecological economists get it right, or at least try to, when they attempt to internalize all the external costs that, when lacking, make traditional cost accounting warped, at best.
Thanks for thoughts on this topic and examples of how to frame the issue. I like to bring up this example: how long did it take the host of economists at the Energy Information Administration to be wrong in their 2005 30-year forecast of oil prices (they said it would be $30 per barrel by 2035)? Less than a year. But then, August of that year really rocked them--that was when Hurricane Katrina hit...
Posted by: Peter Yost | 04/11/2011 at 10:21 AM
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Posted by: Moncler Rockar | 11/12/2011 at 05:49 PM
We live in south-west Virginia on a very tight budget. We are sainvg with the goal of converting to a combination of solar and wind power in future. In the meantime, we're frugal with our power usage. We recycle, drive as little as possible, we're installing rain barrels to capture snow and rain water and gravity/drip-feed it to the gardens we are planting. We hope to barter with neighbours for the rest with a goal of eventually being self-sustaining. The food we buy is local, whenever possible, whole, and with minimal packaging, and it is bundled into reusable bags instead of plastic or paper. We boycott companies whose practices and politics are bad for the environment, and avoid GMO, plastics, and other products that common sense and science tell us are probably bad for us and the environment. We actively communicate our priorities to our elected representatives, and while they are not very receptive at present, as local demographics change the winds of politics will change with them.Ultimately, only people can be corrupted or coerced; dollars can only be saved or spent. How we spend them determines who gets the money to fund campaigns and lobby representatives. If you want to see the world change, change the incentives. The politicians are supposed to answer to the people, but the reality is that they answer to corporate donors. Don't give your money to corporations who will use it to fight against you, and it will be much easier to make these changes happen.
Posted by: Gloria | 03/10/2012 at 08:23 AM