How to Afford Major Home Energy Conservation Improvements - Part I

If your home needs major energy conservation work such as attic or wall insulation, or you are considering a new energy efficient boiler or furnace, the up-front costs can be substantial. By obtaining low-cost financing and taking advantage of the many economic benefits from this work, you will often find it is actually possible to save more money than you pay out - even in your first year. Part I will show you how to find and calculate total estimated savings from these for this first year. Part II will show you how to find and estimate the long-term economic benefits from energy efficiency improvements.

Difficulty: Moderate

Instructions

Things You'll Need:

• A low-cost home energy audit.
• A calculator.

1. Receive a low-cost audit offered by your utility company, or local or county government. You should receive a list of possible energy conservation improvements along with an estimated cost and "payback period" for each. This is the number of years required for each improvement to pay itself back through reduced energy costs.

2. Decide which of the suggested improvements you would like to have completed. Those with the lowest payback periods will be the most beneficial. Divide the estimated cost of each improvement by its payback period to obtain the estimated energy savings per year for each of your proposed improvements. Add each of these together to obtain the total yearly cost savings from reduced energy bills (=S).

3. Find out if any rebates are offered by your local utility companies for home energy improvements. Sometimes there will be deadlines and certain efficiency requirements to qualify. Add all of the rebates together that you will qualify for (=R).

4. Insulation improvements and energy efficient boilers and furnaces qualify for federal tax credits (=T1). Generally this will be for 10 percent of the cost of the items themselves, excluding labor up to certain amounts. Check the IRS tax code or your own tax consultant for further details. Also check to see if your state offers any tax deductions or credits for home energy improvements(=T2).

5. If you take out a loan for this work, look at options such as home equity loans, home improvement loans and home energy loans offered by your local or county government. Find out the monthy payment (=P) and total interest you would pay each year. The interest will qualify for a federal tax deduction (=D). Any origination fee for this loan should also be tax deductible (=O).

6. Calculate your total savings during your first year (=Y) by adding S+R+T1+T2+S+D+O from above. Calculate your average monthly first year savings (=M) by dividing this number by 12. Then subract your monthly loan payment from M to find out your net monthly cost - or savings!

Tips & Warnings

• If you obtain a governement subsidized loan only geared towards energy conservation, this may disqualify you from the federal energy tax credits.

[Miri]

on 2/2/2009 Good detailed article.