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Energy Solutions

Energy Upgrade or 401(k)?

Paying for energy savings now (through retrofits) may be smarter than more conventional investment strategies

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An energy audit that includes a blower door test is a great way to identify cost-effective retrofits for a building. Energy retrofit work may outperform other investments.
Image Credit: Tristan Roberts
An energy audit that includes a blower door test is a great way to identify cost-effective retrofits for a building. Energy retrofit work may outperform other investments.
Image Credit: Tristan Roberts
Adding insulation just to the above-grade portion of this basement wall is projected to save $300 per year in energy costs, at current prices. As prices get ever-higher, project like these may make even better investments.
Image Credit: Tristan Roberts

Sure, I’ve heard of placentas before, but my mental image of them was of some kind of amorphous blob that sort of disappeared after the baby was born.

But as an expecting father, I learned in a class last weekend that the placenta is the main source of nutrients, waste processing, and oxygen for the developing fetus, which is attached to it via the umbilical cord. From the Latin word for “cake,” it’s a flat, roundish organ attached to the uterine wall. Within half an hour after giving birth to the baby, the mother gives birth to the placenta, which weighs in at one to two pounds!

What happens next depends on your species and culture. Most animals that have a placenta, including herbivores, eat it, but few humans do so. People of many cultures bury it. In some cultures it is fed to animals — for example, fed to ravens to encourage prophetic visions in the child.

In Eastern medicine, it may be dried and included in herbal formulas for certain conditions. That practice has been catching on in some pockets around here, with midwives drying it and putting it in capsules for the mother to take as post-partum medicine. The hormones in it may help ward off post-partum blues. But in most of the western world, this unique object is simply incinerated.

Spending on inefficiency costs more and more

I don’t know what the “right” thing is to do with the placenta, but the idea of treating it as a resource, even as a food or medicine, got me thinking. In our culture we tend to literally burn the resources that are closest at hand, and then go looking further afield for new resources to replace those.

In the energy realm, I can definitely tell you that this is not a good idea. The strategy of living with inefficient homes and cars, and then looking to retirement accounts and paychecks to pay for that inefficiency appears more and more questionable. And I have some numbers to prove it.

An astute analysis was recently posted here on by Ted Clifton, a builder, and the founder of Zero-Energy Plans ( in Washington. The numbers Ted put together are pretty straightforward, but the conclusions might be startling to many people, particularly those living in a home with significant energy bills, while also thinking about retirement.

Straightforward stats, startling conclusions

Clifton quotes statistics kept by the U.S. Department of Commerce, which has been keeping track, since 1974, of the price that consumers pay for energy. Although energy prices are very volatile, and are different for various energy sources (oil goes up and down, while trending up over time, while electricity is more stable, while still going up), Clifton found that the average annual increase for overall energy prices including natural gas, heating oil, and propane, has been 6.33%.

According to Ted, “By comparison, the Consumer Price Index, used by the government to calculate increases to your Social Security check, has only risen at an annual rate of just under 1.54% during that same period. It is clear just from looking at these two numbers that if you are trying to use your Social Security check to pay for your energy use, you will be falling behind by about 4.8% per year.

“The average American living in a 2,000-square-foot house is currently paying home energy bills of around $214 per month. In addition to the home energy costs, the average American is also spending a similar amount on gasoline for transportation. At the current rate of energy price inflation (over the last 38 years), this number will double in about twelve years. Yet your Social Security check would only increase by about 18% over the same time period.”

Are there any sure bets?

Wait, you say. I’m not relying on Social Security — I have a retirement account invested in stocks and bonds. Fair enough. The stock and bond markets have been great at times, with 10-year annual returns often better than 10%. On the other hand, 10-year annual returns can be more like 0%. It’s a volatile investment world. Are there any sure bets?

Ted proposes a simple, radical solution: “If you could use the equity in your home to buy your next 30 years worth of energy at today’s prices, you could lock in a rate of around 5% interest on the loan, and receive a return of 6.33% over time. This would allow you to earn a return of 1.33% per year on the bank’s money.”

In other words, do a major energy upgrade on your current home, or buy a new (or used) energy-efficient home. Depending on the home and your needs, you may even be able to afford a “net-zero energy” home, one that produces as much energy as it consumes.

Too far-fetched? Make targeted investments

If this seems too far-fetched to you, maybe some more targeted investments would make sense. I just had an energy audit that identified several possible energy efficiency upgrades, all of them pretty basic stuff—caulking to reduce air leaks, and adding insulation.

To give an example, my single-family home is lacking insulation in a strategic location — the above-grade portion of the basement walls. Adding spray-foam insulation to the interior of those walls would cost $2,310. An incentive through Efficiency Vermont should reduce that cost to $1,760. Thermal House, which did my audit, predicts that this project will save $25 per month in heating costs, meaning that in a “simple payback” calculation, the upgrade will pay for itself in just under six years. Let’s say that I borrow the $1,760 at 5% for five years to pay for the work, bringing my overall cost up to $1,848. It still pays for itself in just over six years. Neither of these calculations looks at likely increases in energy costs, either. I’m also not looking at return on investment (ROI), because that varies a lot based on your time horizon.

Start with an energy audit

I hope you can both invest in your retirement and also have an efficient home. But if you’re struggling to keep up with energy bills while also saving for the future, I would at least start with an energy audit.

Tristan Roberts is Editorial Director at BuildingGreen, Inc., in Brattleboro, Vermont, which publishes information on green building solutions.

One Comment

  1. user-282515 | | #1

    Questions and Comment

    Just curious if the basement upgrades include the installation of a continuous vapor barrier across the floor and up the walls (at least 6" above exterior grade)? The picture looks like the basement is unfinished.

    Also curious if you have any water/moisture that needs to be managed in the basement? I ask because I encounter this all the time - homeowners wanting to encapsulate or condition crawl spaces without properly addressing water/moisture issues. It is always amazing to me that houses are constructed with the elevation of the crawl space floor below the outside elevation - and then everyone wonders why a hole holds water.

    Even though it is difficult to monetize, I would think your family would see some health benefits from improving your basement, especially by air sealing penetrations between the basement and living space. Fewer trips to the doctor and less money spent on medicines because of better IAQ would only add to your ROI.

    BTW, congrats on becoming a father!

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