If you are considering investing in an energy-efficiency improvement for your home — for example, additional attic insulation or a photovoltaic system — you probably expect the investment will lower your energy bills. So it’s only natural to ask, “Is this a good investment?”
For example, let’s say that you are considering spending $5,000 on an improvement that will save you $350 a year on your energy bills. Does the investment make economic sense? The answer, of course, is “it depends.” Among the factors affecting such a decision:
- How soon do you expect to move? Most people are more likely to invest in home energy improvements if they plan to stay in their house for a long time.
- Will the improvement increase the value of your home?
- Do you expect energy costs to rise in the future? If the cost of energy rises quickly, home energy improvements will prove to be a better investment than if energy costs stay flat.
- Can you finance the work with a low-interest loan? The lower your borrowing costs, the better the investment.
- What is the expected lifetime of the measure you are contemplating? A long-lived measure like attic insulation is likely to be a better investment than the purchase of short-lived equipment like a new water heater.
- Will there be any maintenance costs associated with the energy improvement?
- Do you value the environmental benefits associated with reduced energy use, even if the cost of achieving that goal is high?
- Do you value the peace of mind that comes from lower energy bills?
- Do you value the comfort improvements that may accompany some energy-efficiency improvements?
Some of the items on this list — for example, the interest rate on a loan — are quantifiable. Others — for example, the rate of energy cost inflation — can only…