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The Big Rewards of a Deep Energy Retrofit

Calculating the return on this major investment may be missing the whole story

The author's deep energy retrofit of his house in California included the addition of rigid foam insulation to the exterior walls.
Image Credit: Christopher Peck

I have long advocated for deep energy retrofits; as we developed the resilient investing system, this became an obvious activity promoting tangible assets close to home. “Remodel your house so that it uses dramatically less energy,” I’d proclaim. “It’ll be more comfortable, and you can save money and the planet at the same time!”

Experts like McKinsey & Company assured me that insulation and heating systems pay off very quickly. After two years of actually tackling it at our house, the practicalities are — surprise! — a bit more complicated.

When you take a closer look at an older house, you don’t see just outdated insulation; you also see drafty windows (and possibly mold), and a dark room with only one small window, and you wonder how a house built in the 1970s would fare in an earthquake. After an even closer look, opening up walls and crawling underneath the building — well, it all gets very real very quick. You wonder, “How deep into my wallet is this retrofit going to go?”

Does a $50,000 investment make sense?

We started with a single-story ranch house built in 1971 in Sonoma County, California: 2x4s, shoddy fiberglass insulation, T1-11 for sheathing and siding. We removed the T1-11, and did a variety of upgrades with the framing exposed: adding a few bolts into the foundation and adding bigger washers to the foundation bolts, as well as adding headers and framing for new windows or doors.

In some places we had to replace the framing, and in several spots we did some rewiring and added outlets. After the framing was finished, I meticulously corrected all of the fiberglass insulation — lots of nitpicky detail to get that just right. Then we re-sheathed everything with OSB and added 2-inch foil-faced polyiso insulation held on with OSB furring strips. We installed Milgard windows, trimmed with 3 1/2-inch 5/4 HardiTrim, and added 8 1/4-inch HardiPlank siding. Then everything was painted.

As of August 2015 we’ve done almost 100 linear feet (a bit more than half) of the retrofit work on the walls. With a handful of assumptions mated to a bunch of caveats, our deep retrofit costs approximately $1,500 for each 10 linear foot section. If you’re quick at math you can see that just doing the walls will cost us close to $35,000. Add in the attic and work on the crawl space, and we’ll easily spend over $50,000 on a deep energy retrofit. Will that ever make financial sense?

My plan when we started this project was that our house would need very little supplemental energy for heating or cooling when we finished. Assuming we succeed at that, which I believe we will, we should save around $500 per year in energy costs in our moderate climate. Spend $50,000 to save $500? Have I taken leave of my senses? Shouldn’t I have to turn in my Investment Advisor membership card? But that’s a solid 1% return on investment — better than cash, right?

If the costs of a deep energy retrofit are accounted against just the energy (and carbon) savings, it will be a hard sell indeed. At fifty grand a pop, it’s hard to imagine a widespread transformation/remodel of our existing housing stock; and indeed, we have not seen that. Colder and hotter climates will have better ROIs, of course, but there are other challenges.

People remodel all the time. It might not include energy-efficiency work, or perhaps energy efficiency work is just part of the picture. My current conclusion is that a deep energy retrofit is more accurately a part of a comprehensive retrofit that improves several integrated factors. For us, these are: function, comfort, energy efficiency, durability, health, and aesthetics.

The first three are the biggest for us; the others are add-ons — bonus benefits, but ones with real value — and other folks, even in a similar climate region, will rank these differently. Still, the deep retrofit is not about just reducing energy waste but also about improving how we enjoy and use our home, while reassuring us that it will last long after we are gone. We like the way it looks and feels, too.

Let’s take a closer look at the long- and short-term benefits we’re gaining, beyond that $500 in energy savings.


This is the primary reason that people remodel: to get their house working the way they want it to. Creating a great room or updating a kitchen or adding a bathroom, houses need to do so much more these days than a generation ago. We’ve turned two bedrooms into offices, with lighting and more room for electronics. When you’re already adding doors or windows, it’s a great time to improve insulation and air sealing.


We’re the classic “put on a sweater” frugal types. The last two years we haven’t used our furnace, and last year we barely used the highly efficient wood stove. We’ve had some chilly mornings (60°F inside) but even with a 2-year old, we’ve weathered those fine. We don’t have an air conditioner and have just suffered through the three to four hot days each summer. For us the goal is less about saving money on energy for heating and cooling and more about improving the comfort range of the house. Families that use more heat will see greater energy-reduction benefits than we do!


I say that durability is an add-on because as we open up walls to improve insulation, we also add a couple of foundation bolts (or just use beefier washers) and then we add full length OSB sheathing to replace the partial siding that was here. We’re also repairing the various rotted corners or termite-ridden rim joists while eliminating the moisture infiltration that supports termite habitat, an obvious long-term benefit. Whenever we complete a section we fully expect that it won’t need care for 50 years.


Replacing windows and improving bathroom ventilation has reduced mold, which was a minor problem. Reducing mold is a major health plus, but definitely wasn’t the driver for the whole project. It would be hard to justify the expense of a remodel just to control indoor humidity levels, but as an add-on benefit it is very much appreciated — and has value.


Each step we take in our remodel journey brings our house closer to our image of home. The look of the trim, the subtle ornamentation details, the paint color, the lighting options, each piece is adding up to a more integrated and more pleasing composition.

One unexpected benefit we’ve noticed from all of our improvements is how much quieter our house is. It doesn’t wheeze or rattle in the wind and trucks driving by don’t shake the windows. Going deep has payoffs we hadn’t realized before we started, and the return on investment looks like it will continue to improve over time, especially when also considering the increased resale value. I still recommend going for it!

Christopher Peck is a managing partner of Natural Investments LLC, a portfolio management firm. Peck is the co-author with Hall Brill and Michael Kramer of The Resilient Investor: A Plan for Your Life Not Just Your Money published in 2015. Peck lives with his wife, son and parents on a developing homestead in suburban Sonoma County, California. He’s been working on his home since 2008. A version of this post originally appeared at The Resilient Investor.


  1. Tedkidd | | #1

    Fantastic post Chris!
    Yes, programs have perpetuated the lie that EE is an investment "with great financial return", it rewards the best liars, and ultimately holds Home Performance back. Eventually consumers see the lie and it has exactly the opposite of the intended effect.

    We need more people talking about benefit stacking. The idea that when looking at "payback" alone the effort doesn't pencil out, but when the other benefits are added on top of the energy savings the crazy decision is to NOT fix the problems. Benefit stacking might help stop the rampant savings exaggeration programs are perpetuating upon a vulnerable public.

    People want homes to perform. They want them to not stink, literally and figuratively. Fixing these problems costs money - the good news is if you do it thoughtfully, as Chris has, you get a better house and the energy savings HELP pay for it.

    Thanks Chris, and thanks GBA for raising the bar on your content!

  2. JC72 | | #2

    The problem is that by in large people no longer live in their homes for their entire lives and consequently are more than ever reliant upon tract builders. Also IMO people have correctly realized that home ownership in the US is glorified renting where inflation eats away at what little equity they mange to accumulate.

    Take my townhome as an example. It would cost approx. 70 percent of my existing equity to perform a deep energy retrofit (new cement siding, exterior foam, rain screen,renovate attic, new windows, upgraded HVAC, new flooring, appliances, etc).

    I would re-coup maybe 20 percent equity upon time of sale.

  3. ecdunn | | #3

    Added Square Feet
    I have said this a few times on GBA, comfort is worth the retrofit. With our house, even though we did not change the footprint, we gained more usable space. Our north two bedrooms were COLD! Our children told us they could see their breath on a cold Flagstaff, AZ morning. We can get down to -10 easily every winter.
    I did the same thing to our 2X6 walls. Fixed insulation and added 2" of rigid foam, creating a thermal break. Foamed the attic at the sheathing. Not only did we cut our gas bill in half, the north bedrooms get no more than 4 degrees cooler than the front room where the gas heating stove is located. We figure that we gained more usable space because my wife, who had for years, set up her studio in our dining room, now uses that far back bedroom, year around!
    We spent $45k, including Pella triple panes and new cherry kitchen cabs, plus all new plumbing fixtures. Had to get rid of the nasty acrylic and fiberglass. I did most all of the work myself except for the $4k rock facade on the front.
    Now my kids complain, why did we wait to do this after they moved out?

  4. user-1017420 | | #4

    Good for you Chris.
    We too have embarked on a major renovation job, that is also a deep energy retrofit. I prefer this description because we are, like you, renovating and improving at the same time. I recently read a 2014 post by Martin H. that seemed to throw some doubt on the financial feasibility of a DER. I think the problem is that everything gets lumped into the "DER" pot and then of course it seems so expensive!
    If you'd like to see what I wrote him back recently, it's at:
    Our blog is at:
    Good luck!

  5. JIM BAERG | | #5

    Energy Retrofits that work
    Ted, I loved your phrase "benefit stacking." That alone is worth the read.
    However, I have some quarrels with this article. To look a little closer at the payback argument, the author has a moderately insulated house in a mild climate where the homeowners haven't used their heat the last two years. I'm not sure where the expectation of energy savings would come from.
    A good energy and economic analysis would estimate both cost and savings for each potential measure. Wasn't that done prior to commencement of the work? A good energy auditor would readily recognize that the highest payback wouldn't be in upgrading the walls. Perhaps it would be in HVAC upgrades, in air leakage or in the attic.
    The bible for California Energy Retrofits is "Measured Home Performance" by Chitwood and Harriman. I don't think they even mention reworking walls. Of course they aren't shooting for 80 or 90% energy reductions, but they do find measured 40 to 60% savings if proper protocols are followed. Costs range between $15 and $40k. Strategic choices are fundamental to the process and a whole house/whole package approach is recommended.
    Let's use those numbers and "stack" the other benefits onto them.

  6. GBA Editor
    Martin Holladay | | #6

    Response to Alec Shalinsky
    Like Ted Kidd (Comment #1), I believe that a lot of energy-saving promises made by deep-energy retrofit advocates are too rosy. These advocates sometimes imply that a deep-energy retrofit makes sense due to the expected energy savings. While energy savings are probable, homeowners need to sharpen their pencils to determine whether these large ($30,000 to $70,000 or more) investments make sense due to energy savings alone. They usually don't.

    If (like Ed Dunn) you like new cherry cabinets, or you'd rather perform a deep-energy retrofit than install a couple of space heaters in your cold back bedrooms, all power to you. That's great -- as long as you realize that the retrofits can't be justified by energy savings alone.

  7. Tedkidd | | #7

    Chris M - many want help building a strategy
    Chris, what "sucks" about your house? What annoyances would you like to solve?

    The residual value of EE retrofits is often $0 the day after completion. This problem will exist until Energy Use Intensity becomes a standardized comparable. Pretty fundamental Econ - you can't value what you don't measure.

    When the market can readily see that house A costs $600/yr less than the average, or than the other houses you are looking at, you will be willing to increase your offer for house A by some fraction/multiple of that $600 annual. At that point EE has residual capital value. Until then the value is rhetorical.

    SO, it comes down to a "my house sucks" issue. All EE that I've seen correlates to something the homeowner wants to make not suck anymore. EE is just using good design rather than being stupid when attempting to fix problems.

    Our clients all have performance issues that frustrate them. These issues are often stacked (high bills, low comfort, equipment should be replaced, etc.) and many have attempted to solve problems and failed, so they painfully understand the value of having a written plan that addresses all these issues.

    Making decisions around EE for your non-appreciating property means taking a lot of specific personal financial information into account, mixing it with the current condition of your home, your frustrations, the deferred maintenance (money you really need to spend soon anyway), and EE $ savings opportunity that can be leveraged into helping fund the repairs and improvements.

    It is our mission to help people gain clarity around their problems, by creating a written list, and develop a budget for solving the list. It's a design challenge tailored to the intersection of the needs and resources of each homeowner and the specific problems of their home. A fundamental premise is leveraging energy savings to deliver more comprehensive projects, and that EE is sigmoidal -

    To get started understanding how we help people get clarity on these decisions the first step is to check out our questionnaire. [Editor's note: the comments section of GBA is intended for discussion of technical issues, not business promotion, so GBA has removed this last URL.]

  8. Tedkidd | | #8

    "Can we all just get along?"
    Martin, if you agree with me on things it reduces the likelihood of virality.

    "as long as you realize that the retrofits can't be justified by energy savings alone."

    Oh, and the comprehensive retrofit project that can be justified by energy savings alone is so not as rare as a unicorn, but it's close. This is why savings are exaggerated by as much as a factor of 3x -

    So people who have no performance complaints they are willing to come out of pocket to solve should put their money elsewhere.

  9. GBA Editor
    Martin Holladay | | #9

    Response to Ted Kidd
    We agree on some things -- just not everything. I still believe in low-hanging fruit. But let's not go there -- at least today.

    For many years, I have been a consistent skeptic on the question of whether deep-energy retrofits can be justified by energy savings. See, for example:

    Deep Energy Retrofits Are Often Misguided

    The High Cost of Deep-Energy Retrofits

    Researchers have known for at least 25 years that most energy modeling programs over-predict energy savings arising from energy retrofit work. I was reporting on this research back in the 1990s. I've interviewed Michael Blasnik on the topic many times, and there are many articles on the topic here at GBA. See, for example, Energy Modeling Isn’t Very Accurate.

  10. user-1135248 | | #10

    Can you guys please post real URLs, instead of sending everything
    through third-party redirectors that have no business collecting stats
    on who chases what? That oughta be GBA *policy* -- no shorteners.

    I calculated the ROI on my own reno at something on the order of 50
    to 70 years. It'll undoubtedly need minor maintenance over that
    time as well. That's okay, as I enjoy many of the benefits mentioned
    as well as the impetus to publicly geek out about it and use it as
    a show-n-tell tool to further community knowledge and confidence.


  11. GBA Editor
    Martin Holladay | | #11

    Response to Ted Kidd
    Preaching to the choir, Ted.

  12. Tedkidd | | #12

    Energy Modelling accuracy and precision.
    Martin, energy modeling is just math. Fancy spreadsheets. Have you ever wondered why it isn't accurate?

    Accuracy AND precision takes more work. Most people want to get some type of reward, payment, recognition when they do more work. It also takes adjustment, tracking, feedback loops. You can't measure ABSOLUTELY everything, so you have to gain judgement. It's as much a sport as a science - you need to hit the ball, see where it lands, and adjust your swing.

    Nobody tracks outcomes, so how are they going to gain judgement or know what is or isn't accurate? There is no accountability for performance in these programs. They prefer more savings to less, and they don't care about REAL savings - they care about modeled savings

    There are lots of reasons to exaggerate energy savings, and practically no reasons to underestimate. For example, most programs want projects to "cost justify" or they don't get financing and subsidy approval. Think this might put serious pressure on exaggerating your savings modeling? Maybe?

    What baffles me is people's surprise that realization is so far below 1:1.

    When I look at Matt's realization chart some things stand out to me. First the obvious - the best fit line is 34% realization. But what nobody seems to comment on is that there seems to be pretty strong precision around that line. So in other words, if you took all those promises and divided them by 3, you would not only have high accuracy, it looks like precision would be really good too.

    The presumption that modeling should be accurate when there is no incentive for accuracy, and lots of incentive for inaccuracy, seems idiotic to me. The conclusion that inaccuracy is because of a faulty spreadsheet seems to indicate a failure of first principles critical thinking. No surprise considering the source. His reasoning skills are very shallow.

    Accuracy is achievable, it just needs to be a goal. It needs to be rewarded, not punished. Outcomes need to be tracked to promises.

    We left the NY program because they wanted us to overstate savings and we wouldn't. Our projects suggested we were doing well with accuracy and we didn't want to abandon that skill. NYSERDA wants their modeled savings, they don't care if the consumers get real savings. They've had plenty of time to fix this.

    This is how you get accurate modeling

    Here is our project reporting. Lots of 50-150 year "paybacks" - and it so far we have high precision and high accuracy on savings. We are using a third party weather normalization M&V service to track outcomes -. [Editor's note: GBA has deleted a link promoting a for-profit business.]

  13. Tedkidd | | #13

    How do we get the choir to
    How do we get the choir to start singing? This is fixable.

    [Editor's note: GBA has deleted links promoting a for-profit business. The GBA comments section is intended for technical discussions, not for placing free ads or promoting businesses.]

  14. christopher_peck | | #14

    Thanks to everyone for the
    Thanks to everyone for the thoughts and comments!

    I'd like to respond to Jim Baerg's comments, and provide a bit more detail and some of the thinking behind our project. The blog post was originally for a general audience, so spreadsheets and formula are right out. As you might imagine, as an investment advisor, a financial analysis of the project was done well prior to any work being done. We did an energy audit. We looked at what our actual energy costs were (I have a spreadsheet with every PG&E bill on it with therms and kWh broken out.) PG&E's website is also helpful, with comparative data on energy usage going back as long as we've had a bill. The PG&E comparisons showed that on average, for houses our size in our area, that households used up to 100 therms a month at peak, though 85 is a better average, and that's for just a couple months. At $1.30/therm, heating a house in Sonoma County just doesn't use that much energy or cost that much. My made up rough number of $500/year in savings would be a wasteful scenario for our climate. That's the expense (and eventual savings) number.

    As far as estimating costs for the DER, for a homeowner who's not a builder, it's pretty challenging. I solicited bids from a couple contractors, or, I tried to, but received nothing helpful. Comments ranged from "you can't do that" to "If you really want to go for efficiency you should try this insulating paint." Yup, someone actually tried the insulating paint line on me. My next step was basically to add up what each component would cost. So I did actually add it up, counting how many screws and sheets of foam and OSB and windows, etc. And then tried to make something up with regard to labor. I am horrible at estimating how long a project will take, but clearly so is everyone. As homeowners with more building enthusiasm than building experience, and working on a project at the cutting edge of building science, the project has been a learning experience. We made some dumb mistakes at the beginning, like trying to screw HardiPlank onto the furring strips (cracked corners even with pre-drilling = loud cursing). Now that we've done about 2/3's of the house, and own a nailing gun, the project is much faster. But the cost has held pretty steady.

    Another piece of the decision making that I haven't mentioned anywhere before, is that having done all of this analysis, and knowing the ROI on EE won't be that great but still doing the project anyway, is the staged nature of the whole project. We knew the whole project was going to cost a lot of cash and we didn't want to pay all of that upfront or add to the cost by financing it. So paying cash as we go is working for us. Also, we live in the house. We can only handle so much dislocation at once. We can take the guest room out of commission to add a window and a door and overhead lights and turn it into a highly functional office. Then I can move my office into that room and turn the next room down the line into another office, after improving windows, lights, DER, etc. The DER work has worked in conjunction with this process. That is, if you don't mind the couple years when your house is half T1-11 and half HardiPlank! We did a refi during this process and they didn't mind, so there's a vote in our favor.

  15. PAUL KUENN | | #15

    ROI doubles
    Good for you!
    Don't forget you may only save $500/year but now you also have $500/year cash in hand to spend on other things so you've really gained $1000/year. I can do quite a nice vacation for a grand:) or just keep adding PV panels!

  16. GBA Editor
    Martin Holladay | | #16

    Response to Paul Kuenn
    Either I'm missing something, or we should make you Secretary of the Treasury so you can solve our federal budget problems.

    Tell me again how it is that saving $500 a year on my energy bills puts $1,000 cash in my hand for a vacation? Because I want what you've got. Help me get there, Paul.

    I won't even go into the fact that I just shelled out $30,000 for house repairs, and that makes me feel poor. I want a vacation.

  17. JC72 | | #17

    Ok I'll bite.

    #1 Thermal Bridging and Air Leaks: OSB sheathing was used at the corners with some rigid foam in the field on one side. The other two sides were all OSB. No house wrap. This is an end unit so two sides are hardiplank and one side is combination stucco w/brick.

    #2 Framing of the windows is below avg and some are out of square at the sill (one develops a 1/4" gap moving left to right along the bottom of the sill). The windows themselves are double pane solar heat gain is significant.

    #3 Grade 2-3 insulation. I don't know for a fact it's this bad, but this is going off how cold the walls are around the windows and from what I saw while other units were being built. I had wanted to air seal with foam once the windows went in, but the windows, insulation, and sheetrock went up in about 2 days and I missed the opportunity. Tract builders and their schedules.

    #4 HVAC duct design. The system is on the 3rd floor so I have: Poorly insulated walls space where the refrigerant lines enter the unit and run up to the third floor. Flex duct is run between the roof trusses up next to the roof sheathing and down the inside of the exterior walls. The system itself is designed poorly (4 ton, zoned, single stage, heating/cooling ~2000 sqft)

    #5 The one-car interior garage. Cold floor in the room above it so at the very least that would need to be addressed.

    #6 Re-configure 3rd floor to gain access to insulation on one side of the unit. This floor is like a big hallway running from the front to the back of the unit and there isn't access to the insulation and soffits on one side. I'd probably have to reduce this room by half to open the attic space and reposition the HVAC system because the plenum bumps up against one of the roof trusses.

    With all this work we'd save some $$ on our utilities and probably be a little more comfortable but we've grown accustomed to living in the 60-65 degrees range in the winter and 76-78 degrees in the summer so I don't know. A normal household (i.e. kids, and possibly stay-at-home parent) might enjoy more normal lifestyle with higher winter temps and cooler summer temps.

    These issues are more of an annoyance stemming from my OCD.

  18. BCinVT | | #18

    Because it's the right thing to do.
    All the points Chris has made are good and this type of insight is needed. But I think he stopped short of giving us all he might have felt.

    It's good to keep the financial picture in mind, and we can try to balance it with all the details for each specific situation. But really it is a moral question, and that brings in all the details that each of us can only justify by referring to who we are and what we want to be in the world. Our lives are really not made by the most practical choices we ever had. Why would you plant that tree which you won't ever see in it's full benefit? Why would you give less than your best effort, and how would you feel about it?

    True, such thinking is not a key to success in the world. But maybe that's the world's problem

  19. rjparker | | #19

    I agree that one must have
    I agree that one must have significant fuel / power hvac usage (maybe $300 or more a month) to economically justify deep retrofits. I wonder how likely "very little supplemental heating or cooling" is regardless of the quality of an improved envelope? I have seen people spray foam top, bottom and sides perfectly and then wonder why it still was hot in summer and cold in winter without using cooling or heat. Then the same people tried a ventless propane heater which would not stay running without opening a window. Not suggesting such in this case but...

  20. exeric | | #20

    I agree with your philosophy. But humans being what we are we never completely grow out of the need for self gratification. So I would say find an "excuse" for doing the right thing and doing a DER. Think of an improvement for making your house more useful or more aesthetically pleasing. Most people can find a million of them, and then use that to grease the wheels to do the DER. "Do the DER": sounds like a catchy title to a song...

    I think despite our self delusions most adults are a little childlike in this way. Sort of like when your mom promised you a cookie or something to clean your room when you were a child. (Some of us could be more easily bought than others.)

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