June 30, 2009

Home Energy Cost Cutting Project : Bids for Insulation work

Previously I laid out my plan to improve our homes heating energy usage. We started with a home energy audit and then we got air seal and duct seal testing done.

The goal of the project has been to duct our home energy usage in the most cost effective manner while making sure we were making a good investment.

Our latest step in the process has been getting bids on having all the air seal, duct sealing and insulation work done. We got bids from three different contractors. The first contractor was the one that did the air & duct seal testing with the door blower. We also then got estimates from two other contractors. The first and second bids were both around $6,000 total and the third bid was well over $8,000.

These numbers seem high to me, but theres a few factors causing them to be higher than I might like. First of all they are doing not just insulation but also air sealing and duct sealing. For insulation alone the 1st bid was about $4,100 and the 2nd bid was about $4,500. The air sealing, duct sealing and work on our venting in the ceiling as well as fixing some other misc. items. Another reason the bids are likely a little higher is that the contractors we'd need to use are on an approved list of certified contractors that know how to do the insulation to meet the standards required by our local utility to get their rebates. I have to use contractors from their limited list of certified contractors or we won't get the rebates from the utility. But I'm assuming that the contractors on that list know their work has built in benefit by ensuring the rebates so they probably charge a premium. I don't know this for a fact but I'm pretty sure its a safe assumption that the certified contractors typical fees are higher on average then all contractors.

While I think the costs are a little higher than I expected, they aren't out of the ballpark of what it should cost. I found this reference on Cost Helper that says the cost to fully insulate a home is $2,500 to $5,500. So the insulation costs are around the middle of that range. I also took a look at materials at Home Depot and I guesstimated that the insulation alone to do the job would run in the ballpark of $1500 to $2000. Plus I shouldn't be surprised if the cost is higher than I would expect, since this seems to usually be the case.

So we had two contractors bid about $6,000 to do the work. Between the two we decided we prefer the second contractor. They seem to have more experience and knowledge overall plus they'd won a couple awards for their work.

The contractor bid is the full cost of the work. We won't have to pay the full $6,000 in the end as we'll get a number of rebates and tax credits. Between our utility, state tax credits and federal tax credits we'll get about $2,200. So in the end our total out of pocket cost after all the rebates and tax cuts will be about $2,800.

Is it Worth The Cost?

To determine if its worth spending $2,800 out of pocket to air seal and insulate our home I'd have to know about how much money we'll be likely to save. There is no single source to find out what all the improvements we're looking at will save us.

Energystar says that air sealing and insulating a typical home in the northern US will save 19% on average for your home heating and cooling costs. Our home is very close to the 'typical' home they discuss.

This site Energy Boomer has an equation to figure out the payback period for adding insulation to your attic. I used their formula and it says the payback period is 12 years based on a cost of $1,500 for the attic insulation alone. I'd assume that equates to about $125 savings per year from attic insulation alone.

Duct sealing alone can improve energy efficiency by as much as 20% according to Energystar. If we got 20% improvement on our energy efficiency from duct sealing then that would equate to a around $200 per year difference. I doubt our ducts are that bad but even if we got 5% improvement thats $50 a year.

Our floor currently has ZERO insulation. I'm sure that we're losing a lot of energy through our floor. I remember last year when it was winter and I was outside I could feel hot air coming out from under our crawl space. Adding air sealing and floor insulation to our crawl space should have a good impact on our energy savings.

Between the savings from air sealing, duct sealing, increasing attic insulation and insulating the floor I'm going to guess that we should be able to see something in the range of $200 to $400 a year in energy savings. Right now our energy heating costs are around $1000 per year for a full winter. So thats about 20-40% reduction. Based on our cost of $2800 that would be a 7-14% annual return and a payback period of 7 to 14 years.

While its hard to know exactly how much money we'll save in advance, I think that the estimate is pretty safe.

I think this is worth it. My wife and I are going to go ahead and have the work done by the second contractor we mentioned.

After the insulation and air /duct sealing is done we may or may not continue to investigate additional improvements. The next options we will look into is having a heat pump installed and maybe getting solar panels added.

4 comments:

  1. I've also spent quite a bit of time analyzing our home energy usage. I've used a government web site (Home Energy Saver) that was quite helpful: http://hes.lbl.gov/

    I'm not really sure what to make of all the data I've accumulated. In almost all respects, our house is a worst case scenario: we have a 40-year-old furnace(!), bad insulation, HORRIBLE ducts, old windows, old A/C, etc, plus we don't really adjust the thermostat like we should to save money in either summer or winter. And yet, in spite of all that, our bills are only modestly higher than average for this area for our square footage. Hence, I'm not really convinced we will save as much as these audit sites indicate because obviously some portion of the house is functioning a lot better than I imagine. I certainly won't save as much as some of these fliers I get in the mail that claim $X amount of savings per year for replacing our furnace, because we don't even spend that much right now.

    One huge savings was getting a new refrigerator. Our base electric bill (e.g. winter time) went down quite a bit after that. Also, we found that ventilating the attic (i.e. attic fan + soffit vents) helped somewhat as well. It's not clear the ventilation helped materially with the bills, but it seemed to make the temperature much more even throughout the house.

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  2. S.B.,

    That Home Energy Saver site looks really neat but for me the numbers are WAY off. I plugged in my homes data and it told me my electric bill would be $3400 but we actually pay $2100 last year. So I don't know how they're figuring it or what kind of assumptions they make.

    If I were you I'd check with your local utility and state government and see if they have any energy audit or energy savings programs. Some do and some don't. If they do then you can possibly get a home energy audit for free.

    What part of the country do you live in? If the climate is more moderate like California then heating/cooling costs are not such a big deal. But if you're in the frozen north then heat costs could kill you.

    Jim

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  3. Jim, I'm in the Northeast Corridor, so heating (and cooling) can be quite substantial. One thing that makes it hard to determine the breakdown is that we have gas and electric, and there is no (practical) way of self-metering individual items for the gas the way one can for the electric.

    Not trying to pry, but do you worry about such a long payback period as (potentially) 14 years? Some improvements we've looked at seem have payback periods in the 10 to 20 year range as well. One concern is that if you move before the payback period, you probably won't get the money back, as my (limited) experience is that buyers generally don't seem to care what the utility bills cost, so you probably won't be able to charge more just because, for example, you have an insulated attic and sealed ducts. Also, as the time period gets really long, I wonder about whether I should really be discounting the money...15 years discounted at, say, 6% makes a a substantial difference in whether the improvement looks attractive from a financial perspective. Of course, most of these sorts of improvements also increase your comfort and/or convenience, so it might be worth it anyway.

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  4. For improvements with payback period of over 10 years you could be taking a gamble. We're planning on staying in this home for a long time so we should see the full payback period. But if we were to sell early then we might not get the full investment back. Its certainly a good point to consider. If you aren't going to be in the home for many years then it makes less sense to sink a bunch of money into it that you may not get back when you sell.


    Jim

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