Energy productivity

Energy efficiency has been the buzzword in the heating and plumbing industry for the last 40 years. However, increasing energy efficiency isn’t the ultimate goal. A better goal is increased energy productivity. Essentially, this is how many gross domestic product dollars we generate divided by the amount of energy we use to get there.

Increasing energy efficiency is sometimes a great thing. But, if you aren’t enabling yourself to also do more with less, you aren’t increasing your energy productivity. For example, if you purchased a tankless water heater but then increased your time in the shower by 10 minutes beyond what you did with your old water heater, you are increasing energy efficiency but not productivity.

In its American Energy Productivity Executive Summary, the Alliance to Save Energy (ASE), a non-profit organization dedicated to advancing energy efficiency, advocates a bold but doable goal of doubling energy productivity in the U.S. by 2030 (getting twice as much economic output from each unit of energy).

The summary states, “achieving the Energy 2030 productivity goal would benefit the country enormously. We would save $327 billion annually in avoided energy costs; we would create 1.3 million jobs; we would reduce imports to represent a mere 7 percent of overall energy consumption; and we would lower greenhouse gas emissions to 1/3 below the level emitted in 2005.”

To achieve these goals, the ASE estimates we would need to invest $166 billion a year until 2030 in energy productivity projects. (For reference, we spent $626 billion on defense last year). According to their study, by 2022, we would have a higher national output than demand of energy. By 2030, we would net an average of $1,039 in energy savings per U.S. citizen per year.

To do this, the ASE recommends three key approaches. They aim to invest in our infrastructure, modernize regulations and codes, and engage consumers. These are fairly straightforward concepts, with more complicated implementation processes. An interesting topic they address is individual access to efficiency upgrade financing.

To achieve the Energy 2030 goals, we will need very low interest rate loans to be available to the average citizen to perform energy upgrades on their homes or businesses. Upgrading mega corporation buildings or tax dollar funded buildings like fire departments is wonderful; however, they can generally finagle the cash they need to accomplish these goals. The average American may not have money available to retrofit their home or business to LEED Platinum standards without help.

Home energy upgrade specific financing programs are already available in some areas. In Colorado, one option is Energy Smart Colorado. When you have an energy audit performed at your home, you can tap into zero money down financing for upgrades with low interest rates. Depending on how energy inefficient your home is, you may be a great candidate for an energy efficiency loan instead of waiting to save the cash to do the repairs. If the government is going to throw money at anything related to energy productivity, it should be really simple grassroots financing options for homeowners.

In my day job as a manufacturers’ rep, I frequently run into the argument that the property owners don’t have the money to do big mechanical room upgrades. Instead, they end up spending thousands of dollars in maintenance costs to keep old boilers limping along, while their efficiencies decrease with age. They also maintain the same poor comfort in their buildings. If, instead of buying Band-Aids for outdated equipment, they had the option to get a great energy upgrade loan, they could potentially save the money they are spending on additional maintenance every year and take a big efficiency productivity leap.

Financing anything will be more expensive than cash up front. Yet, it could very well be a better long-term decision than putting up with grossly oversized and inefficient equipment. The determining factor would be whether you would save more money on your energy bills than you will have to pay in a monthly loan payment, or if you are fine with paying the difference to upgrade your living conditions.

As an example, here is a common scenario I see. (All numbers are approximations. A more complex formula would be needed to compare all the expected lifetime costs of mod/cons verses atmospherics).

A homeowner currently has an oversized, 80 percent efficient atmospheric boiler, installed 15 years ago. A contractor bids a new mod/con boiler system, upgraded house controls, and distribution for the price of $15,000. With the new equipment, they are shooting to save 30 percent on utility bills. On average, they spend $1,500 per season on fuel with the current boiler that also has escalating maintenance costs as components wear out. With the new equipment, they expect to pay $1,050 for the heating season.

When would financing make sense in this situation? They would add $83 to their monthly expenses for a simple 3 percent, 20-year, zero-down loan on the $15,000 system cost, but they would have the benefit of a new comfortable heating system that now costs $450 less per season. In this case, they would pay an additional $629 that first year in loan costs beyond their utility savings, assuming energy prices stayed the same.

Gas prices don’t stay the same, long term. For this example, you would pay more out of pocket initially for the new boiler if energy prices stayed the same for the next 20 years. If we use natural gas as an example, from 1993 to 2013 the U.S. price of natural gas delivered to residential consumers went up 67 percent according to the Energy Information Agency (EIA). Propane prices have gone up nationally 200 percent in the last 20 years. As energy prices increase with this system example, they will eventually reach a point where they will save more in a year than the loan payment costs.

Another financial advantage of upgrading your boiler is minimizing your risk of being hit hard by a spike in energy prices. A person living in a net-zero house today has minimal financial risk associated with a spike in fuel costs. Someone with an old, inefficient boiler is at high risk of taking a price increase deep into their savings account. Once an event like the oil embargo of 1973 hits, you are already too late if you have an inefficient boiler in your home.

The example presented will have different variables in every house in the world. A financed upgrade will make more sense in some cases than others. Some examples may save more energy monthly than a loan payment cost from month one. The overall theme here is that financing is worth considering, especially in cases of oversized systems that are energy hogs.

If you were the chief operations officer of a national department store chain and you told your chief financial officer the following, you would look like a hero.

“I have a financial plan for our stores to replace oversized, inefficient, aging, boilers that are controlled poorly, make employees uncomfortable by overheating stores, and cost an arm and a leg to fuel and repair. We would put in new boiler systems that could save us 30 percent on our monthly utility bills, will heat the stores more comfortably, will come with new equipment warranties, and will reduce our exposure to energy price spikes.”

Why should small residential decisions be a different rational?

What we shouldn’t do is pretend energy isn’t getting more expensive and harder to find. In the U.S., we have potential to produce more energy, but we are also as likely to export more of it to higher bidders around the world. As time goes on, we will watch our national energy productivity go down, and we increase our risk of another Arab Oil Embargo type event devastating our economy. Home energy efficiency upgrades need to be a key part of the American lifestyle going forward, and low interest energy loans could be a big part of the 2030 equation.

Max Rohr is a graduate of the University of Utah. He is currently an outside salesperson at Shamrock Sales in Denver. He has worked in the hydronics and solar industry for 10 years in the installation, sales and marketing sectors. Rohr is a LEED Green Associate and BPI Building Analyst, and is RPA’s Education Committee Chairman. He can be reached at max.rohr@mac.com.

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