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Home energy retrofit (part 2)

This summer I put our household through an energy efficiency retrofit. I was working on a research paper on energy efficiency, and then both the BC and federal governments announced new funding for their retrofit programs, so I engaged in some direct action research, staring with an energy audit of our home (more in part one). Over the summer I completed some projects around the house, then recently had the second closing audit done.

I basically aimed to harvest all of the low-hanging fruit, the actions that will be most cost-effective in cutting down on our heating bill. Most of this was less-than-sexy caulking around windows and on the stairs, tightening up the doors, and putting in foam gaskets in the electrical plugs on exterior walls. I installed programmable thermostats, which should better control for leaving the heat on all night downstairs by mistake. I spent an afternoon in our confined attic space, dodging nails sticking through from the roofing tiles, crawling around the joists holding the ceiling up, being sure to step only on beams so as not to crash through the attic floor, and packing insulation into place with an extendable ski pole – it was a mix of rock climbing and caving, a physical feat of which I am proud but never want to do again.

One of the things I was excited about at the outset was the possibility of getting a heat pump installed. Because we have electric baseboard heaters, a heat pump is about three times more efficient at space heating because it sucks the warmth from the outside air (even when it it cold) and puts it into the house (similar to a fridge in reverse). Alas, after getting support for the idea from the audit, I contacted some contractors (approx $4-5000 installed), did the math and found that a heat pump is just not cost effective. At best it had a payback period of about 12 years, and a useful lifespan of about 15. Even with electricity prices set to go up, and a combined federal and provincial incentive of $1,500, all it would take was one maintenance or service call and we’d be in the red. Plus to install it we would have to have units placed inside and out, and electrical connections made, meaning holes and drywall repair and … at best we might save a couple hundred bucks over a fifteen year period. So we bailed on the heat pump.

Some of the suggestions from the energy advisor seemed excessive, like changing our bathroom fan; others seemed dumb, like spraying expansion foam to prevent even more marginal air leaks (so that toxic fumes can off-gas in our more tightly sealed home?), and replacing toilets (what does this have to do with energy?). Overall, I think I did well on tightening up the air leakage, though when the overnight  temperature dropped last week I noticed an alarming amount of condensation on the window frames that dripped into a pool by our window ledge. File that under unintended consequences.

Costs and benefits:

I have not got the final, final reports yet, and I’m told it could take eight months to get cheques from each of the feds and province, but here is how it looks. Total outlay on my part: $960 including $336 for both audits (the BC government also pays the auditing organization another $168 to subsidize the cost of the first, longer audit). I will get back $650 from the federal and BC governments for meeting certain targets. So a total net expenditure of $310, which is basically the cost of the audits. And over the long-term, this investment will manifest itself in lower winter electricity bills, but it will take a few years to assess how much.

For attic insulation, I get back $250 from the feds, and spent $330, so a net cost of $80. I did mess up on this, however, misreading the report and putting only an extra R-20 instead of R-30, which would have qualified me for an extra $125 from the feds and $300 from the province. On the other hand, you cannot buy R-30 batch insulation easily and I would have had to pay for double the insulation. Still, attic insulation is basically fully subsidized by the combined federal and provincial programs (apart from the labour if you were to hire someone to do it, and given my experience up there, I can say that it is not for everyone).

The best incentives would appear to be for air sealing. I spent maybe $70 on caulking, new door sweeps and seals, and gaskets for electricity plugs and switches. I had to meet a federal target of 14% reduction in air leakage to get $190 in incentive money. But I achieved more than a 26% reduction, which qualifies me for an extra $120 from the feds and $100 from BC. That’s $410 in incentives, for a net gain to me of $340, for something that I should have done anyway because it saves money on heating bills. Some of the proceeds went into buying programmable thermostats, but overall the improvements paid for themselves (no charge for my labour) due to the combination of all the incentives.

Final Thoughts

Every home is different in terms of starting point and size and climate, so there will be a range of outcomes. I’m the marginal consumer, the person the program is really meant to target, as I would not have made those changes in the absence of the program. Estimates from Natural Resources Canada point to about one-quarter of funds going to free riders, those who would have made upgrades in the absence of a program.

There is a basic market failure in all of this in the form of imperfect information. Like most people, we just paid our bills and really had no idea how a house operated as a system, what the big draws for energy were (heating and hot water are the top two for us and most homes) and what a more efficient home would look like (caulking, not new windows). Just getting the information about how our home rated and what to think about for improvement was liberating.

This stuff is pretty complex, including the patchwork of programs themselves. It can be a lot to wade through, and having a graduate degree in economics was an asset. Having a decent non-profit energy auditor was particularly informative (though I’m geeky like that), but you only really know the final tally after the fact (several years after the fact when you factor in reduced heating costs). So you do the improvements with a large dose of faith, and in the case of the heat pump I still see a fundamental uncertainty about upfront costs versus long-term savings for which my faith was insufficient to move ahead. The reports you get from the energy auditors speak only of energy efficiency and do not make any estimates around costs and benefits.

Also, this just happens to be a rare window when both federal and provincial programs are funded, and when they do come on-line they tend to get depleted quickly. Those programs are only accessible to homeowners who can put some cash upfront, and then only to single-family homes. So they essentially subsidize the households that do not really need it, which echoes comments I’ve made about various tax cuts I keep getting but did not really ask for.

That said, there is a public good aspect associated with gains in system-wide efficiency (less need for new generation capacity) and reductions in greenhouse gases. In that context we need more of these programs not less, but perhaps aimed at older, draftier housing stock to get the maximum benefit of public funds. Unfortunately, retrofit programs for rental housing stock and multi-unit buildings have not really progressed beyond a few pilot programs. This is where the real benefits could be had for public dollars in terms of getting the low-hanging fruit, improving comfort and lowering bills for low-income households, and cutting down on the free-rider and rebound effects common to traditional retrofit programs.


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Comment from Stephen Rees
Time: October 24, 2011, 12:44 pm

I started a similar process – and even a blog about it – but abandoned both in the face of bureaucratic obstacles. And the need to get both the strata council and the local building inspector on side. As you note, even with rising energy costs, the rate of return was usually marginal if not negative especially with some of the big budget items. But some no brainers – replacing an old “log effect” gas fire (negatively energy efficient) with something that actually made the home more comfortable – was negated by a gas inspector who insisted that an open air brick to the outside would be required. The replacement I was considering had its own air supply from the outside – as I showed him on the plans – but he was unmoved. The strata council is still more concerned with appearances than energy efficiency – so no new windows would be considered.

Nowhere in any of this was the question of ghg emissions considered – and of course thanks to BC’s exports of coal, oil and gas, any domestic energy efficiency efforts are overwhelmed by “elsewhere emissions”.

Comment from Dan
Time: October 24, 2011, 1:08 pm

In the article you talk a lot about your own cost/benefit, but your article is really discussing public policy. Therefore, what would be more interesting would be how much the government had to pay you to incentivize you to make these changes, and whether the public good value of the changes is greater than the public good value of alternative uses of that money (opportunity cost).

Do you have any thoughts on that?

Let me offer a counter-example: I recently had to upgrade my water heater, and I wanted to move to a more efficient boiler system. However, I had just missed the incentive window for an expired program, and there were rumblings about a new program coming along in the future, so I deferred the job. The ‘cash for clunkers’ program in the states saw the same thing – rather than creating new demand, it just shifted demand around in time. Sales did go up during the program, but they declined in the period immediately before and after.

In addition, the contractor who came to my house to give me a quote had a different story to tell – the government program wreaked havoc on his industry. The year before there was a big incentive program in place, so they had more work than they could handle. This caused them to increase prices, which in turn raised industry profits. The result was a bunch of guys leaving their companies to start companies of their own, and a shortage of labor that required the hiring of sub-standard workers. Then the program ended, and suddenly there was a glut of companies and not enough work – and all those new companies started going bankrupt. The contractor told me that a lot of the work he was currently doing was to go around fixing the shoddy work that the fly-by-nighters of the previous year had done.

This is a complex topic with good points and bad. It’s very difficult to see whether these programs are on balance a good thing, especially when you consider the market distortions they cause and the opportunity cost of the government money.

Comment from Purple Library Guy
Time: October 24, 2011, 7:13 pm

Well, as to “market distortions they cause”, arguably they are compensating for externalities and thus if anything reducing market distortions. It’s sort of the flip side of the coin from a carbon tax.

I’d certainly agree that it would be better if government programs on this sort of thing were fairly stable and ongoing, rather than starting and stopping on short-term whims.

Comment from John W. Warnock
Time: October 25, 2011, 2:52 pm

I had the energy audit done on my 100 year old two storey house in Regina. For $250. They did not produce anything that I did not already know. They advised me to have insulation blown into the walls, as I had basically done all the other easy things. For about $7,000. Forget that.

Sask Energy had a program for low income people last year, and I filled out the application for a friend who is a senior on GIS. They approved the installation of a badly needed new furnace, for which the province would pay full cost. Then came the hook. They would not approve the installation of the furnace until he had a federal energy audit. He did not have the $250 for the audit and never got the new furnace.

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