The Price Of Payback

Concern for the environment, federal and state tax incentives, and rising costs for electricity have sparked interest in making home improvements that increase energy efficiency.

Improvements can range from appliances to replacement windows or metal roofs. A few homeowners may install expensive high-tech solutions such as renewable energy systems, notably small wind turbines and solar photovoltaic panels that generate electricity.

Despite the publicity about such exotic renewable energy devices, you will likely get a bigger bang for your buck with such simple steps as replacing windows. But how can homeowners know when their costs will be paid back?

Unfortunately, there’s no simple answer. The payback period on investments in energy efficiency depends on many factors, including your electric co-op’s power costs and specific government programs and policies.

Depending on the project, some savings from energy-related home investments can be realized within as little as a month. And as energy costs rise, those savings can continue over time.

The return on investment can be substantial. For example, if $2,000 is spent on energy-related improvements, and savings total $200 in one year, the savings represent a 10 percent return on investment.

According to EnergyStar.gov, Kentuckians could save between $126 and $465 annually by replacing single-pane windows. Installing the cheapest ENERGY STAR low-emission window at $300 per window for 10 windows at a cost of $3,000 results in payback in about 24 years at $126 savings a year, or in as little as 6-1/2 years at $465 savings a year.

You can reduce payback time by taking advantage of tax incentives for certain projects. Consult the Database of State Incentives for Renewables and Efficiency at www.dsireusa.org.