Making a smart investment in energy

Aug. 30, 2013
“My air conditioning has died, it’s almost 90°F on the first floor, and I need help!”

“My air conditioning has died, it’s almost 90°F on the first floor, and I need help!”

Another summertime A/C emergency! Funny how A/C has gone from being a luxury (not that many years ago) to being more of an emergency call than a no-heat call in the dead of winter. This was a through the wall (TTW) model built-in decades ago with absolutely no chance a replacement would be available that would fit the same opening. The existing TTW unit was 24-years-old, so that indicated a low seasonal energy efficiency rating (SEER). The bi-level home had two TTW units for its cooling and electric baseboard units in each room to handle heating.

How are your electric bills I asked? “They’re keeping me in the poor house,” said the customer. The resignation in this single mother’s voice regarding her shackled fate with the power company could rip your heart out.

She had seen ads for mini-splits and also window units, but none of the cheap window units were rated for TTW applications and she had no windows to spare. The breaker panel was on the opposite side of the home and the existing TTW was on its own circuit, but that was 120-volts instead of 220-volts. There are 120-volt inverter (variable speed) mini-split heat pumps, but their operating costs are higher than the top-of-the-line 220-volt inverter heat pumps. “I only need A/C because I have heaters in every room,” she exclaimed.

Nothing ventured, nothing gained! Best guess regarding her operating costs to run the old A/C unit was $229 if it was on for 850 run-hours. The baseboard heating, on the other hand, at 2,250 run-hours, clocked in at $609. Inverter mini-splits operate down to -F temperatures without requiring any backup resistance heating and in my area, ASHRAE guidelines for design-day conditions are above 0°F. On an average year, we may experience temperatures below 10°F, but that only lasts for nine hours and those hours are in the middle of the night. For peace of mind, those electric baseboard units can stay put and serve as backup, but I know from experience with inverter mini-splits that they’ll remain idle.

Based on the same run-hours and electricity at 12-cents per kWh, her proposal looked like this (brand, models and pricing removed):

Option No. 1:Your existing 12,000-Btu air conditioner operates using 115-volts. A (brand name) 115-volt inverter 12,000-Btu mini-split model #XYZ operates at 16-SEER and 9- heating seasonal performance factor (HSPF). Your existing electric baseboard costs $609 and the mini-split will cost $185, so you’ll want to use this as the primary heating source. Your existing A/C unit would cost $229 where the same cooling using the mini-split will be $57. Combined energy reduction for operating cost = $596. Installed cost will be $x,xxx. The energy efficiency rating (EER) for this model does not meet the power company’s requirements for a rebate.      

Option No. 2:Upgrading to the 220-volt highest efficiency (brand name) model #ABC mini-split results in 28-SEER and 12-HSPF efficiencies. Your heating costs would be $139 and cooling $34. Combined energy reduction for operating cost = $665. Installed cost will be $x,xxx (before rebate). This model qualifies for a $400 power company rebate.

Option No. 3:Installing a two-zone (two indoor wall-mounted units connected to one outdoor unit) 220-volt system, which would replace your upper floor TTW A/C unit. Outdoor unit model #DEF with two #GHI indoor units would result in operating efficiencies of 14.5-SEER and 8.7-HSPF. The first floor area would be $191 for heating and $63 for cooling. Combined energy reduction for first floor operating cost = $584. Installed cost will be $x,xxx (before rebate). This model qualifies for a $250 power company rebate.  

If she had been given just the pricing and I had talked in vague terms regarding SEER, HSPF and EER without carefully explaining them in plain customer-English, she would never have chosen the higher up-front-cost option No. 2, but that’s exactly the one she picked because she could clearly see the value of investing in her own energy.

Here’s a paragraph from a national study regarding real estate values and energy conservation: The study uses statistical analysis of actual real estate sales data to conclude, "These results provide statistical evidence that the housing market does indeed capitalize the benefits of fuel savings in the selling of the house. The estimate ... indicates that an investment in an energy saving durable good resulting in a one-dollar reduction in the annual fuel bill of the house will certeris paribus (all things being equal) increase the market value of the house by $20.73 in 1978 dollars."

I used an online inflation calculator to determine that's $74.24 in 2013 dollars. Given that Option No. 2 results in lowered energy costs of $665, her home’s net worth was enhanced by $49,389.55. I’ve read other studies that suggest a 20:1 ratio and that would imply an increased real estate value of $13,300.

Let’s ground ourselves: The ECV of $665 results in a ROI of 20% if the installed price is $3,296. It's tax free, she owns it, it’s not subject to crazy investment fluctuations or a stock market crash and, as we all know, fuel costs will rise faster than inflation, so it's a rock-solid investment that pays great dividends. It's an investment in energy; her own energy. Using an annual increase of 3.5% per year for electricity over 20-years, that $665 ECV totals $18,805.99 she will have kept for herself instead of giving it to the power company.

If you would like to read the full article, The Resale Market Value of Residential Solar Photovoltaics: A summary of literature and insight into current value perceptions, go to:

All Dave Yates material in print and on Contractor's Website is protected by Copyright 2013. Any reuse of this material (print or electronic) must first have the expressed written permission of Dave Yates and Contractor magazine. Please contact via email at: [email protected].   

Voice your opinion!

To join the conversation, and become an exclusive member of Contractor, create an account today!