Financial Payback

Return on your Investment (ROI)

 
Energy efficiency improvements, unlike many other investments in your home, help pay for themselves in lower energy bills. For this reason many homeowners want to know how quickly the cost of the efficiency measures will be paid back in through lowered utility bills. Dividing the cost of the project by the annual savings gives you a “simple payback” number. The following example is for a home in Washington, DC:
 

 
Payback periods can be dramatically cut down when the improvement that you make was going to happen anyway. For example, in the case of a replacement of  household appliances such as a fridge, water heater or furnace that is nearing the end of its life-cycle, the difference in cost would be substituted for the total cost.  If the more efficient model cost $150 extra but saved $150 per year, b>the payback on the extra efficiency is just one year. The same logic can be applied for renovations such as roof replacement, painting, or general remodeling.
 

Savings to Investment Ratios (SIR)

 
Because energy efficiency improvements — like other home improvements — cost money, you may need financing to help get the job done. The good news is that energy efficiency financing has some advantages over conventional financing, due mainly to the fact that energy efficiency investments produce savings. These energy bill reductions are often larger than the loan payments, producing what the bankers call “positive cash flow.” This means that efficiency loans help pay for themselves by freeing up other income that would have gone to pay energy bills.
 

See our Learning Center for information on federal, state, local and utility rebates in the mid-Atlantic area.