Improving your home’s energy efficiency is a smart move. High-performance appliances and materials can significantly reduce your energy bills and fuel costs, making these improvements high on ROI.
However, some projects have more to offer than others. Choosing an energy-efficient project requires some research, since you want to make sure your improvement makes sense economically. Additionally, it’s helpful to know how to prioritize your projects, since multiple improvements over time can help you boost your home’s overall energy efficiency for the long term. That’s exactly what this guide is for. Use it to help you evaluate and weigh the projects that make sense for your budget and how to afford each one.
Popular Energy Efficiency Projects
Energy efficiency has just begun to gain traction in the home improvement realm, which means there are plenty of projects available for homeowners looking to reduce their energy consumption. A few projects tend to be more popular, however, either because they are most effective at saving energy or because of rebates offered for these types of improvements. Here are the energy efficiency projects that homeowners gravitate to.
Installing Solar Panels. Solar is a large investment, but an excellent opportunity for the homeowner looking to reduce monthly utility bills. Purchasing solar panels also qualifies you for rebates and credits that can help offset the initial cost. Solar also improves a home’s value by about $15,000, on average.
Replacing HVAC Units. Replacing inefficient HVAC equipment—particularly air conditioning—with high performing units can certainly reduce energy consumption in your home. In fact, installing a energy efficient AC unit could potentially lower energy bills by 20 to 40%.
Adding New Windows. Inefficient windows are responsible for a great deal of infiltration, which is reflected on homeowner energy bills. In fact, about 25 to 30% of heat loss or gain can be contributed directly to windows. Installing efficient windows with gas insulation, high-performing glazing and spacers can reduce the amount of heating and cooling windows allow through the frame and glass.
Improving Water Heating. Water heaters eat up about 18% of a home’s monthly energy use, so any way you can cut back here helps your home’s energy performance. Certain innovations—new tank types and systems—can reduce energy use significantly. For instance, tankless water heaters, where water is heated as needed rather than stored in a storage tank, average between 24 to 34% more efficient than conventional hot water heaters. They also have a life expectancy of around 20 years, on average, compared to 10 to 15 years for conventional heaters.
Purchasing Efficient Appliances. Appliances too, particularly refrigerators, dishwashers, clothes washers and dryers can affect your home’s energy consumption. The Environmental Protection Agency has created a system for evaluating the efficiency of appliances, known as the ENERGY STAR program. Products labeled with the ENERGY STAR rating have been tested and shown to demonstrate higher energy performance than other models. You may even be eligible for rebates or tax credits when you purchase these items.
Upgrading to Smart Thermostats. Replacing a conventional thermostat with a smart, programmable model can help you use heating and cooling to maximum efficiency. Turning a thermostat back seven to ten degrees for at least eight hours a day can shave as much as 10% off annual energy bills, and a smart or programmable thermostat can help you automate this process.
Home Energy Audits
If you’re not sure which improvements would be most useful to you, a home energy audit may be a good place to start. These assessments evaluate your home’s working systems, insulation, and other architectural elements that impact your energy consumption.
Professional auditors use a variety of specialized tools, including blower door tests, infrared cameras, draft gauges and manometers, to seek out air infiltration and leaks that may be difficult to detect by feel alone. Auditors also consider the age of HVAC equipment, appliances and windows and may measure device efficiency using a tool called a watt meter. They may review copies of your energy bills to understand your energy use and consumption.
Using the information collected in your analysis, your auditor will make a set of recommendations for improvements that will reduce your energy use. Auditors can also help you prioritize projects if you’re not able to complete them all at once.
A professional energy audit costs typically range between $300 to $500. However, you may be able to supplement the cost of your audit with rebates from your local energy provider or government.
It is also possible to perform your own DIY energy assessment. Although you will not have access to professional tools, a thorough inspection of your home’s insulation, heating and cooling equipment, lighting, appliances, and air sealing can certainly provide some insights into where energy is being lost in your home. You can find a detailed “how to” on the Department of Energy’s Do-It-Yourself Home Energy Audits page.
Financing an Energy Efficiency Project
If you don’t plan to pay for an energy efficiency improvement upfront, there are many ways of financing your project. In fact, there are personal loans and mortgage packages designed specifically for homeowners planning to boost the energy efficiency of their homes. Of course, conventional loans and credit cards work fine, too. Here’s a sampling of some of the ways homeowners like you are funding their energy efficiency programs.
Energy Efficient Mortgages. The Energy Efficient Mortgage is an FHA-insured loan package for homeowners looking to improve the energy performance of their homes. This mortgage loan is administered as a 15 to 30 year fixed-rate or variable loan. Loan amounts are capped at 5% of either the adjusted value of the home, 115% of the median price of a home in your area, or 150% of the Freddie Mac conforming loan limit, whichever is smallest. This program makes a good choice for a larger improvement, such as solar panels or a new HVAC system. Bear in mind that these are mortgage loans, which means you’ll have to put up your home’s mortgage deed as collateral in order to access funds.
HomeStyle Energy Program. The HomeStyle Energy Program is a refinancing package offered by Fannie Mae for homeowners looking to improve the energy performance of their homes. Homeowners may use funds to pay for energy-minded projects like solar panels, efficient windows, improved insulation or new HVAC systems. This refinancing program is intended for energy efficient improvements that will increase your home’s overall value, and cash-out amounts are capped at 15% of the as-completed value of your home, after improvements are finished. This program makes a good choice for a larger improvement, especially if you’re already thinking about refinancing your mortgage.
Loans Through Your Energy Provider or State or Local Government. Many energy providers, as well as state and municipal governments, offer loans for homeowners in their jurisdiction. The details of these loans vary from program to program, but many will administer several thousand dollars to make home improvements. For instance, the Louisiana Department of Natural Resources’s HELP program will lend state residents up to $12,000 for energy-focused repairs. Lenders may require you to submit a home energy audit as part of the application process. Check with your local energy provider, or your state or local government for more information.
Home Equity Loans. Home equity loans are a popular way to finance home improvements, energy efficiency projects included. Loan amounts and interest rates depend on your lender; however, many allow you to borrow up to 85% of your home’s current value, minus the outstanding balance on your first loan. To qualify for this type of loan, you must have equity in your home, which makes it a good choice for someone who has paid part of their first mortgage loan off. Your equity loan will also need to be secured by your home, which means the deed to your mortgage will be put up as collateral. On the other hand, these loans typically have low interest rates, which makes the favorable for large energy efficiency improvements.
Personal Loans. If you do not have existing equity in your home, a personal loan makes a good alternative. Personal loans are not secured by your home—rather your credit rating, existing stocks, bonds, certificates of deposit, savings account, pension or retirement account are used to determine your financial stability. Interest rates for these loans can vary immensely—rates may go as low as 2.5% or as high as about 36%. However, you’ll typically be able to secure a better interest rate if your credit score is higher and if you have a low debt-to-income ratio.
Contractor Financing. Your contractor may offer their own financing for customers. These programs are convenient; however, you may pay for that convenience with very high interest rates. However, some financing programs offer zero interest for a set period of months, which makes them a good choice if you think you can pay off your project quickly.
Credit Cards. Many energy efficiency projects can be accomplished for under $5,000, which makes them good candidates for financing with credit cards. Cards typically have higher interest rates than loans, but their convenience may make them worth it, especially if your project is less expensive. Some big box home improvement stores offer their own branded cards, as well. These cards may have high interest rates, but many offer an interest-free period of between 12 to 18 months. This can make them a good choice if you plan to pay off your project before interest comes due.
Credits and Rebates for Energy Efficient Improvements
The nice thing about opting to make an energy efficiency improvement is that you may be eligible for tax credits or rebates which can reduce the initial cost of your project. Programs often vary depending on where you live and the type of program you wish to make, but many are very favorable indeed. Here’s the scoop on those programs.
The Federal Investment Tax Credit (ITC). Homeowners who install solar energy systems, solar water heating, fuel cell energy systems, wind energy systems, or geothermal heat pumps are eligible for a tax credit through the federal government. The tax credit is worth 30% of the cost of the system plus the cost to install, and is applied to your federal tax liability after calculating your income and assets. Values for this credit decrease after 12/31/2019. Visit the official website for more information.
State Government Incentives. Some state governments offer incentives to encourage homeowners to improve the energy efficiency of their homes. These programs may be administered through local energy providers, or they may exist on their own. Rebate amounts and details depend on your state and the type of improvement you plan to make. Check with your state government for more information.
Local Government Incentives. Likewise, some municipal governments have created their own programs to help homeowners afford energy efficiency projects. The details of these programs vary depending on your location and the type of project you’re planning. Check with your local government for more information.
Incentives Through Your Energy Provider. Energy efficiency rebates are also available through some local energy providers. Providers may offer incentives for homeowners installing renewable energy products, or they may have rebates for purchasing certain ENERGY-STAR rated devices and appliances. These details of these programs greatly vary depending on your provider and the type of improvement. Check with your local energy provider for more information.
Estimating Your Return on Investment
Of course, one of the most enticing reasons to invest in improving your energy efficiency is the savings on your monthly energy bills. Savings can vary vastly, depending on the size of your home, the amount of energy you use, and the type of improvement you make.
You’ll also want to consider the upfront cost of your project, as well as any fees you incur from loans or credit cards. Higher costs extend your payback period for improvements.
For a general idea of how much energy you’ll save, we recommend the following tools.
Modernize Cost Calculators. Modernize provides free resources for homeowners looking to improve energy efficiency with solar, HVAC, roofing or windows projects. Calculators can give you a ballpark estimate of the amount you’d spend based a variety of different factors, such as the size of your home or the type of materials or equipment you choose. You’ll also be given an estimate of your energy savings, depending on the project factors you select.
EPA’s Appliance Calculator. The EPA has an additional tool you can use to calculate energy savings for ENERGY-STAR-rated appliances. After inputting a variety of information about your new device into the spreadsheet, you will receive feedback on your fuel or electricity savings.
Low-Cost Ways to Improve Energy Performance
If you’re hoping to boost your home’s energy efficiency, you don’t necessarily need to make a major purchase. There are many smaller projects that can impact your energy bills—some that you can even DIY. In fact, you may want to combine these projects with a larger energy efficiency improvement to get the most out of your repair or replacement.
Weatherizing Windows and Doors. Adding foam tape, caulk, foam spray insulation, door sweeps, or some combination of the above to your windows and doors can limit drafts and heating and cooling loss through small gaps around the glass and the frame. The materials for this project are very inexpensive. And since the project is not very complex, it can be managed by most homeowners. For a detailed how-to, see the Department of Energy’s pages on caulking and weatherstripping windows.
Insulate Water Heater. Many older hot water heaters are not properly insulated, which means heat is being lost through the tank itself, making your unit less efficient. Insulating an inefficient heater with a water heater insulation blanket can save you 7 to 16% annually on your energy bills. [LINK TO: ] Blanket kits are not very expensive, but some utilities offer them at a reduced rate or even for free to customers. This project can be accomplished by most homeowners. Take a look at the Department of Energy’s how-to page for more information.
Insulate Hot Water Pipes. If you can lose heat through your hot water tank, you can certainly lose it through your hot water pipes. Insulating pipes with a pipe sleeve can reduce energy savings and may reduce the amount of time it takes for water to heat up. This project may be difficult for some homeowners, but you can find a detailed how-to here from the Department of Energy. You may also want to consider this project as part of a larger home renovation.
Insulate Your Attic. Homes with uninsulated attics may lose a great deal of heat through the attic ceiling. Insulating your attic with blown fiberglass insulation can have a huge impact on your heating bills, saving you between 10 to 50% annually. This project is not for novices, however. Insulation materials can be difficult to manage and may affect your home’s ventilation when not properly installed. However, if you choose to hire a professional contractor for this project, your savings on your energy bills may quickly offset the cost. And your home will be more comfortable in the winter, too.
Other Small Ways to Save. Simple maintenance, such as changing your AC air filter every six weeks, will ensure that your unit works more efficiently, therefore consuming less energy. Other small measures include lowering your hot water heater’s temperature to 120 degrees, which can save you between 4 to 22% annually on your energy bills.
Talk to a Contractor
Ready to get started with your energy efficiency project? Talk to one of our representatives today. We can connect you to a list of verified contractors who can get your project underway quickly. A more efficient home awaits!