Whenever you open a newspaper, you’ll likely find ads for home improvements such as new windows, insulation, and furnaces. These ads regularly promise energy savings that will allow you to recoup your investment in a short period of time, often something like “5-7 years” or maybe even less. But unless your utility costs are well above average, you might question the credibility of these claims (“how can $10,000 worth of windows pay for themselves in 7 years if my utility costs are only $1500 per year?”).
The truth is, most of the advertised payback periods are based on upgrading an extremely inefficient home with very high utility costs. This post will evaluate the savings possible in more typical situations.
According to Natural Resources Canada, space heating accounts for about 60% of the average home’s energy costs, so it makes sense to focus on this when making energy improvements. You’re probably using a gas furnace to heat your home right now. If it was made before 1995, it’s probably only about 65% efficient. If it was made between 1995 and 2009, it’s probably about 80% efficient. By comparison, new furnaces are 90-98% efficient, so you’ll save 18-34% on heating costs by upgrading. But new furnace costs are in the $5000 range, and natural gas prices are at a 10-year low. So you’ll have to evaluate how much you spend on space heating (it usually accounts for most of your gas bill). If you have a larger home with high heating costs, the payback periods can still be short (7 years or less) if you have an old, inefficient furnace. But if you have a smaller, better insulated home, the payback periods can be long (20 years or so, assuming gas prices remain low).
A heat pump is basically an air conditioner that can run in reverse, and can thus provide both heating and cooling. Since they only move heat from one location to another, rather than creating heat, they can operate at efficiencies of over 300%. Unfortunately, electricity costs have been rising in many parts of Canada over the past few years, whereas natural gas prices are at a 10+ year low. Since electricity is now relatively expensive, this means the savings on heating costs over newer furnaces can be marginal. So the main reason to install a heat pump would be for the air conditioning. However, if natural gas prices rise again, heat pumps will once again provide large savings on utilities. Continue reading ROI of Home Energy Upgrades