The complicated psychology of energy efficiency economics

One of the more interesting, yet frustrating parts of home efficiency is how to effectively frame the homeowner economics.

On one level, it is very simple: $X are going to be spent on efficiency improvements to your home, leading to $Y of savings. 

In practice, however, it can be much more complicated.

When homeowners purchase efficiency improvements they often finance at least a portion of the cost. That means that the following cost factors can all play a role in decision-making:

  • Total cost
  • Available rebates
  • Net cost (total cost minus rebates)
  • Financing terms (interest rate, loan length)
  • Qualification process
  • Monthly loan payments

And that’s before you even get into the savings. Once you look at the savings and add it to the costs homeowners may look at other factors and ratios:

  • Projected savings
  • Guaranteed savings (thanks to Sealed)
  • Raw payback period
  • Adjusted payback period (taking into account rebates)
  • Return on investment (annual savings divided by net cost)
  • Net cashflow (monthly or annual basis)
  • Savings to Investment Ratio (SIR), which means estimated lifetime energy savings divided by the total cost
  • Current energy bills
  • New energy bills, not including loan payments
  • New energy bills, including loan payments
  • And much more…

These metrics can also be broken down by total project, category and measure. You can also show energy / environmental metrics like:

  • kWh, therms and gallons of oil reduced
  • Carbon reduced
  • Equivalencies like trees planted, cars taken off the road, etc.

The typical approach is to show everything, thus ensuring that the homeowner will be completely confused. I don’t mean to pick on any one company, but here is an example by one of the companies that generates these home energy reports.

As you can see, there’s a lot of information here, and most homeowners don’t have the time, expertise or desire to wade through it all.

That’s why here at Sealed, we’re trying to simplify the information while remaining as transparent as possible. Below is a draft of how we think this information should be displayed to homeowners. 

Our hypothesis is that the most important information consists of:

  • Annual savings (projected or guaranteed)
  • Money down
  • Monthly loan payment

This is how homeowners actually experience the economics. They save a certain amount of money each year (monthly variance larger than annual), and those savings are either projected or guaranteed. They also will put down some amount of money (hopefully $0!) and may also have a monthly loan payment (again hopefully $0 with Sealed!). 

All of the other metrics are just details that help you get to those three pieces of information that hit your pocketbook.

Let us know what you think! 

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