What’s the Payback of Green Building?

How much does green building cost? How long does it take to pay for itself?What is the payback?

Now, let’s set the tone here. I am not saying those aren’t good questions. All of them are very applicable to the decision making process when deciding which green features to include when building a new home or a home retrofit. However it is always interesting to see someone’s face who is a doubter of the benefits when I ask, “well now that you know the payback of upgraded insulation, what is the payback of those granite counter tops over the laminate ones instead.” Sometimes I get angry looks so I have to be careful. A good friend of mine, who is a building scientist, Dan coined that term. It has stuck with me for a long time.

The reality is sometimes you can quantify payback, sometimes you can not. For example, we promote and sell many solar thermal hot water heater systems. The math is pretty simple. The system costs $8,000. As a homeowner you are eligible for $3,500 in renewable energy tax credits getting the net costs down to $4,500. Our standard hot water heater is a tankless gas model. All the costs associated with that are around $2,500. So for $2,000 a client of ours can upgrade to solar thermal hot water providing 95% of their needs for decades. We have seen monthly savings average around $50 per month. That’s a 3 year, 3 month payback. After that period one has positive cash flow and has water heated by the sun.

But let’s consider indoor air quality. We spend probably $4-6,000 per house (1%) on many features including sealed conditioned crawl spaces, low VOC materials, < 2% duct leakage, and many other things to create a healthy indoor living environment. How does one quantify payback of a healthier home? Could the answer be less sick days from school and work, better attitudes from clearer thinking, less headaches maybe? Those items are priceless but impossible to pen a “payback” period on.

For our company our decision to build green is based on the commitment to build homes that use 40-50% less energy, have safer indoor air quality, are more durable, require less maintenance, and make less environmental impact. Those items alone may not address payback but we feel down the road at time of resales, green homes that have a proven performance record and certifications will be worth more than homes that do not.

When the situation arises with a client, banker, appraiser, or even “tire kickers” this is how I explain paybacks of green improvements. This example is only relevant for our company; I’m not trying to speak for anyone else. We have chosen to add $15,000 worth of green features not required by code to our average home valued at $450,000. That’s 3% higher than the builder down the street not certifying green. Most people still finance their homes. At today’s rates of 5-6% that $15,000 costs those folks somewhere between $80-$90 per month. Based off energy savings alone with HERS scores of 59 or better we should save $150-$200 per month on utility bills. At absolute worst case we pay for the investment. In most cases we have a 60-100% ROI. I am no Wall Street guy, but I would love to get those “paybacks” on my retirement investments.

If you would like more information about reducing your HERS score or about green building, please call us at 919-269-4555 or fill out our contact form.

Sincerely,

Chad Ray, “That Green Builder Guy”

9 responses to “What’s the Payback of Green Building?”

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  2. Another way to look at payback is “at what percentage increase in energy cost will the monthly energy savings offset the fixed mortgage cost?”

    The value of the dollar is falling as the price of energy is rising but mortgage payments are set at the closing. People who invest in healthier, more durable and energy efficient homes will at least have some satisfaction in knowing that they made a smart decision when gas is $6 at the pump.

    I’m old enough to remember buying gas at twenty six cents a gallon so I’ve seen over ten fold increase in my life time (of course back then I was earning a dollar seventy an hour so inflation is a big part of that) but both inflation and rising fuel costs are valid arguments for investing today in a green home.

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