Saving energy saves you money every month

When shopping for appliances and comparing prices, it makes sense to compare the life-cycle cost rather than just the purchase price. Life-cycle cost analysis works like this:

• P is the purchase price of the appliance
• A is the annual projected energy cost of the appliance. This is often available on the yellow "energy guide" tag
• L is the number of years that you expect the appliance to last

Total lifetime cost = P + A * L

See the washing machine story and the lightbulbs page for examples of these. You can do the same analysis on any appliance from telephones to furnaces. By purchasing the most efficient appliances you can get you will save hundreds of dollars each year when compared against average efficiency appliances.

Also check out how solar water heating saves you money.

Saving energy improves your home's resale value

An article appearing in The Appraisal Journal a few years ago concluded that the market value of a home increases by $10 to $25 for every $1 in annual energy savings from a built-in energy-efficiency feature. For example, a $288 per year energy savings from a solar water heating system would therefore increase the market value of the home by at least $2,800. This is more than the homeowner's initial investment of under $2,600.

The most cost-effective means of financing a solar hot water system or another home energy improvement is by rolling it into a long-term mortgage when buying a home. For the example of the solar hot water, adding an additional $2,600 to a mortgage loan at 6% interest would increase the monthly mortgage payments by $16 per month for a 30-year mortgage and $19 per month for a 20-year mortgage. A family of four would be save $24 per month on utilities every month, for a net gain from day one.

The increased value of a home due to energy efficiency features is the basis of the energy efficient mortgage (EEM) offered by Fannie Mae, the FHA, and the Veteran's Administration. The EEM can be applied to most home mortgages, whether buying or refinancing. It works like this: The borrower pays about $200 to $400 to have the home's energy efficiency potential evaluated by a certified "home energy rater." (This cost can be rolled into the mortgage.) The rater comes up with a list of cost-effective measures that will improve the home's energy performance and the estimated savings that will result from making the improvements. If the benefits exceed the cost of the improvement, then the amount of the savings is added to the borrower's income for purposes of qualifying for a higher mortgage loan that includes the cost of the improvement. The value of the home is also adjusted upward to reflect this increased value. The borrower wins financially by qualifying for a larger mortage and getting a better home.

Solar hot water is an example of the kind of improvement that can be easily financed through an EEM. Wachovia is one local lender that offers EEM's.