Energy Retrofits – Return on Investment Myth

The most recent issue of Remodeling magazine’s cover story was about retrofitting houses with energy improvements.

One part of the story listed the 10 Reasons to Retrofit. It said, and I quote, “Some people invest in energy retrofits because they want to help achieve energy independence or reduce greenhouse gases or reverse climate change. For everyone else here are 10 more tangible reasons.”

The first reason listed was:

Save Money

It then said, “Savings on energy bills vary but are immediate and will likely grow over time as prices increase.”

WRONG! Stop the train! That’s a very misleading statement, and I see many publications say it all the time. I hear home improvement TV hosts say it. I hear it on home improvement radio shows. It’s a half truth. It’s bunk.

Here is what I’ve said for years about saving money on energy improvements:

You do NOT save money on energy improvements or retrofits UNTIL SUCH TIME as you pay yourself back all the money, PLUS interest, you spent to do the improvement or retrofit. You pay yourself back with the lower utility bills. After you have paid yourself back the money you spent, THEN you finally start to save money.

Does that make sense?

One of the retrofits they used as an example was a tankless water heater. Do you think you’ll save money with one of those bad boys?

“Just the facts,” as Jack Webb on Dragnet would say! It takes the same amount of energy input to heat water no matter what type of device you use. Ask any thermodynamic engineer and they will tell you that you must expend one Btu of energy to raise one pound of water one degree Fahrenheit. This simply means that a tankless heater and a traditional storage tank heater must each burn the same amount of energy to heat the water in your home. But, each heater has a different efficiency rating. The tankless heaters are more efficient, but not as efficient as you might think.

The burner on a traditional storage tank water heater does NOT burn 24 hours a day. Do not confuse a water heater with a pot of water heating on a stove. If you turn the stove off, the water in the pot cools. In a traditional storage tank water heater, the high-performance foam insulation keeps the water hot for many hours before the heater needs to turn back on to raise the temperature.

The numbers do not lie. Look at your own utility bill. If you live in the Northern Hemisphere, you typically do not use any gas during summer months for heating your home. The usage in these three months gives you a very good idea what you spend each month to heat water. Granted, some gas goes for cooking and clothes drying if gas fuels those appliances.

Also, you will spend more money to heat water in the winter as the incoming water is colder and needs more energy to raise the temperature of the water. But this is also true of the tankless heaters, so it is a wash with respect to cost.

Some people who have tankless heaters have reported their utility costs stayed the same because they used more hot water. Why? Since there was now an unlimited supply of hot water they stayed in the shower longer. Not only did they use more gas, but they also used more water than they would normally—now that’s saving the environment. Do not rely on numbers printed in a brochure. Those are average or blended costs. You are simply concerned with how much gas will you use with a tankless heater vs. a traditional tank heater. Every person needs to compute their own usage and cost.

You NEVER experience savings until you pass the break-even point. In other words, if you pay $400.00 more for a tankless heater and think you are “saving” money the instant it turns on, you are foolish. You must first get back the extra money you spent plus the interest on that money. Once you get all of that back, then you can talk about saving money. It could take you years and years to achieve the break even point.

Tankless heaters have governor gas valves. This means that the amount of gas burned is a function of the rate of flow. If you just turn on your vanity hot water valve a little bit, then the gas valve supplies the needed gas to heat that smaller flow of water. Tankless heaters come in various sizes. Many are rated for just one fixture. This means, you get an unlimited amount of hot water if just one fixture is asking for water. This is great if you are single or have no kids. But always pay attention to the flow rate! See how much hot water can flow through the heater before it is overloaded.

Some people remove flow restrictors. It is a common practice. The low flow shower heads can be turned into a high flow fixture in about 3 minutes. Some fixtures/sinks have huge flow rates. A laundry sink where you fill buckets of water to wash cars, windows, etc. has a standard valve on it. If I open just the hot water valve alone to full flow, it consumes an astonishing 4.2 gallons of water a minute. That single faucet could overload a high capacity tankless heater on a cold winter day. If you have a large whirlpool tub, place a 5-gallon bucket in the tub and turn on just the hot water for one minute. See how much water is in the bucket 60 seconds later. These tubs often have high flow valves.

Another problem is that the “on demand” only applies to the gas and not the hot water. This means that we are now letting the water run longer in order to get “hot” water. Compared to our ugly old tank water heater, we must wait up to 60 seconds or longer in some instances to finally get “hot” water—instant?

Forget about making up the cost in energy savings … you can purchase 3 conventional water heaters at $700 each that combined will last for at least up to 30 years. Just taking into consideration the debt the in initial cost for a tankless water heater compared with a conventional water heater, your energy savings would have amounted to $1400 before there is any payback. Assuming that a tankless water heater lasts for 12 years, that’s $120 per year or $10 per month. Even if that were achievable, it may be time to replace that tankless water heater. The replacement costs should be less since the initial installation has been done, so assume $1200 for tankless heater number 2. This time it’s probably only $1400, which for some people may be possible (I don’t see how). You tell me, where is the energy savings?

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