A friend recently sent me an article about Super Insulation economics. The story was about a Passive House built in Wisconsin. For those of you who aren’t total energy and building nerds, “Passive House” is a German standard for building a super efficient house in terms of thermal performance and total energy usage. As the term suggests, it relies on passive technology to minimize the cost of keeping warm in winter.
There are many people in the US that regard Passive House as the gold standard of Green. While there is a lot to be learned in terms of energy efficient design, it’s not something that is going to work in every location in the US. The northern part of Germany, where the standard originated, is a heating climate. That means more cold days than warm days, so most of the energy budget goes toward heating the house. Most of the lower 48 in the US is a cooling climate, meaning we keep the home comfortable with air conditioning. We’re trying to keep hot air out, they’re trying to keep hot air in.
The “House in the Woods”, featured in the article, is owned by Gary Konkol. He built his passive house back in 2009, when everything was much more expensive than it is now. He had to import windows from Europe, for example. Contractors in his area had zero experience super insulation building technology. As a result, they charge hefty premiums for both the extra time and higher perceived risk. Even appliances were more expensive.
In addition to building an amazing house, Mr. Konkol did another thing that is really cool, he’s gone public on what the costs were, and what the month by month energy costs have been. Even with thousands of passive houses in Europe and a few hundred now in the US, this critical data has been hard to find. Now that we have good data, the evidence is solid that super insulation works.
It’s been amply demonstrated that utility costs can be reduced to bare minimums. Even a partial energy upgrade can save $100 per month, $1200 per year. There are other costs and savings that are difficult to calculate. For example, a HVAC system that is correctly designed, sized and installed should save money on a month to month basis. Over or undersized systems cycle on and off more frequently, which increases the monthly utility bill. The bigger problem is that a badly designed system will wear out faster. By how much? Impossible to calculate with certainty, but replacing a failed system after 12 years rather than 20 is going to be pricey. Even worse, the big bill is more likely to come when you are living on a fixed income.
The same rules apply to other long term costs. Repainting and refinishing the exterior would be an example. Roof and window repair and replacement another.
There are so many variables in making a decision about what makes financial sense for a particular project. The passive house standard is a great idea in an extreme climate. It doesn’t matter if you build where the climate has long and bitterly cold winters, or extremely hot summers. Super Insulation is going to provide comfort and safety. In a more moderate climate, two feet of insulation in the walls is overkill, you’re just not going to get a reasonable payback.
That’s where the “Pretty Good House” comes in. The idea is to get 80% of the benefit for 30% of the cost. The PGH standard starts to look a lot better if you’re locked into renovating an existing house rather than building new. There are plenty of examples of “Gut Rehab-Deep Energy Retrofit” houses in the Northeast that provided high levels of energy efficiency, but with a 100 year payback period on the cost. A “Pretty Good” rehab can definitely work, but you have to do the work when it comes to planning and research. You don’t want to increase costs by 30%, chasing the last 5% of efficiency. At some point, it’s going to make more sense to put some solar panels on the roof to save on the power bill. Faster payback.
Rehabs have other issues that are hard to quantify. Finding a contractor that can do quality work at an affordable price is a huge one. My own experience is that you have to be there every day and closely supervise the work at every stage. That assumes you’ve taken the time to know exactly what needs to be done and the materials to use. When trying to build a perfect thermal envelope, craftsmanship counts. It’s the difference between success and a disaster. Sloppy details mean your final blower test comes in at 5.5 rather than 1.0. Good long term value in one case, money down a rat hole in the other.
If you are a DIY kinda guy that does quality work, the savings can be huge. But at the expense of hundreds of hours. Sweat Equity has been a tradition in real estate for a long time. If you are handy and willing to learn, the value is there. Plus, there is that intangible… Putting in the work adds a quality that will never show up on a spreadsheet.
The financial implications of going green are complex. There are big payoffs for doing it right. But monthly bills may not be the most important aspect of building quality. Next week I’ll talk about health.