Is home energy efficiency a good investment?

| 1 July 2013 | 3 Comments

Author Nick Hanna spent £43,000 on home energy efficiency measures. His period home’s rating has gone up from a “G” to a “B”. But was it a good investment?

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Where ever we choose to get our energy from – it looks certain that utility bills will continue to rise for the foreseeable future.

If you want to reduce the impact of rising energy prices on your finances and minimise the carbon footprint of your house, what changes can you make?

Every house is different, and everyone will have a different solution tailored to their own needs and circumstances.

But like so many period property buyers, we were charmed into buying the home without thinking too much about its energy performance (it was given a dismal “G” rating on the certificate).

Over the past two years we’ve carried out various improvements (including creating new rooms and re-modelling old ones), and along the way attempted to incorporate as much as we could in terms of energy efficiency.

We want to reduce our carbon footprint and make our house warmer, as well as bringing bills down. We haven’t really been thinking about the improvements as an investment.

It has in fact been a long and costly process, but if you think about Return on Investment (ROI) not just in pure financial terms, but in terms of the lifestyle and environmental benefits as well, then I think we have achieved a “return” of sorts. Can you put a price on additional warmth in winter and the liveability of your home? What about the knowledge that your home is no longer wasting precious energy unnecessarily? The ROI starts to look higher if you do.

And the Department for Energy and Climate Change recently published a report showing energy saving improvements to your property could increase its value by 14 per cent on average – and up to 38 per cent in some parts of England. So perhaps if we ever sell we’ll reap the benefits.

This is what we’ve done:

Low and zero carbon energy sources

The first major improvement we made was to replace the hot water tank with a thermal store. This type of tank is designed to maximise the relatively low-grade heat produced by renewable sources to pre-heat the water, which is then given a final boost by a gas boiler. It supplies the central heating and our hot water needs via a heat exchanger, and is linked into a solar thermal array on the roof and a wood-burning stove in the living room. Cost: £12,000.

Solar PV

We just managed to get our solar array installed under the 43.3p Feed-in-Tariff (FIT) rate in November 2011. The 2.6 kW array cost £9,378 and is expected to generate 1,787 kWh per year of electricity, earning us £800 per annum in FIT payments and £116 in money saved, so payback should be around 10 years (with payments due to continue for 25 years). So far, over the 18 months from November 2011 to March 2013, we’ve received £1,224 in FIT payments – bearing in mind what a lousy, wet summer we had in 2012 that’s not too far off course.

Boiler

Our boiler was at least 20 years old and probably operating at around 40 per cent efficiency. We replaced it with a Dutch-made Atmos boiler, which are known for being tough and long lasting. At 88 per cent efficiency, it’s ‘A’ rated. Cost: £2,600.

Windows

Some of our windows were very old and draughty, a few needed replacing altogether. The house isn’t listed (or particularly old), but the windows were in ‘period’ style and we didn’t want to change the outside appearance so we chose double-glazed Storm windows from Evolution (www.evolutionwindows.com) which combine the aesthetics of timber with state-of-the-art ‘A’ rated energy efficiency – so even though they’re still made from uPVC, they look like wood. Cost: about £1,800 per large window, patio doors £1,300, total cost £8,500.

For the rest of the windows we decided to install secondary glazing. Everest quoted us £15,000 for 12 windows, reduced to £7,500 if we ordered on the salesman’s visit – something I would never do. As it turned out, this was the right call since a local glazing company installed units made to an identical specification (including Pilkington ‘K’ glass) for £3,900 including VAT.

Insulation

The house is mostly covered in timber weatherboarding, with solid walls. There are no cavities to insulate. Some of the weatherboarding was rotten, some of it was OK: we replaced about 30 per cent and put insulation behind it. Cost: £5,000.

In some rooms, which we were renovating anyway, we managed to squeeze in 50 or 100mm of ceiling or wall insulation – but not everywhere, and not as much of it as we would have liked. New rooms had to comply with building regulations, and therefore have a standard 50mm of insulation on the walls, 100mm under the floor. The cost was part of the re-build.
The loft was easy: it had 100mm of fibre insulation already, we trebled that with two layers of 170mm and boarded over the top. The insulation rolls were virtually free (under the old CERT scheme), the loft boarding-out was about £1,000 including materials and labour.

Lighting

We replaced all the existing light sources with compact fluorescent lamps (CFLs) and two new bathrooms and an office were equipped with LEDs. The kitchen has down-lighters which use energy-thirsty halogens, I’m replacing these with LEDs as they expire (about £11 each from www.LEDgiant.co.uk, so £100 for the kitchen area).

Aga Saga

When we moved in the house had a lovely, homely, welcoming Aga in the kitchen. We enjoyed its benign presence for our first winter and then took it out because of its monstrous gas use and replaced it with an electric range cooker – less homey, but much cheaper to run. We sold the Aga on Ebay and bought the electric range second-hand as well, so this was cost neutral.

Curtains and draught-proofing: We made sure all new curtains were made with thermal lining, and we’ve just recently put curtains rails behind the front and back doors so that next winter we’ll have curtains hanging over those too. Extra costs: negligible if you’re making curtains anyway.

Summary

It’s hard to separate out energy efficiency costs from general building work but we’ve probably spent around £43,000. When we moved in the house was like a leaking sieve and we were spending £2,000 a year on LPG gas. This is gradually coming down, and I’m hoping it will be under £1,000 by next year, when we’ll have had a whole winter with the benefit of full secondary glazing and draught-proofing. Bear in mind we’ve got an income of £1,000 a year from the solar PV, and we might be cost neutral.

Keen to find out if we’d made any measurable progress, I commissioned a new Energy Performance Certificate. I’m delighted to say that they’ve classified the house as ‘B’ rated. That’s quite an achievement, considering we were only considered to have the potential for ‘F’. I feel confident that in years to come these investments will feed through into a much more sustainable lifestyle.

Don’t have £43,000 to spend? Read how Josef Davis-Coates stretched £100 across some measures to reduce his energy bills here.

Is the Green Deal a good deal?

Launched in January this year, the Green Deal is the government’s flagship programme to improve the energy efficiency of Britain’s homes. Recent reports suggest it has been a resounding flop so far – but hopes remain it could still catch on, if people understand it.

The aim is to encourage people to improve their homes with more insulation, better glazing and modern boilers without having to front up the cash. Instead, businesses will provide the capital, getting their money back via energy bills for up to 25 years.

At the heart of the offer is what they call the Golden Rule: the estimated savings on bills should always be more than the cost of the work.

Anyone interested in taking up the Government’s offer first needs a Green Deal assessment. Many different organisations – including energy companies, DIY stores and local tradespeople – are authorised to do this.

But they are not necessarily free – it depends if your local authority is backing the scheme. You can expect to pay about £150. After the assessment, you will be given recommended improvements that are appropriate for your property and an indication of payback time.

The next step is to approach one or more of the 400 or so Green Deal providers for a quote for the installation of one or more of the “recommended measures”. You are entitled to shop around with your assessment, so people are generally advised to get a minimum of three quotes.

Once you have agreed the work, you will receive a Green Deal Plan, which is a contract that sets out the work that will be done and list the repayments to be made.

There’s no doubt it’s a complicated process, and criticism has also been levelled at the rates of interest on the green deal loans, which can be as high as 7 per cent. Some trade bodies have warned that the green deal could end up costing consumers a lot more than other means of funding energy efficiency improvements.

Although repayments are supposed to be outweighed by savings from lower energy use, this isn’t guaranteed. Calculations are based on estimates of average use, and future energy prices. As well as paying for the assessment, householders have to undergo a credit check – so those who need the improvements most, who may be on low incomes, might not qualify.

Suppliers can also choose to impose a further £63 setup fee, and charge annual operating costs of £20. There are also early repayment penalties.

Despite these shortcomings, the government says that nearly 10,000 green deal assessments had been carried out by the end of April. Whether those numbers translate into contracts signed remains to be seen.

Visit Which? For more information on how to access the Green Deal.

Risk warning

Please note that investments in renewable energy projects tend to be long term. Your capital may be at risk and investments may not be readily realisable. Returns tend to be variable.

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