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When Home Performance Customers Ask About Payback, What Do You Say?

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In my last two articles, I have suggested that Home Performance professionals need to be able to make some quick economic decisions for the customer. Our goal is to time-and-cost-effectively identify the home performance measure(s) that will result in the greatest impact. Sometimes we get in the habit of over-emphasizing the measure that is easiest to do or uses the new machine in which we just invested a few thousand dollars. Or sometimes we do not even address the economics, because the customer was heck bent on owning this measure, because a blog said someone in Sweden did this and saved a few thousand dollars per winter!

Estimating the energy savings or enhanced comfort is difficult. Every home you encounter is probably going to be different. Even two identical homes, side by side are still different because, two different families are involved. So do not depend on average impact estimates for your home performance services. A great first step in every case is to complete an energy bill analysis and then it will be easier to suggest the most appropriate measures to maximize the impact. Of all the measures we could suggest, the one we hope to discover is the one that results in a response from the customer that is celebrating their new-found comfort and/or significant change in energy use.

And what about the comfort vs. savings argument? When we consider all types of impacts we all agree that a significant increase in comfort, regardless of energy savings, is many times enough to motivate the investment. But if this were always true, we would never need to worry about an energy savings impact. However, we still hear the question, “What is my payback for this investment?” Personally, when I consider new investments or upgrades, this is typically one of my questions. So when I hear it from my customers, I like to be prepared. So how can we answer this accurately?

Lacking the sophisticated software that would please me or that I have time to complete, here is how I handle this question. First, we have this in our favor. I explain to the customer that the measure should save them energy and money on a certain portion of their energy bill. However, there are so many variables that any savings estimate from any source will be speculative.

“But,” I will tell the prospect, “Let’s look at the billing analysis I just completed.”

Your estimated base appliance use is $1200 per year. Your estimated heating costs are about $800 per winter and the air conditioning appears to be costing about $300 per summer. Insulating and sealing your ducts in the attic will not affect your base appliance usage, but it will help both heating and cooling which we estimate at about $1100/year. From the Manual J load calculation I completed, I see the duct loads to be about 30% of the load and I hope to cut this in half. 15% savings on $1100 is $165.

Is this savings estimate accurate? Well it’s a bunch more credible than boasting, “We see savings from $200 to $1000 per year in homes around here.” Instead of a reflex, exaggerated claim, explain your bill analysis and where you get your estimate. Note that it’s a fair estimate, but it’s not a guarantee. Your customer will accept this. They normally are very understanding. Most of the other contractors had nothing to offer.

Completing a load calculation helps you in more ways than simply sizing a new HVAC system. From a detailed load calculation you can see the percent of heating attributed to (for example) the attic insulation. It’s 9% with the current level of insulation. You add another $400 worth of insulation and run the load again and now the ceiling load is about 6% of the total load. Save 3% of $1100 and you have discovered $33 per year savings. This is how I get a rough estimate on home performance impacts. If you do enough load calcs and pay attention, you will soon be much more adept at spotting measures for the greatest impact.

Even if you do not do a detailed load calculation, at least do a billing analysis. I have looked at some of my geothermal customer bills and after subtracting their unexplained high base appliance usage, I find they are only heating and cooling for about $400 per year. I am honest with them and tell them I would love to upgrade their 12 year old system, but the investment in higher efficiency may only save about $70 per year. I do not need to do a load calculation or push heating and cooling savings on this customer. The bill analysis tells me the real story. But even if there are no obvious money saving opportunities, maybe they are uncomfortable in the summer and need a whole house dehumidifier.

I think our clients grow weary of the incessant barking, “Save up to $2000 with our product!!” My advice and summary on these past three articles is the following: Of the many skills we need in order to offer quality home performance services, making economic decisions and estimates for our customers may be the most difficult. But you will be amazed at how much there is to learn when you research the customer’s bills, complete a simple energy use breakdown and then base your decisions with the customer’s actual energy consumption sitting in front of you. Teach the customer. Be realistic. Find the greatest impact.

Dan Welklin
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Posted In: Building Performance, Residential Buildings

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