Payback

High technology appliances can pay back their excess costs in terms of energy savings, over time.  But how long is a realistic amount of time to wait?

Once again, I have been pilloried for actually having an opinion different from someone elses and again, it deals with hydronic heat.   This time around, I am told that while they can't refute any of my cost, efficiency, and repair arguments (as well as the A/C issue) that I simply "don't understand" the advantages of hydronic heating, and of course, if they had time, they'd explain them to me, but they have to walk the dog and thus are too busy to discuss it.

Yes, it sounds a lot like the person who flamed me about co-signing loans - so many legitimate reasons to do this, but time and space do not permit them to elaborate.   But they had plenty of time to call into question the legitimacy of my ancestors.   In other words, they didn't have a cogent argument to make, but had just co-signed a loan, and now want emotional validation.   Just as the fellow with this plumbing nightmare in his basement doesn't want to be told that maybe $10,000 more in his IRA might have been a better "investment".

But emotional thinking is really a bad way to live - and a bad way to balance your checkbook.   If you really want to evaluate things on their merits, you have to crunch the numbers and do the math and see what really makes sense.

And sadly, even a lot of things being sold as "practical" or "energy-saving" are often sold for emotional reasons.   The Toyota Prius, by all accounts is a reliable car and its hybrid drive works well and actually saves energy and will pay back its costs in about seven years.   But that is not why people buy them.   They buy them to make a statement about their commitment to the environment. 

How do I know this?  Well, in America, fuel is cheap - by worldwide standards.  Yet America represents the largest market for the Prius.   In Europe, where fuel prices are astronomical, you rarely see them.  The Europeans love their diesels, instead.   It is a simpler technology that is less costly to buy and gets about the same fuel mileage.    But it doesn't make a statement about the environment, does it?

As I noted in a previous posting, you can buy one of these tiny cars like a Chevy Spark or Aveo or whatever, and get near-Prius-like mileage.   But when you drive one of these tiny cars, it says "I am poor" whereas when you drive a  Prius, you are saying "I care about the environment, so I am better than you!" and people buy cars for emotional reasons all the time.

I was also taken to task over my posting about fancy washing machines.   A reader points out that they save money and water.  I point out that over the 15-year-design life, they don't save enough of either to really make a difference, unless you live in a desert.   But again, people buy fancy washers to show off.   How do I know this?   Because the ordinary top-loader comes in one color - WHITE.   And it lives in a laundry room or basement that isn't shown off to visitors.

But the front loaders come in stainless steel or red (red?  I don't know why, but it is popular!) and the latest thing now is to have a showplace laundry room with the front-load machines, on pedestals, of course (the pedestals often costing more than a top-loading machine!) and cabinets and built-ins and so on.   The status kitchen is so last year.  This year, it is the status laundry room.

My top-loader is in the garage.  I really don't give a shit or not if you are impressed by my laundry machine.

But it begs the question:  What is a good payback period for any of these energy-saving devices?   I have looked at a number of these over the years, and some are obvious upgrades that pay themselves back in a short period of time.   Others are just expensive boondoggles that end up costing you a lot more money, time, and hassle.   Here are some questions to ask yourself before you spend a lot of money on "energy-saving" appliances.

1.  What is the payback period?   If it takes longer than seven years to realize the energy savings, then forgetaboutit.   Chances are, you won't even own your home seven years from now (based on national averages) so "investing" in energy-saving appliances not a very good idea.

2.  Does this add value to your home?   And be realistic here.   Putting in a fancy washer or dryer isn't increasing the value of your home by a dollar.   Although a fancy laundry room may make the home easier to sell, you generally get back pennies on the dollar for home improvements.   Things like replacement windows, however, in addition to saving energy, will add value to a home (but generally not more than their cost).   Don't go overboard here - very few home improvements add value to a home.  Location determines value.

3.  How complex is the device?   I was looking at a solar hot water heating system the other day.  My garage does face the South and it gets sun on the roof most of the day.  And that is where the hot water heater is.   Seemed like a no-brainer to put in a solar hot water heater.   But then I looked at how they work - with circulating pumps, controllers, timers, and drain systems.   It would involve cutting holes in the roof, running a lot of plumbing, and having to maintain a fairly complex system, just to save a few bucks on hot water heating costs.   And since the system cost thousands of dollars, the payback would be a long, long time away. 

Simplicity has its virtues.  I like to go away on vacation, not sit around monitoring my solar panels.  You laugh, we have a friend who refused to come South in the winter and visit, because he was afraid if he left his house in the frozen North, the power would go out and his hydronic heating system would freeze up.   His "solution" of course, was to install a whole house generator (!!!!) which cost thousands and thousands of dollars.   More complexity to handle complexity.   Frankly, if you wanted to own his home today, you'd either have to have been a master Engineer on a cargo ship, or have to have an army of maintenance men on speed dial.   All equipment requires maintenance.  The more you own, the more you have to maintain.

4.  Will it last long enough to reach payback?   This is an honest question to ask yourself.   The U.S. Market has been flooded with cheap LED lights from China.   They are still much more expensive than the old incandescent bulbs or CFL's.   They claim they are a better deal, of course, as they last much longer and use less energy, so over time, you save money.   And LEDs can last 30 years or more.   But, cheap LEDs from China can break right out of the box, or within a year.    There go your savings.    

I installed these in our kitchen, replacing 12 halogen lamps, which heat up the kitchen like a heat lamp.   They make the kitchen a lot cooler and should save energy and pay back their costs.   However, the payback will likely take several years, and if they burn out before then, well, there are no savings.

Most household appliances are designed for a 15-year design life.   The problem is, that is an average number.  Some fail before then.  If a $399 washer fails a the 10 year point, well you just chuck it and get another one (and your total cost is still less than the front-loader).  If the front-loader breaks, which it is likely to do, as it is more complex, it will be costly to repair, and the option of just throwing it out and starting over is more heartbreaking.   But I have seen this, particularly with membrane-switch appliances.  A circuit board or other part breaks, and with the cost of labor, well,  it ain't worth fixing.   So there goes your energy savings, and you end up just spending more rather than saving anything.

The more complex any piece of technology is, the more likely it is to break.  We call this Failure Mode Effects Analysis (FMEA).   The reliability rate of any device is based on the number of components and their failure rates.  You multiply the failure rates (actually their inverse) together to get an overall rate.  Obviously the most reliable device in the world is an Anvil, with one part and an infinitesimal failure rate.  With more complex devices, the failure rates increase - it is a matter of simple Engineering.  See, e.g., MIL-SPEC-217.

So, complexity for complexity's sake is never a good idea.  It is more likely to be less reliable and more costly to repair.  Which leads us to...

5.  Are they expensive to repair?   Condensing gas furnaces are up to 99% efficient.   They achieve this by using a second heat exchanger, that condenses furnaces gases down to a liquid which can then be drained away.   Many require no venting, just a drain.   The problem with these types of furnaces is that they have control boards, induction fans, an extra coil, and other hardware.    The condensed liquids are very corrosive and over time can corrode through the secondary coil.   Is this really worth it for an additional 10% increased efficiency?

Lennox tried this esoteric technology technique with their pulse furnace with mixed success.   The system used a heart-shaped combustion chamber and fed in a carefully controlled mixture of gas and air which was ignited by a spark plug.   It pulsed like a V1 rocket engine and was supposedly very efficient.   But being very unique, it also had its share of troubles.  And finding someone to work on it was problematic.   You had to make sure you found a mechanic who went to pulse furnace school.

And the same is true with hydronic heating.   Finding a tech to work on it is problematic, as it represents only about 2% of the installs nationwide.   The guy who does work on it, has a niche market and charges accordingly.   It's like owning a Jaguar, back in the bad, old days.   Limited production means limited sources for parts and labor - which means single-sourcing, a place you never want to be.

6.  Is this pushing the technological envelope?   As I have noted before, it pays to wait until new technology reaches the Wal-Mart level, in terms of pricing and widespread use.   If it is red-neck proof, chances are, it is also cheap and reliable.   You never want to be the guy pushing the technology curve, as the "bleeding edge" gets awfully expensive.   In addition, it might turn out to be a dead-end, in terms of technology, and thus you are stuck with a system or appliance that is no longer made (such as the pulse furnace) or one that just never took off in the marketplace (like hydronic heating).

Companies like to push technology, hoping to be the first to market (but often that means, last in the marketplace) or to "leapfrog" the competition.   Chevy thought its high-tectate silica engine block for the Vega would be so advanced, it would negate all the disadvantages it had when trying to compete with the Japanese.   It didn't work of course, and they found themselves even further behind.   It turns out, what  the market wanted was just conventional technology that was well made, not some techno-solution that didn't work and was poorly put together.

Technology can't solve every problem, and often it ends up making things worse.

7.  Does my use pattern make sense for this technology?  One reason I don't own a Prius or a Nissan Leaf is that I only drive about 5,000 miles a year.   To recoup the excess costs of these types of vehicles, I would have to drive 15,000 miles a year for at least seven years or more.  For me, it makes more sense to keep my 1999 M Roadster, which only has 50,000 miles on it, and all I do is change the oil once a year.

And this applies to just about everything.  The front-end loader washer savings are based on "family use" for a family of four.   A single person or a childless couple might wash a lot fewer clothes, and thus the payback may take many, many more years (if ever) to achieve.

Similarly, putting LED light bulbs in your attic or closet lamps may make less sense than putting them in your living room (other than the convenience factor of less burnouts).   Lights that are used a LOT will pay back with an LED much sooner than lights that are rarely used.

Even things like hydronic heating or condensing furnaces are affected by use.   Our vacation home in NY had hydronic heating.  We lived there in the spring,summer, and fall, and very rarely used it.  We used our split-system heat pumps for spot heating on cold mornings.   In fact, the hydronic system was just annoying as it made the house hot, trying to make hot water.   I ended up putting in an electric hot water heater, so we could just shut the system down in the summer.

And the winter, well, except on very cold days, it rarely ran, as we didn't use the house in the winter.  We set the thermostat at its lowest setting, and also had a gas fireplace as a backup heating system.   When the system blew out its pipe in the living room ceiling, we had to shut it down for the rest of the winter.   Turns out that the gas fireplace and a few space heaters were more than enough to keep the house from freezing over while we were gone (and the gas fireplace didn't need electricity to run, and in retrospect, was all we needed to prevent winter freezovers).

But frankly, I would have preferred a gas furnace.  Much more reliable, and I could have just drained the water pipes in the house and let it go cold and really saved energy as opposed to keeping the house warm so the hydronic system wouldn't freeze over.

Now, if you live in polar regions where the heat is on all the time, maybe hydronic makes more sense.  Maybe.  Why do you live in a polar region, though?  Most Americans live in more temperate climates (and the climate is becoming more temperate every year) - so their needs are different.  Even in cold places like Central New York, you need A/C in the summer these days - and it is a lot cheaper to install with a forced-air system.  A lot...cheaper.   Like $10,000 cheaper.

8.  Is the manufacturer fudging the numbers?   Act shocked.   Yes, companies will present their own products in the most favorable light.   And this often means making baseline assumptions that are just ludicrous, ignoring entire categories of expenses, or comparing apples to oranges.  It is like the cone filter people, who claim "up to 20% more horsepower" - the key words being "up to."

For example, the makers of NEVs claim they "save money" compared to operating a car.  But as I noted in another posting, they skew the numbers considerably in order to make this comparison work.  They make wild assumptions about comparative resale values, maintenance costs, and mostly, the miles driven.   A typical car is driven 12,000 miles a year, while an NEV is driven about 1200.  As I concluded, it is far cheaper to just drive your regular car another 1200 miles a year, than to buy an NEV.   You aren't "saving" anything - not even the environment.

But, they are selling NEVs so of course, their numbers add up to "great savings!"   And the same is usually true for other high-cost "energy saving" appliances which may or may not save you real money down the road.

9.  Are there ancillary benefits and are they worth it?   The guy trying to argue with me about front-loading washing machines claims they cause "less wear to your clothes" - which sounds like something the manufacturer said in its brochure.   We had top-loaders for 60 years or more - are your clothes "worn out" as a result?  Some of these ancillary benefits seem pretty specious.

Hydronic heat people say they get "warm floors" and that the heat "feels better".  The first is not really true - the floors are not "warm" just not ice cold.  And whether heat feels better one way or another is really a subjective thing.   Is this worth the cost delta?  That is the real question.   $10,000 in the bank gives me a really warm feeling that hydronic heat cannot provide.

Other things are easier to quantify.   Replacement windows are quieter and easier to open and close than old worn-out wood windows - and they look better as well.   But is it necessary to spend $500 a window on Pella, or would $150 vinyl windows work just as well?

Ancillary benefits are a factor to consider, and in most cases are the real benefit the user wants - with the energy savings being the ancillary argument.  We all lie to ourselves when we want candy, let's face it.

10.  Are you really just doing this for STATUS?  That is the real kicker.   People think of status in terms of cars and yachts.  But as we have discovered here, status takes all forms.   And the status "high end" house is a big deal these days - with fancy appliances, HVAC system ("it's zoned!" the owner chirps).  Granite countertops, professional-grade (so-called) kitchen appliances - the works.  People claim they install these "for the resale" but the real deal is, they want to impress their friends with their apparent wealth.

And for a lot of folks anti-status is the new status.  "I consume less, because I care about the planet and you don't, you energy-wasting monster!" - that is a common message today.   So often, the homeowner, when giving the house tour (and I have been subjected to more than one) points out the "energy saving" appliances they have, as if to justify this orgy of self-indulgence (all paid for with credit).   They are not just treating themselves to a five-bedroom four-bath house (which every childless couple needs) but are saving energy  in the process!.

Think hard about it - and think about how many people you've shown off your front-load washer to (I'll admit, I've done it) and fancy HVAC system (BTDT!)   Just own up to your own weaknesses - its a lot easier and cheaper in the long run.

* * *

Saving energy is a fine and wonderful thing.   But it is funny, we owned two houses at the same time.  One was an "Energy Star" home that was built by a utility company executive - and won an award from the utility company for energy-saving features, including the ill-fated hydronic heating system.   Our other house is a 1970's tract home with single-pane windows (which we will replace in 2015)  little insulation, and a cheap "contractor grade" heat pump.   Are their energy bills that much different?

Not really.   The cost of electricity and propane for the Energy Star home was pretty much the same as the cost of electricity for our Energy Waster home.  Throw in the repair costs, and well, the Energy Waster comes out ahead.   There were no huge savings in going to esoteric technology.  The main difference in energy usage had more to do with the fact the Energy Star home had better windows and insulation - both of which are low-tech solutions, cost little to install and cost nothing to maintain.   The actual choice of heating plant really was secondary.

(Note: The contractor-grade heat pump is now ten years old.  It appears to be on track to easily make it to 15 years, without significant maintenance.   The hydronic system blew its guts out at year 12).

Similarly, other "high end" energy-saving appliances may or may not save you tons of money, depending on how you use them, how long you plan on having them, and so on.

My rule of thumb is that if the payback is longer then seven years, forgetaboutit.   It ain't worth the extra cost, hassle, reliability, and potential repair costs.  And even seven years is a stretch.   With the staggeringly high cost of labor - particularly repair labor - in this country, it isn't worth saving a few pennies if you risk reliability.

Keep It Simple, Stupid - the more complex you make your life, the more difficult it becomes.

NOTE:  The photo above is of the new "boiler" we installed in our hydronic system.  Yes, it is a Dunkirk Boiler, but set to run below boiling point.  You never want the water to actually boil in a hydronic system, it will cause nightmares.   Yes, those are all new circulating pumps, replaced twice and $300 apiece (not including labor).  When the boiler rusted out after 12 years, we had a choice to replace it with a $6000 condensing boiler (actually a giant hot water heater) or getting the identical boiler (NOS), which I got wholesale from a friend for $1200 and I installed it myself.   If I had hired a contractor, this would have been far more expensive.  As  former HVAC tech, I could make the repairs myself.  Most folks can't. The payback for the condensing boiler would have been over a decade.  The choice was pretty simple to make.