Save a Bundle on Your Energy Bills, Part 1: Upgrade Your Equipment

In October, Money magazine had a special energy insert that featured five ways to save on your energy bills. They not only highlighted the ideas, but the annual savings and up-front costs you'd expect from each of them. They also listed a "quick fix" -- a step you could take in case you didn't want to take the "full-on" advice. Today we'll look at their #1 suggestion, upgrading your equipment. Their thoughts:

Idea: If your system is more than two decades old, the new one should easily pay for itself in three to seven years. In the long term it can save you more money than any other home improvement project.

Annual savings: As much as 25% to 50% on your fuel bills.

Up-front cost: $3,000 to $6,000 for a new furnace and air conditioning unit, including installation.

Tax credit: $300 for central AC system; $300 for water heater; $150 for furnace or broiler (credit cannot exceed $500).

Quick Fix: Air Filters (costing about $30 a year) could save you about $100 a year if you change them every three months, according to the U.S. Green Building Council. Chose a pleated model - it'll do a better job.

My take:

I pay roughly $2,000 a year to heat and cool my house. If I put in a new system for $4,500 (the mid-range above -- I'll leave out the tax credit savings, though they would make this even better) and saved 37.5% (the mid-range above), I'd pocket an extra $750 a year. At this rate, it would take me six years to recover the costs of the new system. Not bad.

In the worst-case scenario, let's say the new system cost me $6,000 and I only saved 25% per year (or $500.) In this case, it would take 12 years to pay back the investment. It's not a killer as the system should last 15-20 years, but it's not a clear winner, either.

However, in the best-case scenario, the idea's a big winner. If the system were to run me $3,000 and I saved 50%, I'd have the money re-couped in two years! Woo hoo!

Our current furnace is at the breaking point. For the last three years, each time we've had it checked prior to the heating season, we've been told it could "go any time." We're hoping we don't need to replace it before we move, but if we don't hurry, we won't have a choice.

We do use air filters and I change them every other month (believe me, they're dirty by then), so I guess I am saving a good amount even with the old system.

Click here to read part 2 of this series.

Comments

[FinanceAndFat]

I'm fortunate in that I bought a new house about three years ago so everything is energy efficient (at least it can't be too far behind in only three years). I have a washable air filter, which I clean about every two months, varying a bit on usage. I'm not sure if the washable filters are an option for all units or how much they cost since it came with ours, but that is definitely a cost saver too.

[Lord]

Everyone should do their own calculations. My utility spending is around $750 a year, only a portion of which is actually heating and cooling. I had to replace mine due to age and function but it would never make sense for me due to energy efficiency.

[anon]

That's really swell that you hope to sell the house to some person and duck out just before the furnace craps out. It would be even better if you could manage to do that in Feb.

[FMF]

Anon --

As I'm sure you know, the age of all systems, appliances, etc. is reflected in the selling price.