How to Save Over $2,000 on Home Energy Costs

Consumer Reports details how you can save over $2,000 every year on home energy costs by buying new, more efficient appliances versus the ones you have today. Here's what they say you can save on a variety of appliances:

• Washer - $129
• Refrigerator - $72
• Dishwasher - $51
• Thermostat - $202
• Furnace - $230
• Water Heater - $310
• Lighting - $51
• Computer - $18
• Car - $900
• Television - $53

A few thoughts on this from me:

1. Yeah, you could save up to $2k per year, but it would cost you a fortune to buy all these items new. Obviously, no one's going to do this.

2. Most (if not all) of these purchases will not payout if you simply abandon your current appliance for a new one. Now, if your old appliance is at the end of its useful life and needs replacing, by all means, you should consider a more-efficient option when you buy. That said, a more efficient model will often cost more than other alternatives, so you still need to do a cost-benefit analysis.

3. Looks like changing from a manual to a programmable thermostat give you the best bang for your buck. A rather small investment can save you over $200 per year -- pretty good payback. I was also surprised at the savings with new water heater, though the cost would obviously be much higher.

4. The car delivers almost half of the savings, but we all know that hybrids are much more expensive than gasoline engine cars. I've seen articles both ways arguing whether or not buying a hybrid actually pays out.

5. Here's where we stand on each of the items above:

• Washer - A few years old -- probably a very efficient model.
• Refrigerator - Very old. Needs replaced. We'll get a new one if we move.
• Dishwasher - A couple years old -- a very efficient model.
• Thermostat - Have used a programmable for years.
• Furnace - Ours is at the end of its useful life, but still functioning. We'll stay put for now.
• Water Heater - We have an older model, but it's working well at this point.
• Lighting - We're transitioning to CFLs.
• Computer - Not really much savings here.
• Car - One of our cars is a Corolla. Does that count for anything? ;-)

Comments

[MasterPo]

These kinds of suggestions presume the cost of energy remains the same. If the cost goes up (like it always does, especially lately) your real pocket savings won't be anywhere near that.

IOW, you get a new appliance that uses less electricity but if the cost per kw goes up the net savings just isn't there. I suppose you can say that if you didn't get a more efficient unit (still used your older less efficent appliance) you would have paid more. But reducing the rate of cost growth is not the same as actually cutting your costs.

[pink panther]

... "cost you a fortune to buy all these items new" and I've noticed that amortizing the projected savings over the life of the appliance doesn't even pay for it, in many cases, because the expense of the item is so much higher.

[Chris]

@MasterPo

Actually, if the cost of energy goes up, your "pocket savings" gets even bigger. I will make up a semi-fictional example.

On one of my summer energy bills, we used 562 kWh for a month. We paid 4.3 cents/kWh on that bill, for a cost of $24.17.

Lets say you make improvements to your energy using appliances that saves you 62 kWh for the month (this is the fictional part - I don't know how much you can save...)

At the current rate, your savings is 62 kWh * 4.3 cents/kWh = $2.66

If the rate went up to 6.3 cents/kWh, then your new savings is 62 * 6.3 = $3.91

Yes, your bill is still larger than before the increase, even with the savings, but you save more because of your improvements. This is similar to how hybrids make more sense as gas prices get higher - each gallon of gas saved is worth more, offsetting the increased purchase price.

[Kris]

A quick look at water heaters online showed prices between $270 and $500 so less than 2 years (maybe 1) to pay back the savings is a good deal if the savings numbers can be believed (probably depends on the age / efficiency of your current unit)

[MasterPo]

Chris - I understand your math. But the bottom line is that if it's not cash in my pocket then it's not a real tangible savings. A reduction in rate of cost growth is not a savings, just a slowing of the increase.

So to use your example, if originally your bill was 562kwh X $.043/kwh = $24.17, reducing your usage by 62kwh but raising your cost per kwh to $.063/kwh your new bill is 500kwh X $.063 = $31.50. Granted, if you had not reduced your usage your bill would have been $35.41. But by comparison to your current bill of $24.17 you're still paying $7.33 more out of your pocket. And at the end of the day that's where savings really comes from.

[Jim]

I looked at the return on replacing major appliances lately. If your fridge, dishwasher or clothes washer is 15-20 years old then it may make financial sense to replace it with a new one just for the energy costs. A 20 year old fridge could be using $200 a year in electricity and a typical new fridge uses $40. But from what I saw it really doesn't make financial sense to pay the premium for the highest energy efficiency models.

Masterpo, If the cost of energy goes up then your savings will go up also. You can't stop energy costs from going up but if it does then using less will save you more.

Jim

[Kevin]

Agree - programmable thermostat is the best bet of this list. I actually can't believe everyone isn't using one of these considering it takes about 5 minutes to install and costs about $25 for the most simple variety.

The hot water heater looks like a decent bet too since most I've seen cost less than $300. I'm going to get a tankless water heater at my next house so I don't have to keep reheating that water that's just sitting around most of the day.

[Jim]

The water heater that consumer reports is looking at is a heat-pump water heater. Those are not very common and they are pretty expensive. A basic water heater is $400-500 range and a heat-pump version is more like $1500. Here's a report on the savings benefit from heat-pump water heaters:
http://www.energy.wsu.edu/documents/building/res/ht_pmp_water_htrs.pdf
They give an example of spending $1200 more for the heat-pump version and saving $262 annually for a 4.5 year payback period.

Jim

[yipeng]

I am curious to know which applications are likely to payout "if you simply abandon your current appliance for a new one."

From an energy inefficient to efficient appliance of course!

[Jim]

Yipeng,

If comparing new models then chosing an efficient clothes washer is probably the best bet to be worth the extra cost to save energy costs. Efficient clothes washers use a lot less energy and water than less eficient models. The difference in energy savings for dishwashers or fridges isn't as much between the most and least energy efficient new models.

Usually abandoning an appliance to buy a new one just to save energy is probably not going to be worth it financially unless your current appliance is 15 or 20 years old.

Jim

[Anonymous]

I put in a programmable thermostat a year ago. 40 bucks, about 20 minutes. I'm sure I've saved $120 already.

[Ken.H]

MasterPro - I don't want to flame you on this, but you can't ignore the additional savings if (more like when) the cost of energy increases when determining how much you saved. It should be a Time Value of Money decision and the increased cost in the future has to be factored in.

It's like taking a bonus over a pay raise. Yeah the bonus gives you some immediate cash, but the raise compounds and eventually nets you way more money.

[rwh]

We replaced our 20 year old refrigerator 3 years ago with a newer, more efficient unit. Our electric bill dropped $10/month immediately. A few months later we swapped out about a dozen light bulbs with compact flouresent bulbs. The electric bill dropped another $10/month immediately.

Next week we are replacing our old natural gas water heater with a similar model. It's efficiency rating is 0.62, which qualifies for a $50 rebate from the gas company. It will cost $700 to purchase, install and dispose of the old one. But we had to replace the unit because it's old and rusty and we're trying to sell the house. The new owners will reap any savings.

We bought a conventional gas engine Honda Civic last year for 18k. The hybrids were 22k. It consistently gets over 40 mpg highway, upper 20s in town in the summer, lower 20s in the winter. We calculate we're using about 200 gallons less gasoline per year from when our minivan was our main vehicle.

It always makes sense to replace old, inefficient appliances with more efficient models if you have reached the point where the unit has to be replaced. Spending lots of money up front when you don't necessarily have to is a harder calculation.

We're moving to a new house and will consider geothermal heating/cooling. That could cost 15-20k. That's a lot of money. It could take 10-12 years at current utility prices to pay back. But if we're going to do it, we should do it at the beginning, in order to have the best chance of recouping our investment.

Little things like programmable thermostats are no brainers in my opinion.

[MoneyLint]

@Chris -

I would love to know how you get $0.043 per kwh. Is that a rate you locked in a long time ago or is that the standard rate in your area? In Texas, standard rates range from $0.14 - $0.21 kwh. I pay $0.145.

[uFirst]

yea makes sense to me. i remember when i was considering buying a hybrid car to save money on gas, but the extra cost for a hybrid didnt make it worth it in the end :/
-John

[RJ]

A few months later we swapped out about a dozen light bulbs with compact flouresent bulbs. The electric bill dropped another $10/month immediately.
_______________________________________________________________________________

Yep, and if you break one of them remember to have a hazardous waste company come and clean up the mercury that is contained in them, average cost for cleanup 2K... Makes perfect sense to me, Not. I'm stocking up on bulbs since the day is coming that the enviro freaks will have them banned along with everything else that "They" think is bad. Plus for the lousy 10 bucks in savings simply isn't worth the poor light the CFL bulbs produce.

[MasterPo]

Ken - Disagreeing isn't flaming. ;-)

Your example is also incorrect. Be it a raise or bonus both are actual additional cash in your hand that increase your overall cash flow and spending ability.

Where as slowing the rate of your future expenditures you still have the expenditure and it's still going up, just not as fast as it might have without the equipment change.

Imagine if you have $100 in your pocket when you go to the store to buy whatever. When you get there the whatever is on sale for $80 (let's assume tax included). You didn't "save" anything. You had prepared to spend all of the $100 for whatever, you spend $80 that left you with $20. Yes you can now spend that $20 on something else you had not planned on being able to purchase. But your overall spending power is still just $100. That didn't change.

I know this is a very tough concept to grasp. All our lives we are bombarded with ads saying "Buy to day and save 20%!" etc. You're still spending. Saving would be no spending at all.

Don't misunderstand me - I'm all for reducing costs and spending rates! But reducing what you spend is not the same as increasing the amount you have to spend. One has the same starting point, the other raises the starting point.

[MasterPo]

RJ - 2010. That's when a new federal law kicks in banning regular bulbs. France has already gone that way.

ps- The EPA has guidelines on their site for how to clean up a CFB break.

pps- You know how in some places a home seller has to give a lead paint disclosure? A mercury disclosuer is coming soon for just this reason! It stinks!

[Chris]

@MoneyLint- I looked at the rate for the month I happen to pull again - I had a credit for having a remote switch on my A/C unit. I just looked at the net total and divided it by energy usage. My actual rate is closer to 11 cents/kWh... Bad random example

@MasterPo-

I understand what you are saying about rising costs taking away more money than the additional savings nets you, and I agree with that. This is similar to the person that has a $10 dollars off a purchase of $50 coupon that goes shopping, only needs $35 worth of stuff, and picks up something worth at least $15 more. In the end, they have something they didn't really need, and spent at least $5 more than they would have without the coupon, leaving them with at least $5 less in their pocket.

However, I think the argument here is based on the fact we're assuming that the end residential consumer has no control over the cost of electricity from the utility. Prices will fluctuate (most likely in an upward direction), and our available action is to use less electricity. This will require an upfront cost (the purchase of the new energy efficient appliance) leaving me with less cash-in-pocket and result in a small reduction in expenditure per month, slowly replacing that cash.

I think what Ken was saying about the raise is that if I get a $5k bonus today, I have $5k extra with no promise of future income. If I get a $5k raise today, I will get $5k extra this year and every following year.

[MasterPo]

@Chris,

The raise vs. bonus thing may have been a poor example.

The point I'm trying to get across is since no usage isn't an option and we agree the price per unit of energy is beyond our control (and will most likely go waaaaay rather than down) even in the end you're still going to pay more on a monthly or annual basis for the use of these appliances so there really is no savings in your pocket. (The cost to purchase an appliance is a one-time sunk cost.)

To use an extreme example, if a new appliance can get you to cut your energy use in half but the cost per unit of energy doubles then you're still paying the same as before. I agree that if you had not cut your useage in half you'd be paying even more.

To put it another way, the government does this kind of bait&switch all the time. An initial budget plan may call for a 5% increase. After all negotiation is said and done that increase is reduced to 2%. The pols will say they cut spending! No. They are still spending 2% more than now just not the full 5% originally planned. A cut would be spending 2% less than what is being spent today.

Or, to use another example, gasoline prices have come down about $.30/gal in my area in the last month or so. I'm still spending a lot more today on gas than I did this time last year. But not as much as I did back in say June or July. That isn't a savings, just a reduction in how much more I am spending today than I was last year.

[rwh]

"To use an extreme example, if a new appliance can get you to cut your energy use in half but the cost per unit of energy doubles then you're still paying the same as before. I agree that if you had not cut your useage in half you'd be paying even more."

I don't understand your logic MP. If my refrigerator dies and I have to buy a new one I'm going to buy one that's more energy efficient, even if it costs more than a less efficient model. I will spend less on electricity over the life of the unit, eventually making up for the extra up front cost. That constitutes a net savings over time compared to buying a less expensive, less energy efficient unit. The same can be said for paying an extra $1000 or $2000 for a more energy efficient car, assuming both cars (and both refrigerators) have similar life spans and similar reliability. If you hold onto these items long enough, there will always be a point in which you start to save (and yes, that means spending less over time).

I don't see how you can compare spending on necessities like a refrigerator or car to the way the government does it's budget negotiations. Unless you don't think we need refrigerators or cars.

[Chris]

@MasterPo,

"I agree that if you had not cut your useage in half you'd be paying even more."

I think we've come to the point where we are both saying the same thing in different ways.

I agree that we are still paying more than in the past, and your "reduction in how much more I am spending" is my savings. Both ways, there is extra money in pocket with a more efficient appliance. Is it too bad that there isn't even more extra money? Sure, but I guess at some point, I accept the fact that prices go up.

FWIW, I also track my energy consumption in terms of kWh of electricity, therms of natural gas, and gallons of gasoline for auto use, and in those stats, I can see a real reduction month over month and year over year performance. I guess I look at that as my savings, regardless of the dollar value it equates to. The lower I make those numbers, the more I maximize the money I keep. This may be in the form of lower cost or lower cost increase; look at it either way.

[MasterPo]

@Chris,

I think you and I have different definitions of what a "savings" is.

If you're using less kwh, therms etc now than before it's not like the difference is being banked somewhere. For all you know you're neighbor is eating up whatever you have reduced! Or if someone builds a new house on your block the kwh, therms etc will be used by that family (even if they start out with all Energy Star equipment etc).

And I still don't see your reduction in rate of cost being a savings. You're still paying out more tomorrow than you are paying today. It's great that with new equipment your pay out is less than what it might have been with the old equipment. But you're still paying out additonal. At best a savings would be if you held your costs steady tomorrow (same as today's costs). And a real savings would be tomorrow's cost is less than today's cost.

Bottom line: Paying more but not as much more as it could have been is not putting money back into your pocket. It's just reducing the rate at which the money comes out. The pocket still only has so much in it.

@rwh - If an appliance breaks you're going to have to replace it anyway. So whether you spend more for an better efficient model or not it's a sunk cost one way or another.

Just as I'm discussing with Chris, your cost of electricity will not be lower over the life of your new fridge. It will be less than it would be if you still had your old fridge. But the cost rate for electricity is always going up so you're still going to be paying more than you do now, just not as much more.

[SAHM]

Kevin
CR has a very interesting article talking about the comparisons of the tankless waterheater. The cost benefit isn't as great as we have been led to believe. I had been convinced that we would get one in the next couple of years when our current tank dies. After reading the article, I'm reconsidering.

Here is the link:
http://www.consumerreports.org/cro/appliances/heating-cooling-and-air/water-heaters/tankless-water-heaters/overview/tankless-water-heaters-ov.htm

[Success Professor]

So, if my total electrical costs for the year are $800, would I be given an extra $1200 a year? Then I might consider it. Of course, I don't think these changes would move it to $0 a year anyways....

[rwh]

MP: "Just as I'm discussing with Chris, your cost of electricity will not be lower over the life of your new fridge. It will be less than it would be if you still had your old fridge. But the cost rate for electricity is always going up so you're still going to be paying more than you do now, just not as much more."

That's the only point I'm trying to make. If we take steps to reduce future consumption of a commodity, regardless whether inflation increases the absolute cost of that commodity, then we are saving money, even if we have to spend money first. And the money we save (which you state at best simply represents a reduction in the rate of increased spending) can be put toward more concrete savings and investments, such as bank accounts or stocks and bonds.

I think your point of view seems to assume that we can never spend money to save money. But we can factor a return on spending if we take into account how much less we won't have to spend on the specific item in the future. Otherwise, there would be no economic justification to insulate under our roof, weather-strip our doors and windows or buy an energy efficient appliance.