The Money You Will Save: Calculate Your Payback Period

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Installing energy-conserving methods such as insulation will save you money—you hear it everywhere. If you have no real knowledge of insulation’s direct impact on your heating and cooling bill, do not worry. There are simple calculations that you can do at home to figure out just how much money insulation will save you through saving energy.

A measurement called the “payback period” is the most commonly used way to evaluate how cost-effective your energy saving home will be. To figure out this calculation, you need to know four numbers:

  1. the cost of the insulation or respective energy efficient renovation
  2. the cost of its installation
  3. the price of energy in your home
  4. the amount of energy that you will save by installing your energy efficient insulation

The payback period itself is the amount of time that it takes for an energy efficient measure’s, such as insulation’s, savings to break even with its original cost. With insulation for example, the “original cost” is the amount you invest on the material and its installation. The ideal payback period is the shortest one.

If you invest in moderately priced insulation instead of skimping with a cheaper kind, you will receive better value and a shorter payback period. Due to the immense energy savings that good quality insulation like cellulose offers, the energy savings leave you with you more money in a shorter period of time.

To calculate your total predicted payback period, you must do a few simple calculations. First, you need to know what we will call the “first cost,” which is the cost of new insulation minus the cost of the old insulation. This number gives you the difference in prices between your new energy efficient home and your older, ineffective insulation.

$ New Insulation – $ Old Insulation = “First Cost”

Next, calculate the annual savings by deducting the cost of your new heating bill from your old one. You will need to know how much energy you will save with your new insulation in order to do this calculation. Dolphin can help you predict this number after a free home energy assessment.

Old Heating Bill – New Heating Bill = “Annual Savings”

Finally, divide the first cost (your first calculation) by the annual savings (your second). This number is your final payback period, calculated in years.

First Cost / Annual Savings = Payback Period

The calculation of the payback period is generally the easiest way to map out your predicted energy savings when you upgrade to energy efficiency. At Dolphin, we can help you calculate this number so you can see how soon you will start saving when you insulate with our loose fill cellulose insulation. If you have any questions or would like help calculating your own payback period, contact Dolphin to get started.