3

of about $15,000) was assumed for the typical home buyer. As an example of the costs and savings for increased thermal protection under the new Minimum Property Standards, consider the table for Seattle. The new MPS for Seattle require increased ceiling, wall, and floor insulation and, for the first time, storm windows are required on all windows. These increases would yield a 50.5% reduction in the yearly heating energy used in the home and a 21.4% reduction in energy needed for cooling.

For homes in Seattle with either gas or oil furnaces and electric air conditioning, the new standard would raise the cost of construction by $1,129.74 over the old standard. At the mortgage, tax, and insurance rates assumed, these increased initial costs would mean a net increase of $114.75 in yearly payments. For a home with gas heat (the lowest cost fuel) and electric air conditioning, annual savings would be $176.55 for heating and $1.18 for cooling. Net yearly savings are $177.73 annual savings minus $114.75 increased annual mortgage, tax and insurance costs equal $62.98. With oil heating, yearly net savings are $174.53. For homes in Seattle with electric heating, the increased construction cost would be $893.93. This would mean extra yearly mortgage, tax, and insurance costs of $90.00. With savings on heating costs of $125.85, and savings on cooling costs of $1.18, the homeowner would realize a net yearly savings of $37.03.

Even in areas where storm windows were required by the old MPS, construction costs will rise because of the increased insulation levels of the new MPS. For example, in Minneapolis, higher levels of ceiling and wall insulation are now standard. The increase in construction costs is $296.03, or $30.07 per year in mortgage, tax, and insurance payments. However, energy savings for all three kinds of heating systems with electric air conditioning offset this increased cost. Energy savings with gas heat are $31.76, with oil heat $54.96, and with electric heat $65.33.

The above calculations are based on current costs of fuels. Gas and oil prices in Seattle are 10-25% higher than the national average, but electricity prices are much lower than average. Minneapolis fuel prices are very close to 3National average costs in December, 1974, for natural gas for heating were $13.42 per 100 therms. For oil, the average was $37.86 per 100 gallons of distillate. Electricity prices vary greatly by region and even by season, but the U.S. average is in the range of 3.5¢ per kilowatt hour.

gas prices are at

the effect of the housing costs for

average. In both Atlanta and Los Angeles where natural least 10% below the national average, new MPS is a net increase in yearly homes which install gas heating systems. Thus, in Atlanta where the new MPS would increase construction costs by $193.33, equal to a $19.64 increase in yearly mortgage and tax payments, energy savings total $14.97. At today's prices, the new MPS cause a net cost increase of $4.67 per year.

Mortgage and tax payments for a home built today will stay relatively constant for the life of the house (or of the mortgage). But it is almost certain that energy prices will continue to rise for a number of years. This means that while the costs of increased insulation protection will stay constant, the savings will rise. If energy prices in Los Angeles, for example, were to rise to the national average, energy savings would more than balance mortgage and tax payments.

In conclusion, the new levels of insulation now required by the MPS give the home buyer a measure of insurance against the rising costs of home heating and cooling. Even where construction costs rise by over $1,000, the resulting decrease in energy use more than balances the extra expense over a reasonable period.

TABLE A

6

APPENDIX DATA UPON WHICH THE STUDY IS BASED

Fuel prices:

These are shown in the table. They were collected in late 1974.

Material prices:

All prices were collected by Oak Ridge National Laboratory from national guidebooks of construction costs. All insulation costs are for batt/insulation.

Ceiling insulation: 1 7/8"

3 1/2"
6"
7 5/8"

13¢ square foot 17.8¢ square foot 28.4¢ square foot 34.4¢ square foot

No incremental labor costs assumed for use
of thicker insulation.

51. REPRINT: "FINAL REPORT, A PILOT PROJECT IN HOMEOWNER ENERGY CONSERVATION," FEDERAL ENERGY ADMINISTRATION, OCTOBER 31, 1974

Federal Energy
Administration

Final Report

A Pilot Project In Homeowner
Energy Conservation

Washington
D.C. 20461