As energy costs continue to rise, energy efficiency is becoming more than a building performance consideration. It is also a financial opportunity for homeowners and builders.
During EEBA’s webinar, How Utility Savings Turn Into Long-Term Financial Returns: The Financial Case for Energy-Saving High-Performance Homes, Jon Pues, Founder and CEO of EcoSmart Construction Stud, explored how investing in high-performance homes can reduce long-term operating costs and create lasting financial value.
Understanding the Rising Cost of Energy
Energy prices have increased significantly over the past several decades. Pues cited an average annual increase of approximately 6.75% over the past 50 years. Since 2020, that average has risen to 9.3% for combined natural gas and electricity costs.
He also pointed to growing demand from AI data centers as one factor contributing to increased competition for electricity and natural gas, alongside the infrastructure needed to support that demand.
For homeowners, these increases can have a substantial impact over time. While a utility bill may seem manageable today, the cumulative cost over 10, 20 or 30 years can become a significant part of the overall cost of homeownership.
Looking Beyond the Initial Upgrade Cost
To demonstrate the financial potential of energy efficiency, Pues shared a case study based on a home being built in Bloomington, Minnesota. The home includes approximately 1,440 square feet above grade, with an additional 1,000 square feet below grade.
The modeled Net Zero Ready upgrades range from approximately $6,000 to $19,000, depending on the building approach. For the home, Pues estimated that a Net Zero Ready design could save approximately $1 per square foot annually, while emphasizing that actual savings depend on factors such as local energy prices and fuel type.
One of the most important points of the presentation was how those savings are calculated. Simply multiplying the first year's savings by the number of years does not account for rising energy costs. Instead, builders should use compounded calculations to understand how annual utility savings can grow over time. Using the case study, Pues illustrated the potential for more than $38,000 in savings over 10 years.
Turning Utility Savings Into Financial Value
Energy savings can also create opportunities beyond reducing monthly expenses. Pues explained how homeowners could redirect the money they would otherwise spend on utilities toward paying down their mortgage or investing.
In one modeled scenario, applying energy savings toward additional mortgage payments could potentially shorten a 30-year mortgage to approximately 21 years. He also emphasized that utility savings are effectively after-tax dollars. Using a $100 monthly utility bill as an example, a homeowner may need to earn approximately $133 before taxes to cover that expense.
These examples demonstrate why the financial return of a high-performance home should be evaluated over its full ownership period, rather than solely by its initial upgrade cost or payback period.
Three Numbers, One Story
For builders, Pues recommended a straightforward way to communicate the financial benefits of energy efficiency:
- Year-one energy savings: Estimate how much the homeowner can save annually.
- Net upgrade cost: Calculate the actual cost after applicable rebates and incentives.
- Payback period: Show how long it may take for the savings to offset the initial investment.
In Minnesota, Pues highlighted utility rebate opportunities through programs offered by Xcel Energy and CenterPoint Energy. He noted that typical rebates discussed during the webinar ranged from approximately $500 to $2,000, depending on the upgrades and program requirements.
Building for Long-Term Value
High-performance upgrades continue to benefit homeowners long after the initial investment. Unlike cosmetic improvements that may need to be replaced, energy-efficient features can deliver ongoing savings while helping homes remain better positioned as building codes and energy expectations evolve.
The financial case is clear: when builders help homeowners understand the long-term cost of energy, the conversation shifts from the price of an upgrade to the value it can deliver over time.