Industry Watch
By Rich Walker, American Architectural Manufacturers Association
Defining Payback for Energy Saving Measures
B
e it windmills or windows, energy saving measures are subject
to cost-benefit analysis, which is
often a point of contention between
advocates and skeptics. In the building components sector, the discussion
tends to focus on the cost-effectiveness of energy saving
measures mandated by
codes and/or encouraged
by rating programs such
as Energy Star. Usually, the defining
metric is the payback period—that is,
the time it takes for the calculated energy cost savings to amortize the extra
cost that energy-saving measures add
to a basic fenestration unit.
This issue rises anew with the
recent reintroduction of the Energy
Savings and Building Efficiency Act
(H.R. 1273), which is very similar to a
like measure that was introduced but
failed in the 2014 Congress. It requires
that any code or proposal supported
by the Department of Energy must
have a payback of 10 years or less.
A BIT OF HISTORY
Where did this 10-year period come
from and what basis is there for it?
In developing a payback scenario for
the Energy Star Version 6.0, the Environmental Protection Agency and
Department of Energy went through
an evolution of thinking in arriving
at much the same payback period.
Initially, the idea was that the payback period should be the anticipated
service life of the product (i.e., 20 or
more years). If the savings in utility cost
over the service life of the product was
more than the incremental cost of the
product, it was cost-effective.
After this approach was met with
a certain amount of skepticism, the
DOE figured its own calculations with
the issuance of Draft 1 of Energy Star
v6.0 that arrived at an average payback period of 13 years. One more
12 | Window&Door | May 2015
iteration for v6.0 produced a payback
period of less than 10 years, which is
consistent with the legislation.
The DOE approach essentially divided the average cost differential between Energy Star-qualified windows
and a basic code-compliant window
(IECC 2009) by the average incremental energy savings per household in
different localities scattered throughout the four Climate Zones. The incre-
fied on a localized basis as possible.
The National Association of Home
Builders weighed in favor of the 10year payback, opining that the bill
would ensure that the most practical
energy-saving features, such as highefficiency windows, would be included
in new homes and result in reduced
costs for homeowners.
The measure also stipulates that
the DOE would serve as a technical
➤➤The Energy Savings and Building Efficiency Act
requires that any code supported by the DOE must
have a payback of 10 years or less.
mental energy savings is based on a
whole-house simulation using RESFEN
5 software and utility rates based on
2011 residential data.
The average cost differential represents the increase for improving the
product to various performance levels
(e.g., U and SHGC) to Energy Star v6.0
levels through the use of glass coatings, gas infill, better spacers, etc., and
is essentially the difference between
an Energy Star 6.0 vs. an Energy Star
5.0 window, which most manufacturers agree was more realistic.
CAUSES FOR CONCERN
The 10-year payback reference point
for the legislation is nevertheless controversial. Part of the difficulty lies in
arriving at a payback period applicable
nationwide. The DOE analysis indicated that payback ranges from as low as
2.5 years for “average-cost” products
and less than one year for “low-cost”
products, to as high as 14.5 years for
average-cost products and nearly 13
years for low-cost products. High-end
products with calculated payback
periods of more than 10 years are not
prohibited by the proposed rules, of
course, but may have to be cost-justi-
advisor in the development of energy
codes, while prohibiting the agency
from showing favoritism for specific
technologies, building materials or
construction practices. Specifically,
the bill would require all energy code
change proposals to be made available
to the public, including calculations
on costs and savings (a cost-impact
statement, if you will), allowing public
comment and taking into account the
concerns of small business.
NAHB says this will help code
officials make more informed decisions and result in cost-effective code
provisions, and that it will curtail the
influence of outside groups that seek
to advance energy code proposals
with little regard to their cost.
It remains to be seen whether H.R.
1273 will turn out to be another pass
at the brass ring on the merry-goround or a solid step forward in establishing a bona fide reference point for
cost-effective energy efficient building
components. w
Rich Walker is president and CEO of the
American Architectural Manufacturers
Association, 847/303-5664, rwalker@
aamanet.org.