Tortured ROI Calculations: hot water insulation edition
Submitted by murph on 17 December 2006 - 11:59am. houseone | projects | sustainability
In general, I believe it's worth utilizing materials to reduce energy consumption - both are, of course, subsidized heavily in our economy, but materials are much easier to reuse, salvage, or recycle in the future. (Note my statement of utilizing materials, as opposed to using (up) energy.)
With this in mind, and an annoyance at how quickly the hot water turns cold if I step away from the dishes for just a few minutes, I decided to look into insulating my hot water pipes.
The US DoE's Energy Efficiency and Renewable Energy Office assured me of the quantitative benefits of insulating hot water pipes, though in a seemingly odd way:
Insulating your hot water pipes reduces heat loss and can raise water temperature 2ºF–4ºF hotter than uninsulated pipes can deliver, allowing for a lower water temperature setting. You also won't have to wait as long for hot water when you turn on a faucet or showerhead, which helps conserve water.
Armed thus with the knowledge that the project would actually have meaningful results, and the good luck of having the entire length of my hot water system accessible in a full-height basement, I set off for the hardware store. Note: make sure that, before you go, you measure both the linear quantity of hot water pipe that you have (it'll be a lot more than you probably expect!) and the diameters of hot water pipe - I have about 70 feet of pipe, with mixed 3/4" and 1/2". Pipe insulation comes in 6-foot-long lengths, slit along the length; installation requires only a knife to cut to length and duct tape or similar to ensure the insulation stays put.
Now for the fun part. Let's try to figure out when this project will pay off. I'm open to any suggestions for improving this estimate.
- Material costs were $15. Estimate 1.5 hours work for materials acquisition and installation, or another $15. 
- Savings is stated by EERE as "2 to 4 degrees" of temperature.
- Ambient/input water temperature is about 50 degrees, output temperature is about 120 degrees, so 70 degrees of heat is added.
- 2-4 degrees of efficiency improvement is 2.9%-5.7% of the 70 degrees of added heat. 
- I'll estimate we spend $16/month to run the water heater. 
- Percent savings * cost = $0.464-$0.912 savings on gas monthly at current rates.
- Total project cost / monthly savings = 33-65 months, or 3-5 years, to recoup the costs of the project in gas savings.
On the one hand, it might not seem worthwhile to undertake a project that will optimistically take 3 years to pay off, and then only have a return of $1 / month. This is especially true if you are renting. On the other hand, I'm pleasantly surprised to come up with any quantitative result at all, let alone the result that this will have a positive monetary return within so short a time as 3-5 years - if only everything I did on a Saturday afternoon could be counted as such a clear positive investment!
Additionally, taking into consideration the fact that I think my water heating bill is higher than the $16 used above, and that I expect energy prices to rise in the near future, this will probably pay off even faster than the 3-5 year estimate. Since I personally believe our current energy system to have high, but officially unacknowledged and thus unquantified, social costs, I see my investment as having an additional return in welfare for myself and my friends and family.
Therefore, I consider this project to be a clear win. $15 and an hour and a half of my Saturday that I'd otherwise no doubt have spent online with no real results  for a project that will provide positive benefits for the life of my hot water pipes. Not bad. And, if this write-up helps a few other people make the decision that it's a worthwhile project, I'll consider the time spent on it also worthwhile.
 Here I use the Ithaca Hours standard of $10/hour as the value of labor. Any economist you talk to will give you a different and conflicting reason why this is a bad way to estimate labor value. That's their problem.
 By this quantification, the lower your water heater is set, the higher a percentage savings you get. This is probably backwards, as heat loss will be fastest when the water temperature is higher. Oh well.
 Our gas bill for June-September averaged $32/month. This includes water heater and stove; no furnace use during that period. The stove is too old to have any sort of indication of gas usage marked on it, so I'm estimating half-and-half between the two. My guess is that the water heater uses more gas than the stove. As a check on this, the Missouri Extension states that water heating accounts for 15% of a household's annual energy bill. This would require a year's worth of energy bills to determine, but will come in higher than $16/mo.
 In the process of coming up with this quantification yesterday, I'm betting I spent at least an hour and a half on the garden path of agonizing over the comparative energy usage of my stove and water heater, leading into an attempt to figure out how fast a new water heater would pay off, despite the fact that my refrigerator, stove, and furnace are before that in the queue for replacement or tuning to address energy use, and we probably won't invest in a new water heater soon enough for today's efficiencies and prices to mean much of anything to me. So, yeah, I consider the project itself time well spent.