There are many reasons why people might want to retrofit their homes, but saving money isn’t one of them.
A new Economic and Social Research Institute report notes that on average, uber-efficient A-rated homes consume almost as much energy (10,569 kilowatt-hours annually, to be precise) as F- and G-rated houses (10,964). Reality refuses to conform to convenient energy models, with people in cold, inefficient homes often under-heating to save money, while their A-rated counterparts are more casual about turning up the thermostat.
Even so, retrofits are still calculated to save energy. After grants, a deep retrofit costs roughly €16,400 for an apartment, delivering about €700 annually in energy savings. If you don’t mind waiting 23 years to get your money back, have at it.
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It gets worse. For a detached house, your deep retrofit spend of €42,900 will likely deliver only about €900 a year in energy savings, so 48 years to break even. Bring on 2074.
Here’s another question, though: what about the opportunity cost? Stocks have historically averaged annualised gains of about 9-10 per cent, or 6-7 per cent after inflation. Invest €42,900 in global stocks at a 6 per cent real return and you’d end up with over €703,000 after 48 years.
Minister for the Environment Darragh O’Brien recently said energy bills will “plummet” if people take up the Government’s increased retrofit grants, but the only thing plummeting here is your opportunity.
Of course, there are other reasons – warmth, modestly higher resale value, lower emissions, out-Ber-ing your neighbours (the joys of one-upmanship, energy edition) – to do retrofits. But saving money? Not so much.
Money spent today is money you can’t compound tomorrow. That’s why when Warren Buffett paid $31,500 for his house in Omaha in 1958, he called it “Buffett’s Folly”. The Oracle of Omaha would surely see a deep retrofit as an even greater financial folly, one that heats the house while freezing the finances.