Why it's hard to save money making your house more energy efficient

Washington Post

14-04-2025

Upgrades will cut carbon pollution, but even with tax credits, it can be difficult to save money.
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Nestled in a quiet suburb of Maryland, it's about 1,500 square feet, with three bedrooms across two floors. In an average year, the family in this home spends around $3,483 on utilities:
Utilities cost and
emissions per year
Gas (heating and cooking)
$1,590
5.1 tCO₂
Electricity (cooling, water heating and appliances)
$1,893
3.3
Total
$3,483
8.4
All that energy creates around 8.4 metric tons of CO2 emissions per year, or the equivalent of more than eight round-trip transatlantic flights.
Like many Americans, these homeowners want to cut their bills and carbon emissions. But even with generous state and federal tax subsidies, the economics of home retrofits don't always pencil out.
Here's how we evaluated the pros — and cons — of electrifying this home.
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By Simon Ducroquet and Shannon Osaka
April 14, 2025 at 10:00 a.m.
Residential buildings in the United States emit around 975 million metric tons of CO2 each year, or approximately 15 percent of the country's total emissions. For the United States to hit its climate goals, those millions of tons have to go to zero.
The Inflation Reduction Act created generous tax credits and rebates for homeowners who install solar panels, retrofit their homes, or buy heat pumps — but a Republican-controlled Congress may soon eliminate those subsidies. President Donald Trump has already taken aim at the $8.8 billion in home energy rebates authorized by the IRA.
But even with those subsidies, there are complications. Every house is different, and factors like weather, age of construction and duct work can dramatically change the costs and benefits of upgrades.
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The Washington Post asked researchers at Harvard's Graduate School of Design to simulate the potential cost savings and emissions reductions of updating this home. Holly Samuelson, an associate professor of architecture, and Mayuri Rajput, a lecturer and fellow, modeled the home and possible improvements. Local contractors provided cost estimates on those upgrades.
The results show that, while there are a few easy and cost-saving upgrades, any final decision may depend more on a homeowner's comfort — and desire to cut carbon emissions — than saving money.
Solar panels
Let's start with solar panels — one of the most popular upgrades. Right now households can get a federal tax credit equal to 30 percent of their panels' cost. In 2023, more than 752,000 Americans used that program for rooftop solar, for an average of around $8,000 back on their taxes.
According to a quote from local company NovaSolar, the house's roof could fit 17 solar panels.
The south-facing part of the roof – which, in the Northern Hemisphere, gets the most sunlight throughout the year – only has space for six panels. The others would have to be placed in less efficient spots.
Those panels would generate 7,811 kilowatt-hours of electricity in the first year – covering roughly 70 percent of the home's overall use.
The panels cost around $22,300 – but generous state and federal incentives would cut that cost to just $10,127. With yearly savings of $1,829, the solar panels would pay for themselves in just over five years.
Utilities cost and
emissions per year
Without solar panels
$3,483
8.4 tCO₂
With solar panels
$1,654
6.1
Savings
$1,829
2.3
But there's a catch: Two large oak trees shade the house, blocking most of the roof's sunlight, especially during the summer.
Summer is also when the panels would be producing the most electricity – and when the house needs more power for air conditioning.
Because of the trees, the panels would produce 40 percent less energy. Yearly savings would drop to $1,116. It would take eight and-a-half years to justify the investment.
Utilities cost and
emissions per year
Without solar panels
$3,483
8.4 tCO₂
With tree-shaded solar panels
$2,367
7
Savings
$1,116
1.4
The homeowners could remove or cut back the trees – but that could reduce the value of the home and make it warmer.
And removing the trees would make the outside of the house uncomfortably hot during the summer. According to modeling, removing the trees would add an additional 800 hours during the year – or more than one full month – where the yard temperature is more than 79 degrees Fahrenheit.
The solar panels could provide real benefits, but they aren't a slam dunk. Peter House, energy adviser at EnergySage, a clean energy company, says most homeowners like to see payback in around seven years. Tree shade, he added, is one of the main reasons that homeowners decide not to switch to solar.
Payback solar panels
Cost and return on investment
for solar panels
$12,173
Covered by state and
federal incentives
$10,127
Paid by
homeowner
$1,116
annual
savings
1
2
3
4
5
6
7
8
Homeowner's
investment returns
after 8 years
Cost and return on investment
for solar panels
$12,173
Covered by state and
federal incentives
$10,127
Paid by
homeowner
$1,116
annual
savings
1
2
3
4
5
6
7
8
Homeowner's
investment returns
after 8 years
Cost and return on investment
for solar panels
$12,173
Covered by state and
federal incentives
$10,127
Paid by
homeowner
1
2
3
4
5
6
7
8
$1,116
annual
savings
Homeowner's
investment returns
after 8 years
Heat pump
What about installing a heat pump? Many houses around the country still rely on natural gas, propane or oil for heat — with each home functioning like a little fossil fuel plant. In this Maryland census tract, 83 percent of homes are still heated by natural gas.
According to The Post's modeling, installing a minimum-efficiency heat pump would lower bills by approximately $252 per year.
Utilities cost and
emissions per year
With gas heating and central AC
$3,483
8.4 tCO₂
With heat pump
$3,231
5.7
Savings
$252
2.7
But installing it would cost around $12,000 after rebates, making the payback period around 48 years.
heat pump payback
Cost and return on investment
for heat pump
$1,100
Covered by state and
federal incentives
$252
annual
savings
$12,000
Paid by
homeowner
Homeowner's investment returns after 48 years
Cost and return on investment
for heat pump
$1,100
Covered by state and
federal incentives
$252
annual
savings
$12,000
Paid by
homeowner
Homeowner's investment returns after 48 years
Cost and return on investment
for heat pump
$1,100
Covered by state and
federal incentives
$12,000
Paid by
homeowner
Homeowner's investment returns after 48 years
$252
annual
savings
A higher-efficiency heat pump could save more money — around $755 per year. And if their gas furnace had reached the end of its life, homeowners would have to pay only the difference between the cost of a new heat pump and a new furnace — bringing the payback time closer to eight years. Because a heat pump heats and cools the home, it could also replace the traditional air conditioning unit.
That could make sense for this home. But in colder climates, the calculus changes. While there are new, high-efficiency models that can take on frigid temperatures, they often cost more to purchase and run. According to the modeling, if this home was subject to Chicago's weather and prices of utilities, switching to a heat pump could actually lose money, to the tune of $1,221 added to bills each year.
'It's a relationship between the outdoor temperature, your rates and the efficiency of the heat pump,' said Lacey Tan, manager in the carbon-free buildings program at the energy think tank RMI.
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Heat pumps are much more efficient than fossil fuel furnaces, which work by burning energy and converting it into heat. A gas furnace, for example, might take 1 kWh of natural gas and generate 0.96 or 0.98 kWh of heat — an efficiency of 96 or 98 percent.
A heat pump, on the other hand, doesn't use electricity to make heat — it uses electricity and a complex system of refrigerants to move heat from the outside of the home indoors. Moving heat takes less energy — just 1 kWh of electricity can pull 3 or 4 kWh of heat indoors. As a result, heat pumps can have an effective efficiency, or 'coefficient of performance,' of 300 to 400 percent.
But electricity, in many parts of the country, costs much more than natural gas. In Maryland, electricity is about three times the cost of gas, sapping most of the benefits of switching to a heat pump.
'Heat pumps save energy, but they don't always save money,' said Elliot Firestone, a project manager at Elysian Energy, an energy efficiency firm in the D.C. and Maryland region.
Map of savings for heat pump
Impact on annual utilities cost when switching from
gas furnace to heat pump
Savings
Cost increase
-$2,000
0
$2,000
Costs estimated for the house in Maryland's suburb, when replacing a 70 percent efficient gas furnace with a minimum efficiency heat pump. For more details, see methodology at the bottom of this article.
Impact on annual utilities cost when switching from
gas furnace to heat pump
Savings
Cost increase
-$2,000
0
$2,000
Costs estimated for the house in Maryland's suburb, when replacing a 70 percent efficient gas furnace with a minimum efficiency heat pump. For more details, see methodology at the bottom of this article.
Impact on annual utilities cost when switching
from gas furnace to heat pump
Savings
Cost increase
-$2,000
0
$2,000
Costs estimated for the house in Maryland's suburb, when replacing a 70 percent efficient gas furnace with a minimum efficiency heat pump. For more details, see methodology at the bottom of this article.
Experts say you are most likely to save money if you're switching from an older, less efficient gas furnace (The Post's modeling estimated this home's furnace had an efficiency of 70 percent) and if you live where the gas isn't much cheaper than electricity. In some states, like Maine, homeowners could save money switching from fuel oil, which is relatively expensive, but not from gas.
Still, there are other benefits. 'Unlike oil or gas systems, a heat pump becomes greener over time as the grid decarbonizes,' Samuelson said. 'It can offer long-term carbon benefits, even if the short-term savings don't add up.'
Another type of heat pump would benefit the house right away — a heat pump water heater. The existing water heater runs on electric resistance, heating a wire with electrical energy. That's expensive to run and only 100 percent efficient. Switching to a heat pump version, energy auditors found, would save $240 per year and cost just $978 after local utility rebates. So the new water heater would pay for itself in just four years.
Sealing and insulation
Another way to improve efficiency is adding insulation to improve the home's 'envelope' — the barrier between outdoors and indoors. But that might not pencil out.
The Post asked a local energy auditor to analyze how to limit the home's air leaks. The auditor performed a blower door test — setting a large fan in the sealed front door of the house and tracking air as it flowed through the home.
The test revealed several areas of the house where conditioned air could leak out, leading to costly energy bills.
Using a thermal camera, auditors found that warm air was flowing through the hatch to the attic.
That's a common problem — most homes lose energy through what's known as the 'stack effect.' Warm air rises through the home, creating a vacuum in the lower floors and basement.
Outside air then seeps in through cracks and holes in the lower floors, and air that's been cooled or warmed escapes through the upper floors.
With major leaks homeowners have to constantly heat or cool their homes to counteract this effect — which can cost hundreds to thousands of dollars.
'It's kind of like money just flying out of your house,' said Josh Friddle, president of Terra Insulation, the company that performed the energy audit.
Friddle recommended adding insulation to counteract this effect — first, by adding polyurethane foam to leaky points in the attic to keep air from escaping, and then by sealing and conditioning the crawlspace to prevent outdoor air from coming in. Adding insulation to the walls would also help, he said. 'We call it the ABCs,' he said, of the priorities for sealing up a home. 'Attic, bottom floor, crawlspace.'
All told, those improvements would cost around $9,187, after local utility rebates, and would save around $320 a year. That would give the improvements a payback time of almost 29 years.
According to the modeling by Harvard researchers, a more state-of-the-art envelope upgrade could save almost three times that. But, achieving that level of insulation would require replace the sidings, at a much higher cost.
Utilities cost and
emissions per year
With current insulation and infiltration
$3,483
8.4 tCO₂
With upgraded insulation and reduced infiltration
$2,433
5.2
Savings
$1,050
3.2
'The math on retrofits is horrible,' said Nate Adams, a home energy consultant. 'And also there's no addition to resale value in most markets.'
But, he added, most people are not doing retrofits to save money on bills — they are doing it to improve comfort. One room, for example, might be freezing in the winter and burning hot in the summer. Fixing insulation could make it more comfortable year round.
Multiple retrofits can also be done at the same time. If the homeowner needed to replace the vinyl siding of the house, for example, it would be cheap to add better insulation. That better insulation, in turn, could add to the savings of a heat pump — lowering bills to the tune of around 45 percent.
Still, the cost of upgrades show the challenges for many families hoping to make their homes more efficient — and the challenge for the country as a whole as it struggles to eliminate buildings' carbon pollution.
Adams said that while some Americans have adopted these new technologies, the country can't hit its climate goals without changes to how the United States retrofits homes.
'We're going to burn another decade that we don't have if we don't figure out how to get to the mass market,' he said.