ms NAT'L INST. OF STAND & TECH R.I.C.

1 Reference

| MINI IN II II

A Jj Jj Jj U j U H r J J c: NBSIR 79-1948

Optimizing Weatherization

Investments in Low-Income Housing:

Economic Guidelines and Forecasts

Robert E. Chapman, Richard W. Crenshaw,

Kimberly A. Barnes, and Phillip T. Chen

Center for Building Technology

National Engineering Laboratory

National Bureau of Standards

Washington, D C. 20234

February 1980

Sponsored by the:

Community Services Administration

1200 19th Street, NW

* QC -«^~**^/Vashington, D.C. 20506

100

.1156

79-1948

1980

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NBSIR 79-1948

• i i OPTIMIZING WEATHERIZATION

INVESTMENTS IN LOW-INCOME HOUSING:

ECONOMIC GUIDELINES AND FORECASTS

MIO

Robert E. Chapman, Richard W. Crenshaw,

Kimberly A. Barnes, and Phillip T. Chen

Center for Building Technology

National Engineering Laboratory

National Bureau of Standards

Washington, D.C. 20234

February 1980

Final Report

Sponsored by the:

Community Services Administration

1200 19th Street, NW

Washington, D.C. 20506

U.S. DEPARTMENT OF COMMERCE, Philip M. Klutznick, Secretary

Luther H. Hodges, Jr.. Deputy Secretary

Jordan J. Baruch, Assistant Secretary for Productivity. Technology, and Innovation

NATIONAL BUREAU OF STANDARDS. Ernest Ambler. Director

PREFACE

I

This research was conducted under the sponsorship of the Community

Services Administration by the Applied Economics Group of the Center for

Building Technology, National Engineering Laboratory, National Bureau of

Standards

.

The burden of rapidly rising energy costs on low-income families has

prompted concern for the health and well-being of low-income Americans

and led to the passage of Public Laws 93-644 and 94-385. These laws

establish energy conservation (weatherization) programs for low-income

families and provide funds for weatherization grants. Under Public Law

93-644 Congress has assigned to the Community Services Administration

(CSA) the leadership role in reducing the energy cost burden on lowincome Americans. The Community Services Administration's Weatherization

Demonstration Program carried out through the National Bureau of Standards

as one of its objectives an estimate of how much money can be saved

through optimum weatherization.

This report establishes a framework for systematically analyzing alternative methods of weatherizing low-income housing, and provides forecasts

of the optimal level of weatherization for the 15 cities participating in

the Community Services Administration's Weatherization Demonstration

Program. Data collected during the Weatherization Demonstration Program

will facilitate the testing and refinement of these forecasts.

Appreciation is extended to Drs. Harold E. Marshall and Stephen F. Weber,

Applied Economics Group, and Mr. William G. Hall, Center for Applied

Mathematics, who reviewed the economics and mathematical aspects of the

paper. Special appreciation is extended to Dr. Joseph G. Kowalski and

Mr. Stephen R. Petersen, Applied Economics Group, for their helpful com- ments throughout the course of this research effort. Special appreciation

is also extended to Dr. Alan J. Goldman, formerly of the Center for Applied

Mathematics, and Mr. Harvey W. Berger, National Engineering Laboratory, for

their excellent suggestions on the treatment of certain technical aspects

presented in the paper. Special appreciation is also extended to

Ms. Barbara C. Cassard, Applied Economics Group, who performed most of

the computer calculations.

iii
ABSTRACT

This study establishes a framework for systematically analyzing

the economic viability of alternative methods of weatherizing low-income

housing. These methods include but are not limited to insulation,

weatherstripping and caulking, and installation of storm windows and

doors. The economic framework is illustrated through the development of

a series of forecasts (economic guidelines) which show the optimal level

of weatherization for low-income residences in 15 cities across the Nation.

These economic guidelines are designed to assist the Community Services

Administration in carrying out its Weatherization Demonstration Program.

In particular, they are designed to achieve a more balanced level of

weatherization per dollar spent. The optimal level of weatherization is

balanced in the sense that for a given weatherization budget no increases

in net savings (total savings minus total costs) can be achieved by trading

one method for another.

Key Words: Benefit-cost analysis; building economics; building envelope;

economic analysis; economic efficiency; energy conservation;

insulation; life-cycle costs; low-income housing; marginal

analysis; thermal efficiency; weatherization.

IV
TABLE OF CONTENTS

Page

PREFACE iii

ABSTRACT iv

LIST OF FIGURES vii

LIST OF EXHIBITS viii

LIST OF TABLES ix

SI CONVERSION UNITS xiii

1 . INTRODUCTION 1

1.1 PURPOSE 2

1.2 SCOPE AND APPROACH 2

2. DESCRIPTION OF THE WEATHERIZATION DEMONSTRATION PROGRAM . . 4

2.1 SITE SELECTION 4

2.2 DWELLING UNIT SELECTION 5

3. METHODS FOR CALCULATING WEATHERIZATION COSTS AND SAVINGS. . 10

3.1 Option Costs 10

3.1.1 Initial Cost Considerations 10

3.1.2 Life-Cycle Cost Considerations 11

3.2 Weatherization Savings 12

4. ECONOMIC FORECASTS OF OPTIMUM WEATHERIZATION LEVELS ... 17

4.1 BASIC ASSUMPTIONS 17

4.2 KEY PARAMETERS USED IN FORECASTS 18

4.3 CASE STUDY: PORTLAND, MAINE 27

4.3.1 Baseline Forecasts 27

4.3.2 Sensitivity Analysis 35

4.4 FORECASTS FOR OTHER DEMONSTRATION SITES 44

5. SUMMARY AND RECOMMENDATIONS FOR FUTURE

RESEARCH 49

REFERENCES 52

APPENDIX A. ESTIMATING WEATHERIZATION COSTS 55

A.l Description of Weatherization Options .... 55

A. 2 Assumptions Used in Making Cost Estimates . . 56

A. 3 Cost Figures used in Economic Forecasts ... 59

A. 4 Format and Methodology for Cost Data

Collection 59

v
Page

APPENDIX B. ESTIMATING WEATHERIZATION SAVINGS 69

B.l Infiltration Calculations 69

B.2 Conduction Calculations 71

B. 3 Mechanical System Calculations 79

APPENDIX C. SELECTED TOPICS IN INVESTMENT THEORY 86

C. l The Present Discounted Value Criterion 86

C.2 Optimizing Weatherization Investments 94

APPENDIX D. DESCRIPTION OF COMPUTER PROGRAM USED TO MAKE

ECONOMIC FORECASTS 107

APPENDIX E. SUMMARY OF BALANCE POINT CALCULATIONS FOR EACH

DEMONSTRATION SITE Ill

vi
LIST OF FIGURES

Page

2.1 Selected Sites for Weatherization Demonstration Program ... 6

C.l Investment Opportunity Frontier . 87

C.2 Equilibrium Between Present and Future Consumption 88

C.3 Equilibrium Between Present and Future Consumption When

Borrowing is Permitted 90

C.4 The Effects of Changing Technology on the Shape of the

Investment Opportunity Frontier 91

C.5 The Effects of a Payback Constraint on Equilibrium 92

C.6 Minimizing Life-Time Building Costs Through Optimum

Weatherization 96

C.7 Optimizing a Weatherization Investment 98

C.8 Optimizing Weatherization Investments Subject to a Budget

Constraint 102

C. 9 Effect of a Payback Constraint on Optimum Weatherization

Levels 105

D. l Flowchart of Computer Program 110

E. l Sample Balance Point Calculation 112

vii
LIST OF EXHIBITS

Page

4.1 Computer Output: Input Summary and Infiltration Options. . . 29

4.2 Computer Output: Window Options 30

4.3 Computer Output: Attic Insulation 32

4.4 Computer Output: Wall Insulation Above Grade, Basement

Wall, and Door Options 32

A.l Dwelling Unit Cost Data Form 64

A. 2 Type of Work Definitions 65

A. 3 Indirect Labor Costs Data Form 66

A. 4 Contract Specific Indirect Costs 67

viii
LIST OF TABLES

Page

2.1 Experimental Design for Weatherization Demonstration

Program 8

4.1 Estimated Real Rates of Fuel Price Escalation Used in Economic

Analyses 22

4.2 Estimated Short Term Rates of Fuel Price Escalation 23

4.3 Estimates of the Frequency of Replacement of Building

Materials to Achieve a 20 Year Physical Life 25

4.4 Values of Key Decision Variables Used in the Baseline

Forecast: Portland, Maine 28

4.5 Overview of the Factors Treated in the Sensitivity Analysis . 37

4.6 Optimal Weatherization Packages Determined from the

Sensitivity Analysis 38

4.7 Results of Sensitivity Analysis 40

4.8 Differential Effect of Each Factor on the Baseline

Weatherization Package 42

4.9 Optimal Weatherization Packages for Houses Heated by Fuel

Oil in Other Demonstration Sites 46

4.10 Optimal Weatherization Packages for Houses Heated by

Natural Gas in Other Demonstration Sites 47

4.11 Optimal Weather Packages for Houses Heated by Electricity,

Propane or Kerosene in Other Demonstration Sites 48

A.l Estimates of First Costs Used in the Economic Analyses by

Site 60

A. 2 Estimates of 20 Year Costs Used in the Economic Analyses

by Site 61

A. 3 Cost Data Collection: Reporting Requirements 62

B. l Energy Savings Due to Reductions in Infiltration Losses ... 70

B.2 Load Calculations Associated with Window Retrofits 72

B.3 Energy Savings Calculations Associated with Window

Retrofits 74

ix
Page

B.4 Load Calculations Associated with Door Retrofits 75

B.5 Energy Savings Calculations Associated with Door Retrofits. . 75

B.6 Load Calculations Associated with Attic Insulation 76

B.7 Energy Savings Calculations Associated with Attic

Insulation 76

B.8 Load Calculations Associated with Wall Insulation 77

B.9 Energy Savings Calculations Associated with Wall

Insulation 77

B.10 Load Calculations Associated with Basement Walls 78

B.ll Energy Savings Calculations Associated with Basement

Walls 78

B.12 Load Calculations Associated with Floor Insulation 80

B.13 Energy Savings Calculations Associated with Floor

Insulation 81

B.14 Values for Degree Days A through E and Heating Days Used

in Forecasts 82

B.15 Definition of Terms Used in Mechanical System Retrofit

Calculations 84

B.16 Energy Savings Calculations Associated with Mechanical

System Retrofits 85

E.l Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Albuquerque, New Mexico 113

E.2 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Atlanta, Georgia 114

E.3 Optimal Weatherization Packages as a Function of Balance

Point for Propane in Atlanta, Georgia 115

E.4 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Charleston, South Carolina 116

E.5 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Charelston, South Carolina 117

x
Page

E.6 Optimal Weatherization Packages as a Function of Balance

Point for Electricity in Charleston, South Carolina 118

E.7 Optimal Weatherization Packages as a Function of Balance

Point for Propane in Charleston, South Carolina 119

E.8 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Chicago, Illinois 120

E.9 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Chicago, Illinois 121

E.10 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Colorado Springs, Colorado 122

E.ll Optimal Weatherization Packages as a Function of Balance

Point for Propane in Colorado Springs, Colorado 123

E.12 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Easton, Pennsylvania 124

E.13 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Easton, Pennsylvania 125

E.14 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Fargo, North Dakota 126

E.15 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Fargo, North Dakota 127

E.16 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Los Angeles, California 128

E.17 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Miami, Florida 129

E.18 Optimal Weatherization Packages as a Function of Balance

Point for Electricity in Miami, Florida 130

E.19 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Minneapolis/St. Paul, Minnesota . . 131

E.20 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Minneapolis/St. Paul, Minnesota. . . . 132

E.21 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Oakland, California 133

xi
Page

E.22 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Portland, Maine 134

E.23 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in St. Louis, Missouri 135

E.24 Optimal Weatherization Packages as a Function of Balance

Point for Natural Gas in Tacoma, Washington 136

E.25 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Tacoma, Washington 137

E.26 Optimal Weatherization Packages as a Function of Balance

Point for Electricity in Tacoma, Washington 138

E.27 Optimal Weatherization Packages as a Function of Balance

Point for Fuel Oil in Washington, D.C 139

E.28 Optimal Weatherization Packages as a Function of Balance

Point for Propane in Washington, D.C 140

E.29 Optimal Weatherization Packages as a Function of Balance

Point for Kerosene in Washington, D.C 141

xii
MOST COMMON SI UNITS AND THEIR EQUIVALENT VALUES IN CUSTOMARY UNITS

QUANTITY INTERNATIONAL (SI) UNIT U.S. CUSTOMARY UNIT APPROXIMATE CONVERSION

LENGTH

AREA

VOLUME

CAPACITY

VELOCITY, SPEED

ACCELERATION

DENSITY

FORCE

I

MOMENT OF FORCE, TORQUE

PRESSURE, STRESS

WORK, ENERGY, QUANTITY OF HEAT

POWER, HEAT FLOW

RATE

COEFFICIENT OF HEAT TRANSFER [U-valuel

THERMAL CONDUC- TIVITY [k-value]

meter (m) millimeter (mm)

square meter (m2

)

square millimeter (mm2

)

cubic meter (m3

)

cubic millimeter (mm

2

) liter (L) milliliter (mL)

meter per second (m/s) kilometer per hour (km/h)

meter per second squared (m/s 2

)

metric ton (t) [1000 kg]

ki loqram (kg) gram (g)

metric ton per cubic meter (t/mJ

) kilogram per cubic meter (kg/m 3

)

kilonewton (kN)

newton (N)

kilonewton meter (kN*m) newton meter (N*m)

megapascal (MPa)

kilopascal (kPa)

megajoule (MJ) kilojoule (kJ) joule (J)

kilowatt (kW) watt (W)

watt per square meter kelvin

(W/m2 *K) [= (W/m2 *°C)

)

watt per meter kelvin (W/m*K)

[ = (W/m* °C)

)

foot (ft) 1 m = 3.2808 ft inch (in) 1 mm = 0.0394 in

square yard (yd 2

) 1 m

2 = 1.1960 yd2 square foot (ft 2

)

1 m

2 = 10.764 ft2 square inch (in 2

) 1 ran

2 = 1.5500 x 10" 3 in2

cubic yard (yd 3

) 1 m

3 = 1.3080 yd 3 cubic foot (ft 3

)

1 m

3 = 35.315 ft 3 cubic inch (in 3

) 1 ran

3 = 61.024 x 10’ 6 in 3

gallon (gal) 1 L = 0.2642 gal fluid ounce (fl oz) 1 mL = 0.0338 fl oz

foot per second (ft/s or f.p.s.) 1 m/s = 3.2808 ft/s mile per hour (mile/h or m.p.h.) 1 km/h = 0.6214 mile/h

foot per second squared (ft/s 2

)

1 m/s 2 = 3.2808 ft/s 2

short ton [2000 lb] 1 t = 1.1023 ton pound (lb) 1 kg = 2.2046 lb ounce (oz) 1 9

= 0.0353 oz

ton per cubic yard (ton/yd 3

)

1 t/m3 = 0.8428 ton/yd 3 pound per cubic foot (lb/ft 3

) 1 kg/m3 = 0.0624 lb/ft 3

ton-force (tonf) 1 kN = 0.1124 tonf

kip [1000 Ibf] 1 kN = 0.2248 kip

pound-force (lbf) 1 N = 0.2248 lbf

ton-force foot (tonf'ft) 1 kN*m = 0.3688 tonf'ft pound-force inch ( 1 bf* i n

)

1 N*m = 8.8508 lbf* i

n

ton-force per square inch (tonf/in 2

)

1 MPa = 0.0725 tonf/in 2 ton-force per square foot (tonf/ft2

) 1 MPa = 10.443 tonf/ft2 pound-force per square inch (lbf/in 2

)

1 kPa = 0.1450 lbf/in 2 pound-force per square foot (lbf/ft2

) 1 kPa = 20.885 lbf/ft 2

kilowatthour (kWh) 1 MJ = 0.2778 kWh British thermal unit (Btu) 1 kJ = 0.9478 Btu foot pound-force (ft*lbf) 1 J = 0.7376 ft* lbf

horsepower (hp) 1 kW = 1.3410 hp British thermal unit per hour (Btu/h) 1 W = 3.4121 Btu/h

foot pound-force per second (ft*lbf/s) 1 W = 0.7376 ft*lbf/s

Btu per square foot hour degree 1 W/m2 *K = 0.1761 Btu/ft2 *h* Fahrenheit (Btu/ft 2 *h* °F)

Btu per square foot degree Fahrenheit 1 W/m*K = 0.5778 Btu/ft 2 • °F (Btu/ft2 *°F)

NOTES: (1) The above conversion factors are shown to three or four places of decimals.

(2) Unprefixed SI units are underlined. (The kilogram, although prefixed, is an SI base unit.)

REFERENCES: NBS Guidelines for the Use of the Metric System, LC1056, Revised August 1977; The Metric System of Measurement, Federal Register Notice of October 26, 1977, LC 1378, Revised November 1977; NBS Special Publication 330, "The International System of Units (SI)," 1977 Edition; NBS Technical Note 938, "Recommended Practice for the Use of Metric (SI) Units in Building Design and Construction," Revised edition June 1977; ASTM Standard E621-78, "Standard Practice for the Use of Metric (SI) Units in Building Design and Construction," (based on NBS TN 938), March 1978;

ANSI Z210. 1-1976, "American National Standard for Metric Practice;" also issued as ASTM E380-76 e

, or IEEE Std. 268-1976.

xiii
-

.
1.0 INTRODUCTION

As a result of the "energy crisis," American consumers have become

acutely aware that energy prices are rising rapidly and that substantial

real

1

energy price increases are likely to persist well into the future.

Low-income homeowners, unlike other consumers, often spend a disproportionate share of the family budget on housing services including energy.

Increasing housing expenditures therefore tend to act as a regressive

tax, forcing low-income homeowners to reduce their consumption of essentials such as food and clothing. Concern for the health and well-being

of low-income Americans led to the passage of Public Law 93-644 in 1975

and of Public Law 94-385 in 1976. These laws establish energy conservation programs for low-income families and provide funds for weatherization grants.^ Under Public Law 93-644 Congress has delegated to the

Community Services Administration (CSA) the leadership role in administering a nationwide program to evaluate how much money can be saved

through optimum weather izat ion.

A program has been undertaken in order to identify and test the optimum

weatherization levels for different climatic regions of the country and

for different supply and demand factors in the energy and construction

sectors. Through this demonstration program, low-income residences will

be weatherized at selected sites across the country. Explicit in this

program is an economic analysis of alternative methods for weatherization.

Since improving the efficiency of space heating systems and increasing

the thermal resistance of the building envelope are nearly perfect substitutes for energy consumption, J it is necessary to weigh the costs of

weatherization against future reductions in energy consumption. In particular, it is necessary to recognize that, other things being equal,

each additional increase in the level of weatherization will generate

smaller reductions in energy consumption. This implies that the economically optimal level of weatherization, i.e., the one which results in

the maximum net savings (the excess of life-cycle savings over life-cycle

costs4

) will typically not coincide with the one which minimizes energy

consumption.

1 A real rate is a dollar value expressed in terms of constant purchasing

power; in this case current dollar values have been adjusted to take

out the reduction in purchasing power due to inflation.

2 Throughout this report the term weatherization will be used synonymously with energy conservation.

3 Stephen R. Petersen, Retrofitting ..... Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

^ Life-cycle savings and costs will be discussed in detail in Chapter 3 of this report.

1
As energy prices continue to rise, low-income homeowners may find that

weatherization is one of the best investment opportunities available.

Even at today's borrowing rates, consumers are wise to invest in energy

conservation. Subsidized programs could therefore provide an incentive

to low-income homeowners to weatherize. Furthermore, most weatherization options can pay for themselves over the term of the usual home

improvement loan. Low-income homeowners would therefore have a chance

to reap permanent increases in future consumption of non-energy goods

without drastically reducing their consumption of essentials in the

present and near future. Weatherization investments also act as a hedge

against inflation which severely impacts low-income families, especially

if they are living on fixed incomes.

1.1 PURPOSE

The purpose of this study is to develop a framework which may be used by

researchers and regional and local program managers of the CSA for systematically analyzing the economic viability of alternative methods of

weatherizing low-income housing. Included in this framework is a forecast of the optimal level of weatherization for each demonstration site.

These economic guidelines should enable representatives of the CSA, and

other public administrators, to achieve a more balanced level of weatherization per dollar spent. The optimal level of weatherization is balanced

in the sense that for a given weatherization budget no increases in net

savings can be achieved by trading one method for another.

1.2 SCOPE AND APPROACH

The focus of this study is on identifying the optimal level of weatherization investment for each site in CSA's national demonstration program.

The alternative methods for weatherization are divided into six basic

categories. These categories were chosen in a such a way that each

building element could be analyzed. The six weatherization categories

studied are: (1) infiltration options; (2) window options; (3) door

options; (4) attic insulation; (3) wall insulation; and (6) basement

insulation. The study explicitly takes into consideration not only the

present cost of energy and energy conservation but also future expenditures for energy, including projected real rates of energy price escalation. Anticipated costs resulting from the need to replace one or more weatherization options are also handled within the framework of the economic analyses.

It is important to note that the forecasts of the optimal level of

weatherization for each demonstration site are based on life-cycle costs

and savings. Therefore, in order to test or validate the forecasts made

in this report, it will be necessary to analyze statistically data on the actual costs experienced in the field as well as pre and post weatherization

energy consumption. This report, in its focus on forecasting the optimal

level of weatherization, does not offer detailed statistical analyses

of data from the demonstration sites. Statistical analyses of these data

when they become available will be presented in a future report.

2
The basic format of the study consists of a description of CSA's

weatherization demonstration program, the formulation of an economic

model, and a presentation of the forecast of the economically optimal

levels of weatherization for each demonstration site. Specifically,

the study is organized as follows:

Chapter 2 describes the weatherization demonstration program, how

the sites were selected, and which building types were chosen for

study.

Chapter 3 develops a methodology for calculating weatherization

costs and savings.

Chapter 4 presents the forecast of optimal weatherization for each

demonstration site.

Chapter 5 contains a short summary of our research findings, and

recommendations for future research including an econometric analysis

of field weatherization costs.

The report also includes five technical appendices which treat in some detail: (A) the costs used in the economic analyses; (B) the methodology

for estimating energy savings; (C) selected topics in investment theory

which permit the economically optimal level of weatherization to be

determined; (D) the computer program used to choose among weatherization

methods; and (E) a summary of the calculations performed for each weatherization demonstration site.

3
2. DESCRIPTION OF THE WEATHERIZATION DEMONSTRATION PROGRAM

2.1 SITE SELECTION

The selection of the candidate cities for the demonstration program

reflected a desire to assess accurately the effect of and relationships

among as many key factors in the determination of weatherization

savings as possible. Climate was judged to be the major determinant in

the choice of the demonstration sites because it is the major variable

affecting energy consumption and hence energy savings. By conducting

demonstrations in a variety of climates it thus becomes possible to more efficiently estimate the savings attributable to an option or combination of options. The choice among alternative sites was simplified through an analysis of four key climatic parameters which affect

buildings. These parameters are: (1) temperature; (2) humidity;

(3) sunlight; and (4) wind.

Additional inputs to the selection process included results from The

House Beautiful Climate Control Project

1

conducted by the American Institute of Architects and the Environmental Data Services' Climatic Atlas

of the United States . ^ Major climatic zones were first identified with

the Atlas which contains maps dividing the country into eleven temperature

zones. Each zone corresponds to a "width" of 1000 degree days (see

Figure 2.1).^ These zones were used as a base map. Guidelines presented

in The House Beautiful Climate Control Project were next used to subdivide the temperature zones on the base map. Candidate cities which

best fit the two following requirements were then selected within each

of these temperature zones. First, the city had to have CSA groups

capable of meeting the needs of the program. Secondly, hourly climate

data were available on tapes from the National Weather Service.

^ American Institute of Architects, The House Beautiful Climate Control

Project , Bulletin of the AIA, 1951.

2 Environmental Data Service, Climatic Atlas of the United States , U.S.

Department of Commerce Report, 1968, 1974.

3 Degree days, DD, may be defined mathematically as

365

DD = i (65 - T

t

) for all T

± < 65

i-1

where T^ =* the average temperature of the i^ day of the year.

Degree days are based on 65°F rather than 70°F, the assumed indoor

temperature setting, since the 5°F temperature differential is con- sidered to be provided by small solar radiation gains and internal

heat sources rather than direct heating.

4
The 15 cities which were selected as demonstration sites are shown in

Figure 2.1. The number of degree days for each city is given in parentheses by the city's name. No boundaries have been drawn around the

climate zones surrounding each demonstration site. This is due primarily

to difficulties involved in unambiguously identifying boundaries which

are affected not only by the four climatic parameters mentioned above,

but also by local factors such as mountains and large bodies of water.

Consequently, it is recommended that the reader of this document not

attempt to interpolate between sites. (Once post-retrofit information

is available and analyzed this constraint may be relaxed. However, in

the absence of firm empirical evidence the reader must be cautioned

against generalizing the forecasts of optimum weatherization to other

cities at different points in time.)

2.2 DWELLING UNIT SELECTION

The selction of dwelling units for inclusion in the demonstration program

was based on the following considerations:

(1) the ability of the total sample of dwelling units to encompass

those factors which affect energy consumption;

(2) the accuracy of the data on energy consumption;

(3) continued occupancy by the same family since April 1975;

(4) no major changes to the building's envelope or heating system

since April 1975;

(5) that the building be in a reasonable state of repair; and

(6) that the building be of a fairly simple shape.

Based on these broad considerations, each demonstration site was requested to submit a sample of from 27 to 50 low-income residences

which were typical of their locale. Additional factors were used to

facilitate the selection of typical residences by the local CSA representatives. These factors are: (1) climate; (2) construction materials;

(3) building type; (4) heating system type; (5) building size; (6) building shape; (7) building age; (8) percent of wall area in glass; (9) orientation; and (10) occupant characteristics. The first variable, climate,

has already been addressed in the process of selecting the demonstration

sites. Building shape was considered of minor importance. Building

shapes were standardized in order to simplify energy load calculations

and field test procedures. The remaining variables required closer

attention so as to avoid the introduction of bias into the experiment.

Of these eight variables, some will vary sufficiently across a sample

of 27 to 50 dwelling units, some will vary moderately in any given cross section of low-income dwelling units, and some require a conscious effort

to insure sufficient variation. Orientation, size, and occupant characteristics will usually vary sufficiently without special effort. The area of glass in low-income homes is normally between 20 and 30 percent

of the wall area. Such a variation, though moderate, typifies most lowincome houses. This leaves four factors which must be carefully "controlled" in the experiment. They are: building type, construction

material, building age, and heating system type.

5
FIGURE 2.1 SELECTED SITES FOR WEATHERIZATION DEMONSTRATION PROGRAM

t '

,

’ ir ' *r luded on the map. This Is because future weatherization activities are planned

or .ew Orleans. The numbers shown on the map refer to heating degree days.

MlA

M(I

20]6
To facilitate the past retrofit analysis of energy savings, an experimental design which controlled for construction material and building

type was formulated. This experimental design is reproduced in Table 2.1*

The cities participating in the demonstration program are labeled at the

top of each column of Table 2.1. The building type/construction material

designator is labeled at the side of each row. Each block or "cell" in

the experimental design lists the desired number of observations in the

upper left half and the actual number of observations in the lower right

half. For example, in Washington, D.C. the desired number of one story

detached/wood frame houses was 5 where the actual number weatherized was

6. Those cases where the cell contains no entries indicate that the

building type/construction material designator is atypical for that site.

For example, the only site in which adobe homes are typical is Albuquerque.

With respect to the heating system types, an even distribution of the

types in the locality was requested. With respect to building age, each

local CSA group was requested to submit at least two dwelling units from

each of the following periods: pre World War I; between World War I and II; and post World War II.

The houses submitted by the local CSA representatives were then screened

to ensure that each one had:

(1) accurate data on fuel consumption;

(2) the same occupants since April 1975;

(3) no major changes to the building's envelope or heating

system since April 1975;

(4) been maintained in a reasonable state of repair; and

(5) a fairly simple shape.

For items 2, 3, and 4, it was necessary to rely on the on site evaluations

by the local CSA representatives. Screening for item 5 involved a review

of photographs submitted for each house. The screening for item 1 was more complicated and involved the use of the statistical techniques known as regression and correlation analysis. These techniques were used to evaluate the accuracy of the energy consumption data for individual dwelling

units by examining the relationship (the ability to fit a straight line)

between the quantity of fuel consumed and the number of degree days

occurring between data points. More precisely, a linear relationship

between energy consumption (gallons, therms, kilowatt hours) and degree

days was hypothesized. Previous studies 1 have found this relationship

to be valid. The linear relationship is extremely useful in estimating

energy consumption for an individual dwelling unit. The relationship was empirically estimated by inputting values for actual energy use into a computer program The best fit straight line was then identified using

these data. (At least five readings are usually required to obtain the

desired level of accuracy.) It was hypothesized that if the correlation

L. S. Moyer and Y. Benjamin, "Modelling Residential Demand for Natural

Gas as a Function of the Coldness of the Month," Energy in Buildings,

Vol . VI, No. 3, April 1978.

7
TABLE 2.1 EXPERIMENTAL DESIGN FOR WEATHERIZATION DEMONSTRATION PROGRAM

DEMONSTRATION

SITES

uo)BuiMseM

euiooei

sinon is

pueiuod

puei^eo

ined IS / uuiw

jiuejft

o6jej

uojseg

ids opejoioo

o6eo;i|0

uo)se|jei|0

ejuepv

anbjanbnqiv

(O 4?

in

co

in'

in •o'CO

in'

CO in'

ft

<o

in' >5

m

CO

in'

o>

in'

in CO

in in'

<0

in'

CO

in' CM in*” m

in"

«0 in' m

<0 in'

<o in'

in

in' m

(O in'

in'

<0 in'CO

in'

BUILDING

TYPE AND

CONSTRUCTION

MATERIAL

Detached

(1)

frame

Detached

(2)

frame

Detached

(1)

masonry

Detached

(1)

adobe

Detached

(2)

masonry

Attached

(2)

masonry

Detached

(1)

mas.

veneer

Detached

(2)

mas.

veneer

8
between actual energy consumption and degree days, as determined by the

best fit straight line, exceeded 0.90 that the dwelling unit was acceptable for inclusion in the demonstration program. If the energy consumption data was unable to fit a straight line, it was taken as an indication

of either maintenance problems not revealed in the field inspection or irrational responses to temperature or fuel price changes on the part of

the homeowner. Those readers interested in a more detailed discussion of

this topic are referred to Appendix E.
3.0

METHODS FOR CALCULATING WEATHERIZATION COSTS AND SAVINGS

It was mentioned earlier that the demonstration program has been undertaken in order to identify and test the optimum level of weatherization

for different climatic regions of the country and for different supply

and demand factors in the energy and construction sectors. The purpose

of this chapter is to present a framework for: (1) choosing among alternative weatherization options and (2) selecting the level of investment

for a given option which is economically most efficient.

From an economic standpoint, the goal of the demonstration is to identify

and test that level of weatherization which maximizes net savings to the

homeowner. These savings are associated with each weatherization option

and are assumed to accrue over a period of 20 years. Consequently, both

initial costs and savings and future costs and savings must be weighed.

The background information which is required to calculate these weatherization savings and costs is discussed in this chapter. The technical

underpinnings of the economic methodology which permits the optimal level

of weatherization to be identified and tradeoffs among competing alternatives to be made is discussed in Appendix C.

3.1

OPTION COSTS

3.1.1

Initial Cost Considerations

In this report the definitions of initial costs to be used are fairly

conventional. However, to insure understanding, we will explicitly

define the terms which will be used throughout the report. For any particular weatherization task, a contractor will incur total a cost of

undertaking that particular task. This total cost will include payments

for labor, payments for materials, overhead costs and profits. The difference between the bid price (i.e., the contract amount for which the

contractor agreed to do the work) and the total labor, materials, and

overhead costs represents the contractor's pretax profits .

Those cos ts that the contractor incurs if he undertakes a specific job

(i.e., labor costs including fringe benefits, social security, workmen's

compensation, unemployment insurance , and the cost to the contractor for

materials and equipment purchase/rental) are called direct costs . Labor

cos t s , however, may be divided into two parts: 1) direct labor costs,

and 2) indirect labor costs. Direct labor costs are those labor charges

which can be associated with one particular weatherization option, such

as scraping paint and caulking around windows. Indirect labor costs are those labor charges which can not be associated with any particular

weatherization option but can be associated with a particular contract.

For example, the time spent picking up building materials at a warehouse

or lumber yard is in an indirect labor cost. Note that the direct cost

for installing a weatherization option is by definition equal to the sum of the labor costs, material costs, and any special equipment costs.

10
Direct cost can be discussed either in total terms or in per unit terms.

If we divide the total direct costs of installing 500 square feet of

loose fill attic insulation by the number of square feet, we are then

discussing direct costs per square foot (i.e., per unit direct cost). In

this report our discussions of costs are presented on a per unit basis.

Note that per unit direct cost is always equal by definition to the sum. of per unit direct labor costs, per unit material costs, and any per unit

special equipment costs.

Those costs that the contractor incurs regardless of whether he undertakes

a specific job or not (e.g., rental payments, debt service payments,

payments for equipment, payments for clerical and secretarial labor, and

payments for management) are called overhead costs .

Another important factor is the size of the contractor's markup . The

bid price divided by the sum of the direct costs in the contract yields

one plus the percentage markup. Markup, therefore, includes both overhead

costs and pretax profits. It is important to note that the overhead costs

and profits which accrue to a specific task may depend on factors over

and above that particular task. (For example, a lower percentage markup

may be demanded if a contractor can install the entire weatherization

package rather than only one or two options.'*')

3.1.2 Life-Cycle Cost Considerations

An interpretation of weatherization costs more comprehensive than initial

costs is needed if the benefits of future energy savings are to be made

comparable with the costs of weatherization. One approach which permits

us to compare savings and costs unambiguously is the engineering economics

concept of life-cycle costing. Life-cycle cost techniques differ from

initial cost considerations in that they explicitly take into account all

costs (e.g., owning, operating, maintaining) which occur over the period

under study. Thus if plastic storm windows were installed in a residence

and due to a lack of long-term durability they had to be replaced every

five years, then the value of the cash flows resulting from periodic

replacement must be estimated. (These cash flows should in principle

include any escalation in construction costs (labor, materials, and

equipment) as well as incorporate a measure of the time value of money. )

"* For a detailed discussion of markup and its determinants see Robert E. Chapman and Joseph G. Kowalski, Guidelines for CostEffective Lead Paint Abatement , National Bureau of Standards,

Technical Note 971, Janaury 1979.

2 Eugene L. Grant and W. Grant Ireson, Principles of Engineering

Economy , Fifth Edition, The Ronald Press Company, New York, 1970.

3 A more detailed treatment of prices changing over time and methods

for comparing them on an equivalent basis is presented in Section 4.2

of this report.

11
Using the initial cost figure rather than the life-cycle cost figure

would understate the true cost to the homeowner of using plastic storm

windows for energy conservation purposes. To pursue this topic a bit

further, suppose conventional storm windows have an estimated useful

life of 20 years. Now if we assume that plastic storm windows have an estimated useful life of only five years but that both window systems

save the same amount of energy over the 20 year period, then it is possible that plastic storm windows with their need for several replacements are more costly than conventional storm windows. (The value of

energy being saved is the same.) Thus, only with life-cycle costing

will the true costs of ownership over the study period be represented.^

In this report life-cycle savings and costs will be used to compare

alternative weather izat ion options. Additional assumptions concerning

the relative performance and durability and how they affect the lifecycle costs of specific weatherization options are given in Section 4.2

and Appendix A of this report.

3.2 WEATHERIZATION SAVINGS

The calculation of weatherization savings is of crucial importance in

the selection of the alternative options. Since a strong emphasis was placed on installing only those options which are the most cost effective, accurate estimates of energy savings were required. As a means

of achieving accurate estimates of energy consumption, incorporating

interactions among weatherization options, and providing a dynamic

simulation of the heat transfer process within the dwelling unit, the

(BLAST), Building Loads Analysis and Thermodynamics , ^ and (NBSLD),

National Bureau of Standards Load Determination^, computer programs

were initially considered. A closer examination of these programs,

however, indicated that substantial program modifications would

have been necessary in order to use the programs. Consequently, an alternative method of calculating energy savings was developed. These

calculations were based on existing methods and modified to incorporate

specific considerations such as the use of management devices on window

systems (e.g., thermal drapes and shutters).

The calculations used to estimate energy savings associated with a particular option were divided into two major categories: (1) envelope

retrofits and (2) mechanical system retrofits. Energy savings for each

category are estimated under the assumption that the other category has

' That is, if the savings from energy conservation are counted, the costs

implicit in achieving that level of energy savings must also be counted.

9 D. C. Hittle, The Building Loads Analysis and Thermodynamics (BLAST)

Program Volume I: User's Manual~ U.S. Arrpy Construction Engineering

Research Laboratory, September 1977.

3 Tamami Kusuda, NBSLD, The Computer Program for Heating and Cooling

Loads in Buildings , National Bureau of Standards, Building Science

Series 69, July 1976.

12
already been retrofitted. This ad hoc approach was due to the mutual

dependence between the two categories. The analysis was accomplished

by holding the level of all options within one category constant while

allowing those within the second to vary. One set of calculations were undertaken for each category. ^ Such an approach produces conservative

estimates of energy savings for each category.

An illustration of this approach may help to clarify the issue. Suppose

we wish to calculate the energy savings associated with the envelope,

or architectural, retrofits. Then the level of weatherization which was held fixed in the estimation of energy savings for each architectural

option was the efficiency of the mechanical system. The efficiency

actually used reflects a mechanical system in good working order. That

is, the mechanical system efficiency is consistent with that which would

be expected after the mechanical system had been retrofitted.

The energy savings calculations for^the architectural options were based

on the steady state ASHRAE methods. Savings were calculated on a square

foot or linear foot basis. As mentioned above, modifications were incorporated into these calculations to reflect specific considerations. Two

types of architectural savings were analyzed, due respectively to

reductions in (1) infiltration losses and (2) conduction losses.

Infiltration losses were derived by use of the formula

L = 0.24 • Q

* p

• DD • 24

where

L = Infiltration heat load;

0.24 = specific heat of air;

Q

= cubic feet of air per hour;

p = density of air;

DD = degree days; and

24 = hours per day.

Under ideal conditions it would be possible to perform more than one

set of calculations for each category. However, the scope of this

study did not permit multiple levels for both envelope and mechanical

system retrofits to be tested.

2 American Society of Heating Refrigeration and Air-Conditioning

Engineers, Inc., ASHRAE Handbook of Fundamentals, New York, 1972.

13
In actuality, infiltration losses vary according to which option is used.

For example, the cubic feet per hour of infiltration through open holes

created by structural cracks, Q, is given by the relationship

Q

= 300 + 22 (M)

where

DD = degree days; and

HD = heating days.

The ratio DD/HD reflects the average number of degree days per day

occurring during the heating season. The cubic feet of infiltration

through broken glass or cracks plugged with a rag or some other means

is assumed to be one tenth the above figure. Infiltration through cracks

around doors and windows is calculated on a linear foot basis by dividing

the number of linear feet of doors and windows in an average dwelling unit

into 20 percent of the volume of air (in cubic feet) in the conditioned

space. For the purposes of this study, the average dwelling unit was assumed to have a volume of 12,000 cubic feet and to contain 344 linear

feet of doors and windows.

Conductive losses were derived by multiplying the U-value^ times the number of degree days. In general, the U-values are based on those presented

in the ASHRAE Handbook of Fundamentals . ^ One exception, the U-values for

basement walls, is based on work conducted in Twin Rivers, New Jersey,

which takes into account the thermal resistance provided by earth fill

for wall sections below grade.

For the reader interested in examining the calculations used to estimate

energy savings, including those associated with mechanical system retrofits, a more thorough discussion has been prepared and is presented in

Appendix B.

Keeping in mind the points discussed above, let us now examine some of

the mechanics of calculating life-cycle energy savings and costs. In

order to arrive at an adequate dollar value estimate of life-cycle energy

savings, we must specify the values of certain key parameters used in

the economic analysis. These key parameters are: (1) the severity of

the climate; (2) the present cost of energy; (3) the length of the study

* The U-value indicates the number of British thermal units (Btus) which

will flow through 1 square foot of envelope section in 1 hour when

there is a temperature difference of 1 degree Fahrenheit on opposite

sides of the envelope section.

2 American Society . of Heating . Refrigeration . and Air-Conditioning .....Engineers,

ASHRAE Handbook o f Fundamentals

,

New York, 1972.

14
period; (4) the fuel price escalation rate and (5) the discount rate.

Although each of these parameters is discussed in Section 4.2 in some

detail, a brief examination of some of their relationships is useful.

The severity of the climate and the present cost of energy are the key

parameters needed to determine the first year's annual energy savings.

We have seen already that other things being equal, heating energy losses

increase linearly as a function of degree days, a measure of the severity

of the climate. Suppose we are able to reduce energy losses by X Btu's

per square foot per year and our cost per Btu is Y dollars, then our expected annual energy savings is XY dollars per square foot.

In the example presented above we must be careful to identify where the

cost per Btu is measured. In general, the cost at the building envelope

does not measure the true cost of energy losses to the consumer. This

is because the mechanical systems used to heat the residence do not

usually operate at 100 percent efficiency. We must therefore develop

a measure of energy costs which explicitly includes the efficiency of

the mechanical system. To do this we need three additional pieces of

information: (1) the cost per unit of fuel; (2) the energy content of

that fuel; and (3) the efficiency of the mechanical system. Our measure,

equivalent energy cost, shall therefore be taken as the cost per therm

(100,000 Btu). That is,

cost/therm = (100,000) x (cost/unit)

(Btu content/unit) x (Btu output/Btu input)

where Btu output/Btu input is equal to the system efficiency.

In the economic analyses presented in this study, the following Btu

contents per unit were used: (1) number two fuel oil, 140,000 Btu per

gallon; (2) natural gas, 100,000 Btu per 100 cubic feet; and (3) electricity, 3413 Btu per kilowatt hour. System efficiencies of 65 percent for

oil, 70 percent for natural gas, and 100 percent for electricity, were

used. For example, in Portland, Maine the cost per gallon of number two

fuel oil was 46 cents. This translated into a cost of slightly over

50 cents per therm within the building envelope.

Let us now examine how the length of the study period, the discount rate

and the fuel price escalation rate are incorporated. Since each of these

factors will be discussed in detail in Section 4.2 the discussion here

will focus only on the functional relationship. Suppose expected annual

savings are S dollars. We thus want to determine the present value, (i.e.

how much) of that annual stream of savings for the given study period. The

present value of our total savings over the study period or life-cycle, PVS, are then given by the equation

PVS = S Z t=i (1 + D) 1"

15
where L = the length of the study period;

P = the real rate of fuel price escalation; and

D = the real discount rate.

I

For ease in calculation all cash flows are assumed to occur at the end

of each year. The above equation may then be simplified further by

recognizing that

L t

i a + p )i

t=l (1 + D) t

1 + P

D - P

[1 - ( 1 + P

1 + D

L

) ] if D ^ P

L if D = P

Real rates are used so that the dollar value of total savings, TS, is

expressed in terms of constant purchasing power. In this case, current

dollar values have been adjusted to take out the reduction in purchasing power due to inflation.

16
4.0 ECONOMIC FORECASTS OF OPTIMUM WEATHERI ZATION LEVELS

4.1 BASIC ASSUMPTIONS

The general approach used in calculating heating loads and associated

energy savings is based on the ASHRAE methodologies presented in the

ASHRAE Handbook of Fundamentals .^- A summary of this approach, including

the estimation formulas, is presented in Appendix B.

It is important to note that in this study the ASHRAE calculations are not used to determine the heating load under design conditions for the

dwelling unit. Rather, the focus of this study is on estimating the net

effect, on the annual heating load, of installing one or more weatherization options. Earlier economic studies have shown that the most

important assumption is that "the reduction of Btu losses in any envelope

section has a corresponding effect on the reduction of the total heating

load.

Implicit in this assumption is that for weatherization categories two

through six, reductions in heat losses are independent.^ That is, energy

savings are additive. The first weatherization category, infiltration,

however is interdependent with the window and door options, categories

two and three. The interdependence issue is of crucial importance because

the ASHRAE calculations require the assessment of an option to be independent of the level of any other option. Questions have arisen about

the validity of such calculations, but addressing them would require a dynamic simulation. The model therefore treats infiltration first and

then assesses the economic viability of the window and door options under

the assumption that windows and doors are well fitted.^ In addition, it

is assumed that reducing the heating load requirement does not change

the efficiency of associated mechanical systems. The mechanical system

efficiencies used in the study are 65 percent for oil, 70 percent for

natural gas, and 100 percent for electric resistance heating.^

1 American Society of Heating, Refrigerating, and Air-Conditioning

Engineers, Inc., ASHRAE Handbook of Fundamentals , New York, 1972.

Stephen R. Petersen, Retrofitting Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974, p. 22.

O The six weatherization categories are: (1) infiltration options;

(2) window options; (3) door options; (4) attic insulation; (5) wall

insulation; and (6) basement insulation.

^ That is, infiltration abatement is always assumed to be in place.

^ The selection of the mechanical systems retrofit options is discussed

in a separate report. A brief discussion is provided in Appendix B.

17
4.2 KEY PARAMETERS USED IN FORECASTS

It was shown in the previous chapter that the choice of the optimal

level of investment in a weatherization option depends not only on the

installation costs and the annual energy savings attributable to that

option, but also on its expected useful life. Since this implies that

cash flows will occur throughout the life of the option, a method for

comparing these cash flows and those of other options on an equivalent

basis is needed. This method incorporates five key factors: (1) a discount rate; (2) a fuel price escalation rate; (3) the useful life of

the option; (4) the (present) annual fuel cost savings of the option;

and (5) the number of degree days. Changing any or all of these factors

can significantly alter the optimal level of investment in a weatherization option. Therefore the values of these key factors that are used

in the economic analyses should be carefully selected and based on a sound economic rationale. Let us now examine the economic rationale

used in the selection of the representative values for each of these

key decision variables.

Discount Rate ^

A discount rate is that rate of interest which reflects the time value

of money. (The "time value" of money stems from the difference between

the value of a dollar today and its value at some future time if invested

at a stated interest rate. That is to say, a dollar today is worth more

than a dollar in ten years, apart from inflation.) The discount rate may

therefore be used to bring future costs and savings back to the present

so that all options can be compared on an equivalent basis. Second, a real discount rate is one expressed in constant terms (i.e., current

dollar values have been adjusted to take out the reduction in purchasing

power due to inflation). Therefore, a real discount rate may be thought

of as that rate which treats future costs and savings in terms of constant

dollars (1977 dollars are assumed in our analysis of optimal weatherization). A 6 percent real rate of interest will be used in this study.

Two alternative approaches were used in developing this figure.

Most engineering economics texts deal with discount rates and recognize

that cash flows occurring in the future must be brought back to some common reference point, e.g., Gerald W. Smith, Engineering Economy:

Analysis of Capital Expenditures , 2nd ed., The Iowa State University

Press, Arne 8, Iowa, 1973.

2 For a detailed discussion of this topic, the interested reader is

referred to Rosalie T. Ruegg, et al . , Life-Cycle Costing: A Guide for

Selecting Energy Conservation Projects for Public Buildings , National

Bureau of Standards, Building Science Series 113, September 1978.

3 Note that this rate is significantly lower than the 10 percent real rate

required for Federal Government programs by Circular A-94 of the Office

of Management and Budget. It will be shown, however, that for this

particular target population a 6 percent real rate is more appropriate.

18
The first approach assumes that weatherizing low-income housing is a form

of income redistribution. In this case, higher income families contribute

funds through taxes which are used to finance weatherization activities.

As a result of taxation, some higher income families which contribute to

the program will have to forego potential investments. That is, there is an opportunity cost associated with the funds contributed through taxation.

(The opportunity cost is the return foregone by not undertaking the best

investment opportunity available.) Ideally when these funds are redistributed to low-income homeowners in the form of weatherization activities,

they should generate a stream of income (benefits or energy savings) equivalent to their best alternative in the private sector. William Baumol

asserts that to obtain a social discount rate* which is consistent, it

should be a "weighted average of the opportunity cost rates for the various sectors from which the project would draw its resources." In essence

this doctrine argues that it is the rate of return on capital which is

drawn into the government project that should serve for discounting savings

and costs. ^ Potential investments which higher income homeowners might

have to forego if they "contribute" to weatherization activities are the

purchases of short-term government securities or municipal bonds. For

example, recent yields on short-term government securities have averaged

approximately 10 percent. The effective before tax yield on a 7 percent

municipal bond for someone in a 30 percent tax bracket would also be 10

percent. Assuming a long term (20 to 25 year average) rate of inflation

of 4 percent produces a real discount rate of 6 percent.

^ A social discount rate is one which is appropriate for society as a whole

rather than for a particular individual.

o William Baumol, "On the Discount Rate for Public Projects," Analysis

and Evaluation of Public Expenditures: The PPB System , Joint

Economic Committee, U.S. Government Printing Office, Washington, D.C.,

1969.

3 The economic principles behind this claim are discussed in detail

in Walter Nicholson, Microeconomic Theory; Basic Principles and

Extensions , The Dryden Press, Inc. , Hinsdale, 111. , 1972.

11 In the case of a tax free bond, the effective yield, EY, is given as

EY = Y/(1-TR)

where Y = yield quoted on the face of the bond; and

TR = the tax rate of the holder of the bond.

In the example given above, EY is given as EY = 0.10 = (0.07)/(l. 00-0.30).

Note that the effective yield, EY, is higher than the yield quoted on

the face of the bond. This results from the assumption that the bond

was tax free.

19
Theoretically the opportunity cost is a measure of the "best" alternative

foregone. In reality higher income consumers can probably undertake

investments which have before tax yields in excess of 10 percent. Investments in housing (for personal use) are an excellent example. Figures

from the Final Report of the Task Force on Housing Costs can be used to

illustrate this point. ^ During the 1972 to 1976 period, the median sales

price of new single family homes rose at an annual rate of 12.5 percent.

During the same period, the median sales price of existing single family

homes rose 9.3 percent. Projections for the increase in the median sales

price for all single family homes over the next 10 years are approximately

10 percent. These figures represent lower bound estimates on the rate of

return on a housing investment, however, since the return is computed with

respect to the owner's equity rather than the full purchase price of the

house. Transaction costs are high, however, usually averaging 6 percent

for realty fees. Points may also be charged for certain types of financing. Although these factors tend to reduce the rate of return on the

housing investment, it appears quite likely that the rate of return on

the investment would exceed 10 percent. This is an indication that a real social discount rate of 6 percent is a lower bound estimate. The

inclusion of funds from private industry would tend to increase the real

discount rate toward the 10 percent figure required by the Office of

Management and Budget.

The second approach is based on the assumption that low-income families

are primarily borrowers. Consequently, their opportunity cost is a measure of the costs of transferring consumption from the present to the

future through borrowing. The lending rates they face thus represent

the rate at which they can trade present consumption for future consumption. (See Appendix C.l for a theoretical treatment of this topic.) It

is important to point out that an individual may face more than one lending rate. For example, the physical process of weatherization may

be interpreted as housing renovation. Thus the lending rate faced by the

individual is the one for home improvement loans. Note that lending rates

for home improvements tend to be somewhat lower than those for other goods

and sevices (for example, revolving charge accounts). If we take a representative rate for home improvement/renovation loans, a discount rate

of 7 to 12 percent^ results. The term on these loans is usually between

10 and 12 years. Therefore, the savings generated by the weatherization

activities should be sufficient to permit the low-income homeowner to pay

back the loan within a 10 to 12 year period. In order to get a real

^ U.S. Department of Housing and Urban Development, Final Report of

the Task Force on Housing Costs , May 1978.

2 Note that when the wider spectrum of renovation and rehabilitation

programs is considered, it is possible for low and moderate income

families to obtain loans at rates substantially below the market rate

of interest. See David Gressel, Financing Techniques for Local Rehabilitation Programs, National Association of Housing and Redevelopment

Officials, Washington, D.C., 1976.

20
discount rate from this figure it is necessary to adjust for the anticipated long term (20 to 25 year average) rate of inflation. Assuming a long term rate of inflation of 4 percent produces a real discount rate

of approximately 3 to 8 percent.

In our initial investigations, figures between 3 and 10 percent were

used. (See the sensitivity analysis presented in Section 4.2.2.) However,

since a nationwide weatherization loan program will probably offer lower

interest rates, our emphasis has focused on using an intermediate estimate

of 6 percent. This should provide us with a means of insuring a high

degree of comparability between the field experiences of the demonstration program and the anticipated market responses of any future loan

programs

Fuel Price Escalation Rate

As was indicated earlier, the future energy savings (cash flows) associated with alternative weatherization options must be brought back to

the present (or recovered) so that they can be compared on an equivalent

basis. Therefore, in addition to a discount rate, an estimate for the

long range rate of fuel price escalation is needed. Its choice is subject

to somewhat more uncertainty than choosing an appropriate discount rate,

for several reasons. First, fuel prices may be rigidly established by the

Federal government. This is usually done to correct market imperfections.

The impact of such a policy however may be contrary to that desired.^

Furthermore, energy prices may be strongly affected or even imposed by

a cartel, such as OPEC. Usually a cartel operates so that the cartel

members maximize their joint profits. Such activities are, generally

speaking, impossible to forecast so that any estimate affected by the

behavior of cartels is fraught with uncertainity . Thus it is not sur- prising that estimates of the long term rates of fuel price escalation

are extremely variable. Ranges of real rates between 0 (constant energy

costs) and 12 (more than tripling every 10 years) percent have been used

in recent economic studies. Although ranges might be useful to see how

sensitive a weatherization option is to rising fuel prices, they do not

provide us with enough precision to make reliable tradeoffs. To do this

a specific estimate within the range is needed.

^ Shortages are likely to result with price regulation because a greater

quantity will be demanded than producers are willing to supply. This

may cause non-renewable resources to be wasted and finally result in

either rationing or deregulation. One way in which this problem can

be treated when dealing with energy conservation is through the use of

resource impact factors (RIF S ). Current research efforts in this area

are presented in Stephen F. Weber, The Effect of "Resource Impact

Factors" on Energy Conservation Standards for Buildings , National

Bureau of Standards, Building Science Series 114, September 1978.

21
Note that there are econometric methods which can be used to produce

estimates which are "statistically desirable." All of these methods,

however, involve data bases and complicated computer programs which

should, at least in theory, be examined to determine the adequacy of the raw data and the merits of the estimate. Several Federal Agencies,

which own and operate buildings, have reliable empirical data for the

various regions of the country for which econometric forecasts have been

made. Furthermore, these Federal agencies have an incentive to make

reliable estimates since they are required to perform economic analyses

of potential energy conserving options prior to construction or renovation. The Department of Defense is one Federal agency which has made

public the forecasts it uses for long term real rates of fuel price

escalation. These rates are summarized in Table 4.1.

TABLE 4.1 ESTIMATED REAL RATES OF FUEL PRICE

ESCALATION USED IN ECONOMIC ANALYSES

Fuel Rate

Oil 8%

Coal 5%

Natural Gas 8%

LPG 8%

Electricity

New England 7%

Pacific 7%

All others 6%

Source: Assistant Secretary of Defense (Installations

and Logistics) Memorandum, Energy Conservation Investment Program Guidance, March 24, 1977.

Estimates of short term rates for fuel price escalation are also available through the Department of Defense. In some instances these rates

are given on a regional basis. Telephone conversations with local GSA

and utility representatives have indicated that the short term rates

forecast by the Department of Defense were comparable to recent increases

in fuel prices. Table 4.2 summarizes these rates. If these forecasts are accepted on the basis of past performance, then more confidence can be

placed in the long term rates reported in Table 4.1.

22
TABLE 4.2 ESTIMATED SHORT TERM RATES

OF FUEL PRICE ESCALATION

(1 October 1977 to 30 September 1980)

Fuel Rate

Coal 10%

Oil 16%

Natural Gas 16%

LPG 16%

Electricity 16%

Source: Assistant Secretary of Defense (Installations

and Logistics) Memorandum, Energy Conservation Investment

Program Guidance, March 24, 1977.

The rates used in the economic analyses presented in this study are those

presented in Table 4.1.

The Useful Life of the Option

In an earlier example it was noted that not all options have the same useful life. The introduction of option life as a variable poses several

problems when choosing among mutually exclusive weatherization investment

alternatives. Even in the case when two or more alternatives can be

installed together as a unit, varying lives can cause analytical problems.

Thus in order to provide a rational means for choosing among weatherization options a life cycle, or study period, must be selected. The choice

of the life cycle is significant since a lengthy study period would tend

to favor options with a long life whereas a short one would significantly

reduce the set of feasible options.

In selecting a representative life cycle both economic and engineering

concepts were taken into consideration. This analysis indicated that a suitable study period would be 20 years. From an economic viewpoint,

20 years is about as far into the future as values for key factors, such

as the discount rate and the fuel price escalation rate, can be projected

without introducing either unacceptable uncertainties or unrealistic

assumptions. From an engineering viewpoint, 20 years provides a conservative estimate of the useful life of most of the options without biasing

23

?
the selection toward those options which will likely last as long as the

building. For these reasons the 20 year study period has been used in

other economic analyses of residential weatherization.

Using a study period of 20 years, we must now determine the life-cycle

costs of each option. In order to estimate life-cycle costs, assumptions

about the relative durability of the alternative weatherization options

must be made. These assumptions, based on engineering experience, are summarized in Table 4.3. The cost of the option over the life cycle may now be estimated. The present value option's of the cost is equal to the

initial cost (i.e., the installation cost) plus any future costs (discounted

to a present value) resulting from required maintenance, repair or replacement. The estimate uses a 20 year life cycle and a six percent real

discount rate; a zero real price increase in the cost of the option is

used in the calculation. The present value (life-cycle) cost of an option,

PVC, may now be expressed mathematically as

20

PVC = C

Q + I C

t t=1 (l-OS)*

where

C

Q = the installation cost, and

C

t = the costs for maintenance, repair, or replacement

occurring in year t (C

t may be equal to zero).

Life-cycle cost estimates for each option and each demonstration site are given in Appendix A of this report.

Annual Fuel Cost Savings

Annual fuel cost savings are determined by the estimated annual reductions

in energy consumption and the cost per unit of energy. More precisely,

the annual fuel cost savings, AS, are given by

AS

±i = 4Q 1 *Pj

where i identifies the option, j denotes the fuel type, AQ is the quantity

changein consumption (Btu) for the i

1"*1 option and P. is the price per energy

unit of the j

11 fuel type. Since methods for calculating physical energy

Stephen R. Petersen, Retrofitting Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

24
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25

McClure

Godette,

Installation

of

Architectural

Options ,

National

Bureau

of

Standards,

Interagency

Report,

(in

press).
savings^ were discussed in Section 3.2, we shall focus our attention on how the figures for the cost per unit of energy were derived.

The first requirement for energy savings to be representative is that the

rates used for each fuel type reflect local supply and demand factors in

the region under study and be as up-to-date as possible. In order to ensure that these considerations were met, CSA representatives in each

of the demonstration sites were contacted. In some cases, this field

survey produced the desired level of reliability in that the representatives were able to quote recent prices. In other cases, the local representatives were unable to provide up-to-date information on energy

prices. The names and phone numbers of local suppliers of the different

types of fuel were then requested, and suppliers were contacted directly

to obtain the necessary information.

It is important to point out here several elements incorporated in the

energy prices used for our economic analyses. These price considerations

included local taxes and surcharges and the existence of block rates.

Block rates are important in that they depend on the amount of fuel consumed and are used for natural gas and electricity in almost all demonstration cities. Several cases where neither the CSA contact nor the

local supplier could provide an estimate of the average price per unit

of fuel or the average amount of fuel used per year, a price estimate

based^on an average annual heating requirement of 90 million Btu's was

used. A final check was made with the prices quoted in the Bureau of

Labor Statistics' December 1977 issue of Retail Prices and Indexes of

. . . . . 3 - -— Fuels and Utilities: Residential Usage .

Number of Degree Days^

As indicated in Section 2.1, the demonstration sites were selected

primarily on the basis of climate factors. The sites were chosen so as

to represent all the important inhabited climates of the country. In

^ Note that the number of Btu's saved (physical energy savings) depends

on of the number of degree days. We shall explore some of the implications of this relationship to dollar energy savings in the topic

which follows.

2 75,000 Btu's per square foot per year times 1200 square feet.

3 Retail Prices and Indexes of Fuels and Utilities: Residential Usage , Department of Labor, Bureau of Labor Statistics, December 1977.

4 Degree days are based on 65°F rather than 70°F as the 5°F temperature

differential is considered to be provided by small solar radiation gains

and internal heat sources rather than direct heating and should therefore not be reflected in direct energy savings. For this reason all

energy savings calculations, while reflecting a 70°F inside temperature,

are based on 65°F.

26
terms of base heating loads as measured by the annual number of degree

days, the demonstration sites range from 206 to 9271. Such a wide variation is particularly useful from an economic viewpoint since previous

studies have shown that doubling the number of degree days is equivalent

to doubling the cost of energy. (This relationship can be seen by

referring to Appendix B where the calculations used to estimate energy

savings are presented. Both degree days and the cost of energy enter

multiplicatively into the calculation which determines annual energy

savings.) Degree days therefore not only represent a key factor in

weatherization investment decisions but also provide a means for, other

things being equal, generalizing the results of the demonstration program.

4.3 CASE STUDY: PORTLAND, MAINE

In order to highlight the economic issues discussed in Chapter 3, an indepth analysis of the forecast optimum weatherization package for

Portland, Maine is presented in this section. This analysis is divided

into two parts. In the first part, an optimum weatherization package

is given based on a balance point^ of 65°F and a specific set of values

for the key decision factors discussed in Section 4.2 is given. This

case is regarded as the baseline forecast since the values used are the ones which are most likely to prevail in the Portland, Maine area. In

the second part, a sensitivity analysis is performed to determine how

"sensitive" the optimal weatherization package is to changes in the value

of one or more of the key parameters. This type of analysis is particularly useful because it permits the impacts of changing assumptions^ or forecast errors

4 to be quantified.

4.3.1 Baseline Forecasts

The purpose of this section is to present in detail the results of the

baseline forecast for Portland, Maine. The term baseline is used because

the assumptions and the values of the key decision variables are the ones which are most likely to prevail in the Portland area. Table 4.4 sum- marizes the assumptions and values of the key decision variables used in

the analysis.

Stephen R. Petersen, Retrofitting Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

2 The balance point is defined as the average outside temperature at which

the heating system comes on to maintain the interior thermostat setting.

3 For example, changing the discount rate from 6 percent to 3 percent

to reflect of an assumed interest subsidy.

^ Forecast errors are likely in most estimates of the rate of future

fuel price escalation. Breaking the estimate up into short and long

term rates which will most likely bracket the true value can somewhat

reduce the chance of incorrect decisions.

27
Several of the factors mentioned in Table 4.4 are expected to vary

across demonstration sites. Although this variation does imply that

different sites will have different baselines, the use of a constant

base temperature of 65°F should somewhat simplify comparisons among

sites and facilitate the generalization of results.

Two additional factors not covered in Table 4.4 are the type of construction and cost of the option. Both of these factors are expected to vary

across sites as a function of tastes and trends in the demand for housing

and of changing conditions in the markets for local construction, labor

and building materials.

Prior to participation in the demonstration program, each candidate site

was asked to submit from 27 to 50 homes which satisfied an extensive set

of criteria outlined in the CSA Weatherization Demonstration Project

Plan . A wood frame construction type is used in the baseline forecast.

This is because the vast majority of the homes submitted by the local CSA

agency at Portland were of that type. In making the baseline forecast

a prototypical design for a wood frame house was specified. Based on information submitted by the local CSA agency, the house used in making

the baseline forecast is a one story rectangular box measuring 30 feet

by 40 feet with a full basement. (An average basement temperature of

44°F during the heating season is used in the forecast.) The house

contains 240 square feet of glazed area with an average window size of

15 square feet.

TABLE 4.4 VALUES OF KEY DECISION VARIABLES USED IN

THE BASELINE FORECAST: PORTLAND, MAINE

Number of Degree Days 7493

Discount Rate 6%

Type of Fuel Fuel Oil

Fuel Price Escalation Rate 8%

Length of Study Period 20 years

House Construction Type Wood Frame -

1 Story Detached

Floor Area 40 ft x 30 ft

Foundation Type Full Basement

Richard Crenshaw, Roy Clark, Robert Chapman, Richard Grot and McClure

Codette, CSA Weatherization Demonstration Project Plan , National Bureau

of Standards, NBSIR 79-1706, March 1979.

28
Based on this information and the specifications established in

Appendix A. 2, local CSA agency representatives were contacted and

requested to provide data on the costs of installing each of the

weatherization options. Each of these cost estimates reflects the

locally preferred choice between installation by the local community

action group or by a local building contractor.

The information on costs (see Appendix A. 3) and the number of degree days

(see Appendix B.2) was then read into a computer time-sharing system and

stored in a user file. (Each demonstration site had its own user file.)

All forecasts were made through an application of the computer program,

Community Services Administration Optimum Weatherization Package (CSAOWP),

described in Appendix D.

The output of the computer program consists of a brief summary of data

inputs and six sets of weatherization option outputs. The six sets are:

(1) infiltration options, (2) window options, (3) attic insulation,

(4) door options, (5) wall insulation above grade, and (6) basement wall.

The first portion of the output which corresponds to the baseline forecast for Portland, Maine is shown below as Exhibit 4.1.

Exhibit 4.1 Computer Output: Input Summary and Infiltration Options

PORTLAND MAINE 7505 DEGREE DAYS

CALCULATIONS FOR A FRAME DETACHED HOUSE WITH FUEL TYPE: FUEL OIL

FUEL PRICE ESCALATION RATE = .08 DISCOUNT RATE = .06

LIFETIME OF OPTIONS = 20 $/UNIT OF FUEL = $ 0.46

INFILTRATION OPTIONS

OPTION 20PVS 2 OPVC S/C 11PVS 11PVC

REPLACE BROKEN GLASS 230.14 6.39 36.03 115.90 6.39

RESET GLAZING 2.79 0.41 6.78 1.41 0.41

REPLACE THRESHOLD 338.23 9.35 36.17 170.32 9.35

SEAL STRUCT’ L CRACKS 338.23 0.80 422.78 170.32 0.80

WEATHSTP WINDOWS 2.79 0.46 6.13 1.41 0.46

CAULK WINDOWS 2.79 0.38 7.42 1.41 0.35

WEATHSTP DOORS 2.79 0.57 4.88 1.41 0.53

CAULK DOORS 2.79 0.38 7.28 1.41 0.38

WEATHSTP ATTIC HATCH 2.79 0.57 4.93 1.41 0.40

Notice that each of the nine infiltration options has five columns

associated with it. All entires in these columns are in dollar terms.

These five columns show: (1) the present value of energy savings

over the 20 year life cycle, 20 PVC, (2) the present value

29
of option costs (including replacements) over the 20 year life cycle, 20 PVC,

(3) the 20 year savings-to-cost ratio, S/C, (4) the present value of energy

savings in the first 11 years, 11 PVS, and (5) the present value of option costs

in the first 11 years, 11 PVC. Recall that a payback constraint of 11 years has

been placed on each architectural option; if the figure printed in

the 11 PVS column is greater than the figure in the 11 PVC column, we can

assert that the option satisfies this constraint. Note that all nine of

the infiltration options are included in the optimum weatherization

package since their savings-to-cost ratio is greater than (or equal to)

1 and they all satisfy the 11 year payback constraint.

The second set of calculations is concerned with window options.

The output from the base line forecast for this set is shown below as Exhibit 4.2.

Exhibit 4.2 Computer Output: Window Options

WINDOW OPTIONS

BASE ENERGY COST = 25.1304

OPTION 2 OPVS 2 OPVC *2 OPVS *2 OPVC S/C IIPVS IIPVC

STAGE 1

STORM WINDOW 12.68 2.40 12.68 2.40 5.28 6.38 2.40

INSUL. DRAPE 4.12 2.34 4.12 2.34 1.76 2.07 2.34

INSUL. SHUTTER 12.47 3.50 12.47 3.50 3.56 6.28 3.50

LOW EMISIV. FILM 8.67 3.30 8.67 3.30 2.63 4.37 2.71

STAGE 2

STORM + DRAPE 13.67 4.74 1.00 2.34 0.43 6.89 4.74

STORM + SHUTTER 18.16 5.90 5.49 3.50 1.57 9.15 5.90

STORM + FILM 16.168 5.70 4.00 3.30 1.21 8.40 5.11

TRIPLE 17.12 4.80 4.45 2.40 1.85 8.62 4.80

STAGE 3

TRIPLE + DRAPE 17.62 7.14 0.50 2.34 0.21 8.87 7.14

TRIPLE + SHUTTER 20.37 8.30 3.24 3.50 0.93 10.26 8.30

TRIPLE + FILM 18.90 8.10 1.78 3.30 0.54 9.52 7.51

Notice that in the upper left hand corner a base energy cost figure is

given. This figure states that over the 20 year life cycle slightly over

$25 worth of energy (in present value terms) is lost through each square

foot of single-glazed window. From the output it can be seen that three

stages of analysis are performed in selecting the optimal combination of

window options. Each stage corresponds to an incremental analysis which

uses the results of the previous stage, or base, an Input. For example,

in Stage 1 we wish to Identify the most cost-effective option whichhcan

30
be applied to the existing single-glazed window. Consequently, we must

refer to the information contained in each of the seven columns in the

output. The same meaning as in the previous analysis (for infiltration

options) is associated with each of the following column headings:

20 PVS, 20PVC, 11 PVS, and 11 PVC. Two new columns have now been added

and the S/C column has been redefined. These columns, *20PVS and *20PVC,

are the incremental savings and incremental costs over the 20 year life

cycle associated with each option.'*' The S/C column has been redefined

such that S/C is equal to *20PVS divided by *20PVC rather than 20PVS/

20PVC. Notice that in Stage 1, because we are comparing savings and

costs for each of the options to the single-glazed window, 20 PVS is equal

to *20PVS and 20 PVC is equal to *20PVC. From the Portland baseline

output it can easily be seen that a storm window is the most cost-effective option to install in the first stage. Consequently the storm window

is used as an input (i.e., it is the new base) in calculating weatherization savings and costs in the Stage 2 analysis. A close examination of

the Stage 2 output reveals that 20 PVS is greater than 20 PVC for all four

possibilities. The addition of a thermal shutter or a low-emissivity

film, although it may produce total savings which exceed total costs, may

not be cost effective because it does not increase net savings to the

homeowner. For this reason we must examine the incremental savings and

costs given by the entries in the *20PVS, *20PVC and S/C columns. Such

an examination shows that the installation of triple glazing, accomplished

through the addition of another storm window, is the most cost-effective

option. Stage 3 then proceeds on the assumption that the window system

is triple glazed. In Stage 3 weatherization savings and costs are calculated for three possibilities: the addition of a thermal drape, a thermal

shutter, and a low-emissivity film. From the entries in the *20 PVS,

*20PVC and S/C columns it can be seen that none of these options will

increase net savings to the homeowner. We can thus assert that triple

glazing corresponds to the optimal glazing system for the Portland, Maine

baseline case.

The question of the economic implications of a payback constraint were

alluded to earlier. In Appendix C it will be shown that basing investment decisions solely on a payback criterion would not be economically

efficient. The third stage of the window analysis serves to highlight

this point. All of the Stage 3 options clearly satisfy an 11 year payback criterion. However, if a decision to install both triple glazing

and a low-emissivity film were made based on the figures in the 11 PVS

and 11 PVC columns, the homeowner's net savings would actually be reduced

by almost $23 per window over the 20 year life cycle.

1 Here "incremental" is defined relative to the base energy cost or the

previous stage.

2 That is, marginal savings is total savings and marginal cost is equal

to total cost for the first unit.

3 The $23 figure is based on an average window size of 15 square feet.

31
The third set of calculations is concerned with attic insulation. The

output from the baseline forecast for this set of calculations is shown

below as Exhibit 4.3.

Exhibit 4.3 Computer Output: Attic Insulation

ATTIC INSULATION

BASE ENERGY COST = 4.22546

OPTION 20PVS 2 OPVC *20PVS *20PVC S/C IIPVS IIPVC

R-ll INSUL. 2.78 0.19 2.78 0.19 14.81 1.40 0.17

R-19 INSUL. 3.25 0.33 0.47 0.14 3.25 1.64 0.30

R-30 INSUL. 3.54 0.47 0.29 0.14 2.01 1.78 0.43

R-38 INSUL. 3.67 0.62 0.13 0.15 0.87 1.85 0.56

As in the previous set of calculations, a base energy cost figure is

given in the upper left hand corner of the output. This figure indicates

that conductive heat losses are approximately $4.25 per square foot for

the attic over the 20 year life cycle. An examination of the output on attic insulation reveals that the incremental savings-to-cos t ratio is

declining, but remains greater than unity for all levels of resistance

up to R-30. This implies that all increases in the level of attic insulation up to R-30 would result in increased net savings to the homeowner.

At R-38 however, the incremental savings-to-cost ratio is less than 1. Thus increasing the level of attic insulation from R-30 to R-38 would not

increase the homeowner's net savings.

The last sets of calculations are concerned with wall insulation (frame

and basement) and door options. The outputs from the baseline forecast

for these three sets of calculations are shown below as Exhibit 4.4.

Exhibit 4.4 Computer Output: Wall Insulation Above Grade, Basement

Wall, and Door Options

WALL INSULATION ABOVE GRADE 1

BASE ENERGY COST = 4.89264

OPTION 20PVS 20PVC S/C 11PVS IIPVC

R-ll INSUL. 3.36 0.80 4.20 1.69 0.80

The term "grade"

the building.

refers to the ground level at the outside walls of

32
BASEMENT WALL

OPTION 20PVS 2 OPVC S/C 11PVS 11PVC

BASE ENERGY COST = 8. 44565

R-7 ABOVE GRADE 7.14 0.70 10.19 3.59 0.70

BASE ENERGY COST = 2. 16555

R-7 BELOW GR. 2 FT. 1.27 0.70 1.81 0.64 0.70

BASE ENERGY COST = 1. 54837

R-7 BELOW GR. A FT. 0.77 0.70 1.11 0.39 0.70

BASE ENERGY COST = 1. 23436

R-7 BELOW GR. 6 FT. 0.55 0.70 0.78 0.28 0.70

DOOR OPTIONS

OPTION 20 PVS 2 OP VC S/C IIP VS IIPVC

BASE ENERGY COST (0% GLASS) = 10.1652

STORM DOOR 3.27 4.56 0.72 1.65 4.56

SECOND WOOD DOOR 5.72 5.20 1.10 2.88 5.20

NEW INSUL. DOOR 6.38 5.70 1.12 3.22 5.70

BASE ENERGY COST (10% GLASS) = 11.6599

STORM DOOR 4.77 4.56 1.05 2.40 4.56

SECOND WOOD DOOR 7.21 5.20 1.39 3.63 5.20

NEW INSUL. DOOR 7.88 5.70 1.38 3.97 5.70

BASE ENERGY COST (30% GLASS) = 14.6538

STORM DOOR 7.76 4.56 1.70 3.91 4.56

SECOND WOOD DOOR 10.21 5.20 1.96 5.14 5.20

NEW INSUL. DOOR 10.87 5.70 1.91 5.48 5.70

BASE ENERGY COST (60% GLASS) = 19.1434

STORM DOOR 12.25 4.56 2.69 6.17 4.56

SECOND WOOD DOOR 14.70 5.20 2.83 7.40 5.20

33
As in the previous sets of calculations, base energy cost figures are given in the upper left hand corner of each output. Notice that four

separate sets of base energy costs are given for the basement wall

calculations and for the door options. Separate calculations are needed

for basement walls to allow for the resistance to heat flows caused by

the varying amounts of earth fill surrounding the basement wall. Separate

base energy calculations are needed for the exterior door to allow for the

effects of varying amounts of glass in the door. These calculations are particularly important because the U-value of the exterior door increases

as the glass area increases. Referring to the output it can be seen that

the base energy costs over the 20 year life cycle increase from slightly

over $10 per square foot to slightly over $19 per square foot as the glass

area increases from zero to 60 percent.

In the first set of calculations the cost-effectiveness of installing

R-ll insulation in the wall cavity is assessed. No other values of wall

cavity insulation were analyzed since most frame construction uses two by

four studding. From the calculations above we can see that installing

R-ll insulation in the wall cavity is quite cost-effective. The 11 year

payback criterion is also satisfied.

The second set of calculations assesses the cost-effectiveness of R-7

insulation applied directly to the basement wall. (Note that in this case

11PVC is equal to 20PVC. This phenomena stems from the fact that no future

replacements are needed to attain a 20 year life.) From the changing base

energy costs, it can be seen that potential savings are reduced as we move to depths further below grade. (This is due to the increased thickness of the earth fill.) The energy savings calculations for the basement

wall are thus designed to answer two questions: (1) should we insulate

above grade and (2) if so, how far below grade should we insulate. The

output indicates that it is cost-effective to insulate as far as four

feet below grade. Unfortunately, when we examine the 11 year savings and

cos t s we find that the 11 year payback criterion is not satisfied for the

option if it is applied to a depth of two or more feet below grade. Consequently, basement wall insulation will only be applied to those sections

which are above grade. (Not insulating to four feet below grade will

somewhat reduce the net savings to the homeowner over the 20 year life

cycle.

)

In the third set of calculations, we wish to examine three potential door

retrofits: the installation of an aluminum storm door, the installation

of a second wood door, and removing the existing door and replacing it

with an insulating door. It is interesting to note that the installation of a storm door is found to be less cost-effective than either of

the other two options. In fact, in the case where the exterior door

contains no glass the present value of the energy savings (20 PVS) is

less than the cost of the storm door to the homeowner (20 PVC). A close

examination of the computer output reveals that a second wood door is

slightly more cost-effective than an insulating door if the amount of

glass in the door is greater than or equal to 10 percent. In the first

two cases (0% glass and 10% glass) we see that the imposition of a pay34
installation of a second wood door, 11 PVS differs from 11 PVC by only

six cents. (Since this is less than two percent of the total cost figure, we can assume that the payback criterion is satisfied.) In the fourth

case the 11 year payback criterion is easily satisfied. Thus for the

Portland, Maine baseline the installation of a second wood door is recommended whenever the glass area in the exterior door is 30 percent or more.

4.3.2 Sensitivity Analysis

A sensitivity analysis was performed in order to get a better understanding

of the factors affecting the selection of the optimum weatherization

package. The sensitivity analysis makes use of the computer program

discussed in Appendix D. Four specific variables were studied. They

were: (1) average installation costs, (2) balance point, (3) fuel price

escalation rate (both short and long term rate changes were considered),

and (4) discount rate. Three values were chosen for each of these variables; including all combinations, this resulted in 81 different cases. These variables were shown to have a definite effect on the options

selected in the optimum weatherization package.

In addition to these variable factors, there were other assumed conditions for the analysis. These assumed conditions were held the same as

in the baseline forecast. They include a frame house type, fuel oil as the major heating source, a fuel price of $0.46 per gallon, and a study

period of 20 years.

The values for installation costs of the options were based on estimates

obtained from Portland field representatives. All costs were adjusted

where needed to obtain an estimate of the costs of that option over the

20 year life cycle. (These are the same costs which were used in the

selection of the optimum weatherization package discussed in Section

4.3.1.) In order to look at the effect of variations in costs on the

options selected, values that were 20 percent higher than the original

estimates and 30 percent lower were used. These two sets of values were

chosen to cover those cases where either substantial amounts of preparation work are needed or where labor or materials can be obtained at a discount

Three balance points were considered. They were 55°F, 65°F and 70°F. As

indicated earlier, predicting the rates of future fu^l price escalation

is very sensitive to a particular set of assumptions 1 and consequently

may be highly volatile. Thus the rate of fuel price escalation is of

fundamental importance in any sensitivity analysis. The baseline value

used was the 8 percent real rate^ recently forecast by the Department of

Defense for fuel oil. In addition to that value, a short and long term

^ For example, the assumed behavior of the OPEC members might change.

2 Assistant Secretary of Defense (Installations and Logistics) Memorandum, Energy Conservation Investment Program Guidance, March 24, 1977.

35
escalation rate combination of 0 percent for the first four years and

10 percent thereafter was used. This approach permits us to examine the

effect of short term stable fuel prices and high future rates on the

selection of the optimal weatherization package. The other extreme,

rapidly increasing fuel prices over the short term and modest increases

in the long term, was modeled by using a rate combination of 12 percent

for the first four years and 4 percent for the remainder of the 20 year

life cycle.

The last key parameter in the analysis was the discount rate. In

addition to the baseline rate of 6 percent, rates of 3 and 10 percent

were used. (All rates quoted are real rates.) The 10 percent rate was chosen because it is consistent with the rate mandated in 0MB circular

A94. This permits us to determine the optimal level of weatherization

if low-income homeowners are forced to compete against other government

energy conservation projects for funds. The 3 percent rate was chosen

to cover the case where the Federal government provides an interest

subsidy to the low-income homeowner as an integral part of the weatherization loan.

From the previous discussion, it can be seen that some conditions are held constant throughout the sensitivity analysis whereas others are allowed to vary both singly and in combination. To promote a clearer

understanding of the sensitivity analysis, both sets of conditions are summarized in Table 4.5.

To facilitate the presentation of the results of the 81 cases examined

in the sensitivity analysis, a reference table has been prepared. The

purpose of this table is to identify what options are included in each

of the 12 weatherization packages which emerged from the sensitivity

analysis. Referring now to Table 4.6, we can see that the most basic

(i.e. , least cost or lowest level of weatherization) weatherization

package, denoted as "A", consists of all nine infiltration options,

storm windows, R-19 insulation in the attic, and R-7 insulation on all

basement walls above grade. In all cases infiltration abatement tends

to be particularly cost effective due to the relatively high air change

rates observed in the low-income homes participating in the Portland

demonstration. Referring once again to Table 4.6 we see that weatherization package "B" is the same as "A" with the exception that installing

insulation ( R— 11) in the wall cavity is now cost effective. Weatherization package "C" indicates that in addition to those options identified

in "B", R-30 insulation in the attic is now cost effective. Triple

glazing first becomes cost effective with weatherization package "D".

It is important to point out that weatherization package "D" forms a basis for all of the remaining weatherization packages. For example,

weatherization package "E" includes R-7 insulation on all basement walls

to a depth of two feet below grade, whereas weatherization package "F"

,

1 For example, Federal grants to retrofit schools and other public

buildings require that a real discount rate of 10 percent be used.

36
TABLE 4.5 OVERVIEW OF FACTORS TREATED

IN THE SENSITIVITY ANALYSIS

CONSTANT CONDITIONS

0 Frame House

0 Fuel Oil

° Initial Fuel Price: $0.46 per gallon

0 20 Year Study Period

VARIABLE CONDITIONS

° Average Installation Costs

- Current Costs (Baseline)

- Current Costs + 20%

- Current Costs - 30%

° Balance Point

- 55°F

- 65°F (Baseline)

- 70°F

° Fuel Price Escalation Rate

- 8% (Baseline)

- 0% Short and 10% Long

- 12% Short and 4% Long

° Discount Rate

- 3%

- 6% (Baseline)

- 10%

37
TABLE 4.o OPTIMAL WEATHERIZATION PACKAGES DETERMINED

FROM THE SENSITIVITY ANALYSIS

A B

All Infiltration

Storm Windows

R-19 Attic

R-7 Basement-Above grade

All Infiltration

Storm Windows

R-19 Attic

R-7 Basement-Above grade

R-ll Wall

C D

All Infiltration

Storm Windows

R-30 Attic

R-7 Basement - Above grade

R-ll Wall

All Infiltration

Triple Glazing

R-30 Attic

R-7 Basement - Above grade

R-ll Wall

E F = BASELINE

All Infiltration

Triple Glazing

R-30 Attic

R-7 Basement - Above grade

R-ll Wall

R-7 Basement 2 feet below grade

All Infiltration

Triple Glazing

R-30 Attic

R-7 Basement - Above grade

R-ll Wall

2nd Wood Door (302 glass)

G H

All Infiltration

Triple Glazing + Shutter

R-38 Attic

R-7 Basement-Above grade

R-ll Wall

All Infiltration

Triple Glazing + Shutter

R-30 Attic

R-7 Basement Above grade

R-ll Wall

R-7 Basement - 2 feet below grade

I J

All Infiltration

Triple Glazing

R-30 Attic

R-7 Basement - 2 feet below grade

2nd Wood Door (302 glass)

All Infiltration

Triple Glazing + Shutter

R-38 Attic

R-7 Basement - Above grade

R-ll Wall

2nd Wood Door (30% glass)

K L

All Infiltration

Triple Glazing + Shutter

R-38 Attic

R-7 Basement - Above grade

R-ll Wall

R-7 Basement - 2 feet below grade

2nd Wood Door (302 glass)

All Infiltration

Triple Glazing + Shutter

R-38 Attic

R-7 Basement - Above grade

R-ll Wall

R-7 Basement - 2 feet below grade

2nd Wood Door (102 glass)

38
the baseline package, does not. Weatherization package "F" does however

include all options listed under "D" plus the use of a second wood door

on exterior doors in which glass area is 30 percent or more. The six

remaining packages usually consist of two or more additions to weatherization package "D" . For example, "G" adds the use of a thermal shutter

and R-38 insulation in the attic to "D". The largest weatherization

package, "L" , adds to "D" the use of a thermal shutter, R-38 insulation

in the attic, R-7 insulation on all basement walls to a depth of two feet

below grade, and the use of a second wood door on all exterior doors containing a glass area of 10 percent or more.

Note that weatherization packages "A" through "L” do not identify any

mechanical system retrofits (space heating and hot water). This is

not because these retrofits are not cost effective. In fact, certain

mechanical system retrofits are likely to be so cost effective that

they might be undertaken in even the most basic weatherization programs.

The exclusion of mechanical system retrofits is due mainly to the

fact that the existing efficiency of each mechanical system must be

evaluated by a heating contractor before an assessment can be made.

The contractor will then provide cost estimates for potential retrofits

for that particular house against which savings can be compared.

We are now ready to examine the effect of changing the values of one or more of the key decision variables on the composition of the optimum

weatherization package. Throughout the discussion which follows, we will

make use of the reference key presented in Table 4.6.

The results of the sensitivity analysis are presented in Table 4.7.

This table is laid out in such a way that each of the 81 cases examined

corresponds to a "block" or "cell". Across the top are listed the three

factor levels for option cost (20 percent high, normal, and 30 percent

low) and the discount rate (10 percent, 6 percent, and 3 percent).

Notice that the levels of option cost examined are repeated three times.

This is because we must examine each of the three factor levels of option

cost for each discount rate. Across the side are listed the three factor

levels for balance point (55°F, 65°F, and 70°F) and the fuel price escalation rate (0 percent short, 10 percent long; 8 percent; and 12 percent

short, 4 percent long). The three factor levels of balance point are

also repeated three times. This permits us to examine each of the three

balance points for each estimate of the rate of increase of future fuel

prices

.

Examination of Table 4.7 reveals that the weatherization packages asso- ciated with an 8 percent rate of fuel price escalation (Panel 2) are almost always identical to those resulting from a 12 percent rate over

the next four years followed by a 4 percent rate over the remainder of

the 20 year life cycle (Panel 3). Only three cases were found in which

the packages were not identical. All of these cases can be related to

the assumption that the life cycle costs of the weatherization options

are 20 percent higher than our estimates. For example, with a 10 percent

discount rate, the use of triple glazing is cost effective with a 65°F

39
TABLE 4.7 RESULTS OF SENSITIVITY ANALYSIS

T“ CM CO

0 0 0

C c c

<0 (U 0

a a. a

DISCOUNT

RATE

sP

CO

OPTION

COST |

5o X _i id -1 id _i -1

norm O o “9 LU * -J LU * -1

-C

05

'£ O 0 -» 0 -S 0 LL “3

sp

o'* (D

OPTION

COST 5o LU id -J LU

i

0

-J LU -i -J

Ek_o

c o a 4 h

0 LL “9

£

05 IE < Q o o LL CO 0 LL

10%

OPTION

COST 5o 0 Q LL LU — -1 LU — -i

norm < o 0 00 0 LL m 0 LL

05 < o 0 < 0 0 < O 0

UO

in

So

CO

oo

1^

&>

in

So

CO

o

NSo

in

&5

(O

o

INIOd

BONvnva

INIOd

30NVHVa

INIOd

aoNviva

0%

short 10% long 00 12%

short 4% long 31VU N0I1VHV0S3 30iad 13fld

II LL

40

BASELINE
I

i balance point if the rate of fuel price escalation is 8 percent, whereas

it is not cost effective if fuel prices escalate at a rate of 12 percent

during the next four years and at a rate of 4 percent for the remainder

of the 20 year life cycle.

Due to the similarity of the packages resulting from the 8 percent rate

of fuel price escalation (Panel 2) and the 12 percent short/4 percent

long (Panel 3), we may focus our atention on two fuel price escalation

rate scenarios. That is, a comparison of the packages resulting from an

8 percent rate of fuel price escalation (Panel 2) with those resulting

from a 0 percent short/10 percent long rate of fuel price escalation

(Panel 1).

Examination of Table 4.7 reveals that the weatherization packages associated with an 8 percent fuel price escalation rate (Panel 2) tend to

be larger and to increase more rapidly as the discount rate is lowered

than those associated with a fuel price escalation rate of 0 percent in

the next four years and 10 percent thereafter (Panel 1). There are two

fairly basic explanations for this. First, the energy savings associated

with a given option which occur in the first years of use and hence have

the greatest value are lower with constant energy prices over the next

four years than if energy prices rise at a rate of 8 percent. Even though

the energy savings which occur beyond the fourth year are valued higher

when the long term rate of fuel price escalation is 10 percent rather

than 8 percent, they are not large enough to offset the reduced dollar

savings associated with the assumption of constant energy prices in the

first four years. Second, in the presence of a payback criterion, the

present value of savings in the first 11 years is considerably lower under

the assumption of constant energy prices followed by rapidly rising energy

prices than under the assumption that energy prices increase at a rate

of 8 percent. The payback constraint is thus more often binding. Therefore, some options which were cost effective over the 20 year life cycle

(even with reduced dollar savings) could not satisfy the payback criterion

and hence had to be excluded from the weatherization package.

We shall now examine how the baseline package compares to the "median"

level of weatherization. The "median" level of weatherization is

package "E" since 25 cases had lower levels and 25 cases had higher

levels (including the four cases where the baseline, "F", was optimal).

Focusing on Panel 1 and Panel 2 of Table 4.7, we can see that the baseline package occurs four times and that there are 29 cases where the

optimal package was of a lower level than the baseline and 21 cases where

the optimal package was of a higher level. Recall that weatherization

packages "E" and "F" were very similar. The package which occurs most

often is "D" which is also very similar to the baseline, "F". These

two observations serve to highlight the fact that the level of weatherization associated with the baseline package has an additional merit in

that it is, in a statistical sense, among the most probable outcomes.

41
A brief synopsis of the differential effect of each factor on the baseline

case is presented in Table 4.8. The effects of changes of several factors

in combination on the baseline case, however, are more complicated. These

effects are discussed in more detail in the text which follows.

TABLE 4.8 DIFFERENTIAL EFFECT OF EACH FACTOR ON THE

BASELINE WEATHERIZATION PACKAGE

Variable Conditions

Change in

Condition Change in Retrofit Package

Average Installation Costs + 20% less 2nd wood door (30% glass)

- 30% add thermal shutter insulate

attic to R-38 add R-7 basement

insulation to 2 feet below

grade

add 2nd wood door (10% glass)

Balance Point 55°F less 2nd wood door (30% glass)

70°F add thermal shutter

insulate attic to R-38

Fuel Price Escalation Rate A

1 less 2nd wood door (30% glass)

B

2 no change

Discount Rate 3% add thermal shutter

insulate attic to R-38

add R-7 basement insualtion

to 2 feet below grade

10% less 2nd wood door

1

2

A refers

B refers

to a 0% short and 10% long fuel price escalation rate,

to a 12% short and 4% long fuel price escalation rate.

42
Similar patterns of change in the optimal weatherization package can be seen when the two of Table 4.7 rows associated with the 70°F balance point

in Panel 1 and Panel 2 are examined. For example, with 20 percent higher

life-cycle costs associated with each option we have the same package with

a 10 percent discount rate for both fuel price escalation rate scenarios.

Furthermore, the six cases associated with a 6 percent discount rate and

a 3 percent discount rate are nearly identical for both fuel price escalation rate scenarios. In most cases, however, a higher level of weatherization than given by the baseline package is indicated.

If we now focus our attention on the four remaining rows associated with

the 55°F and 65°F balance points in Panel 1 and Panel 2, we can better

see the effects of changing the discount rate on the optimal weatherization package. At a 10 percent discount rate weatherization package "D" occurs almost half the time. Although weatherization package "D" is of

a lower level than our baseline case, "F" , the two packages only differ

by one option. (The baseline package includes the use of a second wood

door on exterior doors containing 30 percent or more glass area. ) Thus even in cases where the discount rate exceeds the fuel price escalation

rate, the most likely weatherization package is revealed to be nearly

identical to the baseline. This result is very important, since the rates

of fuel price escalation estimated by the Department of Defense tend to

be somewhat higher than those recently forecast by another Federal agency.

The above statement may be easily illustrated. The present value of

energy savings with a 4 percent rate of fuel price escalation and a 6

percent discount rate would be nearly identical to those associated with

an 8 percent rate of fuel price escalation and a 10 percent discount rate.

Replacement costs would of course be slightly higher with a 6 percent

rate than with a 10 percent rate. However, quite a few of the options

in the baseline package will not require replacement to achieve a 20 year

life. Even in those cases where higher replacement costs are incurred

(infiltration abatement and attic insulation), life-cycle savings are high enough to insure that all of the options in the baseline package

are still cost ef f ective. ^ At a 6 percent discount rate, weatherization

packages D", "E", and : 'F" occur in six out of the 12 possible cases. Thu? once again ’’he "baseline" package^ ip revealed to be the most likely

*- If we consider the possibility of continuous changes in the level of

attic insulation tnen tne optimax ievex ox attic insuxatxon wouiq De

reduced slightly in going from a 10 percent discount rate to a 6 percent discount rate. (Recall that the rate of fuel price escalation

is 8 percent when the discount rate is 10 percent and is 4 percent

when the discount rate is 6 percent.) Since we are limiting our attic

insulation choices to R-19, R-30 and R-38, however, the optimal level

in this case, does not change.

2 .. .. Quotation marks are used since the actual baseline package is F and

not an average of "D", "E" and "F". Weatherization packages "D" and

"E", however, are nearly identical to "F".

43
candidate as the optimal level of weatherization. When we examine the cases where a 3 percent discount rate is assumed, we find that the

"baseline" case occurs in only four out of the 12 possible cases. If we

ignore the cases where the weatherization options can be installed for

30 percent less than estimated, then the "baseline" package occurs in

half the cases examined.

The previous discussion has demonstrated that although there is a great

deal of variation in the optimal weatherization package, and although

each of the four factors examined is important in determining that

package, the most likely optimal weatherization package is the "baseline"

weatherization package. (That is, small changes in one or more of the

four key factors about the baseline figures are not likely to change the

composition of the baseline package.) There are two sets of circumstances

where this observation is not true. These two sets of circumstances are

the assumption that (1) energy savings are based on a balance point of

70°F, and (2) the life-cycle costs of each option are 30 percent lower

than estimated and future savings and costs are discounted at a rate of

3 percent.

4.4 FORECASTS FOR OTHER DEMONSTRATION SITES

Tables 4.9 through 4.11 present the forecasts for the optimal level of

weatherization in each of the other 14 Demonstration Program sites.'*"

Each table identifies the city, the number of degree days and the fuel

type(s) and fuel price(s) used in determining the optimal level of

weatherization. All forecasts presented in this section are based on

the assumption that the balance point of the typical low-income residence

is 65°F. Balance points based on empirical data were calculated for

each house, so that use can be made of an additional set of calculations

given in Appendix E. These calculations identify the optimal level of

weatherization as a function of balance point. The weatherization

packages which will actually be installed, however, are those presented

in Tables 4.9 through 4.11.

In Tables 4.9 through 4.11 the following abbreviations are used: ALB,

Albuquerque; ATL, Atlanta; CST, Charleston; CHI, Chicago; CSP, Colorado

Springs; EAS, Easton; FAR, Fargo; LAS, Los Angeles; MIA, Miami; MIN,

Minneapolis/St. Paul; OAK, Oakland; STL, St. Louis; TAC, Tacoma; WDC

,

Washington, D.C. Four symbols are also used in Table 4.9 through 4.11.

The packages summarized in this section are based on the cost figures

given in Appendix A. 3 and the energy savings calculations given in

Appendix B. Some minor variations from the lists presented in

Tables 4.9, 4.10 and 4.11 may result, however, due to local considerations. For example, certain products may be unavailable or available

only at a price significantly different from that presented in Appendix A. 3. In these cases it may be necessary to modify the weatherization

package somewhat. These changes are being documented and will be made

available upon written request to the authors.

44
They are: (1) an X; (2) a blank space; (3) an A; and (4) a 2. The

symbol X indicates that the option named on that now is to be installed

in the city under consideration. A blank space indicates that the

option named on that row is not to be installed in the city under consideration. The symbols A and 2 are are used only for basement wall

insulation. The symbol A indicates that R-7 basement wall insulation

is to be installed above grade for the city under consideration. The

symbol 2 indicates that R-7 basement wall insulation is to be installed

to a level of two feet below grade.

45
TABLE 4.9 OPTIMAL WEATHERIZATION PACKAGES FOR HOUSES HEATED

BY FUEL OIL IN THE OTHER DEMONSTRATION SITES

SITES

CST CHI EAS FAR MIN TAC WDC

Degree Days 1904 6127 5827 9271 8310 5185 4211

OPTIONS $/ Gallon .52 .479 .49 .469 .482 .479 .492

INFILTRATION

Replace Broken Glass X X X X X X X

Reset Glazing X X X X X X X

Install New Threshold X X X X X X X

Seal Structural Cracks X X X X X X X

Weatherstrip Windows X X X X X X

Caulk Windows X X X X X X X

Weatherstrip Doors X X X X X X

Caulk Doors X X X X X X

Weatherstrip Attic Hatch X X X X X X X

WINDOWS

Storm Windows X

Storm + Film

Storm + Shutter X X

Triple Glazing X X

Triple + Shutter X

DOORS

Storm Door (60% Glass) X X X

Second Wood Door X

New Insulating Door

Storm Door (30% Glass)

Second Wood Door X

New Insulating Door X

ATTIC

R-ll Insulation X R-19 Insulation

R-30 Insulation X X X X _ R-38 Insulation X X

WALLS

R-ll Insulation X X X X X X I

BASEMENT WALLS 9i

R-7 Insulation A A A 2 A A A
TABLE 4.10 OPTIMAL WEATHEKIZAT10N PACKAGES FOR HOUSES HEATED BY NATURAL GAS IN THE OTHER DEMONSTRATION SITES

SITES

ALB ATL CST CHI CSP EAS FAR LAS MIA MIN OAK STL TAC

Degree Days 4292 3095 1904 6127 6473 5827 9271 1819 206 8310 2909 4750 5185

OPTIONS $/Therm .276 .235 .30 .263 .163 .318 .332 .20 .31 .216 .186 .273 .295

I

I INFILTRATION

Replace Broken Glass X X X X X X X X X X X X

Reset Glazing X X X X X X X X

Install New Threshold X X X X X X X X X X X X Seal Structural Cracks X X X X X X X X X X X X X Weatherstrip Windows X X X X X X X

Caulk Windows X X X X X X X X Weatherstrip Doors X X X X X X Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X

WINDOWS

Storm Windows X X X X X Storm + Film

Storm + Shutter

Triple Glazing X Triple + Shutter X

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door Storm Door (30% Glass)

Second Wood Door X

New Insulating Door

ATTIC

R- ll Insulation X X X

k-19 Insulation X

k-30 Insulation X X X X X X

R-38 Insulation X X

WALLS

R-ll Insulation X X X X X X X

BASEMENT WALLS

R-7 Insulation A A A A A A A A A A

47
TABLE 4.11 OPTIMAL

PROPANE

WEATHERIZATION PACKAGES FOR HOUSES HEATED BY ELECTRICITY,

OR KEROSENE IN THE OTHER DEMONSTRATION SITES

ELECTRICITY PROPANE KEROSENE

Sites CST MIA TAC ATL CST CSP WDC WDC

Degree Days 1904 206 5185 3095 1904 6473 4211 4211

OPTIONS $/Unit .037 .038 .015 .48 .49 .359 .525 .52

INFILTRATION

Replace Broken Glass X X X X X X X

Reset Glazing X X X X X X X

Install New Threshold X X X X X X X X

Seal Structural Cracks X X X X X X X X

Weatherstrip Windows X X X X X X x Caulk Windows X X X X X X x Weatherstrip Doors X X X X X X X

Caulk , Doors X X X X X X X

Weatherstrip Attic Hatch X X X X X^ X

WINDOWS

1 Storm Windows X X X

1 Storm + Film X X

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-l 9 Insulation

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS

R-7 Insulation

48
5. SUMMARY AND RECOMMENDATIONS FOR FUTURE RESEARCH

This study has established a framework for systematically analyzing the

economic viability of alternative methods of weatherizing low-income

housing. This economic framework has been illustrated through the development of a series of forecasts (economic guidelines) which show the optimal

levels of weatherization for low-income residences in 15 cities across the

Nation. These economic guidelines are designed to assist the Community

Services Administration in carrying out its Weatherization Demonstration

Program. In particular, they are designed to achieve a more balanced

level of weatherization per dollar spent. The optimal level of weatherization is balanced in the sense that for a given weatherization budget

no increases in net savings can be achieved by trading one method for

another.

The results of this study indicate that further research on additional

topics would be useful. Further research is needed in order to refine

the economic model developed in this study and to determine the optimal

level of weatherization investment in low-income housing under a wider

variety of circumstances. Studies which promote a fuller knowledge of

how the energy consumption patterns of low-income households will change

as a function of weatherization are also needed.

Of the utmost importance is the development of a methodology, based on

the results of the Weatherization Demonstration Program, that will guide

future weatherization activities. Ideally such a methodology would entail

the development and validation of econometric models for estimating

weatherization savings and costs. Such models could be tailored to the

needs of the local CSA groups. Consequently these models would have the

potential to identify the optimal level of weatherization in cities other

than those which participated in the Weatherization Demonstration Program

at points in time in the future. Another benefit of such a methodology

would be to assist the CSA in the planning of its loan program for lowincome homeowners. Along these lines such important questions as the

size of the weatherization loan, the length of the term, and the level

of subsidy required to meet desired goals could be assessed.

Previous studies have determined that significant interdependencies exist

between weatherization options used to upgrade the thermal performance

of the building envelope. Interdependencies are also known to exist

between building envelope retrofits and mechanical system retrofits. At

present only crude estimates are available for determining how these

options interact. It would be helpful if better estimates were available.

More consideration might be given to alternative approaches in identifying the optimal level of weatherization. For example, optimal levels of

weatherization for each balance point were calculated for each demonstration site, but the actual level of weatherization will be based on a balance point of 65°F. Additional research into how the balance point

of a low-income house changes as a function of weatherization is needed.

Econometric models which include empirically validated procedures for

49
estimating both savings and costs could then be used to identify the

optimal level of weather ization under a wide variety of circumstances.

To determine the actual level of energy savings associated with each

weatherization option, the performance of that option as a function of

time is of the utmost importance. This issue was addressed only partially in this study and was approached indirectly through the use of

future replacement costs. In essence it is assumed that the option

performs as if new until the day it is replaced or the end of the study

period whichever comes first. Since energy savings will be affected if

the level of performance is reduced and this reduction is likely to be

gradual, it is possible that the estimates of savings presented in this

study may be biased upward. This bias could lead to overinvestment

in energy conservation. To correct this, an attempt could be made to

develop a performance function which reflects the probability that the

weatherization component will not perform at the same level in the future

as it does when initially installed. Ideally this performance function

would incorporate information on material degradation over time as well

as identify the minimal amount of maintenance required to achieve a specified level of performance.

If low-income homeowners are to bear the full cost of a loan (subsidized

or not) to finance weatherization activities, it may turn out that the

cost of optimum weatherization will pose unacceptable repayment burdens.

In such cases (i.e., in the presence of a budget constraint), it has been

recommended that all options be undertaken, but at a reduced scale.

One alternative to this approach, which has not been fully explored,

is the use of a staged investment program. Such a program could offer

a potential for generating revenues from past investments to cover the

costs of future investments. Previous economic z and engineering studies

have shown that a particular mathematical analysis technique, dynamic

stochastic programming, can be especially useful in the treatment of

such (multiperiod capital allocation) problems. Should empirical studies

reveal the presence of substantial fixed costs (i.e., the marginal cost

of the first unit is quite high) associated with weatherization activities, it may be more beneficial to the homeowner to undertake only

two or three options at a time at their optimal level rather than all

of them at a reduced level (which would require upgrading at a future

Stephen R. Petersen, Retrofitting Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

2 Paul A. Sarauelson, "Lifetime Portfolio Selection by Dynamic Stochastic

Programming," The Review of Economics and Statistics, Vo. 51, No. 3,

1969.

3 Haim Levy and Marshall Sarnat, "The Portfolio Analysis of Multiperiod

Investment Under Conditions of Risk," The Engineering Economist,

Vol. 16, No. 1, 1970.

50
date). From a program managtmtnt viewpoint, this approach is quite

attractive because if dynamic stochastic programming is used, it will

always be possible to identify an optimal investment policy to pursue.

An additional benefit of this approach is that as the process unfolds,

the level of uncertainty associated with the values of key factors in

the weatherization investment decision can often be reduced. Thus

regional/local CSA managers can tailor the staged investment program

to address both the needs of the low-income homeowner and the goals

of the CSA.

Another application of dynamic programming techniques relates to the

estimation of energy savings in the presence of a block rate structure.

As indicated in Chapter 4, both natural gas and electricity are usually

priced in blocks. From an energy conservation viewpoint the dollar

value of energy savings is closely tied to the block rate. This is

because it is the marginal units of energy which are being saved. In

performing the calculations presented in this study, it was not possible

to determine when the discontinuities in the block rate structure were

passed. To realistically do this would require that calculations on all

sections of the building envelope and mechanical systems be performed

simultaneously. Sizing decisions would then be made sequentially. The

optimization technique known as dynamic programming fits this broad

framework since it optimizes a set of decisions made sequentially.

Furthermore, each decision is made in light of the consequences of past

decisions. An additional advantage might result in that interdependencies among options as well as the problems posed by discontinuities

in the rate structure could be accommodated. Additional research in

this area could thus result in a technique which was analytically

simple and more realistic than the techniques presently being used.

One of the most important questions from a policy viewpoint is how will

weatherization affect the energy consumption patterns of low-income

households. Since weatherization tends to make energy relatively less

expensive, the families receiving it will experience a rise in real

income. Expenditures resulting from this rise in real income will

be ^divided among consumption of energy and non-energy commodities.

For example, with the same family budget as before weatherization, the same household may be able to increase the thermostat setting to a level

deemed more comfortable. Thus even though the family's absolute level

of energy consumption has fallen, the actual level of energy consumption

may be significantly greater than that anticipated as a result of optimal

weatherization. Demand studies, including econometric analyses designed

to 'estimate the price elasticity of demand for energy, are needed if

policy makers are to insure that the goals of a nationwide energy

conservation program for low-income households can be attained.
REFERENCES

American Institute of Architects, The House Beautiful Climate Control

Project , Bulletin of the AIA, 1951.

American Society of Heating, Refrigerating and Air-Conditioning Engineers,

Inc., ASHRAE Handbook of Fundamentals , New York, 1972.

BASIC Language , Honeywell Software Series 400, Honeywell Information

Systems, Inc., August 1971.

Baumol, William, "On the Discount Rate for Public Projects," Analysis and

Evaluation of Public Expenditures: The PPB System , Joint Economic

Committee, U.S. Government Printing Office, Washington, D.C., 1969.

Branson, William H. , Macroeconomic Theory and Policy , Harper and Row

Publishers, New York, 1972.

Chapman, Robert E. and Joseph G. Kowalski, Guidelines for Cost-Effective

Lead Paint Abatement , National Bureau of Standards, Technical Note 971,

January 1979.

Crenshaw, Richard, Roy Clark, Robert Chapman, Richard Grot and McClure

Godette, CSA Weatherization Demonstration Project Plan , National Bureau

of Standards, NBSIR 79-1706, March 1979.

Energy Conservation Investment Program Guidance , Assistant Secretary of

Defense (Installations and Logistics) Memorandum, March 24, 1977.

Environmental Data Service, Climatic Atlas of the United States , U.S.

Department of Commerce Report, 1968, 1974.

Godette, McClure, Installation of Architectural Options , National Bureau

of Standards, Interagency Report (in press).

Grant, Eugene L. and W. Grant Ireson, Principles of Engineering Economy , Fifth Edition, The Ronald Press Company, New York, 1970.

Gressel, David, Financing Techniques for Local Rehabilitation Programs , National Association of Housing and Redevelopment Officials, Washington,

D.C., 1976.

Hastings, S. Robert and Richard W. Crenshaw, Window Design Strategies to

Conserve Energy , National Bureau of Standards, Building Science Series

104, June 1977.

Hirshleifer, J., Investment, Interest, and Capital , Prentice-Hall, Inc.,

Englewood Cliffs, New Jersey, 1970.

52
Hittle, D. C., The Building Loads Analysis and Thermodynamics (BLAST)

Program Volume 1: User's Manual , U.S. Army Construction Engineering

Research Laboratory, September 1977.

Hunt, Charles M. , John M. Porterfield, and Paul Ondris, Air Leakage

Measurements in Three Apartment Houses in the Chicago Area , National

Bureau of Standards, NBSIR 78-1475, June 1978.

Kusuda, Tamami, NBSLD, The Computer Program for Heating and Cooling Loads

in Buildings , National Bureau of Standards, Building Science Series

69, July 1976.

Levy, Haim, and Marshall Sarnat, "The Portfolio Analysis of Multiperiod

Investment Under Conditions of Risk," The Engineering Economist , Vol. 16, No. 1, 1970.

Mayer, L.S., and Y. Benjamin, "Modelling Residential Demand for Natural

Gas as a Function of the Coldness of the Month," Energy in Buildings , Vol. VI, No. 3, April 1978.

Mishan, E. J. , Cost-Benefit Analysis , Praeger, Washington, 1971.

Nicholson, Walter, Microeconomic Theory: Basic Principles and Extensions , The Dryden Press, Inc., Hinsdale, Illinois, 1972.

Petersen, Stephen R. , Retrofitting Existing Housing for Energy Conservation: An Economic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

Retail Prices and Indexes of Fuels and Utilities: Residential Usage , Department of Labor, Bureau of Labor Statistics, December 1977.

Robert Snow Means Company, Inc., Building Construction Cost Data 1978 , Duxbury, Mass., 1978.

Ruegg, Rosalie T., John S. McConnaughey , G. Thomas Sav, and Kimberly A.

Hockenbery, Life-Cycle Costing Guide for Selecting Energy Conservation

Projects for Public Buildings , National Bureau of Standards, Building

Science Series 113, September 1978.

Samuelson, Paul A., "Lifetime Portfolio Selection by Dynamic Stochastic

Programming," The Review of Economics and Statistics, Vol. 51, No. 3,

1969.

Silberberg, Eugene, The Structure of Economics: A Mathematical Analysis , McGraw-Hill Book Company, New York, 1978.

Smith, Gerald W. , Engineering Economy: Analysis of Capital Expenditures , 2nd ed. , The Iowa State University Press, Ames, Iowa, 1973.

U.S. Department of Energy, "Weatherization Assistance Program for LowIncome Persons; Proposed Amendments", Federal Register , Vol. 44,

No. 74, Monday, April 16, 1979.

53
U.S. Department of Housing and Urban Development, Final Report of the

Task Force on Housing Costs , May 1978.

Weber, Stephen F., The Effect of "Resource Impact Factors" on Energy

Conservation Standards for Buildings , National Bureau of Standards,

Building Science Series 114, September 1978.

54
APPENDIX A

ESTIMATING WEATHERIZATION COSTS

Cost estimates of the architectural options used in identifying the

optimal level of weatherization are developed in this appendix. Since

the specifications for material selection and proper installation of

the architectural options have not been fully developed, descriptions

of those factors affecting the cost estimate of each weatherization

option have to be made more explicit. The assumptions used in making

cost estimates for each option are described and the specific cost

figures used in the economic forecasting are listed. Finally, the

methodology and format to be used for the collection of actual costs

of specific weatherization options for the post construction evaluation

of the optimization process are developed.

A.l Description of Weatherization Options

Based on past studies with multi-family weatherization projects conducted

by the University of Illinois at Chicago Circle, and literature searches

for viable weatherization options for low-income housing, the following

options have been selected for consideration as the architectural options

in the demonstration program. The estimates for mechanical system options

such as the improvement of furnace and hot water heater efficiencies

are beyond the scope of the present cost estimates.

Architectural options for which estimates are presented are listed below:

Windows

1. Replace broken glass

2. Reset glazing in windows

3. Install storm windows

4. Install triple glazing

5. Install low emissivity film on windows

6. Weatherstrip windows

7. Caulk windows

8. Install insulating drapes (R = 1.14)

9. Install insulating shutters (R = 7.8)

Doors

10. Install storm door

11. Install second wood door (R = 2.18)

12. Weatherstrip exterior door

13. Caulk exterior door

14. Install new threshold

55
Insulation

15. Insulate walls below grade (basement and perimeter)

16. Insulate walls (R = 11) plus vapor barrier where possible)

17. Insulate attic (R = 11, 19, 30, 38)

18. Insulate floor above basement or crawl space (R = 19, 30)

General

19. Weatherstrip attic hatch

20. Seal-up structural cracks

21. Install carpet on floor

22. Close-off unused portions of house

23. Provide wind barrier around crawl space or basement walls

A. 2 Assumptions Used in Making Cost Estimates

Since the level of detail associated with construction specifications

for providing the weatherization options is beyond the scope of this

study, it was necessary to make simplifying assumptions. The assumptions used in making cost estimates for all options are stated as follows

Cost estimates for the weatherization options were primarily collected

from the local community action groups or local contractors recommended

by the community action group, and supplemented by construction suppliers'

catalogues, department store catalogues and the 1978 Means Building Construction Cost Data 1 guide. Each local community action group identified

whether the weatherization options will be carried out through the use of

CETA labor or furnished and installed by a local building contractor.

1. All estimates shown are "in-place" prices which include labor,

material, overhead and profit.

2. Each estimate shown is the unit price for one option only.

3. Estimates used for selecting energy conservation options are only

of the order of magnitude. Actual installation prices will have

to be collected and tabulated during the demonstration phase of

the weatherization project.

4. Estimates are shown in dollar per square foot or linear foot for

each item. These unit prices can be easily compared with the benefit

side of energy conservation since the reductions of energy use are also expressed in the same units.

1 Building Construction Cost Data 1978 , Duxbury, Mass., 1978.

Robert Snow Means Company, Inc.,

56
Specific assumptions for estimating each weatherization option are listed

as follows.

1. Replace broken glass in windows : $/Ft^

Remove broken glass and old glazing, cut new plate glass to fit

existing opening and install glass. It is assumed that 24" x 24"

size of glass would be the most common stock size from which the

replacement pane is to be cut.

2. Reset glazing in windows : $/Ft

Apply glazing compound on outside and inside of existing window

panes to make them weatherproof. A window size of 3 ft by 5 ft

is assumed.

O 3. Install storm windows : $/Ft z Furnish and install a triple track storm window of up to 15 square

feet in size. Screen is included. No special preparation on existing surfaces to receive the storm window is required.

2

4. Provide triple glazing for windows : $/Ft

Install a new storm window up to 3 ft by 5 ft size inside the

existing window and storm window.

2 5. Install low emissivity films : $/Ft

"Lockspraygold" or equivalent applied to the entire glass area

of the window. ^

6. Weatherstrip windows : $/Ft

Any weatherstripping material which is available in local hardware

and specialty stores.

7. Caulk windows : $/Ft

Use suitable sealant or caulking compound for exterior weatherproof caulking

2 8. Install insulating lining over existing window drapes : $/Ft

"Roclon" insulated drapery lining ($1.80 per yard of 48" width).

2 9. Install insulating shutters over windows : $/Ft

Install on the interior side of the window to reduce heat losses.

Composed of 1-1/2" thick insulation sandwiched between 1/4" thick

plywood with R value = 7. Price includes hinges, trim, and finish

painting.

10. Install storm door : $/Ft^

Furnish and install a storm door of approximately 3' x 7' in size.

1 Identification of commercial products is included only to adequately

specify the procedure. Identification does not imply recommendation

or endorsement by the National Bureau of Standards.

57
11. Install 2nd wood door : $/Ft^

Install a standard grade exterior wood door. Installation will be

either on the inside or outside of the existing door depending on

the direction of swing of the existing door.

12. Replace exterior door with insulating door : $/Ft

Furnish and install a commercially available insulating door.

It shall have a minimum of R6 rating.

13. Weatherstrip exterior door : $/Ft

Any door weatherstripping material which is available in local

hardware and specialty stores.

14. Caulk exterior door : $/Ft

Use suitable sealant or exterior weatherproof caulking.

15. Install new threshold : $/Ft

Furnish and install a new threshold that is compatible with the

exterior door.

I O 16A. Install insulation below grade of a first floor slab : $/Ft

Excavate, attach 2" styrofoam with adhesive to the edge of slab

and footing. Make the exposed surface fireproof. Backfill to

existing grade. 18" to 20" deep insulation is estimated.

O 16B. Install interior wall insulation for basement walls : $/Ft z' Apply furring to the basement wall. Install 2" styrofoam.

Install 3/8" thick drywall. Taping and painting are not included.

2 17A. Install interior wall insulation over solid masonry wall ; $/Ft

Provide furring, install 2" thick styrofoam or 3-1/2" fiberglass

insulation. Install dry wall. Provide wood base. Tape and

paint walls with damp-proof paint.

2 17B. Install exterior wall insulation over solid masonry wall : $/Ft

Install "Drive-it" over exterior wall.

17C. Provide insulation (R-ll) in existing wood framed walls : $/Ft^

Fill frame walls with loose fill or other insulation by inserting

an applicator through the exterior side of the wall. Plug and

paint with two coats of vapor barrier paint.

17D. Provide insulation (R-ll) in existing veneer wall : $/Ft^

Similar to assumption for 17C.

18. Insulate attic : $/Ft^

Furnish and install loose fill or blanket insulation to satisfy

Rll, R30, R38 values. Install attic vents where needed.

19. Provide floor insulation ; $/Ft^

Provide blanket insulation to satisfy R19 and R30 values.

58
20. Weatherstrip attic hateh i $/Ft

Furnish and install locally available weatherstripping to make the

attic hatch weather-tight.

21A. Seal up Structural Craeks on Masonry Walls ; $/Ft 2 Provide "tuck-pointing" for a square foot area.

21B. Seal up Structural cracks on Wood Siding Walls : $/Ft 2 Replace with similar siding and paint to match for a square foot

of area.

O 21C. Seal up Structural Cracks on Veneer Wall : $/Ft

Provide "tuck-pointing" for a square foot area.

22. Carpet floor : $/Ft 2 Provide floor carpet.

23. Close-off unused portion of house

Seal and tape existing interior doors.

24. Provide wind barrier around crawl space or basement wall

Design specifically for an individual situation.

A. 3 Cost Figures Used in Economic Forecasts

Following are the cost estimates for providing these weatherization

options in 15 cities. The First Cost is the cost incurred at the time

of the installation of the option. The 20 Year Cost includes the cost

of maintenance and anticipated replacement throughout the time period

of analysis.

In Tables A.l and A. 2 the following abbreviations are used: ALB,

Albuquerque; ATL, Atlanta; CST, Charleston; CHI, Chicago; CSP, Colorado

Springs; EAS, Easton; FAR, Fargo; LAS, Los Angeles; MIA, Miami; MIN,

Minneapolis/St. Paul; OAK, Oakland; POR, Portland; STL, St. Louis; TAC,

Tacoma; WDC, Washington, D.C.

A. 4 Format and Methodology for Cost Data Collection

The collection of accurate cost information is of crucial importance in

the weatherization demonstration program. A good set of detailed cost

information is needed to verify the weatherization option selection

process and to provide a sound basis for future weatherization planning

and budgeting. The "optimal" weatherization package weighs expected

energy savings against the cost of the options. However, the "optimal"

weatherization packages actually being installed are based on forecasts

which of necessity rely on simplifying assumptions. Similarly, the

expected energy savings figures are based on calculations which include

additional simplifying assumptions (see Appendix B). As a result, the

information collected in the field, on both actual cost and actual energy

59
TABLE

A.l

ESTIMATES

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FIRST

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3 CO 3 CO

co a> co <y U 5S O ^

3 <u • a . S CO

C/5 003

-O -H U 4-1 CO CO T3 rH 3 3

3 CO u 3

C/5 M

B N

00 rH 3 3 H H

•H Cu O

3 o a

CD 3 -H 3 -H U M 3 H

rH rH 3 H H 3

3 3 *H

4-» 4J > 3 3 0 ecu HH ft.

U 3

O rH O 3

U Q 3 o c

O "O M

Q O ^

„ o >

e s u

0-0 0

4-» 3 O W CM Q

3 3

61

Basement

Insulation
savings, may indicate that greater cost effectiveness could be achieved

if a different combination of weatherization options were installed.

Thus, in order to improve the chance of identifying the most costeffective combination of weatherization options for future programs,

it is necessary to develop a cost estimation procedure which permits

"real world" considerations such as the size of the dwelling unit, the

condition of the different building elements, and the wage rates paid to

workers doing the weatherization job to enter into the cost calculations

The use of this procedure should permit the achievement of more weatheri

zation per dollar spent. This should permit field offices to operate

with greater flexibility in the future in budgeting and forecasting

program costs, so that more houses can have the most cost-effective

combination of weatherization options installed.

The types of cost data which were of interest to the weatherization

demonstration program were discussed in Section 3.1. Briefly, they

include payments to labor, payments for materials, equipment rentals

and any overhead costs or profits that should in principle be assigned

to the weatherization task. Those costs that the contractor or CSA

Agency incurs if it undertakes a specific joJ> are called direct costs . Those costs that the contractor or CSA Agency incurs regardless of

whether it undertakes a specific job or not are called overhead costs . The difference between the bid price , the contract amount for which the

contractor agreed to do the work, and direct costs and overhead costs

represents the contractor's pretax profits . Also of interest is the

size of the contractor's markup . The bid price divided by the sum of

the direct costs in the contract yields one plus the fractional markup.

Markup, therefore, includes both overhead costs and pretax profits.

Table A. 3 summarizes the cost data required to meet these needs.

TABLE A. 3 COST DATA COLLECTION: REPORTING REQUIREMENTS

Type of Cost Reporting Requirements

Bid Price Each Contract*

Direct Costs*

Labor

Direct Labor

Indirect Labor

Materials

Equipment

Each Option, Each Dwelling Unit

Each Contract

Each Option, Each Dwelling Unit

Each Option, Each Dwelling Unit

*Contracts should be numbered

all direct costs associated

back to the parent contract.

, for example from 1 to N, so that

with that contract can be traced

62
Now that we have seen the types of cost data which are to be collected,

we can review the way in which they will be collected. Our past experiences indicate that better quality cost information can be collected

if one member of the research staff is assigned as coordinator and

meets with contractors on a regular basis. 1 This facilitates control

of the operation and helps in determining the appropriate action to

be taken if any cost information is found to be lacking. It is not

desirable to wait until the contract has been completed to request the

cost data, since the reliability of the data will then depend more on

the contractor's memory rather than on documented figures.

Two basic cost data collection forms are used. The first form is con- cerned with direct labor, material, and equipment charges (Exhibits A.l

and A. 2). This form will be filled out by the local CSA representative

for each weatherization option and for each dwelling unit . The second

form is concerned with indirect labor charges (Exhibits A. 3 and A. 4).

This form will be filled out by the local CSA representative for each

contract

Let us first consider the form (Exhibit A.l) for recording the direct

costs for labor, materials, and special equipment. Notice that on the

form there is a space for the street address of the dwelling unit (along

with the street address, a contract ID number should also be entered).

Additional information includes: when the work was started and when it was finished; the building element to which the option was applied; and

the name of the option. Beneath this information are listed three types

of work which can be performed: (1) preparation, (2) installation, and

(3) other. Associated with each of these types of work are direct labor

charges and materials used and/or equipment rented. Direct labor charges

are identified by skill type, for example, carpenter, painter, laborer.

The number of hours expended in the task for each skill type is then

entered, for example; 8 hours for the carpenter, 3 hours for the painter,

10 hours for the laborer. The hourly wage rate is then entered in the

third column, for each skill type.^ Also associated with each of the

three types of work are material and special equipment usages. This

information facilitates the identification of the material and equipment

needs associated with the installation of the various weatherization

options. In the first column, the type of material or equipment is identified, for example, caulking compound. The second column is to record

the unit size, for example, 20 oz. tube. The third column is for either

the time in use (for special equipment, such as blowers or heaters) or

the quantity used, for example, 7 tubes.

^ Robert E. Chapman and Joseph G. Kowalski, Guidelines for Cost-Effective

Lead Paint Abatement , National Bureau of Standards Technical Note 971,

January 1979.

2 • ... . The program does not intend that any individual be identified; our focus

is on determining the role that labor inputs play in causing costs to

vary and not on determining the wage or productivity of any individual.

63
EXHIBIT A . 1 DWELLING UNIT COST DATA FORM

64
EXHIBIT A.

TYPE OF WORK DEFINITIONS

PREPARATION

Those tasks which must be done prior to the actual installation of

the weatherization option. This category includes tasks such as

job set up and any necessary repairs to or replacement of building

elements. Preparation should not include indirect labor costs.

INSTALLATION

Those tasks that are involved in the normal installation process

for the particular weatherization option. This includes such

activities as finish painting and clean up.

OTHER

Those taks which are not normally involved in the installation

of the particular weatherization option. This category is different

from "preparation" in that it includes such tasks as equipment

repairs and work stoppage.

65
EXKBIT A.3

INDIRECT LABOR COSTS DATA FORM

CONTRACT NUMBER

KOIRECT COST ITEM LAMR TYPE 1 LAMR TYPE 2 LAMR TYPE 3 OTHER

DESCRIPTION 10# WARE HOURS WARE HONRS WARE HOURS COST AMOUNT

66
EXHIBIT A.

CONTRACT SPECIFIC INDIRECT COSTS

Indirect labor costs are those costs which can not be linked to a

specific weatherization option. Below is a list (not exhaustive)

of the kinds of indirect labor costs that may be associated with

the installation of the weatherization options.

1. Travel time

2. Down time

3. Clean-up time (if not attributable to a specific

weatherization option)

4. Equipment costs (if not attributable to a specific

weatherization option).

67
The final column contains. the unit cost, or rental rate, for the material

or equipment, for example, $2.00 per tube. Additional information about

filling out the form is given on the back of the form (see Exhibit A. 2).

Exhibit A. 3 displays the data collection form for recording "indirect

labor cost." This form is not required for each option and each dwelling

unit. It is only necessary to complete one indirect labor cost form for

each contract. However, since indirect labor costs will occur irregularly

(for example, downtime because the dwelling unit occupants may not be at

home), these costs should be recorded on the form when they happen, in

order to avoid reporting errors due to faulty recall. The first column

of the indirect labor cost data form asks for a brief description of the

indirect cost item. A dwelling unit ID number, if possible, is also

reported along with the brief description. For example, one might find

in this column, "Travel time between dwelling units 34 and 35." There

follow three columns labeled "labor" with sub-headings for wage rates

and hours. This enables differing labor rates to be associated with the

described item. (If more than three categories of labor are involved,

the next line can be used.) A fourth column headed by "other" is also

included in order to capture related costs other than labor. For

example, "Travel-time between dwelling units *34 and 35,” may involve

the cost of operating a vehicle used in that period. On the back side

of this form, Exhibit A. 4, a brief definition of indirect labor cost is

given. Also on the back are a few examples of indirect labor costs

that are likely to arise.
APPENDIX B

ESTIMATING WEATHERIZATION SAVINGS

The purpose of this appendix is to provide background and technical

information on the calculations used to estimate weatherization savings.

Three basic types of of calculations are discussed. These calculations

concern: (1) infiltration options; (2) conduction options; and

(3) mechanical system options. Savings associated with the first category, infiltration options, are based on reductions in the number of air

changes per hour. In the second category, savings due to increased

thermal resistance are based on load estimates expressed in Btu's per

square foot per year. Btu energy savings per square foot are then derived

by examining the differential loads associated with a given retrofit. In

the final category, savings due to improved mechanical system efficiencies

are expressed in percentage savings on the building load after the shell

has been weatherized. In all cases life-cycle dollar savings are calculated and used as input to the investment analysis discussed in Appendix C.

Let us now examine each set of calculations.

B.l Infiltration Calculations

Energy savings from reductions in the number of air changes per hour are expressed as the number of Btus per square foot or per linear foot per

year for each option. All calculations assume the specific heat of air

to be 0.24 and the density of air in pounds per cubic foot to be 0.075.

The building being examined is assumed to have a volume of 12,000 cubic

feet and to contain 344 linear feet of doors and window sashes. Infiltration savings for each option based on the above assumptions are given

in Table B.l. The term DD

a used in the load calculations presented in

Table B.l refers to the number of degree days per year for a given balance

point at a given location.'*' The term HD, which enters into the calculation

of savings from replacing the threshold and broken glass and of sealing

up structural cracks refers to the average number of heating days per

year for a given location.

* The balance point is that outdoor temperature below which a supply

of heat to the conditioned space is needed in order to maintain a given indoor temperature. Throughout this study the temperature in

the conditioned space is assumed to be 70°F. A balance point was calculated for each dwelling unit in the Demonstration Program. It was determined based on the best fit straight line between energy

consumption data and degree days. By the nature of this relationship,

calculations based on the balance point permit a more accurate measure

of anticipated savings. Those readers interested in a more detailed

discussion of the balance point concept and its effect on the optimal

level of weatherization are referred to Appendix E.

69
TABLE B.l ENERGY SAVINGS DUE TO REDUCTIONS

IN INFILTRATION LOSSES3

Retrofit

Units of

Savings Yearly Savings

Replace Threshold Btu/Ft 2 /year

[0.24 x 0.075 x DD

a x 24] x

Seal up Structural

Cracks

Btu/Ft 2 /year [300 + 22 x DDa /HD]

Replace Broken

Glass

Btu/Ft^/year [0.24 x 0.075 x DD

a x 24] x

[30 + 22 x DD /HD] d

Reset Glazing Btu/Ft/Year

Weatherstrip Windows Btu/Ft/Year

Caulk Windows Btu/Ft/Year [0.24 x 0.075 x DD0 x 24] x

a Weatherstrip Doors Btu/Ft/Year r 0.1 x 12000t

344

Caulk Doors Btu/Ft/Year

Weatherstrip Attic Hatch Btu/Ft/Year

Source: Charles M. Hunt, John M. Porterfield, and Paul Ondris, Air

Leakage Measurements in Three Apartment Houses in the Chicago Area , National Bureau of Standards, NBSIR 78-1475, June 1978.

70
B.2 Conduction Calculations

In order to calculate estimated energy savings in Btu’s per square foot

per year due to reductions in conductive losses, a series of steps must

be followed. First, the base load per square foot of envelope section

is calculated. Next, as the resistance of the envelope section is

increased, reductions in the initial base load are estimated. (These

reductions or load differentials are the Btu savings associated with the

retrofit option.) Finally, if the resistance of the envelope section can

be varied incrementally (e.g., attic insulation), the difference in the

load between increments must also be examined. This approach facilitates

the marginal analysis which is undertaken to identify the optimal level

of weatherization investment for each option.

In estimating energy savings through increased thermal resistance it is

also important to take into consideration the effect of selective management practices used by the occupant. For example, shutters are usually

closed only at night. Thus the resulting increases in thermal resistance

over the glazed portions of the window accrue only during the nighttime

hours. To deal explicitly with the potential for window management, or any other special cases, degree days during the nighttime hours for a given balance point and location (DD

c

) and degree days during the day

for a given balance point and location (DD^) were calculated. Two sets

of degree day figures based on the average temperature of the basement

were calculated. The difference in temperatures in the conditioned

space and the basement result in degree day category DDe

. The number

of indoor-outdoor basement degree days is denoted DD^; this category of

degree days is used only in cases where floor insulation is being

assessed.

Since there are a large number of potential window options, the alternative window retrofits had to be examined in stages. The load calculations associated with each stage and each retrofit are coded and

identified in Table B.2. Btu savings based on these calculations (see

Table B.2) are summarized (using the retrofit code) in Table B.3. Note

that these figures are based on differential loads. In order to get

dollar savings, the product of the equivalent energy cost per therm and

the differential load expressed in therms is multiplied by a present

value factor.

Load and energy savings calculations for doors, attic insulation, wall

insulation, and basement wall insulation, are given in Tables B.4 and

B.5, B.6 and B.7, B.8 and B.9, and B.10 and B.ll respectively. Notice

that in Table B.7, both total and incremental savings are calculated.

Total savings are needed to calculate how long the option takes to pay

for itself whereas incremental savings are needed to determine the optimum level of weatherization. These topics are discussed in more detail

in Appendix C.

71
TABLE B.2 LOAD CALCULATIONS ASSOCIATED WITH WINDOW RETROFITS

Retrofit Code Load in Btu/Ft^/year

STAGE 1

BASE : Uninsulated window3

(single glazing)

1.13 x DDq x 24

CL

Storm Window3

(Double glazing)

0.56 x DDq x 24

cL

Managed Insulating Drapes

Night JN

0.80 x DD

C x 24

Day

Total

1.13 x DDd x 24

CN + CD

Managed Shutters

STAGE 2

Night dn 0.13 x DD

C X 24

Day dd 1.13 x DDd X 24

Total D °N +

°D

Low Emissivity Film

>

E 0.74 x DD„

a X 24

Storm Window and Drapes

Night bc

n 0.48 x DDC X 24

Day bcd 0.56 x DDd X 24

Total BC BC^ + BCp

Storm Window and Shutter bd

n 0.12 x DDC X 24

Day bdd 0.56 x DDd X 24

Total BD BDM + BDn N D

Storm Window and Film BE 0.38 x DD„

a X 24

Triple Glazing BB 0.36 x DD„

a X 24

72
STAGE 3

Triple Glazing and Drapes

Night

Day

Total

Triple Glazing and Shutters

Night

Day

Total

Triple Glazing and Film

BBC

n 0.32 x DDC x 24

BBCd 0.36 x DDd x 24

BBC BBC

n

+ BBCd

BBD

n 0.10 x DD

C x 24

BBDd 0.36 x DDd x 24

BBD BBD

n

+ BBDd

BBE 0.28 x DD 0 x 24

a

Source: American Society of Heating, Refrigerating and AirConditioning Engineers, Inc., ASHRAE Handbook of Fundamentals,

New York, 1972.

k Source: S. Robert Hastings and Richard W. Crenshaw, Window Design

Strategies to Conserve Energy , National Bureau of Standards,

Building Science Series 104, June 1977.

73
TABLE B. 3 ENERGY SAVINGS CALCULATIONS ASSOCIATED

WITH WINDOW RETROFITS3

Retrofit Savings in Btu/Ft^/Year

STAGE l b

Storm Windows A - B

(Double Glazing)

Managed Insulating Drapes A - C

Managed Shutters A - D

Low Emissivity Film A - E

STAGE 2

C

Storm Windows and Drapes B - BC

Storm Windows and Shutters B - BD

Storm Windows and Film B - BE

Triple Glazing B - BB

STAGE 3 d

Triple Glazing and Drapes BB - BBC

Triple Glazing and Shutters BB - BBD

Triple Glazing and Film BB - BBE

The letters in the second column refer to calculations presented

in Table B.2.

Base: Single Glazing

c Base: Double Glazing

d Base: Triple Glazing

74
TABLE B .4 LOAD CALCULATIONS ASSOCIATED WITH DOOR RETROFITS 3

Retrofit Code Load in Btu/Ft^/Year

Base: Existing 1-3/4" A 0.457 x DDq x 24

Solid Door

Storm Door B 0.31 x DD 0 x

a 24

Second Wood Door C 0.20 x DD„ x

a 24

Insulating Door D 0.17 x DDo x

a 24

3 Source: American Society of Heating, Refrigerating and AirConditioning Engineers, Inc., ASHRAE Handbook of Fundamentals,

New York, 1972.

TABLE B.5 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH DOOR RETROFITS 3

Retrofit Savings in Btu/Ft^/Year

Storm Door A - B

Second Wood Door A - C

Insulating Door A - D

3 The letters in the second column refer to calculations presented

in Table B.4.

75
TABLE B.6 LOAD CALCULATIONS ASSOCIATED WITH ATTIC INSULATION3

Retrofit Code Load in Btu/Ft 2 /Year

Base

Uninsulated attic A 0.19 x DD x 24

cl

R-l 1 Insulation B 0.065 x DD. x 24

u R-19 Insulation C 0.044 x DD 0 x 24

a R-30 Insulation D 0.031 x DD

a x 24

R-38 Insulation E 0.025 x DD„ x 24

u

a Source: American Society of Heating, Refrigerating and AirConditioning Engineers, Inc., ASHRAE Handbook of Fundamentals , New York, 1972.

TABLE B.7 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH ATTIC INSULATION3

Retrofit

Total Savings

in Btu/Ft^/Year

Incremental Savings

in Btu/Ft 2 /Year

R-ll Insulation A - B A - B

R-19 Insulation A - C B - C

R-30 Insulation A - D C - D

R-38 Insulation A - E D - E

3 The letters in the second and third columns refer to calculations

presented in Table B.6.

76
TABLE B.8 LOAD CALCULATIONS ASSOCIATED WITH WALL INSULATION3

Retrofit Code Load in Btu/Ft 2 /Year

Base 1: Uninsulated

Masonry Wall

A1 0.39 x DD. x 24

a

R-ll in Masonry Wall B1 0.08 x DD x 24 SL Base 2: Uninsulated

Frame Wall

A2 0.22 x DD x 24 a

R-ll in Frame Wall B2 0.069 x DD x 24

a Base 3: Uninsulated

Veneer Wall

A3 0.33 x DD„ x 24

a

R-ll in Veneer Wall B3 0.077 x DD„ x 24

a

3 Source: American Society of

Conditioning Engineers, Inc.

Heating

, ASHRAE

, Refrigerating and AirHandbook of Fundamentals,

New York, 1972.

TABLE B.9 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH WALL INSULATION3

Retrofit Savings in Btu/Ft 2 /Year

R-ll in Masonry Wall A1 - B

R-ll in Frame Wall A2 - B2

R-ll in Veneer Wall A3 - B3

3 The letters in the second column refer to calculations presented

in Table B.8.

77
TABLE B. 10 LOAD CALCULATIONS ASSOCIATED WITH BASEMENT WALLS

Retrofit Code Load in Btu/Ft^/Year

Base 1: Uninsulated

Wall above grade

Basement A1 0.78 x DDb x 24

R-7 above grade B1 0.121 x DDb x 24

Base 2: Uninsulated

Basement Wall below grade

A2 0.113 x DDb x 24

R-7 below grade B2 0.058 x DDb x 24

TABLE B. 11 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH BASEMENT WALLS3

Retrofit Savings in Btu/Ft^/Year

R-7 above grade A1 - B1

R-7 below grade A2 - B2

a The letters in the second column refer to calculations presented in

Table B.10.
The load and energy savings calculations for first floor insulation

differ slightly from those presented above (see Table B.12). This is

because first floor insulation is examined in two stages. In the first

stage, R-19, R-30 and floor carpet are analyzed independently (see

Table B.13). In the second stage the economic viability of floor carpet

is analyzed on the assumption that either R-19 or R-30 floor insulation

has been installed. Incremental analyses are conducted at each stage

to determine the optimal level of first floor insulation.

B.3 Mechanical System Retrofits

The types of mechanical options which are being considered for installation in each weatherized house cair be classified as: a) those that affect

the building load, b) those that affect the efficiency of the furnace,

c) those that affect the efficiency of the heat distribution system, and

d) those that reduce the amount of energy used for supplying domestic hot

water. The mechanical options intrinsically differ from the architectural

options in that, though the savings which they produce are dependent on

the total load of the dwelling, the cost of installing an option is

usually load independent. Second, the amount of savings that can be

obtained from most mechanical options depends on the initial condition

of the mechanical system. For example, it is not possible to predict

the savings that would result from replacing a burner or a furnace unless

the present efficiency of the burner or furnace is known.

In order to simplify the selection processes and to reduce problems

attributable to interdependence, the architectural options and the

mechanical options have been separated. As a means of insuring that

only those weatherization options which are cost-effective are installed,

engineering judgment was used to establish several ground rules for

limiting the impact of system interdependencies. These ground rules

focused: (1) in the case of the architectural options, on anticipated

system efficiency improvement; and (2) in the case of mechanical system

options, on reduced loads due to the improved thermal performance of the

building envelope.

Specifically the two types of options are separated by assuming a conservative overall mechanical efficiency of 65 percent for oil, 70 percent for

gas, and 100 percent for electricity in selecting architectural options,

and then selecting the mechanical options to satisfy the reduced thermal

load based on the "post" retrofit levels of the architectural options.

In order to decide what options are to be installed in a given house,

a series of tests are first performed, and the efficiency of the existing

system determined. Each option that can be added to the existing system

is then assigned an efficiency improvement value (EIV) based on the efficiency of the existing system plus any improvements already incorporated.

The improvement value is then multiplied by the load of the building

after architectural retrofit to determine the energy savings. The change

79
TABLE B.13 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH FLOOR INSULATION3

Retrofit

Total Savings in

Btu/Ft2 /Year

Incremental Savings

in Btu/Ft2 /Year

STAGE 1

R19 in floor A - B A - B

R30 in floor A - C B - C

Carpet on floor A - D A - D

STAGE 2

R19 and Carpet A - BD B - BD

R30 and Carpet A - CD C - CD

a The letters in the

presented in Table

second and third columns refer to calculations

B.12.

80
TABLE B. 13 ENERGY SAVINGS CALCULATIONS ASSOCIATED WITH FLOOR INSULATIONS3

Retrofit

Total Savings in

Btu/Ft^/Year

Incremental Savings

in Btu/Ft^/Year

STAGE 1

R19 in floor A - B A - B

R30 in floor A - C B - C

Carpet on floor A - D A - D

STAGE 2

R19 and Carpet A - BD B - BD

R30 and Carpet A - CD C - CD

3 The letters in the second and third columns refer to calculations

presented in Table B.12.

81
TABLE B . 14 VALUES FOR DEGREE DAYS A THROUGH E AND HEATING DAYS USED IN FORECASTS

District3

Degree Degree Degree Degree Degree Heating Heating

City Days A Days B Days C Days D Days E Days Factor

Albuquerque 4292 2818 2788 1504 3107 239 1.03008

Atlanta 3095 2545 2012 1083 1568 196 0.74280

Charleston 1904 1904 1341 563 795 159 0.45696

Chicago 6127 2976 3410 2717 5120 256 1.47048

Colorado Springs 6473 2749 4018 2455 5817 277 1.55352

Easton 5827 2750 3348 2479 4902 258 1.39848

Fargo 9271 3758 5041 4230 8323 287 2.22504

Los Angeles 1819 1018 1336 483 2034 226 0.43656

Miami 206 206 183 23 160 32 0.04944

Minneapolis/St. Paul 8310 3859 4539 3771 6552 273 1.99440

Oakland 2909 975 1884 1024 4438 317 0.69816

Portland 7493 3648 4202 3291 6060 303 1.79832

St. Louis 4750 3040 2778 1972 3164 226 1.14000

Tacoma 5185 1544 2972 2213 6042 318 1.24440

Washington, D.C. 4211 2633 2546 1665 3402 243 1.01064

3 U.S. Department of Energy, "Weatherization Assistance Program for Low-Income

Persons; Proposed Amendments,” Federal Register, Vol. 44, No. 74, Monday,

April 16, 1979.
in load due to the EIV expressed in dollars over the life cycle is then

compared to the cost of the option. Savings-to-cost ratios for the

20 year study period are then computed.

The resulting list of possible options for the particular house is ranked

by savings to cost ratio, with the largest savings-to-cost ratio first.

The remaining list of mechanical system retrofits are then reranked based

on the assumption that the first option has been installed. Working down

from the top of the list, enough options are selected such that their

combined EIV is equal to the difference between the efficiency of the

existing system and the potential efficiency of that system. That is,

they will bring the efficiency of the existing system up to the theoretical optimum of 65 percent for oil, 70 percent for gas, and 100 percent

for electricity. The benefits in energy saved are then compared to the

cost of the combination of mechanical options to insure that they pay for

themselves in 11 years.'*' Table B.15 defines the terms used in estimating

energy savings due to mechanical system retrofits. Table B.16 summarizes

the calculations used in the economic analysis.

1 The selection of mechanical options differs from the selection of the

architectural options in that each mechanical option represents an

increment. Thus each mechanical option is assessed incrementally

using a 20 year life cycle. The whole set of mechanical options,

or the mechanical system, is then tested against the 11 year payback

constraint. If the constraint is violated, then the mechanical system

retrofit package is resized in the same way as for the architectural

options

33
B. 15 DEFINITION OF TERMS USED IN MECHANICAL SYSTEM RETROFIT CALCULATIONS

L = .50 times the yearly Btu load on the house as determined from

utility bills.

e a

= annual efficiency of the furnace before modification or replacement.

e^ = annual efficiency of the furnace after modification or replacement.

D = square feet of duct to be insulated.

V„ = U-value of duct after insulation,

a = U-value of duct before insulation.

n = percent reduction due to nighttime temperature setback.

e aR = measured recovery efficiency for water heater from mechanical

system test data.

ev

, R

= recovery efficiency of new water heater.

e n

= recovery efficiency of water heater.

84
B. 16 ENERGY SAVINGS CALCULATIONS

SYSTEM RETROFITS

ASSOCIATED WITH MECHANICAL

Retrofit Yearly Savings

(Btu/year)

Flue or Vent Damper

or Restrictor

.07 x L

a

Electronic Ignition .05 x L

a Derate Furnace .046 x L„

a Replace Burner or Furnace

La " 7

} eb

e a Insulate Ducts D <V

a

- V

b

)

Radiator Reflector Assumed effective on exterior wall if annual

heating degree days

greater than 4000

Night Setback Thermostat L x n/100

a Relocate Thermostat Estimated on houseby-house basis

Insulate Water Heater Electric 1,245,745

Gas 3,650,000

Oil 3,570,000

Aquabooster .124 x L„

a Replace Water Heater 13.78 x 10 6

/(

1 - 1

) e aR eNR

Thermostat Setting Gas 3,650,000

(150-130° F) Oil 3,570,000

Reduce Water Heater Electric 1,245,745

Shower Flow Resistors 7.55 (F-2.5) x 105 /eN

Timer on Electric Water Heaters 6,399,375

85
APPENDIX C

SELECTED TOPICS IN INVESTMENT THEORY

In this appendix we shall explore several topics in investment theory

which provide the technical underpinnings for identifying the optimal

level of weatherization.

C.l The Present Discounted Value Criterion

Generally speaking, investment today is undertaken in order to increase

consumption in some future time period. The rate of return associated

with the investment may be interpreted as a measure of the terms at

which consumption today may be turned into consumption tomorrow. Since

the future holds uncertainty, the rate of return acts as a signal to

individuals to withhold some output from current consumption and as a rationing device to limit investment opportunities. The rate of return

may therefore be used to relate individual tastes and available technology. First let us relate graphically the technical possibilities of

transforming consumption today, C Q , into consumption in the future, Cf.

For a given technology and with available resources, the possible com- bination of C

Q and C^ are similar to those shown in Figure C.l. The

concavity of the curve is based on the assumption that there is a diminishing rate of trade-off of C

Q for C^ as present consumption, CQ , increases. More precisely, the marginal rate of transformation diminishes. The slope of the curve at any point, A, shows how consumption

can be technically traded between the present and the future. The slope

of the curve at any point A may also be regarded as the rate of return

on the investment. Let us now introduce a set of indifference curves which relate individual tastes or preferences for present and future

consumption. Along each indifference curve we have all those combinations of present consumption and future consumption which leave the

individual equally well off. The slope of the indifference curve at

any point shows how for the individual's tastes, present consumption

may be substituted for future consumption while leaving the consumer

equally well-off. Indifference curves are assumed to be convex, that

is , as present consumption increases , the marginal rate of substitution

decreases. As an individual moves up and to the right he becomes better

off. In our analysis, we shall assume that each individual seeks to

maximize his/her well-being by moving to the highest indifference curve attainable. In Figure C.2 we see that the highest indifference curve attainable is 1^ which is just tangent to our investment opportunity

curve at A. (In this case the individual relies solely on his own productive opportunity.) At A the marginal rate of substitution (the slope

of the indifference curve) is equal to the marginal rate of transformation

(the slope of the investment opportunity curve). The slope of both curves

at A is -(1 + r) where r is the rate of return on the investment. Notice

that this individual has a high preference for current consumption. This

result would be expected in low-income households.

86
LEVEL

OF

FUTURE

CONSUMPTION

Cf

FIGURE C.l INVESTMENT OPPORTUNITY FRONTIER

87
LEVEL

OF

FUTURE

CONSUMPTION

C

f

FIGURE C . 2 EQUILIBRIUM BETWEEN PRESENT AND FUTURE CONSUMPTION

I

88
Suppose now that the individual can borrow money at some market rate r

Q

. We wish to see if a higher indifference curve can be reached by such

borrowing. Furthermore, let us assume that r

Q is less than r. The slope

on our borrowing curve is -(1 + r). This curve is shown in Figure C.3

to be tangent to our investment opportunity frontier at B and to be tangent to indifference curve at C. That is, the individual uses their

own productive opportunities to reach B and then borrows to end up at C.

Note that the individual is better off at C than at A because he is on

a higher indifference curve. Since poor people have a relatively strong

preference for current consumption over future consumption their indifference curves constrain them to a relatively steep portion of their

investment opportunity frontier. However, by borrowing even if rates

are high they can reach a higher indifference curve. This argument helps

to explain why poorer families often incur substantial borrowing debts.

Suppose that we now introduce a new investment alternative, weatherization, and that the loan may be financed at a market rate of interest,

r , where rw

is less than r

Q

. The slope of the borrowing curve is

-(1 + r w

). The borrowing curve is tangent to the investment opportunity

frontier at D and is tangent to indifference curve I

3 at E. From

Figure C.3 we can see that with weatherization investments the low-income

homeowner is able to reach a higher indifference curve than by either

borrowing or relying on his own productive opportunities (i.e., staying

on the investment opportunity frontier).

Earlier it was stated that the shape of the investment opportunity

frontier was determined under the assumption that technology was fixed.

The introduction of weatherization opportunities is essentially an introduction of a new technology to the low-income homeowner. This

change affects the shape of the investment opportunity frontier by

shifting portions of it upward. Figure C.4 shows the effect of changing

technology on the shape of the investment opportunity frontier. Here

the curve shifts from CC to CC' and finally to CC". If we were now to

draw in our indifference curves, we would see that a new equilibrium

position results. Also, since the investment opportunity curve has

shifted upward it is possible for the homeowner to reach a higher indifference curve.

Let us now examine what effect a payback constraint will have on the

shape of our investment opportunity frontier. A payback requirement

serves to constrain investment opportunities. It also biases investment

decisions toward those options which maintain a high level of current

consumption. That is, in the presence of a payback constraint for a given level of current consumption C , a lower level of future consumption (Cp will result than if no payback constraint were imposed (C^").

This point is illustrated graphically in Figure C.5 where the investment

opportunity frontier is CC' in the presence of a payback constraint and

CC" with the payback constraint removed. Furthermore, if we were to

put in our borrowing line we would see that it is tangent to CC* at A' and to CC" at A". The highest indifference curves that can be reached

are then 1^ and I

2 at B' and B" respectively. If we extend the borrowing

89
FIGURE C .

THE EFFECTS OF A PAYBACK CONSTRAINT ON EQUILIBRIUM
FIGURE C.4 THE EFFECTS OF CHANGING TECHNOLOGY ON THE SHAPE OF THE INVESTMENT OPPORTUNITY FRONTIER

LEVEL OF PRESENT CONSUMPTION C,

91
FIGURE C .

EQUILIBRIUM BETWEEN PRESENT AND FUTURE CONSUMPTION WHEN BORROWING IS PERMITTED

h

92
line until it reaches the horizontal axis, as is done in Figure C.5, we can calculate the present value of the investment. Notice that in

the presence of a payback constraint, the borrowing curve intersects

the horizontal axis at PV-^. In the case where no payback constraint is

imposed the present value of the investment is It can readily be seen that PV

2 is greater than PV^, so that imposing a payback reduces

the present value of the investment.

What is being portrayed in Figure C.5 is the process through which

investors maximize present value while maximizing their utility. It has

been shown elsewhere 1 that maximizing present value will result in

equating the marginal rate of transformation along the investment opportunity frontier to the marginal rate of substitution along the indifference curve. This is a basic condition for economic efficiency. Note

that in our previous discussion a two period model was used for expository

clarity. The generalization from two periods to N periods is straightforward but rather tedious. More succinctly, we may define the (net)

present value of an investment, j, over N periods to be

PVj = - cJ Q

+ Zn <si

t -dt

)

t=l (1 + D)'

where D = the discount rate;

cJ

Q = the initial cost of the project;

S^

t - savings in the t

1 *1 period; and

C j ^ = costs in the t ^ period.

(For the reader interested in a rigorous formulation, the text by

Hirshleifer is highly recommended. ) Maximizing present value is therefore equivalent to selecting only those investments, j, for which PVj

is greater than zero. If there are J of these investments then the

quantity to be maximized, MPV, of the investor's present value may be

expressed mathematically as

J

MPV = Z PV •

j=l

^ William H. Branson, Macroeconomic Theory and Policy , Harper and Row,

Publishers, New York, 1972.

2 J. Hirshleifer, Investment, Interest, and Capital , Prentice-Hall, Inc.,

Englewood Cliffs, New Jersey, 1970.

93
As was stated earlier, maximizing present value will maximize welfare.

We saw that in the presence of a payback criterion present value and

hence welfare was not maximized. Other investment criteria which do not

maximize present value will not maximize welfare. Let us now examine

a commonly used investment criterion which maximizes present value.

C .2 OPTIMIZING WEATHERIZATION INVESTMENTS

In this section we shall review several economic concepts which permit

us to identify that level of weatherization which is optimal. In particular, we shall focus on how life-cycle cost techniques enable us to choose

among options as well as what effect the presence of a payback constraint

has on weatherization investments.

Cost-benefit analysis provides the basic framework for an economic analysis of alternative weatherization options. That is, by the systematic

weighing of available alternatives cost-benefit analysis establishes

guidelines for increasing the efficiency of resource allocation. ^ The

emphasis in this study will be on those portions of cost-benefit analysis

which permit us to choose among investment opportunities of varying size.

The principles of cost-benefit analysis actually used in this study are,

to a great extent, based on microeconomic theory. It is through microeconomic theory and its treatment of profit maximization and marginalism

that the necessary criteria for optimizing weatherization investments are established. An illustration of how these two microeconomic concepts

are used in practice is now in order. In the next paragraph parenthetical

terms refer to the application of microeconomic concept to weatherization

specifically. The general microeconomic terminology immediately procedes

the parenthetical term.

A firm's profits (household's net savings) are defined as its total

revenues (total savings) minus its total costs. In this case we shall assume that both revenues and costs are a function of the level of output (weatherization). Microeconomic theory then requires for profits

to be maximized that the additional revenue on the last unit sold

(marginal revenue) be equal to the additional cost of producing that

unit (marginal costs).

Clearly total weatherization costs and total energy savings are a function of the level of energy conservation. Net savings, the difference

between the total savings and total costs, is therefore directly

analogous to a firm's profit. If we denote total savings as S(A) and

total cos ts as C(A), where A is the level of energy conservation, then

net savings, NS(A), is defined as

NS( A) *= S( A) - C( A)

C.l

For a thorough treatment of cost-benefit analysis see E. J. Mishan,

Cost-Benefit Analysis , Praeger, Washington, 1971.

94
It is net savings, NS(A), that the homeowner wishes to maximize. Having

specified this relationship, calculus may now be used to maximize the

homeowner's net savings. Differentiating equation C.l with respect to

A results in

NS'(A) = S'(A) - C’U).

Equating NS' (A) to zero gives a necessary condition for maximizing NS(A),

namely that the optimum level of weatherization is that level, A,

at which

S'U) = C ' ( A)

In other words, net savings are maximized when marginal savings. S' (A),

are equal to marginal costs, C'(A). That is, the savings generated by

the last increment of weatherization are just equal to the costs of that

increment. ^

Thus far no mention has been made of either the length of the study

period or how future cost or savings considerations are to be treated.

These costs and savings, although more difficult to quantify, must be

included in the consumer's decision to invest in weatherization. The

requirement that all relevant costs which occur over the study period be

taken into consideration leads to the use of life-cycle cost techniques.

Life-cycle cost techniques may be defined as techniques which explicitly

treat the cost (negative cash flows) of purchasing, installing, operating

maintaining and repairing a specific weatherization option as well as the expected savings (positive cash flows) associated with that option

which occur over the entire study period. Life-cycle cost techniques

are particularly useful since they enable us to analyze the merits of

alternative weatherization options and make tradeoffs between competing

alternatives.

It was stated earlier that life-cycle cost techniques would be used in

this study because they explicitly considered all costs over the study

period. We now wish to examine how life-cycle cost techniques can be

used to look at a weatherization investment from the viewpoint of the

low- income homeowner.

As a homeowner increases the level of weatherization, the amount of money

spent on energy is reduced. Energy losses, however, do not fall to zero. This is due to the non-linear (in this case inverse) relationship between

heat losses and the level of weatherization. This relationship must be

recognized and incorporated in the calculation of life-cycle energy costs

Referring to curve E

Q

E in Figure C.6, it can be seen that the life-cycle

energy costs associated with no weatherization investment, E

Q

, are quite

1 Based on the usual shape of the S(A) and C(A) curves, it is safe to

assume that the second order condition for a maximum, NS" (A) < 0,

is also satisfied.

95
LIFE-CYCLE

COSTS

FIGURE C . 6 MINIMIZING LIFE-TIME BUILDING COSTS THROUGH OPTIMUM WEATHERIZATION

TOTAL OWNING

lipt

LEVEL OF ENERGY CONSERVATION

96
high. As the level of the energy conservation investment is increased,

life-cycle energy costs fall off quickly at first and then at a diminishing rate. Of course, if we are to count the benefits of reduced energy

consumption which accrue from weatherization we must also include all

costs associated with that level of weatherization. These costs, the

life-cycle costs of energy conservation are illustrated graphically by

the curve C

q

C on Figure C.6. Notice that the initial levels of weatherization are the most expensive due to set ups for labor and equipment.

The C

Q

C curve then rises at a constant rate.

The homeowner must now decide how to tradeoff the costs of weatherization

against reduced energy costs. If we vertically sum the two curves, we

get the total life-cycle costs to the homeowner—that is, the costs both

of the energy and of the weatherization options. Notice that this curve,

T

qT, decreases to a minimum and then rises. At the minimum, T

t

, the

total life-cycle costs to the homeowner are minimized. It is tnis level

of weatherization, £ t

, that is optimal for the homeowner because it

minimizes the costs or owning and operating the system.-*- By a closer

examination of the T

q

T curve it can be seen that at any point to the

left of the point ( A 0 p t

, T

Q p

) total costs could be reduced by increasing

the level of energy conservation. Similarly, at any point to the right

of ^opt» T

0p t>, total costs could be reduced by reducing the level of

energy conservation.

The criterion for maximizing the homeowners net savings will now be

derived from Figure C.6. As a first step draw a horizontal line from

E

q

. The vertical distance from the horizontal line emanating from E

Q

to the E

q

E curve, for any given £, is then equal to the life-cycle

energy savings of that level of weatherization. Denoting life-cycle

energy costs, as a function of £, as E(£), life-cycle savings,

S ( 5, ) , are then given by the following equation

S(A) = E

c - E(i).

In Part A of Figure C.7 both life-cycle savings, S(£), and energy conservation costs, C ( £ ) , have been plotted. Notice that at all levels of

energy conservation less than £^, the life-cycle costs of weatherization

exceed the life-cycle energy savings. Similarly, at all levels of energy

conservation above £

the life-cycle costs of weatherization exceed the

life-cycle energy savings. Therefore, weatherization is economically

viable only at levels of energy conservation between £^ and % 2

' T^e number of years it will take for the weatherization investment to pay

for itself will depend on what level of energy conservation between £-^

-* The term system as used here denotes both the energy purchased and the

weatherization options. Implicit in the costs of owning and operating

the system is the rate at which energy prices are expected to increase

over the study period as well as the rate at which future costs and

savings are to be discounted.

97
FIGURE C . 7 OPTIMIZING A WEATHERIZAT ION INVESTMENT

PART A

PART B

TC

TS

^opt ^2

LEVEL OF ENERGY CONSERVATION

MC

MS

LEVEL OF ENERGY CONSERVATION

98
and £2 is selected by the homeowner .

*• Although there are many levels of

investment which pay for themselves, there is only one optimal level of

investment. The optimal level of investment is the point at which net

savings are maximized. Graphically it is the point where the vertical

distance between the two curves (TS and TC) is maximized, that is, where

the slope of the total savings curve is equal to the slope of the total

cost curve. Note that this point does not guarantee a payback in say

11 years. In fact, when more than one option is being examined the

payback periods on the optimal levels of investment are likely to vary

considerably.

Let us now examine the marginal savings and marginal cost curves in

Part B of Figure C.7. Since the life-cycle cost curve was assumed linear,

marginal costs, MC, are constant. The rate of decline of the marginal

savings curve, MS, however diminishes. This, once again, is a reflection of the fact that there is an inverse relationship between heat flows

and the level of energy conservation.

The point at which MS crosses MC is revealed to be the optimal

level of energy conservation. (See the dotted vertical line from the

point of tangency in Part A of Figure C.7.) At all levels of energy

conservation, £', below £ t

, life-cycle energy savings generated by the

increment £ t - £' (shown cross hatched), exceed the life-cycle costs

incurred by installing that increment (the rectangular part of the cross hatched area). Similarly, at all levels of energy conservation, £", above

£Q t

» life-cycle energy savings generated by the increment £" - i- 0p t are

less than the life-cycle costs incurred by that increment. The exact

difference is equal to the area of the lightly shaded triangle in Part B

of Figure C.7. Under the assumption of perfect information, homeowners

would thus gravitate toward that level of energy conservation which eliminates any potential for further improvement through raising or lowering

of the level of energy conservation.

The previous discussion focused on the case of an optimal level of

weatherization using a given set of options. Increasing the level of

weatherization could therefore mean either increasing the input of all

weatherization options or adding one or more new options. To draw the

analogy to the theory of the firm once more, suppose a firm produces

one output but has many inputs; how does it combine these inputs so as

to maximize its profits? We have already seen that the homeowner's net

savings are directly analogous to the firm's profits. The question

facing the homeowner therefore becomes, "How do I combine the weatherization options in such a manner that I maximize net savings?" In the

discussion which follows it will be assumed that all weatherization

options are independent. That is, any savings generated or costs

incurred by increasing the level of one option does not affect those

1 The number of years which it takes the present discounted value of

weatherization savings to equal weatherization costs is defined as the payback period.

99
generated or incurred by any other option. This simplification permits

us to treat both savings and costs as additive. To make this point more

transparent, a slight modification in the notation for weatherization

savings and costs is useful. If weatherization costs are denoted

CUlt *2» •••» 4n

) anc* weat^er i zat i°n savings as S(i,j, j^, •••» & n

) w^ere the for i equal to 1 , 2, ..., n indicate the respective weatherization

options, then

CCs,^* S»2* •••» = ... + Cn

(j,^)

and

S( A-l ,

fi, 2

* •••» i- n

) = ^

2 ^2

) ••• Sn

( £ n)

where

Ci ( £i ) = the cost of the i*"*

1 option.

We now wish to examine how a homeowner should move toward an optimum.

First let us assume that the homeowner has a binding budget constraint.

Net savings must therefore be maximized subject to this budget constraint.

In order to accomplish this task we shall make use of the method of

Lagrangian Multipliers.

In this case we seek to maximize

... , £ n

) — C(i,^, ... , &n

)

subject to

C(i,-^» •»., Jl n

) B

where B is the budget constraint. We then define a new function, L,

such that

L = [S(&^, ..., £- n

) “ C(£ 1# • «», £ n) ] d" X [B-C(j,^, ..., &n

) ]

where X is an additional variable called the Lagrangian Multiplier. L is

then maximized1 by differentiating with respect to the for i equal from

1 to n, and al^o with respect to X. The resultant derivatives are then set

equal to zero. Upon simplification we get

1 Notice that since B-C(«,j, ..., 4 n

) = 0 at the highest allowable budget,

L is equal to net savings.

o We are tacitly assuming that the second order conditions are satisfied.

These conditions require the bordered Hessian matrix to be negative

definite. See Eugene Silberberg, The Structure of Economics: A Mathematical Analysis , McGraw-Hill Book Company, New York, 1978.

100
si<*i>

1 + X, • • • 1 + X

where X > 0. 1

S A<*n> .

That is, on a limited budget the weatherization options should be

installed in such a way that the ratios of marginal savings to marginal

cost for each option are equal. This point can be made more clear through

reference to the marginal savings to marginal cost ratio. The ratio of

marginal savings to marginal cost, S i^i\ shows the dollar amount of

qcq)

savings generated over the life cycle by an additional dollar investment

in weatherization for a particular option. Consequently, if two options were being considered (both with marginal savings to marginal cost ratios

greater than one) and one had a lower marginal savings to marginal cost

ratio, it would be possible to transfer a dollar from the option with the

lower ratio to the one with the higher ratio and increase net savings. Only

when the marginal savings to marginal cost ratios are equal across all options

is it no longer possible to trade dollars in one options for dollars in

another. We may now explore how this information can be used to arrive

at an optimal solution. In the previous example the Lagrangian

multiplier, X, was taken to be greater than or equal to 0. If

X is greater than 0, this implies that

q( q) > q<i±

> i = 1, ..., n.

Thus if the budget is increased a small amount, greater net savings can

be achieved by increasing the level of the i*"*

1

option.

2 Consider for the moment the case of two weatherization options. Given

the above functional relationships, total savings and total costs associated with each level of weatherization can be calculated. Consequently,

the net savings associated with each combination can be calculated.

Furthermore, by reducing the level of one option and increasing the level

of the other a small amount, the same net savings can be generated. For

example, there exist many combinations of the two weatherization options

which will produce a given amount of net savings. These iso-net savings

curves^ may be plotted graphically and used to identify an expansion

patlT along which the homeowner moves to achieve the optimum level of

weatherization. Figure C.8 illustrates what such an expansion path would

look like.

1 The Lagrangian Multiplier, x, will be greater than or equal to zero

as long as it is profitable to use the entire budget, B, for weatherization.

2 n is now equal to 2.

^ The iso-net savings curve show all of the combinations of weatherization options 1 and 2 which result in the same net savings.

'A Assuming the average costs of the two options remain the same, the

expansion path shows the locus of cost minimizing choices facing

the consumer as the available budget is increased. An excellent

discussion of a firm's expansion path is given in Walter Nicholson,

Microeconomic Theory: Basic Principles and Extensions , The Dryden

Press, Inc., Hinsdale, 111., 1972.

101
LEVEL

OF

OPTION 2

FIGURE C .8 OPTIMIZING WEATHERIZATION INVESTMENTS SUBJECT TO A BUDGET CONSTRAINT

LEVEL OF OPTION 1

102
The level of option 1 is plotted on the horizontal axis of Figure C.8

whereas the level of option 2 is plotted along the vertical axis. The

iso-net savings curves are denoted as NS

Q through NS

6

« The iso-net

savings curve NS

Q is that combination of options 1 and 2 which produces

no net savings. The iso-net savings curve NSp is that combination of

options 1 and 2 which produce some specified positive net savings, say

$175. Notice that the least cost way of achieving NS^ dollars of net

savings is to spend B-^ dollars, where

B

1 = CjUj) + C

2

( &2 ^

and Jl| = the level of option 1; and

£

2 = the level of option 2.

At this level of investment the budget curve is tangent to the iso-net

savings curve at Wp where the term W, is used to indicate the first

weatherization package, combination of ip and S^, which is being considered for installation. At this point the slope of the budget curve

c '(^)

is equal to the slope of the iso-net savings curve. This relationship

produces the constrained maximum criterion,

spj;) sp*)

cp*) cp*)

where = marginal savings for option i;

Cj(j^) = marginal cost for option i;

k = 1 + X.

If the saipe net savings were realized with any other budget, say B|, with

levels £,j an^l respectively, then from Figure C.3 it can be seen

that budget is greater than Bp Notice also that the iso-net savings

curves curl back on themselves. That this occurs may be demonstrated

by referring to Part A of Figure C.7 where it can be seen that increasing

the level of energy conservation beyond a certain point (j^) generates

increasingly higher costs while savings diminish. The locus of points

at which the budget curves are tangent to the iso-net savings curves is

the expansion path along which the homeowner moves to achieve the most

weatherization per dollar spent. As the budget curves move out to the

right, more money is being spent on weatherization. The budget is

increased until when B^ dollars are spent, the homeowner can achieve

maximum net savings of NS^ dollars, say $2100, at point (the sixth

weatherization package). At this point

S 1<*1> S

2

(£

2

6)

cp*) cpj)

103
as in the previous cases. However, in this case k is equal to 1, which

implies

S

1 (A

1

) = C

l

(ll l

) 5 SjCtj) = C^( Jl|)

This is the maximum efficiency criterion. Notice that if more than

dollars are spent on weatherization, net savings are reduced. The

levels of weatherization that produced NS^ dollars of net savings would

therefore be optimal.

Let us now examine the impact that a payback constraint has on the

optimum level of weatherization. Consider the case where we have four

weatherization options. For each of these options the ratio of marginal

savings to marginal costs,

Ri(ili)

s

i

( V w

for i = 1, 2, 3 and 4

can be plotted graphically. From the preceding discussion, we know that

the optimal level of weatherization consists of those levels, £ £ , where

= 1 for i = 1, 2, 3 and 4.

In Figure C.9, R^Ci^) is plotted for each option. The level of weatherization is shown on the horizontal axis of each figure. The vertical

axis shows the values which R^Cjl^) takes on as varies. The horizontal

line at R^(i-) = 1 shows the optimum level of weatherization for each

option considered in isolation. A second horizontal axis is drawn on

the top of each figure. The markings on this axis shows how long it

takes the option to pay for itself as a function of the weatherization

level. A quick examination of Figure C.9 shows that at the optimal level

of weatherization option 1 takes 5 years to payback, option 2 takes 7 years, option 3 takes 11 years, and option 4 takes 13 years. Thus if an

11 year payback constraint is imposed on each option, as is done in the

demonstration program, only option 4 fails. Now if the level of option 4

is reduced from to a£, where the p denotes payback, R^(a]?) is greater

than 1. Let us denote this value as P. If A^ units of option 4 are installed, life-cycle energy savings will be reduced from what they would

have been at A^ by an amount equal to the entire cross hatched area. Life-cycle costs however are only reduced by the rectangular area bounded

above by the horizontal line at 1. The triangular area thus represents

1 This would imply that \ is less than zero,

a more mathematical discussion is referred

The reader interested in

to the text by Silberberg.

1U4
OPTION

1

OPTION

2

OPTION

3

OPTION 4

FIGURE C .

EFFECT OF A PAYBACK CONSTRAINT ON OPTIMUM WEATHERIZATION LEVELS
foregone net savings. The imposition of a payb^c^ constraint therefore

does not lead to a utility maximizing solution. ’

The above illustration shows how the use of a payback constraint as an investment criterion produces an imbalance in the weather izat ion package.

It is important to point out that if payback alone is used, the result

is likely to be economically inefficient. From Figure C.9 it can be seen that increasing the level of weather ization to the point where the

option just pays back in 11 years will result in costs that are not

being offset by energy savings in two of the four cases (options 1 and 2).

An additional disadvantage is that payback calculations ignore benefits

which accrue to the homeowner beyond the eleventh year.

An alternative way to think of the payback constraint, and the one used

in this study, is to treat it, where binding, in the same way that physical barriers are treated. For example, the amount of wall insulation

which can be installed is limited to the thickness of the interiorexterior wall cavity. If denotes the level of wall insulation

then would be greater than 1. In the presence of physical

barriers, other economic studies have shown that it is sufficient

to optimize the level of energy conservation for th^ options which

are not affected by the presence of such a barrier. We shall

therefore proceed with the optimization of the other weather ization

options in this manner. If a payback constraint is binding on one option, it will be noted and the economic analysis of the other options

will proceed as if no budget constraint were imposed.

It is important to note that there may be instances where an 11 year

payback constraint would not be binding on any option, since it would

occur at a level where RCi.?) was less than 1 for all i. In this case

a utility maximizing solution would still be possible.

2 An alternative method would be to apply the payback constraint to the

entire package of weather izat ion options. From an economic efficiency

viewpoint this method would be preferred to an option application of

the payback con iu it.

3 Stephen R. Petersen, Retrofitting .... Existing Housing for Energy Conservat ion : An Fconomic Analysis , National Bureau of Standards, Building

Science Series 64, December 1974.

106
APPENDIX D

DESCRIPTION OF COMPUTER PROGRAM USED TO MAKE ECONOMIC FORECASTS

CSAOWP (Community Services Administration Optimum Weatherization Package)

is an interactive computer program developed by NBS and written in BASIC

language

1

that determines the cost effectiveness of thirty-seven alternative weatherization options. Using a life-cycle benefits versus costs

approach, the program calculates for each option the energy savings over

11 years and the energy savings over the life of the option (20 years

was used in this analysis). Also included are the option cost over 11

years and the life-cycle cost of the option. Using these values, the

program then calculates the savings-to-cost ratio of either the total

present value costs and savings, or the marginal costs and savings in

cases where the investment can be installed in incremental stages (for

example, increasing thicknesses of insulation).

To facilitate the use of the program, and for ease in analyzing various

combinations of fuel and housing types, a data file was set up for each

of the 15 cities in the demonstration. The name of each file consists of

the first two letters of the city name or a similar abbreviation. Corresponding to each city file is a specific code number (numbers 1 through 15,

alphabetically) which is requested by the computer as the first input

value. Two types of information are contained in these files. The first

type consists of the weather data needed to calculate energy savings for

the alternative weatherization options. These data include: DD^ , total

degree days; DDg, degree days for basement walls; DD^,, degree days occurring at night; DD^, degree days occurring during the day; DD~, degree days

for the basement ceiling; and the number of heating days. The second type

of information is a complete set of first costs for the architectural

options, as described and listed in Appendix A. The program uses these

figures to calculate the 11 year cost and total cost of each option over

the study period, adjusting and discounting to include periodic replacement. The replacement schedule is based on that shown earlier in Table

4.1. The lifetime costs are used in the calculation of the savings-tocost ratios, and the 11 year costs are used for determining if the

payback criterion is satisfied.

After the user informs the computer for which city an analysis is desired,

the program requests any additional information required to complete

the economic calculations. The discount rate (real terms) and length

1 "BASIC" is an acronym for Beginners All-Purpose Symbolic Instruction

Code. For a description of the use of BASIC see BASIC LANGUAGE , Honeywell Software Series 400, Honeywell Information Systems, Inc.,

August 1971.

2 The subscript refers to the variable name used in the computer program.

107
of study period are variable inputs. The fuel type can be fuel oil,

natural gas, electricity, propane (bottled gas) or kerosene. The price

per unit and fuel price escalation rate are then input so as to correspond

to that fuel type. Three housing types are permitted: (1) frame,

(2) masonry and (3) veneer.

f From this information, the program computes the present value factors

needed to make the energy savings calculations. The following formula^

is used for both 11 and 20 years:

PVF = 1 + P

[1 - (-1-——

N

] x FP

D - P 1 + D

where:

P = real rate of change in fuel prices

D = discount rate

N = number of years (11 and 20 in our case)

PP _ 100,000 Btu x $/unit

(Btu content/unit) x (Efficiency for the fuel type)

The 11 year factor is used to determine if the savings from the option

are sufficient to cover the cost of the option within 11 years. The 20

year (or lifetime) factor is used for calculating the savings-to-cost

ratio, a measure which provides a way of ranking the options so that

the most cost-effective package of options can be selected.

The annual savings for each option are then calculated using the equations

described earlier in this report. The cost of the energy load of a category with the option installed is subtracted from the existing energy load

cost (called BASE ENERGY COST in program). These savings are then multiplied by the 11 year and lifetime present value factors, and divided by

100,000 to get values (columns 11PVS and 20PVS in the program output) that can be compared with the corresponding costs (columns 11PVC and 20PVC).

For certain types of options, the total savings and total costs are not

as important as the additional savings and additional cost incurred by

the installation of, say, an extra window covering or a thicker layer of

insulation. For these categories, a marginal analysis is done. The

change in cost and change in savings (column *20PVC and *20PVS) of going

from one stage to the next are computed and are used in the savings-tocost ratio.

Finally, the program calculates the savings-to-cost ratio for each of

the options by dividing the 20 year present value savings by the 20

year present value costs (or marginal values as indicated above). All

1 For further discussion of the use of this formula, see Section 3.2.

108
of these values are then printed in a table format, with the separate

categories of options divided and each option labeled. Those options

which are cost effective can be selected and ranked through a comaprison

of ratios and by confirming that payback occurs within 11 years.

109
FIGURE D.l FLOWCHART OF COMPUTER PROGRAM

O

Computer PVF

For 11 Years

and Lifetime

o

Computer PVS

For Each

Option

Do Marginal

Analysis

Where Needed

<Z>

Computer SCR

For Each

Opt ion

O

KEY:

Disc - Discount Rate FPE - Fuel Price Escalation

Rate

PVF - Present Value Factor

PVS - Present Value Savings

SCR - Savings-to-Cost Ratio

Stop 3

FIGURE D.l

FLOWCHART OF COMPUTER PROGRAM

110
APPENDIX E

SUMMARY OF BALANCE POINT CALCULATIONS FOR EACH DEMONSTRATION SITE

Tables E.l through E.29 present the forecasts for the optimal level

of weatherization for each demonstration site as a function of balance

point. The range of variation in balance point is between 50°F and 70°F

in increments of 2.5°F; in all, nine balance points are analyzed. These

balance points are typical of those empirically estimated with actual

energy consumption data. A separate table is presented for each city

and each fuel type. It is important to point out that although these

balance points correspond to those which were empirically estimated for

the houses in the demonstration program, the weatherization packages

which will actually be installed in those houses are presented in

Tables 4.9, 4.10 and 4.11.

The heating balance point (average outside temperature in °F at which

heating system comes on to maintain the interior thermostat setting)

and the K-f actor (rate at which the house consumes energy in Btu/degree

day) were determined by NBS for each house in the demonstration, by

applying standard correlation and regression techniques to fuel consumtion and weather data. Given data on fuel consumption and on temperatures from the Weather Bureau, it is possible to plot fuel consumption

versus local degree days for a specific time period. Different balance

points result in different degree day totals for any periods in which

temperatures fell below the balance point. Past studies have shown

that finding the balance point which produces the best "fit" straight

line to a fuel use temperature data plot will provide a good measure

of space heating fuel consumption for a house. From this information

it is also possible to calculate the expected fuel consumption of the

house for other time periods, from the temperature data for those time

periods. The accuracy of the calculation is dependent on how closely

the other variables associated with energy consumption, such as con- struction and thermostat setting, remain constant.

Figure E.l is a sample computer printout of a balance point calculation.

In this figure, T

Q

is the balance point of the house, B^ is the slope

or K-f actor of the best fit line (least squares line), and B

Q

is the

base load per degree day or that portion of the fuel consumption which

can not be attributed to weather variations (including, in the sample

case, the heating of service hot water through a "tankless coil" in

the furnace).

Mayer, L. S. , and Y. Benjamin, "Modelling Residential Demand for

National Gas as a Function of the Coldness of the Month," Energy

in Buildings , Vol. VI, No. 3, April 1978.

Ill
FIGURE E.l SAMPLE BALANCE POINT CALCULATION

112

Degree

days

per

day
TABLE E.l OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN ALBUQUERQUE, NEW MEXICO

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X

Caulk Windows X X X X X

Weatherstrip Doors X X X X

Caulk Doors X X X X

Weatherstrip Attic Hatch X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter

Triple Glazing X X

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X

R-19 Insulation

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation

X

X X X

X XX X

XX X

A A A A A A A

*Key for Basement Walls

A - Above Grade

I

113
TABLE E. 2 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN ATLANTA, GEORGIA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X

Reset Glazing X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X

Caulk Windows X X

Weatherstrip Doors X

Caulk Doors X

Weatherstrip Attic Hatch X X

WINDOWS

Storm Windows X

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R— 1 1 Insulation X X X

R-19 Insulation X X X

R-30 Insulation X

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

114
TABLE E. 3 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR PROPANE IN ATLANTA, GEORGIA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X

Caulk Windows X X X X X X

Weatherstrip Doors X X X X X X

Caulk Doors X X X X X X

Weatherstrip Attic Hatch X X X X X X X

WINDOWS

Storm Windows X X

Storm + Film

Storm + Shutter

Triple Glazing X X X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X

R-19 Insulation X X

R-30 Insulation X X X X X

R-38 Insulation X

WALLS

R-ll Insulation X X X X

BASEMENT WALLS*

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

115
TABLE E.4 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN CHARLESTON, SOUTH CAROLINA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X

Reset Glazing X

Install New Threshold X X X X X X X

Seal Structural Cracks XX X X X X X X X

Weatherstrip Windows

Caulk Windows X

Weatherstrip Doors

Caulk Doors X

Weatherstrip Attic Hatch X

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% GlasTT

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X X X X

R-19 Insulation X

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade
TABLE E. 5 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN CHARLESTON, SOUTH CAROLINA

INFILTRATION 50°F 52.5°F 55°F 57.5°F 60°F 62.5°F 65°F 67.5°F 70°F

Replace Broken Glass X X X X

Reset Glazing

Install New Threshold X X X X X

Seal Structural Cracks X X X X X X

Weatherstrip Windows

Caulk Windows

Weatherstrip Doors

Caulk Doors

Weatherstrip Attic Hatch

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X X X

R-19 Insulation

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation A A A A A A

X X

X X

X X

X X

X

X X

X

X X

X

X

A A

_X

_X_x

x_

x_x_

x_x_X

X

X

A

*Key for Basement Walls

A - Above Grade

117
TABLE E.6 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR ELECTRICITY IN CHARLESTON, SOUTH CAROLINA

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X

Caulk Windows X X X X X

Weatherstrip Doors X X X X

Caulk Doors X X X X X

Weatherstrip Attic Hatch X X X X X

WINDOWS

Storm Windows X X

Storm 4- Film

Storm + Shutter X

Triple Glazing

Triple 4- Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R- 1 1 Insulation X X X X

R- 1 9 Insulation X X X

R-30 Insulation X X

R-38 Insulation

WALLS

R-ll Insulation XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

118
TABLE E. 7 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR PROPANE IN CHARLESTON, SOUTH CAROLINA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X

Reset Glazing X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X

Caulk Windows X X X X

Weatherstrip Doors X X X

Caulk Doors X X X X

Weatherstrip Attic Hatch X X X X

WINDOWS

Storm Windows X X

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X X X

R-19 Insulation X X X

R-30 Insulation X

R-38 Insulation

WALLS

R-ll Insulation X

WALLS* BASEMENT *

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

119
TABLE E.8 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN CHICAGO, ILLINOIS

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67. 5°F 7 0°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X

Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X X X

Storm + Film

Storm + Shutter X

Triple Glazing

Triple 4- Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

gew Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation X X

R-3Q Insulation X X X X X X X

R-38 Insulation

WALLS

R-ll Insulation XX X

WALLS* BASEMENT *

; Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

120
TABLE E. 9 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN CHICAGO, ILLINOIS

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter X X X X X

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door X X X

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X X X X X X

R-38 Insulation X

WALLS

R-ll Insulation X XX XX X

BASEMENT WALLS*

R-7 Insulation A

‘ A AA AA AA A

*Key for Basement Walls

A - Above Grade

121
TABLE E. 10 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN COLORADO SPRINGS, COLORADO

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 7 0°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X

Caulk Windows X X X X X X X X

Weatherstrip Doors X

Caulk Doors X X X X X X X

Weatherstrip Attic Hatch X X X X

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% GlasTJ

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X

R-19 Insulation X X X

R-3Q Insulation X X X X X

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

122
TABLE E.ll OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR PROPANE IN COLORADO SPRINGS, COLORADO

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X . X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X

Storm 4- Film

Storm + Shutter X X X X X X

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass) X X

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X

R-38 Insulation X XX XX X

WALLS

R-ll Insulation XX XX XX X

WALLS* BASEMENT *

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

‘ 23
TABLE E. 1 2 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN EASTON, PENNSYLVANIA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter

Triple Glazing X X X X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation X X X

R-30 Insulation X X X X X X

R-38 Insulation

WALLS

R-ll Insulation X XX XX X

WALLS* BASEMENT *

V - 7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

124
TABLE E. 13 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN EASTON, PENNSYLVANIA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 7 0°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter

Triple Glazing X X X X X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation X X

R-30 Insulation X X X X X X

R-38 Insulation X

WALLS

R-ll Insulation XX XX XX X

WALLS* BASEMENT *

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade
TABLE E. 14 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN FARGO, NORTH DAKOTA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing X X X X X X

Triple + Shutter X X X

DOORS

Storm Door (60% Glass)

Second Wood Door X X X X

New Insulating Door. Storm Door (30% Glass)

Second Wood Door ; X X X X X

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X X X

R-38 Insulation X XX X

WALLS

R-ll Insulation XX XX XX XX X

BASEMENT WALLS*

R-7 Insulation AA AA A A A A A

*Key for Basement Walls

A - Above Grade

126
TABLE E. 15 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN FARGO, NORTH DAKOTA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing X X X X X

Triple + Shutter X X X X

DOORS

Storm Door (60% Glass)

Second Wood Door X X X

New Insulating Door

Storm Door (30% Glass)

Second Wood Door X X

~ X X X X

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X X

R-38 Insulation XX XX X

WALLS

R-ll Insulation XX XX XX XX X

WALLS* BASEMENT *

R-7 Insulation 2 2 2 2 2 2 2 2 2

*Key for Basement Walls

A - Above Grade

127
TABLE E. 16 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN LOS ANGELES, CALIFORNIA

INFILTRATION 50°F 52. 5°F 55°F 57.5°F 60°F 62.5°F 65°F 67 . 5°F 7 0°F

Replace Broken Glass X X X

Reset Glazing

Install New Threshold X X X X

Seal Structural Cracks XX XX X X X

Weatherstrip Windows X

Caulk Windows X

Weatherstrip Doors

Caulk Doors X

Weatherstrip Attic Hatch

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glas~sT

Second Wood Door

New Insulating Door

ATTIC

R— 1 1 Insulation X X

R-19 Insulation X

R-30 Insulation , R-38 Insulation

WALLS

R-ll Insulation

WALLS* BASEMENT *

R-7 Insulation

*Key for Basement Walls

A - Above Grade

128
TABLE E. 17 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN MIAMI, FLORIDA

INFILTRATION 50°F 52.5°F 55°F 57.5°F 60°F 62.5°F 65°F 67.5°F 70°F

Replace Broken Glass

Reset Glazing

Install New Threshold

Seal Structural Cracks X X X X X

Weatherstrip Windows

Caulk Windows

Weatherstrip Doors

Caulk Doors

Weatherstrip Attic Hatch

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation

*Key for Basement Walls

A - Above Grade

129
TABLE E. 18 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR ELECTRICITY IN MIAMI, FLORIDA

INFILTRATION 50°F 52.5°F 55°F 57.5°F 60°F 62.5°F 65°F 67.5°F 70°F

Replace Broken Glass

Reset Glazing

Install New Threshold X X X

Seal Structural Cracks X X X X X X X

Weatherstrip Windows

Caulk Windows

Weatherstrip Doors

Caulk Doors

Weatherstrip Attic Hatch

WINDOWS

Storm Windows

Stopn + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R— 1 1 Insulation X

R-19 Insulation

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation

*Key for Basement Walls

A - Above Grade

130
TABLE E. 19 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN MINNEAPOLIS/ST. PAUL, MINNESOTA

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X X X X

Storm + Film

Storm + Shutter X X

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door X X

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X

R-38 Insulation XX XX XX X

WALLS

R-ll Insulation XX XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

131
TABLE E. 20 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN MINNEAPOLIS/ST. PAUL, MINNESOTA

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 7 0°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X f_ Storm -f Film

Storm + Shutter X X X X X X X X

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door X X X

Storm Door (30% Glass)

Second Wood Door

New Insulating Door X X X X

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation

R-38 Insulation XX XX XX XX X

WALLS

R-ll Insulation XX XX XX XX X

BASEMENT WALLS*

R-7 Insulation AA AA A A A A A

*Key for Basement Walls

A - Above Grade

132
TABLE E. 2 1 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN OAKLAND, CALIFORNIA

INFILTRATION 50°F 52.5°F 55°F 57.5°F 60°F 62.5°F 65°F 67.5°F 70°F

Replace Broken Glass X X X

Reset Glazing

Install New Threshold X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows

Caulk Windows

Weatherstrip Doors

Caulk Doors

Weatherstrip Attic Hatch

WINDOWS

Storm Windows

Storm + Film

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X X

R-19 Insulation X X

R-30 Insulation

R-38 Insulation

WALLS

R-ll Insulation

BASEMENT WALLS*

R-7 Insulation

*Key for Basement Walls

A - Above Grade

133
TABLE E. 22 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN PORTLAND, MAINE

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62.5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X X

WINDOWS

Storm Windows X

Storm + Film

Storm + Shutter

Triple Glazing X X X X X X

Triple + Shutter X X

DOORS

Storm Door (60% Glass)

Second Wood Door X X X

New Insulating Door

Storm Door (30% Glass)

Second Wood Door X X X

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X X X X X

R-38 Insulation X X

WALLS

R-ll Insulation XX XX XX X X X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

134
TABLE E. 23 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN ST. LOUIS, MISSOURI

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F O' •

Ln o 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X

Caulk Windows X X X X X X X X

Weatherstrip Doors X

Caulk Doors X X X X X X X

Weatherstrip Attic Hatch X X X X

WINDOWS

Storm Windows X X X X

Storm + Film

Storm + Shutter

Triple Glazing X X

Triple + Shutter

DOORS

Storm Door (60% Glass)

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X

R-19 Insulation X X X X

R-30 Insulation X X X

R-38 Insulation

WALLS

R-ll Insulation XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA A A A

*Key for Basement Walls

A - Above Grade
TABLE E. 24 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR NATURAL GAS IN TACOMA, WASHINGTON

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X

Caulk Windows X X X X X X X

Weatherstrip Doors X X X X X

Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter

Triple Glazing X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X

R-19 Insulation X X

R-30 Insulation X X XX X

R-38 Insulation

WALLS

R-ll Insulation X XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

\

136
TABLE E. 25 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN TACOMA, WASHINGTON

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F •

Ln o

i

70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X x" X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X

Caulk Windows X X X X X X X X

Weatherstrip Doors X X X X X X

Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X X X X X

WINDOWS

Storm Windows X X

Storm + Film

Storm + Shutter

Triple Glazing X X X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X

R-19 Insulation X X

R-30 Insulation X X X X

R-38 Insulation X X

WALLS

R-ll Insulation X X X X X

BASEMENT WALLS*

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

137
TABLE E. 26 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR ELECTRICITY IN TACOMA, WASHINGTON

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X

Caulk Windows X X X X X X X

Weatherstrip Doors X X X X X

Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X X X

WINDOWS

Storm Windows X X X

Storm + Film

Storm + Shutter

Triple Glazing X X

Triple + Shutter

DOORS

Storm Door (60% Glass) X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation X X

R-19 Insulation X X

R-30 Insulation 4 X X X X X

R-38 Insulation

WALLS

R-ll Insulation XX XX X

WALLS* BASEMENT *

R-7 Insulation A A A A A A A A A

*Key for Basement Walls

A - Above Grade

138
TABLE E. 27 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR FUEL OIL IN WASHINGTON, D.C.

INFILTRATION 50°F 52. 5°F 55°F 57. 5°F 60°F 62. 5°F 65°F 67. 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X

WINDOWS

Storm Windows X X X X X X X

Storm + Film X X

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation X

R-30 Insulation X X X X X X

R-38 Insulation X X

WALLS

R-ll Insulation XX XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

139
TABLE E. 28 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR PROPANE IN WASHINGTON, D.C.

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X

Install New Threshold x" X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X

Caulk Doors X X X X X X X X

Weatherstrip Attic Hatch X X X X

WINDOWS

Storm Windows X X X

Storm + Film X X X X X X

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass) XX X

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation

R-30 Insulation X X X X

R-38 Insulation X X X X X

WALLS

R-ll Insulation X X X X X X X X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

140
TABLE E. 29 OPTIMAL WEATHERIZATION PACKAGES AS A FUNCTION OF BALANCE POINT

FOR KEROSENE IN WASHINGTON, D.C.

INFILTRATION 50°F 52. 5°F 55°F 57 . 5°F 60°F 62. 5°F 65°F 67 . 5°F 70°F

Replace Broken Glass X X X X X X X X X

Reset Glazing X X X X X X X X

Install New Threshold X X X X X X X X X

Seal Structural Cracks X X X X X X X X X

Weatherstrip Windows X X X X X X X X X

Caulk Windows X X X X X X X X X

Weatherstrip Doors X X X X X X

Caulk Doors X X X X X X X X X

Weatherstrip Attic Hatch X X X X X X

WINDOWS

Storm Windows X X X X X X

Storm + Film X X X

Storm + Shutter

Triple Glazing

Triple + Shutter

DOORS

Storm Door (60% Glass) X X X

Second Wood Door

New Insulating Door

Storm Door (30% Glass)

Second Wood Door

New Insulating Door

ATTIC

R-ll Insulation

R-19 Insulation X

R-30 Insulation X X X X X X

R-38 Insulation X X

WALLS

R-ll Insulation XX XX X

BASEMENT WALLS*

R-7 Insulation AA AA AA AA A

*Key for Basement Walls

A - Above Grade

141
Nes-i Ma «e * DE PT. OP COMM.

o ^ p A PHIC DATA

;!ET

1. PUBLICATION OR REPORT NO. NBSIR 79-1948

'fcoJ t. Recijjrenf s Acc*$&lon No.

- -

4. TITLE and subtitle

Optimizing Weatherization Investments in Low-Income Housing:

Economic Guidelines and Forecasts

5. Publication Date February 1980

SI. PMfefmtai Organization Code

7. author

S Robert E. Chapman, Richard W. Crenshaw, Kimberly

A. Barnes, Phillip T. Chen

8 . Performing Organ. Report No.

8. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, DC 20234

I

Unit No.

11. Contract/Grant No.

12. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS (Street. City. Stete, ZIP)

Community Services Administration

1200 19th Street, N.W.

Washington, D.C. 20506

13. Type of Report & Period Covered Final

1%..

L.- 15. SUPPLEMENTARY NOTES

Document describes a computer program; SF-185, FIPS Software Summary, is attached.

If. ABSTRACT (A 200-word or loat tactual mummery ol moat t igni ficant information. II document ineludee a signi ficant bibliography or

lltera rure murrey, mention it here.)

This study establishes a framework for systematically analyzing the economic viability

of alternative methods of weatherizing low-income housing. These methods include ,but are not limited to insulation, weatherstripping and caulking, and installation of

storm windows and doors. The economic framework is illustrated through the development

of a series of forecasts (economic guidelines) which show the optimal level of

weatherization for low- income residences in 15 cities across the nation. These

economic guidelines are designed to assist the Community Services Administration in

carrying out its Weatherization Demonstration Program. In particular, they are designed to achieve a more balanced level of weatherization per dollar spent. The

optimal level of weatherization is balanced in the sense that for a given weatherization budget no increases in net savings (total savings minus total costs) can be

achieved by trading one method for another.

17. KEY WORDS fm to twelve entriee ; alphabetical order; capi tali Me only the tirat letter ol the lire t key word unleea a proper name

eepara ted try eem icolone) Benefit-cost analysis; building economics; building envelope; economic analysis;

economic efficiency; energy conservation; insulation; life-cycle costs; low-income

housing; marginal analysis; thermal efficiency; weatherization.

LI. AVAILABILITY Unlimited

Q3 For Official Distribution. Do Not Release to NTIS

Order From Sup. of Doc., U.S. Government Printing Office, Washington, DC

20402, SD Stock No. SN003-003- S, Order From National Technical Information Service (NTIS), Springfield, VA. 22161

19. SECURITY CLASS

(THIS REPORT)

UNCLASSIFIED

20. SECURITY CLASS

(THIS PAGE)

UNCLASSIFIED

21. NO. OF

PRINTED PAGES

22. Price

311. 0

J

USCOMM-DC