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Net Zero and Profit in 2 Easy Steps

The idea of having a net zero home, one that generates as much power as it consumes, is very exciting. Some people are interested in it to help save the planet, others like the idea of never paying another power bill, or the freedom of energy independence. For a long time, net zero homes were so expensive and complicated that they were simply dreams for most people. Finally, technology has improved so much that retrofitting your old home to become net zero can be both simple and profitable. With two simple updates I was able to make my regular old house net zero. These updates cost a bit of money up front, but in the long run they will both more than pay for themselves. In this post I’ll explain how I did it, and how you can to.

The Two Keys to Net Zero

In the old days, retrofitting a home to be net zero generally required making lots of changes to the house. You’d add insulation to the ceiling, walls and floor, air seal everything, update the windows, install a new HVAC along with a ventilator (this pumps fresh air into your well sealed house so you don’t suffocate), update appliances, replace your lighting and who knows what else. This is all great stuff to do to a house, but the sheer number of tasks, along with the cost of it all has put it out of reach for most people. Luckily, nowadays you can turn most houses into net zero houses with just two changes. All you need to do is install a super efficient heat pump, and a big fat solar array then BAM, your home becomes net zero.

Step 1. Get a Big Fat Solar Array

Solar is the first key to easily converting your home to net zero and making money while doing so. A lot of people overestimate the price of solar because it used to cost a lot and they haven’t rechecked the prices recently. It turns out that the price of panels has been falling steadily for decades now. Even if you did the math on solar and found it wasn’t profitable for your home just a few years ago, it may well be so today. The price of installing solar on a home dropped over 60% from 2010 to 2017! All these price drops, along with the federal tax credit for installing solar means that if your roof gets decent sun you can now probably make money by putting panels on it. How much money depends on a lot of factors, which I delve into in my solar ROI post, but the key thing to realize is that solar panels now essentially pay for themselves and beat pretty much all “safe” investments.

WARNING: The Federal Solar Tax Credit (also called the Investment Tax Credit, or ITC) has dropped from 30% of total install cost in 2019 to 26% in 2020. It will drop again to 22% in 2021, and then be gone for residential systems in 2022. Even if solar costs keep falling as they have, a system installed in 2021 with the 22% tax credit will be cheaper than a system installed between 2022 and 2026, maybe longer. Unless you have a lot of faith that congress will extend this credit, you should install before 2021 ends!

Efficiency Improvements Vs Solar

Because solar can now pay for itself, cost concerns shouldn’t limit the size of your array. Having a higher energy demand simply allows you to make a larger profitable investment in solar. Back when solar prices were higher and people were essentially losing money for every panel they installed, it made economic sense to do lots of efficiency upgrades to keep arrays as small as possible. Now, most people are better off simply building a bigger solar array instead of making lower ROI efficiency improvements.

An efficiency improvement only makes economic sense if the same money spent on solar will generate less energy than that improvement will save. It’s surprising how often solar wins in this calculation. For example, I know many people who have installed new windows in their homes. It’s pretty common to spend thousands on this, often over $10k. If that same money were put into panels instead, they would produce far more energy than those new windows will save. There are still some efficiency improvements with high enough ROIs to be worth doing, like upgrading bulbs to LEDs, adding insulation to a very poorly insulated attic, and DIY caulking and spray foaming to seal air leaks. In general, though, the price of solar has dropped so low that simply building a larger array is now usually the most profitable choice.

Where To Put Your Array

There are some limits on the size of an array your house can support though. Here in the northern hemisphere, you want to put all your panels on the south side of your roof because the tilt of the Earth means that the sun is shining more from that direction. If your roof doesn’t have that much southern facing space, or it is shaded by trees or another building then that might limit the size of an array you can profitably install.

Of course, you can always think outside of the box and install an array somewhere other than your existing roof. Building a new shed, outbuilding, or car port with a sunny, south facing roof will cost more money, but it can give you a nice space to add more panels and increase the usability and value of your home. If your outbuilding is more than just a frame with solar panels on it then it may not be the obvious economic slam dunk of putting panels on your existing roof. But, this is because you’re adding a usable building as well as solar, so you have to factor that in.

Step 2. Get an Efficient Heat Pump

A heat pump is the one high ROI efficiency improvement that usually makes a bunch of sense to pair with a solar array. Read my Heat pump ROI post for more details.

Average Home Energy Use by $ in PA. Heating and Cooling are over 50%.
Average Home Energy Use by $ in PA. Heating and Cooling are over 50%.

From a whole house perspective, heating and cooling are usually the top energy uses. A lucky few can avoid this by living in a tropical paradise where their home’s climate can be controlled by cool ocean breezes. For the rest of us, upgrading our HVAC system to be all electric and super efficient is the next key to making our homes net zero.

Even just a few years ago this wasn’t possible for people who lived in colder climates. Heat pumps made in the 90’s and even early 2000’s just couldn’t put out enough heat when the weather got cold. But now heat pump technology has gotten so good now that they can efficiently heat homes even in cold places like upstate New York.

There are plenty of other ways to cut down the HVAC use in your home. The simplest is to just turn down the thermostat, but there’s always a limit to how far people are comfortable going with this. The other options that have been recommended for years involve air sealing, adding insulation and updating your windows. Those can all still be great choices, and if your house is in really bad shape you might need to do some or all of them. But, the amazing price and efficiency of modern heat pumps crushes most of these other options.

Upgrading to an efficient heat pump can cut the HVAC energy use of your house by more than HALF! The only way upgrading your windows will cut your home heating bills in half is if your current windows have multiple gaping holes in them. If this is true for your home, I recommend investing in some duct tape stat! Otherwise upgrading all your windows will generally cost more than buying a new efficient heat pump, so why do them first? Heat pumps have the added benefit of working as efficient air conditioners as well as heaters.

The ins and outs of how heat pumps work and why they can be well over 100% efficient are best saved for another post (or you can watch this detailed video). The key thing to know is that a good heat pump can pull over 3 Watts of heat into your house while using just one 1 Watt of electricity. Old electric resistance heat adds slightly less than 1 Watt of heat for each Watt of electricity and oil and gas furnaces are even worse. This means that a heat pump can cut the size of solar array needed to make a home net zero by a lot. The price for that heat pump is almost certainly lower than the panels it is replacing, or other traditional energy efficiency improvements like windows or insulation.

Finally, because a heat pump runs on electricity, your solar panels are able to power it. This means that you can power your own HVAC, the biggest power consumer in your home. Oil and gas furnaces rely on someone else delivering that fuel to your house. You have to pay whatever price they’re charging, and if they don’t deliver, you’re left in the cold. With a heat pump and solar combo your roof is creating the power you need to heat your home.

The one issue with this is that solar panels often create less power in the winter than a heat pump needs. Most people in the U.S. can essentially use the electric grid as a giant battery to store the extra power they generate over the summer until they need it in the winter. This is complex enough that it deserves its own post as well, so I’ll just keep to the financial side here. If you’re in a net metering state you can size your solar array so its total annual generation matches the total annual consumption of your home and pay $0 for electricity. If your state is one of the few that doesn’t yet have net metering then this guide is probably not the best way for you to go net zero right now.

Real World Numbers

House Stats:
Built: 1960s
Sqft: 2200
ACH: 0.32
Attic: R38
Walls: R3
Windows: Old

My family moved into a regular old house in central Pennsylvania over a year ago. It was built in the late 60s and while it has decent air sealing, its insulation is lacking and most of its windows are original. A deep energy retrofit would have improved all of these areas, but it would have cost more than my heat pump and solar combined and our house still would have pulled more energy from the grid than it produced.

Putting a big solar array on our roof cost $24k after tax rebate and upgrading our old oil furnace to a high efficiency heat pump cost another $15k. These two updates allowed us to generate over 11,000 kWh in 2019 while only consuming 10,000 (those extra kWhs are for an EV we’ll get some day). We made $1,382 from our solar panels and saved around $1,000 with our heat pump, so $2,382 in total. That’s over a 6% return on investment (ROI). Of course both of these amounts are not taxed so if you factor in a 15% long term capital gains tax the ROI goes up above 7%. There are plenty of stocks that returned over 7% last year, but they could all well lose money this year. Our solar panels and a heat pump on the other hand will keep returning this much money year after year unless there’s a huge drop in electricity prices, which is very unlikely.

Why Not Just Do Solar And Old Electric Heat?

We could still heat our home with electricity using those old resistive electric heaters (like the inside of a toaster). This would be far less efficient than our heat pump and probably pull and extra 6,000-9,000 kWh more. We’d need to install more solar panels costing $13k-$20k to generate this extra electricity and the resistive heaters themselves would cost over $1k to install. This means we’d be spending $14k-$21k to heat this way instead of the $15k we paid for our heat pump. The $15k we spent seems like the lower priced option, and I’ve discovered a few tricks for my heat pump that should make it even more efficient next year. Also, our roof is already full of solar panels and we don’t have an obvious place to put more.

Step 2a. Convert All Appliances to Electric

If you already have an electric hot water heater, stove, and dryer then you can skip this. If any of these are powered by gas though. the solar panels on your roof won’t be able to power them and you won’t be able to be truly net zero. Converting them to electric is the final step in making it so the energy you produce can power your entire home.

If you want to still cook with gas there has been a lot of progress on generating biogas from food scraps, but it’s still a niche technology. This post is all about making the net zero conversion easy so I’ll leave the biogas stuff for another day.

Won’t Converting From Gas Lose Me Money?

It is true that gas was pretty dang cheap in 2019. You could get a therm of gas for just over $1.00 in the U.S. last year. It takes about 29 kilowatt hours (kWh) of electricity to equal the energy content of 1 therm of natural gas. If your kWh comes from a utility, it probably costs around 11 cents, so $1 of gas has the same energy as $3.19 of electricity. If you install solar you’re probably reducing your true cost per kWh to around 7 cents (possibly less) so for you it’s only $2 for an equivalent amount of energy. A good heat pump powered by this cheap electricity beats a gas furnace because it delivers 3x more heat from the same amount of energy.

There are heat pump hot water heaters that can beat gas hot water heaters by a similar amount, but they aren’t for every home. Most draw heat from air inside your house so they need a bigger area than many homes have set aside for a hot water heater. This also means that they are taking energy your heat pump added to your home during winter (Sanden makes one that pulls heat from outside). On the flip side, in summer they give your home some free cooling, which makes a ton of sense in warmer areas.

Even regular old electric water heaters may be able to beat gas if you have low total gas usage. These units may be only 10-25% more efficient than a gas model so you might assume the lower price of gas beats them. This ignores the gas monthly fee though.

MATH TIME!
$1/therm*(1+75% fee)
= $1.75/therm
1.75/29 kWh/therm
= $0.06/kWh
$0.06/80%
= $0.075/kWh
0.075/$0.07/Solar
= 1.071
1.071 - 1*100
= 7.1% more

In a previous house I paid $16/month for gas service and used around 550 therms of gas per year. This monthly fee increased my true cost per therm by 35%. Over half of that gas went to the furnace so if I had replaced that with a heat pump the monthly gas fee would have increased my true cost per therm by 75%. In this case an 80% efficient gas furnace would actually cost 7% more to run than a solar powered electric resistance unit (see math on the side if you want to check my work).

Once you get rid of the gas hot water heater, all you have left is a gas stove and dryer. These appliances will have math similar to the resistance hot water heater above, except their lower energy usage means the monthly gas fee will increase the true cost per therm for them even more. If you’ve accepted that it’s a good financial choice to convert your hot water heater then it’ll be an even better financial choice to replace your dryer and stove.

In the end, replacing these appliances gives a lower ROI than solar panels and a heat pump. Getting them done is still a financial benefit though. Doing so also eliminates combustion in your house, improving every day indoor air quality and eliminating the risk of your whole family dying of carbon monoxide poisoning. You can go fancy with a heat pump hot water heater, condensing dryer and induction stove, or you can just use the regular old resistance heat models. Either way you’ll make money and get a house that is entirely powered by the sun.

Step 3. Profit!

Hopefully this post has shown you how it can be both easy and profitable to convert your home to be net zero. Just get solar panels and a heat pump and profit. If you don’t already have electric appliances then it’s a tiny bit more complicated than just these two steps, but not by much. If, in the future, you better insulate and air seal your home, you may find your solar starts generating more power than your home uses. All you have to do to solve that is buy an electric vehicle to use the excess. This is something most everyone will be doing in the coming decade or so anyways, so it’s fine to expect it. Hope this has helped you, and if you have any questions or want to share your own story of going net zero please do so in the comments.

Heat Pump ROI – First Year Data

Upgrading an old oil furnace and AC unit to a new high efficiency heat pump has been one of the two keys to making my family’s home in PA produce more energy than it consumes (the other of course was adding a big fat solar array). Now that we’ve lived in the house for over a year I thought it would be a good time to look back at the data and see what sort of return on investment (ROI) this heat pump has given us.

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