There’s an age-old question of how much insulation to install in our homes. Conventional wisdom says to add more until the “payback” for the added insulation isn’t worth it — until the energy savings that will result from the insulation doesn’t pay back the cost of that insulation quickly enough.Energy and environmental consultant Andy Shapiro, of Energy Balance, Inc. in Montpelier, suggests a different approach: basing that decision on the cost of a solar electric system. Energy conservation and the cost of solarAndy argues that once we get to very high levels of insulation, it doesn’t make sense to spend more on energy conservation than it would cost to supply that saved heat (or cooling) with a photovoltaic (PV) system used in an air-source heat pump. Air-source heat pumps (often referred to as minisplits) are the heating and cooling system of choice today for many highly efficient homes; they offer two to three times the efficiency of standard baseboard-electric heating systems. Using PV as the benchmark makes sense, because — like conservation — after the up-front investment, there is little to no operating cost. To illustrate this point, Andy evaluated a 1,000 square-foot roof insulated to either R-60 or R-80. In the 7,700 degree-day climate of Burlington, Vermont, the R-60 roof results in a heat load of 390 kilowatt-hours per year (kWh/yr) or 3.1 million Btus per year (MMBtu/yr), or vs. 290 kWh/yr or 2.3 MMBtu for the R-80 roof. In this analysis I’ll mostly use kilowatt-hours (kWh) as the measure of both thermal and electrical energy, as is common in most of the world; Btus (British Thermal Units) are unique to the U.S.The savings from providing the extra R-20 in the ceiling is 98 kWh/yr. Andy assumed that the cost of the PV system is $4 per peak-watt ($4,000/kWh-peak) without any tax credits or other incentives, and he assumed that a PV system in Burlington’s relatively cloudy climate will generate 1,100 kWh/yr for every peak kW of rated capacity, while the air-source heat pump has an assumed coefficient of performance (COP) of 2.3.Given these assumptions — which are certainly up for debate — providing 98 kWh/yr of heat will require 0.089 rated kW of a PV system (98 ÷ 1,100). At $4 per installed peak-watt, the cost of that PV system would be $356, or $0.36/ft2 of roof. With this analysis, adding the extra R-20 to the roof will make sense as long as it costs less than $357. In reality, such a change would cost more like $750, or $0.75/ft2 (assuming loose-fill cellulose and just the cost of the insulation). In other words, it makes better economic sense, in this example with these assumptions, to stick with the lower R-value (R-60) and invest in the PV capacity. Using investment in PV as a benchmark for conservation investmentsI like this approach for figuring out how much we should spend on energy conservation. It could be used not only to evaluate investments in insulation, but also investments in air tightness and some pieces of equipment, such as a heat-recovery ventilators (HRVs). Andy’s calculations assume no tax credits, rebates, or other incentives for PV; with such incentives in place (as is currently the case), the argument is even stronger.One thing the analysis does not account for is the fact that investments in insulation should continue paying off for a very long time (maybe even a few hundred years if the house is well-built and the insulation protected from damage), while a PV system will need to be repaired and periodically replaced during the life of the insulation. This analysis does not address lifetime costs of PV and insulation; doing so would require an assumption regarding the discount rate and an estimate of future maintenance costs.My friend Dave Timmons, Ph.D., who is working on models of renewable energy economics and who teaches ecological economics at the University of Massachusetts, notes that for electricity there is a formula for the levelized cost of energy (LCOE), and he suggests that one could develop an analogous calculation for the levelized cost of conservation, so that we’re comparing apples to apples. (But I’ll have to leave that to the economists who are a lot smarter than me.)Dave also points out that the analysis doesn’t account for the cost of electricity storage. Producers of PV electricity today are able to use the grid as a storage system, but that may change as renewables begin accounting for a larger percentage of electricity production. Viable storage in the grid may increase the assumption we should use for PV cost. RELATED ARTICLES Payback Calculations for Energy-Efficiency ImprovementsNet-Zero-Energy versus PassivhausCan Foam Insulation Be Too Thick? Q&A: Insulation’s diminishing returns What about with lower insulation levels?I’ve used this argument for deciding between really high levels of insulation: R-60 vs. R-80. How does it work when applied to insulation levels most builders are using?If we are considering boosting attic R-values from R-19 to R-38 (also an increase of about R-20)—the economic argument for investing in conservation is far different. In this case, the savings in heat would be 620 kWh/year to go with the additional insulation and the cost of PV needed to deliver this heat would be $2,250, or $2.25/ft2. Clearly, the extra insulation, at $750 ($0.75/ft2), is a better investment.This second example illustrates the argument I’ve long made that it makes sense to invest in energy conservation first and only after that put in the PV system. But if you go far enough with conservation, as Andy argues, you eventually reach a point where it doesn’t make economic sense to invest in he additional insulation.Does this reasoning make sense? I’d be interested in your thoughts. Alex is founder of BuildingGreen, Inc. and executive editor of Environmental Building News. In 2012 he founded the Resilient Design Institute. To keep up with Alex’s latest articles and musings, you can sign up for his Twitter feed.