The long-term financial benefits of investing in a GO Logic home based on Net Present Value Calculations
The long-term financial benefits of investing in a GO Logic home based on Net Present Value Calculations GO Logic is an architectural design-build firm, building super energy efficient homes designed for cold climates. As a design-build firm, the efficiency of project delivery from concept to completion is improved over standard design-bid-build delivery systems. The result of these efficiencies is a shorter planning and construction period, but a finished product with improved long-term energy performance for space heating. These improvements in process and product result in both first-cost and lifecycle savings for the homebuyer, saving money on construction and the long-term operating costs for the home. To demonstrate the investment value in a GO Logic home, we have compared the construction cost and lifetime energy savings of a GO Logic home vs. a standard built home in today’s dollars using a Net Present Value Calculation. The NPV (Net Present Value) calculation compares the lifetime (30 year) costs of each build method in today’s dollars, taking into account inflation and operating costs.* Because we are comparing the benefit of reduced operating expenses over the life of a mortgage, we expect to see a favorable NVP calculation expressed in a negative numbers, or dollars saved. Based on the time period of a standard 30 year mortgage, the NPV calculation compares the total cost of a GO Logic home to a standard built home. Given this time period, we estimate that the cost saving for a GO Logic home in today’s dollars to be $55,150. Not discounted to today’s Net Present Value, the model projects total cost savings resulting from a GO Logic home’s super energy efficiency over the course of a 30 year mortgage, including material estimated energy inflation, to be a remarkable $147,268. To provide background and insight into the assumptions made for the NPV calculation, the Energy Performance, Cost of Construction and Financing and Inflation rates are explained below: 1. Energy performance: A GO Logic home, built to the German Passive House Standard**, is showing performance in the model home of only 10% of the energy used for space heating of a standard built, code-compliant home. Given Maine’s cold climate, this level of energy performance has a significant impact on the life-time energy costs of the home. In standard built construction, the cost of space heating is typically 75% of the total energy used by a home, with the remaining energy balance divided roughly evenly between the domestic hot-water and plug loads. Reducing the space heating demand therefore has the greatest impact on reducing a home’s total energy consumption and related energy costs. In terms of the actual cost savings of space heating on an annual basis, comparing a 1500 SF standard built home with a GO Logic home, the savings for space heating is estimated to be $1,300*** in the first year. For the NPV calculation, we have modeled the annual space heating cost for a GO Logic home to be $400, and that for a standard built home to be $1,700. 2. Cost of Construction: The cost of construction for a GO Logic home is similar to standard code compliant homes of similar durability. The 1500 SF GO Logic prototype home was built in 2010 for $150/ SF, resulting in a total construction cost of $225,000.**** The cost of construction for standard code compliant homes of similar durability is approximately $145/SF, resulting in a build cost of $217,500.**** For the NPV calculation we have assumed the GO Logic home’s construction cost at $150/SF and the standard built home at $145/SF for a 1,500SF home. 3. Financing and inflation rates: The long-term cost of a home is determined by the difference in rates between the interest for a fixed 30 year mortgage and energy inflation, the latter likely being the greater and more costly of the two. The historical rates of inflation for heating oil in the North East have fluctuated significantly in the past 20 years. We have conservatively set the annual energy inflation rate at 8% for the NPV calculation. Likewise, the mortgage interest rate has been set at 4.5%, based on the average interest rate today for a 30 year fixed home mortgage. *Net Present Value-NPV, www.Investopedia.com ** Passive House Standard, more information visit- www.passivehouse .us *** Estimated space heating costs for 1500SF home in Maine: standard built $1,700, GO Logic $400- Space heating costs based on energy modeling using Mid-Coast Maine climate data, at today’s oil heating oil price, $2.76/gal. ****The cost per square foot and construction costs include the site work, foundation and mechanical systems.
