By now you’ve probably heard about the new Stimulus Plan Tax Credits our government has made available to incentivize people to buy higher efficiency equipment. Unfortunately they’ve once again missed the mark demonstrating they still don’t really understand what delivers true energy efficiency. The credits are based on the same old myth that HVAC system efficiency is a commodity that can be unitized and purchased in boxes (the appliance).

Delivered Performance: Where It’s At

Any contractor who has taken the time to learn about delivered system performance will tell you that so much more performance can be gained by “fixing the system” than installing a higher efficiency box. There’s increasing evidence that replacing the box without fixing the system in can result in zero net efficiency gains and in some cases, lower efficiencies than with the old box.

What does “fixing the system” entail? It requires a real-time test of operating performance and measurement of delivered btus. Then you diagnose what it will take to get 90% or higher of the BTUs the equipment is capable of producing delivered into the home (We call this percentage of delivered BTUs CSER™ or Cooling System Efficiency Rating). By the way, the national average is around 57% delivered BTUs in homes and most light commercial buildings.

“But,” you may protest, “consumers are still interested in taking advantage of as much of the tax credits as possible, particularly during these tough economic times. How can I still capitalize on this new opportunity?” The answer is to educate your customer to understand the value of reinvesting the tax credit into “fixing” their system to obtain delivered performance that exceeds 90%. By doing this they actually receive 90% of the performance the new equipment is capable of. When you calculate the delivered Return On Investment (ROI), the result will blow you away. Today we have the technology and knowledge to give your customer much more value for their dollars invested in their comfort system.

A Tale of Two Systems

Let’s compare installing a new 13 EER (16 SEER) 4 ton unit in an existing home with original 9 EER, 11 SEER equipment and 60% delivered performance versus installing the same equipment on a system that has been renovated to deliver 90% of its capable btus into the home. The prices in the example below are for example purposes only, and will vary based on brand, climate, and installation type:

Scenario A: Let’s say the old 9 EER equipment is actually operating at a delivered 5.4 EER versus its rated 8 EER (you measured 60% CSER™).

9 EER X .60 = 5.4 EER

If the box is replaced without addressing the system, the new 13-EER system will perform at 60% delivered btus (CSER™), for a delivered 7.8 EER:

13 EER X .60 = 7.8 EER

7.8 EER – 5.4 EER = 2.4 EER Improvement

That gives us roughly an effective 2.4 EER improvement. If the original annual cooling cost was $2,000, it will be reduced by roughly 31% or $615. If the new high efficiency 16 SEER, 13 EER unit cost $7,500, and qualifies for a $1,500 tax credit (up to 30% with a $1,500 cap) their net invest would be $6,000.

$2,000 Annual Cooling Cost X 31% = $615 Savings

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$7,500 Installed Equipment Cost - $1,500 = $6,000 net investment

With a $615 per year savings, the payback period would be just under 10 years.

$6,000 investment / $615 Annual Savings = 9.76 year payback

2.24 year additional life X $615 = $1,385 Residual Value

After that the consumer would get about 2.24 years of additional useful life (calculating a 12 year lifespan) at $615 per year or $1,378 in residual value from their $6,000 investment in high efficiency (after tax credit) – roughly a compounded 2% return over 12 years! Most CDs yield twice that.