New Improvements for the New Year

Have you thought about improvements for the New Year? It is the time for resolutions and planning what you are going to do differently from last year.  I just realized a few days ago that not only are we entering  a new year, we’re entering a new decade.  That’s like a new year times 10!

However, resolutions are for other people. Some years ago I resolved to stop making resolutions.  January 1 has never seemed to me to be a particularly propitious time to pioneer particular pastimes.  (Sorry, I just couldn’t help myself — the alliteration got away from me.)  Rather than resolutions for personal improvement, I wanted to talk about the potential for home improvement.

Some things should be planned replacements. One item that never seems to be a planned purchase is a hot water heater.  We ignore our hot water heaters right up until the time they cease to function.  I’ve decided not to wait that long this time.

There are warning signs of a water heater about to run cold. That rumbling, grumbling sound is sediment rolling around in the bottom of the tank as the water is heated.  And, it gets worse the closer to death the water heater gets.  What about the length of time it takes the hot water to get to the shower head?  Or, the shortening length of time available for your shower?  It might be time to consider replacing it.

You have choices if you have oil, natural gas or propane available. If your only source of energy is electricity, your choices are significantly more limited.   Water heaters can either be storage tank models or tank-less (aka instantaneous) models.  Operation cost is lowest for natural gas fired tank-less models, but acquisition cost is about the highest.

Consumer Energy Tax Incentives are available from the US Department of Energy. These include HOME ENERGY EFFICIENCY IMPROVEMENT TAX CREDITS that can provide 30% tax credits for certain improvements up to a total of $15oo in credits.  These tax credits are available for certain gas, oil, or propane water heaters.  Remember that credits are a direct dollar-for-dollar reduction of your taxes.  The links on the Energy Star page take you to a Directory of Certified Product Performance where you can verify the certification of water heaters you are considering.  The Energy Star page has step-by-step directions for running the query, but you really only need to remember to choose “yes” for “Tax Credit Eligible”  near the bottom of the page.

After reviewing your options and choosing what seems best your next step is to calculate the total cost to narrow the field and ensure you’re making the best choice.

Compare total costs, not just energy savings or acquisition costs.

  1. Start with the price of each water heater you’re considering, add in any accessories and the cost of installation.  That gives you the acquisition cost.
  2. Calculate the tax credit for a tank-less model with a certification from the Directory of Certified Product Performance.  This does not apply to storage tank models.  Multiply the total acquisition cost including installation by 30%.  Subtract this amount (or $1500, whichever is less from the total acquisition cost.
  3. Next, you have to calculate the energy cost.  The US Department of Energy offers a calculator for this.  (If you’re working with propane, it’s helpful to know that 1 gallon of propane = 0.918 Therms.)
  4. Calculate total life costs for each model.  A standard storage tank water heater has an average life expectancy of 13 years.  Tank-less manufacturers claim twice the life expectancy for those models, but I’m basing my calculations on a 20 year life.  Compare the models based on an equalized cost per year.

Working out the calculations for the two models I’m considering, one a storage tank and the other a tank-less, the difference was greater than I expected.  Every other time I’ve considered a tank-less model, the acquisition cost has been so high that the operational savings could barely offset the difference over the entire life cycle.  Now, with the tax credits available, the difference swings the other way.  For my example, the total life cost of a storage tank model would be about $9150 over a 20 year period, compared to a tank-less model with a total cost of $6250 for the same period.

Armed with all this information, you can truly make an informed choice. Don’t depend on my calculations, evryone’s usage is different.  Take the time to run your own calculations and see what works best for your situation.

Finally, be sure to consult your tax professional for information regarding the application of tax credits.

Let me know how you decided to proceed.  I’d also be interested in hearing about any resolutions you couldn’t resist making.

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