Rocky Mountain Institute launches report on the economics of constructing zero-energy homes
Building new construction single-family homes to zero-energy (ZE) or zero-energy ready (ZER) home standards makes sense for longevity and economic purposes. ZE and ZER homes currently make up less than 2 percent of the residential market, but their market share is growing. There are many reasons for the currently small share, but a key barrier is the perceived incremental cost. RMI’s latest report, The Economics of Zero-Energy Homes: Single Family Insights, demonstrates that the cost increase to build a ZE or ZER home is modest (only 6 percent–8 percent)—far less than consumers, builders, and policymakers realize—and highlights methods builders and policymakers can use to drive increased market penetration.
RMI compared the incremental costs of building ZE and ZER homes in four US locations against four key consumer cost thresholds that reflect the metrics that both homebuyers and builders use to make investment decisions:
- Mortgage: The anticipated energy cost savings over the life of the mortgage.
- Resale: The anticipated energy cost savings over 12 years (the average duration homeowners expect to stay in a home).
- Consumer Willingness to Pay: The 4 percent first cost premium customers have stated they’re willing to pay according to consumer research.
- First Cost: Zero incremental cost compared with an identical code-compliant home.
When the incremental costs of building ZE and ZER homes are equal to or less than the cost thresholds, decision makers are more likely to be willing to bear the cost of investment in ZE or ZER homes. The report confirms that ZE homes have already passed the mortgage and some resale thresholds and that ZER homes have already passed the mortgage, resale, and consumer willingness to pay thresholds in most US markets.
“It’s now clear that zero-energy ready homes make sense economically today, even as they provide multiple benefits over standard construction,” says Jacob Corvidae, Principal at RMI and coauthor of the report, “It looks like zero-energy homes will become the norm sooner than most people realize. Building anything else today runs a risk of creating homes that will be seen as out-of-date in only five years.”
With current costs to build ZE and ZER homes already meeting consumer thresholds and continuing to decline, first cost is no longer a significant barrier. Builders can use the recommendations provided in the report to fine-tune home designs and construction processes to minimize incremental costs. The report also outlines key actions that policymakers can take to drive increased adoption of ZE and ZER homes in their jurisdictions. Both builders and policymakers are essential to driving progress in this industry.
About Rocky Mountain Institute
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. RMI has offices in Basalt and Boulder, Colorado; New York City; Washington, D.C.; and Beijing. More information on RMI can be found at www.rmi.org or follow us on Twitter @RockyMtnInst