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How good is the Energywise Warm Up New Zealand: Heat Smart Scheme?

By Matthew Cutler-Welsh

The official results are out and it makes for some very interesting reading. The team at He Kainga Oranga have released their evaluation report of the government’s $340 million Warm Up New Zealand: Heat Smart (WUNZ:HS) programme.

Perhaps the most impressive result is the bottom line 4:1 benefit ratio. Put simply that means that the estimated net benefits to the community, when all costs are taken into account, are four times that of the investment.

That’s a pretty good rate of return.

So what’s the catch? Well, most of that net benefit is associated with health benefits resulting from keeping people warmer. And most of these health benefits are attributable to a decrease in the winter mortality rate, particularly of the elderly and those who have previously had health issues.

This is not a bad thing. Having people being healthier and therefore probably happier in their homes, is what I’m all about.

But does it make it harder for those wanting to capitalise on the immediate financial benefits of installing insulation? That is, for all the service providers of the programme who might rely on extolling the virtues of insulation to bring down household monthly power bills.

For a number of years, I pursued a holly grail of calculating how much, in dollar terms, could be saved by installing a given amount of insulation. “Install x insulation, and you’ll saving $y on your monthly power bill”.

Taken literally, this report suggests that the annual energy saving resulting from an insulation retrofit under the programme, is just under 1%. A far from compelling argument if your trying to convince someone to install insulation purely on economic terms. That’s a pretty long payback period on a $3,000 investment of insulation.

There are a couple factors at play here. The first is the low standard that we’re starting from. The result of this evaluation confirms (again) that the bulk of our existing housing stock is so bad, that it requires a huge investment just for us to start seeing some return. Heating our uninsulated houses was not only inefficient, it was drastically ineffective. By installing insulation, we just start to make the heater effective. And that’s a key reason why the actual energy savings are relatively low. If you give someone the ability to get warm, that’s just what they’ll do. Get warm! The difference is that they’ll now be able to effectively get warm and so they’ll be more likely to run a heater and enjoy the comfort.

The second factor is that housing decisions are rarely logical. Comfort and health (not to mention aesthetics and other short term gratification) will always trump logical, calculated decisions in all but the most analytical of us.

So what’s the marketable benefit, and the effective sales strategy for anyone selling insulation? I’m interested to know if you anyone will be adjusting their sales pitch as result of this report.

Showing 1 Comment

Posted by Jake Humphreys on 03/11/2015 03:02 PM

Marketing pitch
Too much green tech is marketed on a hair shirt ideology. If insulation makes your home bearable to live in, that's a huge benefit! I think people are much more motivated by lifestyle concerns like comfort and fashion than financial return on investment, when it comes to their own home. I'm curious to see whether any legally enforced performance requirements will be made of rental property, as I imagine much unimproved housing remains in this sector. Landlords aren't going to fork out for improvements unless the market or the law demands.

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