Cost-Energy Dynamics of Thermal Insulation: Potential Energy Savings and Policy Recommendations

Abstract

This paper looks at extra insulation for saving energy from the viewpoint of a decision maker. Public and private decisions are distinguished. Profitability and process analyses are combined to obtain a simple trade-off relationship between the extra cost and extra energy saving. Due to higher costs of energy at present and in the foreseeable future, good opportunities exist to retrofit existing thermal envelopes with extra insulation. Potential costs and savings in the residential, commercial and manufacturing sectors are assessed. A hypothetical $10 billion insulation budget is determined to save 0.5 quad/yr of energy for the next 10 to 15 years, resulting in conservation energy costing less than $2/MMBtu. It is argued that public subsidies to energy conservation and energy supply technologies should be weighed so that the worth of each unit of resultant energy at the point of use is the same.