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01/15/14

Residential Cost Savings in Michigan, 2012 IECC Report

Methodology

An overview of the methodology used to calculate these impacts is provided below. Further information as to how these estimates were developed is available at the U.S. Department of Energy’s (DOE) Building Energy Codes website.

Cost‐Effectiveness

Pacific Northwest National Laboratory (PNNL) calculated three cost‐effectiveness metrics in comparing the 2012 International Energy Conservation Code (IECC) and the Michigan Uniform Energy Code. These are:

Life‐Cycle Cost (LCC): Full accounting over a 30‐year period of the cost savings, considering energy savings, the initial investment financed through increased mortgage costs, tax impacts, and residual values of energy efficiency measures 

Cash Flow: Net annual cost outlay (i.e., difference between annual energy cost savings and increased annual costs for mortgage payments, etc.)

Simple Payback: Number of years required for energy cost savings to exceed the incremental first costs of a new code

LCC is a robust cost‐benefit metric that sums the costs and benefits of a code change over a specified time period. LCC is a well‐known approach to assessing cost‐effectiveness. DOE uses LCC for determining the costeffectiveness of code change proposals, and for the code as a whole, because it is the most straightforward approach to achieving the desired balance of short‐ and long‐term perspectives.

The financial and economic parameters used for these calculations are as follows:

New home mortgage parameters:

  •  5.0% mortgage interest rate (fixed rate)
  •  Loan fees equal to 0.7% of the mortgage amount
  •  30‐year loan term
  •  10% down payment
  •  Other rates and economic parameters:
  •  5% nominal discount rate (equal to mortgage rate)
  •  1.6% inflation rate
  •  25% marginal federal income tax and 4.35% marginal state income tax
  •  0.9% property tax

Insulation has 60‐year life with linear depreciation resulting in a 50% residual value at the end of the 30‐year period

Windows, duct sealing, and envelope sealing have a 30‐year life and hence no residual value at the end of the analysis period

Light bulbs have a 6‐year life and are replaced four times during the 30‐year analysis period

Energy and Economic Analysis

This analysis determined the energy savings and economic impacts of the 2012 IECC compared to the Michigan Uniform Energy Code. Energy usage was modeled using DOE’s EnergyPlus™ software for two building types:

1. Single‐Family: A two‐story home with a 30‐ft by 40‐ft rectangular shape, 2,400 ft2 of floor area excluding the basement, and windows that cover 15% of the wall area, equally distributed on all sides of the house 

2. Multifamily: A three‐story building with 18 units (6 units per floor), each unit having conditioned floor area of 1,200 ft2 and window area equal to approximately 10% of the conditioned floor area, equally distributed on all sides of the building

Each of these building types, single‐family and apartment/condo in a multifamily building, have four unique foundation types:

1. Slab on grade

2. Heated basement

3. Unheated basement

4. Crawlspace

Each building type also has four unique heating system types:

1. Natural gas

2. Heat pump

3. Electric resistance

4. Oil

This results in 32 unique scenarios (2 x 4 x 4) for each of the three climate zones.

PNNL incorporated the prescriptive requirements of the Michigan Uniform Energy Code and the 2012 IECC when modeling the impacts of changes to the code. Whenever possible, PNNL uses DOE’s EnergyPlus model software to simulate changes to code requirements. However, in some cases, alternative methods are employed to estimate the effects of a given change. As an example, in order to give full consideration of the impacts of the 2012 IECC requirement for insulating hot water pipes (or shortening the pipe lengths), a separate estimate was developed for hot water pipe insulation requirements in the 2012 IECC, which results in a 10% savings in water heating energy use (Klein 2012).

Energy and economic impacts were determined separately for each unique scenario, including the single‐family and multifamily buildings, the four unique foundation types, and the four unique heating system types.

However, the cost‐effectiveness results are reported as a single average for each climate zone and as an overall state average. To determine this average, first the results were combined across foundation types and heating system types for single‐family and multifamily prototypes as shown in Table A.1 and Table A.2 (single‐family and multifamily have the same shares for foundation types). For example, the primary heating system type in new residential units in Michigan is a natural gas furnace. Therefore, the combined average energy usage calculations were proportionally weighted to account for the predominance of natural gas heating. Then single‐family and multifamily results were combined for each climate zone in the state and the climate zone results were combined to determine a state average weighted by housing starts from 2010 U.S. Census data as shown in Table A.3.

For full report, download attached PDF.