# Residential Energy and Cost Analysis Methodology

The U.S. Department of Energy (DOE) evaluates model energy codes and proposed changes to help states, localities, and other stakeholders better understand the impacts of updating residential energy codes. DOE relies upon an established methodology for evaluating the energy & economic performance of residential energy codes, which helps to ensure the Department’s proposals are both energy efficient and cost-effective. This methodology is updated regularly through a public process (Docket No. EERE-2015-BT-BC-0001) — a summary of current assumptions and economic parameters is outlined below.

The DOE methodology contains two primary assessments:

- Energy savings
- Cost-effectiveness

Energy and economic calculations are performed to model changes across representative building types. National energy savings are reported, in addition to economic metrics, by state and climate zone. In considering cost-effectiveness, longer term energy savings are balanced against incremental costs of construction through a life-cycle cost perspective.

## Energy Savings

Energy consumption is modeled using the DOE *EnergyPlus*™ software for both *single-family* and *multifamily* buildings based on an established suite of residential prototypes:

Parameter | Assumption |
---|---|

Conditioned floor area | 2,376 ft^{2} (plus 1,188 ft^{2} of conditioned basement, where applicable) |

Footprint and height | 54-ft-by-22 ft, two-story, 8.5-ft-high ceilings |

Area above unconditioned space | 1,188 ft^{2} |

Area below roof/ceilings | 1,188 ft^{2} |

Perimeter length | 152 ft |

Gross exterior wall area | 2,584 ft^{2} |

Window area (relative to conditioned floor area) | Fifteen percent equally distributed to the four cardinal directions (or as required to evaluate glazing-specific code changes) |

Door area | 42 ft^{2} |

Internal gains | 86,761 Btu/day |

Heating system | Natural gas furnace, heat pump, electric furnace, or oil-fired furnace |

Cooling system | Central electric air conditioning |

Water heating | Same as fuel used for space heating, or as required to evaluate domestic hot water-specific code changes |

Parameter | Assumption |
---|---|

Conditioned floor area | 1,200 ft^{2} per unit, or 21,600 ft^{2} total (plus 1,200 ft^{2} of conditioned basement on ground-floor units, where applicable) |

Footprint and height | Each unit is 40 ft wide by 30 ft deep, with 8.5-ft-high ceilings. The building footprint is 120 ft by 65 ft. |

Area above unconditioned space | 1,200 ft^{2} on ground-floor units |

Wall area adjacent to unconditioned space | None |

Area below roof/ceilings | 1,200 ft^{2} on top-floor units |

Perimeter length | 370 ft (total for the building), 10 ft of which borders the open breezeway |

Gross wall area | 5,100 ft^{2} per story, 2,040 ft^{2} of which faces the open breezeway (15,300 ft^{2} total) |

Window area (relative to gross wall area) | Twenty-three percent of gross exterior wall area, excluding walls facing the interior breezeway (or as required to evaluate glazing-specific code changes) |

Door area | 21 ft^{2} per unit (378 ft^{2} total) |

Internal gains | 54,668 Btu/day per unit (984,024 Btu/day total) |

Heating system | Natural gas furnace, heat pump, electric furnace, or centralized oil-fired boiler |

Cooling system | Central electric air conditioning |

Water heating | Same as fuel used for space heating, or as required to evaluate domestic hot water-specific code changes |

The DOE analysis covers almost all aspects of residential buildings, including envelope; heating, ventilation, and air conditioning; water heating; and lighting systems. As part of its analysis, the Department examines variations across these systems, which results in the evaluation of a significant number of unique scenarios representative of U.S. climate and building types.

## Cost-effectiveness

The DOE methodology accounts for the benefits of energy-efficient home construction over the life of a typical mortgage, balancing initial costs against longer term energy savings. DOE evaluates residential energy codes based on three measures of cost-effectiveness:

*Life-Cycle Cost*: 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 (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.

*Life-cycle cost is the primary measure by which DOE assesses the cost-effectiveness of residential energy codes.*

Parameter | Current Estimate |
---|---|

Mortgage Interest Rate | 5% |

Loan Term | 30 years |

Down Payment Rate | 10% of home price |

Points and Loan Fees | 0.6% (non-deductible) |

Discount Rate | 5% (equal to Mortgage Interest Rate) |

Period of Analysis | 30 years |

Property Tax Rate | 1.1% of home price/value |

Income Tax Rate | 15% federal, state values vary |

Home Price Escalation Rate | Equal to Inflation Rate |

Inflation Rate | 1.6% annual |

Energy Prices and Escalation Rates | Latest national average prices based on current Energy Information Administration data and projections; price escalation rates taken from latest Annual Energy Outlook. |