Energy Conservation: A Great Investment Again

At the same time, the prices of the two key inputs to most conservation measures, labor and materials, have increased. These higher costs and lower savings make for lower returns on investment. So what makes conservation investments worth reconsidering? The answer, in a word, is interest.

In the last few years, interest rates have plummeted from the highs of the 1980s, when certificates of deposit and bonds offered consumers more than 15%. Today, if you have the extra money to invest, you will be lucky to get more than 5%. And while you may have made a killing in the stock market before, putting your money there now is not as lucrative a prospect for the long haul. In general, nonspeculative investments, like bonds, have entered a period of low returns where 8% sounds good.

Meanwhile, there's still a lot of conservation out there that can earn a 20% return on investment. You probably have your own list, but here's a sampling of ours. (We used typical conditions in these calculations. Savings in your region will vary.)

Of course, investing in energy conservation is not identical to buying stocks or bonds. Some of the differences favor conservation measures and others don't. For example, conservation measures reduce costs, while the interest and dividends from stocks and bonds increase income. Uncle Sam taxes increased income but ignores reduced costs, so energy conservation looks even better after taxes.

Obviously, conservation investments are not liquid like stocks--they are true investments and not just short-term parking places for cash. They also involve a few more hurdles than simply depositing money with a broker. Some of these hurdles are trivial, such as replacing an old refrigerator with virtually any new one, but others require more research.

The bottom line is that many conservation investments look very attractive in our new, low-interest environment. Saving energy may not be in the headlines, but it should be in the minds of savvy investors.

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