Updated on May 30, 2008.

IF YOU SWITCHED all the light bulbs in your home from conventional incandescents to compact fluorescent light bulbs, or CFLs, you'd save about $270 in one year. Not bad for making an easy "green" upgrade, right?

If the dwindling polar bear population and receding glaciers don't move you to hug a tree, what would compel you to buy more energy-efficient lights? Well, if you're reading SmartMoney.com chances are you do care about your bottom line. So for those skeptical environmentalists who aren't shopping for yurts or spending Sunday afternoons composting in their yards, making some green home upgrades is a way to actually spend money to save money. Switching to CFLs, for one, is money in your pocket. (As a bonus, they consume less energy, and the polar bears will thank you.)

There's an endless amount of information out there touting the environmental benefits of going green. But part of the reluctance to actually doing so stems from the painstaking financial gymnastics involved in figuring out if it's really worth it. Short answer: It is worth it. For some things. But it depends. Long answer to follow.

Compact Fluorescents

How did we get to that $270 in savings a year? Not as straightforward as one might think. As we've learned, the cost-benefit analysis of making green upgrades comes with as many caveats as plant species in a Brazilian rain forest.

A little explanation: For the sake of uniformity, let's say a "typical" home though as we were told by numerous experts, there is no such thing as a typical or average American household, so bear with our generalizations has about 20 lamps or light bulbs. According to the Department of Energy's Energy StarYou can see the Energy Star calculator in the right column here

You spent around $70 for the new bulbs, which would bring your net savings down to $270. (Compare that with the cost of 20 60-watt incandescent bulbs, at 50 cents each, totaling $10.)

But wait. The precise amount you save depends on a few things. If your home uses more bulbs, your potential savings can increase (and vice versa). Cost savings also depend on the amount of time your lights are actually in use. Our example was based on a home that uses light bulbs for about six hours a day. It's recommended that the best target replacements are 60- to 100-watt bulbs, used several hours a day, because usage affects how long it takes to recover the initial investment in CFLs.

We're not done. That $270 also doesn't take into account the cost of electricity, which varies based on the state you live in and possibly when you use the electricity. Some utility companies charge customers more during the summer months when energy use is higher. The past few years have seen a increase in electricity prices. For instance, the average cost of residential electricity in New Jersey for 2007 was 14.44 cents per kilowatt hour, up from 12.84 cents in 2006.

Confused? Us Too
If you want to figure out if making a few choice green upgrades to your home is financially worthwhile, we wish you luck. You might have an easier time cracking the Da Vinci code. Part of what makes getting at the numbers so difficult is the myriad factors and circumstances unique to each individual home: your region, the size of your home, when it was built, your usage habits, and so on.

Still, the consensus is that switching to compact fluorescents is a simple and effective cost-saving move. "For the average customer, the standard household using electricity for lighting, appliances, TV, they'll see a 30% reduction in their electricity bill," says Peter Talmage, owner of Energy and Design, a solar-energy consulting firm in Northfield, Mass. "You save 100 to 150 kilowatt hours a month. And the CFL lamps last 10 times as long as an incandescent. That's probably the most outstanding example of spending money to save money." (Of course, Talmage's 30% estimate comes with the above-mentioned caveats.)

Insulation

There are a few other relatively easy and effective upgrades recommended by green-building pros that can have an impact on your energy bill. One of them is insulation. Attics are notorious for hemorrhaging heat during cold winter months. Insulating your attic with fiberglass, cotton or cellulose will reduce heat loss from conduction and air infiltration, and take some dollars off your utility bill. And according to David Johnston, president of Boulder, Colo.-based What's Working, a consulting firm, "there's no house in the country that has sufficient attic insulation. Heat rises, and most heat is lost to the cap of the house."

So how much can insulating your attic save you on utility costs? Again, it depends on your local climate, the size, shape, construction of your house, how well the rest of the house is insulated, the living habits of your family, the fuel you use, etc.

Andre Desjarlais, program manager at Oak Ridge National Laboratory's Building Envelopes Program, in Tennessee, says it would take a professional engineer half a day to calculate exactly how much money a homeowner would save by upgrading their attic insulation. But we gave it a go anyway, using a calculator Desjarlais and his colleagues designed. (The Building Envelopes Program works on developing technologies that improve the energy efficiency of residential and commercial buildings.)

The calculator is the same one the Department of Energy recommends homeowners use for this same purpose. It tells users the most economic insulation level for your home. (Another caveat: Desjarlais says the calculator, based on 2005 economic data, is a bit out of date.)

For the purposes of getting a dollar estimate, we used a 3,700-square-foot house in New Jersey that uses an oil furnace for heating. The calculator told us the cost of insulating a 200-square-foot attic is about $142. However, that's assuming the attic already has insulation with an R-value of 11, in which case we'd add insulation of R-38, making for a total R-value of R-49, the recommended number for attics in a Northeastern state, according to the North American Insulation Manufacturers Association. (R value measures the ability of the insulation to resist energy loss. The higher the R value, the more effective it is.) This is also assuming the attic is a do-it-yourself job. Attics can be insulated relatively easily, but insulating walls may require professional help.

Desjarlais says the attic typically represents about one-quarter of your energy bill. A substantial increase in performance may cut that in half. The heating and cooling portion of an energy bill is at least 40%. "So, you could guess that your attic improvement would reduce your bill by (0.5 x 0.25 x 0.4) or about 5%," he says. According to the Bureau of Labor Statistics, the average annual U.S. household energy bill comes to about $2,310 as of 2006. (And whether our sample 3,700-square-foot New Jersey home constitutes an "average" U.S. household may be subject to debate, but we'll use the BLS figure for the sake of simplicity.) In the end, the attic insulation would lower our energy costs by $115. And the insulation which cost $142 would pay for itself in less than two years.

Here's more on what upgrades are eligible for Energy Star tax credits And states have energy efficiency financial incentives of their own.

Tankless Water Heaters

Tankless water heaters have been around for a while. And while very common in the rest of the world, they're rarely used in the U.S. The savings here come from the heat-on-demand feature. Gas and electric tankless heaters work like this: When you want hot water, the system sends cold water back to the water heater until hot water arrives at the sink or shower. You don't waste water down the drain, and the pump gets the hot water there much faster than standard plumbing. (Gas tankless water heaters provide the highest amount of hot water compared to electric tankless water heater models.)

Johnston, of What's Working, recommends the Metlund D'Mand system, which can be installed in new or existing homes. You need to choose a model designed to work with your specific plumbing system, but base prices start at about $334 and go up to $830. (More expensive models can be applied to more than one shower and have a higher "flow rate.") Johnston says going tankless can save you 20% on the cost of heating water. Other cost savings cited put that number as high as 45%.

OK, it's math time. As we said in the insulation example, the BLS's average annual U.S. household energy bill is about $2,310, 13% of which $397 is used to heat water.

Now let's take a middle-of-the-road number for the potential cost savings 33% which is somewhere between our estimated 20% and 45%. That amounts to $131 a year subtracted from your utility bill. Say you paid about $800 for your tankless water heater, it's paid for itself after 6.1 years. And that's assuming energy costs remain stable. If they go up (very likely), the payback would come sooner.

here's a list, which would bring our original cost of the heater down to $500. In that case, it pays for itself in less than 3.8 years.

Solar Panels

Who needs the utility company when you have the sun the ultimate renewable resource? Solar technologies use the sun's energy to provide heat, light, hot water, electricity, and even cooling, for homes, businesses and industry. Sounds like a no-brainer, but as of now, installing a

in your house is one pricey endeavor.

Wes Kennedy, vice president of Namaste Solar Electric, a design and installation firm, based in Boulder, Colo., put an average system size between 3 kilowatts and 4 kilowatts. (Each kilowatt of PV panels produces around 100 kilowatt hours, or KWH, per month.) Kennedy says the typical cost for a PV system is $9 per watt, or $9,000 per kilowatt, which would put our average home system between $27,000 and $36,000. How long would it take to recoup the initial cost of the system? Divide your average annual energy bill ($2,310) by the above numbers. You're looking at about 12 to 15 years.

The real inducement here is the government. It's particularly generous with financial incentives for homeowners who go solar. The tax credit for solar-electric systems is 30% of the cost, up to $2,000. And many states have direct cash rebates of around 50% of the cost of the system. When you factor in these incentives, payback may come in about six years.

Most green building experts agree, however, that before a homeowner considers doing the "sexy" stuff," like installing solar panels, it's best to first increase overall energy conservation with simpler upgrades. Johnston recommends doing as many energy retrofits as possible weatherization, insulation, caulking. "Doing the low-hanging fruit, the easy stuff, is the best place to start," he says.