Going Green Saves Money. How Much Is the Question

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.

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 Star program, the annual operating cost of a 15-watt compact fluorescent light bulb is $3, while that of an equivalent 60-watt incandescent bulb is $20. So with a compact fluorescent you save $17. In one year, if all those bulbs are replaced with the more efficient CFLs, you can save $340. (You 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.)