New Report Compares Cost-Effectiveness Methodologies As Congress Considers Requirements For Energy Code Updates

A significant proposal before Congress would require proposed energy code changes to be evaluated for their cost-effectiveness prior to inclusion in a code. The proposal before Congress designates simple payback as the principal basis for evaluating the cost-effectiveness of proposed energy code changes, but two other methods for determining cost-effectiveness are Life Cycle Cost (LCC) and Mortgage Cash-Flow (MCF). When assessing efficiency measures, it is important to include energy and cash savings over the full useful life of the measure or building. Both the LCC and MCF methods incorporate measures’ useful lives, which can vary from five years (e.g. lighting measures) to more than 30 years (e.g. insulation measures). By contrast, simple payback fails to recognize useful life; this is a critical omission that places into question the appropriateness of simple payback for public policy analysis. To help resolve these issues, this new study provides a rigorous, consistent, quantified comparison of these three methodologies. View the new report here.