Is it worth borrowing to improve the energy efficiency of your home?

It’s unlikely the €250 winter energy bill credit will be repeated in this year’s budget, the Taoiseach has warned. It was always a temporary cost-of-living measure to shield us from higher energy costs, but that reasoning will be cold comfort when your winter energy bills land.

If you own your own home, there are ways to permanently reduce your energy bills. Getting a Sustainable Energy Authority Ireland (SEAI) grant, coupled with borrowing money from the Government-backed Home Energy Upgrade loan scheme, can help fund improvements to make your house permanently warmer and cheaper to run.

So where are the savings, and how does the loan scheme work?

Attic attack

If you have an attic, one of the cheapest and most effective things you can do to achieve a warmer home and reduce energy bills is to insulate it. Heat rises, and up to 30 per cent of your home’s heat is lost through your roof.

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The median cost of roof insulation for a semi-detached or end of terrace home is €1,900, according to the SEAI, but a grant from them will cover €1,300 of that.

For your own €600 investment, the payback from roof insulation is instantaneous. This is one of the cheapest but highest-impact things you can do to reduce your energy bills.

The cheapest way to fund the cost will be from savings, if you have them.

The Government-backed Home Energy Upgrade loan scheme, offered by Bank of Ireland, AIB , PTSB, Avant Money in partnership with An Post, and some credit unions, offers borrowings of between €5,000 and €75,000 over terms of one to 10 years.

As the attic insulation costs less than €5,000, this loan is no good to you here.

Solar panels

Solar panels are all the rage, with an explosion in the number of people opting for this measure to reduce their energy bills.

There were 119,300 homes, or 6 per cent of all occupied dwellings, in the country with solar panels, according to Census 2022 data. Meath had the highest proportion at over one in 10 homes, which is almost twice the national rate, according to the data.

For a mid-terrace home, expect to pay €8,100 for a 4kWp set-up, according to SEAI estimates. You’ll get an SEAI grant of between €1,400 and €1,800 towards that.

Can solar panels save on energy costs? The answer is “Yes”. How much you can save and how fast will depend on the number of panels, their aspect, whether you use more daytime or night-time electricity, what tariff you are on, and whether you are also selling electricity back to the grid.

Householders generating energy through solar panels reported perceived savings averaging €91 a month on energy bills, according to an Electric Ireland sustainability index published in June.

Solar thermal panels can save up to 60 per cent on water heating bills; and solar photovoltaic (PV) modules can save householders €200-€300 per year on electricity bills, according to an AIB Homes Retrofit Report, published in December.

Solar isn’t as effective in winter, so it averages a five- or six-year pay back, installers say.

After the maximum grant of €1,800, expect to pay about €6,300 for your panels.

One of the cheapest ways to borrow the money is through the Home Energy Upgrade loan scheme. Rates vary by bank.

Borrow €6,300 over five years from Bank of Ireland and the rate is 2.95 per cent with repayments working out at €113 a month.

The interest rate for this type of loan is a higher 3.15 per cent with AIB and 4.55 per cent with PTSB, so the monthly repayments with those banks will be €115 and €118 respectively.

Wall insulation

About 60 per cent of household energy spending goes on heating, says the SEAI.

You can lose 20 to 30 per cent of heat through your walls however. Walls that leak heat mean you have to keep the heat on for longer for the place to get warm, and once it goes off, the place cools fast - so you lose all the heat you’ve paid for.

This costs you in the form of higher heating bills.

For a semi–detached or end of terrace house, the median cost for external wall insulation is €22,000, says the SEAI. You can get an SEAI grant towards that of €6,000.

Borrow the €16,000 balance through Bank of Ireland’s Home Energy Upgrade loan scheme over 10 years and the repayments will be €154 a month. On your €16,000 loan, you’ll pay back €18,495 in total.

You’ll have had the benefit of a warmer home and lower bills for those 10 years.

Go all the way

Attic, walls, solar panels, windows, heat pump - if you plan to go the whole hog, retrofitting your home up to an A rating, expect to spend about €40,000 of your own money after grants. That’s according to SEAI estimates presented to the Public Accounts Committee in 2023.

These retrofit measures will seriously reduce your energy costs over time. For example, your energy usage can be reduced by up to 20 per cent by using a heat pump, according to the home retrofit report from AIB published in December.

Borrow €40,000 over 10 years through the Government low-cost loan scheme and monthly repayments will range from €385 with Bank of Ireland to €402 with PTSB.

In addition to the €40,000 you borrowed, you’ll be paying back €6,240 and €8,256 respectively to these banks for the cost of the loan.

Again, you’ll have enjoyed far lower bills and a warmer home for the 10 years you are paying off your loan.

You will have increased the value of your home too. Home values increase by 1 per cent for every level you go up on the Ber scale.

For example, a home that goes from a Ber of G to a B2 will increase its value by 10 per cent, according to the SEAI.

Three-quarters of prospective homebuyers say they are more inclined to consider a property’s Ber in light of sustainability concerns and higher energy costs, according to a MyHome.ie survey in February 2023.

You’ll pay far higher interest on a car loan for example, and that car is not going to appreciate like a retrofitted house.

Change on the horizon?

From 2019 and to the middle of this year, 213,000 homes benefited from SEAI schemes and grants to improve their energy efficiency, according to the Department of the Environment.

More will need to be done, and fast, to reach Ireland’s 2030 carbon reduction targets.

Government budget watchers hope that, in lieu of short-term energy credits, there will be better grants to help cash-strapped households retrofit and take charge of their own energy bills.

While there are long-term savings from retrofitting, the upfront cost is still considerable.

You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, by Dominic Coyle on holiday car hire pit falls to avoid, you can read it here.