Traditionally real estate has been a good investment for most people. The value of homes appreciates with inflation such that homeowners often end up with an asset that is worth a considerable sum of money. During the era of cheap energy, the largest cost of home ownership has been the mortgage payment. It is starting to become clear that “cheap energy” is a thing of the past and may eventually challenge the mortgage payment as the biggest expense for large houses and homes that are poorly insulated.
Energy prices are rising in the coming year and your finances are going to be affected. Heating oil is 84 cents / liter and could rise at any time based on the world price. The price of electricity is likely to increase by double digits in 2007 (15%?), according to the trial balloon floated recently. Total increases may be 40% in the next four years. There are several reasons for this. Payments for the refit of Coleson Cove, upcoming Point Lepreau refit, higher oil prices and the rate schedule. NB Power subsidizes large industrial power users by $75 million per year by charging less than the average cost of production. Don’t get mad at NB Power; when large industries threaten to close their doors, the government listens. Watch closely whether industrials get a deal in the coming rate increase. If they pay less, you pay more.
After the oil embargo of 1973, government policy was to get people off oil. There was significant conversion from oil to electric heat in New Brunswick such that roughly 60% of all homes are heated with electricity today. Recently, the Liberal government through Efficiency NB made a decision to promote the conversion of homes and business from electric back to oil and to natural gas. This decision was made for two valid reasons.
First, oil or natural gas burned at the home for heat is more efficient than using oil or natural gas to centrally generate electricity to heat homes and results in less greenhouse gases emitted. Secondly, the use of electric heat causes a peak during cold weather and therefore requires earlier construction of power plants and hence power rate increases.
However attractive this logic may be, perhaps we should be thinking about the future of oil and natural gas in 5 years. Many analysts consider a decline in worldwide oil production to be likely within five years with oil prices escalating to shocking levels. Natural gas prices will be linked to some extent. Will we then be suggesting that people convert again to some other form of energy? Are there any other options existing for us?
Just this past week Newfoundland proposed installing a power cable to New Brunswick to sell power from the Lower Churchill hydro project. Hydro electricity is renewable and can heat our homes without greenhouse gases. History has shown us that the cost of power from hydro developments remains quite stable over the years. Power from this source could be available in roughly 5 years. It is also possible to charge thermal storage units in the home during the night with off peak electricity for use during the day. This flattens the load curve. Let’s talk to Danny Williams, the Premier of Newfoundland. Is there a possibility of a partnership with Newfoundland that is good for both parties?
Over the years the size of new homes have increased from an average of 1000 to 1600 square feet. Anyone contemplating new house construction should seriously consider R2000 or Energuide 80 rating as well as reducing the size of the house to minimum requirement. In general, a mega-home means large heating bills.
Efficiency NB has just announced a series of programs to help those with existing or new homes increase efficiency and adjust to the new energy reality. One positive thing I noted was the recognition of wood furnaces as being eligible for grants. Hopefully, this means pellet stoves. Wood is an abundant resource in the province according to Peter Salonius and George Jenkins, forest research scientists in the province. Efficiency NB will be featured in an upcoming article.
The average New Brunswicker’s salary is used up by essentials like food, gas, home payments and heating bills. There is little or no money saved at the end of the year. When rising energy costs disrupt our comfortable existence, something will have to give. How low can we go with our home-heating thermostat? Will your home be a good investment for the long term? Just keep in mind that energy prices will soon change all the rules and it could make your energy guzzling home a millstone around your neck.