Cost to Buy or Cost to Own — a societal imperative

America has developed a 99-cent shopping obsession that has turned Benjamin Franklin’s axiom “a penny saved is a penny earned” on its head. A price of $100 gives us pause, but a price of $99.99 seems like a bargain. Combined with easy access to revolving credit and our disposal culture, our focus on purchase price overshadows the total cost of many of our purchase decisions. We tend to focus on the “cost to buy” rather than the “cost to own.” More often than we care to admit, we are — to trot out another axiom that predates Franklin — “penny wise and pound foolish.”

So began a recent article of mine. This is a theme that I often emphasize in my energy diaries and in Energize America:

The critical importance of moving from

  • a stove-piped, limited perspective Cost to Buy mindset to a
  • more holistic, inclusive perception as to Cost to Own.

And, this is true in our individual lives, in our communities and businesses, and for our government.

Debunking the Myth of the Sustainable Design Premium (small pdf) appeared in the spring 2007 issue of ArchitectureDC.  My focus: the mistaken belief that building energy smart is somehow costly.

When it comes to Cost to Buy versus Cost to Own, there is one quite prominent example that should be familiar with everyone.

“Compact Flourescent Lightbulbs cost more …”

If I only had a nickel for every time I heard or read that, well, I would be a wealthy man. (Well, even though that nickel means less than when I was a child, it would still be a lot of money.)  I have heard it from quite senior people (former EPA Administrator Carol Browning) and from friends / acquaintances who are concerned that CFLs are a waste of money.  

This is misleading and mistaken.

  • Purchase of a Compact Fluorescent Lightbulb (CFL) will Cost More to Buy than an Incandescent Lightbulb — perhaps ten times as much.
  • Within months, the 73+% electrical savings of a CFL compared to an incandescent lightbulb will make up for the additional cost to buy and the savings will continue for years making the CFL far Less Expensive to Own. (For more discussion of CFL payback periods, see discussion in Making Energy CENTS — From the Home to the Globe.)

And, there are even additional barriers. Many people, when it comes to Incandescents vs CFLs are concerned about their sunk costs, not wanting to ‘waste’ their existing capital investment — planning to wait until the incandescent is burnt out before replacing it with a CFL.  This is, in the end, a counterproductive approach because it simply delays the financial savings from reduced electrical use.  It also, not unimportantly, delays reductions in electrical use and therefore reduced pollution.  (Note, every kilowatt hour in the US, on average, equals about 1.5 pounds of CO2 into the atmosphere … how many KwH are wasted in the incorrect approach of delaying the move to a more efficient system due to ‘sunk cost’ considerations.)

Cost to Buy versus Cost to Own translates quite directly from our individual lives into larger considerations.  Governments, businesses, and other larger groups often separate out “capital investment” from “operating costs”, making it difficult to relate Cost to Buy to Cost to Own.  And, well, it is often easier to push out to the future (a tax increase on the unborn, if you wish) operating costs rather than fight for additional upfront investment — especially for a manager who knows that they will be in a new job before those expenses hit or for a politician worried about next year’s election more than the next decade’s implications of their decisions.

Thus, back to Green Architecture

In the (short — one page) article, I then highlight how “If sustainable design is to realize its full potential, we need to focus on the long-term” and the systems-of-systems benefits of building more sensibly, more sustainably.   This article was another case of taking The Washington Post to task as it reacted from a Washington Post article which asserted that

“Opponents say building green can add as
much as 11 percent to construction costs. Supporters
place the extra costs at 2 to 4 percent but contend
it’s worthwhile.”

My reaction: The Post left unchallenged whether building green actually adds to the cost of construction at all. Completely absent was any analysis of how building green might benefit the city or the buildings’ owners and occupants.

Even if there is a (small) cost-to-buy premium for a Leadership in Energy and Environmental Design (LEED) (Energy Smart and Environmentally Smart) structure, the true cost savings and other benefits are tremendous:

  • Lower energy costs to operate, lower water bills
  • Typically, lower maintenance costs
  • Often, lower future equipment replacement costs (systems last longer and, well, a smaller air conditioning system costs less than a bigger capacity one, all things being equal)
  • More income for owner: with less space devoted to heating / cooling systems; higher rent values
  • Reduced heat island effect (which benefits community but also, to some degree, lowers cooling bill for the specific building)

And, well, so on …

Cost to Buy inhibits thinking about full implications — not just in direct long-term fiscal costs, but in terms of environmental, social, and other impacts as well.

Not realizing these benefits is, well, “penny wise, pound foolish” …


One response to “Cost to Buy or Cost to Own — a societal imperative

  1. Pingback: Energize America: CRASHING THE HILL … Yearly Kos, Chicago, part 3

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