This blog post is from Christo­pher Rus­sell, Energy Manager.

If you are moti­vated to reduce energy costs, the sequence of your actions makes a dif­fer­ence. To put it all in per­spec­tive, the aver­age house­hold spends about $2,000 to $2,500 per year on energy uses, exclud­ing vehi­cles.  You have three basic energy cost reduc­tion opportunities:

1.       Change behav­ior.  You guessed it:  turn off appli­ances and fix­tures that you aren’t using.  Cer­tain appli­ance adjust­ments cost noth­ing: try low­er­ing the tem­per­a­ture on your water heater to 120°. Try rais­ing refrig­er­a­tor and freezer set­tings.  Use that pro­gram­ma­ble ther­mo­stat.  Con­sol­i­date or elim­i­nate appli­ances, if pos­si­ble. Enable the “sleep” mode on com­put­ers, fax machines, and other appli­ances that have them.  Use power strips with an on/off switch for “fam­i­lies” of appli­ances, like home enter­tain­ment cen­ters and com­put­ers.
2.       Low cost tune ups.  Get sea­sonal tune-ups for fur­naces, water heaters, and air con­di­tion­ers.  Main­tain clean fil­ters on air con­di­tion­ers, refrig­er­a­tors, and dehu­mid­i­fiers.  Weath­er­strip win­dows and doors. Seal air leaks, espe­cially the pen­e­tra­tions to the attic.  It’s equally impor­tant to seal leaks and insu­late around the rim joists, which is where the house’s wood frame inter­faces the masonry foun­da­tion.  Replace inef­fi­cient light bulbs with effi­cient ones.
3.       Install effi­cient appli­ances.  The top pri­or­i­ties are the fur­nace, air con­di­tioner, water heater, and refrig­er­a­tor.  Look for the Energy Star label when it’s time to replace these items, as well as wash­ers, clothes dry­ers, tele­vi­sions, and computers.

Con­ven­tional wis­dom sug­gests that we pur­sue the no– and low-cost items first.  The idea is that sav­ings from low-cost efforts pro­vide the cash flow to sub­si­dize the next round of ini­tia­tives.  In gen­eral, I agree with this approach, but the rea­son­ing goes a bit deeper.  The sequence of energy improve­ment activ­i­ties makes a dif­fer­ence both in your com­fort and in your cash flow.  Here’s why the sequence of imple­men­ta­tion mat­ters:
A fur­nace or air con­di­tioner should be prop­erly sized to meet the needs of the build­ing that it serves.  Specif­i­cally, the unit’s size is pri­mar­ily a func­tion of the house’s square footage and num­ber of doors and windows—and it’s a func­tion of how much the build­ing “leaks” through air gaps and radi­ant losses.

The leaks and radi­ant losses con­sume energy first, before sat­is­fy­ing your inter­nal heat­ing and cool­ing needs.  The leakier the build­ing, the larger the capac­ity of the fur­nace, boiler, or air con­di­tion­ing unit that’s required to serve it.  That’s why air seal­ing and insu­la­tion should come first.  Not only are these low cost mea­sures that bring instant results, they can also reduce the capac­ity needed when it’s time to replace your cur­rent heat­ing and cool­ing equipment.

Want an exam­ple of real-life sav­ings?  This will be the sub­ject of a future blog post, but my own space heat­ing (nat­ural gas) expe­ri­ence since August 2010 shows that I have shaved 30 per­cent off the gas bill alto­gether, with 11 per­cent attrib­ut­able to improved insu­la­tion and air seal­ing and another 19 per­cent thanks to the instal­la­tion of a high (93%) effi­ciency boiler with an indi­rect water heat­ing sys­tem (see Energy Savers.Gov for a more detailed explanation).