As the cost of energy rises—natural gas prices went up 6.5 percent last year for Central Hudson customers, and electricity jumped 13 percent—energy efficiency is a financially smart move. "Who wouldn't consider a drastic reduction in fuel costs?" says Doug Hoffman of Eco-Con Building Systems, Inc.

Hoffman says the key to realizing real savings is to begin early in the house design phase. For example, the size of a heating system is often based on square footage. However, proper sizing is more a function of insulation levels. By investing more in insulation and in sealing the house tight, homeowners save money twice—first by downsizing the heating system (a smaller system is cheaper to buy and run than a larger one) and again with long-term energy savings.

Solar-electric (photovoltaic, or PV) systems are becoming an increasingly popular installation measure to help homeowners defray the cost of electricity. Solar-electric systems require little to no maintenance and are extremely durable, lasting up to 50 years. The cost to install a typical 2KW system at $8 per watt is $16,000. The New York State Energy Research and Development Authority (NYSERDA) will pay for about 50 percent ($4 per watt for an average home, $4.50 per watt for an Energy Star home) of the system cost as well as provide a tax credit up to $3,750, bringing the net system cost down to $6,500. The remaining cost can be financed through the Energy Smart Loan program, in which NYSERDA will buy down the interest rate on a loan by 4 percent.

A PV system pays for itself in energy savings in about 10 years, meaning the money invested up front will be paid back in the form of lower utility bills. It's like buying all your energy at once, only at a cheaper rate; how cheap depends on how much your system produces.

However, the savvy homeowner views the move to solar as an investment not just in terms of energy savings, but as a financial one that fares better than the average investment in the stock market, only with much less risk.

John Wright, of Hudson Valley Clean Energy, is a solar-electric installer located in Rhinebeck. "If your investment in a PV system is $10,000, that typically generates a 10 percent return on investment based on a warranty of 25 years," he says. "Typical stocks and bonds generate 6 percent at best." The return on investment is calculated based on electric price savings, electric price inflation of 3 percent per year (local rates increased by much more last year), a marginal income tax rate of 40 percent, and the interest earned on savings (which will earn about 2 percent in a money market account). Furthermore, says Wright, "As rates increase, the ROI is going to be greater and greater every year."

Using energy-saving technologies like solar as part of a financial strategy has the advantage of creating a context for a relatively intangible concept—that is, you can't exactly see energy savings. Although investing in solar (or energy efficiency) as part of a strategic financial plan is a relatively new concept for homeowners, the business world has started to catch on. Many businesses develop energy management plans and use the savings from upgrades to invest in capital projects. 

Another financially savvy decision is geothermal (or geoexchange), a simple technology that will heat and cool your home as well as provide hot water. Ground source heat pumps are used to extract the thermal energy of the earth. Because the earth, five feet below ground, maintains a constant temperature of approximately 52 degrees all year around, the earth is a reliable source of energy. Using the earth's constant temperature means very little energy is expended to pump hot or cool air into your home to make it a comfortable 65 to 70 degrees. Geothermal systems use 30 to 70 percent less energy for heating, and 20 to 50 percent less energy for cooling than conventional systems.

The cost of installation can vary. Charles Lazin of Altren Consulting says geothermal systems cost anywhere from $4,500 to $20,000 depending on location and the type of installation. Nationally, pay-back times average two to eight years. According to a case study of a Hudson Valley residence by the Geothermal Heat Pump Consortium, a home of 3,000 square feet will cost $6,000 more on the mortgage, but will reduce average monthly utility bills to as low as $150 to $200.

Some lenders recognize the financial benefits of energy-efficiency and will qualify homebuyers with higher mortgages. The premise is simple: energy-efficient homes cost less to operate, enabling more of the homeowner's income to be applied to mortgage payments.