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3 ½ inches of polystyrene has an R-value of 17.5, whereas 3 ½ inches of fiberglass has only R-13. Sounds good, but a 2’ by 8’ panel of 2” thick polystyrene, plus another 1 ½” panel (about 16 S.F.), will cost as much as a whole roll (40 S.F.) of R-13 fiberglass. Moreover, the rigid panels would be very labor intensive to use throughout the entire house, with electrical outlets and the like. For example, since the panels are 2’ wide and the studs, 16” on center, each panel would have to be cut down, creating substantial waste. Consider also, the fact that studs are not always 16” on center, nor are they always straight. Fiberglass batts are 15” wide, and are flexible to imperfections.
The extra cost would probably far outweigh any energy savings, unless you stay in the house for, say, 50 years. Even so, some applications can still benefit from the use of polystyrene besides basements. For example, vaulted ceilings and the like need to have a “breathing” area above the insulation to prevent ice damming and prolong roof life. This limits the amount of insulation in this restricted space. Polystyrene panels could be beneficial in this situation. For most of the house, though, you can get a very close R-value to polystyrene with a combination of fiberglass, reflective panels, and a vapor barrier, for considerably less money.
There are other types of insulation you may want to consider, including several types of foam insulation which are blown in as a liquid, then, when cured, become rigid. If you were thinking of that as polystyrene, well, it’s not. Polystyrene is sprayed into an extruded mold, and the manufacturing process is volatile. Besides, polystyrene is highly flammable and emits toxic gases when burned. One of the other insulation choices is called Icynene, and although typically used in remodeling, may have a spot in your new construction. Check around. Something should fit your plans.
Hope this helps. It would be interesting to hear other opinions and ideas on the subject.