
Instead of building secondary walls solely for the purpose of holding fiberglass insulation, an option is to apply rigid insulation directly to foundation walls.
This product, which has insulation values ranging from R-4 to R-7 per inch, is made from a variety of plastic materials, including expanded polystyrene, extruded polystyrene, polyurethane, and polyisocyanurate. All of the products come in easy-to-handle sheets and some are designed specifically for insulating foundation walls. Some products (at least one brand of extruded polystyrene) have rabbeted edges that can be held in place with 1x3 wood cleats. Although extruded polystyrene is very resistant to moisture, the foundation walls must be dry before they can be insulated.
The following system features extruded polystyrene that is rabbeted on the edges and held in place with wood cleats. The insulation itself is 1-1/2 inches thick and has an R-value of 7.5. Sheets are 2 x 8 feet so the cleats are installed on 24-inch centers. Drywall also is nailed on 2-foot centers instead of the more typical 16-inch centers. Installing them this way works because the drywall is fully supported by cleats and insulation. Check with local code officials, however, to make sure this method is permitted in your area.