Remove all outlet and switch covers and any existing trim. You can choose different depths of insulation, every inch of polystyrene foam insulation carries an R-factor of 5. Where I live, today’s building code requires walls to have a minimum R-factor of 22. Check your local building codes for the recommended R-factors in your area.
Cut the rigid insulation to size using a utility knife. Use caulking and a caulking gun to glue the insulation to the wall, tape the joints with sheathing tape and apply the paneling or drywall or wood over the top of the insulation. You’ll need to use a jigsaw to cut holes in the paneling / planks to allow for electrical outlets and switches.
You’ll also need fairly long nails to get through the insulation and into the studs, so bear that in mind when buying your supplies. Alternately you can install furring strips which are 1″x 2″ strips of wood hung horizontally (24″ apart) and nailed into the studs. That way you can easily hang the paneling or drywall over the top of the insulation. Plus if your walls are uneven, the furring strips allow you to correct the unevenness before you attach your final wall covering. For any windows and doors, you may also need to use 1x4s as casing around the edges because your new walls will be much deeper.
For any electrical outlets in those walls, you will need to pick up box extenders which are available at any hardware store. The insulation and new wall covering will add depth to the wall and these extenders are adjustable and allow you to bring out the existing boxes to the right wall depth. They’re super easy to install and save a lot of time fidgeting around with moving the electrical boxes.
Add your trim pieces, fill any nail holes, caulk the corners and edges (or tape, mud, sand if using drywall) and prime and paint.
The beauty of this technique is that you don’t need to worry if the existing wallcovers have asbestos or some other harmful substance in them because you’re not disturbing them at all. Covering them up is permitted, tearing them down without hiring an abatement team is not permitted.
Enjoy your lower heating/cooling bills and your beautiful new feature walls!