Improvement Bundling: Inciting an Energy Efficiency Tipping Point
Big-impact energy efficiency improvements can be a big investment. Adding insulation to your home’s exterior walls is a prime example. While improved resistance to outside air temperatures can provide noticeable energy savings, the cost of the improvement can sometimes result in a payback that is too slow to interest homeowners. So how do you get a homeowner or building owner to invest in energy efficiency? "Improvement bundling," or providing additional incentives for when quick payback improvements are paired with longer payback improvements.
Examples of this already exist, such as pairing air sealing and insulation rebates. Natural gas provider CenterPoint Energy uses one form of this approach, offering a higher rebate ceiling for homeowners that get higher savings by completing attic air sealing and attic insulation in tandem. Sacramento Municipal Utility District offers a different form of "improvement bundling" by incentivizing homeowners to invest in multiple improvements at one time. While this favors those that have the upfront capital or the good credit to take out a loan to make the investment, it also increases the opportunity to complete more energy efficiency improvements.
In Minnesota, energy efficiency incentives and programs are primary mechanisms for driving energy efficiency improvements. Well-designed programs that offer cost-effective, packaged improvements to building and homeowners are key to achieving energy savings at a larger scale. Innovative ways programs can motivate building owners to invest in multiple improvements is something CEE is working to integrate into some of its programs.
Inducing a Tipping Point
The key to the "improvement bundling" approach, or any energy efficiency incentive approach, is to gain as many homeowners or building owners as possible without abandoning those that want to or can only invest in one improvement. The diagram below illustrates the concept. Bundling shifts marginal costs down for customers, but savings up for utilities. Higher-cost improvements could be paired with lower-cost improvements to create an attractive package, tipping customers to make more improvements. There could even be flexibility in which additional "low-cost" improvements are paired with a larger ticket item, offering customers some control and choice.
Our program experience shows that homeowners are more likely to invest in the improvements with the lowest cost, even if the resulting energy savings are less than a more expensive improvement. Understanding this, incentives that package low and moderate-cost items may increase customer action. Pairing improvements can also help drive down the cost of services to a customer, as labor costs may be reduced when multiple services are purchased at once. Presenting the potential cost savings in labor from such bundling would help homeowners consider this point when making home improvement decisions.
Future Applicability: Residential & Commercial Buildings
We see this form of energy efficiency bundling as having effective applications in both residential and commercial settings. For example, commercial energy assessors in the field have reported replicable energy savings from adjustments in ventilation fan speeds. Here, direct electric savings, and indirect savings, from the resulting reduction in building conditioning, are captured. Moderate energy saving improvements, with little to no associated cost, could be paired with more advanced improvements, such as a new chiller, where the energy savings are substantial, but the costs are moderately expensive.
As the home energy and security remote control revolution continues to wind up, more gadget driven and DIY driven may arise. As study of these devices expands and we better grasp their ability to deliver home energy savings, smart building features may provide a number of low-cost improvements that could be bundled with other larger commercial or residential improvements. Providing building owners and homeowners with timely cost information and incentives that are structured for customer choice may have the power to incite an energy efficiency tipping point.
Photo credit: Marc Monaghan and Terry Feuerborn via Creative Commons