Media: Defending the Case for Energy Retrofits: Spotlighting the Energy Fit Homesâ„  Program (Energy D

Oct 16, 2015

Reprinted with permission from Energy Design Update, Vol. 35, No. 10 (October 2015)

An assault on home weatherization — and energy retrofits in general — was launched coincidentally with the start of summer. In June 2015, researchers from the University of Chicago and the University of California, Berkeley, released a study entitled, “Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program.” The project looked at Michigan households participating in the federal Weatherization Assistance Program (WAP), which provides low-income families with products such as home insulation and weather stripping. “The findings suggest that the upfront investment costs are about twice the actual energy savings,” the researchers state, adding that, “Overall, the energy efficiency investments we evaluated are poor performers ... across a variety of metrics.” The report’s authors also recount that model-projected savings overestimate real savings by roughly 2.5 times.

While the report’s criticisms were aimed directly at WAP, implications were that energy efficiency upgrades, in general, might not pay for themselves.

Since its release, “Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program” has received a number of thoughtful critiques and rebuttals. Martin Holladay, Green Building Advisor, noted that “It neglects to report information of obvious interest to those concerned with weatherization issues: for example, how many weatherized houses were included in the study, the average pre-weatherization utility bills for the studied houses, and the average post-weatherization bills of weatherized houses.”(Article available at http://www.greenbuildingadvisor.com/blogs/dept/musings/gba-prime-sneak-peek-weatherization-cost-effective#ixzz3jrF820rd.) 

As Rebecca Stanfield of the Natural Resources Defense Council pointed out in an article by Brad Plumer (http://www.vox.com/2015/6/26/8849695/weatherization-e2e-studyresponse), these programs aren't intended to be cost-effective solely on the basis of energy savings. They also have a variety of social benefits: helping low-income people stay comfortable through the cold winter, improving people's health by removing mold or asbestos, fixing potential carbon monoxide leaks from heaters, and boosting the value of dilapidated housing stock.

Martin Kushler, a senior fellow at the American Council for an Energy-Efficient Economy, cites a Department of Energy evaluation pegging these "non-energy benefits" at around $3,466 per household.

A meaningful answer in the light of the attack on energy remodels needs to make the case that retrofits are valuable, both financially — and most importantly — to the homeowner. If we find a successful model, what are the takeaways? Ultimately, can we make the case to homeowners that investing in efficiency is a good trade?

Looking for data in a similar climate area to the Michigan study, Energy Design Update contacted the Center for Energy and Environment (CEE) in Minnesota. In the last 7 years, CEE has served over 15,000 residential customers with energy-efficiency services and has run various utility-funded energy-efficiency programs for over 30 years, targeted towards homeowners as well as other industry segments. EDU had the opportunity to interview Carl Nelson, Director of Program Development, CEE.

EDU: Give us a description of your work, so [we] have a little background.

CN: CEE provides technical analysis of retrofit opportunities and assistance with rebates, combined with additional support for homeowners getting work done such as working with contractors, and finding financing assistance. We want to provide support that is helpful in moving people toward energy retrofits, whether they are a business or a homeowner. Specific to the residential market, we currently work with homeowners primarily in Minneapolis and the western suburbs.

EFPlan.pngWe are contracted by utilities as part of their required energy efficiency programs. Within the program we run, our results have to be cost effective from the money that the utility is spending. Overall, for Xcel, looking at natural gas programs in the residential sector, measures incorporated produce a $2 benefit for every $1 spent. State regulations require a positive cost/benefit ratio, or more than $1 in benefit for every $1 spent. Cost efficiency is something state regulators look at pretty closely.

EDU: What do your services look like?

CN: Given our mandate, we do consider cost effectiveness when we make recommendations to folks. When a homeowner contacts us with efficiency concerns, or if they are looking for ways to make their home perform better, we initially send a 2-person crew out to the home. That crew directly installs energy saving devices like light bulbs — we offer CFLs for free, or LEDs for a small charge — and water conserving devices. The customer sees a direct benefit immediately at the house. In addition, we will perform diagnostics and an energy audit, conducting a blower door test and capturing images with an infrared camera. Once we look at this data, we provide a report to the homeowner that lists actions they can take.

EDU: Taking action can be daunting. How do you help homeowners with the decision making process?

Insualtion-rate.pngCN: We try to make things as simple as possible, particularly with insulation upgrades. People find it difficult to work with contractors: competing bids can be so different, in terms of cost and specifications, that a homeowner doesn’t know what to go with or even how to make the best decision. In Minneapolis we are trialing a program in which, if a homeowner wants to make insulation upgrades, we contact a certified insulation contractor for them, negotiate pricing, determine what scope is appropriate, and then provide a quote to the homeowners. We aim to take the hard decisions out of the way and secure quality assurance for the homeowner. Insulation work is the primary recommendation we have; we find it’s appropriate for most customers. In Minneapolis around 80% of homes are inadequately insulated, and about 25% of Minneapolis homes have no wall insulation. Adding insulation when there is zero in the walls secures a huge amount of savings for a homeowner.

EDU: How do you make the value proposition to homeowners, as they weigh making the investment in efficiency? What are barriers you see in the decision making process?

CN: People are interested in savings and the environment. Yet it is one thing to say ‘I will do my best to save energy,’ and another to spend $2,000 on doing that. We want homeowners to look at homes as an investment. But they want to know, can we recoup our investment when we sell the house? Without a market incentive that values energy performance, we have a major barrier to investment. Many people are unaware there is no insulation in their walls. It’s invisible; energy is not incorporated into the housing transaction. Homes with no insulation are not selling for less money than comfortable, high performance homes. Why spend money on something invisible when they could upgrade their kitchen and get a return?

So we must learn to deal with how to motivate homeowners facing competing remodeling projects.

In terms of payback on investment, with the economical cost of natural gas in our area, return on investment is not the most compelling reason to upgrade a home. You might see payback from energy saved in 5, 8, or even 10 years on the $2,000 spent to upgrade. Many homeowners go ahead and perform our recommendations, but you really need more than just energy savings to motivate.

EDU: What are the biggest motivators for homeowners that you’ve seen in the program?

CN: Some of biggest motivators are first, comfort. Homeowners notice that they are cold while sitting near a wall in the winter, and are amazed by how much more comfortable they feel post-upgrade. Second, the ice dams that form here in the winter are a great motivator. The value proposition becomes: I can either spend $10,000 on repairing damage from the ice dam in the spring, or I can spend $2,000 on attic air sealing and insulation, and prevent the problem permanently. Efficiency becomes very worth it! Identifying issues caused by poor efficiency and spelling out potential damage is a great way to sell efficiency. Suddenly, investing in efficiency becomes preventative.

EDU: What are strategies you feel would be helpful to encourage homeowners looking to invest in efficiency?

CN: We need to look for ways to solve the problem that efficiency is not valued or incorporated into house prices. There is no real, effective national strategy. For new homes, there are solutions: ENERGY STAR® is a great program. But there is nothing for existing homes.

For our area, we created the Energy Fit [Homes] certification (learn more at http://mncee.org/Energy-Fit-Homes/Home/). A certificate program’s key contribution is to make the hidden value of energy efficiency conspicuous and enticing for both homeowners and homebuyers. If a homeowner completes everything that we recommend as a cost effective energy upgrade, they are issued an Energy Fit [Homes] certificate for their home. Obviously, we aren’t asking homeowners with 2’x4’ walls to build their walls out to 2’x6’ and mass insulate, but if they go from no insulation to a properly insulated 2’x4’ wall, that will still achieve significant savings and performance.

Cert-Components.pngWhat we are trying to accomplish with the certification program is to move the market for existing homes and provide a way for people to know that an efficient home is worth more, and why it is worth more. Cost of certification is low, at $100. We look at 7 key points of the home: attic insulation and air leakage, wall insulation, heating system efficiency, efficient lighting, windows, programmable thermostat, and combustion safety and ventilation. Not only do we issue a scorecard with recommendations for upgrades at the initial audit, we estimate cost of those upgrades. While a typical non-certified Minnesota home has average annual energy costs of $1,500 to $2,000, Energy Fit homes have costs that are $250 to $400 less per year. All of the major investments considered in Energy Fit Homes have an expected lifetime of at least 18 years, and “cost-effective” is defined as having a simple payback of 10 years or less.

We have certified nearly several hundred homes at this point, and have generated a lot of interest. However, when there are 20,000 homes sold per year, it will take a while to really get recognition.

EDU: I know you have pinpointed realtors as a key piece of the puzzle. How do you approach that market segment?

Cert-example.pngCN: Our main focus is on educating realtors. We work through the local association of realtors and do presentations for local offices, describing the Energy Fit [Homes] program, and outlining what the benefits are. We have 2 angles: first, we build an awareness so that when a realtor is selling [a] home and comes across the certificate, they know what it is, and can use Energy Fit [Homes] as a selling point. Second, by educating realtors, we are educating new homeowners about what Energy Fit [Homes] is and the opportunity they have to upgrade. New homeowners are more receptive to spending on energy upgrades, as they are at the beginning of the home ownership cycle, have more enthusiasm about fixing up their home, and will get the most energy savings out of it by making an early investment.

EDU: What takeaways would you like to leave us with, based on your experience and data?

CN: The decision to do an energy upgrade is 30% rational and 70% emotional. So many programs focus on rational things like payback, or getting the cost-benefit equation right, yet if that’s all you do, you’re not going to get the buy-in.

There are several established reasons why homeowners do not invest in retrofits:

Competing priorities for investing in home remodeling projects. Unlike some home improvement projects, insulation (for example) is not visible and does not have the emotional appeal of other, more visible projects such as room additions or kitchen remodels.

Lack of consistent and credible information about the home’s current level of efficiency. Most homeowners did not confirm that their home had wall insulation, for example, when they bought it. Many erroneously assume that it did. Likewise, most homebuyers do not investigate the efficiency of the heating system.

Lack of clear and simple action steps. Although many homeowners may want to “go green” with their home, without a clear indication of what to prioritize, and how to effect improvements, they typically take no action.

Efficiency measures don’t add value when it comes time to sell the home. A homeowner’s investment in most efficiency improvements is recouped fairly quickly; however, homeowners often intend to move before they recoup their investment, and because there is no current, widely used, or accepted market mechanism to capture the value of energy-efficiency improvements, they are unsure whether the investment will increase the sale price. This uncertainty can be a significant factor in a decision not to upgrade.

To tap into a homeowner’s emotions, make the decision easy. Minimize the pieces of the process they get tripped up on, which will discourage them or will cause them to drop off. Lay out the steps to remedying the problem once recognized. Keep in mind that information and recognition are not sufficient for someone to act. A homeowner might have the intention, but if they want to act it has to be easy to make the right decision. At CEE, to overcome this barrier, we try to do the homework for people. We are a third party organization, with no financial connection to contractors, and no kick backs, so our interests are solely in helping the homeowner and getting the best deal for them. Homeowners need to see and feel that you are a trusted advisor, that you will do the homework for them, and that they can feel secure that they have found the right contractor. Identifying the best contractor is a key hiccup in the process: there is a lot of variation in terms of how quality of work is defined. Unfortunately, there are a lot of snake-oil salesman out there.

How can a homeowner gauge the quality of work? It’s sort of invisible, making this a particularly hard industry for homeowners to navigate. If you can’t determine which is the best choice, you get paralyzed and don’t take action. Having that peace of mind is what CEE provides. We help navigate and show a homeowner what needs to get done. We present a package laying out appropriate scope of work, with a qualified contractor, and we figure out the details. This is something particular to the energy retrofit world — most other remodeling you do is not as invisible as this. We’re trying to sell them peace of mind. 

Related links

Energy Fit Homes website
Carl Nelson's staff profile