Over the past five years, we have come to the conclusion that these are the most important qualities in determining a successful business model in the home performance industry:Service: Are we solving real problems for our customers?Public Good: Are we saving energy and reducing residential carbon emissionsSustainability: Did we make a profit while conducting quality work?Scalability: Can we grow our business and the industry to meet future demand?
If your goal is efficiency with cars, you don’t specify the parts with carsNot about the exhaust systemWe don’t judge a car by its parts
For a house we have all of these products, air conditioners, insulation, windows, radiant barrier.What are all of these different products one off?Just like with a car,The EPA used to specify specific scrubbers, but then they started to specify emissions. When they did emissions, they
Automatically created cost effective solutionsRemoves government from having to pick winnersTechnology neutral
When the money saved by renewable energy and energy efficiency more than pay for the capital and maintenance costs over a given period.Based on a McKinsey report that focused on all of the different carbon reduction measures.Building efficiency is so cost effective, that in a very short period of time you are making money on that investment. Every year after that, your savings exceed the amount of money that you spent. Therefore you are making more money than you spent.This is vs. the more cost effective measures, where you find that they cost more to reduce carbon. They are clean, but they cost you more.We will need the alternative options at some point because you can only go so deep on energy efficiency.
Use municipal solar bond to finance solar electric systemHurdle: Solar bond requires immediate cost-effectiveness
Annual Solar Generation: 825,000 kWhAnnual Efficiency Savings: 4,500,000 kWhAnnual Bill Savings: $639,000Annual Debt Service: ($429,000)Annual Total Savings: $210,000
Lets talk about what we currently focus on which are incentives that focus primarily on solar. Then lets compare that model to one that focuses on a combination of ee and solar
This is the overarching measure that determines how public good money should be spentOrder that rate payer money should be spent“The loading order consists of decreasing electricity demand by increasing energy efficiency and demand response…”California Energy Commission, 2003 Energy Action Plan
Adopt mandatory reporting rules for significant sources of greenhouse gases by January 1, 2008. • Adopt a plan by January 1, 2009 indicating how emission reductions will be achieved from significant GHG sources via regulations, market mechanisms and other actions. • Adopt regulations by January 1, 2011 to achieve the maximum technologically feasible and cost-effective reductions in GHGs, including provisions for using both market mechanisms and alternative compliance mechanisms. • Convene an Environmental Justice Advisory Committee and an Economic and Technology Advancement Advisory Committee to advise ARB. • Ensure public notice and opportunity for comment for all ARB actions. • Prior to imposing any mandates or authorizing market mechanisms, requires ARB to evaluate several factors, including but not limited to: impacts on California’s economy, the environment, and public health; equity between regulated entities; electricity reliability, conformance with other environmental laws, and to ensure that the rules do not disproportionately impact low-income communities. • Adopt a list of discrete, early action measures by July 1, 2007 that can be implemented before January 1, 2010 and adopt such measures.
“Proposing a package of strategies for cutting the state’s greenhouse gas emissions to 1990 levels by 2020”
CA Energy Efficiency Strategic Plan Existing Residential Goals (from CPUC presentation by Michael Wheeler)By 2020:25% of existing single family homes have a 70% decrease in purchased energy from 2008 levels75% of existing single family homes have a 30% decrease in purchased energy from 2008 levels100% of existing multi-family homes have a 40% decrease in purchased energy from 2008 levelsBy 2015:On average, existing homes will have a 20% decrease in purchased energy from 2008 levels“[The Goal] is to reach all existing homes and maximize their energy efficiency potential through delivery of a comprehensive package of cost-effective, whole-house energy efficiency retrofit measures.”California Public Utilities Commission (CPUC), Long Term EE Strategic Plan California Public Utility Commission is a state agency that regulates privately held utilities.“Goal #2: Home buyers and renvoators will implement a whole-house approach to energyConsumption that will guide their purchase and use of existing and new homes, home equipment (eg. HVAC systems), household appliances, and ‘plug load’ amenities.”“The overall objective of Goal 2 is to reach allexisting homes and maximize their energyefficiency potential through delivery of acomprehensive package of cost-effective,whole-house energy efficiency retrofitmeasures—including building shell upgrades,high-efficiency HVAC units, and emerging deepenergy reduction initiatives— withcomprehensive audits, installation services andattractive financing. This can be achievedthrough parallel and coordinated initiativesamong utility programs, market mechanisms,and state and local government policies.The IOUs currently offer a wide range of energyefficiency programs for existing homes, includingaudits, efficient appliance rebates, lightingprograms, and consumer education. This Planenvisions a refocusing of these programs tomove from a “widget” based approach to a“whole house” approach to program delivery tooffer comprehensive packages of audits,demand side management options and tools,rebates and financing options, and installationservices.
We have established that if we care about cost effective results, our policies will reward the solution that reduces carbon emissions at the least cost to the public.
Home Specs:2500 sqft1100 sqft attic insulation (+ air sealing which is not covered) @ $0.81 sqft with 30% rebate – capped @ $1500 = $270 1 High Efficiency Furnace and Duct Sealing: $7,400 @ 30%rebate – capped at $1500 = $1,5003.5 kWh solar @ $8500 / kWh with 30% uncapped rebate = $8,925
Home Specs:2200 sqft1100 sqft attic insulation (+ air sealing which is not covered) @ $0.15 / sqft rebate = $1651 Furnace: $300 rebate for 94AFUE and higher furnace3.5 kWh solar @ ~$1.40 / watt = $4900
Insulation / Airsealing:$3260 labor and materials 30% reduction in load – (20% gas / 10% electric) $1,115 annual electric $1,013 annual gas savings = $324 10% annual payback96 AFUE Furnace / Duct Seal: $7400 install (labor and materials) 50% gas usage from heating ~ 362 therms Annual : 362 therms @ $1.40 per therm = $506.80 16% reduction by replacing 80% efficient with 96% efficiency furnace = $81 annually 30% reduction of gas usage with sealed ducts is 217 therms @ $1.40 = $304 2% annual paybackSolar: 3.5 kWh solar @ $8500 / kWh = $29,750 $1,115 annual savings 4% annual payback
Solar Incentive as Disincentive for EE90% energy efficiencyCreated a city level incentive for solarThe market for EE and Solar are the same marketplace – when you benefit one side of the equation, you are unintentionally dis-incentivizing the other“Incentives programs encourage investments in energy efficiency by lowering the consumer’s cost of implementing energy efficiency actions. Incentives can take the form of direct rebates to customers or manufacturers, low-interest loans, or payments to customers or energy services companies for delivered energy savings.” -SF Climate Action, pg 3-19
This is solar in general, even if we had x amount of stuff was residential its 90% energy efficiencyWhat is san Francisco doing – 6,000 for residential? Energy efficiency is second to none – If you put a solar system in SF, what does it do? What is the implementation plan – SF solar incentive disincentivizes EE.Incentive amount – 60% plus or greaterIn San Francisco – we are killing the energy efficiency when it is 90% of solution
6000 + SF not only incentivizing the wrong stuff, but by doing so, they are dis-incentivizing everything else
Households may select a combination of energy efficiency measures, from a prioritized climate-specific list based on average savings, that show an average improvement of a 10% energy savings to receive the incentive (10% = $1000, 20% = $2000). Prescriptive incentives will sunset after 1 year or upon an EPA decision based on results. Households are eligible to receive a $3,000 incentive for a 20% improvement in energy performance of the home. The amount of the incentive would increase with higher performance at a rate of $150 for each 1% improvement. The incentive amount shall not exceed 50% of the total project costs.
Annual Solar Generation: 825,000 kWhAnnual Efficiency Savings: 4,500,000 kWhAnnual Bill Savings: $639,000Annual Debt Service: ($429,000)Annual Total Savings: $210,000
Delivering On Our Promise
Delivering On Our PromiseSustainable Solutions to Achieve OurClimate and Economic Goals<br />
Agenda<br />Rethinking Our Approach<br />Strategies for Carbon Reduction<br />Disconnect Between Strategy and Policy<br />Delivering Market Transformation<br />From Theory to Practice<br />Pathways to Success<br />
Efficiency First, Washington DC<br />Representing America’s Home Performance Workforce<br />Non-Profit Trade Association <br />400 Member Companies<br />Active at National and State Level<br />Supporting a performance based market for residential energy efficiency retrofitting.<br />For More Information: www.efficiencyfirst.org<br />
Carbon Saved: The Metric that Matters<br />CARBON is the metric.<br />Focus on PERFORMANCE and measurable results.<br />The MARKET will innovate and deliver.<br />
What is America’s Largest Source of<br />Carbon Emissions?<br />Carbon Dioxide Emissions From Fossil Fuel Combustion<br />Residential<br />Buildings<br />Industrial<br />21%<br />Buildings<br />Passenger<br />Cars<br />11.5%<br />Transportation<br />http://www.pewcenteronthestates.org/uploadedFiles/Climate%20Change%20101,%20Technological%20Solutions.pdf<br />http://www.pewclimate.org/docUploads/ustransp.pdf<br />
What Does Achieving our Goals Look Like?<br />Growth Curve to Retrofit 128MM Homes By 2030<br />Retrofit 128MM Homes By 2030<br />250,000 Homes / yr.<br />10,000,000 Homes / yr.<br />Home Performance – 5M<br />Weatherization (WAP) – 3M<br />Multifamily – 1.5M<br />http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf<br />
2030 Goal:25% Reduction in Residential Energy <br />CLIMATE:<br />Equivalent to taking ½ of all passenger cars off the road<br />JOBS:<br />1.25 million direct contracting jobs<br />ENERGY:<br />Save as much energy as US imports yearly from Saudi Arabia<br />COMMUNITY:<br />Keep energy dollars local and create an annuity<br />
State of the Contracting Industry<br />“New home construction fell to its <br /> lowest pace on record in April” <br />- New York Times, May 2009<br />146,600 jobs have been lost in the residential building construction industry between April 2008 and 2009. <br />Housing starts were down 12.8 percent last month from March , to an annual pace of 458,000. <br />http://www.businessexaminer.com/blog/8232nonresidential-construction-job-loss-slows/<br />http://www.nytimes.com/2009/05/20/business/economy/20econ.html?_r=1&scp=2&sq=housing%20starts&st=cse<br />
Home Performance Contracting<br />A market-based* whole-house approach to retrofit existing homes for energy, health and comfort.<br />Sustainable: Jobs in Home Performance do not require endless subsidies.<br />Leveraged: Government subsidies stimulate private sector investment.<br />Market-Based: Leverage business as the engine to achieve rapid growth.<br />*WAP or Low Income Weatherization serves the market up to 200% of poverty.<br />
Performance is Fiscal Responsibility<br />“We should be getting the savings we’re paying for”<br />
Product Rebates Don’t Deliver<br /><ul><li>California’s Residential Energy Efficiency Portfolio
CFL subsidies account for > 80% of residential energy efficiency savings.
CFL subsidies will not be an allowable program after 2012.
75MM rebated units, only 46MM verified installed.</li></ul>Product Rebate Results: Screw-in CFLs<br />Expected vs. Realized GWh Savings<br />46% Less Savings<br />January 2006 – June 2008, California Public Utilities Commission<br />
Reduce Then Produce<br />“What is all the fuss about retrofitting, why can’t we just put on solar panels?”<br />
Cost Per Ton of Carbon Abatement<br />“The Firepower of the Lowly Caulk Gun” Wall Street Journal<br />http://online.wsj.com/article/SB123629700922046051.html<br />
Cost Effective Hybrid Model<br />The Moscone Center - San Francisco, CA<br />Hybrid EE + RE Project<br />Lighting Retrofit<br /><ul><li> 40% Better Lighting Quality
Energy Star Refrigerator</li></ul>40% Reduction in Energy Bills<br />
Option 2: Solar Electric<br />Solar Electric System<br />73% Reduction in Electricity<br />0% Reduction in Natural Gas<br />No Health or Comfort Improvement<br />Peak Load Reduction<br />Work Scope<br /><ul><li>3.5 kW Solar PV</li></ul>40% Reduction in Energy Bills<br />
What is the Real Cost?<br />3.5 kW <br />Solar Electric<br />Energy Efficiency Retrofit<br />60% Faster<br />60% Less<br />Annual Savings: $825 $825<br />CO2 Reduction: 2.7 tons 3.6 tons <br />Total Cost: $28,000 $10,800 <br />Simple Payback: 33.9 yrs 13.6 yrs <br />33% More<br />* Based on carbon abatement achieved over 20 years.<br />
A Ton of Carbon is a Ton of Carbon<br />Solar<br />Retrofit<br />Total Cost: $28,000 $10,800<br />Cost to Client: $13,300 $10,168<br />Rebates / Incentives: $14,700 $632<br />Annual Savings: $825 $825<br />CO2 Reduction: 2.7 tons 3.4 tons <br />*Rebate / Ton of C0 2 $246 $9 <br />http://www.spur.org/publications/library/report/critical_cooling<br />
Why Do We Value Carbon Abatement fromRenewables More than Efficiency?<br />It’s the METER <br />that MATTERS!<br />
Section 2<br />Strategies for Carbon Reduction<br />
California Energy Commission (CEC):Loading Order<br />Priority<br />Priority for use of Public Good Charges<br />Energy Efficiency<br />High<br />Demand Response<br />Renewable Resources<br />Distributed Generation<br />Low<br />http://www.energy.ca.gov/2005publications/CEC-400-2005-043/CEC-400-2005-043.PDF<br />
California Solar Initiative<br />“By January 1, 2008, the commission… shall require reasonable and cost‐effective energy efficiency improvements in existing buildings as a condition of providing incentives for eligible solar energy systems”<br /> - CEC Guidelines for CA Solar Incentive Programs<br />http://www.cleanenergystates.org/library/Reports/CEC-300-2007-012-CMF_Guidelines_CA_Solar_Incentive_Programs_Dec2007.pdf<br />
California AB32: Global Warming Solutions Act<br />Establish a statewide GHG emissions cap for 2020, based on 1990 emission levels.<br />Local governments: <br />15% reductions in GHG by 2020.<br />http://www.arb.ca.gov/cc/factsheets/ab32factsheet.pdf<br />
California Air Resource Board (CARB): AB32 Implementation Plan<br />Increased Building Efficiency<br />and Appliance Standard<br />26.4 Million Metric Tons<br />12X<br />California Solar Initiative<br />2.1 Million Metric Tons<br />http://www.arb.ca.gov/cc/cc.htm<br />
California Public Utility Commission: Long Term EE Strategic Plan<br />CPUC Existing Home Retrofitting Goal<br /><ul><li>40% energy reduction in existing homes energy use by 2020
$13+ Billion / Year</li></ul>Source: California Public Utilities Commission<br />http://docs.cpuc.ca.gov/efile/RULINGS/85173.htm<br />
Section 3<br />Disconnect Between <br />Strategy and Policy<br />
Plans vs. Reality<br />Strategies get it right:<br />Set the end goal<br />Focus on performance not product<br />Policies get it wrong:<br />Focus on product incentives<br />Misaligned incentives when compared to results<br />
“How are these policies being implemented locally?”<br />
San Francisco Climate Action Plan<br /><ul><li>Reducing overall greenhouse gas emissions to 20% below 1990 levels by 2012</li></ul>19% Residential<br />http://sfenvironment.org/downloads/library/climateactionplan.pdf<br />
San Francisco Climate Action Plan<br />Residential Reduction Goals from Energy Efficiency<br />Efficiency<br />Solar<br />Combined Reduction Goals from Renewables<br />85% of SF’s residential climate goals<br />delivered through Energy Efficiency<br />http://sfenvironment.org/downloads/library/climateactionplan.pdf<br />
San Francisco Implementation<br />SF - Solar Energy Incentive Program <br />$6,000 Residential City Solar Incentive<br />Plus: $1.50 Watt CA Rebates and Federal Tax Credits 30%<br />SF – Residential Energy Efficiency Program<br /> No Incentives<br />2 kW Solar System in San Francisco<br />Public Contribution: 70%<br />http://www.sfenvironment.org/downloads/library/solarincentives.pdf<br />
One Market<br />”Incentives favoring renewables disincentivizes energy efficiency.”<br />
Inspire innovation</li></li></ul><li>What Models Can We Apply?<br />Incentives<br />Standards<br />Financing<br /><ul><li>Performance based on before and after Home Energy Rating Score (HERS).
20% minimum improvement in energy performance grants rebate of $3,000.
5% in performance improvement adds $1,000.</li></ul>Currently in US House Climate Bill<br />(Retrofit For Energy and Environmental Performance)<br />http://energycommerce.house.gov/Press_111/20090331/acesa_discussiondraft.pdf<br />
Reduced interest rates compared to traditional loans
The retrofit stays with the property and so should the loan</li></li></ul><li>On Property Tax Bill Financing<br />On Utility Bill Financing<br />National Green Bank<br />Green Mortgage Products<br />Aggregated ESCO Model<br />Standards<br />Financing<br />Incentives<br />What Models Can We Apply?<br />http://www.euci.com/pdf/0409-solar-finance.pdf<br />http://www.ci.berkeley.ca.us/ContentDisplay.aspx?id=26580<br />x<br />
Standards<br />Incentives<br />Financing<br />Home Performance Standards<br />Contractor Accreditation - Building Performance Institute (BPI) <br />All Building Analysts (auditors) Certified<br />Construction Team Lead Trade Certification<br />Yearly review of customer data<br />5% Field Quality Assurance<br /><ul><li>Certified Energy Auditor
Retrofit with Performance Incentives<br />Retrofit<br />Total Cost: $10,800<br />Rebates / Incentives: $4,832<br />Cost to Client: $5,968<br />Annual Savings (Gas/Elec.): $825<br />CO2 Reduction: 3.4 tons <br />*Rebate / Ton of C0 2 $71 <br />45% Incentive<br />* Based on carbon abatement achieved over 20 years.<br />
Hybrid Whole-House Solution<br />Energy Efficiency Retrofit<br />25% Reduction in Electricity<br />54% Reduction in Natural Gas<br />Improved Health and Comfort<br />2.1 kW Solar Electric System<br />Reduced from 3.5 kW to 2.1 kW<br />40% Reduction in Electricity<br />Peak Load Reduction<br />Work Scope<br /><ul><li>Duct Sealing
Finance for Immediate Savings<br />$15,688 financed at 6% over 20 years<br />Year: 1 10 20<br /> Monthly Payment: $112 $112 $112<br /> Monthly Savings: $117 $159 $230<br />$12,970<br /> Total utility bill savings: $39,850<br />Total cost of loan (20 years at 6%): $26,880<br /> NET SAVINGS: $12,970<br />* Based on Electric Rate increase of 4% per year, and Gas rate increase of 6%.<br />
Creating the Future Model<br />”Using the market to achieve scale and transformation”<br />
Tier 3: Prescriptive Measures <br />List of Measures<br />Insulation<br />Windows<br />Solar<br />HVAC<br />General Contractor<br />Pick from list of eligible measures<br />Must combine measures to achieve 20% average savings or greater<br />Lower level of incentive<br />Program sunsets after 12 months<br />
Tier 2: Third Party Rater<br />HERS Rating<br />HERS Rating<br />BPI Analyst<br />BPI Analyst<br />Insulation<br />Windows<br />Solar<br />HVAC<br />Test-In<br />HERS Rating<br />Test-Out<br />HERS Rating<br />General Contractor<br />(Accredited After 6 Months)<br />Third Party HERS Rater <br />Work scope generated through software<br />Test-in / Test-out<br />Retrofitting<br />Specialty trade contractors<br />Home Performance Contractor <br />Any General Contractor must become accredited within 6 months of taking first incentive.<br />
The Time To Act Is Now!<br />Change the way we talk about efficiency from products to systems.<br />Start incentivizing our success in terms of results and measure performance.<br />Fix the imbalances in the market.<br />Set in place the foundation for a the American Home Performance Retrofitting Industry.<br />
A Foundation for Home Performance<br />Level the playing field<br />Make it easy to say yes<br />Drain the swamp<br />
Delivering On Our Promise<br />Sustainable Local JOBS<br />Cost Effective CARBON Abatement<br />Significant Homeowner SAVINGS<br />Effective Use of STIMULUS<br />Seize this opportunity to achieve <br />our climate and economic goals<br />
Delivering On Our PromiseSustainable Solutions to Achieve OurClimate and Economic Goals<br />For More Information: www.efficiencyfirst.org<br />