Creating an MPG for existing homes

What is the purpose of an energy performance standard? Who is it for and how are they expected to use it? Only when we know the answers to these questions can we design a standard that works well.

In Oregon, like most other US states, there is no requirement to assess and disclose the energy performance of the house at sale or rental. However, there is growing interest in doing so – over a dozen states or municipalities are exploring it with seven new policies in place as of 2009 according to a report for the Northeast Energy Efficiency Partnerships, Valuing Energy Efficiency through Disclosure and Upgrade Policies.

The Energy Trust of Oregon created the Energy Performance Score,

a tool to assess the energy consumption and carbon emissions of a home. This is an asset-based rating system – it does not take into account behaviour – or how an occupant actually uses the house. The EPS has done what it was meant to do – created recognition and value for highly energy efficient new homes. But can it work for existing homes?

Many people have argued that a simple energy rating for homes is needed – like the miles per gallon figure for cars – so that homeowners understand quickly and easily how much energy the house will use and what it will cost. Then they would be motivated to act on this information (upgrade their home, or buy a more energy efficient home). Of course, houses are more complicated than cars – differing hugely in terms of age, size, structure, fuel types, climate, etc. Nevertheless, several tools have been developed to do just this – and the Energy Trust commissioned a report to explore a comparison of the different tools (including the Energy Trust’s Energy Performance Score, the Department of Energy’s Home Energy Score and the HERS (Home Energy Rating System) and explore consumer reaction to them. Comparisons to the European Union Energy Performance Certificate have also been made.

The report, Home Energy Scores: Efforts to date with modelling tool comparison and  summary of key issues, concluded that applying energy performance scores to existing homes poses several challenges:

• energy upgrades result in small changes in scores (so perhaps not actually motivating consumers to change)
• lack of consumer understanding of scores and units
• the need for an appropriate reference ‘average’ house (eg house performs 120% of average)
• cross-fuel comparison
• comparison from one assessment tool to another

In terms of impact on the consumer, the report’s results are inconclusive  - the most significant factor in conversion to action was the quality of the on-site audit and customer service rather than the score. However, 83% of participants said it would be useful to have a score when house-buying, and they were very interested in information on energy costs and potential savings from an independent source. So while scores are seen to be useful, it appears they won’t drive action on their own – particularly when done on a voluntary basis. They must be accompanied by a trusted and credible program, with professional service and strong financing. And most important, the scores themselves must be improved to provide a clear, meaningful, comparable and consistent picture.

For those states considering mandatory asset ratings, the NEEP report noted above offers some useful recommendations:

• disclosure must be mandatory and early in the sale or rental process
• it should be an asset rating and come with recommendations
• rating costs should be reasonable (supported and over time the price will lower with economies of scale)
• enforcement should be a priority
• phase in over time, starting with public, then commercial and lastly homeowners
• state and local governments should build market demand by linking incentives to asset ratings

At this time of recession in the Pacific Northwest, the real estate industry has a powerful voice in stopping anything that they think might impact house sales, so mandatory disclosure is not really up for debate. In the meantime, the Energy Trust maintains an interest in devising the best assessment tool that would be used on a voluntary basis as part of their customer package to motivate more energy savings in Oregon homes.

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Repowering communities

CSG, the organisation contracted to deliver residential energy efficiency services for the Energy Trust Oregon, has similar contracts in 22 states. In Washington state, they are doing something different – working with three communities to change energy use. The Repower Bainbridge, Kitsap and Bremerton programs are funded by the Department of Energy and the American Reinvestment and Recovery Act and supported through public and private institutiosn.

Each program follows a common template, though tailored to the particular community. For example, on Bainbridge Island the focus is on families, while in Bremerton, with 80% of properties are rented, local landlords are engaged as champions. Profiles of local energy champions,
information on certified local contractors, and a community energy use dashboard all help to create a sense of momentum, a reassuring feeling of change alongside your neighbors and friends.  Bespoke advice on local incentives and financing then make it easy to uprade. And community and school events and competitions keep awareness levels high. Repower also encourages people to sign up to MyEnergy (see previous posting) a social media platform which compares energy use.

Does Repower offer a model for the future? Most agree that a key motivating factor for changing energy use is the influence of families, friends and community. Whether it be peer pressure, competition, or sheer security in numbers, the knowledge that others are ‘doing it’ tips the balance for many. But this work is expensive and unlikely to be cost-effective. So who should pay for the on-the-ground community work? Like Repower, public/private partnerships are the most likely way forward with local government, utilities, and local groups pulling together. While programs like this may not be cost-effective in the short run, in the longer term, if they make energy efficiency a desirable, valued, and respected thing to do for this community, it could pay off many times over.

MyEnergy – watt’s yours?

MyEnergy is a social media platform for comparing your energy use with others. It takes what most people think is a dull product – energy efficiency – and turns it into something – dare I say it – trendy and cool to talk about and share through social networks. MyEnergy collects an individual’s energy use data to help understand his/her energy consumption, how to reduce it, and how it compares against neighbors and other MyEnergy participants. It can provide information on local incentives and rebates, and rewards points for reducing consumption. These points earn discounts or free prizes at local businesses.

This initiative is just getting off the ground – so what it will achieve is a bit of an unknown. CSG (Conservation Services Group), the organisation contracted to deliver the Energy Trust of Oregon’s residential programs, promotes this product through some of their other initiatives (for example, see post on Repower).

MyEnergy taps in to several motivations for behavior change – conforming to social norms – or good old peer pressure. Knowing that your friends and neighbors are saving energy (and perhaps saving more than you are) is a more effective motivator than saving money. And getting a reward or recognition for that change is also a key motivator.

While talking to neighbors and putting signs up outside the house help encourage that feeling of ‘everyone else is doing it’, in today’s world of virtual communities through facebook and twitter, MyEnergy has something important to offer.

Putting upgrades within reach

Many householders want to do the right thing – but the upfront costs are simply out of reach. Even with incentives and rebates, people can’t afford to be energy efficient. Clean Energy Works Oregon, a non-profit program, hopes to bridge this gap with loans that are no-money-down, easy financing and simple qualifications.

Clean Energy Works Oregon provides an ‘all-in-one’ solution with an energy adviser that works alongside the homeower from start to finish, from audit, to finance, to installation. The adviser helps bundle multiple upgrades into one plan, coordinates certified contractors, helps obtain the best incentives, rebates and financing available.

Different loan offers have been negotiated with local banks. Low interest rates, quick and easy approval process, and a portion of the loan can be applied towards non-energy efficiency related improvements have made these attractive. In some cases repayment can be through utility bills

The program has been a fantastic success – 1 out of 3 applications converts to a project, thanks to pre-qualifying and targeting leads.

This compares with the open market rate of about 1 to 6. This program also has a high conversion rate from assessment (audit) at about 50%.

This financing has only been made possible through public-private partnerships. It is intended that the upfront seed money will become a revolving loan as time goes on, generating capital to loan out to more homeowners.

Beyond financing, Clean Energy Works Oregon has made the home energy upgrade more user-friendly with a project management ‘dashboard’ on the website which allows you to check the progress of your project online. This is just another example of making energy efficiency upgrades an attractive and easy thing to do.

Finally, Clean Energy Works Oregon does not just do retrofits – it has a Community Workforce Agreement, with equity and diversity goals for contractors and a mission to build an inclusive green economy.

It seems the ‘all-in-one’ solution Clean Energy Works Oregon – a truly sustainable business – is providing just what the market wants.

Selling the Resource of Energy Efficiency in Oregon

Oregon – a state with a reputation for quality of life, outdoors,green living and of course coffee. But it is also highly respected for its energy efficiency programs. Throughout my travelling fellowship, people recommended I visit the Energy Trust of Oregon to learn firsthand what they do and why it works. Thanks to Marshall Johnson, Energy Trust Homes Program Manager, I was able to spend time with them and piece together the components of their success.

The Energy Trust is an independent non-profit organisation funded by ratepayer surcharge on utility bills (gas and electric). Like Efficiency Vermont (see earlier blog post), this ratepayer funding is pooled into one pot, and given to a “public purpose” organisation to provide energy efficiency services to all utility customers.

The Energy Trust was established in 2002 and works to tough performance measures set by the state public utlities regulator. Since 2002, the Energy Trust has saved participating homeowners $800 million on energy bills and more than $1.8 billion in investments that their utilities do not have to make for fuel, storage, transportation and generation of more expensive energy. The Energy Trust contracts CSG (Conservation Services Group) to deliver the residential program. CSG operates energy efficiency programs across the US in 22 states.

So why is the Energy Trust so successful?

A visit to a house which had recently been upgraded gave the answer – we met with a satisfied homeowner who was pleased with the workmanship, the incentives, the Energy Trust support – and that the whole process had only taken 2 weeks! How does it work?

The homeowner received a call from an insulation company (one of the Energy Trust’s trade allies), offering a free audit with blower door test and an energy upgrade with incentives from the Energy Trust and the local government. The homeowner has been aware that this work needed to be done, so the phone call was just the right trigger. He arranges an appointment for the audit, which reveals the need to insulate the attic, duct work and floor. The work is completed and tested out (including crawling under the floor by yours truly) to ensure the right energy savings have been made (if not, the incentives won’t be paid so the contractor has a real stake in doing the job right). The homeowner is then encouraged to talk to his neighbors and encourage them to do the same. Signs are posted outside his house to raise awareness of the upgrade.

This household was eligible for the ‘moderate income’ program, which targets those families are caught in the middle – they don’t qualify for low income programs, but also don’t have the disposable income to do the upgrades. So there is more money per measure, going beyond what is strictly cost effective. The program provides enough incentive to reduce the risks and meet the needs of this income group which tends to be underserved by ratepayer programs.

The Energy Trust launched the moderate income program, then once demand was created, turned over the marketing to its trade allies – those contractors which can meet the Energy Trust requirements. This approach – market transformation in action – has allowed the Energy Trust’s marketing budget to stay static for four years, while its goals have become more ambitious. Trade allies are given support through a cooperative marketing budget, which provides up to 33% of trade ally marketing costs. The Energy Trust also provides template advertising with Energy Trust branding.

There are other programs to target and assist different segments of the population – finance, social media, and community – all behind the shop front of the trusted brand of the Energy Trust. One call to the Energy Trust, a free audit over the phone or in person, and the homeowner is put in touch with the right program for them.

So how else can the service be improved? The Energy Trust is looking at improving customer engagement to improve the conversion rate – from phone call, to audit, to upgrade. They want to improve follow-up contacts once the free audit is completed, tailored to the individual, to prompt action on the ‘road map’ they’ve been provided. They see this as a long-term relationship, working with the homeowner to upgrade the home over many years to come.

I believe it is this strong customer perspective is what keeps the Energy Trust at the cutting edge of delivering energy upgrades.

City of Berkeley – minimum energy standards pioneer

Beautiful sunny Berkeley is known to be one of the most politically liberal cities in the US. Located in the San Francisco Bay Area, it is home to the University of California Berkeley and Lawrence Berkeley Laboratories, two of the largest employers in the city. This city was top of my list for my Churchill travelling fellowship, as it was the only example of regulating for energy efficiency, as opposed to wholly relying on the voluntary approach, I had been able to find.

Indeed, I used Berkeley’s Residential Energy Conservation Ordinance (RECO) as a case study in a report I did with WWF Scotland (Maximising the Minimum: The need for minimum energy performance standards in private housing) on how regulation can be used to drive energy upgrades. Now I had the chance to meet with Billi Romain, Sustainability Coordinator at the City of Berkeley, to have an honest exchange on how the policy is working and how it is expected to evolve in the future.

What is RECO? The Residential Energy Conservaton Ordinace was adopted in 1987 (and revised in 1992) to increase water and energy efficiency. Specifically, it should help the residential sector do its part towards meeting greenhouse gas emission reduction goals of 33% by 2020 and 80% by 2050. The key components of RECO are:

• certain energy and water efficiency measures must be in place before selling the property or conducting a major renovation (these are modest measures – weather stripping, hot water tank and pipe insulation, attic insulation (R-30 or approx 215 mm), flow reduction devices on toilets, showers and faucets)
• the requirement may be passed on to the buyer who must meet the RECO requirements within one year
• city building inspectors check compliance as part of overall building inspection for remodels and a 3^rd party contractors verifies compliance prior to property sale

What next for RECO?:

While RECO has been successful (Berkeley housing consistently scores better on home energy use than neighboring cities), city officals have been working on an update which could help drive more extensive energy upgrades and contribute to climate change goals. City officials proposed moving to a performance standard which would be more appropriate and accurate for more significant upgrades. Furthermore, Billi’s team was convinced that the measures-based approach was leading to lost opportunities or problems by not tailoring the upgrade to meet the needs of the particular house.

However, defining a performance standard is difficult due to concerns that assessments and improvements could present an unreasonable cost to homeowners and there has been an outcry from the local and statewide real estate industry concerned about mandatory requirements harming the real estate sector. The California State required residential energy assessment, simulation and report – HERS 2 – can takes up to 10 hours to complete. This makes it expensive and burdensome – especially for the temperate climate found along the coast of California where energy costs average $1500 to $2000 per year. So in the words of Billi Romain, “RECO became a policy in search of a tool”. It also was a policy pushing at the boundaries of political acceptance, even in a progressive city like Berkeley. As a result, the updated RECO is now looking like it will include the following:

• require a Home Energy Score at point of sale, rental and major rennovation and installation of minimum measures as required in the current RECO. The Home Energy Score is a simple audit, costing the homeowner about $200. (note – compare with EPC)
•   Require minimum prescriptive measures, such as weather stripping, fireplace closures, pipe insulation and low flow plumbing, consistent with the new building code

The hope is it will serve as an ‘on ramp’ for homeowners to make use of the incentives and rebates available. It is also hoped it will create a significant sampling of what a whole-house upgrade looks like and costs for Berkeley – and case studies which can be used for marketing upgrades to others. Finally, if this approach fails over the next few years, city officials will be in a better position to argue the need for mandatory action, and they will know how much on average an upgrade to a certain standard will cost.

Probably of most interest, the city is also conducting research on the pros and cons of using HERS 2 or the Home Energy Score – which tool is fit for purpose?

At the end of the day, Billi wants the updated RECO to meet three criteria: 1) ensure homeowners do not suffer from lost opportunities; 2) drive demand for deep energy upgrades; and 3) provide measureable outcomes.

Billi stressed two other points: 1) the importance of establishing a publicly available database which allows the City, potential buyer and realtors to quickly and accurately show what properties have passed RECO; and 2) the need to market asset ratings to make them mean something in the property market.

What can we learn from Berkeley’s experience?

• mandatory regulation works – as 10 years of the current RECO shows
• a prescriptive measures-based approach can lead to lost opportunities and even problems, and does not drive whole-house upgrades
• a performance-based approach has advantages, but needs an audit tool that is fit for purpose – sufficiently robust, at a reasonable price
• mandatory assessments with improvement incentives may work together to increase update of incentives
• incentives are important, but won’t deliver change on their own
• asset ratings need to be a factor in the real estate marketplace
• support from stakeholders must be earned – from politicians, homeowners, real estate agents, and energy performance contractors
• energy performance contractors must up their game to earn the confidence of property owners

Warming up the rental market in Boulder

Boulder, Colorado – the home of left-leaning politically-correct environmentalists and outdoor enthusiasts. Bumper stickers adorn cars – Free Tibet, Treehugger, and Compost Happens. But it is also a city which puts its money where its mouth is when it comes to climate change. Home to University of Colorado Boulder and the Rocky Mountain Research Institute – both international leaders on energy, sustainability and climate change research. So it comes as no surprise that Boulder is the first city in the US to require all existing rental properties to meet a minimum energy efficiency standard by a set date.

So why did Boulder decide to go this route and how did they do it? And can it be achieved in more ‘mainstream’ cities?

In 2006, the Boulder City Council adopted a Climate Action Plan (CAP) and Boulder voters passed the CAP tax, the nation’s first tax exclusively designed for climate change mitigation. The Plan sets a goal to reduce greenhouse gas emissions to 7% below 1990 levels by 2012 (tracking the Kyoto Protocol). Since CAP-funded programs began in 2007, the community’s carbon emissions have remained stable – so 4.5 percent less in 2010 than they could have been had pre-CAP trends continued. However, the city’s emissions in 2010 remained 27 percent higher than the 2012 Kyoto goal. The city decided it needed new policies to help reduce emissions. Energy efficiency and tightening up building standards on new buildings were already a focus and attention turned to the existing stock. Rental properties make up over 50% of the building stock, so it made sense to target this market. The city also had a licensing system for health and safety standards which offered an ideal means to implement an energy efficiency standard.

While the ‘Smartregs‘ or Smart Regulation for Sustainable Places, seemed a logical next step in a community which is largely in favor of rigorous action on climate change, the proposals met with some resistance. How did the city finally win approval?

The city invested in a two-year community stakeholder process, involving property owners, property managers, rental inspectors, student housing advocates, environmental groups and community interests. The process ranged from online surveys, social media to official public hearings. The SmartRegs finally gained support through three measures: allowing an eight-year period for compliance, including financial incentives and technical support through the EnergySmart program, and offering two routes for compliance – prescriptive and custom, energy assessment route.

The standard is relatively modest (using HERS – Home Energy Rating System – about 20% more energy use than the 2006 International Energy Conservation Code) but nevertheless has driven unprecedented investement in upgrading rental units. In the first year, the city’s goal of 1,000 units inspected and 500 compliant was more than doubled. Within two years, the city hopes to have inspected all units with 16% compliant. The average upgrade costs about $2,000 before incentives, meaning a first year total of $1.2 million mostly self-funded.

What can we learn from Boulder’s experience? The key ingredients for success appear to be: a mandate for action through a Climate Action Plan; a means to implement through some kind of licensing regime; attractive incentives and support; and a lengthy stakeholder process which resolves community concerns. Early success shows that other cities can and should follow Boulder’s example.

Note: this material was drawn in part from a pre-publication version of a Lawrence Berkeley Lab policy brief. A link to the final version will be added when it is published.