Home Performance with Energy Star - Looking Back to See the Future
United States Department of Energy, in conjunction with the United States Environmental Protection Agency administers the Home Performance with Energy Star program, a voluntary program designed to improve the energy efficiency and overall performance of homes across the country. As this program celebrates its tenth anniversary, we take a look back to see how the past might help to inform the future.
In the mid-1990s, the U.S. energy industry was undergoing significant change. Spurred in part by the Energy Policy Act of 1992 and by the Federal Energy Regulatory Commission’s Order 888 of 1996, independent power producers were granted access to larger utilities’ transmission lines, and electric utilities faced the prospect of a deregulated supply market. In the energy efficiency world, demand side management (DSM) programs funded and operated by utilities were the norm, and the potential impact of electric restructuring caused concern among those interested in home energy efficiency. Without rate-based funding, what would happen to energy efficiency programs? Did deregulation signal the swan song for our industry?
The significance of this situation is highlighted in the 1996 Affordable Comfort Conference agenda. The national conference dedicated an entire track to this topic: Utility Programs—Life, Death, and Rebirth, featuring sessions covering the impacts of utility restructuring and Life after DSM. Out of adversity comes opportunity, as Benjamin Franklin once said, and such was the case for residential energy efficiency, thanks to the determination and leadership of a series of visionaries who took the opportunity to create an entirely new archetype. An industry called home performance was born.
The concept of home performance was introduced in October 1995, when then-president of ACI Greg Thomas announced the formation of the short-lived Affordable Comfort Housing Performance Association (ACHPA). This organization was conceived to “create a long-term, consumer-driven market” for home performance services, and its primary role would be to “educate the general public and policy makers on housing performance issues and to provide housing performance contractors with marketing information and support” (“Conference Christens Home Performance Industry,” HE Jan/Feb ’96, p. 9). “It was about helping contractors sell jobs that customers want for a pile of reasons, not just energy,” remembers Thomas.
Over the next seven years, regional initiatives were launched that laid the foundation for Home Performance with Energy Star (HPwES), a program created by EPA in 2002 under EPA and DOE’s shared Energy Star labeling program. HPwES strategically shifted the focus to driving consumer demand for energy upgrades. Rick Gerardi, principal at New Dawn, LLC, and former director of Residential Energy Affordability programs at the New York State Energy Research and Development Authority (NYSERDA), explains that “the most important principle was to shift all of the residential rebates into incentives to meet the critical components of any successful market: Drive consumer demand using program funds for advertising; [create] access for consumers to reach a competent contractor network, which included incentives for training, certification, and start-up equipment; and [offer] robust quality assurance to maintain confidence in the marketplace.” But before home performance could make an impact on the national scale, it had to be fostered at the local level.
New York and Wisconsin were among the first states to create centralized energy efficiency funds under a single statewide administrator, which made it possible to offer consistent programs statewide. This created an opportunity for innovation in program design, including the packaging of energy efficiency with nonenergy measures to address health and safety and fuel-blind program offers. Based on these ideas, NYSERDA and the Wisconsin Energy Conservation Corporation soon became pioneers in home performance.
Around the same time as local programs launched, BPI offered workforce certifications to the low-income weatherization industry, which were later adapted for the private market. In 2001, Building Performance Institute (BPI) introduced a Contractor Accreditation program coupled with a new set of contractor-based certifications designed for the home performance market. Early-adopter contracting firms found themselves in a position to access state-administered incentives that could be leveraged to drive consumer investment in energy efficiency.
“What set us on a path to significant revenue growth were the BPI standards that enabled us to train our salespeople in whole-house concepts, BPI certification and accreditation as a selling tool, and easy-to-access low-cost financing. While the financing availability wasn’t the ultimate closing tool, it was the lubricant that enabled the homeowner to make the decision to buy easier,” recalls Dick Kornbluth, then-owner of Syracuse-based Entherm, one of New York’s most successful home performance businesses, now operating as part of the Green Homes America network.
Supporting the fledgling home performance industry, ACHPA evolved into the Building Performance Contractors Association (BPCA), formed in New York in 1999 and in California in 2001. Later, BPCA would be joined in representing the home performance trade by Efficiency First, the first nationally based industry trade association with a mission to provide public policy advocacy to further drive the growth of home performance.
While there have been many key influencers over the years, one group that deserves much credit for the underlying concept of home performance is DOE’s low-income Weatherization Assistance program. Gerardi credits his experience as weatherization director for New York State as a first step in the evolution of HPwES. “As we got better as a [weatherization] network in understanding the benefits of whole-house approaches, we saw the comprehensive approach as fully appropriate in a non-low-income market.”
Bob Knight of Bevilacqua-Knight, Incorporated, adds, “Whole-house energy retrofit programs in California and elsewhere have provided an essential initial step in moving from the traditional piecemeal energy efficiency measures to the introduction of more-integrated retrofit models with much higher energy savings potential.” The higher energy savings potential and understanding of the whole-house approach energized and legitimized the home performance industry for the next decade.
More local programs increased the momentum and created a place in the market where contractors trained in building science could differentiate themselves from their untrained competitors. Diane Ferington of the Energy Trust of Oregon explains, “Home performance and BPI certification raised the overall bar of quality among our contractor base and allowed a way to differentiate the premium contractor from Bubba and his truck.”
As we mark the ten-year anniversary of HPwES, the program has also reached an impressive milestone: Over 50 local HPwES sponsors supporting more than 1,800 contractors have improved more than 200,000 U.S. homes. These homes are more efficient, more affordable, and healthier to live in, because of home performance improvements.
Even with the proven benefits of energy improvements, the high up-front costs for whole-house improvements can deter customers from investments that will lead to long-term savings. “Today I realize that whole house all at once is ideal, but the reality is that [the typical homeowner] can’t always afford to do everything all at once,” says Ferington. And while this is a major challenge for home performance program administrators and contractors, the market opportunity is tremendous. A 2003 Harvard School of Public Health report estimated that there are 46 million existing homes in the United States that have inadequate insulation. Couple that with the Harvard Joint Center on Housing Studies (JCHS) estimated 13 million energy-related residential improvements completed each year in the United States, and the need to create a scalable model for home performance becomes clear. While HPwES participation rates are rising on a steep curve (see Figure 1), there is still an enormous amount of work left to do.
Mike Rogers, vice president at ABM Energy, views this challenge as an opportunity. “HPwES should enter a period of exponential growth within the next couple of years,” he says. “But this will only really happen if we learn to leverage existing transactions and motivations. The program can’t change the fundamental reasons why homeowners call people out to their homes, or what drives their buying decisions. If we can tap into these core drivers, we’ll succeed. If we ignore them, we’ll fail.” And with over $28.5 billion spent on energy-related home improvements annually (per JCHS), consumers are investing money in improving their homes in spite of a down economy. The key will be leveraging the opportunity presented by trades-based work that is already happening to create pathways that are manageable for homeowners to improve their homes over time as budgets and other constraints allow.
John Tooley of Advanced Energy describes one aspect of a successful home performance business. “I envision a day when customer success will be valued higher than what we think they need. A program that focuses on what customers want, and delivers that, will succeed in selling them what they need. Deliver what will make them high-five you when you leave. If I want tires for my car and you try to sell me a tune-up, you are sales focused and not customer focused. Excellent service and customer experience with the tires will keep me coming back.”
As HPwES enters its second decade, the program looks forward to building upon the existing foundation (see “HPwES Historic Timeline”). “We are indebted to the determination and vision of those industry players who understood the opportunity for home performance and brought it to reality,” says Ely Jacobsohn, DOE’s program manager for HPwES. “As HPwES and the home performance industry continue to mature, we look forward to working with old and new partners alike to advance and expand HPwES with clarity, innovation, and quality.”
Future success will largely depend on how industry leaders and local programs address the challenges of continuing operations without American Recovery and Reinvestment Act funding, educating homeowners about the benefits of home performance, listening to the many voices and perspectives of home performance stakeholders, and creating an environment where competition among local participants can be transformed into collaboration. “There is a need for broader discussion and consensus in developing the advanced strategy and programs needed. Facing the limitations of reality, not every recommendation can be successfully achieved—but all must be considered and attempted,” says Knight.
Rogers suggests another solution for long-term success. “If we truly want HPwES to scale, we must standardize the approach. We need software that can communicate across platforms… We need to get industrywide agreement on what an audit, quality installation, test-out, and quality inspection look like. And unless the price of energy increases, we need to accept the fact that most of the time, energy efficiency is the happy by-product of delivering things like comfort, improved aesthetics, and simpler home maintenance.”
Offering another perspective on scalability, Gerardi predicts, “Advancing a true performance path by adopting an investment grade standard to monetize energy savings to an actuarial level will create the market-based underpinnings for the next iteration of HPwES.”
Thomas believes that success will depend on the utilities’ support of local programs. In his opinion, “utilities need to support and not hinder programs. We need more standardization so companies can invest and grow. We need longer-term program incentive stability, cost-effectiveness tests changed to work with whole-house programs, data flow made more efficient, and feedback mechanisms so we can improve savings performance.”
2010’s proposed Home Star legislation (HR 4230, S1914) would have created clearly defined federal incentives for home performance, stimulating rapid expansion of the market. Thanks to a mighty effort on the part of a wide and varied group of stakeholders, this proposed law left a lasting legacy in spite of failing to pass in the Republican-led House. The idea of home performance as a vehicle for both public and private market growth of residential energy efficiency is no longer a secret. From the halls of Congress to the White House, home performance made its way into the vernacular for our policy makers.
Fortunately, Congress and the utilities have not been the only ones talking about home performance. Movements are afoot in the retail, manufacturing, real estate, and financing sectors to formalize their participation in home performance. The promise of greater standardization and clarity sparked interest from these sectors because they saw home performance work as a potential source of revenue, and because the existing-homes market is ready to engage in home performance.
Meanwhile, market players from a variety of sectors established new resources and program opportunities to support the continued growth of the home performance industry. In response to the new-construction downturn, RESNET returned to its original existing-homes roots by establishing its own contractor-based credentialing program geared specifically to the retrofit market. Air Conditioning Contractors of America, whose HVAC-related standards have long been cited as a gauge of quality in residential retrofit programs, has established a firm commitment to home performance by joining forces with RESNET and introducing new standards based on a whole-house approach. In addition, the Laborers International Union of North America has thrown its support behind several home performance-based federal and state energy efficiency initiatives and now offers career path training for workers in the industry.
For more information about Home Performance with Energy Star, go to www.energystar.gov.
As we look ahead, efforts are under way to develop tools and resources that will support greater consistency in assessments; data collection and transfer; quality assurance; workforce training and certification; and program administration. These efforts, combined with industry wide innovation, make one thing certain: As the home performance industry continues to evolve, if we remain true to the original vision we can change the way consumers think about their houses and make a lasting impact on the performance of our nation’s homes.
This article is part of a series sponsored by Home Performance with Energy Star, jointly managed by the U.S. Department of Energy and Environmental Protection Agency. The opinions, views, and ideas expressed within this article are those of the authors and do not necessarily reflect the official policy or position of any agency of the U.S. government.
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