Home Performance Legislative Outlook
The U.S. Congress has found little to agree upon over the last couple of years. As the 112th Congress closed in December with the fewest bills to reach the president’s desk in 70 years, there has been frustration at every level of government.
The new Congress will be faced with the challenge of quelling ongoing partisan bickering and educating a large class of new members in both chambers in order to forge compromise. The silver lining for the home performance industry is that energy efficiency remains a bipartisan issue. In addition, one of the first items on the agenda of the White House and both parties in Congress is energy efficiency, which could signal good things to come for home performance policy.
State of the Union
President Obama returned to the White House for his second term with a State of the Union speech that addressed the energy waste in America’s buildings. The president challenged America to “cut in half the energy wasted by our homes and businesses over the next 20 years.” This challenge, now referred to as the Energy Efficiency Race to the Top, incentivizes states to compete for the best plans to achieve energy savings with the award of federal funding to implement their policies. Whole-house energy efficiency retrofits will go a long way toward achieving the president’s goals. In fact, with 30% of America’s delivered energy used in the residential sector, and a large portion leaking through roofs, uninsulated walls, and poorly sealed ducts, the home performance industry has a huge role to play in cutting U.S. energy consumption.
Many states have achieved important energy savings through innovative programs. These programs offer new ideas for policy makers, and the president’s challenge will help to support and promote those achievements. However, complementary policies are also needed at the national level. National policies are important because they support standardization; manufacturers, companies, and contractors see a patchwork of policies and may choose not to invest time and energy in initiatives that do not have a national reach or that will require different rules and procedures when crossing state lines.
In the last Congress there were three home performance initiatives that drew bipartisan support and aimed to tackle three of the key challenges to advancing home performance retrofits. These challenges were the high up-front costs of efficiency upgrades, the difficulty of assessing the value of energy efficiency in a home, and the difficulty of gaining access to energy data. Each of these initiatives is under consideration for reintroduction in the new Congress.
Incentives for Home Performance Retrofits
High-efficiency technology is often more expensive and requires greater skill to install than its less-efficient counterparts. This tends to result in higher costs for energy efficiency retrofits. Tax credits and rebates can help address these up-front costs and convince a homeowner to invest in more-efficient technology. Performance-based incentives are tied to energy savings and are technology neutral. Instead of providing special favors to key industries, they encourage consumers to make purchases that advance a public good—energy savings. Furthermore, they continually push industry and markets to innovate and keep pace with changes in technology. Incentives based on individual product efficiency levels need to be regularly updated, because otherwise they will provide a perverse incentive for maintaining the status quo. Whether in the form of a rebate or a tax credit, performance-based incentives for home performance retrofits encourage contractors and homeowners to choose the most energy-efficient solutions for an individual home, to save money, create jobs, and protect the environment.
In the last Congress, bipartisan legislation in both the House (the Home Owner Managing Energy Savings [HOMES] Act [HR 4230]), and the Senate (the Cut Energy Bills at Home Act [S.1914]) would have provided an incentive to homeowners (or contractors) based on predicted energy savings. The more energy saved, the larger the credit. The homes Act was recently reintroduced in the 113th Congress as HR 2128.
Valuing Home Energy Efficiency
One of the key barriers to accessible financing is the low value placed on energy efficiency. Spend $15,000 on granite countertops or a new porch, and an appraisal will reflect the improvements. This is not always true for a home performance upgrade, even though the upgrade makes the house more comfortable and lowers utility bills. This is largely because energy efficiency is hard for agents and buyers to see, and thus difficult to value in a home sales transaction. The last Congress saw the introduction of the Sensible Accounting to Value Energy (SAVE) Act of 2011 (S. 1737), which would have required all federal lenders to consider projected energy efficiency when underwriting mortgages. The intent of the legislation was to provide lower-rate mortgage financing for cost-effective energy improvements, and to make possible better federal mortgage underwriting while lowering utility bills for American households. This Congress, ranking member of the Senate Energy and Natural Resources Committee Lisa Murkowski (R-Arkansas) released a report in which she noted the need to “promote a comprehensive energy efficiency approach by making financing accessible for energy efficiency retrofits.”
Ensuring Access to Utility Data
While there is no longer debate over whether consumers own their utility data, there is debate over how easily they should be allowed to access these data. Last Congress saw the introduction of the bipartisan Electric Consumer Right to Know Act (S.1029), which would have clarified consumers’ right to gain access to their own electric data, including direct access to the meter. The bill would also have enabled homeowners to designate a third party (such as a home performance contractor or software system) to access the data on their behalf and use these data to help them become more energy efficient, thus allowing private-sector companies and home performance contractors to provide products and services to homeowners and help them to reduce their electricity costs.
The Future of National Legislation
House Energy and Commerce Committee Chairman Fred Upton (R-Michigan) and Subcommittee on Energy and Power Chairman Ed Whitfield (R-Kentucky) will decide which energy efficiency provisions will get hearings in the House of Representatives—the first step on the long road to enactment into law. When questioned earlier this year on prospects for legislation in this new Congress, Chairman Whitfield noted, “I totally think we have a lot of areas that we can agree on, and everyone supports energy efficiency.” Chairman Upton echoed that point, saying, “Who wouldn’t like to [lower] their home energy costs by 50%? We’ll look at energy efficiency and I’m sure a number of different things.”
While the new Congress has many challenges before it, there are bright points. Returning members of Congress felt a sting in the last election from constituents who remembered its lack of action over the previous two years. And, now that Obama is no longer running for president, there can perhaps be new olive branches offered between the White House and Congress. All signs point to those branches coming in the form of energy efficiency initiatives, which suggests great prospects for home performance policy in the 113th Congress.
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