Clean Energy Works Oregon: Total Home Performance

January 01, 2015
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January/February 2015
This online-only article is a supplement to the January/February 2015 print edition of Home Energy Magazine.
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Clean Energy Works Oregon (CEWO) is the largest nonprofit home performance provider in Oregon, according to Derek Smith, CEO of CEWO. Home Energy Publisher Tom White spoke with Derek about his work in the Pacific Northwest region. CEWO was one of the few organizations that used American Recovery and Reinvestment Act federal investments to unlock private capital in a local market, getting private lenders into the home performance sector without credit enhancements. “Now private capital is flowing throughout Oregon for home performance at very competitive rates,” says Derek, with financing coming from “credit unions, traditional banks, and CDFIs offering on-bill financing. We've got a suite of financing tools that are working in the market very well and not relying on any subsidy.”

Derek SmithDerek Smith, CEO of Clean Energy Works Oregon

Tom White: Is this type of financing happening across the kitchen table, where you get a credit check during the audit?

Derek Smith: It's within a day or two for most of the lenders. We're trying to meet the customers where they are. We want them to understand the needs of the project. On-bill would be appropriate for a general energy efficiency project. But we’re looking to expand services to enable remodelers to add a kitchen remodel, so contractors get more work.

TW: What are the limits on a home equity loan (HELOC)? How much can homeowners tap for a given upgrade?

DS: A HELOC can go up to $100,000. All those financing options will open up what we see as the next phase for home performance. We want to add lines of services that help homeowners make sure that their home is running as well as possible all across a full spectrum of home performance. We consider this total home performance, where we're not just considering energy efficiency, we're considering solar, radon mitigation, seismic strengthening—and in the future, storm water, electric vehicle infrastructure, you name it. Anything that will make a home more comfortable, better performing, and ready for the future that we’re all facing.

TW: Do you take a staged-retrofit approach? Or do homeowners complete the whole upgrade at once if they can get access to the credit?

DS: We're motivating people to go as deep as they can, as soon as they can. Our average project runs around $14,000, so generally we’ve been doing very large, comprehensive projects, with five or more measures per project. As we get into new segments of the population, we want to sell more people on home performance. We want to meet our customers where they are, and then have them take on more projects over time. So you could call that a staged retrofit.

TW: What interest rates do your contractors offer?

DS: Everything is generally around 6% with a 10- to 15-year term. Financing is critically important to the growth of the market, but I think too many people assume it's a silver bullet. We've learned over the past several years that we really have to work on demand.

In my mind, demand is a much more critical issue than getting capital to flow to the market. In our experience, the capital is there. We were able to unlock it, and we've got a very competitive lending situation. But we need to motivate homeowners to want to do this, and capital always follows demand.

I strongly believe that we as an industry are putting too much focus on capital and not enough focus on meeting the customers where they are, finding new points of entry, and then developing a bundle of services that gets them to move, gets them to buy, and then keeps them buying over time. We need to get them to see the value of home performance. We need to get them to see the value of making these investments in their largest asset.

TW: What's your geographic range in Oregon?

DS: Eighty-two percent of the state's population has access to CEWO right now. We will have statewide presence within two or three years.

TW: What customer points of entry have been most successful in your market-building efforts?

DS: Once you grow the demand, you need to focus on sales. We as an industry are not as focused on sales as we should be. We're supporting our contractors by investing in a sales process that helps them to sell conversions. In the business model that we're working on, we're essentially sharing the value of the project with the contractor, so we're aligned with the contractor in motivating conversions. Our market-building effort is to use our home performance advisors (who used to be called energy advisors) to help qualify the customers as well as we can before we ask contractors to invest resources. Then we support those contractors to work with the customers to get them to sign on the dotted line and through to a successful project.

We think it's very important to bring together the public sector, the private sector, and the ratepayer sector. Each one of those sectors wants into that home to accomplish something. The public sector wants jobs, or better building stock. The ratepayers want energy savings, and the private sector wants financial returns. We're trying to create a model that gives each of those sectors access to that home, where their dollars can be leveraged by other dollars to create more outcomes.

Points of entry would be where we can align our message with a local government. Where we can send a message, like a direct-mail campaign, with the city's logo, in a window envelope. We know that envelope gets opened, and when it gets opened, conversion rates go up.

We want our credit unions to be marketing partners. We want to motivate credit unions to unlock their whole membership base with a special marketing program for CEWO. That’s what we're working on. We think that will really help demand.  

When it comes to total home performance, we're trying to create new points of entry. In Portland and Seattle, for example, earthquakes are a huge risk. We want to get people thinking about seismic strengthening. We’ve been deploying FEMA dollars recently in Seattle and Portland to buy down costs for a seismic project. Right now FEMA is providing a 75% subsidy when we help homeowners do a seismic project along with an energy efficiency project.

If we can get the homeowner interested in seismic, then when we're about to bolt down the house, we explain how we can open up the walls and now would be the perfect time to put in some insulation. Then perhaps we can sell them solar, or radon mitigation. Anything that will make the home more comfortable, make it perform well on a range of metrics. Our view is that we should be setting up a system where the public, private and ratepayer sectors can all leverage each other and gain access to the home and help the homeowner get that home ready for the future. Make it more comfortable, perform well, on a range of metrics.  

TW: How do you recruit the contractors and educate them to deliver the kind of performance that you're shooting for?

DS: Our contractors are the technical experts. We have a great building science team on our staff that supports our contractors with the test-outs and through the projects. If the technical field folks have questions, we are always available to help.

We're very fortunate to have the Home Performance Guild of Oregon—that’s the contractor network there. I think they're one of the first Efficiency First chapters.  They work very closely with us to help the contractors learn from each other and share business with each other.

TW: Have you had experience working with pest control or other contractors who don't get building science? Tell me a bit more about that screening process for trades that haven’t had experience in HP.

DS: On a personal note, we've noticed that since we did a retrofit of our home, that we don't have rodents in our house any more because of the airsealing. We've been recruiting a great mix of contractors for years now—HVAC, remodelers, HP specialists, even solar companies. Some of them bring certain other services, like insulation, in-house, so there's some vertical integration, and some maintenance of specialties with a strong subcontracting network. What our program can do is find out what the customer wants and what the home needs. And then work out a system where we pair the customer with the contractor that is best able to meet those needs. If we can line up specialty contractors that fit that scope of work, so the customer isn’t forced to pay unnecessary margins for subcontracting out part of the job, then we're adding value for both the customer and the contractors.  

We work with such a range of business models. A lot of our contractors are mom-and- pop shops that need help with writing a profit and loss statement, hiring staff, or closing a sale. Providing that kind of sales support is another role we’ve played and will continue to play.

TW: You emphasize equity in your mission statement. What are some of the strategies you're using to build equity?

DS: We're really excited to help strengthen the underpinnings of the home performance market by broadening the tent of who is involved and who benefits from it. We really do believe that we can create an industry that is unlike most industries. We want to create an industry that is very inclusive from the start, with the benefits shared broadly throughout society.  

For example, on the workforce development side, we leverage U.S. Department of Labor dollars, working with local workforce intermediaries on pre-apprenticeship programs. We've been able to create an on-the-job training-wage subsidy for contractors who are willing to risk hiring someone who may not have a ton of training, but who has the aptitude, the interest. We can get those folks generally from disadvantaged populations—people of color, women, and veterans. We've focused on getting those folks access to the jobs, on getting them the training, on reducing the risk to the hiring contractor, because we've provided some subsidy there, available from public sources. Then we get them into a career pathway, and then they move out of poverty, into a middle-class situation, where ultimately they can buy a house. They can invest in a house and do home performance in their own house. That's the broader vision that we see for the industry.  

learn more

Learn more about CEWO.

We also support minority women-owned firms and we support rural communities. We do contractor development in rural communities where there often aren’t often Building Performance Institute-certified contractors. We're trying to bring resources from the public sector, which has an interest in all those objectives, to support the interests of the rate ratepayer and the private sector. We really think there's power in bringing that all together. We were able to secure $10 million in investment from the State of Oregon largely because we have focused on a market-based model—a model that is inclusive, and that creates opportunities for disadvantaged populations and rural communities; a model that addresses and is addressing a range of public policy objectives, not just energy savings or climate change.  

Tom White is publisher of Home Energy magazine. He restores historic homes in his free time.

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