DOE's Home Energy Score: Looking Backward and Forging Ahead
In 2010, DOE set out to develop a reliable, low-cost “mpg for homes” that could rapidly penetrate the existing-homes market. Although ratings were available for a growing percentage of new homes, few existing homes were being rated. With the goal of creating an easy-to-understand, transparent rating system, our team at DOE wrestled with a lot of tough questions. What data needed to be collected? Could a reliable rating be generated in less than an hour? Who should deliver the rating?
Through the hard work and commitment of members representing both government and industry, our team developed a highly regarded tool and scoring system that is now being adopted by a growing number of states and utilities (see "Explaining Home Performance"). This article summarizes progress to date, highlights emerging opportunities, and suggests ways that the public and private sectors can collaborate to overcome remaining challenges and make residential energy efficiency information available for every home in the United States.
Progress to Date
Since the official launch of Home Energy Score in 2012, utility, state, and other partners have scored nearly 26,000 homes. While that’s just a drop in the bucket compared to the 80 million single-family homes in the United States, the number of homes scored is expected to grow significantly, considering programmatic and market developments.
Growing Pool of Home Energy Score Assessors
In 2014, the Home Energy Score program started working with a team of training and testing experts to develop a comprehensive training and testing tool for candidates interested in becoming Home Energy Score Assessors (see Figure 1). This tool, developed with significant input from existing Assessors, uses a 3-D simulation environment for both training and testing. An evaluation found that home professionals with varying backgrounds could consistently score homes in the field after taking the training and scoring well on the test.
Previous to the launch of the new platform in February 2015, a prequalification for Home Energy Score Assessor was that the candidate had to be either a HERS Rater or a BPI Building Analyst. Since the launch of the new training and testing platform, home inspectors, contractors, and other building professionals can qualify to be Home Energy Assessors. (See the “learn more” section for a full list of accepted credentials.) Once the credentials are confirmed, the candidate has access to the training and testing platform. After the test is passed, the candidate becomes a Home Energy Score Assessor.
This should significantly open up the market for Home Energy Score and lead to many more homes being scored as part of real estate transactions.
Offering the score can be as simple as a click of a button, thanks to continuously improving IT capabilities. A growing number of private companies are integrating the Home Energy Score into their energy-auditing and other software tools, so assessors can provide the Score with little to no additional effort. The Home Energy Score program provides an application-programming interface (API) at no cost to software developers and an HPXML translator that allows efficiency programs using HPXML (a standard home performance data protocol) to easily transmit data between Home Energy Score and other software tools. A number of software companies are already providing the score via the API, and others are likely to start doing so during the coming year.
Statewide Use of the Score
More and more states are showing an interest in adopting the score as part of statewide home energy scoring or labeling initiatives. Connecticut was the first to launch a statewide program using the Home Energy Score, in spring 2015. The Connecticut Energy Efficiency Fund funded both United Illuminating Company and Eversource to integrate the Home Energy Score into Home Energy Solutions, its flagship residential energy efficiency program for existing homes. The program’s in-home assessment begins with diagnostic testing of the home’s energy use and air leakage and includes on-the-spot improvements, including energy-efficient lighting, water-saving measures, and air and duct sealing to seal critical leaks. Residents are then presented with a report and a Home Energy Score containing information about their house and recommendations for further improvements. The state is also considering using the score as one way of tracking its progress toward its goal of weatherizing 80% of homes by 2030. Connecticut plans to score 12,000–14,000 homes annually.
The Colorado Energy Office is leading efforts to integrate the Home Energy Score into a variety of programs across the state, with an end goal of including the scores on the state’s multiple listing services (MLSs). This will allow buyers and others to consider Home Energy Score at the point of sale, in addition to other energy efficiency features. The score is offered through utilities’ residential energy efficiency programs, as well as at point of sale by home inspectors. In addition, the state has tied the score to its Energy Saving Mortgage Incentive, which provides homeowners up to $3,000 if they improve their score by making energy efficiency improvements ($750 for every point increase on the Home Energy Score scale, up to a maximum of four points). The state has been a leader in its engagement with the real estate community; coordinating closely with MLSs to enable sharing of energy information, sponsoring appraisal valuation studies, and educating real estate agents on the value of energy efficiency, including a new course specifically on the Home Energy Score. In addition, the state is developing a consumer-facing interactive online map that shows recently purchased homes, their scores, and the agents associated with those listings.
In Missouri, the Home Energy Score is one available path that homeowners can take to qualify for a gold or silver certificate as part of the Missouri Home Energy Certification program, announced by Governor Jay Nixon in February 2015. Homes with a score of 8 or higher are eligible for a gold certificate. Homes that cannot achieve a score of 8 but can significantly reduce their energy use by making energy improvements recommended by the Home Energy Score are eligible for silver certificates.
With a statewide launch planned for early 2016, Vermont will provide consumers with a Home Energy Profile that features multiple metrics derived from the Home Energy Scoring Tool, including the score and estimated energy use and cost.
In Oregon, the Home Energy Score is one of three approved scoring systems allowed under the state’s 2014 updated rules on residential energy performance scores. And on the local level, the city of Berkeley, California, is requiring use of the score for homes prior to sale as part of its Building Energy Savings Ordinance.
Through ongoing dialogue with DOE, states have made it clear that they are looking for flexible, reliable, and simple rating methods for homes. They recognize the value of aligning with a national score but also want to tailor the information included in a home energy label to their specific market interests or needs. Fortunately, DOE’s Home Energy Score provides a breakdown of estimated energy uses in the home, so partners can apply local utility rates to estimate energy costs for interested home buyers and others. DOE will continue to assist states in offering customized information while ensuring that the score and other data provided to consumers are consistently derived, clear, and accurate, and that they motivate them to invest in energy efficiency (see Figure 2).
Delivery Through Utility Programs
Until a region has a significant concentration of homes with Energy Scores, convincing homeowners and buyers to step up and get a score can be difficult. Utilities are uniquely positioned to market the score along with their other services. Consider how quickly the market would get to critical mass if a score were provided along with each of the millions of energy audits and quick home energy checkups performed each year.
A growing number of utilities appreciate the score’s simplicity and usability, the robust energy model supporting the score, the programmatic quality assurance component, the potential for real estate integration, and the credibility associated with DOE. Also, the score has proven flexible in that it can be integrated into various implementation models. For example:
- New Jersey Natural Gas has scored more than 11,000 homes since 2012, primarily through its appliance rebate program. The utility provides the score after the homeowner replaces a gas furnace, boiler, or water heater, with the goal of encouraging participation in the statewide Home Performance with Energy Star program.
- Since 2012, Columbia (Missouri) Water & Light has scored over 5,000 homes as part of its Home Performance with Energy Star program. The score is provided before and after energy efficiency improvements to help homeowners understand the impact of their investment. The final score also serves to qualify the home for the state of Missouri’s silver or gold certificates.
- Focus on Energy (FoE) developed a Home Energy Score pilot in 2014 and scored about 1,000 homes as part of its quick energy audit and direct-install program in Wisconsin. FoE hopes to boost participation in its other residential energy efficiency offerings.
The score is attractive to program implementers that are already collecting most of the required data through energy checkups or audits. In these cases, adding the score often takes less than 15 minutes of additional time per home. The score is also proving popular with programs that do not rely on such robust energy modeling or that do not issue such user-friendly homeowner reports.
While the score is free to use and quick to add, it’s still not always easy to persuade utilities and public service commissions to add a service that does not demonstrate immediate savings. Many of them want to know how much the score motivates homeowners to invest in efficiency and to participate in programs such as Home Performance with Energy Star—and they want a quantitative answer. To provide that answer, DOE is working with stakeholders to better assess the score’s immediate and long-term impact on energy use. For example, the New York State Energy Research and Development Authority plans to launch a pilot with about 2,500 homes to assess the impact of the score on demand for the statewide Home Performance with Energy Star program. Results from this pilot should be available in the second half of 2016.
In addition to growing adoption of the score by states, utilities, home inspectors, and software companies, recent developments in the real estate sector hold significant promise for spurring the use and impact of the score.
Better Buildings Home Energy Information Accelerator
In May 2015, DOE, along with more than 25 partners from the real estate and energy efficiency sectors, announced a new Better Buildings Accelerator, the Home Energy Information Accelerator. This initiative is designed to expand the availability and use of reliable home energy information in residential real estate transactions. Bringing groups together that have not historically collaborated, the new accelerator aims to make home energy information, such as a home’s energy score or estimated energy usage, readily available, so that before long, finding out how much a home’s energy bills are likely to run will be as easy as looking up a home’s age, size, or school district.
The accelerator partners include national organizations, such as the Council of Multiple Listing Services and the National Association of Realtors' Center for Realtor Technology, as well as local organizations. These partners have committed to develop and demonstrate replicable, sustainable approaches that make energy information easily available to home buyers and sellers as well as other stakeholders (for example, real estate agents, lenders, and appraisers). A primary focus of the accelerator is creating automated systems that use standard data specifications and effectively maintain and share information. Through the accelerator, these organizations are leading the way to help sellers highlight the investments they’ve made in energy efficiency and help buyers make informed decisions about what is likely to be their biggest investment—purchasing a home.
Explaining Home Performance
The Certificate of Performance provides homeowners and industry professionals with documentation of energy efficiency improvements and other information on a home's performance (see Figure A). It is BPI 2101 compliant and is co-brandable. A version of the certificate includes the Home Energy Score scale to easily convey the score, if it is performed, and improvements made to the house.
Tying the Score to Financing
On September 30, 2015, the Federal Housing Administration (FHA) issued a mortgagee letter notifying lenders that borrowers can qualify for a stretch ratio if the existing home scores 6 or higher at time of purchase or refinance. With this higher debt-to-income ratio (as well as stretches on other ratios used to qualify borrowers), borrowers are eligible for a larger loan if the home scores a 6 or higher, or if the borrower commits to improvements that will result in a score of 6 or higher. The new policy is meant to encourage buyers and sellers to get a Home Energy Score and thereby have a better idea of how much the utility bills are likely to run.
Previously, only new homes could qualify for this stretch policy—by meeting HUD's most recently adopted IECC (International Energy Conservation Code) standards. With the new policy, FHA offers a simple way to encourage and recognize efficient existing homes. Borrowers can include the cost of energy upgrades in their regular FHA loan, spreading out payments over 30 years and thereby taking advantage of a low-cost option to enhance the energy efficiency and comfort level of their home.
Currently, lenders need to go through “manual” underwriting to offer these stretch ratios. DOE and FHA are interested in working with a few motivated lenders to promote the score, particularly in areas where large numbers of Home Energy Score Assessors are available to score homes.
While these programmatic and market advances are promising, policy makers and program administrators must still overcome a number of challenges in order to tap into the full potential of the Home Energy Score.
Addressing Market Confusion
Although the Home Energy Score, on its own, is fairly simple to understand, consumers and decision makers quickly become overwhelmed when faced with lots of competing information and different rating systems. To overcome market confusion, it’s critical that we find a way to make energy ratings as comparable as possible. One option is to develop a DOE translator that could be used in conjunction with other energy ratings. For example, whenever a home received a HERS rating or a Home Energy Score, the translator would also calculate one or two metrics (e.g., estimated energy use or cost) using standard inputs and assumptions, making it easy for home buyers, appraisers, and others to compare new and existing homes through one lens. With a HERS rating, buyers could still see how a new home’s energy features compare to energy code, but at the same time could look across new and existing homes to see how much energy each home is likely to use.
Getting Decision Makers to Access and Use Energy Efficiency Information
It’s important to note that the Home Energy Score is not based on private information, which can be a barrier to homeowners. The score is not linked to the way an individual or family chooses to live or how much they spend on energy. As an asset rating, it simply reflects the energy-related characteristics of the home, just as a Walk Score reflects its location, or an MLS listing notes how many bedrooms and baths it has.
Getting energy efficiency information on the MLS is just the first step. Policies are needed to ensure that lenders, appraisers, and insurers (for example Fannie Mae, Freddie Mac, FHA) apply this information consistently and regularly, to inform property valuations or lending practices. Because utility costs are likely to exceed the cost of home insurance, it only makes sense that estimated utility costs should be factored into real estate transactions. Improved lending and appraisal practices can go a long way toward ensuring that a home’s energy performance is fairly valued.
Moving Forward: Best Practices and Creative Approaches
There are a few best practices that program administrators, contractors, and others can implement to move the ball forward.
Use Release Forms
Unless your jurisdiction requires that a home’s energy rating or score be made public, the Assessor should ask the homeowner to sign a release form that allows the score report to be added to data pulled by real estate agents and others. That way, when a home is on the market, the information can be more easily shared on the MLS. Home Energy Score has developed a form for this purpose.
Apply for Continuing Education Credits
Many different professionals need to understand energy ratings if they are going to increase the market for energy-efficient houses. A powerful way to reach these professionals is through courses required to maintain their certifications. Home Energy Information Accelerator partners are coming together to identify needs, design training resources to meet those needs, and make these training resources available to professional stakeholders nationwide. While requirements vary by state and profession, technical and informational training courses that cover energy efficiency and ratings can often qualify for continuing education credits. BPI, for example, offers six credits to assessors who train and pass the DOE Home Energy Score online exam. The Home Energy Score program welcomes requests from training providers who may want to use or adapt program materials for their courses.
Get to Know Local Real Estate Agents
Information alone is not enough. Just as a bad comedian can ruin a perfectly fine joke, an energy rating presented to a consumer without a clear explanation, and with no encouragement to do something that will benefit the consumer, can fall flat and be forgotten. One extremely important set of professionals who have the ears of consumers are real estate agents. Buyers riddle their trusted real estate agents with questions not only about homes, but also about financing, contractors, schools, crime . . . the full gamut. An agent who understands what an energy rating means, and believes that the rating is credible, can be a great advocate for energy efficiency. A knowledgeable real estate agent will not only encourage buyers to choose Energy Star appliances but will also help them to understand why a low Home Energy Score usually means high energy bills. A knowledgeable agent can also explain that energy improvements like insulation and sealing—made either prior to listing by the seller or upon purchase by the buyer—can save money, make the house more comfortable, and even improve the value of the home. Recognizing the importance of real estate agents in advocating for energy- and water-efficient housing, the state of Colorado placed ads in newsletters to Realtors to encourage them to educate home buyers and sellers about energy efficiency opportunities.
A Bright Future Through Strong Partnerships
Remarkable progress has been made over the past five years. Home Energy Scores are generated every day, and state home energy labels that feature the score are emerging across the country. Collaboration across sectors has been a key to this success, and the circle of stakeholders is widening to include real estate agents, financial institutions, retailers, and many others.
Don’t you wish someone had offered you the Home Energy Score before you bought your home? And even better, what if your lender had made it easy to pay for energy efficiency improvements when you moved in? Together, we can forge a path to improve energy literacy and provide greater opportunities for the next generation of home buyers and owners to take action. Let’s make it happen for every home in the United States!
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