Changes in the Residential Energy Efficiency and Renewable Energy Marketplace

Off the Grid - Total Energy Solutions for the Home

In an effort to serve growing demand for a broad spectrum of energy efficiency improvements that can be made to our homes, GE recently announced plans to become a one-stop shop for residential energy efficiency products (Source: EnergyEfficiencyNews.com, July 15). In addition to some of the more conventional products that GE offers, such as energy efficient light bulbs, appliances, and climate control consoles, the company will soon add residential energy generation and storage products. GE estimates that by improving the energy use of appliances, HVAC systems, and lighting, peak energy demand will decline by 7% in the United States.

As we look at the expansion of energy offerings that could feasibly enter the residential market in the coming months and years, one wonders which methods will truly be the most cost effective in the long run. Though most people are aware by now that better insulation, smart climate control consoles, energy efficient light bulbs and other small items can drastically reduce energy waste in their homes, what can be said of energy generation products designed for residential use?

For most, residential solar panels, wind turbines and other energy generation technologies have historically been out of reach both financially and logistically. As I mentioned in this earlier blog, however, the options available to the average homeowner in terms of renewable energy hardware and financing for such systems are increasing rapidly. The price of solar panels, for example, has dropped 40% this past year, opening the door for some to consider installation of such panels on their property for the first time (Source, NewYorkTimes.com, August 28).

In addition to improvements in technology and the reduction in price of some renewable energy components, government and utility subsidy programs for residential renewable energy systems are also starting to gain momentum. Though a reduction in market pricing and increases in availability of private financing for such systems is a positive trend, the impact of government subsidization and financing programs face a high standard of scrutiny. With a wider range of options now available for both energy conservation and renewable energy generation in the typical residence, a recent article in the Wall Street Journal raises an important question where our tax dollars are concerned; “…should the government be doing more to subsidize conservation?”

This same article cites a study by a consulting firm McKinsey & Co. that examined the cost of eliminating one ton of CO2 emissions via different methods, including light-emitting diodes, energy efficient appliances, wind power and solar power (Source, Online.WSJ.com, July 15). The study found, not surprisingly, that reducing energy demand through an upgrade of more efficient items for the home reduced CO2 more cheaply than generating new energy through the installation of renewable energy collection devices. The latter part of this article goes on to discuss a bill that’s pending in congress right now that would do just such a thing by offering tax incentives for homeowners and businesses who install these energy saving items. In addition to its focus on reducing energy demand, the bill is structured on a results-basis so as to provide the greatest incentive for the most energy demand reduced.

Government Funding - Upgrades for the Home

Many countries worldwide are rolling out with similar energy efficiency incentive packages, such as a £15 million home makeover package, which will provide free energy audits, advice, and free or discounted insulation materials to 96,000 homes (Source: EnergyEfficiencyNews.com, August 3). As I mentioned in an earlier blog, there are similar programs being considered or implemented at national, state and local levels, such as Boulder County's (Colorado) ClimateSmart program, which loans income-qualified homeowners up to $50,000 to make energy efficiency improvements to their homes and applies the debt to the property itself. ClimateSmart participants may also install renewable energy hardware under the program, including photovoltaic, solar thermal, or wind energy systems (a full list of approved projects is available at this link).



On a national level and as a part of the American Recovery and Reinvestment Act, tax credits are available at 30% of the cost, up to $1,500, in 2009 & 2010 for several energy efficiency improvements to existing homes, including roofs, HVAC upgrades, insulation, water heaters and more (Source: EnergyStar.gov). On the renewable energy side, the Federal Government is offering a 30% individual tax credit for residential solar electric expenditures through December 31, 2016, several of which have no upper limit on the base cost (Source: Energy.gov, EnergyStar.gov). This renewable energy tax credit includes small wind property credits with a cap of $4,000 and geothermal heat pumps up to $2,000.

Return on Investment - Thoughts on Spending Stimulus Dollars Wisely

As efforts to reduce CO2 emissions ramp up in the United States and worldwide, it will be interesting to see how many new programs will be geared toward simple efficiency upgrades as opposed to renewable energy research and industry. Currently, there's a wide variety of funding and programs in place at the federal, state, county and some city levels for either or both types of improvements. While the goal is to ultimately reduce our overall pollutant waste, we should also be mindful of squeezing the most energy savings out of each dollar we spend wherever possible. I expect to see a rash of cost-effective net energy-savings studies on both commercial and residential properties in the coming months as individuals and builders begin utilizing stimulus funding to pursue these upgrades. My hope is that these studies will also factor in the net employment stimulus effect that these projects are having so that funding is most strongly allocated to those that are serving the dual purpose of employing the most workers for the most energy savings gained per dollar spent.

Programs That Work: Energy Efficiency Initiatives with Power in a Recession

There's a lot of buzz out there around the idea of reducing energy waste in new construction projects. Hundreds of researchers, architects and construction companies have perfected dozens of highly effective building methods, materials and mechanisms to create efficient new buildings in both the commercial and residential markets.

While promoting the latest and most cost-effective methods in new construction projects is a step in the right direction, less clarity and more challenges exist on the topic(s) of how to promote energy efficiency upgrades in existing homes and office buildings. "Nearly half of America’s energy - and 10 percent of the energy used in the world - goes towards powering our buildings, and much of that energy is wasted. Buildings account for 40 percent of total U.S. carbon dioxide emissions, a major contributor to global warming. " (Source: EnvironmentMinnesota.org, 6/2/09).

In addition to all of the hurdles associated with retrofitting existing structures including the cost of materials and the wide variance in structural design, building owners face the additional pressures of a prolonged recession. How then can we encourage residents, businesses, construction contractors and local governments to take on the additional short-term costs of adding energy efficient components to the property they own?

While I do not pretend that I have a solid answer to this question, I would like to examine programs and incentives with a great deal of potential in these times of economic stress. Virtually all of these incentives are government based and many of them are tied to the economic stimulus legislation that originated in Washington, D.C.

One such initiative that caught my eye recently is Boulder County's (Colorado) ClimateSmart program. The 6.6 million dollar program, approved by county voters last November, allows for homeowners to apply for a loan of up to 20% with a limit of $50,000 to make energy efficiency improvements to their homes. The unique part about this program is that it ties any loans granted are attached to the property, rather than the owner. The owner pays a special assessment in property taxes, but will not carry the loan with them should they sell the property (Source: The Denver Post, 6/27/09).

In a time where homeowners are struggling with their mortgages, worrying about the safety of their jobs and doing whatever they can to make ends meet, this program may be particularly attractive. For any homeowner who wishes to make such improvements but does not wish to take additional risks with their own credit in case of emergency (through tapping into their home equity line of credit or by taking out standard loans from a bank), this is an incredible opportunity. In addition, the long-term cost-comparison between the standard credit options and this county incentive program stacks favorably for the county's option.

A second, and more traditional, incentive program is the Renewable Energy Finance Act of Colorado, which was signed on April 22nd of this year. This is also a government reimbursement program (on the state level) that's focused primarily on the financing of solar electric systems and the cooperation of local utilities on streamlining access to solar rebate programs to customers of all income levels (Source: Colorado.gov, 4/22/09). "SB51 doesn’t create a pot of money for homeowners or businesses to directly borrow. Instead, the act creates a fund in the Governor’s Energy Office, which provides the backing to banks and other lenders to make clean energy loans." (Source: Todd Hartman, spokesman for the Governor’s Energy Office, The Summit Daily News, 4/23/09). In the same article, author Tillie Fong mentions that the upfront cost of the average residential solar panel system is between $6,000 and $8,000, a significant barrier when loan money systems are in a tight recessionary period as they are today. With this program, the party who installs the equipment will own the equipment until the resident pays it off. In addition, the loan is secured by the Governor's Energy Office, rather than the customer.

Again, this government incentive model shifts the lending burden off of the homeowner and allows them to pursue the improvements so long as they can make the monthly payments (which are likely to be at a lower interest rate than with a privately secured loan).

Another type of energy efficiency program comes from electric cooperatives and providers in a given area. One such example is a program promoted by the Colorado Springs Utility, which provides low interest rate financing for some pre-approved energy and water efficiency home improvement projects. The loans range from $1,000 to $50,000 and are separate from their Renewable Energy Rebate Program, which gives customers a credit on their bills for setting up solar panels and connecting them to the utility's electric grid, a common credit offered by a wide variety of electric utility providers (Source: SolarPowerAuthority.com).

This program follows the same type of model that the Renewable Energy Finance Act does by using the borrowing power and backing of the utility to negotiate loans for in the individual customers, much as a health insurance pool will do. Without the backing of the utility, many of their customers would be unable to finance such improvements in the first place or may not be able to afford the higher loan rate(s) available as individuals.

There are literally thousands of programs out there that try to foster energy efficiency upgrades among residential and commercial developments, but the three above illustrate important options and models that may be more effective than others. The Boulder County ClimateSmart program is, in my opinion, the most compelling of the three at this fragile moment in our economy for the simple fact that the owner of the property is not stuck with the burden of the loan in the long run. Though I believe that we have a long way to go in promoting these improvements in our existing buildings and thus minimizing energy waste, ideas like these give us more opportunity to make the right - and sustainable - improvements despite the instability of our economic circumstances.