SMOKING MONEY

HOME STAR...A Clean-Energy Home Is Where the Heart Is
Bracken Hendricks, December 22, 2009 (Center for American Progress)

SUMMARY
Little known fact: Most U.S. homeowners are smoking twenty-dollar bills. Sadly, it’s legal. In fact, it’s more than legal – the government encourages it.

Living in inefficient homes and working in inefficient buildings is like burning money because so much of the energy used in those buildings goes to waste. And generating that wasted energy by burning coal, natural gas, oil and biomass produces enormous smokestack pollution, not to mention the spew that is worsening global climate change.

Since most of us live in inefficient homes and apartments and work in inefficient buildings, we are all smoking money. The government has encouraged us with enormous subsidies to fossil fuels, regulations to keep utilities from being more efficient and slow, flailing action on efficiency rules and standards.

The Obama administration and the Center for American Progress (CAP) want change. They have proposed the HOME STAR rebate program, a $9 billion plan to jumpstart retrofitting by home and building owners for greater Energy Efficiency.

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The program has 2 parts, SILVER STAR (which promotes step-by-step spending for efficient equipment and upgrades) and GOLD STAR (which promotes comprehensive home makeovers).

HOMESTAR would be done almost entirely through the private sector (with federal guidelines and oversight to assure high standards) and focus initially on residential retrofits (though it could eventually incorporate makeovers in commercial and industrial buildings and public facilities).

Not surprisingly, HOMESTAR also holds the potential to put gazillions of people back to work, from the energy experts who evaluate the buildings to the construction people who do the retrofitting to the factory workers who make the materials, appliances and equipment needed to do the job.

Furthermore, this is the kind of program that will help the U.S. regain its sense of self-reliance and self-respect.

There’s room for every helping hand in this one: It can save the economy, the environment and the polar bears.

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COMMENTARY
The Obama administration calls the HOME STAR program “Cash for Caulkers.” Though its details will not be finalized until it is passed as part of the upcoming jobs or energy/climate bills, the White House program, spearheaded on the President’s Recovery Board by high-tech investor and entrepreneur John Doerr, hopes to create an industry of over 1 million workers that will retrofit 100 million US homes and cut U.S. greenhouse gas emissions (GhGs) 5% by 2030.

The Center for American Progress goals are to retrofit 50 million residential and commercial properties across the country and cut the energy used 20-to-40%, saving $32-to-$64 billion and creating 625,000 jobs at a cost of $500 billion.

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The HOME STAR concept is based on other programs to drive Energy Efficiency. Much of what is proposed is in Retrofit for Energy and Environmental Performance (REEP), which is part of the House-passed energy and climate legislation. It also resembles the Building Efficiency title of the Senate version of the House bill. Both of those programs draw on efficiency plans already at work and proven effective in states like California. A wide range of labor and major corporations have endorsed the concept.

Retrofitting a home can cut its energy consumption 10 to 40%, depending on the location, age, size of the house, and the level of investment in efficiency measures.

The savings from moving to more efficient homes and buildings requires 2 basic things: (1) Educating building owners on the value and (2) bringing the initial out-of-pocket cost of making the changes down to affordable levels.

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The HOME STAR program would offer a 50% rebate on efficient products and retrofit services. This gives those in the businesses of efficient products and retrofit services an incentive to educate building and home owners and brings the upfront costs down while the rebates are available (like Cash for Clunkers), solving both major challenges to achieving greater Energy Efficiencies.

The money will benefit the entire economy because the entire economy of energy efficient home improvements is engaged. Consumer demand for new, energy saving appliances will stimulate activity at Lowes, Whirlpool, and General Electric. Retrofit construction can engage major construction firms and small contractors alike and put the people they employ to work. Insulation and air sealing requires skilled labor. And the work cannot be done without a wide range of building materials and new appliances, many U.S. made.

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Implicit in this straightforward plan is a unique and sophisticated principle: High standards create jobs and drive demand. High-quality, efficient mechanical systems and appliances and better craftsmanship by certified workers not only increase economic activity but lay the groundwork for sustainable, long-term growth and viability.

Energy Efficiency also begins cutting energy bills immediately, making money available to pay off the improvements and spend on other consumer opportunities. In this way, the growth will expand to an even broader portion of the economy.

A HOME STAR initiative would establish a $9 billion rebate program. It could be passed as part of the 2010 jobs bill or the 2010 energy and climate legislation. It can be simple to administer because it should work through existing markets, require minimal new bureaucracy and be largely run by shifting existing state and local programs to implement new, more uniform and well-funded federal standards and incentives.

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The White House sees HOME STAR as a 3-mechanism program: (1) Incentives to the owner of the house or building and to the Energy Efficiency industries; (2) Financing; and (3) Establishing quality standards and training professionals to implement them. It believes that for every federal dollar that goes into it, the program will generate $2 more in private sector spending. This expectation is substantiated by the actual numbers generated in most state, local and utility efficiency programs.

Federal incentives would ratchet down over time, creating an incentive for owners to move immediately rather than procrastinate and spill more energy. This degressing type of incentive has been an essential element in a variety of successful New Energy programs including California’s “Million Solar Roofs” and Germany’s feed-in tariff (FiT).

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HOME STAR would have 2 parts, SILVER STAR (step-by-step purchases of efficient equipment and upgrades) and GOLD STAR (comprehensive home makeovers).

SILVER STAR is “prescriptive.” It provides rebates for the purchase or installation of things that are prescriptions for remedying energy waste. That includes specific Energy Efficiency equipment (furnaces, water heaters) and appliances (refrigerators, washing machines) or changes to a home’s or building’s “envelope” (insulation, duct sealing). It is a fast, near-term incentive. It would require the establishment of no new standards and the creation of no new professionals. It would be easy to administer to get going because it would be largely handled through the dealer or installer and therefore quickly introduced into existing markets.

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CAP would base SILVER STAR incentives on the number of actions taken. Owners would get up to a $1,000 rebate per efficiency measure or $250 per appliance. It would provide as much as 50% of project costs, up to $4,000.

The GOLD STAR is a “performance” program that creates a bigger incentive to do whole-house/building retrofits. At least a third of HOME STAR funds would be set aside for GOLD STAR projects. It is technology-neutral and requires no specific products or improvements. The money goes to solutions. Contractors and owners are free to work plans toward deep energy savings.

The process would begin with an energy audit by an accredited quality assurance professional. A retest when the performance retrofit is completed verifies the results. Consumers get a $4,000 rebate for cutting energy use 20% and $1,500 more for each additional 5% reduction (up to 50% of the overall cost).

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While the owners get financial rewards for participating, the incentives to the Energy Efficiency industries come in the recognizable form of business opportunity. Educating owners about the advantages, savings and temporary rebates becoming available widens the customer base of energy audit professionals, construction companies and workers, retail suppliers and materials manufacturers. Telling buyers there has never been a better time to buy and offering them substantial proof of benefits from their investments cannot help but make sales come quicker, easier and more often.

With interest rates generally low, the key incentive in the finance area is simply making money available. While financing mechanisms are still being developed, one thing should be clear to any and every bank: When an owner invests in Energy Efficiency, it is a solid investment, almost a sure thing. There will be savings from the very first energy bill that can go toward repaying the loan.

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HOME STAR’s biggest challenge could be in setting and enforcing quality standards. On the other hand, it is an opportunity to bring cutting edge building science to bear in doing so. And it is an opportunity to set training and credentialing procedures according to federal standards established through solid building science and not at the disparate regulatory whims of private interests and localities.

Creating a mechanism to establish and enforce standards would also be a means of guaranteeing the energy savings promised are delivered and of doing everything possible to banish the bane of all government programs, waste-fraud-and-abuse.

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Such a mechanism would contribute to the “professionalization” of energy auditing and retrofitting by establishing a credential for those who do the work and certifying that those who obtain the credential can perform to professional skill and ethical levels. The results would be both better work and more consumer confidence and, ultimately, more participation, less energy wasted and less money smoked.

CAP and other experts consider performance-based Energy Efficiency programs the way of the future. Building science pursues and verifies energy savings. Along the way, metrics, standards, private sector economic activity and jobs are created. Immediately and far into the future, owners save on energy bills and the world warms more slowly.

It is hard to understand what objection there could be to such a program unless the objection came from a fossil fool who feared subsidies to spewing energy industries might be shifted to fund the program.

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QUOTES
- Bracken Hendricks, Senior Fellow, CAP: “…[The] HOME STAR program represents a strategy that can drive recovery on Wall Street and Silicon Valley, and quickly put cash back in the pockets of unemployed construction workers laid off by the housing bust. Millwrights, mechanics, and assembly line workers at industrial plants across our nation will also benefit as they fabricate advanced lighting, energy efficient windows, hot water heaters, and the insulation that this work will demand.”

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- Bracken Hendricks, Senior Fellow, CAP: “…Like Cash for Clunkers, which created a government incentive but tapped an existing industry’s marketing and distribution channels, HOME STAR will provide a public incentive, and the industry itself will take the lead on marketing and educating the public on who would qualify. Improved energy efficiency is a fringe benefit of improved sales, new profits, and better prices.”

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- Bracken Hendricks, Senior Fellow, CAP: “…when January rolls around and those credit card bills start coming due, it just might be time to pick up that Sunday circular and find a local contractor to weatherize your home. You’ll save yourself money by investing smart, and you’ll be doing the right thing for the U.S. economy by putting people back to work. So it is that with a smart new HOME STAR jobs initiative, recovery begins at home.”