Throughout 2013, Adding Light will take a look at practical decisions that everyone can take to contribute to making our communities more ecologically and economically resilient. Everything in this Daily Decisions comes from experience or research applied directly by our family or people we know directly.
US households spend up to $2,000 per year on utilities (about 12% of annual home expenses and 4% of average annual household income). We see this as an unavoidable cost of living, and until recently have given energy expenses only a passing glance in considering where we live. Location, schools, safety, access to transportation...these considerations have far outweighed the gas bill when selecting a place to raise a family. Starting with the natural gas price run-up in the mid 2000s, and restarting as of late with recent improvements in the housing market, energy use has begun to show some influence on the market (appraisers now have to include energy efficiency as an assessment point, home energy rating systems like HERS, and green building rating systems like LEED have shown some traction in the marketplace). In response to calls for improved energy efficiency, states, utilities, and the federal government have started initiating incentive programs to help homeowners improve energy use in their homes, perhaps save money, and improve overall energy efficiency across the country. Reaching out to individual homeowners can present a challenge, and convincing them to invest in energy efficiency can further that challenge. Recently, my wife and I put our home through one such incentive program: Energy Impact Illinois.
Energy Impact Illinois provides both analysis and incentive to improve energy efficiency in each home. The program includes a home envelope assessment (valued at $500) for $100; the assessment looks for air gaps, insulation opportunities, and other chances to minimize the heat lost by the structure. The pictures above show my house and a thermal image of my house during the test. Red or white areas note significant heat loss, while blue shows areas of good insulation. Not surprisingly, my one-hundred-plus-year-old house lights up like stoplight, showing major opportunity for improvement. In addition to the exterior, the assessor looks at the interior of the house to find areas where cool air might be leaking into the structure. The picture below shows how poorly constructed an addition to the house was. The blue or black areas show locations with the most impact. After the assessment, the specialists analyze the information, create a model, and project which envelope improvement opportunities will result in the greatest reduction in heat loss, and therefore, the greatest savings to us.
The report on our home included three major improvements:
1. Place significant insulation into the upper roof/flat attic above our third floor.
2. Create new, highly insulated wall structures in our attic.
3. Provide an insulated cover for our whole-house exhaust fan.
Although other opportunities exist, these three will provide the bulk of the energy savings and any additional work will result in less energy savings for the cost of installation. For the three items above, it would normally cost us $5,400 if we were to contract for the work ourselves. The Energy Impact Illinois program includes a $1,750 direct rebate if the work will result in greater than fifteen-percent savings in heating energy to the homeowner. The combination of items above results in a forty-percent savings, easily meeting the program goals. The rebate reduces our cost to about $3,650. (Note that the rebate does not require us to submit any additional paperwork as it is paid directly from EII to the contractor.) With an annual heating bill of about $1,400, our savings of $650 per year means we will earn back our investment in about five and one-half years. With savings and certificate of deposit rates where they are, that investment on the surface makes financial sense. In addition to the direct savings, EII will supply me with a certificate that I have gone through the program, and can list the assessment and reduction on any future listings if I sell the house. Lastly, my grandfather always said that the value in a home is not in the investment, but the value it gives you in supporting your life. The improvements will reduce drafts and create a home that has greater comfort.
We will not know the actual results of the program until we go through another heating season, so I will update you all then. One thing I do know is that not everyone has $1,000 to $5,000 lying around looking for a place to invest. The rebate program is a great idea, but it ends this May, and even if it were to continue, there are several other support mechanisms needed to make any ongoing program viable.
1. On-bill financing: utilities have a great opportunity to buy large amounts of energy efficiency and use the funding streams to support a gradual changing of their business model (see here). If a homeowner can pay for the improvements directly out of their energy savings, and those payments can stay with the residence instead of the homeowner, that gives people both the opportunity and the incentive to get the work done.
2. PACE: Property assessed clean energy has recently entered the marketplace, and although it focuses mostly on new energy installations, it has a place in efficiency as well. It works similarly to on-bill financing, except that a local taxing district arranges for the financing, and the homeowner pays an additional assessment on their property taxes for a period of time to pay off the investment. On-bill financing has the cost and savings in the same statement, so this does not have a similar ease, but it has the same effect of shifting costs from one line of a homeowner's budget to another without significant change to the overall expenses.
3. Local micro-loans: Local banks already excel at auto, medical, and specialty loans. A person with good credit can pay off a new car in four-to-five years. Although rates and availability would increase for loans directly to a homeowner as opposed to the first two options, these have the added benefit of keeping capital in the community. A bank would look at the loan as a specialized home-equity loan, backed by the increased value of the house and the verified energy savings (making the use of certified assessors critical), with a term to match the level of energy savings.
Any of these three would help struggling homeowners, who may not be able to come up with capital, still create significant energy reduction in their home. With local assessors and contractors (and perhaps even local financing), homeowners can turn this reduction not only into significant savings for themselves, but into a community development opportunity for the neighborhood.
And they get to keep their home a little more warm and toasty in the winter.
Win-win-win.
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