A deeper discussion of deeper energy efficiency measures

 

 

Here's a good read from Nate Adams from Energy Smart Ohio, on problems associated with energy efficiency programs, single-action bias and low-hanging fruit. It comes with the above GREAT graph showing the fallacy of diminishing returns on energy efficiency measures. The red line indicates what we think happens with energy efficiency measures, with a steep improvement on the first few dollars invested that plateaus out after improvement #3, based on low hanging fruit and the oft-repeated truism that the first inch of insulation you add gets you your biggest bang for the energy saving dollar. In fact, what happens is a slow start, but ramping up multiple investments in improvments ramps up the benefits in an ongoing (and very steep curve) until it plateaus at a much deeper level of investment.

As an industry, we've kinda shot ourselves in the foot when we rely on energy efficiency programs as drivers, and improvements in the performance of equipment. Thirty, twenty, even fifteen years ago, furnace change outs could be guaranteed to result in energy savings and lower costs immediately, because we were replacing 40 to 50 percent efficient equipment with 75 to 85 percent efficient equipment, and then 85 to 95 percent efficient units. Now, there's not quite such a guarantee -- equipment is failing and needs to be replaced, what are you going to offer for guaranteed savings on an upsell besides a heat pump? And do you think that a heat pump is the silver bullet? That's another major problem -- heat pumps are not the silver bullet, but they are certainly easy to sell. Oh! Look! There's that single-action bias again.

It's hard to fledge an industry when we're still learning about building science and the impacts that new and improved 'energy saving' materials and more efficient equipment have on how a house performs, and then gathering a large number of single-focus trades together on the same page who traditionally have nothing much to do with each other's area of expertise, and don't want anyone stepping on their toes as much as they don't want to step on anyone else's toes.

Nate talks about a few fallacies and limitations, and I'll add a few more here:

The evaluation of the 'success' of EE programs drives the single-action bias that leads to short-sighted grabbing of low-hanging fruit. Most programs use a form of Total Resource Costing (TRC): all incurred costs associated with energy savings are weighed against the energy savings alone in the shortest time period. Non-energy benefits (NEBs) are disregarded: improved durability (longer tenure/tenancy, stable tax base), improved occupant health (fewer sick days, lower health insurance costs, better life...). NEBs can be identified and valued at the household and at the societal level. But it's not so easy as simply quantifying the immediate costs vs. the immediate energy savings.

The house-as-a-commodity mindset that puts all homeowners and all programs and all contractors in position where there has to be a payback on energy efficiency measures within 3-5 years because "nobody" stays in a house more than 5 years. Who asks what the payback is on a fancy whirlpool tub? What about granite countertops? There isn't one. Power prices go up and whirlpool tubs require power and if you have to save money what are you going to turn off/stop using first -- your lights or your tub? And granite doesn't hold it's value if it goes out of style and someone is going to rip out the kitchen to do a cosmetic upgrade.

The missing links as I see them: training the **whole** value chain to grock house-as-a-system, getting all of our trades to view their contribution to the house as part of a team or network of experts vs. silos of experts, eliminating Total Resource Cost (TRC) accounting that doesn't include broader non-energy benefits (NEBs) in the equation, and putting land (and consquently) houses back into the long-term asset class -- and stop thinking about the house as a commodity. It is an investment.


2 comments

  • Nice Shawna.

    I have a problem with programs telling consumers how to spend their own money. I think consumers should be arbiters of cost effectiveness just as programs should decide cost effectiveness of program investment.

    Some houses take more to fix, does that mean they should stay broken? How wasteful to get consumers interested and exploring investment in their homes only to tell them its a bad idea.

    If programs are about improving EE and housing stock, seems silly to discourage consumer investment because it doesn’t meet arbitrary and myopic views of cost effectiveness. Programs should worry about public funds and stop playing God when it comes to private investment.

    Ted Kidd
  • Thanks, Shawna! It doesn’t surprise me you like my point, we seem to be on the same page a lot.

    Why do we have such a problem as an industry seeing that comprehensive upgrades are the only way to deliver results for clients? Do just one or two things, and the odds of success are dismal.

    It is important to work together as trades. I just finished a project with a friend of mine who pays his guys piece rate in one form or another, and they have no incentive for quality. They did a decent job, but now I have a lot of touch up stuff to do. We need a better way, or as Chris Dorsi says, give your insulation guy a raise.

    The 3-5 year payback thing is a real problem. Aside from light bulbs, I don’t think anything gets there. My clients tend to be the ones that are digging in to live for a good while, ’they’ll plant me in the back yard.’ On Bill financing could help with that.

    The health side of things would be great for us all to pound on as an industry.

    Nate Adams

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