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Valuing Home Performance

The Value of Home Performance

There’s a study out recently that’s causing a stir in the energy efficiency world. Researchers found that a Michigan program for weatherizing low-income households funded by the federal Weatherization Assistance Program wasn’t achieving the energy savings it had promised, and that because of this program wasn’t a cost effective use of funds. The report then goes further, suggesting that residential energy efficiency upgrades overall just might not be worth the cost. It’s a report that has some valuable data, but unfortunately that data gets obscured by key mistakes in the study’s methodology and its wrong conclusions.

Across the country, more and more customers are buying building performance because projects designed based on sound building science -- and installed by trained technicians -- help solve problems in the house and provide customers with a great deal of value. Even so, it’s worth taking a look at the recent Michigan study to assess its accuracy and see what we can learn from the data.

Where the report gets it wrong

There are a lot of problems with the way the study analyzed program cost effectiveness and the conclusions it drew. Since the paper came out, industry groups like the Michigan Energy Efficiency Contractors Association have spoken out, and various researchers and energy efficiency industry experts have written helpful critiques. Here are some of them:

  • Marty Kushler at ACEEE makes the point that WAP-funded low income programs serve a variety of different functions and aren’t meant to be cost effective based on energy savings alone. WAP (and energy efficiency investments in general) are not primarily meant to be a “means to fight climate change,” as the report claims. Instead, the benefit of lower emissions is “just a bit of frosting on the benefits cake.”

  • Rebecca Stanfield from NRDC cautions against over-generalizing the conclusions. For example, most of the public investment in energy efficiency (through utility and government programs) is leveraged against lots of private investment by customers themselves. In many cases, ratepayer and/or taxpayer dollars incentives account for only a small percentage of project costs. Where cost effectiveness for WAP includes a variety of different benefits, utilities often require that energy efficiency programs justify their costs strictly by accounting for their energy-related benefits.

  • Merrian Borgeson, also from NRDC, walks through some specifics on the report’s faulty cost-effectiveness calculations. For example, the report itself says that projects included about $1,000 of non-energy improvements related to health and safety, yet those costs are factored into the report’s cost effectiveness calculations -- without accounting for the benefits they provide. Also, Borgeson outlines issues with the way the report calculates costs for things like furnace replacements.

  • Our friends at the Home Performance Coalition highlighted the need for appropriate cost effectiveness tests that are symmetrical (if a cost is included, it’s benefits also need to be valued). You can learn more about best practices for measuring cost effectiveness here.

  • Brent Stephens of the Illinois Institute of Technology states that “the authors don’t appear to have factored in any increases in future energy prices, neither for electricity or gas.”

  • Matt Golden writes on the Environmental Defense Fund blog: “Even if real costs are higher than previously thought, efficiency provides a critical and immediate opportunity for large-scale emissions reductions that are cost-effective compared to other options.”

  • Martin Holiday at Green Building Advisor outlines many of these critiques and surfaces some additional issues about how the study calculated savings.

The messaging around the study has also been confusing. While one of the authors said “I would not feel comfortable generalizing from our study in Michigan,” the paper’s summary itself makes some pretty sweeping generalizations. For those interested, the paper’s authors have posted a response to some of the critiques here.

Put all of these and other concerns together and here’s what you get:

  1. The benefits provided by the Michigan WAP program (energy-related and other) may indeed have outweighed the costs; and

  2. Many other kinds of residential energy efficiency policies and programs are even more cost effective than the Michigan program that was studied.

That said, though, there’s also useful data to be gleaned from the study.

WAP-funded programs, and most programs in general, can improve on implementation.
We can use best practices to reduce marketing/engagement costs, streamline processes that stall a project between the energy audit and retrofit stages, and better train install workers to ensure they are using the right building techniques.

Measuring energy savings -- we can do better!
We need to do better overall at predicting and measuring how much savings result from large groups of projects.

Why does this matter? After all, we know that energy savings can vary quite a bit depending on the customer, so it can be really hard and cumbersome to give a customer accurate savings predictions. Also, lots of actual customers are happy just getting a general idea about the savings they’ll achieve. Many if not most (non-low income) customers get a whole-house retrofit to improve their comfort and reduce health and safety issues -- not only because of energy and cost savings. The value that customers get out of a home performance project is often much greater than the numbers that programs and regulatory entities derive.

So, why is it important to improve the way we measure and predict energy savings? Accurate data will allow us to constantly refine and improve what we know about building science, helping companies do better and better for their customers.

Improved data will also help us better quantify the value that home performance work provides to stakeholders other than the individual customer: procurement of energy savings for utilities, pollution reduction, public health benefits and so on. Currently most energy efficiency programs attempt to quantify their savings at least every program cycle. But those savings numbers often don’t come with enough certainty or confidence (or speed) to attract the kind of private investment that will help our industry scale. Also, because many programs don’t know if the savings will be there until after their evaluations are done, energy efficiency programs often come saddled with lots of onerous rules and regulations on companies just to mitigate the risk of the savings not showing up. With better data, policies and programs can focus on measuring and paying for their goals without controlling everything about the way those goals are achieved -- better enabling innovation and industry scale. Data could unlock a world of opportunity, giving us an even better return on the dollars we invest in energy efficiency. Golden makes the case: “The important question here is not whether public investment in efficiency is a good value, but rather, how do we maximize our efficiency returns?”

Industry-driven progress

All of this is why the building performance industry itself has led the drive for better, more accurate ways to measure savings and pay for the public benefits that home performance provides.

On the West Coast, Efficiency First California pushed the state to adopt CALTRACK, which compares savings predictions to post-project measured results and uses that data to better calibrate future predictions. Also, Efficiency First California is supporting proposals by NRDC for a pilot program that would pay industry for measured savings seen in large groups of projects. On the other side of the country, Efficiency First New York has developed proposals for testing out metered savings approaches, so ratepayer dollars would only be spent on actual savings generated.

This kind of work is going on at the national level too. EE industry leaders have come together in recent years to develop standards for calibrating savings projections to a customer’ previous utility bill data (BPI-2400). A recent study in NY by Performance Systems Development found that this calibration makes leads to much greater accuracy in predictions. Now there's also an organized effort to set standards for calculating actual metered savings information.

Residential energy efficiency projects deliver an incredible amount of value to different stakeholders, in different ways. With the right systems in place, public investment can leverage private sector dollars even better to bring great returns.




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