So when Elias, a former teacher, principal and school administrator who now represents Grand Rapids’ Third Ward on the City Commission, heard about a new program offering subsidized home energy assessments, he and Ruth decided to sign up. Home energy use normally isn’t something people pay attention to—“you’ve got bigger fish to fry,” he says. “But at that point in time, I was looking to see how we could lower some of those utility bills and use that money for something else.”
The energy audit turned up a number of problems, from an inefficient furnace and air conditioner to mold from the dampness. So with help from a $1475 utility rebate and a low cost loan from a part of the program called MichiganSaves, the Lumpkins replaced light bulbs, had the mold removed, and new high efficiency HVAC equipment and water heater, and attic and basement insulation, installed. “It was much more than we wanted to spend, but I think it was worth it,” says Elias. The Lumpkins’ energy use and utility bills are down 23 percent, saving them more than $640 per year, and the drafts and high humidity are gone. “It’s been phenomenal,” says Ruth, a community activist and Grand Rapids Public Library Commissioner. Their total out-of-pocket cost was $15,042.53, but more than a third of that was for the mold remediation, so that they will recoup their energy efficiency investment in 12 years or less—and have the 23 percent energy savings far into the future.
Multiply the Lumpkins’ story by 90 million—the number of existing single-family homes in the U.S. Then make similar improvements in another 30 million multi-family dwellings and commercial buildings. It all adds up to an enormous opportunity to cut energy use and greenhouse gas emissions in America’s homes, offices, stores and other buildings.
In fact, 40 percent of all the U.S.’ energy—and 76 percent of all our electricity—is now used to keep our lights and TVs on, our appliances and equipment humming, and our temperatures comfortable. And study after study, such a landmark 2007 roadmap from McKinsey to slashing greenhouse gas emissions, has concluded that major reductions are both possible and profitable. Deutsche Bank figures, for example, that $279 billion spent on retrofitting buildings would bring $1 trillion in savings over 10 years—and create 3.3 million job-years (The Rockefeller Foundation, 2012). The Department of Energy’s Quadrennial Technology Review says that “by 2030, building energy use could be cut more than 20 percent using technologies known to be cost effective today and by more than 35 percent if research goals are met.1”
Moreover, energy efficiency is often a cheaper energy ‘source’ than wind or solar, since every watt saved means one less watt that must be generated.
But the existence of this huge opportunity raises a troubling question. If billions and billions of dollars of saved energy costs are lying on the table for the taking, why have we largely failed to grab that money? America has retrofitted less than 3 percent of its homes and commercial buildings. And more than two-thirds of the new HVAC systems we buy today are far less efficient than equipment already on the market, which would pay back its higher cost in savings in just a few years. In short, why are we still wasting so much energy—and money?
There are many answers. Building owners often don’t know or don’t much care what their monthly bills are—or have other higher priorities. Landlords have little incentive to cut energy use when tenants pay the bills. Regulators typically allow utilities to get paid only for selling more electricity, not less. And the task itself—upgrading more than 100 million buildings one by one—is enormous and daunting.
So when Michigan launched the effort that would bring energy savings to the Lumpkins and 11,000 other homeowners in the state, one key goal was learning how to surmount the many barriers. “The whole point was to not just deliver a program, but to study what works,” says Jacob Corvidae, former executive director of Detroit-based EcoWorks, which participated in the effort.
The story begins in 2008 when Michigan passed its Clean, Renewable and Efficient Energy Act2. The law required utilities to encourage consumers to cut energy use, and led to a small surcharge on energy bills to pay for incentives. Meanwhile, recognizing that coming up with the cash to pay for home upgrades is a challenge for most homeowners, the Michigan Public Service Commission asked a policy research firm in Grand Rapids to devise a good financing model. They proposed getting banks to provide a fund—which ended up totaling $43 million—for low cost loans by holding a modest reserve to cover defaults.
The third piece of the puzzle was a $30 million grant from the U.S. Department of Energy’s Better Buildings Neighborhood Program to launch a BetterBuildings for Michigan effort3. The idea: go out into dozens of neighborhoods throughout the state to figure out how to persuade people to sign up first for a $99 energy assessment, and then for the improvements the assessment identified.
It wasn’t easy. “We had some theories. Some turned out well, and some failed miserably,” recalls Corvidae.
For instance, the team thought homeowners would respond to a slick brochure and a door-to-door campaign that carefully described how energy assessors used a blower door test to find air leaks, and how simple improvements could save them big bucks. Wrong. “People had no idea what we were talking about,” says Selma Tucker, director of marketing and communications for MichiganSaves. “At best, they were skeptical, and at worst hostile.”
Plus, it was quickly clear that energy efficiency offered little social cachet. “Investing in efficiency has to compete with granite countertops and other traditional improvements,” Tucker explains. “I’ve never gone to a dinner party where the hosts show off their R-49 insulation or new furnace—but they are giddy to show off their remodeled kitchen.”
So the program changed its approach. Instead of talking about air leaks and lower utility bills, they focused on comfort, health and safety. Does the house have drafts? Cold floors? Rooms that were freezing without running a space heater—which could be dangerous? “That was a much better message than a blower door test,” Tucker says.
But that still wasn’t enough. The program burned through a lot of cash trying to go door-to-door and using direct mail to reach people in specific neighborhoods. That didn’t work either. People don’t want to be bothered after they get home from work, Tucker says, and “if you do mail, you are competing with the Macy’s catalog and the other things people are bombarded with.”
Then, the team had an “epiphany,” says Tucker. Rather than trying to reach people in a geographical neighborhood, the program should target communities such as members of a church or university, or employees of a company. And it should enlist trusted leaders, such as ministers, professors or company officials, to spread the world. “The messenger really matters,” says Tucker, who led the effort in the Grand Rapids area.
At Grand Valley State University, for instance, Tucker offered free home energy audits to about a dozen campus leaders in exchange for pictures and testimonials that were put on postcards and sent to all faculty and staff through intercampus mail.
That worked. BetterBuildings for Michigan signed up 215 people (nearly 10 percent of all university employees) for the $99 audit, which included installing more efficient lightbulbs and low-flow showerheads. Perhaps even more impressive, 60 percent made additional upgrades suggested by the audit. That’s an astonishingly high rate compared to a national average of only about 5-10 percent of people following up on the audit. In the U.S. in general, “we’re still struggling to get people to move beyond the energy audit phase to do additional work—and then not just change one appliance or two, but to do the whole house insulation and upgrade,” says Rachel Cluett, Senior Research Analyst at the American Council for an Energy-Efficient Economy4.
Another key lesson from the BetterBuildings for Michigan program is just how easy—and cheap—it is to make major reductions in energy use. In Detroit, few people could afford a $6000 retrofit, even with low cost loans and utility rebates, says Corvidae. So the program offered a pared down energy audit that focused on low cost improvements, such as sealing leaks spotted by the blower door test. “Air sealing is the fastest, cheapest way to cut energy bills in homes,” says Corvidae. “We got, on average, a 15 percent energy reduction, and as much as 40 percent.”
BetterBuildings for Michigan, of course, has been only one of many successful home efficiency efforts in the U.S. Standouts identified by the ACEEE include5:
- National Grid’s EnergyWise program in Rhode Island, which does an energy audit for free, then pays for 75 percent of insulation costs up to $2,000 and up to $750 worth of free air sealing for homes.
- Columbus Gas of Ohio’s Home Performance Solutions program, which offers a $50 energy audit and discounts on insulation and other work.
- Xcel Energy’s Home Energy Squad in Minnesota, where a $70 trip to a house pays for suite of energy-saving items, such as compact fluorescent light bulbs, programmable thermostats, and weather stripping, that are installed for free.
What all these home retrofit success stories have in common, though, is that they are driven by utilities and government programs, not solely by market forces. As a result, they depend on continued support, and can only reach a small minority of building owners. The BetterBuildings for Michigan outreach effort ended when the DOE grant ended, for instance, though the low cost loans and utility rebates are still available.
Moreover, existing market forces are often counterproductive. Contractors can make a lot more money persuading people to install new windows than to seal air leaks, for instance, but for homeowners—and the nation as a whole—plugging those leaks is a far better deal.
So the conundrum remains. A huge opportunity to save money and energy is lying on the table. But we’re only taking advantage of a tiny fraction of that chance. How can we do better?
When Georgetown University’s Francis Stakey posed that question to a meeting of mayors he’d organized, “the mayors told us the best way to stimulate more energy efficiency was to hold a competition.” So the university created the Georgetown University Energy Prize, which will award $5 million to one community in the U.S., selected from 50 finalists in 26 states, that comes up with the most innovative—and successful—ways to boost energy efficiency6.
Similarly, MichiganSaves’ Tucker argues that the biggest challenge on the communications side is making energy efficiency sexy—which might be done by offering awards to homeowners who save the most energy. “No one will probably ever invite me to see their new insulation, but they might feel as proud of an award or plaque in their house as they do about the Cadillac Escalade parked in front,” Tucker says. “That’s when we can get the most amount of change.”