Saving Energy in the Home and Small Business

It used to be that energy was cheap and plentiful and our homes and businesses were built with little consideration about consumption and cost. In the past, home energy was consumed almost exclusively through heat and air conditioning, kitchen uses, and lights. Today, energy is expensive and often dirty. And our consumption habits have changed as computers, televisions, alarm systems, and phone chargers run all day and night. Our homes and businesses were built for a previous era on an outdated energy infrastructure model. But now Americans are becoming more mindful of our energy usage and they want to save money, reduce consumption, and help the environment. However, energy efficiency measures can be expensive upfront and the pay off comes much later. But efficiency can spur economic growth and the creation of jobs and businesses in this new and expanding field

THE PROBLEMS

Energy is expensive and much of it is wasted.

In 2009, the average household spent $2,160 on energy.¹ Americans consume more electricity and oil than any other country² and we are wasteful with our energy, consuming far more than we need. Since 1980 our energy consumption has steadily increased and since 2003 energy expenditures have gone through the roof.³

Many Americans think that they add to air pollution by driving their car. But in actuality, the average home causes more pollution than the average car. This is because energy used in the average home is derived by coal, oil and natural gas. The average household spends more than twice on heating and cooling than they would if they used basic energy saving techniques.⁴

People do not really know how to most effectively save energy and reduce costs. There is very little knowledge about energy efficiency and people feel like they are on their own for figuring out how to become energy efficient.

People want to save energy and money in the abstract, but there is very little knowledge about how to do it and people feel on their own to figure it out. They often view energy saving measures as expensive and complicated. According to the American Council for an Energy Efficient Economy, many people do not know how saving energy can positively affect them.⁵ Consumers are also likely to avoid purchasing something that they do not understand how it works—even if it will make a home or small business more energy efficient.⁶ There is a “knowledge gap of knowing what cost saving measures are available” in the United States.⁷

Energy efficiency costs a lot upfront and the pay-off can take a long time.

Most Americans perceive the upfront costs of energy efficient improvements to be too large and the savings too small to be worth attention.⁸ Consumers do not want to finance large purchases when they see little or no benefits for themselves. Appliances account for about 20% of a household’s energy consumption⁹ but replacing an old appliance can be expensive. One high efficiency rated appliance costs $849, more than double a comparable non-energy efficient appliance. The new model’s operation costs are one-fourth of a comparable non-energy efficient appliance but it will take more than 15 years to recover the price difference.¹⁰

Governors and states can help move the middle class towards success at saving energy in the home and the small business. Below is a list of ideas that governors can use to help homes and small businesses lower their energy bills, become more energy efficient, and in the process bring about economic growth and create job opportunities.

THE SOLUTIONS

Helping homes and businesses save energy costs and create job opportunities.

So much of energy efficiency starts at the local level, in the home or small business. But first, consumers need to know how much energy they are using, and what the available ways are to curb their energy use. We have identified 12 ideas for states to help households and small businesses find ways to save energy in their homes.

1. “On-bill financing.”

States can provide low interest loans to utility companies to help them finance moderately-sized weatherization projects for individuals and their homes. Homeowners would painlessly pay back the costs of the purchase and installation of their weatherization project through their monthly electric utility bills. The loan would be painless because the repayment would come from savings on their energy usage. And it would be successful because utility companies can keep contractors accountable and know which homeowners can be counted on to pay their monthly bills.

This would help households save energy and create job opportunities in three distinct ways: 1) it would help homeowners with the upfront costs of weatherization, which can be significant; 2) it would provide a convenient mechanism for loan repayment, since there is already an established relationship between the utility and homeowner, therefore it is inexpensive and easy to administer and only those households that are current on their monthly bills would be chosen to receive the loans; and 3) it would create and save jobs by incentivizing more homeowners to weatherize their homes.

Electric co-ops and utility companies do not have access to the money necessary to launch this program on a large scale.¹¹ By providing low interest loans to the utility and/or electric co-ops, states could help them get this program up and running quickly and at limited expense. In addition, states could also pass legislation that would require that the loan that is made stays with the property owner/tax payer or utility rate payer.

Best Practices

• Successful pilot programs have been launched by rural electric districts in several states, including Virginia, New Hampshire, Arkansas, and South Carolina. South Carolina has proposed a statewide program using “on-bill financing,” in which rural electric co-op programs would make large amounts of financing available immediately to rural homeowners to finance weatherization projects. The South Carolina project is projected to weatherize and/or retrofit 225,000 homes and create 4,618 new jobs by 2020, with 2,658 new jobs in place by the end of 2011.¹²
• Ohio passed a provision in the 2009 budget to allow home-owners to purchase solar panels through their annual property taxes. The state will pay for a percentage of the panels and charge the homeowner an additional fee each year for 25 years until the purchase is paid off.¹³
• California also passed legislation that requires utilities to pay consumers for any excess electricity produced by a home alternative energy installation, such as a solar panel.¹⁴

2. Clean Energy Business Zones (CBiZ).

Create community-based investment zones at the state-level (based on the Empowerment Zone concept) dedicated to clean energy research and manufacturing. These zones, which would use state tax incentives, could both help to jumpstart the transition to clean energy while creating new clean-tech centers of innovation and business across the country.¹⁵

Best Practices

• Washington’s Governor Gregoire has proposed the creation of a Clean Energy Business Development Program to help attract new businesses and bring jobs focused on clean energy to the state.¹⁶

3. Net-metering Tax Credit.

Provide residential and commercial building owners a state tax credit for the electricity that they send back to the grid via distributed power sources including solar and wind. The tax credit would help encourage property owners to install distributed power sources by helping them recapture their investments more quickly.

Best Practices

• Many states have passed or considered some type of net-metering legislation. The State Environmental Resource Center has kept a good record of what states have done on this issue (see: http://www.serconline.org/netmetering/stateactivity.html).
• Kansas allows people who generate their own electricity to sell back their extra power using net-metering. Net-metering makes it more cost-effective for people to purchase wind turbines and in turn create more jobs by the expansion of wind energy production.¹⁷
• Net-Metering residents who own Photovoltaic (PV) systems in New York are eligible for an income tax credit of 25% of the cost of a qualifying PV system.¹⁸

Energy efficiency financing.

4. Property Assessed Clean Energy (PACE) Bonds.

Create a loan guarantee program that backs municipalities or other entities that provide financing for residential and commercial energy efficiency improvements, with the loan paid back through a surcharge on the building’s property taxes. This stimulates homeowner investment in clean energy labor and technology by offering affordable financing and pegging loan repayment obligations to whoever owns the property at the time.

Best Practices

• The first PACE bond legislation was passed in California, with the first PACE bond issued in Berkeley, CA in 2008. Since then, the following states have passed legislation allowing PACE Bonds: Colorado, Illinois, Louisiana, Maryland, Nevada, New Mexico, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia, and Wisconsin. Arizona and New York have proposed legislation and Florida and Hawaii have existing ability to launch PACE programs.¹⁹

5. Small Business Energy Efficiency Loan Fund.

Create an independently-managed state fund to provide zero or low interest loans to small business for weatherization and other energy efficiency upgrades. This would help small businesses, which often do not have access to the capital to finance long-term improvements, pay for efficiency projects and realize the savings over a much shorter period of time.

Energy usage education and awareness.

6. Educate consumers.

State government needs to help educate consumers about how they can save energy in their homes. One way government can do this is through educating the public. Government can provide information in Public Service Announcements on TV about how to do a generic energy audit of your home. They can also place flyers/pamphlets that go in utility bills or in state income tax mailings or distribute them through the public education system.

Best Practices

• University of Berkeley in California has developed a “Cool Climate Carbon Footprint Calculator” that households and businesses can do online to find out what their complete carbon impact is on the earth, compare their results to similar users, and look at options to minimize their impact.²⁰
• New York’s Consumer Education Program for Residential Energy Efficiency is a statewide effort to educate energy consumers about residential energy efficiency. The program has been ongoing since 2003 and implemented in 44 counties throughout the state. Over 73,000 New Yorkers have attended the program’s workshops. In 2006, those who attended the presentations reduced their home energy bills by an average of $400.²¹

7. Energy usage awareness.

Local utility companies can help households be better consumers of energy by letting them know how their energy consumption compares to their neighbors’. Utility companies could include this information in their utility bills, or set up a mechanism where consumers could look the information up online, comparing their energy usage to other households in their neighborhood.

Best Practices

• Austin Utilities in Minnesota provides a free, bi-monthly Conserve and Save Home Energy Report to its consumers. This report includes information on the home’s energy use in the context of neighbor energy use, progress tracking, and ideas on energy efficiency based on the time of year and characteristics of the home.²²

8. Energy efficiency incentives.

In the same vein, the utility companies could send out a letter to consumers saying how much could be saved if you made certain energy efficient changes to your home. They could incentivize a household’s change in consumption by working with local companies and offering coupons to local retailers for a certain percentage decrease in their energy consumption over a certain period of time. In addition, states could offer coupons or similar incentives to consumers if they switch to energy efficient appliances.

Best Practices

• Governor John E. Baldacci of Maine unveiled a new benefit available to homeowners who improve the energy efficiency of their homes.²³ Called the “Maine Home Performance” program, the program will help people make improvements to their homes and access rebates up to $3,000. To qualify, homeowners must have an energy audit performed and save at least 25% in heating and hot water fuel usage.²⁴

9. Smart Meters.

Smart meters record energy use daily and help consumers understand their energy habits and the best ways for them to save. These meters are expensive though, usually costing between $200 and $500 per meter, and that does not include the cost of installation. Utility companies often pass these high costs on to consumers in their monthly bills.²⁵ To encourage the use of Smart Meters and help defray the cost to consumers, states should create a grant fund for utilities to help them purchase and install smart meters in homes and small businesses.

Best Practices

• Several state utility companies have installed smart meters. Two states that were the first to do so were California and Texas.
• California was one of the first states to start placing smart meters in homes and small businesses through the state public utility company. From 2009 to 2012 the California Public Utilities Commission planned to place 5.3 million smart electricity meters for a total cost of $1.63 billion.²⁶
• Texas was also one of the early states to start installing smart meters in homes. In 2008, Oncor decided to rollout a $690 million smart meter project for 7 million customers, one of the largest projects at the time. Oncor charged a $2.35 fee for 11 years to the customers who received them.²⁷

10. Provide funding to help consumers with energy audits.

Energy audits can be expensive, especially for families whose incomes are stretched in these economic times. State government could provide a tax break or small grant for individual home or small business energy audits. Another idea is to make the usage of energy monitors that help a consumer do an in home energy usage audit and find out how much energy they consume in their home available to “rent” in libraries, government buildings, grocery or hardware stores.

Best Practices

• Kentucky’s Governor Beshear has launched a pilot program that will provide families with an energy audit and information on energy-saving projects such as insulation of ducts and walls, replacement of energy-wasting appliances and replacement of leaky windows and doors. In addition, participating families will have their existing electricity meters replaced by Smart Meters and an in-home monitor to help them monitor their energy usage.²⁸
• Pennsylvania recently introduced a Utility Rebate Program for PPL Electric Utilities consumers who contract a home energy audit. Rebates of $250 are available to residences with permanently installed electric heat, and homeowners using other fuels can receive a $100 rebate.²⁹

Smart energy purchasing.

11. Help consumers make good purchasing decisions.

The state could team up with a major retailer (e.g. Sears) and provide a link to a website that would compare old appliances to new appliances so that consumers could make educated decisions about which appliances to replace that would be the most energy efficient. The state could also provide a Sales Tax holiday for energy efficient cars and appliances once or twice a year, and offer free parking to people who drive electric cars.

Best Practices

• Washington offered a sales tax exemption to shoppers who chose hybrids and alternative-fuel vehicles. It applied only to new cars that got at least 40 highway mpg.³⁰ In 2009, the state also proposed legislation to provide a state tax exemption for the new generation of plug-in electric vehicles.³¹
• Georgia offers a 4-day sales tax exemption each year for residential energy efficient products that meet or exceed federal Energy Star requirements.³²
• Wisconsin has a program called Focus on Energy. The program offers residents advice from professionals to make their home more energy efficient. It also provides Cash-Back-Rewards to residents who make energy saving technology and equipment purchases, such as qualified heating and cooling systems and lighting. As a result, the state has seen $268 million in annual energy cost savings.³³
• Denmark is working on a proposal to not only offer a tax break, but also to offer free parking downtown to those with electric cars. The Danish government offers a minimum $40,000 tax break on each new electric car—and free parking in downtown Copenhagen.³⁴ In big cities, free parking for electric cars would improve urban air quality, and would be a huge benefit with a real dollar value for commuters.

12. Help consumers and business owners make smart, energy efficient choices when purchasing property.

States should pass legislation that requires that information be included on the real estate disclosure forms how energy efficient a home or property zoned for business is. This would put pressure on property owners to upgrade to a more energy efficient property before putting it on the market, as well as provide the energy audit for a new home or business property to the new owner before they purchase the property.

Best Practices

1. New York’s State Energy Plan of 2009 proposed requiring business and industry to have energy audits before the sale of property.³⁵
2. Montgomery County, Maryland requires a home energy audit in conjunction with a home inspection when selling a home. The requirement went into effect in January 2009. In addition, the county requires the seller to provide the purchaser with the home’s energy bills for the 12 previous months and any energy efficiency improvements that the seller has made to the property.³⁶