One of the more intriguing questions surrounding the stimulus package is the extent to which the dramatic increase in funding for weatherization ($5 billion) will lead to a sharp rise in number of contractors skilled in energy efficiency retrofits. For states such as Illinois, which have not invested heavily in energy efficiency programs historically, and consequently have a very limited base of contractors knowledgeable in energy efficiency basics, the outcome matters a great deal.
Without question, the contractor issue has been one of the thorniest challenges we have faced in our attempts to catalyze the market for energy efficiency. Our programs have demonstrated that banks and other financial intermediaries can stimulate homeowner interest in energy efficiency by coupling information and capital together. However, these efforts may have minimal impact on energy usage without a corresponding effort to organize, train, and certify the contractor community. We simply have no way to guarantee that the work will be done correctly or produce the projected energy savings.
Indeed, anecdotal evidence suggests that the likelihood of achieving the savings may be quite small without substantial training and quality control measures being put in place. One example comes from the Executive Director of the Midwest Energy Efficiency Alliance, who recently installed a high efficiency furnace in her home. Despite the 94% efficiency rating on the furnace, it took the contractor several attempts and lots of re-working to push the performance up from the low level initially seen. Only because this particular contractor tested the system’s performance and understood how to rectify the situation, the furnace performs at its rated level.
There does appear to be some reason for optimism, however. ComEd, our local electrical utility company, has had notable success in its efforts to engage the contractor community around commercial lighting retrofits. We believe that with a determined focus and the necessary resources behind it, a similar program could prove equally effective for the residential marketplace.
The City of Chicago recently released its comprehensive and innovative Chicago Climate Action Plan. Chicago now has a very good baseline of existing emissions and a blueprint for its goals of reducing Chicago’s greenhouse gas emissions to 80% of 1990 levels by 2050. Thanks to the leadership of Mayor Daley and tremendous efforts by the City’s Department of Environment, the Center for Neighborhood Technology, and others, such as ShoreBank Corporation board member and former head of the MacArthur Foundation, Adele Simmons, the City now has a clear understanding of what it will take to achieve its ambitious goals.
The steps required to meet the goals are staggering. For instance, the plan calls for retrofitting 400,000 units of housing by 2020. Currently, approximately only 6,000 residences are weatherized annually. This figure should rise substantially given the programs authorized in President Obama’s stimulus package. Even so, the ramp up is considerable.
Interestingly, while the plan offers a great deal of detail on many facets, nowhere does it quantify the expected costs and capital needs for meeting the objectives. Indeed, the capital needs are likely significant. While the exact figures are difficult to calculate since each building will have a different level of capital investment, assuming $7,000 per unit of housing (the estimate used for weatherization costs in the stimulus bill), the housing portion comes to $2.8 billion, and this doesn’t even include the additional costs of more expensive items, such as windows, let alone, higher cost technologies, including geothermal, solar thermal or photovoltaic systems. More likely, given the costs of these items, the capital needs, just for the housing portion (and not including the costs to retrofit the 23,000 commercial buildings), exceeds $4-5 billion.
Such a level of investment would be a huge boost to the region’s economy – indeed, the spending on these retrofits is likely to create tens of thousands of good paying jobs directly, and indirectly support many times that number in the manufacturing, retail and ancillary industries. All told, the investment could support nearly 500,000 jobs regionally. And considering the highest unemployment in 25 years, the dividend on the investment will be an enormous one.
We have seen firsthand how these types of investments impact individuals, families and communities. From the drillers being hired by a geothermal company such as Indie Energy, to the energy raters and installers, active in our Homeowners’ Energy Conservation Loan program, we know that every dollar makes a huge difference reducing energy costs, creating jobs, and protecting the planet, whether its in Chicago, or in any other densely built area of the nation.
To learn more about the Chicago Climate Action Plan’s environmental impact, check out my colleague Karen’s earlier post here.
Better keep those energy drinks close by, ‘cause we’re going to need ‘em
With record amounts of funding for energy efficiency and alternative energy likely to be included in the federal stimulus package, the practical implications of all of this money are beginning to set in. Indeed, at the recent Midwest Energy Solutions conference, sponsored by the Midwest Energy Efficiency Alliance, discussion of the impending federal funding appeared to spark both euphoria and panic among industry professionals.
Clearly, the volume of spending will lead to a lot of new green collar jobs – the requisite number of knowledgeable contractors, program administrators, architects, and financiers simply doesn’t exist. The amount of spending under discussion is many times (some say upwards of 30 times) the level currently deployed annually. To put this in perspective, according to Sheree Dallas Branch, program manager with Wisconsin’s Department of Administration, approximately 100,000 homes are weatherized annually under existing DOE programs – and 10% of those are in Wisconsin alone. The President’s plan calls for 2,000,000 homes to be weatherized. For the mathematically challenged, that’s a very large increase.
I believe the funding offers an even more compelling opportunity. Because most energy efficiency programs are tied to utility sponsored initiatives, evaluation centers almost exclusively on “cost effectiveness.” This analysis looks at the costs to save the kWh or therm as compared to the cost to produce or procure them. The analysis completely ignores other benefits, such as employment, social equity, carbon savings, or reductions in other harmful emissions. The analysis also is completely detached from metrics the public cares most about – ones focusing on how individual households or communities are better off. It is no wonder we have such trouble engaging public support for energy efficiency programs.
In contrast, the stimulus package, as the name implies, is focused on stimulus – economic output and job creation. These are metrics that the public cares deeply about. It is my sincere hope that the federal funding not only catalyzes the industry and marketplace, but even more fundamentally, alters the way we evaluate energy efficiency programs and how we communicate their benefits to the wider world.
Although it’s terribly cliché to do so, given that change in the air and the fact that uncertainty clouds any economic prognostication, I will take this opportunity to offer a few predictions for 2009. I must admit, however, that as a Cubs fan, my DNA is programmed for eternal optimism:
1. The acronym PPA (Power Purchase Agreement) will become common parlance throughout the country, not just on the coasts. With President-elect Obama pronouncing the doubling of alternate energy a central goal of his administration and financing for any project still difficult to obtain under nearly any circumstance, specialty financial vehicles such as the PPA will be the preferred mechanism for getting solar projects off the ground. 2. Within the green building industry, interest in existing buildings will take precedence over the previous focus on new construction. As new projects have trouble getting off the ground, more attention will be paid to making our existing homes, offices and community facilities more efficient and environmentally sound.
3. This focus on existing buildings will lead to a fundamental shift in how we evaluate “green” buildings. We will no longer look to LEED Platinum as the preeminent standard, but instead to specific gains in energy and water efficiency. We can only hope that in 2009, when homeowners are asked about their HERS rating, there will no longer will be that awkwardness reminiscent of high school days gone by.
4. Because overall construction levels will fall significantly, green building’s share of total construction activity will exceed 10% – the level projected by many to be reached in 2010.
5. Interest in energy/water efficiency and sustainable practices may finally catch on with the general public, altering even kitchen and bath remodeling decisions.
6. The US will finally come to grips with its most pressing construction problem – the fact that construction practices are evaluated almost entirely on completion metrics (“on-time” and “on-budget”) and only rarely on performance metrics. Indeed, by far the most common concern raised by small contactors about green practices is not their lack of “expertise” in this area. It is the fact that their work is evaluated against design, product and performance specifications. Until we realize that we have never truly evaluated the performance of most contractors, we will not see significant reductions in energy consumption, nor I believe, come up with a pragmatic mechanism for promoting green collar job opportunities for smaller, under-capitalized firms that must now “guarantee” performance over the long term.
Chicago got hit with its first snowfall and the forecast calling for rough sledding ahead for the nation’s economy means homeowners will consume more energy at a time when they can least afford to.
Don’t put a ‘bah’ in your ‘humbug this winter. Invest in a solution that has the potential to create good paying jobs and to reduce energy costs by up to 45 percent—making energy-efficient improvements to your homes and offices. This is ShoreBank’s mission because it makes good economic sense—costs are rapidly recouped by the energy-savings whole adding value and comfort to the home—it reduces greenhouse gas emissions which is good for the environment.
On occasion, we want to tell you about our customers who share our values and believe in our mission whose own work is inspiring others. We are very excited that Van Jones, the founder and president of Green for All and a fellow with the Center for American Progress is a high yield savings account customer. In 2007, Van worked closely with U.S. House of Representatives Speaker Nancy Pelosi (D-CA), U.S. Rep. Hilda Solis (D-CA), U.S. Rep. John Tierney (D-Mass.) to pass the Green Jobs Act of 2007, authorizing $125 million to re-train 35,000 people in how to build new green design homes, thereby creating new “green-collar jobs that will be around in the days ahead. Other green jobs include adding insulation and double-paned, low-e windows to increase energy efficiency, and attaching solar panels to homes to reduce electric bills.
It is exciting time because the new administration has sent strong signals that it is committed to an alternative energy strategy that significantly reduces our dependence on foreign oil and safeguards the environment while it helps to put people to work.
As these issues continues to heat up, we encourage you to actively engage in the discussion and check out what Van has to say:
ShoreBank and Van’s organization, Green For All, understand environmental sustainability is essential to the present and long-term health and well-being of our economy and our communities
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One of the more intriguing questions surrounding the stimulus package is the extent to which the dramatic increase in funding for weatherization ($5 billion) will lead to a sharp rise in number of contractors skilled in energy efficiency retrofits. For states such as Illinois, which have not invested heavily in energy efficiency programs historically, and consequently have a very limited base of contractors knowledgeable in energy efficiency basics, the outcome matters a great deal.
Indeed, anecdotal evidence suggests that the likelihood of achieving the savings may be quite small without substantial training and quality control measures being put in place. One example comes from the Executive Director of the Midwest Energy Efficiency Alliance, who recently installed a high efficiency furnace in her home. Despite the 94% efficiency rating on the furnace, it took the contractor several attempts and lots of re-working to push the performance up from the low level initially seen. Only because this particular contractor tested the system’s performance and understood how to rectify the situation, the furnace performs at its rated level.
Interestingly, while the plan offers a great deal of detail on many facets, nowhere does it quantify the expected costs and capital needs for meeting the objectives. Indeed, the capital needs are likely significant. While the exact figures are difficult to calculate since each building will have a different level of capital investment, assuming $7,000 per unit of housing (the estimate used for weatherization costs in the stimulus bill), the housing portion comes to $2.8 billion, and this doesn’t even include the additional costs of more expensive items, such as windows, let alone, higher cost technologies, including geothermal, solar thermal or photovoltaic systems. More likely, given the costs of these items, the capital needs, just for the housing portion (and not including the costs to retrofit the 23,000 commercial buildings), exceeds $4-5 billion.
