February 08, 2009
Incentives For Increasing Home Energy Efficiency

Recent US tax law changes provide incentives for increasing home energy efficiency.

Residential energy credits of 30 percent of the cost of certain improvements are available to homeowners, Ms. Weltman noted, with caps of $500 to $2,000, depending on the improvement. They include qualified expenditures on equipment for solar electric power, solar water heating, fuel cells, wind energy and geothermal heat pumps, and for their installation. More traditional energy-saving improvements, like increasing insulation to use less heating oil or natural gas, do not qualify.

Home energy efficiency differs from car energy efficiency in fundamental ways. Most notably, one gives up comfort, convenience, and utility when shifting to a smaller and more fuel efficient vehicle. By contrast, many home efficiency improvements increase comfort. Sealed gaps cut down on drafts. Multi-paned windows with argon gas fillers reduce the coldness one can feel in the winter when standing next to a window.

So if home energy efficiency improvements have such big upsides (along with payback times short enough to justify) why do so many homes lag in their energy efficiency? Why don't more government policies push for energy efficiency to the same extent that government policies push for car fuel efficiency? My guess: car manufacturing is a lot more centralized and standardized as compared to home construction. It is a lot easier for governments to focus on a couple dozen car makers than thousands of home builders and remodelers.

A similar problem is posed for individual home owners. One can't precisely estimate how much many home energy upgrades will cut heating and cooling bills. The uncertainty of the size of the benefit probably reduces home energy efficiency investments below the optimum. Even if one is buying a new appliance that is precisely rated on energy efficiency one doesn't necessarily know the energy efficiency of the older appliance that is being replaced or how much one uses that particular appliance.

Policy changes about cars can also accomplish faster changes. Houses have much longer lifecycles than cars. Changes in policies for new cars will ripple into over half the vehicle miles driven in about 6 or 7 years after the first car built to a new fuel efficiency specification rolls off the assembly line.

Housing construction regulations are also much more local both for historical and practical reasons. The ideal energy efficiency design elements for a house on a Maine hillside is different than the ideal house design for Florida, Brazil, Alaska, London, or Darwin Australia. The ideal design on that Maine hillside also differs depending on whether the house is to be built on a southward or northward facing side of the hill. The sun beating down in Arizona makes photovoltaics economics far more favorable there than in Edinburgh Scotland. Cloud cover and length of daylight varies by season and latitude. Attempts to come up with regulations to mandate higher housing efficiency might meet with success in a small flat country with consistent climate throughout. But in a larger nation building efficiency regulations are problematic at a national level.

Still, as Will Stewart points out, big energy and cost savings are to be had from better design of homes and commercial buildings.

For example, DoEs NREL monitored one passive solar house built 16 years ago, finding primary energy costs savings of 56% compared to similar houses built to the Model Energy Code; small tweaks in the design could have realized a total of 70% energy savings. It may surprise some, but this house cost no more to build than other homes in the neighborhood. With regard to commercial and government buildings, an initial upfront investment of up to $100,000 to incorporate green building features into a $5 million project would result in a savings of at least $1 million over the life of the building, assumed conservatively to be 20 years.

Still, one can take the regulatory attempts too far. Britain's net-zero requirements for energy efficiency of new buildings looks like a case of pursuing dwindling marginal returns into negative returns (though I'd be happy if someone can prove me wrong on this point).

Stepping up a level, the Passive House architectural movement (originating in Germany) has been realizing designs that save 75-90% of a buildings primary energy use. Architecture 2030, an independent research organization, understands that strides that can be made in building energy efficiency. In 2006, it initiated the 2030 Challenge, which calls for a 50% reduction in new building energy fossil fuel use by 2010, and net-zero energy use by 2030. The UK is much more aggressive with a net-zero requirement for all of its new buildings by 2016.

Also see Will Stewart's passive solar series on The Oil Drum.

Share |      Randall Parker, 2009 February 08 10:46 PM  Energy Policy

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