Closing the Energy-efficiency Deal

Everybody is talking about energy efficiency these days. You’ve certainly heard homes that have completed energy-efficiency retrofits are enjoying fewer drafts, consistent temperatures across rooms, better ventilation and humidity control, and lower utility bills.

How can you make energy-efficiency improvements part of your portfolio? Better yet, after you recommend energy-efficiency improvements to a homeowner, how do you ensure he or she contracts you to complete the work? To be successful in the energy-efficiency remodeling marketplace, remodelers must align themselves with an energy auditor and then research and apply for all the incentives available for a project. The more the team can reduce a homeowner’s costs, the more likely the remodeler will get the work.

The Incentives

In today’s marketplace, it is important to stand out from the crowd and reach new customers and markets. For example, my firm offers certification of existing homes to the U.S. Environmental Protection Agency’s Home Performance with Energy Star (HPwES) program. HPwES is a performance standard that provides a whole-house approach to improving energy efficiency and comfort while helping to protect the environment.

To meet the HPwES standard and to receive many incentives available for energy-efficiency retrofits, you must have a relationship with an energy auditor who has been certified by the Building Performance Institute (BPI) or Residential Energy Services Network (RESNET). You also should have relationships with a Combustion Appliance Zone tester and certified Level I thermographer in accordance with the American Society of Non-Destructive Testing standards. There are a number of firms in the current market that have staff meeting all of these certifications. My firm prefers to use third-party rater partners to avoid any possible conflicts of interest.

Auditors use tools and software to perform two whole-house energy audits—one before energy-efficiency improvements are made and one after. After the first audit, a report provides a list of recommendations, including cost, energy savings and return-on-investment calculations, that will increase the house’s energy efficiency.

Once the recommendations are made, it is time to locate the incentives that can reduce the cost of the project. Being able to offer additional value to your customers to offset project costs while reducing operational costs is another way to differentiate your business from your competitors. The following Web sites should be part of your incentive-locating process:

Once you have determined all the possible rebates for your location, you should list them in a master spreadsheet to determine the rebates for your specific project.

The Example Project

An energy-efficiency retrofit typically includes one or more of the following upgrades:

  • Air sealing
  • Additional insulation
  • HVAC upgrades
  • Domestic-hot-water upgrades
  • Addition of renewable-energy systems
  • Additions to the existing home, including new windows, doors, etc.

My team recently performed the energy audits for an HPwES project in Iowa. The project leveraged all the incentives available for the client. In fact, the incentives cut the project cost by half, and the improvements cut the home’s energy use by 68 percent.

The home was built in 1909 and had several standard upgrades through the years. Most recently, the homeowners had replaced windows and upgraded the mechanical system to central forced-air HVAC. When my team arrived, the home still had an old, standing hot-water tank and 10-year-old appliances.

The project’s blower-door test and thermal imaging showed a HERS Index of 196. A home that meets code has a HERS Index of 100. For every point above 100, the home is that many percentage points less efficient than the same home built to code. This particular home was 96 percent less efficient than its code-built counterpart.

During the energy audit, the team noted a number of issues with the building’s air seal. The home also lacked insulation in a number of spots. The REM/Rate model, which calculates heating, cooling, hot water, lighting and appliance energy loads, as well as consumption and costs, allowed the team to model the building as it tested and try out upgrades, such as increasing the air seal and insulation and replacing the hot-water tank, mechanicals and appliances. The resulting model showed that we could save the client 50 percent plus on the home’s utility costs.

The team then put together a scope of work for the project and had three local contractors bid the work by line item. Each one of the bids was then compared to the other in a spreadsheet format to ensure all the contractors bid the scope-of-work document. Contractors that bid the scope of work were all within a few dollars of each other.

To receive some incentives or certifications, such as HPwES, a contractor must be BPI or RESNET certified. (Visit BPI.org and RESNET.us for more information.) In addition, some utilities require contractors to complete their trade ally training before they can file for project incentives.

Incentives and Decisions

The next step was to compare on our spreadsheet the scope of work against the utility, local, state and federal incentives we had located. We listed them as cash, tax credits or reductions in utility rates. We also listed the required paperwork for each program.

For example, for the Iowa project, we located the following utility incentives:

  • Wall insulation: 70 percent of total cost up to $750. This incentive would cover $750 of the estimated $1,800 cost of “drill and fill” insulation.
  • Appliances: $50 for a new Energy Star refrigerator, $20 for a new Energy Star dishwasher, $50 for recycling the old refrigerator
  • HVAC: $250 for new 92 percent annual fuel utilization efficiency furnace
  • Water heater: $75 for new 0.64 energy factor water heater
  • Home sealing: 70 percent of cost up to $200

Total Incentives: $1,395

We then consulted with the client about the costs and offsets we had assembled. We learned the client was planning to borrow money from the bank for the upgrades. Many banks participate in energy-efficiency loan programs and work with utilities on funding efficiency improvements, so we recommended the homeowner ask the bank whether it participates. It happened to participate in the HPwES loan program, which saved the homeowner money on points and reduced interest rates. To receive funding, the bank required the results of the second energy audit and a report ensuring the energy-efficiency improvements were done properly.

The resulting HPwES-labeled home has enabled the homeowner to drastically cut his energy bills. In addition, the project created referrals for my team and shaped a new relationship between my firm and the remodeling contractor that continues to bring both of us new business in a tough marketplace.

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