Houses and apartment buildings account for more than 20% of all of the energy used each year in the United States.1 Almost half of this energy goes to heating homes in the winter and cooling homes in the summer.2 Unfortunately, much of this heating and air conditioning literally goes out windows and doors, and through porous walls, wasting enormous amounts of energy and costing homeowners and renters money for nothing. By simply improving the shells of new and existing American homes– the windows, doors, and insulation – we could cut residential energy use by 10%.3 The more than 550,000 GWh of energy we would save4 is the equivalent of all the energy used in Minnesota each year5 and would reduce GHG emissions by as much as 120 megatons annually.6
Building envelopes can be responsible for up to 60% of the heat loss or gain in a residence.7 This costs households $62 billion each year and wastes more than 1 million GWh of energy.8 Fortunately, we have the weatherization technology to make homes more efficient at a relatively low cost. Insulation improvements save households $1.80 for every $1 spent,9 and high-efficiency windows can cut energy bills by up to $450.10 New construction offers the opportunity to be even more efficient; building to the standards of programs like Building America,11 LEED,12 and Energy Star13 cuts energy use by as much as 30-40% with little added cost to households.14 This has the potential to add 12-13 jobs for every $1 million spent on efficiency,15 jump-starting heartland manufacturing.
Despite a variety of federal, state, and local programs, many residential buildings remain extremely inefficient because homeowners lack clear information or access to the upfront capital needed to make improvements.16 The homebuilder market is highly fragmented17 and building code efficiency requirements vary by state,18 making energy efficient construction overly complicated. Once built, it is extremely hard for homeowners to get easy-to-understand information on how efficient or inefficient their homes are. Because it costs an average of $5,000 – $8,00019 to make building envelope improvements, even willing homebuyers often lack the upfront capital.20
To overcome obstacles preventing more efficient homes in the U.S., a combination of policies upgrading building codes, requiring energy disclosure, opening up a loan program to fund efficiency upgrades, and expanding existing government programs would make a large impact.
Create State Competition on Building Code Reform
The initial construction of a housing unit has the greatest impact on energy efficiency for the lowest investment, but homes are rarely built to exceed local building codes.21 Congress should create a program encouraging states to “race to the top” on building codes, incentivizing the program through federal block grants that could be used to supplement the Low Income Home Energy Assistance Program (LIHEAP).22 LIHEAP funding, a state administered program, helps families who are struggling to pay their monthly utility bills.23 These families could benefit from more energy-efficient housing options. DOE is also prepared to help states adopt and implement more uniform and stringent building codes through the Building Energy Codes Program.24 Raising and standardizing building codes will encourage more efficient home construction by all builders, reducing dependence on LIHEAP funding and saving families money.
Empower Homeowners through Data
Markets work best, including the house market, when buyers and sellers have more information. Increased auditing and disclosure of home energy use are necessary to incentivize efficiency in existing homes. Although some states and municipalities require energy use disclosure at sale25 and there are some voluntary disclosure programs,26 more disclosure would help homeowners assess their energy efficiency options. By requiring an energy audit or previous energy usage disclosure for all new federally insured mortgages, the Federal Housing Administration (FHA) would bolster market clarity. This would help create an accurate residential energy rating program while encouraging the market to account for energy efficiency in home prices. It would also provide the homebuyer and lender information to make an informed decision over whether an Energy Efficient Mortgage – adding the cost of efficiency upgrades to the mortgage amount27 – makes financial sense for them.
Reauthorize and Strengthen Current Efficiency Programs
DOE currently runs two programs to assist with home efficiency upgrades, the Energy Efficient Mortgage (EEM) program and the Weatherization Assistance Program (WAP). To strengthen the EEM program, FHA should integrate the program into the energy audit process recommended above. If providing this information could increase energy efficient mortgages from 1%28 to 5%, it would reduce residential energy use by 500 GWh annually.29 The WAP is currently in need of reauthorization and could be strengthened with a complementary innovation program as well as stronger national standards, as proposed in the bipartisan Weatherization Enhancement, and Local Energy Efficiency Investment and Accountability Act.30 States could increase the number for house rehabs, reduce future LIHEAP needs, gain local jobs and expand the base of support by extending the authorizations for this vital low income program, adding a competitive grant component, and incorporating national standards.
Create a Loan Program for Rural Electricity Cooperatives
Proposed in the Rural Energy Savings Act in the last two Congresses,31 a loan program, run by rural electricity co-ops could get upfront capital for efficiency improvements into the hands of homeowners without large government expenditure. Run by the Department of Agriculture, this loan program would let rural electricity co-ops loan money to customers with the least efficient houses, recouping the funds through a small monthly charge on their electricity bill.32 A program of just $500 million per year could help 1.6 million households reduce their energy use and eliminate more than 17 tons of GHG emissions permanently.33
United States, Department of Energy, Office of Energy Efficiency and Renewable Energy, “Energy Efficiency Trends in Residential and Commercial Buildings,” Report, p.12, October 2008. Accessed April 18, 2013. Available at: http://www1.eere.energy.gov/library/default.aspx?page=2.
David Austin, “Addressing Market Barriers to Energy Efficiency in Buildings,” Report, United States Congressional Budget Office, August 2012, p. 1. Accessed April 18, 2013. Available at: http://www.cbo.gov/publication/43476.
“Energy Efficiency Trends in Residential and Commercial Buildings,” p.13.
Given an increase from 1% of FHA loans to 4% of FHA loans, which are currently 4.8 million single family mortgages and a decrease in heating expense by 30%, the average household would reduce its annual energy expenditure from 106.6 million BTU to 97.7 BTU, based on data from United States, Department of Energy, Office of Energy Efficiency and Renewable Energy, “2005 Residential Delivered Energy Consumption by Intensities, by Housing Type,” Buildings Energy Data Book, Table 2.1.11. Accessed April 18, 2013. Available at: http://buildingsdatabook.eren.doe.gov/TableView.aspx?table=2.1.11.
United States, Congress, Senate, “S.1213 – Weatherization Enhancement, and Local Energy Efficiency Investment and Accountability Act,” 113th Congress, 1st Session, June 20, 2013. Accessed July 1, 2013. Available at: http://thomas.loc.gov/cgi-bin/query/z?c113:S.1213.IS:/.
Josh Freed and Jeremy Ershow, “Spurring Weatherization Investments in Rural America,” Policy Memo, Third Way, January 4, 2010. Accessed April 18, 2013. Available at: http://www.thirdway.org/publications/219.