[Senate Hearing 111-422]
[From the U.S. Government Publishing Office]
S. Hrg. 111-422
ENERGY EFFICIENT BUILDING RETROFITS
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
TO
REVIEW LEGISLATIVE PROPOSALS DESIGNED TO CREATE JOBS RELATED TO ENERGY
EFFICIENCY, INCLUDING A MAJORITY STAFF DRAFT ON ENERGY EFFICIENT
BUILDING RETROFITS
__________
MARCH 11, 2010
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
DeBoer, Jeffrey D., President and Chief Executive Officer, The
Real Estate Roundtable......................................... 40
Epperson, Stacey, Executive Director, Frontier Housing, Morehead,
KY............................................................. 47
Giudice, Philip, Commissioner, Massachusetts Department of Energy
Resources, and Chair, National Association of State Energy
Officials, Boston, MA.......................................... 51
Hanbury, Bob, President, House of Hanbury, and Board Member,
National Association of Home Builders, Newington, CT........... 60
Laseter, Larry, President of WellHome, on Behalf of the Home Star
Coalition, Atlanta, GA......................................... 32
Merkley, Hon. Jeff, U.S. Senator From Oregon..................... 6
Mierzwa, Terrence J., Executive Manager of Marketing, Energy
Efficiency, and Research, Consumers Energy Company, Jackson, MI 56
Parfomak, Paul W., Ph.D., Specialist, Energy and Infrastructure
Policy, Congressional Research Service......................... 7
Warner, Hon. Mark, U.S. Senator From Virginia.................... 3
Zoi, Cathy, Assistant Secretary, Energy Efficiency and Renewable
Energy, Department of Energy................................... 13
APPENDIXES
Appendix I
Responses to additional questions................................ 77
Appendix II
Additional material submitted for the record..................... 115
ENERGY EFFICIENT BUILDING RETROFITS
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THURSDAY, MARCH 11, 2010
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:04 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. I'm told Senator Murkowski will be here very
shortly. But we have today three legislative proposals that
we're going to have a hearing on. They are designed to improve
the energy efficiency in existing buildings, to reduce energy
bills for residential and commercial buildings, to create jobs
in building construction and building-related manufacturing
sectors.
Buildings are a large source of greenhouse gas emissions.
They account for as much as 39 percent. That's figures for
2006. Numerous studies have shown that energy efficiency
improvements in buildings are among the most cost effective
ways to reduce greenhouse gas emissions.
I was very glad to work with Senator Murkowski last year
and all members of the committee to report bipartisan energy
legislation last summer. ACELA, which is the American Clean
Energy Leadership Act, includes provisions to incentivize
energy efficiency retrofits and the residential and commercial
building sectors, as well as a rebate program for replacing
extremely inefficient manufactured housing with Energy Star
manufactured housing.
Today, several months after that legislation was reported
from the committee, the continued levels of unemployment in the
building sector have made energy retrofit programs attractive
for their job creation potential, as well as for their energy
savings benefits. Over the past several weeks, I've been
working along with a group of Senators on developing the Home
Star program, with the administration of course very strongly
in favor and the President advocating for this as well. A large
coalition of leaders from the construction industry, energy
efficiency, and clean energy advocate groups, as well as labor
groups, have pursued this to expand the residential retrofit
programs in the bill that we previously reported.
Senator Warner, who's here, Senator Merkley, Senator
Sanders, they've all made very important contributions to this
effort and the effort has been to create a program that could
be established to quickly have the detailed legislative
language that would be needed for the program to get up and
running. We hope we can finalize that legislation and have it
introduced soon.
I'm also very glad that the hearing today will include
consideration of the Building Star coalition. This is
legislation Senator Merkley introduced focused on commercial
building retrofits. We'll receive testimony on Senator Tester's
proposal for manufactured housing rebates to allow low-income
residents to afford Energy Star-related manufactured homes as
well.
We've invited State and utility experts in efficiency
programs and the National Association of Home Builders to give
their views today, and of course the Secretary, Assistant
Secretary for Energy is here, Catherine Zoi, and she will give
the administration's perspective.
[The prepared statement of Senator Corker follows:]
Prepared Statement of Hon. Bob Corker, U.S. Senator From Tennessee
Today's hearing on the proposed Home Star program brings to the
forefront of our discussions the complexity of setting energy
efficiency standards for windows, doors, and skylights. Since last
year, I have supported a change in the criteria for the 25C tax credit
to make it match the Energy Star 2010 criteria for windows, doors and
skylights. And today, I am advocating for these Energy Star standards
to be the criteria for the Home Star rebate program for these same
products.
As it stands today, there are some parts of the country where an
Energy Star window would not be eligible for the 25C tax credit. This
creates customer confusion, but more importantly does not achieve the
goal of maximum energy efficiency. It is my understanding that the
criteria under the 25C tax credit do not take regional climate
differences into account. Therefore, windows that are more energy
efficient in northern climates are not eligible for the tax credit,
which means they would not be eligible under the Home Star legislation.
The updated Energy Star criteria do, however, take these regional
differences into account.
If the goal of the Home Star legislation is to incentivize energy
efficient products, it seems appropriate that we should coordinate the
Energy Star criteria with the 25C tax credit and Home Star program.
This will best serve customers by ensuring that windows that provide
the greatest possible energy savings for a given climate are available
for purchase and eligible for incentives.
Senators Rockefeller and Grassley have introduced legislation that
would accomplish this goal. I hope this commonsense approach will be
passed into law, and I urge my colleagues to support it.
Senator Murkowski, did you have comments before we turn to
hear from our colleagues?
Senator Murkowski. I do, Mr. Chairman. Thank you very much,
I appreciate the hearing. We've got several interesting
proposals that you have outlined for discussion this morning. I
clearly recognize that the efficiency retrofits have been given
an elevated profile due to some of the President's recent
remarks. I'm eager to review the ideas that we have in front of
us.
It was about a year ago that we sat in this room and we
talked about several proposals intended to improve building
efficiency. The bill that we passed out of committee, the
American Clean Energy Leadership Act, provides a myriad of
incentives to encourage building owners to retrofit their
buildings to make them more energy efficient, certainly, among
other things.
I continue to believe that the policies we put forward then
make good sense. I'm also pleased that today we're moving the
conversation forward, talking about the role of building
efficiency through retrofit programs.
Since the building efficiency hearing that we had last
year, we have learned even more about the ever-important role
that energy efficiency can play in reducing energy consumption,
helping homeowners reduce their energy bills.
We've also seen that sometimes, despite our best efforts,
Federal initiatives don't always play out perhaps the way that
we had intended.
Just last week, we held a general oversight hearing on the
stimulus funds that were awarded to the Department of Energy.
DOE had received unprecedented levels of funding for measures
to retrofit buildings and at the time indicated that the money
would be spent and that hundreds of thousands of homes would be
retrofitted in a timely and a targeted fashion. However, to
date few homes have been weatherized with the stimulus money.
Much of the money remains to be spent, even within the
framework of the weatherization assistance program, which is
more than 30 years old.
So we've got to ask the question now, are we moving in that
same direction? Are we falling into that same trap? To proceed
with both a commercial and a residential retrofit plan
estimated to cost more than $12 billion without accounting for
lessons learned I think is a hazardous path.
Now, it's my understanding when we talk about the Home Star
this is intended to be a part of the package to create jobs,
which is good. It's clearly also an efficiency measure, which
is extremely important. I have some concerns that I will raise
in my questions about the do-it-yourself provision or perhaps
the lack of it in the draft.
When I left home this morning, Mr. Chairman, my husband was
just finishing the sheet rock in the little office that we've
been building out, and did the insulation yesterday. He's
restoring a historic home and doing a great job of it, does it
day in and day out. So the question that I have to ask is does
this meet the Vern standard? When we talk about the necessity
to create jobs, that's very important. But I think we also want
to do what we can to encourage individuals to on their own
build these efficiencies into their home like we're doing in
our house. So I'm going to be looking for that this morning.
I look forward to hearing comments from my colleagues and
to the testimony from the others. Thank you.
The Chairman. Thank you very much.
We'll start today hearing from Senator Warner, who's been a
real champion for this Home Star proposal from the inception of
the idea, and then from Senator Merkley, who has been
championing that, but also the Building Star proposal. We're
anxious to hear both of them. So Senator Warner, go right
ahead.
STATEMENT OF HON. MARK WARNER, U.S. SENATOR
FROM VIRGINIA
Senator Warner. Thank you, Mr. Chairman and Ranking Member
Murkowski, Senator Burr. I appreciate the opportunity to appear
before the committee and I want to echo what the chairman's
already said and thank my colleague and friend Jeff Merkley for
his work on this issue of Home Star as well. I'm not going to
get into all of the specifics of the proposal. I know your
later panel will. But a couple of just kind of data points.
One, this is a proposal we've been working with your staff
on and the administration on and colleagues for a number of
months. I want to particularly thank the chairman and
specifically members of his staff, like Deborah Estes and Bob
Simon, for their hard work on this. I want to thank the Home
Star Coalition, which has assembled a bipartisan group of
business, labor, and environmental groups, retailers and
manufacturers. I think they've done a tremendous job in kind of
working through a proposal that I think really will have 2
effects. One is to create jobs very quickly, but also help us
move toward that national goal of more energy efficiency.
I've got some comments I want to make, but I think it's
really important that right at the outset that I--at least my 2
cents in terms of Senator Murkowski's I think very appropriate
question she asked. I, like probably most members and clearly
as Senator Murkowski just mentioned, I'm just really concerned
about the slow ramp-up on the weatherization program and how
much DOE missed its numbers.
Even at the most sympathetic view of their numbers, they're
still 20, 30,000 homes short in terms of 2009.
I do think--and I think the later panel will go into this,
although I'd be happy to answer to the level of my knowledge
questions. What were the lessons learned in terms of the long
rulemaking process that took place to kind of expand the
weatherization program, the fact that it was mostly run through
government entities, whereas the Home Star initiative is going
to be much more focused on using the private sector.
I think there are a lot of lessons learned from
weatherization that are not going to take place in the Home
Star initiative. I commend the folks at DOE, the White House,
and again all of the individuals from the Home Star Coalition
who have been working on this to kind of get it right this
time, because if we do move forward on this area and we then
take 6, 9, 12 months to implement it, it makes no sense at all,
number 1.
No. 2, I didn't start here, but I have been convinced
through this process that the do-it-yourself folks ought to be
included in this proposal, and that it makes more sense. We've
got to have an audit trail on that and an accountability
function so that we're not using these potential valuable
certificates in ways that work is not being done.
But I think we have worked and are still working and would
welcome all of my colleagues' input on how we get it right so
that do-it-yourselfers can be included in this initiative.
Just a couple other quick points. One, we've made enormous
progress on gaining business support. I want to thank the
Edison Electric Institute, which represents 75 percent of the
ratepayers in this country. All 84 of their CEOs have signed on
to the Home Star legislation and are advocates for this
initiative.
I've got some other good news that I shared a little bit
with the chairman yesterday, but actually now can confirm. I
had a good conversation with, Senator Stabinow, your former
Governor, John Engler, last night and the National Association
of Manufacturers have now endorsed the Home Star initiative as
well. We look forward to working with them and I think we're
going to have a number of other business groups working on
this.
This is a bipartisan effort as well. Senator Graham has
been working with us in our office as we try to kind of get
some of these very valid concerns right, how do we get this
implemented quickly, how do we make sure there's an audit
trail, how do we make sure the do-it-yourselfers are included.
I look forward to continuing work with him. I know I've had
conversations with Senator Burr and other colleagues on the
Republican side of the aisle to really make this a business,
job-creating, hopefully no-brainer proposal. At some point
we've got to make sure it's paid for, but I think we're making
great, great progress.
Again, the statistics we all know. I think this is a
wonderful area, not just in terms of short-term job creation,
but long-term job creation as well. I was blessed to be
involved in the wireless industry in the 1980s and the
telecommunications revolution in the 1980s and then the
Internet in the 1990s. So I'm a telcom and IT guy. But when I
get a chance to talk to business folks these days, if I'm
talking to a business school I would say the place to be in
terms of job creation, of wealth creation over the next 25
years, I think is going to be the energy sector more than any
other sector globally.
Right now we're not in the leadership role. China's eating
our lunch. They may not be signing onto, although I guess they
did sign on the other day to a variation on Copenhagen--they
may not be signing onto all of the international accords, but
they have made the policy choices, not only around retrofit,
but around nuclear, around solar, wind, carbon sequestration,
and they have made the business choice that this is where they
are investing their policy choices and resources, and I think
at our own peril if we don't act quickly.
As a matter of fact, they're investing ten times more as a
percentage of GDP on energy and energy R and D and next
generation energy solutions than this country. That should be a
stunning statistic to us.
Home Star--and again, the next panel will go through the
specific details on how the certificates will take place and
the audit trails. But it will create jobs almost immediately.
We estimate about 150,000 new jobs. I think we can retrofit
about 3 million new homes. The construction industry, as we all
know in our States, is probably the industry that has been most
hard hit during this recession, 25 percent unemployment in the
construction work force.
Unlike the weatherization program, this does not push these
resources and these channels through government programs. It
uses the private sector, some of our large-box retailers and
others, working with the folks in the contracting side to get
this out in an efficient way.
I think beyond the job creation fact, consumers will see
long-term benefits as well. It's been estimated that over the
next decade if we put this program in place it will actually
save consumers about $9.5 billion off of their utility bills.
My hope is that this will be kind of a jump-start. It will be
targeted and timely. I don't envision this being a long-term
program, but if we can use this initiative to jump-start this
retrofit industry at the home level and, as Senator Merkley
will outline, at the construction level, and then wean
ourselves off the program, but as people see these benefits,
this could have enormous long-term impact.
While there is some risk involved, I think, as a former
venture capitalist, this is a risk and the up side is so great
that I believe it requires serious consideration. I hope we'll
get the bipartisan support it needs. It will clearly create
jobs in the hard-hit industry of construction. It will do a
great job, I think, in terms of moving us toward more energy
efficiency, and this is the area where we ought to be able to
find that common ground and get it done and get it done
quickly.
So, Mr. Chairman, again I thank you and the members of your
committee for your leadership on this issue, and look forward
to working with you and making sure we get all the kinks worked
out and seeing if we can move aggressively and quickly on this
item.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Merkley, go right ahead.
STATEMENT OF HON. JEFF MERKLEY, U.S. SENATOR
FROM OREGON
Senator Merkley. Thank you very much, Mr. Chair and members
of the committee, for the chance to testify on Building Star,
and I want to thank the Rebuilding America Coalition, now more
than 60 manufacturers strong. I'll submit the list for the
record if that would be suitable. But manufacturers, contractor
groups, financial service companies, efficiency advocates, and
so on and so forth.
So many people are touched by seeking energy efficiency in
our buildings. As the chair noted, buildings are approximately
40 percent of our energy use. Half of that is in the
residential side and half is on the building side. So these
twin programs here are going forward to tackle and capitalize
on the opportunities in both locations.
The types of work that would be done are envelope
insulation, mechanical insulation, windows, window films,
doors, HVAC equipment, chillers, water heaters, boilers,
variable speed drives for motors, which can very much enhance
energy efficiency, energy audits, commissioning energy
management and monitoring in larger buildings.
So much can be done to be smart with energy, and being
smart on energy is smart for our economy. The type of impact
we're talking about is, in parallel, 150,000 jobs on the
residential side, 150,000 jobs on the commercial side. We would
leveraging on the commercial buildings an $18 billion private
sector investment.
The energy saved would equal 33, 300-megawatt power plants.
I think that's a phenomenal number, 33, 300-megawatt power
plants. The emissions saved would be equal to the emissions of
4 million cars. That's on the commercial side, very parallel to
the residential side.
Some of the things I want to highlight: What is the impact
on small business? More than 90 percent of the construction
firms employ fewer than 20 people and more than 60 percent of
the manufacturers that create the materials and equipment for
retrofits employ fewer than 20 people. So these are key small
businesses scattered throughout our communities across this
Nation. Because commercial buildings are found everywhere, even
in smaller towns, we are talking about something that impacts
both urban and rural economies, which is I think something very
valuable in this effort to take on the challenge to our current
economy.
I also want to note that the savings to small businesses
really mount up. One modeling exercise estimates that if a
restaurant cuts its energy costs by 20 percent its profits rise
by 30 percent, because energy is a very significant factor in
the pro forma for our small businesses.
The structure is both rebates, up-front discounts, totaling
up to 30 percent of the cost, and then low-cost financing.
These 2 things work in parallel. The low-cost financing will
stretch our tax dollars further, get more bang for the buck in
terms of job creations and actual projects and energy savings.
Then I'd like to touch on a piece of this, including the
fact that the vision is to take advantage of structures that
are already in place, community bank lending, State programs,
city programs, county programs, take advantage of on-bill
financing. One of those is the PACE program, which is the
Property-Assessed Clean Energy program, so that people, or in
this case businesses, can actually have the loan paid through
their property bills, making it convenient. That convenience
has come back to us as a key factor in helping people overcome
that up-front hurdle.
Two factors--one, the up-front costs and the rebates and
the low-cost lending--address that up-front cost, and then the
convenience factor. So I think both are important and very
parallel to the residential side.
So I just want to conclude by saying, one, thank you,
Senator Stabenow, for being a co-sponsor to the bill, and I
encourage other folks to get involved. I think this is very
much the type of smart effort that should be, could be a
bipartisan, bicameral effort to put people back to work, to
save energy, and to be good stewards of our environment.
Thank you, Mr. Chair.
The Chairman. Thank both of you for your testimony. It's
very helpful. Thanks for your advocacy of these 2 pieces of
legislation. So we'll allow you to go on to your other
obligations and start in with--I think our first witness will
be the CRS representative, Paul Parfomak, who is a specialist
in energy and infrastructure, and he's going to give us a short
seminar on how this Home Star program in particular would work.
Then we will go on to Catherine Zoi, who is the Assistant
Secretary for Energy Efficiency and Renewable Energy, and then
to our second panel.
Dr. Parfomak, why don't you go right ahead. Is that the
right pronunciation?
STATEMENT OF PAUL W. PARFOMAK, PH.D., SPECIALIST IN ENERGY AND
INFRASTRUCTURE POLICY, CONGRESSIONAL RESEARCH SERVICE
Mr. Parfomak. It's ``PARR-fo-MACK.''
The Chairman. ``PARR-fo-MACK.''
Mr. Parfomak. We're the only ones in the world, so you
wouldn't have heard it before.
The Chairman. Yes, it's not a name I hear a lot in New
Mexico. But go right ahead.
Mr. Parfomak. Good morning, Chairman Bingaman, Ranking
Member Murkowski, and members of the committee. My name is Paul
Parfomak, Specialist in Energy and Infrastructure Policy at the
Congressional Research Service. CRS appreciates the opportunity
to testify here today about the proposed Home Star retrofit
rebate program.
The Home Star program may present a significant opportunity
for both energy efficiency and employment. The program targets
one of the largest sources of cost-effective energy savings in
the United States. It also builds on prior experience with
residential energy programs, offering operating models that may
be replicated nationwide. However, the program also contains
untested elements and has very aggressive goals.
As Congress reviews Home Star, it may be useful to further
consider 4 key aspects of the program: the 2-tiered rebate
structure, rebate aggregation, technical standards, and
expectations for program participation.
Home Star would employ 2 tiers of efficiency rebates. Its
Silver Star program would offer up to $3,000 per home in
prescriptive rebates. The Gold Star program would offer higher
rebates for more comprehensive energy retrofits, but would
require simulation modeling and documentation of actual energy
savings before rebates would be paid.
Because Silver Star is simply, involves no simulation, no
savings documentation nor performance risk, it may be more
attractive to contractors than Gold Star. If homes participate
only in Silver Star, some of their inefficiency might become
locked in because more complex measures would become less cost
effective once the low-hanging fruit of Silver Star measures
were taken. Such cream-skimming behavior could affect the
distribution of expenditures within Home Star and limit its
impact on the energy efficiency of the Nation's housing stock.
Home Star's rebate aggregation function aims to ensure
timely processing and payment of rebates. For similar national-
scale programs, such functions typically are performed by
professional fulfillment companies, which focus exclusively on
rebate transactions, offering quick execution and economies of
scale. The Home Star proposal differs from this approach by
extending rebate aggregation to a range of providers and
assigning to them responsibility for quality assurance.
Given multiple providers with inherently different starting
capabilities, the Home Star program may face challenges
ensuring speedy development and consistent delivery of these
services. Any limitation or inconsistency in Home Star's rebate
fulfillment could reduce the program's effectiveness.
Congress also may wish to examine how Home Star's technical
standards may influence how quickly the program may be
implemented. For example, Home Star's inclusion of multiple
widely used home simulation software packages may facilitate
contractor participation since many contractors may already be
skilled in the use of one or more of these software programs,
but it may also complicate efforts at quality control because
differences in the format, content, or transferability of
information across these software programs may become a
problem.
By comparison, Home Star's training requirements appear
somewhat less inclusive since they do not explicitly authorize
certain established weatherization training standards. If Home
Star contractors believe they face redundant, time-consuming,
or costly training requirements, they may forego training
certification altogether, undermining the purpose of having
training standards in the first place.
Home Star also may face challenges achieving the high
levels of homeowner participation implied by its funding.
Assuming full expenditure of its appropriations in the first 2
years, based on our estimates total participation would be
nearly 2 million homes. By comparison, the Department of
Energy's weatherization assistance program reached 2 million
homes after 15 years. Over its first 9 years, New York's home
performance with Energy Star program, which is similar to Gold
Star, reached approximately three-quarters of a percent of
targeted homes. Achieving this enrollment rate across the
entire United States would yield approximately 728,000
participants.
These comparisons suggest that the level of homeowner
participation implied by Home Star's rebate funding levels
would far exceed that achieved by comparable programs in their
initial years.
In conclusion, the Home Star proposal may offer a
significant opportunity to improve residential energy
efficiency and increase related employment, but it may be
difficult to implement quickly on a national scale. Achieving
the program's high expectations for homeowner participation
would be unprecedented. Its 2-tiered structure, rebate
aggregation function, and technical standards may present
unanticipated obstacles to speedy and consistent
implementation.
As Congress further examines the Home Star proposal,
focusing on tradeoffs between rapid deployment, operational
complexity, and energy savings may be important. Balancing the
two goals of short-term job creation and long-term energy
efficiency could be an ongoing challenge.
Thank you for the opportunity to appear before the
committee. I'll be happy to address any questions.
[The prepared statement of Mr. Parfomak follows:]
Prepared Statement of Paul W. Parfomak, Ph.D., Specialist in Energy and
Infrastructure Policy, Congressional Research Service
Good morning Chairman Bingaman, Ranking Member Murkowski, and
Members of the Committee. My name is Paul Parfomak, Specialist in
Energy and Infrastructure Policy at the Congressional Research Service
(CRS). CRS appreciates the opportunity to testify here today about the
proposed Home Star Retrofit Rebate program detailed in the Majority
Staff Draft provided to the service on March 2, 2010. This testimony
discusses CRS's initial perspectives on the Home Star proposal,
focusing primarily on operational and energy-efficiency aspects of the
program. In accordance with its enabling statutes, CRS takes no
position on this or any other legislation.
INTRODUCTION
The Home Star program is intended to achieve significant energy-
efficiency improvements in American homes while generating new
employment opportunities in the home remodeling, energy services, and
related manufacturing industries. The program targets the residential
sector, which numerous studies have shown to be among the largest
sources of cost-effective energy-efficiency opportunity in the United
States.\1\ The program seeks to build on prior experience with both
federal and state energy-efficiency programs to provide operating
templates that may be replicated nationwide.
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\1\ See, for example: McKinsey & Company, Unlocking Energy
Efficiency in the U.S. Economy, July 2009, p. 10; National Academy of
Sciences, Real Prospects for Energy Efficiency in the United States,
National Academies Press, 2010, pp. 31-84.
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While the proposed Home Star program may present a significant
opportunity for both energy-efficiency and employment--it also contains
untested operational elements and has set aggressive goals for
homeowner participation. CRS has identified four key considerations
which may warrant further attention as Congress reviews the Home Star
program. They are the two-tiered rebate structure, rebate aggregation,
technical standards, and overall expectations for program
participation.
TWO-TIERED REBATE STRUCTURE
Home Star's choice of direct consumer rebates over tax credits and
other forms of incentive seeks to promote home efficiency retrofits as
quickly as possible. The program would employ a two-tiered structure
for energy-efficiency rebates. Its Silver Star program tier would
provide up to $3,000 per home in prescriptive rebates for
straightforward home upgrades, including insulation, efficient HVAC
units, new windows and other measures. The Gold Star program tier would
offer $3,000 rebates for more comprehensive energy retrofits achieving
at least 20% energy savings, with rebates increasing up to $8,000 per
home for retrofits achieving 45% energy savings. The Silver Star
rebates would be paid automatically upon job completion and submission
of a rebate request. In contrast, Gold Star rebates would require
``testing out'' to document actual energy savings before rebates would
be paid.
While Home Star's two-tiered structure offers a mechanism to
capture the highest levels of energy savings from very inefficient
homes, Congress may examine whether this structure may unintentionally
discourage energy-efficiency investments due to ``cream skimming.''
Cream skimming of energy-efficiency opportunities, ``in which
relatively certain (but relatively shallow) energy savings
opportunities are selected in favor of more promising but more complex
and uncertain measures'' has long been documented as a challenge to
efficiency retrofits in buildings.\2\ Because the Silver Star rebates
are simple, require no simulation or testing capabilities, require no
post-installation performance documentation, and involve no risk of
underperformance, they may be substantially more attractive to general
contractors than Gold Star rebates. Many contractors with no additional
training could begin work under the Silver Star program immediately.
Financially constrained homeowners might also prefer the Silver Star
program because it would require less investment and less risk on their
part. Consequently, Home Star may experience lower-than-anticipated
participation in the Gold Star program.
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\2\ Evan Mills, Steve Kromer,Gary Weiss, and Paul A. Mathew, ``From
Volatility To Value: Analysing And Managing Financial And Performance
Risk In Energy Savings Projects,'' Energy Policy, Vol. 34, No. 2,
January 2006, p.191.
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To the extent that homes are highly inefficient, but participate
only in Silver Star rebates, some of their energy inefficiency might
become locked in because the measures would become less cost-effective
to address later, after the lower-hanging fruit of Silver Star measures
have been implemented. Such behavior, if it materializes under the Home
Star program, might not impact the overall number of jobs associated
with the program as a whole, but it could have important implications
for the distribution of expenditures within the program, the immediate
capture of energy savings, and its ultimate impact on the long-term
energy-efficiency of the nation's housing stock.
REBATE AGGREGATION PROVIDERS
Rebate aggregation is a critical function of the Home Star program
which aims to ensure the timely approval, processing, and payment of
rebates to participating contractors. For similar national-scale rebate
programs, such functions typically would be performed by professional
rebate fulfillment companies using specialized Internet interfaces,
administrative protocols, and data management systems to meet a range
of operating requirements for various rebate program partners. Such
fulfillment companies focus exclusively on rebate transactions and
offer the advantages of quick execution, economies of scale, and the
ability to adapt existing capabilities to accommodate new rebate
programs. The Home Star program proposal differs from this approach by
extending rebate aggregator eligibility to a much wider range of
potential providers, including existing energy efficiency programs,
utilities, and quality assurance provider networks. Furthermore, in
addition to a purely transactional function, it appears that the
program's rebate aggregators will be responsible for management and
reporting of quality assurance inspections.
Given the range of providers with inherently different starting
capabilities potentially eligible to serve as rebate aggregators, the
Home Star program may face challenges ensuring speedy development and
consistent delivery of these services for all contractors who seek
them. Congress may wish to ensure that the program's quality assurance
obligations do not deter professional rebate fulfillment companies from
applying to serve Home Star. Such obligations may lie outside the scope
of services they provide and may raise concerns about quality-related
liability. Home Star's rebate aggregation provisions may therefore have
the unintended consequence of discouraging direct participation by
professional providers. Such companies potentially could partner with
quality assurance providers to provide aggregation services, but
establishing such relationships might be time consuming and could
result in complicated rebate and quality assurance processes. Any
limitation or inconsistency in the administration of the program's
rebate fulfillment functions could create transactional bottlenecks or
confusion among contractors and thereby reduce Home Star's overall
market effectiveness.
TECHNICAL STANDARDS
Congress may wish to examine how the Home Star program's technical
standards requirements may influence the speed and breadth with which
the program might be implemented. For programs like Home Star,
technical standards can help to ensure home services are provided at an
appropriate level of quality and consistency across numerous
contracting companies. The selection of particular standards for
inclusion in the program also may determine which contractors initially
will be eligible to participate in the program and what home energy
information they will be able to provide for the purposes of program
management and evaluation. Consequently, the choice of standards
influences both the complexity of program deployment and its
administrative needs.
Home Star's requirements for whole home simulation software to be
used by contractors include (explicitly or by reference) software
packages authorized by the Department of Energy's Weatherization
Assistance Program, the Internal Revenue Service, and equivalent
programs certified by states. These programs include various versions
of EnergyPro, MICROPAS, EnergyGauge, REM/Rate, and other software
packages. By adopting these widely used home simulation software
packages, Home Star intends to facilitate contractor participation,
since many are already skilled in the use of one or more of these
software programs. From an administrative perspective, however,
approving multiple software programs and versions on a national scale
may also complicate efforts at quality control because of differences
in the format, content, or transferability of home simulation
information. Such differences also may make comparisons of buildings
and contractors participating in Home Star more difficult.
Contractors who satisfy Home Star's training certification
standards would face less frequent quality inspection than uncertified
contractors. For certification, the program specifically authorizes
existing skills standards established by the Building Performance
Institute (BPI), North American Technician Excellence, and the
Laborers' International Union of North America (LIUNA). Unlike the home
simulation software requirements, however, there are other training
standards in widespread use that are not initially approved for Home
Star certification. One notable exclusion, for example, is training by
the Home Builders Institute (HBI), the workforce development affiliate
of the National Association of Home Builders (NAHB), which is one of
eight National Training Contractors for the Department of Labor's Job
Corps program. The Institute bases its home energy training curriculum
on the National Green Building Standard, jointly developed by the NAHB
and the International Code Council.
It is beyond the capacity of CRS to evaluate or recommend any
particular technical standard. Nonetheless, it is worth noting that the
National Green Building Standard has been accredited by the American
National Standards Institute (ANSI), while the BPI standard is still in
the process of ANSI accreditation.\3\ It may be that the HBI curriculum
could eventually be authorized for Home Star under provisions proposed
for ``other standards'' if approved by the Secretary of Energy, in
consultation with the Secretary of Labor and the Environmental
Protection Agency (EPA) Administrator. However, the Home Star proposal
offers no process or specific criteria for such approval. As a result,
contractors with HBI training and seeking Home Star certification may
need to undertake additional, potentially redundant, training or wait
for the program to accept HBI standards. Retraining or certification
delays may put them at a competitive disadvantage.
---------------------------------------------------------------------------
\3\ The American National Standards Institute (ANSI) is a private,
non-profit organization overseeing development of voluntary consensus
standards for products, services, processes, systems, and personnel in
the United States. ANSI also coordinates U.S. standards with
international standards.
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Taken together, Home Star standards provisions for home simulation
software and contractor certification illustrate the attempt to balance
quick program execution against operational simplicity. If the proposal
includes fewer standards, that might simplify program administration,
but may put those contractors certified under an excluded program at a
disadvantage; either additional training or more frequent inspections
would be required. LIUNA's training curriculum for energy auditors, for
example, requires seven weeks, and to date has been offered only in a
few of the union's regional training centers.\4\ As the EPA's recent
experience with residential contractor certification under its 2008
lead rule demonstrates, such certification can be an unexpected
bottleneck for program implementation. If contractors wishing to
participate in Home Star believe they face time-consuming or costly
training requirements, they may forgo certification altogether,
accepting higher job inspection rates as an acceptable alternative.
Such an outcome might undermine the intended purpose of the employee
training standards--a more capable workforce, better contract work, and
lower costs for quality control.
---------------------------------------------------------------------------
\4\ Laborers' International Union of North America (LIUNA),
``Weatherization Training Program,'' Brochure, 2010,
www.liunabuildsamerica.org/files/
WeatherizationTrainingProgramBrochure.pdf; and LIUNA, ``Information for
Prospective Trainees,'' Internet page, 2010,
www.liunabuildsamerica.org/weatherize/trainees.
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HIGH EXPECTATIONS FOR PROGRAM PARTICIPATION
In its first two years as a new federal energy-efficiency
initiative, Home Star may face challenges achieving the high levels of
homeowner participation implied by its level of appropriations. The
Home Star proposal authorizes appropriations through FY2011 of $3.4
billion for Silver Star rebates and $1.7 billion for Gold Star rebates.
Assuming average Silver Star rebates of $2,000, this appropriation
would fund 1.7 million Silver Star homes. Assuming average Gold Star
rebates of $6,000, the appropriation would fund an additional 280,000
Gold Star homes. Assuming full expenditure of the appropriated funds
through 2010, and combining both Silver Star and Gold Star, total
participation would be nearly 2 million homes in the first two years of
the program or 1.6% of all U.S. residential housing units in 2008.
Experience with programs similar to Home Star offers some
perspective on the aggressiveness of these participation goals. For
example, under the U.S. Department of Energy's Weatherization
Assistance Program (WAP), home weatherization projects directly funded
by the program reached approximately 2 million in 1992, 15 years after
the program was initiated (Figure 1)*.\5\ The WAP program's peak year
of annual participation was 1981, during which the program weatherized
353,000 homes. The American Recovery and Reinvestment Act of 2009
sharply increased funding for the WAP program and raised associated
weatherization goals to 586,015 homes over the 3-year life of the act,
but the program is not meeting these goals. Although weatherization
rates under ARRA funding have accelerated in recent months, the
Department of Energy's Inspector General reported last month that only
30,297 of the planned 586,015 weatherization projects were completed by
February 16, 2010.\6\
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* Figures 1 and 2 have been retained in committee files.
\5\ The DOE estimates that approximately 2.8 million additional
homes were weatherized through 2008 by state programs leveraging core
weatherization funding from DOE.
\6\ U.S. Department of Energy, Office of Inspector General,
Progress in Implementing the Department of Energy's Weatherization
Assistance Program Under the American Recovery and Reinvestment Act,
OAS-RA-10-04, February 2010, Appendix II.
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New York's Home Performance with ENERGY STAR Program, which is
similar in most respects to the Gold Star component of the Home Star
program, served just under 30,000 homes over its first nine years of
operation (Figure 2). This total represents 0.75% of the 4.0 million
homes in New York potentially eligible for the program.\7\ Achieving
this enrollment rate among the 97.1 million similar homes across the
entire United States would yield approximately 728,000 program
participants.
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\7\ U.S. Census Bureau, The 2010 Statistical Abstract, ``Table
954--Housing Units by Units in Structure and State: 2007,'' 2010,
http://www.census.gov/compendia/statab/2010/tables/10s0954.pdf.
Potentially eligible homes are assumed to include 1-unit detached homes
up to 4-unit attached homes. There are 5.2 million homes in these
categories statewide in New York, but approximately 1.2 million homes
are either ineligible for this program because they are in the service
territory of the Long Island Power Authority, or are not targeted by
the program for other reasons.
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Comparing participation rates expected for Home Star with those
experienced by the WAP program or the Home Performance program in New
York is only suggestive. There are significant differences in the
structure of these programs as well as in their funding, target
markets, and the time periods of their operation. In particular, it is
possible that general economic conditions in the United States over the
next few years may lead to comparatively higher or lower participation
in Home Star than those realized by the WAP or New York programs.
Nonetheless, these comparisons suggest that the level of homeowner
participation implied by the rebate funding provisions in the Home Star
proposal would far exceed that achieved by comparable programs in their
initial years. Implementation experience and supporting infrastructure
developed through the WAP program, Home Performance with ENERGY STAR,
and similar state programs may help Home Star achieve higher market
penetration more quickly than the earlier programs, but to what extent
remains to be seen. Consequently, Congress may consider alternative
options for Home Star program administration and funding if initial
participation rates differ significantly from its initial goals.
CONCLUSION
The proposed Home Star program may present a significant
opportunity to improve residential energy-efficiency and increase
related employment, but it contains a number of operational elements
that have yet to be tested--and may be difficult to implement--on a
national scale. Achieving the program's high expectation for homeowner
participation also would be unprecedented. Taken together, Home Star's
requirements for key operational elements such as its technical
standards, two-tiered rebate structure, and rebate aggregation function
may present unanticipated obstacles to speedy and consistent program
implementation across the country. As Congress examines details of the
Home Star proposal, focusing on tradeoffs between rapid implementation,
operational complexity, and energy-efficiency impacts may be important.
Balancing the twin goals of short term job creation and long-term
investment in cost-effective energy savings could also be an ongoing
challenge.
Thank you for the opportunity to appear before the committee. I
will be happy to address any questions you may have.
The Chairman. Thank you very much for your testimony. I
think it's very useful. I assume you can make yourself
available to all committee members for expert advice on each of
the points you've made, which would be very useful to us.
But why don't--since we've got seven other witnesses, why
don't we go ahead and ask the Assistant Secretary for the
Department of Energy to come forward and give her testimony.
Catherine Zoi is the Assistant Secretary for Energy Efficiency
and Renewable Energy in the Department of Energy and we would
like to hear her perspective on these proposals. Then we have a
second panel with six additional witnesses after that.
Go right ahead. Thank you for being here.
STATEMENT OF CATHERINE ZOI, ASSISTANT SECRETARY, ENERGY
EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY
Ms. Zoi. Thank you for the invitation. Good morning,
Chairman Bingaman, Ranking Member Murkowski, and distinguished
members of the committee. Thanks for the opportunity to appear
before you today. I will make my remarks brief this morning,
and I have submitted a longer statement for the record, as you
know.
We have a tremendous opportunity right now to create jobs
and save money for homeowners all across the country. There are
approximately 130 million homes in the United States, very few
of which are as efficient as they could be, although it sounds
like Senator Murkowski's home might be becoming efficient right
now. Almost all of these homes could benefit from additional
insulation, caulking, upgraded HVAC systems, and other
improvements. Just as critically, there's a work force standing
by ready to make those improvements.
The overall construction sector currently faces a 27
percent unemployment rate. According to the Bureau of Labor
Statistics, nearly 2 million construction jobs have been lost
since December 2007. That's 2 million hardworking Americans who
are ready and anxious to find ways to apply their skills to new
jobs. With the home retrofit program, we can transform these 2
challenges into an enormous opportunity, tapping worker skills
and availability to help American families save money and
energy.
Americans are spending over $200 billion per year on
energy, money that could pay for housing, tuition, or other
basic necessities. As the President has said, if you saw $20
bills flying out your window you would try to grab them. So
let's try to make it easier for American families to prevent
their hard-earned cash from flying out of leaky, inefficient
homes while we create good-paying jobs for folks across the
country.
We can do just that through a home retrofit program like
the one the President called for in his State of the Union.
Last week the President outlined more details of what he has in
mind for the Home Star program, including rebates delivered
directly to consumers, $1,000 to $1,500 Silver Star rebates,
$3,000 Gold Star rebates, oversight to ensure quality
installations, and support for financing.
Through this program, we can create tens of thousands of
jobs while achieving substantial reductions in energy use.
Consumers taking advantage of the program are likely to save
between $200 and $500 per year in energy costs, while improving
the comfort and the value of their homes.
I want to thank the members of this committee and other
Senators who have been working tirelessly on efforts to create
legislative language that follows the President's vision. As
the legislative process moves forward, we will continue to work
with the committee on this bill until it is enacted. Today I'm
glad the committee has convened a hearing and I'm happy to
answer any questions regarding the Home Star proposal or how
the Department would administer such a program were it to be
signed into law.
Additionally, I understand that we will also be discussing
Senator Merkley's Building Star bill and Senator Tester's bill
for homes built before 1976. While I plan to focus
predominantly on the Home Star proposal, I'm happy to provide
feedback on those other bills for the record.
My goal as Assistant Secretary for Energy Efficiency and
Renewable Energy is to harness the ingenuity and ability of the
American work force to help families save energy and money.
Retrofitting millions of American homes can truly transform
energy consumption throughout the Nation while putting people
to work. Last year Secretary Chu said that: ``In the next
several decades, I believe that energy efficiency is our most
powerful tool for reducing our carbon emissions and reducing
our energy bills.'' Home energy retrofits could be critical to
realizing both of those goals while supporting American job
creation.
Thanks again for the opportunity to testify and I will
gladly answer your questions.
[The prepared statement of Ms. Zoi follows:]
Prepared Statement of Catherine Zoi, Assistant Secretary, Energy
Efficiency and Renewable Energy, Department of Energy
Good morning Chairman Bingaman, Ranking Member Murkowski, and
distinguished members of the Committee. Thank you for the opportunity
to appear before you today. I consider it an honor to lead the
Administration's efforts to advance and deploy energy efficiency and
renewable energy solutions at this historic time. As this Committee
knows, we are in a moment of time that poses great challenges and
opportunities in the energy field. I am excited about the opportunity
to harness ideas and innovation to ensure our economic security,
national security, and environmental security. Despite challenges, I am
optimistic about the future and in particular about the areas where the
Administration and Congress can work together to meet the Nation's
energy challenges.
With tremendous support from Congress, both through the American
Recovery and Reinvestment Act of 2009 (Recovery Act) and annual
appropriations, we are transforming the clean energy landscape in the
United States. In the Office of Energy Efficiency and Renewable Energy
(EERE) alone, we are investing more than $16 billion in Recovery Act
funding toward projects ranging from geothermal demonstrations in
Alaska, New Mexico, and Utah to electric drive component manufacturing
in Fargo, North Dakota, to large wind turbine blade testing in Boston,
and the development of biorefineries in Ohio, Oregon, and elsewhere,
and much more. These programs are creating jobs with investments in 56
states and U.S. Territories to encourage deployment of a full range of
renewable energy sources and energy savings measures. In addition, EERE
has provided support to the Department of the Treasury for $2.3 billion
of grants in lieu of tax credits for projects that are expected to
deploy more than 4 gigawatts of renewable energy, and another $2.3
billion in tax credits to domestic manufacturers of clean energy
products.
In addition to investing in renewable technologies, EERE is
engaging in a full court press on energy efficiency. As Secretary Chu
is fond of saying, energy efficiency isn't just low-hanging fruit; it's
fruit lying on the ground. By reducing our energy consumption, we can
create and support clean energy jobs, reduce our reliance on foreign
sources of energy and reduce greenhouse gas (GHG) emissions while
saving money on the energy bills of everyday Americans.
HOME ENERGY RETROFITS
As you know, one of the best opportunities for energy efficiency is
right in our own homes. Home energy retrofits can be a win-win-win.
Consumers can win by cutting their utility bills and saving money,
while getting a healthier, more comfortable living space for their
families. Communities, employers, and employees can win by creating
good jobs in the retrofit industry and at manufacturers that produce
energy efficiency products, spurring the local economy and putting
people back to work. The Nation can win by creating jobs, reducing our
reliance on energy from foreign sources, reducing our carbon emissions,
and slowing the effects of climate change.
There are approximately 130 million homes in the United States.
These homes account for about 33 percent of the Nation's total
electricity demand\1\ and consume approximately 22 percent of the
Nation's energy\2\ while generating 21 percent of the Nation's overall
carbon footprint.\3\ Roughly half of these homes were built before
1973, long before modern residential building codes came into
effect.\4\ With so many older homes, and with advances in building
technologies, there is a tremendous opportunity to upgrade home energy
efficiency by insulating; caulking; improving heating, ventilation, and
air conditioning equipment (HVAC); tightening the building envelope;
and adding other energy efficiency improvements. Existing techniques
and technologies can reduce energy use by up to 40 percent per home and
reduce associated GHG emissions by up to 160 million metric tons by
2020.\5\
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\1\ Percentage derived from figures in the Annual Energy Review.
Energy Information Administration. http://www.eia.doe.gov/aer/txt/
ptb0201a.html. February 2010.
\2\ Percentage derived from figures in the Annual Energy Review.
Energy Information Administration. http://www.eia.doe.gov/aer/txt/
ptb0201a.html. February 2010.
\3\ Pew Center on Global Climate Change. Climate Change 101:
Technological Solutions. January 2009.
\4\ Energy Information Administration. Residential Energy
Consumption Survey 2005: Home Energy Uses and Costs. http://
www.eia.doe.gov/emeu/recs/
\5\ President's Middle Class Task Force and Council on
Environmental Quality. Recovery Through Retrofit report. October 2009.
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This vast potential for savings can be tapped only with a strong,
well-trained American work force. The overall construction sector
currently faces a 27.1 percent unemployment rate.\6\ Insulation-blowing
trucks are standing idle, and many construction workers are anxious to
find ways to apply their skills to new jobs. At the same time,
Americans are paying over $200 billion per year in energy costs--money
that could pay for housing, tuition, or other basic necessities.\7\ As
the President has said, if you saw $20 bills flying out your window,
you would try to grab them. So let's try to make it easier for American
families to prevent their hard-earned cash from flying out the doors,
windows, and ceilings of inefficient homes.
---------------------------------------------------------------------------
\6\ United States Bureau of Labor Statistics. Industries at a
Glance: Construction: NAICS23. March 5, 2010. http://www.bls.gov/iag/
tgs/iag23.htm
\7\ Energy Information Administration. Residential Energy
Consumption Survey 2005: Home Energy Uses and Costs. http://
www.eia.doe.gov/emeu/recs/recs2005/c&e/summary/pdf/tableus5.pdf
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CHALLENGES
To realize job creation, energy savings, and environmental
benefits, making energy retrofits must be easier for homeowners. Three
key barriers prevent Americans from taking advantage of cost-effective
retrofits to their homes: difficulty finding information about which
retrofit upgrades are best for their home; difficulty covering the up
front cost of these investments; and difficulty finding knowledgeable,
skilled workers.\8\
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\8\ McKinsey & Company. Unlocking Energy Efficiency in the U.S.
Economy. July 2009.
---------------------------------------------------------------------------
These three barriers were outlined in the Recovery Through Retrofit
strategy document released by Vice President Biden's Middle Class Task
Force. In close collaboration with other agencies, DOE is pursuing a
comprehensive approach to address these three barriers, which includes:
The creation of a home energy performance labeling system in
collaboration with the Recovery Through Retrofit to provide
consumers with building energy information;
The expansion of rebate programs and appropriate financing
mechanisms to provide homeowners with access to affordable
mechanisms to cover the up front cost of energy efficiency
improvements; and
The establishment of voluntary national standards for
retrofit workforce training and certification to help protect
consumers.
DEPARTMENTAL RETROFIT SUPPORT
The inter-agency Recovery Through Retrofit initiative, coordinated
by the President's Council on Environmental Quality, seeks to lay the
groundwork for a self-sustaining home energy efficiency retrofit
industry. Additionally, the Department actively supports home energy
retrofits in other ways, including a new Retrofit Ramp-Up program and
the ongoing Weatherization Assistance and State Energy Programs.
The Retrofit Ramp-Up program, the competitive portion of the Energy
Efficiency and Conservation Block Grant program funded through the
Recovery Act, could deliver important energy and monetary savings to
communities that win awards. However, its greatest impact may be in
demonstrating sustainable, replicable business models that other
communities across the Nation can copy so that they can also drive job
creation and energy savings in their own areas. The lessons learned
from these projects--both successes and challenges--could enable the
rest of the Nation to ramp up its energy efficiency efforts,
fundamentally transforming the way the U.S. consumes energy.
DOE will soon award up to $390 million of Recovery Act funds for
this program, targeting whole-neighborhood building retrofits. The
Department's goal is to fund projects demonstrating models for
providing cost-effective energy upgrades for a large percentage of the
residential, commercial, and public buildings in communities. EERE
received a large volume of excellent proposals, far more than we will
be able to fund. There is no shortage of good ideas or enthusiasm, and
we hope to leverage the Recovery through Retrofit experience into a
long term model where communities can sustain the efforts to retrofit
whole blocks at a time.
The Weatherization Assistance Program is currently retrofitting
thousands of homes each month, utilizing $5 billion of Recovery Act
funds and $210 million from Fiscal Year 2010 appropriations. This
program primarily reaches low-income families, the elderly and the
disabled, helping those with significant financial need save money on
their energy bills.
Some states are using portions of the $3.1 billion in Recovery Act
funds allocated to the State Energy Program to create revolving loans
funds that finance the deployment of energy efficiency technologies and
support long lasting job creation.
CURRENT PROPOSALS
During the State of the Union, the President called on Congress to
pass a program of incentives for homeowners who make energy efficiency
investments in their homes. Last week, the President outlined more
details of a new ``HOMESTAR'' program that would help create jobs by
encouraging American families to invest in energy saving home
improvements.
Key components of the HOMESTAR Program include:
Rebates delivered directly to consumers: Like the Cash for
Clunkers program, consumers would be eligible for direct
HOMESTAR rebates at the point of sale for a variety of energy-
saving investments in their homes. A broad array of vendors,
from small independent building material dealers, large
national home improvement chains, energy efficiency
installation professionals and utilities (including rural
utilities) would market the rebates, provide them directly to
consumers and then be reimbursed by the Federal Government. The
rebates would also be marketed by the Environmental Protection
Agency and trade associations whose member contractors
participate in the program.
$1,000--$1,500 Silver Star Rebates: Consumers looking to
have simple upgrades performed in their homes would be eligible
for 50% rebates up to $1,000--$1,500 for doing any of a
straightforward set of upgrades, including: insulation, duct
sealing, water heaters, HVAC units, windows and doors. Under
Silver Star, consumers can chose a combination of upgrades for
rebates up to a maximum of $3,000 per home. Rebates would be
limited to the most energy efficient categories of upgrades--
focusing on products made primarily in the United States and
installed by certified contractors.
$3000 Gold Star Rebates: Consumers interested in more
comprehensive energy retrofits would be eligible for a $3,000
rebate for a whole home energy audit and subsequent retrofit
tailored to achieve a 20% energy savings in their homes.
Consumers could receive additional rebate amounts up to $8,000
for energy savings in excess of 20%. Gold Star would build on
existing whole home retrofit programs, like the Environmental
Protection Agency's successful Home Performance with Energy
Star program.
Oversight to Ensure Quality Installations: The program would
require that contractors be certified to perform efficiency
installations. Independent quality assurance providers would
conduct field inspections after work is completed to ensure
proper installation so consumers receive energy savings from
their upgrades.
Support for financing: The program would include support to
State governments to provide financing options for consumers
seeking to make efficiency investments in their homes. This
will help ensure that consumers can afford to make these
investments.
The program may result in the creation of tens of thousands of jobs
while achieving substantial reductions in energy use--up to the
equivalent of the entire output of three 500 megawatt coal-fired power
plants each year. Consumers in the program are anticipated to save
between $200--$500 per year in energy costs, while improving the
comfort and value of their homes.
I am sincerely grateful to the members of this Committee and other
Senators who have been working tirelessly on efforts to create
legislative language that is consistent with the President's vision. I
believe they have done a tremendous job turning a concept into
language, and I have the utmost admiration for them and their staffs.
As the legislative process moves forward, we will continue to work with
the Committee on this bill until it is enacted.
I am happy to answer any questions members of this Committee may
have regarding the proposal or how the Department would administer such
a program were it to be signed into law.
Additionally, I understand that a panel later today will also
examine S. 3079, Senator Merkley's ``Building Star'' bill, and S. 1320,
a bill introduced by Senator Tester for homes built before 1976. As I
mentioned earlier in my testimony, both commercial buildings and older
homes are major challenges in terms of energy efficiency, and I salute
these Senators for their efforts to find solutions. While I plan to
focus on the Home Star proposal today, I am happy to provide feedback
on these additional proposals for the record.
CONCLUSION
Retrofitting millions of American homes may truly transform energy
consumption throughout the Nation. It may also put people to work in
good, domestic jobs while saving Americans money and enabling
significant contributions toward GHG emissions reduction targets.
Public investments can lay the foundation for a vibrant private-sector
led retrofit industry. Workers can get trained and certified, small
contractors can grow their businesses, and millions can save money on
their energy bills.
On October 19, 2009, Secretary Chu stated, ``In the next several
decades, I believe that energy efficiency is our most powerful tool for
reducing our carbon emissions and reducing our energy bills.'' Home
energy retrofits could be critical to realizing both of those goals,
while supporting American job creation. I thank the Committee for its
hard work on energy efficiency and specifically in crafting the
legislative proposal being considered today. I sincerely hope I have
the opportunity to implement this program soon with the aim of
achieving our interconnected goals of creating good clean energy jobs,
reducing our reliance on foreign sources of energy, and reducing our
greenhouse gas emissions.
Thank you again for the opportunity to testify on this topic. I
will gladly answer your questions.
The Chairman. Thank you for being here.
Let me start with a couple of questions. One of the issues
that I think we need to just be aware of, we've got in place a
variety of tax incentives to encourage--we've got some to
encourage alternative energy production in your home, if you
want to put solar panels on or a geothermal heat pump, for
example, and there are other examples. We have other, less
generous tax incentives if you want to pursue energy efficiency
in your home, or at least that's my general understanding of
where things are.
I think this proposal, this Home Star proposal,
contemplates that a person, an individual homeowner, would have
to choose: Do you want to take advantage of those tax
incentives or do I instead want to participate in this rebate
program under the Home Star? I'm just wondering how you think
people would come down in making those judgments as you see it?
Ms. Zoi. The way the program is structured or is
contemplated is that the rebates are available for the eligible
list of measures. Those are generous, point-of-sale rebates
that would be taken advantage of. If those same measures are
eligible under the 25 [c] tax code, you cannot double-count or
double dip for the same technology.
The Chairman. Right.
Ms. Zoi. If, however, you take advantage of the rebate
program for, say, a new efficient furnace, but decide to do a
ground source heat pump or a set of solar panels under the tax
code, that is allowable. So what we don't want is to have
double dipping for the same technology, and the rebate program
as proposed is structured to be generous enough so that you
would actually bump up against the ceiling for that set of
technologies.
The Chairman. OK. How would something like a geothermal
heat pump fit into that? if a person was thinking that would be
a way to reduce my energy bill, how would they benefit either
through the Home Star program or the tax credits in that
regard?
Ms. Zoi. I'm a geologist and I'm a big fan of ground source
heat pumps. It's a fantastic technology. As you know, the
ground source heat pumps are eligible under 25 [c] and they
would be----
The Chairman. I think they're eligible for an uncapped tax
credit.
Ms. Zoi. For the Silver Star program, they are a higher
capital cost item than most of the eligible technologies that
have been identified for the Silver Star program. But they
would be a logical fit conceivably for the Gold Star program,
which has a higher ceiling. But again, we'd probably want to
make sure that if you reached your ceiling on the ground source
heat pump in the Home Star rebate program that it would be
counted against or offset with the tax program.
The Chairman. Dr. Parfomak was making a point there about
this 2-tiered rebate structure. I think he diplomatically
suggested that the Silver Star part of this thing would detract
from the overall impact of it some way or other because people
would--that's the low-hanging fruit and people would choose
that and not do some of the other things. Is that--what's your
understanding of that concern and whether it's a valid one?
Ms. Zoi. I'm really excited about the way we've structured
this program, because I think it elegantly combines the things
that are simple and straightforward, that consumers can
immediately go and purchase without a home energy audit, that
make good economic sense for them measure-by-measure, that will
create jobs immediately, will put construction workers back to
work immediately, that with the more sophisticated Gold Star
program that involves a bigger capital investment and a more
sophisticated modeling approach. It involves a bigger appetite
for doing the whole home at once and will take more time and
more money.
I actually think that because this program is designed to
be both a jobs program and an energy efficiency program, we're
in a good spot.
Second, in terms of the cream-skimming, I would say that
the measures that have been chosen and identified for Silver
Star in no way can be construed as cream-skimming. Eighty
percent of American homes are either uninsulated or
underinsulated. That's something that we need to take advantage
of right now, and you could do that through the Silver Star
program--furnace upgrades, the variety of measures that are on
that list.
So I would actually take issue with that. I don't think
that's cream-skimming. I think those are measures that are
going to create jobs and save American homeowners money
immediately.
The Chairman. Senator Murkowski.
Senator Murkowski. So to meet my Vern standard, how can we
with the proposal that we have in front of us, how do we deal
with the do-it-yourself individual who's working to bring about
those efficiencies within their home, but as I read through the
proposal we really don't allow for that level of participation;
am I correct?
Ms. Zoi. The current proposal does not allow that.
Senator Murkowski. Why the decision to go that direction?
Ms. Zoi. Again, I think it's because the purpose of the
bill is 2-fold. One is to create jobs immediately; and second
is to make homes energy efficieny. Regarding job creation--
because the measures that are eligible have an installation
component that's significant, you'll note that white goods, for
example, that can just be plugged in are not part of the Home
Star proposal because there is very little labor content.
It wasn't what was originally contemplated. I think Senator
Warner's suggestion is that he's open to thinking about that.
The administration will be as well. But the original idea was
to have this focus on the job creation that comes with the
installation of the particular goods.
Senator Murkowski. But that job creation is--that's kind of
the immediate opportunity, if you will. I think if we're
looking at this program and the value that we're really going
to be gaining long-term, it is that we are creating greater
efficiencies within our homes and commercial properties for a
long, long time to come.
So my question is how we can do more to help incent those
to do right within their own home as they're working their
remodeling projects?
Ms. Zoi. It is an important issue. The other piece that we
have been very mindful of is oversight and quality assurance.
So to the extent that we add a DIY component to the
legislation, what we need to be sure of is that the projects
are actually getting installed in the homeowner's homes
themselves, that it's not someone buying a whole bunch of
insulation to store in a warehouse somewhere.
We at the DOE are very, very mindful of waste, fraud, and
abuse, not that DIYs would, but we need to set up a system to
ensure----
Senator Murkowski. There has to be some kind of----
Ms. Zoi [continuing]. That the taxpayer money is getting
invested appropriately.
Senator Murkowski. I would agree with that and I think
Senator Warner recognized that as well.
I think one of the things that, as I looked through the
legislation itself, I looked at it and I thought, boy, is this
getting more complicated and more onerous just in terms of how
the process would come together. I think when we put together
programs such as what we're looking at with Home Star, you want
it to be somewhat expedient, easy to use, the user-friendly
type of an approach.
I've heard from some that they're really quite concerned
that we've got a creation of bureaucracy that's going to make
this more complicated. I'd like you to address that.
I'd also like you to address the comment from Dr. Parfomak
about the high expectations that we clearly have within this
program in terms of how many homes can actually be retrofitted.
He seemed to suggest that we are overly, overly ambitious with
this and that--he didn't say that we needed to narrow the
expectations, but I think it was pretty clear he didn't think
that it was achievable.
Can you comment on both?
Ms. Zoi. Sure. With respect to if we have concocted a
structure that's overly complicated from a bureaucratic
standpoint, what we've tried to do is the antithesis of that.
This program is closer to the Cash for Clunkers, single point
rebate processing system than it is to the other efficiency
programs that the DOE currently administers through States and
local governments and everything else.
So what we envision is by establishing this notion of a
rebate aggregator, there are thousands and thousands of
contractors across the country who are working with or for
utilities, big box retailers, independent sort of regionally
based energy efficiency companies. Those contractors are
certified, licensed, and bonded. Those entities will do the
work when a customer asks for it. Once the work's done, that
gets submitted to a rebate aggregator, who basically does the
quality control for us.
Senator Murkowski. Does DOE currently use a rebate
aggregator for any of the other programs that you operate?
Ms. Zoi. No, this is actually a brand new concept. Again,
because we're standing up something from scratch, we have the
capacity to design a system that we think will really work.
Now, the rebate aggregators are network specialists.
They're sector specialists. For example, Lowe's and Home Depot
have vast arrays of contractors that work for them. They know
them, they're used to this. So the idea of setting up sector
specialists that can aggregate the rebates so that when a
reimbursement request is submitted to the Department of Energy
basically we have a business-to-business relationship with
those folks. Rather than dealing with thousands and thousands
of contractors across this country and cutting checks and
making sure that the quality assurance is undertaken, we are
dealing with a couple of hundred rebate aggregators who are
sector specialists. We're actually really excited about that.
Senator Murkowski. These already exist, the rebate
aggregators?
Ms. Zoi. We've invented this name for them. But sure.
Senator Murkowski. But I mean, are these new jobs that
we're creating? Is this a whole new program that we're
creating? Or are there rebate aggregator systems that are in
existence now?
Ms. Zoi. There are functions that are undertaken by
utilities that currently run rebate programs, by State
governments that currently run Home Performance with Energy
Star programs, by big box retailers, and by contractors who are
operating regionally across the country. So those sorts of
activities exist. Where they're supervising a variety of
contractors, they subcontract out, they collect the data, they
get reimbursed. So yes, that's a familiar function.
What we're overlaying on top of it is an incentive for
consumers to get active and invest in energy efficiency savings
in their home. So we think that we've got a structure on the
rebate aggregator side that is the antithesis of bureaucracy.
It's actually streamlined, with experts who understand the
field.
The second part of it is standing up a quality assurance
scheme, which is again very, very important to us. If we're
investing the taxpayer money, we want to know that the
investments are actually yielding the results that the statute
prescribes. So we want to work with the States, who are closer
to the building home inspection industry, to oversee the
quality assurance piece of this.
So again, we think that we've got a streamlined structure
that is very, very different than the typical programs that
have been administered out of the Department of Energy through
the Recovery Act and otherwise.
To your second question on the ambition on numbers, one of
the things that we're most excited about is harnessing the
marketing potential of the private sector players. The programs
that the previous witness, Mr. Parfomak, talked about that had
been going along at a particular level, we've never had the
marketing machinery behind those programs. We have not had,
historically, the amount of investment and the attention. We
also obviously have leadership in Washington that's talking a
lot about this.
We have an appetite for energy efficiency, and I've been in
the arena for 18 years. It's almost revolutionary, the amount
of appetite that I've seen increase over the past couple of
years.
So I think that we may be ambitious on numbers, but they
are ambitious and achievable. But as you'll note, the
legislation also allows for if the money does not get invested
the money goes back to the Treasury.
The Chairman. Thank you, Mr. Chairman.
The Chairman. Senator Stabenow.
Senator Stabenow. Thank you very much. Thank you, Mr.
Chairman, very much.
Welcome. It's great to see us talking about something that
will both create jobs and also focuses on some very important
goals of energy efficiency, saving money. I'm a very strong
supporter of both Home Star and Building Star and I want to see
both of these go forward.
I want to talk a little bit more in terms of administration
because, as the Senate author of Cash for Clunkers, I was
deeply, on a daily basis, involved after we passed it in terms
of what was happening to reimburse our dealers and to make this
work. So I guess I have a couple of questions.
That is, when we talk about, particularly if we're talking
about Home Star or Building Star, they have to have timely
reimbursement to businesses, particularly when we're talking
about small businesses. It's going to be important for
widespread participation to know that this is something that is
very timely back to the business. This will be--I will just--
that's my advice to you at this point. This is going to be
very, very important.
Secondly, we've got to make sure we're promoting the high
quality of work so that we're instilling confidence in the
potential of home retrofits to capture real energy savings and
reduce homeowners' energy bills, so that they are seeing that
actually happen, so again people will use that program.
So I wonder if you might speak to that in terms of the
current discussion draft. Do you think it adequately addresses
both of those things, and particularly a system that will allow
that timely reimbursement, which is going to be critical from a
cash-flow standpoint for businesses to be able to participate?
Ms. Zoi. Yes, absolutely. Thank you for the questions,
Senator Stabenow. The administration shares your total
commitment to timely reimbursement. What we have constructed is
something that dovetails existing systems of how contractors
work with the people to whom they contract. The rebate happens
right at the point of sale for the consumer, so that's
instantaneous.
As soon as the work gets done, which is what we envision,
the contractor submits the rebate form. We will have given them
a template. We will say we need these fields of information
filled out, and it will probably a dozen things: Is it an
eligible technology? Where was the work done? Where was the
customer, and the signature of the customer.
That gets submitted to a rebate aggregator. These rebate
aggregators will have systems to pull all this together. On a
weekly basis, it will get submitted to the Department of
Energy, where we will have a system that processes those
rebates, and then the checks will be sent out.
So we have a system that we think might even be faster than
what contractors in the field, at the coal face, are actually
used to. That's absolutely what we have in mind. These are
going to be small contractors that are doing this work and it's
very, very important that they're not hanging out there with
month on month delays of getting the money back. So that's sort
of the first thing.
On the work quality, again we are completely committed to
ensuring that there is a quality program. That's one of the
reasons that we're excited about having this rebate aggregator
concept. If you just had a professional rebate fulfillment
house aggregating these things, and it was not aware of some of
the ins and outs of what happens when you actually have a
retrofit that gets done, what it is like to insulate a home,
what certifications you need to have to connect a heat pump
water heater, then we would be a little less comfortable. But
by constructing a situation where there are a couple hundred
rebate aggregators who are basically managing their networks,
then we feel comfortable that--and having a list of criteria--
in order to perform Silver Star, you have to be licensed,
bonded, and warranted. In order to do Gold Star, you have to
have Building Performance Institute certification or some other
certification that the Secretary deems is appropriate. We feel
like we are going to have good quality work that gets done.
Even so, as you know, the program includes a quality
assurance scheme where 20 percent of the jobs that get done get
field audited. Again, that's very, very important to us to
create the comfort in the consumers that this is a good program
that's going to be reliable and that's going to save them
money.
Senator Stabenow. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Burr.
Senator Burr. Welcome, Secretary Zoi. Thank you for your
insight on this.
Let me ask very candidly, with the right structure does the
Department of Energy support a DIY option?
Ms. Zoi. I think that the answer for the moment would be
for us to work with the committee on that, because, as I say,
it would be less about the near-term jobs then.
Senator Burr. I realize I asked a little more pointedly
than Senator Murkowski asked. But let me assure you--and I'm
only speaking for one member of the Senate--if DIY is not part
of this program, then I don't see how I could support this
program, even consider it. It's beyond any comprehension that
I've got as to how we could leave that segment of the
marketplace out of a program if in fact the intent is to make a
program successful.
Ms. Zoi. We would want to work with you on the provisions
that we discussed a little earlier with Senator Murkowski,
making sure that the quality control is there, that the
oversight is appropriate.
Senator Burr. Share with me, if you will, since we have an
Energy Star program, why are some of the Energy Star products
excluded from this Home Star program?
Ms. Zoi. The Home Star program is designed to get efficient
technologies into people's homes quickly. Some of the Energy
Star standards, levels of what is eligible for Energy Star, are
being reviewed right now and they probably need to be upgraded
and updated. At the moment the industry got together, again a
bipartisan group from industry and from the environmental
community and energy efficiency advocates, and came up with a
level for each of the technologies that, in some cases, is
beyond what Energy Star is, just because Energy Star has a bit
of catch-up to do.
Senator Burr. Let me go back to your statement. You said
repeatedly: We've got to make this simple and understandable.
We now have over a decade, if not 2 decades, of driving Energy
Star product into the American people, and now you're saying:
Oh, I'm sorry, that Energy Star product is not going to be
included because it doesn't meet the new standard that we've
set to be included in this program.
I think that just contributes to I think what CRS said,
that we've got a grandiose goal that we're shooting for and a
historical understanding that we're not going to get there.
I've not sure that we've met the threshold of simple and
understandable if in fact we use definitions that are common
with the American people and we say, well, no, that's not the
definition we're using any more, this is now a new standard
that we've set, and you should feel OK because everybody's
agreed to it. I just say that as a precautionary thing.
The Home Star proposal authorizes $6 billion for the
program. Of that $6 billion, how much is targeted for the
administrative costs of the program?
Ms. Zoi. I don't know that number off the top of my head.
Do you know the answer?
Senator Burr. I'm told it's $600 million.
Ms. Zoi. OK.
Senator Burr. I find that to be incredibly high.
For the rebate aggregators, do you know what the average
reimbursement would be for processing of a claim by a rebate
aggregator?
Ms. Zoi. I think the current proposed legislation has $25
per transaction.
Senator Burr. I'm told that in the marketplace that can be
done for $1.50.
Ms. Zoi. That's something that we can look at.
Senator Burr. I'm trying to ask the appropriate questions
that are going to be asked as this legislation moves through.
Now, you're targeted in this to--and I want to get a
clarification--create 168,000 jobs. Is that create or is that
create or save?
Ms. Zoi. The administration has not been terribly specific
on the precise number of jobs created. We say tens of thousands
of jobs will be created. The 168,000 figure I think has come
from the Home Star Coalition.
Senator Burr. From the Home care----
Ms. Zoi. Yes. So I think maybe one of the future witnesses
could talk about what the methodology they used to come up with
that number.
Senator Burr. OK. If I told you that that was $35,714 per
job, would you think that that's probably high?
Ms. Zoi. Interestingly, what we're finding in the
weatherization assistance program that, at the moment, it's
about $42,000 per job. The average----
Senator Burr. Given the number of houses that we've
weatherized, I could find that to be possible.
Ms. Zoi. Actually, can I take a moment and talk about where
we are on weatherization?
Senator Burr. Sure. We went through a hearing the other day
and I walked away from that just as confused as I was when I
went in.
Ms. Zoi. All right. I actually would love to take a moment
with it because, while the program has been slow to get going,
the Congress allocated 25 times the budget that the
weatherization program had ever had in the past. So there were
obviously going to be ramp-up and scale-up issues. In addition,
there were the new Davis-Bacon provisions that had to be worked
out.
So the weatherization structure is that the Department of
Energy allocates money on a formula basis to the States and the
States then allocate the money to 900 community action agencies
to do the weatherization work. During the summer and autumn
months in 2009, essentially what most of those community action
agencies did was that they staffed up, they trained new people,
and they bought equipment.
In the last quarter of 2009, we tripled the number of homes
that were done during that quarter. Our target is to get
between 20,000 and 30,000 homes a month to meet the President's
objectives. In December we were up at about 7,000. In January
we were up at between 15,000 and 17,000. This is not the
official audited reports. This is why I have to be a little bit
vague. So we actually had jumped. We were on the proverbial
hockey stick to meet our targets.
The community action agencies--and I just spoke to them at
their gathering in Washington last week--they are quite certain
that they will be able to meet their targets, their State-based
production targets, some time in the March-April time frame.
So it has been slow to start. Nobody is happy about that.
But, it has turned a corner, and I think that we will, by March
2012, meet the President's objective of weatherizing about
600,000 low-income people's homes.
Senator Burr. I appreciate that and I think, knowing the
community action agencies like I do, I don't think that theirs
was a hesitation to start the program. It was waiting for the
Department of Energy to put the rules and the regulations
together.
I look at another program that lacks the clarity right now
for me to be assured that we're going to go out and this is
going to be a growth curve like this, even if the retailers
believe it. I'm happy to support it if I think it will work.
But they don't have any skin in the game, so they're going to
be supportive of anything. I hope you will take to heart the 3
things that I mentioned: the DIY----
Ms. Zoi. Yes.
Senator Burr [continuing]. The Energy Star inclusion, and
the confusion that that will send; and what I think is an
unacceptable 10 percent devoted to administrative costs in a
program that, as CRS said, the more complicated you get it, the
more difficult it is for a customer to understand it, the less
participation you're going to have. Even if it was perfect, his
estimate was that we fall woefully short of what the target is.
I thank you.
Ms. Zoi. If I could just qualify the $600 million, because
I've just been passed a note which has the actual breakdown.
That $600 million is not just the Federal Government
administration. It also includes $200 million that goes to
States for financing and the quality assurance functions and
the marketing and education functions that happen. So part of
it is administration and part of it is those other very
important pots of money.
The Chairman. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
Thank you to Assistant Secretary Zoi for being here today.
Let me just reaffirm what you had to say about the impact that
the weatherization program is having across the country. I
visited a number of sites in New Hampshire. I've seen the
savings that families are realizing and the benefits to the
quality of their lives and their homes because they're more
efficient, and have talked to some of the people who are
working now because of that program. So it's been a big
success, and obviously we have a lot more to do. Fortunately,
the number of homes that are being retrofitted are going up
every month.
I would like to add a caution to follow up on Senator
Stabenow because, as we've discussed, one of the concerns that
we've heard from the CAP agencies has been around the clarity
of rules governing the program. I think we all appreciate the
need for accountability, but the rules of the road need to be
very clear at the outset so that people know what they're
getting into and know how they have to respond.
So I would just urge as part of this program that that be
very well thought out and clear, so that they're not changed in
the middle of the program and there's no ambiguity about it.
Let me also say that, because New Hampshire has a higher
than national average share of individual homes and dwellings,
that a program like this is particularly important to our
State. I'm very happy that biomass and wood pellet appliances
are included in the proposal. That's something that we care a
lot about in New Hampshire.
My question is that, I understand that EPA maintains a list
of wood and pellet stoves that are based on emissions. One of
the things that I think people are interested in as they're
thinking about this program is how to be as efficient as
possible. So the efficiency of those wood stoves and appliances
are going to be very important to people. Are you envisioning
that DOE will maintain some sort of rating on the efficiency on
these kinds of appliances or has any thought been given to that
and how can we accomplish that, so that people will have that
information as they go to buy their wood stove or appliance?
Ms. Zoi. I think our expectation is that the list of
eligible appliances is written down in the statute and that we
would formalize that in a rule with more specificity. But what
we would really like is to give the Secretary the discretion
over 6 months to adjust those if the market circumstances
change, just to determine if there is an efficiency adjustment
that needs to take place.
Senator Shaheen. My concern is not so much that there be
those adjustments, but that whatever is available is
transparent to the public so they can get that list, so they
know what they're buying, just as if they go out and buy a
refrigerator they know what the efficiency is on that
appliance.
Ms. Zoi. Absolutely. I think what we need to do is make it
easy for consumers to understand what's eligible under Home
Star.
Senator Shaheen. Thank you.
Let me just also address another issue, because I know the
hope is that Home Star can be part of the look at how we get
this economy moving going forward and any kind of a jobs bill.
One of the other areas that I think is very important is
looking at how we address efficiency in public buildings,
because that's a huge energy use. I know that the energy
efficiency and conservation block grant program has been slow,
relatively slow to get up and running. It's my understanding
that now we've turned a corner and that we are getting money
out the doors. Is that something that you would agree with?
Ms. Zoi. Yes, absolutely. We've got 1,200 activities that
are already under way and, hand on heart, we will clear out the
backlog this quarter, because I share your commitment to
getting the money out the door in EECBG.
Senator Shaheen. You agree that this is another way that we
can put people to work, that we can save on energy costs, and
that we in most cases can help communities and school
districts, because they're the big users of energy in those
public buildings.
Ms. Zoi. Absolutely. The list of projects that are under
way already through EECBG and SEP covers schools, public
libraries, a variety of public buildings. Again, it's going to
create jobs, and it's going to reduce the burden of energy
bills for local governments, which is incredibly important.
Senator Shaheen. Absolutely. I'm hopeful that as we proceed
with this effort that we can include public buildings also as
part of those energy efficiency savings. I'm certainly willing
to work with the Department as we figure out how to do that.
Ms. Zoi. Great. Thank you.
Senator Shaheen. Thank you.
The Chairman. Senator Risch.
Senator Risch. Thank you.
Just briefly, I can tell you that the home weatherization
program's well up and running in Idaho. It was slow getting
going, like it was everywhere else. Apparently they were
complaining about having to fight the Davis-Bacon battle, and
once they got that behind them they're off and running.
I was a little bit surprised that the average saving--and
they told me what it was and it's in my mind right now, but I
don't want to quote it because I'm not exactly certain. But I
remember being a bit surprised that the average annual saving
was as low as it was on a residence. Particularly with the kind
of structures that they're working on, it would have seemed to
me that the savings would have been a lot more, particularly
with the amount of the investment.
Go ahead.
Ms. Zoi. If I may, the tricky part with the low-income is
that sometimes the energy savings aren't as much as you might
have thought because now--it's almost a lifeline comfort thing.
People were not using energy and it was actually a health
issue. So now when they have an efficient home, it's more
efficient than it would have been otherwise, but it's a
comfortable home.
Senator Risch. That makes perfect sense. But anyway, that's
something you might want to--if it was private industry doing
it, I have no doubt that they would keep a very close eye on
what that efficiency is.
So thank you so much for what you're doing.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Sanders.
Senator Sanders. Thank you very much, Mr. Chairman.
Let me begin by just thanking you for working with our
office to include financing support in the Home Star program.
We appreciate that very much.
Ms. Zoi, thanks very much for being with us. Let me begin
by saying that, Mr. Chairman, I'm glad that we're focusing on
energy efficiency because as we transform our energy system
probably the most important thing that we can do is make this
Nation a lot more energy efficient. I'm very proud to say--and
I argue with Barbara Boxer about this a bit, but we think
Vermont may in fact be leading the country in that direction.
Having said that--and the results of that is that, with our
economy not being any worse off than other economies in the
recession, we are now--our major utilities now sell less
electricity in Vermont than they used to. So the potential for
energy efficiency is extraordinary, and I'm glad that we are
focusing on it. I think we've got a long way to go.
I would pick up from Senator Risch's point about what he's
seeing in Idaho, we're seeing in Vermont, the weatherization
program being very, very valuable. I don't remember the numbers
as well, but I think they're higher in Vermont than what you
were quoting. I was just in Berry, Vermont, where they've hired
a number of people. They have a long waiting list. People are
now getting their homes--and I think they're able now to put
more money, do a more comprehensive weatherization approach
than they used to. The results in my memory is 20 or 30 percent
cuts in people's energy consumption.
For every dollar we spend on that, I think in terms of job
creation, in terms of cutting greenhouse gas emissions, in
terms of saving fuel, I think it's a dollar very, very well
spent. So I would hope, Mr. Chairman, that we can fight as hard
as we can to put money in weatherization. That is clearly I
think one of the most cost-effective Federal programs that
exists.
Ms. Zoi, could you talk a little bit about the potential of
the Home Star concept and say a few words about how you see the
Department of Energy working with us on that?
Ms. Zoi. We think that there's a unique opportunity to
quickly re-employ construction workers, contractors, idle
folks, that know how to do these things, but have never focused
on the energy efficiency sector per se, with a longstanding
opportunity to make our homes in America more efficient.
There are 130 million homes in America and, as I said at
the beginning, few of them are actually as efficient as they
could be. Almost every one of us has an energy efficiency
opportunity. But it's been a little bit of a pain in the neck
to take advantage of some of those things.
What this program does is it makes it easy for consumers--
through point-of-sale rebates--to obtain technologies that are
tried and tested, using skilled labor to get those things
installed. It's just the beginning of a transformation that I
think will take hold. This is a burst that will create a sector
that will continue to do this after the program is gone. At
least that's our hope.
Senator Sanders. We agree with you, and thanks for your
support. We're interested also in the PACE concept. Actually,
my city in Burlington just in March Meeting Day a few weeks ago
passed language to go forward on that, I think one of a dozen
cities in America that's doing that.
What I like about it, Mr. Chairman, is here you have a
situation where many people want to improve their homes in
terms of sustainable energy or energy efficiency. They don't
have the up-front capital, they don't have the $10,000 or
$15,000 that they need to make that transformation. If they did
have it, they would save money over a period of years, just not
having that initial amount of money.
So if we can get that money to them and have that paid off
over a period of years in property taxes or paid off in
electric bills, they would be able to do the work.
So all that I want to say is I am a very--I think we are at
the cusp of transforming our energy system. Energy efficiency
is at the heart of that. Sustainable energy is at the heart of
that. I think, as the President has indicated many times, this
can be an enormous step forward for our economy in creating
millions of good-paying jobs, not importing oil from abroad,
not wasting energy.
So we look forward to working with you and we thank you for
what you're doing.
Ms. Zoi. Thank you.
The Chairman. Senator Udall.
Senator Udall. Thank you, Mr. Chairman. I thank you and the
ranking member for holding this important hearing.
If I might, if hopefully I'm not going to transgress the
committee rules, I'd like to acknowledge Tom Plant, who's in
the audience, who heads Governor Ritter and the State of
Colorado's Energy Office. Ms. Zoi, I think you know Mr. Plant
and you know what a great advocate he's been of putting people
to work in just the ways that you and Senator Sanders just
discussed.
I agree with all of the comments that have been made that
this is such an opportunity for us, and of course the cheapest
ton of coal, the cheapest barrel of oil, the cheapest megawatt,
is the one you don't use. I think frugality and conservation
have long been an America value, particularly in the great
State of Vermont and the great State of New Hampshire--the
Yankee spirit of doing more with less.
Your efforts are very, very important, and we are waiting
for further resources to enter the pipeline and take advantage
of what I think is a pent-up demand, frankly. I hear it all the
time from my constituents. There are a lot of small businesses
that are poised to go to work.
In that spirit, I want to ask a little bit about the Water
Sense concept and the Water Sense label and certification
process, which would save water, particularly in a place like
the West, where water's the most precious commodity we have.
Have you done any studies on what we could save as a country in
terms of energy, water, even pollutants that are avoided, if we
had a serious sustained effort to retrofit our buildings with
water efficient products, such as Water Sense?
Ms. Zoi. That's an excellent question, and the
administration is obviously committed to not just energy
conservation, but water conservation as well. I would have to
get back to you on that. I don't know that the Department of
Energy has done a study to link the energy savings with the
water savings in any particular way. But that's an answerable
question that I will find out and will get back to you.
Senator Udall. I was just in a skyscraper in New York City
last week. I won't mention the owner. But it had been remodeled
significantly, a very tall building, and with some very
interesting water collection systems, reusing the rain water as
grey water, then eventually putting it into the city's waste
water treatment systems. But they avoided a lot of runoff from
storms, and we know the problems that are associated with that,
and it was a net energy reduction. It was also a net cost
reduction for this skyscraper. It was really exciting to see.
Ms. Zoi. At the other end of the spectrum, not a Manhattan
skyscraper but in a low-income weatherization program, water-
saving features are part and parcel to what we do. So shower
heads that actually conserve water means conserving the heat
that it takes to heat excess water, and then aerators for the
faucets. Those are just standard measures that get installed in
low-income people's homes during the weatherization program.
Senator Udall. I even saw an almost science fiction-like
technology the Japanese use where they actually capture the
little bit of energy that results from water flowing through
the toilet itself. So I think that that is perhaps science
fiction at this point in time, but every bit of energy we can
harvest after we capture it we understand is meaningful.
Let me turn to the National Renewable Energy Lab as the
clock continues to run. The gap between science and applied
research needed to bring energy efficiency technology to the
marketplace at speed and scale is really the focus of the work
there. I know you see that as an important goal. Thank you for
your support of NREL. Of course we're very proud to have it in
Colorado. I hope you've had a chance to visit.
Ms. Zoi. Of course I have.
Senator Udall. I hope you'll come back.
We also with the NREL model have in Colorado and I know
other States, I know the State of Michigan--Senator Stabenow
speaks powerfully and passionately about what they're doing in
Michigan--have created these collaborative efforts between labs
and universities and industry. What more can we do? What are
you doing at DOE to create and promote that kind of an
approach?
Ms. Zoi. Under Secretary Chu's leadership we are pushing
for collaborative research efforts. He often harkens back to
his experience at Bell Labs, which was sort of an under one
roof scientists coming together of multidisciplines. His notion
of the hubs is very much about capitalizing on lab research,
university research, and applications, and getting things into
the marketplace more quickly.
So we are very, very excited about that. All of the
solicitations that I have been involved in since coming to the
Department 7 months ago have basically tried to find the best
and the brightest from labs and from universities, so we are no
longer just focusing on one single sector to get the best
outcomes.
I think it's right from the top of the Department to say,
let's get the best, let's get labs, let's get everybody working
together. ARPA-E has some joint work between labs and
businesses, which again should compress that time it takes
normally to get from discovery to marketplace.
Senator Udall. I don't know why I'm doing this because I
have no voters in all these States I'm mentioning, but I also
acknowledge that Senator Bingaman and Senator Murkowski have
great efforts under way in their States, which thank God for
federalism and hopefully the Federal Government will begin to
lead again, too, in the near future as we look at a
comprehensive energy bill, hopefully a price on carbon that
will emerge from the Senate.
Ms. Zoi. Absolutely.
Senator Udall. Thank you.
The Chairman. Let me just ask members. We have another
panel of six witnesses here and I would go to those, unless
someone has a burning question they need to ask the Secretary
that we haven't.
Senator Murkowski. Mr. Chairman.
The Chairman. Yes, go ahead.
Senator Murkowski. I have a whole series of questions, but
in the interest of time and knowing that we do have a full
panel, I'll just submit those to Ms. Zoi. Thank you.
The Chairman. Thank you very much for being here and
testifying and your advocacy for this set of proposals. We
appreciate it.
Ms. Zoi. Thank you.
The Chairman. The second panel is--let me introduce the
folks. It'll be: Larry Laseter, who is President of Masco Home
Services in Atlanta, Georgia; Stacey Epperson, who is Executive
Director of Frontier Housing in Morehead, Kentucky; Jeffrey
DeBoer, who is President and Chief Executive Officer of the
Real Estate Roundtable; Phil Giudice, who is the Commissioner
of the Massachusetts Department of Energy Resources; Bob
Hanbury, President of the House of Hanbury Builders, on behalf
of the National Association of Home Builders.
I was informed that Senator Stabenow wanted to introduce
the witness we have here from Michigan. So why don't you go
right ahead.
Senator Stabenow. Thank you, Mr. Chairman. I just wanted to
welcome Terry Mierzwa, who is the Executive Manager of
Marketing, Energy Efficiency, and Research at Consumers Energy
in Jackson, Michigan. We're very pleased. He has testified in
the State legislature and a number of other forums, and very
pleased that he's here as a part of this effort.
I also want to say that Masco, Mr. Laseter, is connected
with a great Michigan company as well. So welcome to all of
you.
The Chairman. All right. We will take the full written
statement that each of you have prepared and include them in
the record. But if you could take about 5 minutes each and sort
of tell us what the main points are that you think we need to
understand about these legislative proposals, that would be
very useful.
Why don't we start with you, Mr. Laseter, and just go right
down the table there.
STATEMENT OF LARRY LASETER, PRESIDENT OF WELLHOME, ON BEHALF OF
THE HOME STAR COALTION, ATLANTA, GA
Mr. Laseter. Thank you, Mr. Chairman, Ranking Member
Murkowski, and members of the committee. I'm Larry Laseter. I'm
President of Masco Home Services. We're also known as WellHome,
and our company is a home performance contractor. We're an
operating company of Masco Corporation, which is a Michigan-
based Fortune 500 company and one of America's largest
manufacturers of products for the home. Masco is better known
by our leading brand names, such as Behr Paint, Delta Faucets,
Craftmade Cabinets, and many others, and we are the Nation's
largest installer of insulation, focused on the new home
industry.
But I'm here today to speak on behalf of the Home Star
Coalition. This is a broad group of industry, labor, energy,
and environmental supporters, including more than 600 small
businesses representing all 50 States. We stand together in
support of the Home Star program, which would deliver a rare
triple win for the American people in the form of jobs, savings
for customers, and a positive impact on the environment.
Let me begin with jobs. Make no mistake about it, the
construction industry is in the midst of a one-industry
depression. The unemployment rate in construction is 27
percent, almost 3 times the overall jobless rate. This rate is
higher than our Nation's unemployment rate at the height of the
Great Depression. At Masco Corporation, our parent company, we
have felt the pain of this industry downturn firsthand. We've
lost over 27,000 jobs and over 40 percent of our work force.
However, these construction workers have the know-how and
experience for home energy retrofits and they're ready to get
to work in jobs that cannot be outsourced overseas. Home Star
will create jobs for these workers and drive increased demand
for manufactured products and building materials that are
almost universally made in the United States, supporting
further job growth and economic impact and putting idle plants
back to work.
Now, for the American homeowner the benefit comes in the
form of 10 to 40 percent annual energy savings. These savings
are equivalent to a $500 stimulus check that a participating
homeowner would receive every year for years to come.
Of course, energy efficiency improvements will support
energy independence and the environment. Home energy represents
22 percent of our carbon output, twice that of automobiles, and
more than two-thirds of America's over 100 million homes were
built before modern energy codes. There's clearly a need, and
Home Star will simplify and lower the cost of these home
improvements, things like drafty windows, leaky ducts,
installing insulation, high-efficiency heating, air
conditioning, undertaking whole home energy efficiency
retrofits.
Home Star is also establishing up-front processes and
systems to maximize the impact of the program and ensure its
accessible to all. For example, we all know that many middle
class Americans are squeezed by the economy and the credit
crisis, which could prevent them from paying the homeowner's
share of the efficiency improvements. That's why the Home Star
proposed legislation allocates $200 million for State programs
to facilitate home retrofit financing.
Home Star also establishes a quality assurance system based
on rigorous proven technical standards to deliver on the
promise of energy savings. This system establishes industry
performance standards, ensures that a portion of all jobs are
inspected by credentialed professionals after project
completion, and offers an additional incentive to contractors
that invest in a properly trained and certified work force.
Now, most importantly, this program can move quickly, with
a minimum of red tape, and show immediate measurable results
that will create a platform for a long-term sustainable home
energy retrofit industry. Home performance improvements work.
The building science and the energy savings are proven, and we
have tremendous opportunity to make huge energy efficiency
gains through this program.
Now, while the current bill, draft bill, is excellent, we
believe as the Home Star Coalition that there are 2 important
changes that could be made to enhance the legislation. First is
the addition of a targeted incentive for customer-installed
measures, or the DIY measures, under the Silver Star program;
and the second is the integration of the Home Star incentives
with existing 25 [c] tax credits. These 2 changes will expand
consumer awareness of the Home Star program and ensure its
success while reaching more Americans.
I would like to conclude by affirming that Home Star is a
win-win-win for jobs, for the American consumer, and for the
environment. It will put an estimated 168,000 skilled Americans
back to work in the hardest hit part of our economy, the
struggling construction and its related manufacturing sector.
It will help more than 3 million American families retrofit
their homes for energy efficiency, saving them as much as $9.4
billion in energy costs over 10 years, a return greater than
the cost of the program itself. It will positively impact the
environment and America's energy independence.
So on behalf of the current and future workers represented
by the 600 businesses that make up the Home Star Coalition and
the millions of households which will benefit in every
community in America, I encourage you to move this bill forward
without delay.
Thank you for the opportunity to testify and for your
important leadership on behalf of the American people.
[The prepared statement of Mr. Laseter follows:]
Prepared Statement of Larry Laseter, President of Wellhome, on Behalf
of the Home Star Coaltion, Atlanta, GA
OVERVIEW
HOME STAR is an incentive program that will deliver a rare triple-
win for the American people in the form of jobs, savings for consumers,
and a positive impact on the environment.
HOME STAR will create jobs that can be filled immediately using a
skilled and ready construction workforce--workers idled by the
recession who are now most in need of help. It will drive increased
demand for manufactured products and building materials, supporting
further job growth and economic impact. HOME STAR will result in energy
savings for homeowners and higher home values. And longterm efficiency
gains will support energy independence and the environment as we reduce
our carbon output. Importantly, the program can move quickly, with a
minimum of red tape, and show immediate, measurable results that will
create a platform for long-term development of a high-quality and
rapidly growing home energy retrofit industry.
HOME STAR puts Americans back to work now and will create jobs in
existing industries by providing short-term incentives for energy
efficiency improvements in residential buildings. The program is
designed to jump-start construction and manufacturing jobs by offering
rebates to consumers who invest in home energy improvements and energy-
efficient products and services. Demand will rise for skilled
construction labor and advanced building materials as homeowners make
improvements to their homes. Manufacturing inventories will be
restocked and assembly lines for advanced materials and U.S. technology
will start rolling again. Investment and capital will begin to flow to
millions of idled construction and manufacturing workers and create new
demand to retrofit homes for energy performance--now and into the
future.
HOME STAR is a timely program that builds on existing policies and
initiatives that have already demonstrated effectiveness. It has won
widespread support from the HOME STAR Coalition, which is comprised of
national retailers, building products manufacturers, labor advocates,
environmental and energy efficiency groups, state agencies, contractors
and more than 600 small businesses from every state. The Coalition
views HOME STAR as a win-win-win. It will: 1) put an estimated 168,000
skilled Americans back to work in the hardest-hit part of our economy--
the struggling construction and manufacturing sector; 2) help more than
3 million American families retrofit their homes for energy efficiency,
saving them as much at $9.4 billion in energy costs over 10 years; and
3) positively impact the environment and create a healthier planet by
removing the equivalent of 615,000 cars from the road. Now is the time
for HOME STAR.
THE CRITICAL NEED
Construction: A One-Industry Depression
A program that incentivizes energy improvements would rapidly
create jobs within the construction sector and in the manufacturing and
retail industries that support it. These are areas of the economy that
need help the most.
While the overall economy has begun a slow climb out of recession,
the current state of the American construction and building materials
industry remains depressed. Overall unemployment fell to 9.7% in
January and February of this year, but unemployment in the construction
industry has continued to rise, reaching 27.1% in February--meaning one
in four American construction workers is currently out of work. This is
a higher rate of unemployment than our country felt during the Great
Depression.
Construction-related unemployment is significantly higher in some
states, with catastrophic results for local economies. Arizona, Nevada,
Michigan and Florida, for example, have lost over 40% of their
construction jobs since the peak of the housing market.
As devastating as these numbers are, the unemployment figures for
construction probably do not reflect the full magnitude of the problem,
due to the large number of self-employed construction workers that do
not show up in payroll statistics. Economic Census data shows that the
self-employed share of workers is significantly higher in the
construction industry than in other sectors (16.6% in 2008), so the
jobs picture is even more dire than the statistics suggest.
Further, more than 90% of contractors in the construction industry
are small businesses--another hard-hit segment of the economy. Building
materials manufacturing is off by at least 40% from its capacity. The
result is hundreds of factories that have closed or are running only
part-time lines. This shocking drop in construction industry jobs and
its reverberating impact on building products manufacturers, retailers,
and specialty trades demands attention and an urgent policy response.
It is hard to foresee a robust economic recovery in communities when
these depression-level conditions persist within local construction job
markets.
By the end of last year, 42 of the 44 states with available data
had seen job losses in excess of 10% of total construction jobs since
the last peak in construction employment; 31 states had lost more than
20% of their construction jobs; 11 states had lost more than 30%; and
four states had experienced a shocking decline in construction
employment of more than 40%.
Importantly, the vast majority of manufactured products and raw
materials used in residential energy efficiency retrofits are produced
domestically, so the dollars spent on HOME STAR improvements circulate
primarily through the U.S. economy. In many categories of building
materials, the rate of domestic production is over 92%.
America has millions of skilled construction and manufacturing
workers who are unemployed and need relatively little re-training to
enter the retrofitting industry. HOME STAR is a targeted program that
will create hundreds of thousands of new jobs, and impact thousands of
local businesses in every community in America.
ENERGY EFFICIENCY
Improving the energy efficiency and performance of existing homes
could have a dramatic impact on the national consumption of energy.
Two-thirds of the more than 100 million single-family homes in the
United States were built before the adoption of modern energy codes.\1\
These existing homes consume 22% of the nation's energy overall--
approximately twice the carbon emissions produced by passenger cars.\2\
This stock of older homes provides a prime market for energy efficiency
upgrades.
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\1\ U.S. Department of Energy
\2\ Pew Center on Global Climate Change
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If homes built before 2000 used as little energy per square foot
(adjusted by region) as those built since 2000, residential energy
consumption would drop by 22.5%. While this calculation does not
account for differences between older and newer homes related to
layout, location, and household behavior, it does illustrate the
potential energy savings from retrofitting the existing housing stock.
Another important factor that reinforces the need to make our homes
more efficient is the impact on affordability. The housing and mortgage
crisis occurred at a time of skyrocketing energy prices that pushed
many homeowners over the edge into default as they could not pay both
their mortgages and high energy bills. HOME STAR can help to cushion
working-and middle-class homeowners against future energy price surges.
Further, energy savings translate directly into lower bills and
therefore greater housing affordability, helping to keep hard-pressed
families in the homes.
The time for comprehensive home energy efficiency improvements is
now, and HOME STAR offers Americans the opportunity to do their part in
reducing energy consumption by improving the efficiency of their homes.
HOME STAR offers significant and broad-based energy efficiency
benefits. HOME STAR will help more than 3 million American families
retrofit their homes for energy efficiency, saving them as much as $9.4
billion in energy costs over 10 years. This is the equivalent of
removing 615,000 cars from the road or the energy generated from four
300-megawatt power plants. All supported technologies and improvement
measures in HOME STAR are proven to provide the promised benefits.
building on existing state and federal energy retrofit programs
There are many opportunities for homeowners to improve efficiency
throughout their homes. The most successful campaigns have included the
Home Performance with ENERGY STAR program managed by the Department of
Energy and the Environmental Protection Agency, and state or utility
programs that have focused on replacing old equipment and retrofitting
homes. The structure of the HOME STAR program pulls heavily from the
Home Performance with ENERGY STAR program operating in 29 states.
States as diverse as Oregon, New York, Tennessee, Rhode Island,
Massachusetts, Missouri, Arizona, and California have programs that
demonstrate the effectiveness of the HOME STAR approach and can help
jump-start nationwide participation.
THE SOLUTION
HOME STAR is the solution to the serious issues and challenges
outlined above. HOME STAR is a fastacting, short-term job creation
program that will drive private investment into the hard-hit
construction and manufacturing sectors, while saving consumers money on
their energy bills and reducing carbon emissions. It will build on
current state programs and existing industry capacity for performing
both retrofits and quality assurance, using federal standards and
incentives as a common platform to lower program costs and increase
consumer awareness. Strong consumer incentives to drive market demand,
combined with meaningful standards and incentives for high-quality
implementation of efficiency measures and verification of energy
savings will ensure that the growing energy efficiency retrofit
industry produces ongoing and measurable results while putting
Americans back to work in long-term jobs.
In light of the fact that two-thirds of the more than 100 million
homes in America were built before modern energy codes, there is a
pressing need for the energy efficiency improvements HOME STAR will
make possible. HOME STAR will simplify and lower the cost of home
improvements such as fixing drafty windows and leaking ducts,
installing insulation and high-efficiency heating and air conditioning
equipment, replacing inefficient hot water heaters, or undertaking
whole-home efficiency retrofits that can cut energy bills by 20% or
more.
HOME STAR provides two types of consumer incentives:
The SILVER STAR prescriptive path provides a near-term
incentive for specific energysaving investments. The incentive
is simple to administer and easily introduced into the existing
marketplace. Homeowners receive between $1,000 and $1,500 for
each measure installed in the home, with a benefit not
exceeding $3,000 or 50% of total project costs (whichever is
less). Covered measures include air sealing; attic, wall, and
crawl space insulation; duct sealing or replacement; and
replacement of existing windows and doors, furnaces, air
conditioners, heat pumps, and water heaters with high-
efficiency models. The legislation will utilize existing
standards for qualifying products at a level sufficient to
significantly increase consumer demand for highly energy-
efficient building materials and mechanical systems. SILVER
STAR improvements may be implemented by any appropriately
licensed and insured contractor, but all participating
contractors will receive information about opportunities for
accreditation and training programs.
The GOLD STAR performance path offers an incentive to
households that choose to conduct a comprehensive energy audit
and then implement a variety of measures that are jointly
engineered to provide greater total returns in energy savings.
This performance path represents the future of home efficiency:
state-of-the-art building science is used to identify problems,
present solutions, and deliver verifiable energy savings,
generating confidence among homeowners and investors alike.
This technology-neutral approach is based on performance, not
specific products, so market forces will direct funds to
solutions that achieve the best results. A certified
professional with accreditation from the Building Performance
Institute (BPI), the Residential Energy Services Network
(RESNET) or an approved equivalent conducts an energy audit
before work begins, and a test-out when the performance
retrofit is complete. Consumers receive $3,000 for modeled
savings of 20%, plus an additional $1,000 incentive for each
additional 5% of modeled energy savings, with incentives not to
exceed 50% of project costs or $8,000 (whichever is less).
Contractors implementing the GOLD STAR performance path must be
BPI accredited.
HOME STAR will require skilled, trained workers to complete the
improvements cited above. With the depression of the construction
market, there is a large workforce across the nation ready and eager to
get back to work. HOME STAR will also create manufacturing jobs for the
dramatically increased levels of insulation, windows, HVAC equipment,
caulk, tools and other products needed for retrofitting America's
housing stock. More than 92% of these products are produced in the
United States by American workers. In addition, the retail distribution
of products through home improvement stores and lumber yards will play
an important role in increasing jobs in this sector. Retailers also
will facilitate consumer education and access to energy improvement
products. More than 90% of the jobs created through home retrofits are
in small businesses, a powerful engine of economic growth and job
creation.
Financing of Consumer Investments
Many middle-class Americans are squeezed by a lack of access to
capital, which would prevent them from paying the homeowner share of
investment in efficiency improvements. The HOME STAR legislation
addresses this challenge by allocating $200 million for state programs
that facilitate home retrofit financing. This would be accomplished
through a range of existing and new financing approaches that include
specialized local and national bank programs, property tax and utility
bill financing, as well as national specialty lenders through federal
agencies such as Fannie Mae. In this way, working families will be able
to participate in the HOME STAR program. In addition, financing
measures will increase the number of jobs created through HOME STAR by
bringing new private capital investments into building retrofits,
expanding the leverage of federal investments, and increasing the level
of energy and dollar savings per home. This allocation of financing
subsidies will create up to $1.5 billion in low-interest consumer
financing and support a wide variety of existing financial products,
including (but not limited to):
Property Assessed Clean Energy (PACE) Loans
Fannie Mae loans
Non-collateral loans
Secured loan products
On-bill financing
In most instances, energy efficiency savings will exceed the
monthly loan payments and allow American families to achieve cash-flow-
positive results on HOME STAR projects from day one.
Quality Assurance
HOME STAR establishes a robust quality assurance system based on
rigorous technical standards to protect against waste, fraud, and
abuse. This system establishes industry performance standards, ensures
that a portion of all jobs are inspected by credentialed professionals
after project completion, and offers an additional incentive to
contractors that invest in a properly trained and certified workforce.
Contractors can enroll in the program by registering and presenting
proof of licensing and insurance to a quality assurance provider. These
quality assurance providers are already certified through the Building
Performance Institute (BPI), the Residential Energy Services Network
(RESNET) and other nongovernmental organizations. Homeowners may be
contacted by a quality assurance provider for a field inspection after
a job is completed to verify that work was done according to standards
and as contracted. The program will guarantee minimum inspection rates
sufficient to assure quality work and provide accountability for
contractors.
Quality assurance programs managed at the state level will maintain
lists of qualified inspectors, facilitate access to training and
certification programs (including outreach to low-income workers and
minority contractors), coordinate with existing state and local
efficiency programs, and develop systems for monitoring and
enforcement. To provide for the long-term sustainability of this new
and growing market, states will work with the Department of Energy to
bring their quality assurance oversight up to a common national
standard.
For GOLD STAR projects, contractors must submit a job completion
checklist and work scope for each project, along with testing data,
before the incentive is disbursed. SILVER STAR contractors are only
required to submit a job completion checklist. For both the GOLD STAR
and SILVER STAR programs, field quality assurance is conducted within
30 days on a sample of jobs to verify quality installation. Incentives
will be paid to the contractors quickly so that their businesses will
have adequate cash flow to operate efficiently and hire new workers.
Quality assurance requirements in HOME STAR will involve a simple
paperwork review in approving individual rebates, with a minimum
baseline protocol for field inspection that is sufficiently rigorous to
ensure high-quality installation and appropriate consumer protection.
In all cases, reduced inspection rates will apply for contractors
employing a trained and certified workforce.
MEASURABLE OUTCOMES
One of the unique advantages of the HOME STAR program is that it
will lead to measurable outcomes and the opportunity to quantify the
benefits to job creation, consumer savings, energy efficiency, and
environmental gains. HOME STAR will also help create a marketplace that
is based on sound economics and that can stand on its own in the future
without the need for permanent subsidies.
Jobs
HOME STAR is expected to create 168,000 construction,
manufacturing, and retail jobs in local communities in every state.
These jobs will be quality, living-wage positions that cannot be
outsourced overseas. Construction and manufacturing companies are
poised to ramp up quickly to meet the increased level of demand for
insulation, windows, HVAC equipment, caulking, tools, and other
products needed for retrofitting America's housing stock.
This work is by its very nature local and requires skilled
construction workers who are ready and available to fill the need. The
HOME STAR legislation will create incentives for investing in a skilled
and certified workforce that can build a long-term industry and provide
good wages for skilled workers. Furthermore, most of the manufactured
goods used to retrofit homes are produced domestically, with more than
92% of all the products incorporated into HOME STAR made in America.
The multiplier effect on jobs--from certified home performance
advisors to installers, retailers, manufacturers, quality assurance
contractors--coupled with its reach to literally every state and every
community in America, makes the HOME STAR program a unique opportunity
to put hundreds of thousands of people back to work.
Home Energy Efficiency
The HOME STAR program will help more than 3 million American
families retrofit their homes for energy efficiency and save them as
much as $9.4 billion over 10 years, while reducing their energy usage
by 10-30%. This is the equivalent of an annual $500 stimulus per
household that the homeowner will receive for years to come. Better use
of energy in our homes could raise property resale values in a
recovering real estate market, and offers an opportunity to confront
climate change as it continues to threaten our environment and our
national security.
In addition, smart investments in energy efficiency made today will
pay for themselves through long-term energy bill savings. In fact, home
performance improvements implemented according to the standards set by
the Building Performance Institute (BPI), a key part of the HOME STAR
program, have already resulted in a less than three-to four-year
payback on a homeowner's investment in thousands of homes.
Infrastructure
HOME STAR will help to establish a national platform, with national
standards, for an industry that has been in the making for nearly 30
years. Over the past three decades, industry pioneers have built the
foundation for the home performance industry. National standards and
credentialing are in place through the Building Performance Institute
(BPI), Residential Energy Services Network (RESNET), and other
organizations. The EPA and DOE have increased public awareness and
established rules for executing Home Performance with ENERGY STAR
programs across the country. Private-sector individuals and companies,
working with early champions such as the New York State Energy Research
and Development Authority (NYSERDA), have produced energy modeling
software, productivity and project management software, and powerful
training programs for the army of installers that will be needed to
meet future demand. In New York, more than 30,000 GOLD STAR-level
retrofits have resulted in average annual energy savings of over 25%
per household. They have also recorded and modeled the anticipated
energy savings from retrofits and remodeling, proving that energy
efficiency improvements are effective and have a tangible return on
investment.
Environment
Basic efficiency improvements can reduce energy waste and
greenhouse gas emissions in most American homes, often by 10-30%. This
is particularly true in the nearly 80 million homes built before modern
energy codes.
In total, household energy use accounts for more than one-fifth of
U.S. carbon emissions--roughly twice the emissions produced by
passenger cars. Spurred by HOME STAR rebates, home retrofits are
projected to increase to 3 million a year from the current level of
200,000 a year, which could result in carbon output reduction equal to
taking 615,000 cars off the road or the energy generated by four 300-
megawatt power plants.
Energy Independence
By further scaling back America's dependence on fossil fuels, we
reduce our vulnerability to an energy marketplace with extreme price
swings caused by those outside of our country, who may be hostile to
our interests. Reducing this dependence will not only improve our
national security, but also the economic security of American families.
PROCESS & ADMINISTRATION
The fundamental success of HOME STAR relies on rapid deployment and
ease of execution both for the consumers it intends to serve, as well
as for the service providers and government administrators involved in
delivery and oversight. The HOME STAR Coalition has brought together a
diverse group to work through the many details required for rapid
deployment to ensure this legislation can work quickly.
Administrative Process
The HOME STAR program must meet several overarching goals. To be
successful, HOME STAR must rapidly put construction workers back to
work and create good, living-wage jobs for American workers; generate a
minimum of new government bureaucracy; provide clear lines of
authority; and offer a transparent process for all participants.
HOME STAR is not dependent on whether authority rests with a
particular federal agency; rather, authority could reside within a
number of federal agencies without compromising the program goals. The
federal government must, however, provide uniform guidance to establish
consistent baseline resources and procedures for all states. States
will take the lead in overseeing quality assurance programs,
implementing financing plans, and coordinating with existing programs
to avoid duplication. The ultimate implementation of this program will
be driven by market transactions, and as such the program will set
aside administrative funds to drive consumer awareness.
HOME STAR will provide rebates to consumers, which will be assigned
to the contractors who complete the work, thus providing an instant
price reduction at the point of sale. Rebate checks will be issued by
the federal government through rebate aggregators that assist
contractors in processing payments and data to ensure smooth and timely
payments. Existing state and utility programs will participate in this
role along with large retailers or national organizations. In any case,
administrative procedures are designed for speed and efficiency to roll
the program out rapidly and effectively and to avoid payment delays.
LEGISLATIVE IMPROVEMENTS
While the current draft bill is excellent, we believe that there
are two important changes that could be made to enhance the
legislation. First is the addition of a targeted incentive for
customer-installed measures with educational materials for insulation.
This helps to drive consumer awareness and consumer activity at the
retail level that will translate into installed measures and program
awareness. The second is the integration of the HOME STAR incentives
with the existing 25C tax credits. Some incentives are currently
available through tax credits, but many Americans cannot take advantage
of these credits nor address the delays and uncertainties of their
impact. These credits help but do not solve the goals of the HOME STAR
program. It is paramount that consumers not be faced with uncertainty
and confusion regarding energy efficiency tax credits and HOME STAR
incentives. To avoid homeowner confusion, we recommend that the
customer be able to take a 25C tax credit on the net amount of the work
after incentives but staying within the overall 50% cap. This would
simplify and ensure easy coordination and application of both credits.
The HOME STAR incentives have been calculated based on the use of this
approach.
With these small improvements, we believe that the HOME STAR
legislation will put Americans back to work in all 50 states and begin
to address the depression in the construction and housing industries.
Thank you for the opportunity to testify on behalf of the HOME STAR
Coalition.
[Graphs have been retained in committee files.]
The Chairman. Thank you very much.
Mr. DeBoer.
STATEMENT OF JEFFREY D. DEBOER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, THE REAL ESTATE ROUNDTABLE
Mr. DeBoer. Good morning. Thank you, Chairman Bingaman and
Senator Murkowski and members of the committee. My name is Jeff
DeBoer and I'm President and CEO of the Real Estate Roundtable.
The Roundtable is part of a broad-based coalition of labor,
energy efficiency, environmental advocates, manufacturers, and
we all enthusiastically support the bill that Senator Merkley
introduced along with a half a dozen other Senators, including
Senator Sanders and Senator Stabenow of this committee. We
thank you very much for that focus.
Building Star, as Senator Merkley talked about--and I may
underscore some of his statistics here--it's a very powerful
piece of legislation, we think. It would fit nicely in a
comprehensive energy bill or a jobs bill. Building Star would
establish a rebate and a financing program to help make our
existing commercial and multifamily buildings more energy
efficient.
It would assist building owners by covering a portion of
the cost to install state-of-the-art energy efficient equipment
and materials, like insulation, boilers, chillers, HVAC
systems, variable speed drivers, low slope roofing, other
things, in existing buildings. The program also would encourage
energy audits and worker training programs to ensure that peak
operations for energy efficiency can go forward on an ongoing
basis. This would help ensure that in the future our buildings
are as energy efficient as possible.
I want to bring to your attention a study by Lawrence
Berkeley which indicates that by the end of 2011 approximately
9 percent of all U.S. commercial buildings in America would
receive some benefit from this program. This would yield about
$3.3 billion in energy savings. These savings would go to
business, tenants and hopefully families in multifamily
structures.
Building Star energy efficiency measures would result in
greenhouse gas reductions, as Senator Merkley pointed out, the
equivalent of taking about 4 million cars off the road, the
equivalent of removing 33, 300-megawatt power plants from
service.
We estimate that it would create between 150,000 and
200,000 jobs. As has been noted, these jobs would be in the
construction industry, which is very hard-hit, about 25 percent
to 27 percent unemployed right now, nearly 2 million Americans
out of work. This would get these skilled laborers back to
work, we think, quickly.
By the way, it should be noted that 90 percent of the
contractors that perform work in commercial buildings are
themselves small businesses that have less than 20 workers, and
the manufacturers who are manufacturing the insulation and the
doors and so forth are likewise small businesses.
It's also, obviously with me being here today, Building
Star would help the commercial real estate sector, which today
is struggling. I want to point out buildings--sometimes it's
misunderstood--these are very dynamic assets. To maintain their
competitive edge, owners must continually find capital to
repair and replace obsolete equipment and systems. This is very
difficult in today's business environment. Building Star will
help address that problem. The resulting activity in commercial
real estate we think will help stabilize values, spur
transactions, create jobs, stabilize some tax bases where local
communities need to raise money to provide services we all
like.
Building Star is a fast-acting rebate program. It's simple.
There is a simple application, approval, and verification
process that's envisioned in Senator Merkley's legislation. We
think the building owners and contractors could easily
structure an incentive plan to take advantage of this. They're
used to doing it now in State rebate programs and they could do
it here.
In conclusion, Building Star we believe, our coalition--and
in my written statement we have a list of all of the various
industries and companies that support this--we believe this
deserves the approval of this committee. Obviously you want to
have a lot of input into it, but we think the concept is good
and should be approved and put into law. We think it will help
create jobs, assist small businesses, whether they're
construction or manufacturing or whether they're simply tenants
in these buildings.
A couple of other points. Building Star we think will help
contribute to overall energy independence and reduce our carbon
footprint. As I said, it's important to note that this is
designed to be up and running. In the draft legislation, it's
called for to have the regs or the process out within 60 days.
It would layer on existing programs. There is an aggregator
type feature that's already in place out there, so that would
help.
So I would conclude by just thanking you for the
opportunity to express our enthusiastic support for this. Happy
to answer any questions you have. Thank you.
[The prepared statement of Mr. DeBoer follows:]
Prepared Statement of Jeffrey D. Deboer, President and Chief Executive
Officer, The Real Estate Roundtable
INTRODUCTION
Thank you Chairman Bingaman, Ranking Member Murkowski, and Members
of the Committee, for conducting today's hearing on legislative
proposals designed to create jobs and enhance energy efficiency.
I am Jeffrey D. DeBoer, the President and Chief Executive Officer
of The Real Estate Roundtable, an organization that represents the
leadership of the nation's top 130 privately-owned and publicly-held
real estate ownership, development, lending and management firms, as
well as the elected leaders of the 16 major national real estate
industry trade associations. When I speak of the commercial real estate
sector I am referring to six principal property types--apartments,
offices, retail, industrial, health care and hotels.
Collectively, Real Estate Roundtable members hold portfolios
containing over 5 billion square feet of developed property valued at
over $1 trillion, over 1.5 million apartment units, and in excess of
1.3 million hotel rooms. Participating Roundtable trade associations
represent more than 1.5 million people involved in virtually every
aspect of the real estate business.
I am pleased to testify on behalf of Building STAR, a program
designed to modernize existing commercial and multi-family structures
through energy efficiency retrofits. These building upgrades will help
quickly generate jobs, conserve energy, and save money, all to fuel our
nation's economic recovery. Building STAR serves as a complement to the
Home STAR proposal, which is also a topic of this hearing and provides
incentives for energy efficient upgrades for the single-family
residential market.
The Real Estate Roundtable is proud to be part of a broad-based
coalition that supports Building STAR. We urge Congress to enact,
authorize, and fund this program swiftly. As this statement will
explain in greater detail, Building STAR will:
Create jobs.--As a public-private incentive proposal, a $6
billion public investment in Building Star will yield $18--$24
billion in total program spending. This will create between
150,000--200,000 jobs between 2010 and 2011, especially in the
hard-hit construction industry.
Benefit small businesses.--More than 90 percent of the
contractors who perform commercial and multi-family building
retrofits employ fewer than 20 workers. Even where large firms
hold the primary contract, much of the work is subcontracted to
smaller firms.
Save energy and money.--Based on a study by the American
Council for an Energy Efficient Economy (ACEEE), a coalition
member, Building STAR would yield $3.3 billion in energy
savings annually between now and 2011.
Reduce carbon emissions.--ACEEE projects that the full suite
of Building STAR's energy efficiency programs would result in
greenhouse gas reductions equivalent to taking nearly 4 million
cars off the road, and removing 33 300-Megawatt peaking power
plants from service.
Help a capital-starved industry.--Credit markets remain
tight, dampening activity in the commercial real estate sector.
Moreover, as our country's building stock ages, the value of
those assets will continue to fall and their ability to produce
income will remain constrained. Building STAR will inject much
needed capital to modernize commercial properties, so that our
real estate market can regain its competitive edge and once
again realize a fuller potential to generate income.
Building STAR grew out of the efforts of the Rebuilding America
coalition. In 2009, Rebuilding America worked to develop a
comprehensive national strategy to transform the energy efficiency
market and mobilize a retrofit industry that could renovate 50 million
commercial and residential buildings by 2020--accounting for 40% of the
nation's building stock. This was based on a goal established by the
City of Chicago, which would cut the renovated buildings' energy
consumption by 30 percent.
Rebuilding America's policy priorities were then adapted and
expanded to include a near-term jobs package, which became the Building
STAR program. Building STAR would provide the struggling commercial
real estate sector with a lifeline that would take immediate effect. It
would jump start manufacturing and get the building trades back to work
by installing energy-saving equipment in commercial and multi-family
buildings across the country. As I will explain in more detail below,
through a quick survey of a sample of Roundtable members, we have
learned that many building owners, managers, contractors, and other
professionals can take advantage of the rebates offered in this program
right away. This means a skilled labor force would be put to work
immediately, to manufacture and install the equipment and materials for
which Building STAR's rebates are offered, and conduct services to
ensure that buildings perform to their optimal energy efficiency
capacities. This program would also generate additional jobs for
painting, drywall, and other laborers.
Building STAR was introduced as a stand-alone bill--S. 3079, the
``Building STAR Energy Efficiency Rebate Act of 2010''--last Thursday,
March 4, by Senators Merkley, Pryor, Brown of Ohio, Stabenow, Sanders,
and Cardin. S. 3079 consists of a number of rebates and a financing
title for commercial and multi-family retrofit projects. I want to
thank Senator Merkley for his leadership in introducing this important
legislation and all of the original co-sponsors for sharing that
vision. I especially want to thank Senators Stabenow and Sanders of
this Committee for being original co-sponsors, and appreciating the
immense importance of this legislation for job creation--in their
states and across the nation--as reflected by all of the co-sponsors'
geographic diversity.
Public funding of $6 billion for Building STAR would leverage
private capital and spur $18 to $24 billion in total program spending.
This injection of stimulus will create 150,000--200,000 jobs,
particularly in the hard-hit construction industry, as well as
manufacturing and other sectors. The construction industry has suffered
tremendously, resulting in high unemployment and leaving unused
significant available manufacturing capacity. Today, an average of 1 in
every 4 constructions workers (25 percent)--over 1.9 million people--is
unemployed. Many of these are skilled members of the building trades
who have worked on commercial, institutional, and large residential
buildings. The manufacturing sector has also been hit hard by the
recession: building materials manufacturing is down by 40 percent, and
1.8 million manufacturing jobs have been lost since the downturn began.
I will discuss how Building STAR can help redress these staggering
unemployment numbers further below.
An impressive, diverse group of stakeholders has rallied around
Building STAR. It is the product of a wide consultation among members
of Rebuilding America, a coalition of more than 80 business, real
estate, financial, labor, consumer, environmental, and advocacy
organizations. Furthermore, S. 3079's technical specifications are
drawn from a spectrum of outside energy efficiency and construction
experts, such as the Associated General Contractors (AGC) of America,
the National Association of State Energy Officials (NASEO--also
testifying here today), the Association of State Energy Research and
Technology Transfer Institutions (ASERTTI), the American Council for an
Energy-Efficient Economy (ACEEE), and the Alliance to Save Energy
(ASE). Advocates for Building STAR also include labor and manufacturing
representatives, such as the Sheet Metal and Air Conditioning
Contractors' National Association (SMACNA), Sheet Metal Workers'
International Association (SMWIA), the Polyisocyanurate Insulation
Manufacturers Association (PIMA), and the Council of North American
Insulation Manufacturers Association. Companies like GridPoint, Intel,
and Johnson Controls, the National Association of Energy Service
Companies (NAESCO), the U.S. Green Building Council, the American
Institute of Architects, also rank among Building STAR's supporters.
Representatives of end users such as the Consumer Federation of America
and the National Restaurant Association endorse Building STAR as well.
Appendix I* to this statement lists the members of the impressive and
diverse coalition that has formed to urge Congress to enact Building
STAR into legislation.
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* Appendixes 1-3 have been retained in committee files.
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COMMERCIAL REAL ESTATE AND THE RESIDENTIAL MARKET
Building STAR could play a significant role in the economic
recovery of the commercial real estate sector. My industry's vitality
is critical to ensuring that our state, national and global economies
function and thrive, especially considering the value, jobs and income
produced by commercial real estate.
Value.--Commercial real estate represents $6.7 trillion in
value, constitutes as much as 13% of GDP, and supports $3.5
trillion in debt.
Jobs.--About 9 million jobs can be attributed to a healthy
real estate sector. A gamut of professionals depends on
prospering commercial developments, such as construction
workers, land use planners, investment brokers and lenders,
realtors, building owners and managers, architects and interior
designers, environmental and energy consultants, maintenance
and security contractors, engineers, landscapers, plumbers,
lawyers, and accountants.
Income.--The distinguishing characteristic of commercial (as
opposed to residential) property is that it is designed to
generate income. As the Congressional Oversight Panel observed
last month:
Commercial properties are generally income-producing assets,
generating rental or other income and having a potential for
capital appreciation. Unlike residential property, the value of
a commercial property depends largely on the amount of income
that can be expected from the property.
Congressional Oversight Panel, February Oversight Report:
``Commercial Real Estate Losses and the Risk to Financial Stability,''
Feb. 10, 2010, at 7. Moreover, commercial real estate is financed in a
manner to primarily reflect that the sine qua non of such properties is
income generation. Accordingly, commercial property owners use the
income created from their holdings (that is, rents, leases, retail
sales, hotel stays, etc.) to pay debt service, whereas homeowners
generally use their personal income to pay off their mortgages.
This brings us back to the first item bulleted above: value. The
amount of income generated by a commercial property directly correlates
to that asset's value. Lower real estate values result when a
commercial property produces insufficient income to service any
outstanding mortgage. In turn, default and foreclosure risks run
higher, skittish banks are less inclined to extend favorable (or any)
refinancing for a ``troubled asset,'' and a commercial property with
greater debt compared to its worth will find itself ``under water.''
This is precisely why Building STAR comes at a crucial time for my
industry. The rebate and financing programs provided by S. 3079 will
play a major role in improving the value, or income-producing
qualities, of commercial properties. Buildings are dynamic assets. To
maintain their competitive edge, building owners and managers must
continually find means of financing and capital to repair and replace
obsolete equipment and systems. While the seizure of credit markets is
becoming slightly more relaxed, lending will remain tight as long as
the value of underlying collateral deteriorates.
Commercial properties need new means of reinvestment to attract
office tenants, renters, shoppers, and travelers, who are more
discerning than ever with their own spending. They demand state-of-the
art buildings that use less energy. They want tangible benefits like
savings on utility bills. And they seek intangible appeal in properties
to accommodate their more socially conscious green aesthetic.
On these points, Building STAR delivers. S. 3079's rebates will
stimulate energy efficiency projects across all commercial building
types. Upgrades will attract companies to lease retrofitted Class A
offices, residents to purchase units in efficient multi-family high-
rises, and business travelers to stay in renovated hospitality space.
All of this activity will improve property values and lubricate
financing, which can lead to new developments and more jobs down the
road.
I do not mean to suggest that there is a silver bullet to erase all
of commercial real estate's woes, or that Building STAR is the sole
answer to our nation's economic crisis. But insofar as we are concerned
with improving the underlying asset value of commercial properties, S.
3079 is significant legislation. Furthermore, as I explain below,
Building STAR will operate as a major job creation measure--especially
for the hard-hit construction industry--and will support thousands of
small business contractors who will install and perform those retrofit
components contemplated by the bill. Because these rebates can be
utilized immediately following enactment of this legislation, people
can be put back to work in short order. Finally, Building STAR will
present substantial energy savings and environmental benefits by
encouraging commercial building modernization.
Before I provide information on the jobs and environmental benefits
of S. 3079, let me take this opportunity to explain the nuts-and-bolts
of Building STAR--specifically, the types of rebates offered by the
program, and a description of the application process to receive
Building STAR rebates.
BUILDING STAR PROGRAM--WHAT IT IS AND HOW IT WORKS
Building STAR would authorize a rebate program for building owners
and managers who install or implement nearly 20 different types of
energy-efficient equipment, materials, and services during 2010 and
2011. The Building STAR rebates would cover approximately 20-30 percent
of the cost of installing energy efficient products and/or services
(such as building performance audits) during 2010 and 2011. Rebates are
capped at 50 percent of the total cost of the product or service for a
given building. Moreover, they are largely based on proven, existing
rebate programs offered by some states and utilities.
The Building STAR rebate program would cover the following products
and services:
Building envelope insulation;
Mechanical insulation;
Windows and window films;
Low-slope roofing insulation;
HVAC equipment, chillers, water heaters, and boilers;
Duct testing and sealing;
Variable speed drives for motors;
Interior and exterior lighting;
Building energy audits, retro-commissioning plans, tune-ups
for heating and cooling, and building operator management
training and certification; and
Energy management and monitoring systems.
It is critical to understand that Building STAR's retrofit
components are code-stretching measures. They are not geared to simply
meet minimum building code requirements. Similarly, older, leaky roofs
too often are patched using temporary repair methods rather than
removed and properly retrofitted. As a result, potential energy savings
are lost, the building environment continues to degrade, and the roofs
are ill-equipped to handle new energy technologies such as solar
panels. The specific equipment, materials and services within S. 3079's
purview--including, for example, roofing retrofits--will push
commercial buildings to the next level of energy efficiency, thereby
generating greater savings on utility bills and more reductions in
greenhouse gas emissions. However, because these state-of-the-art
technologies come at a significant cost, it is not as though commercial
real estate operators would install or pursue these extra measures in
all cases. This is precisely why Building STAR's incentives will prove
so valuable. The legislation's rebates and financing provisions will
provide the means for building owners to go beyond current regulations
and bring their assets to higher strata of energy performance.
Once enacted into law, the Building STAR program could be up and
running within 30 to 60 days, using public funding to leverage three to
four times as much private investment. The service providers (e.g.,
contractors or energy service companies) will be the primary marketers
of these commercial rebates, so Building STAR has natural
``aggregators'' that reflect the existing means by which commercial
property owners already contract with firms in the energy services
arena to perform retrofit projects. Indeed, some Real Estate Roundtable
members retain firms precisely for the purpose to navigate energy
efficiency rebate programs. I fully expect these established
relationships will be fully mobilized to capture any available
incentives that S. 3079 offers.
Building STAR will help drive demand for commercial building
efficiency upgrades, because its rebates are based on, and can be
claimed in addition to, successful incentive programs currently
operated by states and utilities. I want to reiterate this latter
point: S. 3079's rebates would not supersede existing programs but,
rather, are designed to complement those successful utility and state
rebate measures that are already in place.
Rebate Process
S. 3079 directs the federal government to establish rules within 30
days after enactment, to swiftly implement the Building STAR rebate
program. A simple and straightforward process is in order and can be
easily accomplished, to replicate existing procedures that building
owners and their contractors already manage through state and local
rebate measures. Commercial real estate professionals are already
accustomed to seeking rebates for the complete array of products and
services in S. 3079, such as lighting, energy audits, windows,
insulation, and more. Moreover, many Roundtable members have senior
sustainability managers whose very job is to ensure maximum energy
savings, greenhouse gas emissions reductions, and overall environmental
performance. They already navigate energy efficiency rebate programs
with great sophistication and ease.
S. 3079's implementing procedures should track the following simple
steps:
1. A building owner (or its designee contractor) will propose
energy-efficient upgrades using the list of products and
services set forth in S. 3079. Alternatively, the building
owner could find a licensed contractor, energy service company
(ESCO), or other provider to propose performance improvement
measures, using this same list. The rebate levels for these
products and services are already established in the Building
STAR legislation, after months of collaboration among engineers
and other experts who developed the bill's precise equipment
and services specifications. This up-front work was undertaken
to avoid the need for federal officials to determine
appropriate rebate and performance levels, and the time delays
that such a deliberation would entail.
2. The building owner electronically submits an application
(as described in the legislation) to the federal government to
be placed in a ``pipeline'' for this rebate. Applications in
the pipeline are prioritized on a first-come, first-served
basis and enable the government to gauge the number of
applicants and determine how many projects the program will be
able to fund.
3. The federal government then sends an electronic
confirmation to those building owners whose projects will, in
fact, be funded.
4. A building owner then installs the equipment or undertakes
the services for which rebates are sought--except for that
portion covered by Building STAR's incentives.
5. The building owner signs a confirmation certifying that
the work specified in the application has been completed
according to the requirements outlined in S. 3079.
Alternatively, the building owner has the option to have a
third-party verifier confirm that the work has been properly
completed. Either way, the confirmation is then sent
electronically to the government.
6. An independent third-party verifier contracted by the
government reviews the confirmation to ensure its accuracy. If
the confirmation is accurate, the rebate money is then
disbursed to the building owner (or in a given case, where it
has been assigned to a contractor), within 30 days of receipt
of the confirmation.
7. Following the completion of the retrofit, 10 percent of
the projects participating in this program will undergo an on-
site evaluation by a certified independent entity to verify
that the project complied with the application submitted to the
government and the program's requirements. If the verification
process finds evidence of fraud or falsification in the
process, building owners are subject to legal penalties as
prescribed in S. 3079.
Aside from the rebate components of S. 3079, the financing
provisions of this bill are similar to those in the Home STAR program.
The Building STAR legislation proposes to create mechanisms by which
commercial real estate owners can obtain capital to cover, and re-pay,
the costs of any retrofit project not covered by rebate dollars. While
some commercial building owners might not need financing for the
remaining non-rebate portion of an upgrade project, the synergies
created by S. 3079's financing title and its proffered rebates will
spur other real estate professionals to act on the full suite of
retrofit measures under the Building STAR umbrella.
building star's job creation, energy, and environmental benefits
Job Creation Potential
Building STAR is a cost-effective way to create thousands of
American jobs by helping make commercial buildings more energy
efficient. As noted earlier, funding of $6 billion for Building STAR
would spur $18 to $24 billion in total program spending, creating
150,000-200,000 jobs. Appendix II (attached) shows the job creation
potential, including for small businesses, in the states represented by
every Member of this Committee.
While the rest of the job market appears to be slowly stabilizing,
construction unemployment is still on the rise. Unemployment within the
industry rose from 18.7 percent in November to 27 percent today. In
February, non-residential specialty contractors shed 1,500 jobs per
day.
Energy efficient retrofits provide a prime opportunity to provide
jobs for high-skilled workers, and also to help property owners and
low-income people in multi-family residential buildings save
substantial amounts on their energy bills.
Expanding Opportunity for Small Businesses
Small businesses are essential engines of job growth and economic
recovery. So it comes as good news that Building STAR will directly
benefit thousands of high-skilled sheet metal, electrical, mechanical,
plumbing, painting, finishing and other contractors who perform the
work of retrofitting commercial and multi-family buildings. Indeed,
some 91 percent of these firms have fewer than 20 employees. On the
very largest commercial retrofit projects, much of the work is normally
sub-contracted to dozens of small firms. Moreover, approximately 63% of
the manufacturers that would provide materials and equipment for
retrofits are firms that employ less than 20 people making insulation,
doors, windows, or parts for durable equipment.
Finally, thousands of small businesses are likely to benefit from
reduced energy bills and operating costs that result from an energy
efficiency retrofit under Building STAR. For example, EPA experts
estimate that if a restaurant cuts its energy costs by just 20 percent,
profits could increase by 30 percent or more. Industry-wide, that is a
savings of $1.6 billion a year. That is why the National Restaurant
Association endorses Building STAR.
Ability to take advantage of Building Star's rebates now
At the Real Estate Roundtable, we conducted an informal survey of a
portion of our Sustainability Policy Advisory Committee members to get
a sense of how they would greet Building STAR rebates, whether the
incentives would truly be useful, and how long it would take to start
building modernization projects and hire workers. The responses we
received were highly enthusiastic. We found that the vast majority of
respondents would be able to take advantage of these rebates
immediately. That is, there are a substantial number of projects ready
to be implemented that will utilize S. 3079's rebates and financing
opportunities. The results of our informal survey are attached at
Appendix III and show:
Respondents identified 19 office and multifamily projects
that would seek rebates across all of Building STAR's various
energy efficiency components.
These projects would modernize buildings that cover almost
4.2 million square feet in space.
This universe of respondents would seek approximately $1.55
million in rebates for these projects, with total renovation
costs approaching $8 million.
Building STAR rebate dollars for these projects can be
quantified at $0.37 per square foot, compared to total retrofit
project costs of $1.90 per square foot.
Should Building STAR be enacted into law, building owners,
contractors, ESCOs, manufacturers, and others would immediately begin
implementing this program. Painters, drywallers, and related industries
would benefit from such retrofits as well, boasting a ``multiplier
effect'' due to Building Star upgrades. In addition, based on a study
by Lawrence Berkeley National Laboratory, we believe that a $6 billion
public investment in Building STAR would result in improvements in
about 425,000 buildings by the end of 2011--or, 9 percent of U.S.
commercial buildings.
Energy and environmental benefits
Occupants and tenants in commercial buildings, and their
electricity demands and usages, account for 46 percent of all building
energy use in the United States. The American Council for an Energy-
Efficient Economy (ACEEE) estimates that Building STAR would yield $3.3
billion annually in energy savings between now and 2011. Modernization
projects undertaken as a result of S. 3079 would result in greenhouse
gas reductions equal to taking 3.95 million cars off the road. This is
also equivalent to avoiding the fossil fuels that would be burned from
33 300-megawatt peaking power plants.
The Air Conditioning, Heating, and Refrigeration Institute
indicates that, with the Building STAR or similar provisions, we could
retire--and replace--as many as 4,000 ozone-depleting CFC chillers
across North America. This would achieve energy savings of 15 trillion
BTUs per year and save the amount of energy equivalent to that consumed
annually by approximately 151,000 average U.S. households. It also
would reduce CO2 emissions by an amount equivalent to
removing 18,864 passenger vehicles from the road (2007 data). It also
would save building owners $430 million per year in energy costs.
Another area where there is significant potential for energy
savings is commercial roof replacements. The replacement of 6% of
commercial roof space in the U.S. each year with high efficiency roof
systems insulated at levels required under Building Star would result
in a CO2 emissions savings equivalent to the annual
emissions of roughly 27 coal fired power plants or 105 million metric
tons of CO2. The 10-year cumulative energy cost savings in
this country would be $12.2 billion. Energy savings would be 648
trillion Btu (0.65 quads) for site energy or 1,464 trillion Btu (1.46
quads) for source energy.
Building STAR rebates would facilitate energy efficient retrofits
that also would create better air quality, healthier workplaces, and
other positive attributes. Because retrofits frequently replace failed
building components that have degraded the interior environment, they
can improve air quality and occupant health. In addition, the
installation of new energy-saving technologies such as daylighting and
advanced climate controls can increase worker productivity.
CONCLUSION
The Building STAR program proposed by S. 3079 picks up where Home
STAR leaves off. Building STAR provides significant incentives to
modernize the vast and diverse commercial real estate stock in the
United States, with high efficiency equipment, materials, and services.
This Committee is right to consider legislation that furthers job
creation, lowers energy costs, and curtails fossil fuel dependence.
Building STAR would stimulate the economy, put people back to work,
save energy and money, and reduce greenhouse gas emissions. Simply put,
however, those critical objectives cannot be fully realized unless
Congress authorizes energy efficiency incentive programs that address
both the commercial and residential sectors.
The Chairman. Thank you very much.
Ms. Epperson.
STATEMENT OF STACEY EPPERSON, EXECUTIVE DIRECTOR, FRONTIER
HOUSING, MOREHEAD, KY
Ms. Epperson. Thank you, Chairman Bingaman, Ranking Member
Murkowski, and members of the committee, for the opportunity to
provide testimony supporting efforts to replace old substandard
mobile homes with new Energy Star manufactured housing. I
represent Frontier Housing, part of a nonprofit network helping
low-income families purchase quality affordable homes. Today I
also speak for a larger group of nonprofit housing and asset
agencies, energy efficiency advocates, and the manufactured
housing industry.
Nationwide, more than 2 million families live in old
energy-inefficient mobile homes. Most are found in economically
depressed rural areas and are home to families that are near or
below the poverty line. These households often fall through the
cracks of Federal programs. Yet they may be trapped in a cycle
of very high energy bills with little or no resources to make
efficient improvements.
For many years housing nonprofits have struggled with how
to solve this problem. Maybe in some parts of America this
problem is less visible, but in Kentucky there are nearly
90,000 old mobile homes. They are part of my landscape.
Fortunately, Frontier Housing is able to help families like
Phyllis Kelly. Mrs. Kelly was living in a small 1970 mobile
home on her own land. Her income was only $889 a month. Her
monthly energy bill was $326. That's 37 percent of her income.
We needed a home that balanced housing affordability and energy
efficiency. The only solution was a manufactured home that met
the Energy Star qualified standard, and Mrs. Kelly said:
``Dreams come true.''
Mrs. Kelly's old home was passed its useful life.
Weatherization was not an option. Mrs. Kelly's monthly kilowatt
usage fell from 6,000 to 1,600 a month. In an unusual twist,
the rural electric coop sent a staff person out to investigate
as they thought her home was abandoned.
We have dozens of these success stories, but funding to
replace mobile homes with Energy Star homes is very limited.
The solution is a targeted program championed by Senator
Tester. It will provide the following assistance: First, $7,500
to help low-income buyers qualify for financing to afford the
monthly payments for an Energy Star home; second, $2,500 to
cover the cost of decommissioning, removing, and recycling the
old home; and third, access to ARRA weatherization funds to
further close the gap between the cost of the new home and the
homeowner's income limitations.
The benefits of a national program are a compelling
trifecta because it will create jobs, conserve energy, and
provide quality affordable housing. An investment of $500
million a year for 3 years will: No. 1, jobs--provide 51,000
manufacturing, construction, and financing jobs all in the U.S.
We estimate that there will be 1.1 new jobs per home built.
In addition to the creation of much-needed manufacturing
jobs, the down payment assistance will generate more than $8
billion in construction-related spending. This in turn creates
significant new tax revenue. Businesses build homes, sell those
homes, and pay Federal corporate income tax. The businesses pay
salaries to workers, who will pay income and payroll taxes. The
banks pay corporate tax. We believe this program has the
potential to generate tax revenue exceeding the cost.
No. 2, energy savings. The program saves nationwide energy
costs at more than $240 million a year. The average energy cost
savings are about $1,800 per year or $150 a month for a family.
We estimate a reduction of 1.4 million tons of greenhouse gas
emissions.
No. 3, quality affordable homes. The program will enable
nearly 135,000 struggling families to live in attractive and
affordable homes that enable them to achieve greater financial
security.
We appreciate the committee's commitment to finding
solutions that address our Nation's economic and energy
challenges and urge you to incorporate this initiative into the
jobs bill. Thank you.
[The prepared statement of Ms. Epperson follows:]
Prepared Statement of Stacey Epperson, Executive Director, Frontier
Housing, Morehead, KY
INTRODUCTION
Thank you Chairman Bingaman, Ranking Member Murkowski and members
of the Committee for the opportunity to provide testimony supporting
efforts to replace old, substandard mobile homes with new ENERGY STAR
manufactured homes.
The organization I represent, Frontier Housing, is part of a
network of non-profit housing organizations helping low-income families
find quality, affordable homes that offer an opportunity to build
equity while reducing homeownership costs. Today I also speak for a
larger group of non-profits, including NeighborWorks Montana and
Anchorage, the Environmental and Energy Study Institute and the
Corporation for Enterprise Development. We have come together with
representatives of the manufactured housing industry to support a
mobile home replacement program. Our coalition includes the
Manufactured Housing Institute (MHI) the national trade association
representing all segments of the manufactured housing industry and the
Systems Building Research Alliance. The Alliance is the research arm of
the manufactured housing industry and US EPA's National Quality
Assurance provider for ENERGY STAR qualified manufactured homes.
THE PROBLEM
Nationwide, more than two million families live in old, and often
dilapidated, mobile homes. These homes are among the nation's most
energy inefficient. Most are found in economically depressed, rural
areas and commonly are home to families that are near or below the
poverty line. These households often fall through the cracks of federal
government assistance programs yet they may be trapped in a cycle of
very high energy bills with little or no resources to make efficiency
improvements in their own homes.
Additional taxpayer supported investments for energy improvements
and weatherization is not a long-term solution: these homes can never
be made energy efficient. Built prior to the federal code that
regulates the construction of manufactured housing, they have degraded
to the point where it is more prudent and less costly to simply replace
the home than make the sizable investment in the insulation, windows,
new equipment, and envelope repair that would be needed.
Rarely are there opportunities for so dramatically reducing home
energy use and home operating costs and, in the process, improving the
quality of life for American families that have few other options.
LOCAL PERSPECTIVES
This is not a fringe issue nor is it limited to one state or one
region of the nation. For example:
In the state of Montana, one out of every 12 homes (8%) is a
pre-code mobile home.
Over half of the factory-built homes in Alaska, New Jersey,
Montana, Wyoming, Idaho, North Dakota, Colorado, Utah, New
Hampshire and ten other states were built prior to the
enactment of the HUD code.
Nearly every state has thousands of mobile homes built prior
to the enactment of energy standards. A few states, like North
Carolina and Arizona, have more than 100,000 homes that fit
this criterion.
Households who live in pre-1980 manufactured housing
generally have incomes well below the state median. In New
Hampshire and Utah, for example, nearly 90 percent of families
living in old mobile homes are below the state median income.
In the states of Tennessee, Kentucky, Arkansas, West
Virginia, and Missouri more than 90 percent of mobile
homeowners have incomes below the national median.
THE SOLUTION
The solution is a targeted program to help income-qualified
homeowners that help them purchase a new and affordable ENERGY STAR
manufactured home. We believe the program should provide the following
assistance:
1. To help the buyers qualify for financing and afford the
monthly payments, a direct incentive of $7,500 to be applied
against the purchase price of a new ENERGY STAR manufactured
home. Funds for home financing should be available at the time
of home purchase (that is, subject to advanced availability).
2. To cover the additional cost of removing and recycling the
old home, a grant of up to $2,500 to be provided upon proof of
decommissioning.
3. To further close the gap between the cost of the new home
and the homeowner's income limitations, we urge that the
replacement of substandard mobile homes be included as an
eligible use of ARRA weatherization funds.
With limited funding, several non-profit housing agencies have
already taken steps to implement programs modeled on this concept. For
example,
In 2007, NeighborWorks Montana received $350,000 to fund a
pilot program for the decommissioning and replacement of older
manufactured homes. The study identified nearly 30,000 pre-1976
manufactured homes in Montana, for which the cost of
weatherization improvements often exceeded the value of the
home.
Maine's state housing authority operates a mobile home
replacement program that incorporates an ENERGY STAR mortgage
product. Maine's program will track energy savings created by
replacement efforts.
Affordable Housing Alliance, New Jersey is replacing pre-
1976 units in a community in Eatontown with ENERGY STAR units
as part of the state's affordable housing initiative.
New York recently created a program that commits $5 million
to replace pre-HUD Code homes with ENERGY STAR rated
manufactured homes.
These efforts provide valuable lessons for the proposed program.
The benefits of a national program are compelling. It will provide:
substantial and sustainable energy savings and reduction in greenhouse
gases, a powerful engine of job creation in the United States, and,
improved affordability and financial stability for families most in
need.
Specifically, we anticipate the following outcomes from the
program:
THE BENEFITS
Energy and Environment
Households participating in the program will save an average
of $1,800 per year in energy costs, savings that could be
better applied to offsetting the new home monthly mortgage
costs and therefore building equity.
Nationwide savings of more than $240 million a year in
reduced energy costs. Within six years of roll out, the program
will have paid for itself and continue to pay dividends.
Reduction in greenhouse emissions of about 1.4 million tons.
Jobs
Adding demand for new manufactured homes at a time when
construction is deeply depressed is a very effective mechanism for
getting Americans back to work. Half of the new jobs created would be
in factories as plants staff up to meet demand, and about half would be
in construction support services. Each new affordable, manufactured
home constructed adds more than one new job. At a program annual budget
of $500 million per year, over the next three years more than 51,000
new jobs will be created in home manufacturing and related construction
in the US. One of the advantages of factory construction is the short
time within which demand turns into production accelerating the pace of
new domestic job creation.
Home Affordability and Quality of Life
Replacement of old mobile homes with new ENERGY STAR units
substantially reduces energy use and improves home
affordability, easing the financial burden on families
struggling to meet monthly homeownership costs.
The program will provide an opportunity for families to
build equity in their homes and increase their families'
wealth. The financial assistance will help families achieve
security of tenure, build wealth and achieve financial
stability
Replacement will eliminate problems that chronically plague
old mobile homes that are detrimental to family health, such as
poor indoor air quality, leaking roofs, collapsing floors and
unvented appliances.
CONGRESSIONAL ACTION
We thank Senator Tester and his staff for their commitment. We also
appreciate the involvement of the staff of the Committee for working
closely with us as the elements of this program were crafted. This
program is part of an innovative recovery plan that will help revive
the economy and put Americans to work in our new clean energy economy.
Senator Tester's bill, the Energy Efficient Manufactured Housing Act of
2009 (S. 1320) has received bipartisan support and we strongly request
its inclusion in the Jobs bill.
A replacement program was also included in '203 of the American
Clean Energy and Security Act of 2009 (HR 2454) and passed by the House
of Representatives.
CONCLUSION
We recommend that Congress appropriate $1.5 billion over three
years to the Department of Energy to provide assistance to eligible
homeowners to replace substandard mobile homes with ENERGY STAR
manufactured homes.
We appreciate the Committee's commitment to finding solutions that
address our nation's energy and economic challenges and urge you to
incorporate this initiative into the Jobs bill to create jobs, save
energy, reduce greenhouse gas emissions and enable low-income families
to afford decent housing and achieve financial security. You may
contact any of the coalition members at the contact information below.
Thank you.
The Chairman. Thank you very much.
Mr. Giudice, go right ahead.
STATEMENT OF PHILIP GIUDICE, COMMISSIONER, MASSACHUSETTS
DEPARTMENT OF ENERGY RESOURCES, AND CHAIR, NATIONAL ASSOCIATION
OF STATE ENERGY OFFICIALS, BOSTON, MA
Mr. Giudice. Thank you. Good morning, Chairman Bingaman,
Ranking Member Murkowski, and committee colleagues. My name is
Phil Giudice and I'm here today on behalf of NASEO. I am the
chair of the board of the National Association of State Energy
Officials. I'm also here on behalf of Governor Patrick. I am a
Commissioner of the Massachusetts Department of Energy
Resources. Under Governor Patrick's leadership, we're excited
to be giving a race to Vermont and California to be the most
energy efficient State in the Union.
Last week my colleague Malcolm Woolf, NASEO's vice chair
and Director of Maryland Energy Administration, testified on
behalf of the stimulus money that we are putting to work, and
things are going quite well there and I look forward to
responding to any questions that may come up in that matter.
But today we're here to discuss several proposals that
really have very exciting opportunity for us. We see these as a
further bridge to our cleaner energy future, creating jobs now,
and with the success of both the energy stimulus investments
and these jobs investments we will have a compelling basis for
the important work into the future to leverage private
financing and carry on this work to create a much better energy
circumstance for us.
NASEO fully supports the Home Star program and urges
Congress to adopt the proposal, including the $6 billion
funding level, which will quickly lead to creating jobs and
serve as a step to implement the longer State-based energy
efficient building programs that were included in both the
energy bill passed by this committee in June last year, which I
was thankful to have an opportunity to testify in support of,
as well as the REAP provision which is included in the House-
passed energy and climate bill.
But a couple of points. It is critical that the Home Star
program be carefully coordinated in collaboration with the
States that are already--and integrated with the comprehensive
State energy programs. We're confident that there will be
methods that we can make that happen.
In addition, we suggest 3 changes. One, the Home Star
program should be treated in the same manner as the
weatherization program with respect to NEPA and Buy American.
We have learned from some of the experiences of the stimulus
and we know that in this program delay is simply not
acceptable, so we encourage simply adopting parallel language
to make sure that those issues do not become challenges to move
forward on this program.
Second, also to avoid delay, we include--we would request
you to include a waiver position to be built into the statute
in order to permit minor changes in State programs implemented
under Home Star so that implementation can be speedy.
Lastly, as a prior speaker indicated, it is critical that
the Home Star program be coordinated with section 25 [c] of the
residential energy--residential existing home energy efficiency
tax credit, so that the Congress can ensure ongoing viability
of the tax credit is accommodated in this program.
Next program, Building Star. NASEO also strongly supports
Senator Merkley's and colleagues' Building Star legislation, a
program to offer rebates for owners of commercial and
multifamily buildings for efficiency improvements. The
delivering of rebates through that program structure is very
straightforward and many buildings we expect will take the
utilization of that. They are constrained now by lack of
financing, by low value of these properties, and by challenges
that they're facing in the commercial sector, and this Building
Star program will have significant benefits for them.
It will also leverage a significant amount of public
financing to make this work. This means that each dollar of
public investment in rebates will spur $2 to $3 of private
investment in making these buildings more efficient.
The third program, NASEO also supports Senator Tester's
proposal to address the urgent need of our pre-1976
manufactured housing and replacing it with Energy Star housing.
We think that the programs that are laid out in that proposal
are helpful in that degree to move us forward.
Lastly, we encourage the committee to take up a proposal to
look at the industrial energy efficiency programs. Investments
made in industrial energy efficiency pays multiple dividends.
It improves our manufacturers' global competitiveness, it
improves our trade balance, stems the jobs loss in
manufacturing, enables our economy to be somewhat less
dependent on just consumer spending for its health, and both
creates jobs in implementing the efficiency projects as well as
reducing energy emissions.
Under ARRA, my State and many States was gigantically
oversubscribed in the programs and the funding that was
available to help our industrial infrastructure become energy
efficient. Only a small fraction of the opportunities, the
submitted proposals, were able to be funded. So NASEO supports
providing $4 billion for this program pursuant to Subtitle D of
Title 4 of the Energy Independence and Security Act. This will
make sense from both a global competitiveness perspective as
well as an energy perspective as well as a jobs perspective.
I look forward--I thank you for the opportunity to testify
today and I look forward to taking your questions.
[The prepared statement of Mr. Giudice follows:]
Prepared Statement of Philip Giudice, Commissioner, Massachusetts
Department of Energy Resources, and Chair, National Association of
State Energy Officials, Boston, MA
Mr. Chairman, my name is Philip Giudice and I am appearing today on
behalf of the National Association of State Energy Officials (NASEO). I
am Chair of NASEO and the Commissioner of the Massachusetts Department
of Energy Resources, so I am proud to be here representing
Massachusetts Governor Deval Patrick. Today, I am testifying on behalf
of a variety of legislative provisions to encourage creation of jobs.
NASEO represents the energy offices in the states, territories and
the District of Columbia. We provide an ability to shape policies and
practices among all of the states to implement a balanced national
energy policy. At the present time, the Association is proactively
working with the states in ensuring that the energy portion of the
stimulus funds directed to state activities is effectively put to work
as quickly and productively as possible. We are also working to ensure
that as we look to the future, we have established the basis for our
transition to a clean energy economy.
Last week, my colleague Malcolm Woolf, who serves as NASEO's Vice-
Chair and is Director of the Maryland Energy Administration, testified
with respect to ARRA implementation. As Malcolm testified, the states
have energetically committed, obligated and are spending the $3.1
billion in ARRA funds under the State Energy Program (SEP). Over one-
half of those funds are already committed, despite the delays caused by
NEPA reviews, Davis-Bacon, Buy-American concerns and procurement
issues. The $5 billion provided to the Weatherization Assistance
Program is projected to hit the target of projected homes consistent
with the state goals. The $3.2 billion in funds under the Energy
Efficiency and Conservation Block Grant (EECBG) is moving forward for
the 2,300 direct recipients, and the states are allocating their funds
rapidly. The $300 million Energy Star Appliance Rebate Program is
planning to spend most of the funds by the end of the first quarter of
this year. ARRA funds are having a direct impact on the economy and are
producing real jobs. I am proud to say that, thanks to the leadership
of Governor Patrick and his entire recovery team, my own state of
Massachusetts is hard at work deploying stimulus funds to create jobs
and deliver energy benefits. We are on track to have 97% of our SEP
funds and the state portion of the EECBG funds under contract with
recipients or in negotiations by the end of this month.
The proposals we are discussing today will help serve as an
important bridge to a cleaner energy future and will create jobs very
quickly. We know that our economy today wastes enormous amounts of
energy. We are in the process of building a substantial track record of
success with the stimulus funds to demonstrate how prudent investments
in efficiency pay dividends for the economy in reducing energy waste.
These jobs proposals will broaden and deepen our track record for
success and will both raise awareness, as well as develop the delivery
models to provide for increased energy efficiency. With the success of
the energy stimulus investments and these jobs investments we will have
a compelling basis for continuing this important work far into the
future by leveraging private financing.
HOME STAR
NASEO supports the Home Star program and urges Congress to adopt
the proposal, including the $6 billion funding level. This initiative
will put people to work and will move aggressively to improve the
energy efficiency of our existing homes. The ``prescriptive'' (Silver
Star) proposal and the ``performance-based'' (Gold Star) proposal
together constitute a short-term, first step to be implemented over a
two-year period. This ``first step'' is significant as we prepare to
hopefully implement a longer-term, state-based energy efficient
buildings program included in both the energy bill passed by this
Committee in June 2009 (S. 1462) and the ``REEP'' provision included in
the House-passed energy and climate bill (H.R. 2454).
The state role in Home Star includes managing the necessary quality
assurance activities, promoting use of financing programs to expand the
reach of Home Star and finally to serve as Rebate Aggregators in
certain jurisdictions. Language is also contained in the legislative
draft that strives to ensure that existing state-based energy efficient
building retrofit programs are not compromised and will move forward
toward their already-established goals without delay, interruption, or
complication. Under ARRA, approximately $800 million in new residential
energy efficiency retrofit programs are being implemented under SEP and
EECBG. These programs are expanding existing, established programs,
that are already being deployed in states like Massachusetts, New York,
Oregon, California, Wisconsin, and elsewhere. It is important that any
final legislation in this area maintain the highest energy efficiency
levels possible--of the type contained in the present draft of the
bill.
In my own state of Massachusetts we have been running comprehensive
home retrofit programs for three decades, and are at this very moment
in the process of expanding them three-fold. After a comprehensive
stakeholder planning process led by my office over the last 18 months,
our efficiency program administrators (primarily the investor-owned
utilities) developed three-year, statewide energy efficiency programs
that have received the endorsement of key stakeholders, including the
Associated Industries of Massachusetts, our state Attorney General's
ratepayer advocate office, environmental organizations and others. The
plan will deliver nearly $6 billion in benefits to all energy customer
classes, save more than 30,000 GWh and nearly 900 million therms of
natural gas and reduce GHGs by about 15 million tons. These programs
reflect the combined efforts of thirteen different efficiency program
administrators who have agreed to integrate efficiency delivery across
service territories and across fuel sources (combining electric and gas
savings wherever appropriate) in order to deliver comprehensive and
coordinated building improvements that are targeted to meet customer
needs. Approximately 40% of the funding is focused on residential
efficiency, and the bulk of that is in building retrofits.
In addition we are aggressively pursuing adoption of strong energy
codes including an optional ``stretch'' code that cities and towns can
adopt; a funded training program for local code inspectors to enhance
code compliance; a robust zero net energy building program in state
government and for the private sector; a GHG review requirement for
major development projects which is improving the quality of buildings
at the design stage; and many other steps to promote building energy
performance improvements.
It is critical that the Home Star program be carefully tailored to
ensure that it maximizes benefits to taxpayers and energy customers by
requiring integration and coordination with existing comprehensive
state programs. Anything less risks disrupting the progress that states
are already making to achieve the employment, energy and climate goals
we all share. DOE and the rebate aggregators must coordinate with these
comprehensive state programs. We certainly do not want consumers facing
confusing offerings.
In addition, three changes are necessary to this legislative draft.
First of all, we feel strongly that for purposes of NEPA and Buy-
American, the Home Star program should be treated in the same manner as
the Weatherization Assistance Program. As Malcolm Woolf testified last
week, the federal and state governments have learned a great deal
through the implementation of ARRA. One thing we learned is that
further delay is not acceptable. Home Star is a residential energy
efficiency retrofit programs: Weatherization is a residential energy
efficiency retrofit program. Home Star should be treated in the same
manner for purposes of these important statutes.
Second, again in order to avoid delay, a waiver provision should be
built into the statute in order to permit minor changes in state
programs implemented under Home Star to be implemented quickly.
Third, it is critical that the Home Star program be coordinated
with the Section 25C residential existing homes energy efficiency tax
credit, so that Congress can ensure the ongoing viability of this tax
credit while advancing this new rebate which will benefit many more
homeowners and provide immediate job growth. The rebate levels in the
draft bill need to be increased in light of the treatment of the 25C
tax credit under this legislation.
BUILDING STAR ENERGY EFFICIENCY REBATE ACT OF 2010
NASEO also strongly supports Senator Merkley's (along with
Senators' Brown (OH), Cardin, Pryor, Sanders and Stabenow) Building
STAR legislation; a program to offer rebates to the owners of
commercial and multi-family buildings for efficiency improvements. The
Building STAR rebates are modeled on successful programs that states,
such as Massachusetts, have created to offer energy efficiency rebates
to commercial building owners. This gives me confidence that Building
STAR would work and immediately spur new projects and new jobs.
Delivering the rebates will be simple and straightforward, because many
commercial building owners and contractors are already very familiar
with how to select and implement such efficiency measures and apply
such rebates.
The economic opportunity in the commercial building sector is
great. Nearly 2 million people have lost high-skilled, non-residential
construction jobs since the beginning of the economic downturn--an
unemployment rate of 24.7%, or nearly 2.5 times the national average.
Nationally, commercial buildings consume 46% of energy, and, as recent
job data indicate, unemployment is high in the construction industry.
But commercial building owners, most of whom understand the great
benefits of energy efficiency to their buildings, often are unable to
conduct energy efficiency retrofits or upgrades, due to a variety of
market barriers, including tight credit markets, low property values,
and confusing landlord-tenant issues on energy bills.
If Building STAR is fully funded at $6 billion, consumers would
save $3.3 billion per year on their energy bills, more than 190,000 new
jobs would be created, and the equivalent of nearly 4 million cars
worth of carbon dioxide emission would be avoided by the end of 2011.
Building STAR will put highly-skilled people in the badly-hit
construction industry back to work conducting energy efficiency
retrofits and help turn the economic tide. It would help the small
construction businesses--91% of construction firms have fewer than 20
employees. Building STAR would help create manufacturing jobs (e.g.,
for windows, lighting, and so on), construction jobs and more in every
state across the nation.
Building STAR is a package of rebates for energy efficient
equipment, materials and building services designed to meet the unique
needs of the commercial and multi-family residential building sector.
It is the product of a broad coalition of more than 80 unions,
contractor groups, manufacturers, financial services companies,
consumer groups, distributors, technical experts and efficiency
advocates that would hit the ground running to deliver new work, new
jobs and significant energy savings in the short run.
Rebates are offered for twenty different activities, including
improving the building envelope, installing more efficient lighting,
high efficiency HVAC and other equipment as well as performing audits,
commissioning, and training. In general, the rebates are designed to
cover 20% to 33% of the installed cost of each measure. That means that
each dollar of public investment in rebates spurs $2 to $3 of private
sector investment.
The need is great. In January alone, a worker from the specialty
trades sector filed an initial unemployment claim every four minutes.
An overwhelming majority; 91%, of the commercial contractors that
employed this workforce are small businesses that are now severely
under-utilized and in trouble. The story is the same in the
manufacturing sector, which has also lost about 2 million jobs over the
last two years.
ENERGY-EFFICIENT MANUFACTURED HOUSING ACT OF 2009 (S. 1320)
NASEO also supports Senator Tester's proposal to address the urgent
need to replace pre-1976 manufactured housing with Energy Star
manufactured housing. There are over 2 million of these pre-1976
manufactured housing units in use in the United States today. Prior to
1976 there were no effective energy efficiency standards for these
homes. In many areas, low-income and elderly Americans (especially in
rural areas) live in these manufactured housing units. They tend to use
far more energy than the average home because of little insulation or
other energy savings measures. Targeting homeowners with a minimum of
$7,500 per home in the form of a rebate or down payment assistance will
help move this critical effort forward. This program should be
especially helpful in rural areas.
INDUSTRIAL ENERGY EFFICIENCY PROGRAMS
Investments to improve industrial energy efficiency pays multiple
dividends. It improves our manufacturers' global competitiveness which
helps to improve our trade balance, slows jobs lost in manufacturing,
enables our economy to be somewhat less dependent on just consumer
spending for its health and both creates jobs in implementing these
efficiency projects as well as reducing emissions. Under ARRA, my state
like virtually all others was widely over-subscribed when we issued
RFPs for certain kinds of projects, including industrial energy
efficiency projects. In addition, at the federal level, funds were
provided at DOE's discretion for industrial energy efficiency
activities such as plant retrofits and modernization to promote
industrial energy efficiency. This protects these manufacturers from
fuel price volatility and increases competitiveness. These federal
funds were also sufficient to fund only a small fraction of submitted
proposals. We have project plans on the shelf from industrial
facilities across Massachusetts who tell us they are ready to move
forward in the next few months with efficiency investments if they
could get access to additional support. We think that $4 billion should
be allocated for this program, pursuant to subtitle D of title IV of
the Energy Independence and Security Act of 2007 (EISA)(42 U.S.C. 17111
et. seq.). Over ten states utilized ARRA funds directly for
manufacturing retooling to promote energy efficiency. This makes sense
from an energy perspective as well as a global competitiveness
perspective.
Thank you for the opportunity to testify today.
The Chairman. Thank you very much.
Mr. Mierzwa.
STATEMENT OF TERRENCE J. MIERZWA, EXECUTIVE MANAGER OF
MARKETING, ENERGY EFFICIENCY, AND RESEARCH, CONSUMERS ENERGY
COMPANY, JACKSON, MI
Mr. Mierzwa. Good morning, Mr. Chairman. Thank you, and
Senator Murkowski, members of the committee. Thank you, Senator
Stabenow, for the introduction. As Senator Stabenow noted, my
name is Terry Mierzwa, Executive Manager of Marketing, Energy
Efficiency, and Research at Consumers Energy, headquartered in
Jackson, Michigan. Consumers Energy provides service to 1.8
million electric customers and 1.7 million gas customers in
Michigan.
I thank you for this opportunity to testify today on the
proposal to implement a Home Star program. Consumers Energy is
a strong supporter of energy efficiency. Recently we worked
with our State legislature and many interested parties to help
craft and pass legislation that requires Michigan energy
utilities to achieve annual energy savings targets through
programs we offer to our customers. With strong bipartisan
support, Governor Granholm signed Public Act 295 into law in
October 2008.
After approval from the Michigan Public Service Commission,
we launched a portfolio of new programs in late July and,
despite having only 5 months to do so, I'm proud to say we
exceeded our 2009 energy savings targets by about 25 percent.
We're off to a great start in 2010 as well.
Clearly, our customers appreciate these programs and are
taking advantage of them. We estimate that more than 170,000
residential customers participated in at least one program last
year and about 9,500 commercial industrial customers did so as
well, including a number of public customers. We heard earlier
about schools. We have many of those participating in our
programs. Our customers look to us as a trusted resource for
expert energy advice and the measures they have installed will
help them save money on their energy bills for many years to
come.
I might add that the other major energy utility in
Michigan, DTE, has followed a similar path, as have all the
smaller utilities. This is truly a statewide effort.
Michigan is certainly not the only State in which energy
efficiency investment has been growing. A new report by the
Consortium of Energy Efficiency shows that since 2006 the
combined budgets for electric and gas energy efficiency
programs in the United States have more than doubled, growing
from $2.6 billion to $5.3 billion.
It is clear that energy utilities are well positioned to
play a critical long-term role in delivering energy efficiency.
In a recent Edison Electric Institute power poll, a national
sample of residential consumers was asked what groups or
organizations would they look to for more information on how to
use electricity more efficiently. Almost 60 percent said they
would look to their electric utility, which was 2 and a half
times as many who mentioned the second most popular choice,
which was retailers.
Successful implementation of energy efficiency programs by
utilities has required development of the infrastructure
necessary to bring them to market. We have hired implementation
contractors, developed detailed policies and procedures, built
web sites, established call centers, built tracking systems,
established rebate processing capability, and recruited and
trained thousands of trade allies. These trade allies include
big box retail stores, architectural and engineering firms,
energy auditors, and electrical home improvement and heating
and cooling contractors across our State. Our programs are
operated in an open and transparent manner, with independent
third party evaluation of the results.
We believe this Michigan model for operating energy
efficiency programs is working quite well, given the energy
savings results achieved thus far, and it will continue to get
even better with more experience. But this model is far from
unique. More than 20 other States have legislated energy
savings targets that are being achieved through similar
programs and infrastructure.
The new legislation being proposed to this committee can
offer enhanced opportunities for our customers to become more
energy efficient and we believe that is a worthy goal.
Improvements in energy efficiency are good for the economy as
well as the environment. We appreciate the changes that have
been made since the original draft and note that many align
with our priorities. To that end, we have 2 key requests, as
follows.
No. 1, we want to ensure that the infrastructure we already
have in place is not duplicated in the Home Star program. We
believe it is important that energy efficiency be achieved in a
cost-effective manner in that States in which utilities are
operating successful energy efficiency programs are especially
well positioned to ensure that outcome. Home Star could and
should supplement and augment what we already have in place.
No. 2, it is critical that Federal legislation be
harmonized with existing State legislation that has already set
energy efficiency requirements for utilities. This can be done
by making it very clear that utilities are allowed to
participate in and coordinate their programs with Home Star.
That clarity will help us to implement quickly and therefore
promote quicker job creation, while also demonstrating to our
commission that we have a role to play and should receive
appropriate credit toward our State energy saving goals.
It's my understanding that the House version of this bill
has some clarifying language around utility participation and
credit that I think is helpful in that matter.
We very much appreciate that the drafters of this
legislation have incorporated many of our suggestions and
incorporated language that would give States such as Michigan
the option the flow much of this activity through the existing
infrastructure that has already been created by the utilities
and has enabled each of us to operate successful cost-effective
energy efficiency programs. We hope that as this proposed
legislation undergoes debate within this committee and later in
the full Senate this option to take advantage of existing
utility program infrastructure is preserved.
Thank you for your attention.
[The prepared statement of Mr. Mierzwa follows:]
Prepared Statement of Terrence J. Mierzwa, Executive Manager of
Marketing, Energy Efficiency, and Research, Consumers Energy Company,
Jackson, MI
Good morning. My name is Terry Mierzwa, Executive Manager of
Marketing, Energy Efficiency, and Research at Consumers Energy Company,
headquartered in Jackson, Michigan. Consumers Energy provides service
to 1.8 million electric customers and 1.7 million natural gas customers
in Michigan's Lower Peninsula.
Thank you for this opportunity to testify on the draft text of a
legislative proposal to implement the Home Star program.
BACKGROUND
Consumers Energy is a strong supporter of energy efficiency. It is
a key component of our Balanced Energy Initiative for meeting our
customers' energy demands. In 2007 and 2008, we worked with our
legislature and many interested parties to help craft and pass
legislation that requires Michigan energy utilities to achieve annual
energy savings targets through programs we offer to our customers. With
strong bipartisan support, Governor Granholm signed Public Act 295 into
law in October 2008.
We subsequently developed a comprehensive six-year plan for
investing $508 million in electric and gas energy efficiency programs
for our residential, commercial, and industrial customers. The Michigan
Public Service Commission approved our plan as filed in late May 2009.
We launched our portfolio of new programs in late July and, despite
having only five months to do so, I am proud to say we exceeded our
2009 energy savings targets of 108,000 MWh of electricity and 300,000
Mcf of natural gas each by about 25%. We are off to a great start in
2010 as well.
Clearly, our customers appreciate these programs and are taking
advantage of them. We estimate that more than 170,000 residential
customers participated in at least one program last year, whether it
was buying and installing compact fluorescent light bulbs, purchasing a
high-efficiency furnace, or letting us pick up and recycle an old
second refrigerator from their basement or garage. Similarly, about
9,500 commercial and industrial customers took advantage of our
programs. They ranged from an elementary school in Swartz Creek that is
saving $2,300 annually after installing 22 occupancy sensors in 16
classrooms to a General Motors plant in Flint that is saving $125,000
annually after replacing nearly 1,200 light fixtures with higher
efficiency units. Just this month, we launched a new program called
Think! Energy targeted at 4th through 6th graders throughout our
service territory. We fully subscribed this program within a month and
are now in the process of visiting 121 schools and making energy
efficiency presentations to 13,000 students. In addition, each child
will receive a Take Action! Kit to take home to review with their
family. The kit contains two compact fluorescent light bulbs, a high-
efficiency showerhead, a faucet aerator, and other easy-to-install
measures. Our customers look to us as a natural resource for expert
energy advice, and the measures that all of these customers installed
will help them save money on their energy bills for many years to come.
I might add that the other major energy utility in Michigan, DTE,
has followed a similar path as have the smaller investor-owned
utilities, municipal utilities, and electric cooperatives. It is truly
a statewide effort.
Michigan is certainly not the only state in which energy efficiency
investment has been growing. A new report by the Consortium for Energy
Efficiency shows that, since 2006, the combined budgets for electric
and gas energy efficiency programs in the United States have more than
doubled, growing from $2.6 billion to $5.3 billion.
It is clear that energy utilities are well-positioned to play a
critical long-term role in delivering energy efficiency. In a recent
EEI Power Poll, a national sample of residential consumers was asked
what groups or organizations they would look to for more information on
how to use electricity more efficiently. Almost 60 percent said they
would look to their electric utility, which was two-and-a-half times as
many (23%) who mentioned the second most popular source, retailers.
PROGRAM INFRASTRUCTURE
Successful implementation of energy efficiency programs by all of
these utilities required development of the infrastructure necessary to
bring them to market. We have hired implementation contractors,
developed detailed policies and procedures, built Web sites,
established call centers, built tracking systems, established rebate
processing capability, and recruited and trained thousands of trade
allies. The trade allies include ``big box'' retail stores,
architectural and engineering firms, energy auditors, electrical
contractors, home improvement contractors, and heating and cooling
contractors across the state. Our programs are operated in an open and
transparent manner with independent, third-party evaluation of the
results. All of this activity is conducted under the oversight of the
Michigan Public Service Commission, which has responsibility for
ensuring the prudency and cost-effectiveness of our energy efficiency
investments. The Commission also plays an important role by its
operation of various energy efficiency collaboratives through which
utilities can better coordinate their program offerings and the public
can provide its input.
We believe this Michigan model for operating energy efficiency
programs is working quite well given the energy savings results
achieved thus far, and it will continue to get even better with
additional experience and collaboration. This model is not unique. More
than twenty other states have legislated energy savings targets that
are being achieved through similar programs, infrastructure, and
collaboration.
COORDINATION WITH FEDERAL LEGISLATION
The new legislation being proposed to this Committee can offer
enhanced opportunities for our customers to become more energy
efficient, and we believe that is a worthy goal. Improvements in energy
efficiency are good for the economy as well as the environment. We
appreciate the changes that have been made since the original draft and
note that many align with our priorities. To that end, we have two key
requests, as follows:
1. We want to ensure that the infrastructure we already have
in place is not duplicated in the Home Star program. We believe
it is important that energy efficiency be achieved in a cost-
effective manner, and that states in which utilities are
operating successful energy efficiency programs are especially
well-positioned to ensure that outcome. By taking advantage of
the infrastructure the utilities already have in place, we can
avoid the creation of redundant infrastructure and
administration, which means more of the money appropriated for
this effort will flow directly to the consumers who want to
improve the energy efficiency of their homes. It also means
that the jobs created by these federal programs can be brought
to market more quickly. Home Star will supplement and augment
what we already have in place.
2. It is critical that federal legislation be harmonized with
existing state legislation that has already set energy
efficiency requirements for utilities. This can be done by
making it very clear that utilities are allowed to participate
and coordinate their programs with Home Star. That clarity will
help to enable us to implement quickly and promote job
creation, while showing our Commission that we have a role and
should receive appropriate credit toward our energy savings
goals. Otherwise, the federal dollars will be competing with
our programs, making them less cost-effective, and potentially
causing us to suspend them while federal incentives are in
place. This would serve neither our customers nor trade allies
well because they seek assurance of a sustained effort rather
than a boom and bust cycle.
We very much appreciate that the drafters of this legislation have
incorporated many of our suggestions and incorporated language that
would give states such as Michigan the option to flow much of this
activity through the existing infrastructure that has already been
created by the utilities and has enabled each of us to operate
successful, cost-effective energy efficiency programs. We hope that, as
this proposed legislation undergoes debate within this Committee and
later in the full Senate, this option to take advantage of existing
utility program infrastructure is preserved.
Thank you for your attention.
The Chairman. Thank you very much.
Mr. Hanbury, you're the final witness here. Go right ahead.
STATEMENT OF BOB HANBURY, PRESIDENT, HOUSE OF HANBURY, AND
BOARD MEMBER, NATIONAL ASSOCIATION OF HOME BUILDERS, NEWINGTON,
CT
Mr. Hanbury. Great, thank you. Good morning, Mr. Chairman
and members of the committee. My name is Bob Hanbury. I'm a
custom design remodeler from Newington, Connecticut with over
34 years experience and I'm a board member of the National
Association of Home Builders, NAHB, and I'm pleased to testify
today on the Home Star Act of 2010.
NAHB supports incentives for retrofitting older homes.
We believe that this approach is the best way to achieve
meaningful energy savings in the residential sector.
Professional remodelers like me have been retrofitting homes
for years and our expertise is an asset to a national retrofit
program.
We have demonstrated success managing federally funded
retrofit programs. For example, the Builders Association of
Minnesota administered a retrofit program called Project Re-
Energize in late 2009 with a grant from the stimulus bill. In
just a few short months, the builders retrofitted over 1,400
homes, employed 800 contractors, and returned nearly $3 million
in consumer rebates for energy efficiency upgrades. This is a
model of efficiency and success that we believe is a perfect
part for the Home Star program.
Despite our hope for Home Star, I can tell you that there
are barriers to its potential success. As an EPA-certified lead
firm, I am fully ready to comply with the new EPA rule covering
renovation, weatherization, and retrofit work in pre-1978
houses beginning in 42 days on April 22, 2010. Unfortunately,
EPA does not have enough certified renovators that can legally
work to retrofit and weatherize older housing stock that the
Home Star program hopes to incentivize. Contractors that cannot
meet EPA's certification requirements for the lead renovation,
repair, and painting rule by April 22 will be breaking Federal
law if they work in pre-1978 homes.
Even without a multi-billion dollars retrofit program like
Home Star, EPA is far from meeting its stated compliance needs
of more than 200,000 certified renovators by the deadline. As
of February 19, EPA reports only that about 14,000 certified
individuals--there are about 14,000, with some States still
having no accredited training providers. As you can see, a
substantial retrofit program like Home Star only magnifies
these compliance issues.
Without a delay in the effective date of the rule, I
believe it will derail the success of Home Star or, vice versa,
these incentives may lead contractors to potentially violate
the law by working in older homes without proper certification
to take advantage of Home Star. NAHB supports lead-safe work
practices as well as retrofit incentives, but unless the
compliance issues with the lead rule are addressed I believe it
will cripple Home Star before it really has a chance to work.
In addition to the issues with the EPA's lead rule, NAHB
also hopes to ensure that the Home Star program is equally
accessible by all qualified highly trained contractors that
have undertaken legitimate work force training and possess
appropriate skills, job skills, in weatherization. We're
concerned that there are limitations on both the certification
requirements as well as the labor pool in the current draft
legislation. The amount of energy lost on older homes is
significant, as are the job losses in construction, and
Congress should not limit in any way the ability of qualified
highly skilled and eligible workers to execute a comprehensive
home retrofit program.
Specifically, NAHB requests the inclusion of the Home
Builders Institute, or HBI, in addition to the named training
programs as a qualified work force development program. HBI is
the largest Job Corps partner with the U.S. Department of Labor
and has developed a robust weatherization curriculum that
creates a clear path for professionals doing retrofit work well
into the future. HBI is a legitimate work force training
program that deserves equal consideration with the others.
NAHB is also concerned that minimum prequalification
requirements under section 8 for work after January 1, 2011,
precludes participation by certain eligible contractors.
Specifically mandating accreditation and only properly
classified employees seems to preclude contractors based on
certification credential and employment status. NAHB has sought
clarification on the reason behind qualifying contractors based
on employment status, but has not received justification for
this inclusion. Unless there is an objective reason for
limiting the pool of available workers in this regard, it seems
fair and appropriate to remove such mandates provided
contractors can demonstrate sufficient job skills and work
force training that otherwise would qualify them to do the
work.
NAHB fully supports retrofitting older homes and we are
truly experts in this field. We support the benefits both in
job creation and energy savings that a program like Home Star
could deliver. But we are wary of the pitfalls. The chief
obstacle to Home Star's success is the effective date of EPA's
lead rule and the lack of certified renovators. This rule must
be delayed until a sufficient number of contractors have the
opportunity to be certified by EPA.
I appreciate the opportunity to be here to present our
thoughts on this legislation and we look forward to working
with you. I'd be happy to answer any questions.
[The prepared statement of Mr. Hanbury follows:]
Prepared Statement of Bob Hanbury, President, House of Hanbury, and
Board Member, National Association of Home Builders, Newington, CT
Chairman Bingaman, Ranking Member Murkowski, and members of the
Committee, my name is Bob Hanbury. I am President of House of Hanbury,
a third generation contractor based company in Newington, Connecticut.
I have over 34 years experience specializing in design-build remodeling
and I am a board member of the National Association of Home Builders
(NAHB). I am pleased to have the opportunity to testify today, on
behalf of the 175,000 members of NAHB in regards to the Home Star Act
of 2010 and to express our support for incentives to retrofit older
homes and buildings to improve energy efficiency and performance.
Through my experience in the housing industry, I am intimately familiar
with the struggles facing residential construction and I am eager to
have meaningful job creation take place in our industry. NAHB members,
like me, are already experts on the type of jobs that the Home Star
proposal seeks to promote. I believe we can be both assets and allies
for creating a robust national retrofit program like the one envisioned
in the draft Home Star legislation.
In addition to the great promise I see in the Home Star proposal, I
also see potential barriers to its success. For example, there are
potential conflicts between Home Star and an environmental rule--e.g.,
the EPA's Lead: Renovation, Repair and Painting Rule (LRRP)--that may
create a serious compliance problem whereby it becomes illegal to work
on any pre-1978 without certification by EPA in Lead Safe Work
Practices (LSWP) as of April 22, 2010. Further, precluding access to
the program by qualified contractors that receive appropriate job
skills training via ``other'' workforce training programs is
problematic. Similarly, requiring all contractors after the initial
implementation period to be on a restrictive ``pre-qualification'' list
will also limit the impact of the program.
This statement details our concerns about the implementation of the
EPA's LRRP that I believe will cripple the success of a Home Star
retrofit program before it really has a chance to begin. Additionally,
I have provided specific comments on the draft Home Star legislation
outlining areas of concern and recommendations for improving the
proposal. In both areas, NAHB looks forward to working with you to
create a successful retrofit program that provides equal access for all
qualified and properly-trained contractors and a true incentive to
renovate the oldest, least-efficient housing stock.
SUPPORT FOR RETROFIT INCENTIVES AND PROJECT REENERGIZE
NAHB has consistently supported incentives for improving the energy
efficiency of existing homes as part of a balanced energy efficiency
policy for the building sector. In collaboration with several
environmental and efficiency leaders, NAHB jointly advocated for the
extension and expansion of tax credits under Section 25C and Section
25D of the Internal Revenue Code that support both efficiency upgrades
and the installation of advanced renewable energy systems in homes.
These two incentives were used by more than 4 million taxpayers in 2007
alone. Incentives for efficiency upgrades in existing homes are
particularly meaningful because those projects are not normally as
visually appealing as a state-of-the-art-kitchen.
Remodelers and renovators have been undertaking retrofit projects
for years and have established networks to deliver large-scale
projects, like Home Star, already in place. Despite the dramatic
downturn in housing, our industry is poised to implement a retrofit
program that employs the skills and expertise already mastered by
builders and remodelers who rely upon the delivery system and supply-
chain that runs between renovation contractors and product
manufacturers. NAHB members have a proven track record of success in
programs like this, primarily because we have been doing this work for
years.
An example of a retrofit success that is particularly relevant to
the draft Home Star legislation is Project Reenergize--
www.projectreenergize.org. This successful retrofit program was
administered and managed by the Builders Association of Minnesota (BAM)
under a grant from the American Reinvestment and Recovery Act (ARRA).
This program leveraged just $3 million dollars of ARRA funding into a
consumer rebate retrofit program that not only provided high-quality
efficiency upgrades to consumers in Minnesota, but also delivered
additional remodeling work to contractors that exceeded the promotional
items as well. In a few short months at the end 2009, Project
Reenergize completed 800 retrofit projects on over 1,400 homes with an
average rebate to the consumer of $2,300.
The success of Project Reenergize is not only that it moved rapidly
with remarkable results, but also that it was managed efficiently and
did not suffer the same bureaucratic issues that plagued other ARRA
weatherization-type projects. First, as a consumer rebate program,
Project Reenergize was not subject to Davis-Bacon wage requirements, as
every other weatherization project faced, because it was awarded an
exemption by the Department of Labor. Secondly, because the State of
Minnesota did not have the network available to deliver the funding
quickly, it allowed the BAM to administer the rebate program, similar
to the proposed Rebate Aggregator role in the draft Home Star
legislation. BAM verified that the contractors were appropriately
trained and qualified to do the work, as well as reviewed all quality
control paperwork and any field inspections prior to issuing the
rebates. BAM was uniquely positioned to be the link between the
manufacturers, distributors, retailers, contractors, and trainers in
this regard. Thus, NAHB believes that the success of Project Reenergize
should be a model for how a larger, national rebate program should
function and that there is a key role for the other 800+ state and
local home builder associations across the U.S.
implementation of the epa's lead: renovation, repair and painting rule
I am concerned with the implementation of the EPA's Lead:
Renovation, Repair and Painting Rule (LRRP) and the potential conflict
with the roll out of a multi-billion dollar retrofit program like Home
Star. As a professional remodeler and an EPA ``certified renovator'' in
Lead Safe Work Practices (LSWP), I am trained and ready to continue
working in pre-1978 homes, in compliance with the LRRP rule, after
April 22, 2010. Despite attempts to get EPA to act quickly and train
enough professionals in time to meet the deadline, I believe thousands
of contractors may be accused of doing illegal work on older homes as
they assist homeowners in taking advantage of retrofit incentives, or
that the LRRP rule, and the liability that accompanies it, will deter
work in pre-1978 homes after April 22, 2010.
EPA finalized the LRRP rule in August 2008 covering all renovation
work in homes built before 1978 to ``minimize exposure to lead-based
paint hazards created during renovation, repair, and painting
activities in all housing and other buildings frequented by children
under age 6.'' NAHB, along with several others, participated as a
stakeholder in the development of the LRRP rule and supported its
intent, as originally proposed. NAHB believes in the benefits of
training contractors in LSWP. Therefore, NAHB has been consistently
disappointed with the amount of time it has taken EPA to begin
training, approve and accredit training programs and training
providers, and approve online training courses for the portion of the
certification protocol that does not require ``hands-on'' observation.
This lack of attention has led to serious deficits in providing enough
``certified renovators'' to meet the compliance demands of the LRRP
rule, and worse yet, it could now derail the success of a retrofit
program to create jobs, like Home Star.
Obviously, the homes in the most desperate need of retrofit are
those built prior to the introduction of energy codes in the late
1970s. This substantial segment of the housing stock--about 68% of all
existing homes--numbers roughly 79 million. In order to address these
millions of older homes, EPA estimated that it would need 212,000
certified firms and 236,000 certified contractors prior to the April
22, 2010\1\. Additionally, EPA proposed adding an amendment to the LRRP
rule in October 2009, which substantially increases the number of homes
subject to the rule, thereby increasing the need for additional trained
firms and contractors by 110,000 and 115,000, respectively, all prior
to the April 22, 2010 deadline\2\. As of February 19, 2010, EPA
reported that is has certified 13,669 renovators in LSWP [See Appendix
I].
---------------------------------------------------------------------------
\1\ U.S. Environmental Protection Agency, Economic Analysis for the
TSCA Lead Renovation, Repair, and Painting Program Final Rule for
Target Housing and Child-Occupied Facilities, (March 2008). table ES-4.
\2\ U.S. EPA, Economic Analysis for the TSCA Lead, Renovation,
Repair, and Painting Program Opt-Out and Recordkeeping Proposed Rule
for Target Housing and Child-Occupied Facilities, ES-2 (October 2009).
---------------------------------------------------------------------------
Furthermore, EPA reports that some States still do not have any
accredited training providers to offer the EPA training, including the
States of Arizona, Louisiana, Oklahoma, Rhode Island, South Dakota,
West Virginia, and Wyoming\3\.
---------------------------------------------------------------------------
\3\ U.S. EPA, http://www.epa.gov/lead/pubs/trainingproviders.htm
[accessed 9 March 2010].
---------------------------------------------------------------------------
EPA has not given contractors the adequate means to comply with the
LRRP rule, a problem which will be magnified if the Home Star program
is enacted into law. EPA did not begin accrediting training providers
until July 2009 and since that time has only accredited approximately
135 firms and 13,669 individuals, far below the 236,000 threshold it
set for itself in March 2008. Additionally, EPA has generally been
deficient in its efforts to inform the regulated community about the
LRRP rule, only starting its advertising campaign for compliance at the
end of February 2010. Thankfully, NAHB and the remodeler members of our
state and local home builder associations began working to try to have
as many contractors as possible trained prior to EPA's ad campaign and
have already held 231 training courses with another 500 planned.
With little effort to effectively train and inform the regulated
community, EPA has done virtually nothing to inform the public about
the LRRP rule. Consumer awareness of this regulation is negligible, at
best, and with the heavy media campaign that will undoubtedly accompany
Home Star, homeowners will rush to call contractors to perform
efficiency upgrades in older housing, not realizing that many of those
contractors could be doing the work illegally if they are not EPA
certified. While the consumer would not bear the liability for
violations, contractors that violate the statute are subject to fines
and civil penalties (under Toxic Substances Control Act, $37,500 per
violation, per day\4\), which will provide a disincentive for working
on pre-1978 homes.
---------------------------------------------------------------------------
\4\ 40 C.F.R. Sec. 745.220(b)
---------------------------------------------------------------------------
Regardless of the certification, pre-qualification and training
requirements as prescribed for contractors working on Home Star
projects, all contractors must comply with the LRRP rule. In order to
comply, contractors must belong to a ``certified firm,'' which requires
paying a fee to EPA or delegated State program, and ``certified firms''
must have at least one trained ``certified renovator'' that must be
present at the outset and completion of renovation work in housing
subject to the rule\5\. Since EPA has publicized a plan showing that it
expects only a portion of the regulated community to be able to comply
with the LRRP rule by the effective date under normal market
conditions, NAHB doubts that it could accommodate the influx of new
renovation contractors in the context of a multi-billion retrofit
program that is specifically designed to create jobs working on the
same housing stock covered by the LRRP rule.
---------------------------------------------------------------------------
\5\ 40 C.F.R. Sec. 745.85
---------------------------------------------------------------------------
NAHB believes that intervention to delay the effective date of the
implementation of the LRRP is warranted and justified, especially in
the context of promoting a retrofit program. Not only has EPA
demonstrated a lack of capacity to provide adequate compliance
pathways, but there are liabilities that accompany this program that
could stymie the success of a planned retrofit program. Because of the
implications of the compliance problems and potential liabilities, both
in federal fines and lawsuits, NAHB believes the Committee should weigh
in with the administration and the Office of Information and Regulatory
Affairs at OMB to request a delay in the effective date of the LRRP
rule.
A delay in the effective date of the LRRP rule is also critical
because the statute under which the rule is promulgated allows for
citizens to sue a regulated contractor after providing notice to EPA if
the EPA declines to pursue an enforcement action or civil action
against that contractor. Thus, even if EPA exercised its discretion and
chose not to actively pursue enforcement actions against remodelers and
other contractors alleged to be in violation of any part of the LRRP
rule, an individual could file a lawsuit against the contractor. For
example, if a contractor were unable to attend certified renovator
training by April 22, on April 23, anyone meeting the Toxic Substances
Control Act's specifications can file notice of their intent to
initiate a lawsuit to ``restrain a violation,'' which would likely
prohibit the contractor from working on any home built before 1978\6\.
---------------------------------------------------------------------------
\6\ The Toxic Substances Control Act (TSCA) allows citizens
satisfying Constitutional article III requirements to pursue civil
actions against persons alleged to be in violation of the act or a
regulation or order promulgated pursuant to the act. TSCA Sec. 20; 15
U.S.C. Sec. 2619(a). Section 20 provides that ``any person may
commence a civil action (1) against any person. . .who is alleged to be
in violation of this chapter or any rule promulgated under. .
.subchapter. . .IV [Lead Exposure Reduction] of this chapter to
restrain such violation.'' See id. In order to pursue litigation
against an alleged violator, the citizen plaintiff must first notify
both EPA and the alleged violator 60 days before filing a complaint.
TSCA Sec. 20(b)(1)(A); 15 U.S.C. Sec. 2619(b)(1)(A). If EPA has
already commenced ``and is diligently prosecuting'' an enforcement or
civil action against the alleged violator, then the citizen plaintiff
cannot bring suit. TSCA Sec. 20(b)(1)(B); 15 U.S.C. Sec.
2619(b)(1)(B). If EPA initiates action after receiving notice of the
citizen plaintiff's intent to sue, then the plaintiff may intervene in
the proceeding.
---------------------------------------------------------------------------
NAHB believes that delaying the effective date of the LRRP rule is
appropriate and that there is sufficient precedent for taking such
action. In 2000, the Department of Housing and Urban Development (HUD)
faced a similar problem implementing a lead rule that covered
federally-owned housing due to lack of trained (certified) personnel.
The rule was finalized on September 11, 2000, but due to the lack of
certified professionals to implement it, an extension, of sorts, was
granted whereby program participants that had properties built after
1960 were granted a ``transition assistance period'' and could file a
``statement of inadequate capacity'' that essentially indicated their
intent to comply with the rule once enough certified professional were
available to do the work. As the need dictated, these transitional
periods continued to be available until January 10, 2002, when it was
determined that there was finally enough capacity to comply with the
rule. If this process was appropriate to establish compliance for
federally-owned housing stock, it seems justifiable for use in this
case where substantially more homes are affected.
COMMENTS ON DRAFT HOME STAR LEGISLATION
NAHB fully supports retrofit efforts like Home Star and has
experience successfully implementing federally-funded retrofit
projects, but we believe the current draft Home Star legislation may
not provide equal access to all trained contractors and could
potentially limit the eligible labor pool. As drafted, only certain
organizations qualify by name under the workforce development training
section of the draft legislation. Furthermore, by 2011, no contractors
working on any ``federally assisted residential retrofit work'' will be
authorized to participate unless those contractors are pre-qualified
and the pre-qualification minimums are needlessly exclusionary. In
order to be truly successful, both in the number of jobs that can be
created, as well as the amount of energy that can be saved, the Home
Star program should be accessible to every contractor that has been
trained in a legitimate workforce training program, or that has the
appropriate job skills to perform the work. Whether or not he or she is
affiliated with a specific credentialed organization, as listed in the
draft, should be irrelevant.
Home Builders Institute (HBI)
One specific omission in the draft Home Star legislation is the
exclusion of the Home Builders Institute (HBI) from the definition of a
``certified workforce'' in Section 2(4). HBI is the largest Job Corps
partner with the U.S. Department of Labor and is currently structured
to serve workers from youth to adults; providing a career path for the
residential construction (and home weatherization) industry. Because
HBI is already a recognized partner with the federal government, it is
a legitimate workforce program that provides the same skills training
and job preparation that the draft Home Star legislation seeks to
promote.
Beginning in 2001, HBI developed a craft trade specific training
program focusing exclusively on the residential construction industry.
The Residential Construction Academy Series published by Delmar
Learning, a leading trade textbook publisher, features textbooks and
electronic teaching materials in the subjects of Carpentry, House
Wiring, Plumbing, HVAC, Masonry and Facilities Maintenance. ``Basic
Principles for Construction'' serves as an introduction to the
curriculum. Weatherization and retrofit strategies and practices are
imbedded throughout the RCA Series' trade titles, many of which are in
their 2nd editions. The training is based on national skill standards
identified by residential builders, remodelers and educators. RCA
Series materials are used in high schools, two-year colleges and
workforce preparedness programs, including Job Corps, throughout the
U.S.--(www.residentialacademy.com)
HBI provides certification for both instructors and students who
utilize its materials through the National Occupational Competency
Testing Institute (NOCTI). NOCTI is a leading provider of high-quality
occupational competency assessment products and services to secondary
and post-secondary educational institutions in the U.S. and worldwide.
In 2009, HBI correlated all of its training materials used in Job Corps
training, as well as its Pre-Apprenticeship Certificate Training (PACT)
used to train disadvantaged audiences, to the ANSI approved ICC-700-
2008 National Green Building StandardTM. These materials
present entry-level, pre-apprenticeship training on craft trades
involved in the weatherization of existing homes. Furthermore, HBI also
created a 40-hour training certification on weatherization and
retrofitting for industry practitioners, which includes includes
classroom and hands-on training and an associated certification. This
training can be administered through home builder associations or
community colleges throughout the U.S. In the last 28 years, HBI has
trained well over 150,000 professionals--youth to adults--in the
residential construction industry.
NAHB recommends including the Home Builders Institute (HBI)
workforce development training program in addition to Building
Performance Institute (BPI), North American Technician Excellence, and
Laborers International Union of North America, as a qualifying program
for a ``certified workforce.'' This is particularly important, as the
ongoing Quality Assurance Framework, under Section 8 of the draft Home
Star legislation, demands the use of a ``certified workforce'' as a
minimum component of pre-qualification. NAHB does not believe that
relegating the inclusion of HBI to a decision by the Secretary to use
``other standards'' is sufficient to guarantee meaningful consideration
because of the length of time that a deliberative agency consultation
and/or rulemaking process might take. NAHB respectfully requests that
HBI be listed by name along with the other named training programs
under Section 2(4)(A).
Certified Workforce
In addition to limitations on the types of workforce training that
could be considered qualified under a ``certified workforce,'' NAHB
notes that there are limitations on the types of contractors that can
be used in any longer-term retrofit projects under Section 8. This
provision requires that by January 1, 2011, all States must submit
plans to implement a ``Quality Assurance Framework'' for any
``federally assisted residential retrofit work''--both Silver Star and
Gold Star--that is ``administered, supervised, or sponsored by [the]
State.'' This mandatory requirement establishes pre-qualification
minimums for all contractors and are exclusionary and restrictive.
Under Section 8(3) of the draft legislation, minimum pre-
qualification requirements for authorized contractors include
``accreditation'' and ``proper employee classification,'' among others.
NAHB believes that the accreditation requirement, as defined under
Section 2(1)(B) of the draft, limits consideration to those that are
accredited by ``BPI'' or ``other.'' NAHB has concerns that restricting
access to only ``BPI'' contractors could limit the program reach, as
there may be instances where BPI-accredited contractors are not serving
every residential retrofit market in the U.S.
More importantly, NAHB is extremely concerned with language in
Section (8)(3)(C) that mandates ``proper classification of employees.''
Despite repeated attempts to clarify the intent of this language, NAHB
has not been able to determine the objective of mandating a ``proper''
way to classify an employee's status for participation in this program.
Unless an objective reason for including this language exists, it
should be removed so that the intent is clear and that every properly-
trained and qualified contractor can participate, despite
classification status, as should be the parameters of a program like
Home Star. Included with this Written Statement is a compilation of
NAHB's specific comments on the legislation and the corresponding
sections with recommendations for changes [See Appendix II].
CONCLUSION
NAHB fully supports the approach that the Committee is considering
with providing incentives for consumers in older, existing homes to be
able to improve energy efficiency and performance. NAHB has
consistently advocated for these types of incentives and will continue
to push for expansions and extensions of such incentives. By far, the
housing and residential construction industry has experienced the worst
of the economic downturn and job creation is critical for
professionals, like me, who have worked for years to retrofit and
remodel homes. We look forward to working with the Committee, Congress,
and the administration as they put the finishing touches on a retrofit
program.
Furthermore, in order to ensure that the Home Star program does not
magnify the compliance issues that renovators are already facing with
the EPA's LRRP rule, NAHB respectfully requests that the Committee and
Congress ask for a delay in the effective date of the LRRP rule--
currently April 22, 2010. NAHB supports the use of contractors trained
in LSWP and similarly supports retrofitting existing homes for improved
energy efficiency, however, without intervention and a delay, these two
initiatives may cripple one another. NAHB believes that without a
delay, compliance with the LRRP rule will effectively limit the reach
and potential success of Home Star, or rather Home Star will create
incentives for contractors to perform illegal work on older housing by
not receiving appropriate certification from EPA in time.
NAHB believes that crafting a retrofit program, modeled after the
success of the Builder Association of Minnesota's Project Reenergize
program, is the right way to include equal access to highly-qualified,
trained contractors and builders. Limiting the program to certain
groups of people with explicit certifications, employment status, or
specific credentials is short-sighted and would reduce the impact on
jobs and energy savings. We look forward to working with the Committee
and Congress on this issue. Thank you.
APPENDIX I
EPA LEAD: RENOVATION, REPAIR AND PAINTING (LRRP) RULE STATS, AS OF 2/19/10
(Data from U.S. EPA)
----------------------------------------------------------------------------------------------------------------
State Certified Renovators Courses by State
----------------------------------------------------------------------------------------------------------------
AK 97 10
----------------------------------------------------------------------------------------------------------------
AL 163 10
----------------------------------------------------------------------------------------------------------------
AR 40 2
----------------------------------------------------------------------------------------------------------------
AZ 55 3
----------------------------------------------------------------------------------------------------------------
CA 742 60
----------------------------------------------------------------------------------------------------------------
CO 378 41
----------------------------------------------------------------------------------------------------------------
CT 239 22
----------------------------------------------------------------------------------------------------------------
DC 35 2
----------------------------------------------------------------------------------------------------------------
DE 56 12
----------------------------------------------------------------------------------------------------------------
FL 468 48
----------------------------------------------------------------------------------------------------------------
GA 289 16
----------------------------------------------------------------------------------------------------------------
HI 21 3
----------------------------------------------------------------------------------------------------------------
IA 75 1
----------------------------------------------------------------------------------------------------------------
ID 204 20
----------------------------------------------------------------------------------------------------------------
IL 356 27
----------------------------------------------------------------------------------------------------------------
IN 343 28
----------------------------------------------------------------------------------------------------------------
KS 62 4
----------------------------------------------------------------------------------------------------------------
KY 149 9
----------------------------------------------------------------------------------------------------------------
LA 103 7
----------------------------------------------------------------------------------------------------------------
MA 389 39
----------------------------------------------------------------------------------------------------------------
MD 461 39
----------------------------------------------------------------------------------------------------------------
ME 188 11
----------------------------------------------------------------------------------------------------------------
MI 588 57
----------------------------------------------------------------------------------------------------------------
MN 569 42
----------------------------------------------------------------------------------------------------------------
MO 187 12
----------------------------------------------------------------------------------------------------------------
MS 76 6
----------------------------------------------------------------------------------------------------------------
MT 6 0
----------------------------------------------------------------------------------------------------------------
NC 542 45
----------------------------------------------------------------------------------------------------------------
ND 70 5
----------------------------------------------------------------------------------------------------------------
NE 515 37
----------------------------------------------------------------------------------------------------------------
NH 124 7
----------------------------------------------------------------------------------------------------------------
NJ 259 21
----------------------------------------------------------------------------------------------------------------
NM 91 6
----------------------------------------------------------------------------------------------------------------
NV 17 2
----------------------------------------------------------------------------------------------------------------
NY 976 84
----------------------------------------------------------------------------------------------------------------
OH 1004 71
----------------------------------------------------------------------------------------------------------------
OK 119 2
----------------------------------------------------------------------------------------------------------------
OR 289 26
----------------------------------------------------------------------------------------------------------------
PA 407 32
----------------------------------------------------------------------------------------------------------------
RI 12 0
----------------------------------------------------------------------------------------------------------------
SC 166 19
----------------------------------------------------------------------------------------------------------------
SD 147 7
----------------------------------------------------------------------------------------------------------------
TN 94 13
----------------------------------------------------------------------------------------------------------------
TX 670 61
----------------------------------------------------------------------------------------------------------------
UT 6 0
----------------------------------------------------------------------------------------------------------------
VA 323 23
----------------------------------------------------------------------------------------------------------------
VT 44 4
----------------------------------------------------------------------------------------------------------------
WA 245 27
----------------------------------------------------------------------------------------------------------------
WI 1170 59
----------------------------------------------------------------------------------------------------------------
WV 21 1
----------------------------------------------------------------------------------------------------------------
WY 6 0
----------------------------------------------------------------------------------------------------------------
Canada 1 0
----------------------------------------------------------------------------------------------------------------
Null 12 4
----------------------------------------------------------------------------------------------------------------
TOTAL....................................................... 13669 1087
----------------------------------------------------------------------------------------------------------------
appendix ii.--nahb comments on the home star act of 2010
General Comments
NAHB supports making program rebates non-taxable income to
consumers and also supports allowing consumers to continue to
utilize credits under Section 25C of the IRS Code of 1986,
supplementary to the rebate program.
NAHB also supports efforts to increase the universe of
Quality Assurance Providers (QAPs), but shares concerns related
to the interplay between QAPs, Rebate Aggregators, and
Contractors, as defined in the draft.
NAHB insists that the Home Builders Institute (HBI) should
qualify by name under the definition of a ``Certified
Workforce'' in Section 2(4)(A) of the draft, as it is an
existing workforce development and training partner with the
U.S. Department of Labor and has an existing weatherization and
retrofit curriculum.
NAHB asserts that the mandatory minimum requirements for
prequalification of contractors under Section 8(c)(3) for use
in any State ``administered, supervised, or sponsored'' quality
assurance programs covering ``all federally assisted
residential retrofit work'' (both Silver Star and Gold Star)
prohibitively limits the labor pool and precludes equal
participation by qualified and highly-trained contractors.
Section 2. Definitions
Subsection (4)(A)--page 2, lines 19-25. The definition of a
``certified workforce'' rests upon certification in job skills
training that is offered by three named programs--(BPI, NATE,
and LiUNA)--and relegates all other legitimate programs to an
``other'' category under 4(B). The process by which DOE and DOL
would have to consult and approve ``another standard'' would be
lengthy and likely fall outside of the design of the program
for quick implementation. NAHB insists that in cases where the
DOL or DOE have already partnered with, and work with, a
legitimate workforce development program (training and job
skills program; retrofitting/weatherization), that those
programs also be listed by name in order to speed the
implementation and availability of additional trained
contractors for eligibility under the certification program
requirements. In this regard, NAHB requests the addition of
``(iv) the Home Builders Institute'' after line 25, page 2 of
this subsection.
Subsection (10)--page 3, line 10-page 4, line 2. NAHB
believes the definition of ``home'' in this subsection is very
broad and in order to focus the government's limited resources
on the least-efficient stock, there could be an additional
qualification that limits eligibility to older housing stock.
As drafted, any home built before the enactment of the bill--
including green homes and advanced energy-code compliant homes,
would qualify. This is not a major sticking point, but it
should be noted that other successful home retrofit programs
have successfully limited participation by house size and/or
year of construction to older stock as a means of delivering a
larger return on investment in terms of energy savings. NAHB
suggests additional qualification requirements to target
resources to the older, least-efficient housing stock by
deleting the words ``the date of enactment of this Act'' on
page 4, line 2 and inserting a year of construction that
predates enactment by at least five or ten years.
Section 5. Silver Star Home Energy Retrofit Program
Subsection (b)(6)--page 16, lines 4-12. It should be noted
that the window and skylight specifications for qualification
under this subsection are both inconsistent with existing
federal incentive programs and geographically inappropriate for
some climate zones. For example, the specifications require
compliance with criteria in Section 25C of the IRS Code and
skylights do not qualify at all under Section 25C, therefore it
is impossible to qualify skylights under this subsection.
Furthermore, Section 25C criteria requires windows with a 0.30
U-factor and a 0.30 solar heat gain coefficient. Unfortunately,
these window specifications are generally too dark for northern
climate zones where radiant heating in the winter is both
warranted and beneficial. In order to improve access for
consumers to affordable and available products, while still
retaining the inclusion of a bona fide energy-efficient
upgrade, NAHB requests a deletion of lines 8-12 on page 16 and
insertion of the following: ``(A) meets the criteria for such
components established by the 2010 Energy Star Program
Requirements for Residential Windows, Doors, and Skylights,
Version 5.0 (or any subsequent version of such requirements
which is in effect after January 4, 2010).''
Section 8. Quality Assurance Framework
Subsection (a)--page-35, lines 17-20. This provision
establishes an ongoing requirement that all State participation
in any ``federally assisted residential efficiency retrofit
work'' is incumbent upon States' submission of a list of pre-
qualified contractors as part of a quality assurance program.
Within 6 months, States must submit a plan for implementation
by January 1, 2011--under subsection (b)(2). Because this
provision says ``all'' work (page 71, line 6) and does not
differentiate between Silver Star or Gold Star, it becomes a
mandatory requirement for participation in any program that is
``administered, supervised, or sponsored'' by a State. NAHB
requests clarification that any and all retrofit work that
utilizes money from Home Star must comply with the framework
and mandatory minimums for pre-qualification of contractors
under this subsection as implied.
Subsection (b)--page 35, lines 21
page 36, line 4. This subsection mandates States comply with
the implementation of an ongoing program via the word
``shall''--page 35, line 21--by January 1, 2011. NAHB questions
how quickly and effectively a State can elicit the required
consultation for a mandatory program with the many stakeholder
groups specified on pages 55-56, and still meet this deadline.
NAHB requests removal of the January 1, 2011 deadline in order
to give States additional time to consult the various
stakeholders, including those not directly specified in this
subsection--e.g., remodelers.
Subsection (c)(3)--page 36, lines 13--20. The list of
``minimum standards'' to be a pre-qualified contractor is
problematic. Because these are mandatory minimums--per the word
``shall'' on page 36, line 6--the type of contractor that can
be prequalified becomes extremely important. Subsection (c)(3)
lists those minimums as: ``(A) accreditation; (B) legal
compliance procedures; (C) proper classification of employees;
. . .'' NAHB believes that items (A) and (C) are exclusionary
to the universe of contractors, possibly independent
contractors, who perhaps are not ``properly classified
employees,'' as well as those not accredited by BPI (per
Section 2(1)(B). If the intent of Subsection (c)(3)(C) ``proper
employee classification'' is to provide reporting information
about a contractor's status, NAHB suggests including that item
as a reportable instance under Section 9. Otherwise, including
this language implies that there is an ``improper'' way to be
classified that could exclude access or participation in the
program. NAHB requests deleting Subsection (c)(3)(A)
``accreditation'' and Subsection (c)(3)(C) ``proper employee
classification''--page 36, lines 15-17--in order to prohibit
any exclusions of qualified contractors who are ``improperly''
classified as a circumstance of status (e.g., independent
contractors) and to prevent limiting the available contractor
pool to only BPI-accredited contractors, which may not be
sufficient to serve the capacity of demand.
The Chairman. Thank you all. Thank you for the excellent
testimony. Thank you all for your testimony.
Let me ask a few questions here. Mr. Laseter, I'll start
with you. You made reference--one of the suggestions you have
is that--and I think Mr. Giudice also made this same
suggestion--that we be sure to make provision for the
integration of this rebate program into the 25 [c] tax credit
provisions. You say in your testimony: ``We recommend that the
customer be able to take a 25 [c] tax credit on the net amount
of the work after incentives, but staying within the overall 50
percent cap.''
Could you just describe a little more precisely what the
problem is here and how you believe we need to address it?
Mr. Laseter. Yes, sir. Senator, we in the Home Star
Coalition, we've worked hard to make sure that this is a
program that can be deployed quickly. One of the things to make
sure it can be deployed quickly is that there's not confusion
with the American consumer in mind. So given that the 25 [c]
tax credit is an existing credit, if we're well integrated
within that credit then the consumers don't have to worry about
the either-or tradeoffs that they would make.
From an affordability standpoint of the program, if the tax
credit applies to the net amount then that's the way the 2
programs can coexist seamless from the viewpoint of the
American consumer.
The Chairman. So your thought is that a person would be
able to go ahead and take the tax credit, claim the tax credit,
and then to the extent that they had additional costs above
that they would get the rebate, or vice versa?
Mr. Laseter. Vice versa.
The Chairman. Vice versa. First they would get the rebate;
to the extent that the rebate didn't cover all their costs,
they would be able to claim the credit for anything that still
needed to be paid for. Is that it?
Mr. Laseter. Yes, sir.
The Chairman. Mr. Giudice, that was your point as well?
Mr. Giudice. Yes, it was. Thank you.
The Chairman. Let me ask another question, Mr. Laseter.
What's your reaction to the point Mr. Hanbury was making about
this lead rule and the lack of certified renovators? How is
that going to impact on this program if we were to enact this
program?
Mr. Laseter. Senator, we support NAHB's position on the
lead rule. A delay in implementation of the lead rule would
enhance the Home Star's opportunity for success. So we would
support their position there.
The Chairman. Mr. Hanbury, your suggestion is that it be
delayed for the full term of this program? Is that the idea, or
what's your suggestion?
Mr. Hanbury. The thought is we need at least time to create
enough certified--have opportunity to have providers present
the classes, so enough certified renovators are available to do
the work. How long that takes is hard to predict. But if you
wanted your program to be as successful as possible, it would
go the length of your program.
The Chairman. Ms. Epperson, let me ask about one of the
suggestions you've got here. You say: ``To further close the
gap between the cost of the new home and the homeowner's''--
this is with regard to mobile homes--``and the homeowner's
income limitations, we urge that the replacement of substandard
mobile homes be included as an eligible use of ARRA
weatherization funds.''
Now, at the current time what is the limitation on the use
of weatherization funds on mobile homes?
Ms. Epperson. Chairman Bingaman, currently it is prohibited
to use weatherization funds in a replacement of a pre-1976
home. You can do some weatherization if it's a prudent
investment, but we find that to be very rare. Weatherization
providers are frustrated with this prohibition right now.
The Chairman. So that you can--I mean, at least in theory
you can use weatherization funds to weatherize mobile homes,
regardless of the age of the mobile home, but you can't use
weatherization funds to replace a home? Is that what you're
saying?
Ms. Epperson. That's correct. But what they find is that
the homes are in such a state of deterioration that it's almost
impossible to really make an impact in the home.
The Chairman. So how much--refresh my memory as to how much
additional money that would be? Senator Tester's proposal is
that we provide $7,500, right?
Ms. Epperson. Correct.
The Chairman. So how much additional would you suggest
should be available from the weatherization funding sources to
assist with replacement?
Ms. Epperson. Chairman, we recommend that up to $6,500 of
the ARRA weatherization be available in addition to the $7,500
down payment assistance in Senator Tester's bill. The reason
why is that most of the families or so many of the families
living in these homes are at the poverty line, and they need
additional what I would call gap assistance to close that
affordability gap, because they're going to be borrowing money
to pay for the home. The cost of the home is going to be about
$60,000.
The Chairman. So you're essentially saying that we should,
the taxpayers, should foot the cost of $14,000 worth of the
cost of that new mobile home?
Ms. Epperson. Only if the family could not afford to borrow
the money. The amount of $7,500 is a straight grant and then up
to $6,500. So yes, it could be as much as $14,000 toward a
$60,000 home.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
I'm thinking about the little guys today. In my questions
to Ms. Zoi it was what are we doing about the do-it-yourself
guys. Explain to me--and I don't know--Mr. Laseter on behalf of
the coalition, maybe this is directed to you. But explain to me
how this Home Star program is going to work in a community like
Ketchikan, Alaska, on an island, not connected to anywhere
else. You don't have any of the big box stores. You've got
Madison Hardware that's the local hardware store there. It's
pretty small, a small town, less than 20,000 people.
Contractors are--we talk about the training that these
contractors will be required to have, the auditors.
We've learned with our own State weatherization program in
Alaska, we dumped a lot of money toward weatherization and,
whoops, forgot to make sure that we had more than six auditors
for the whole State.
So explain to me how I would take advantage of this Home
Star program in a community like a Ketchikan, with Madison
Hardware, or Rangell, where you've got little True Value
Hardware down on the corner and just a few contractors in town?
How does it work?
Mr. Laseter. Yes, Senator. The path for a contractor to
participate under the Silver Star program is clearly and easy.
If they're a licensed contractor with insurance, then they're
going to qualify under the Silver Star program. So to address
your question, the Home Star program was written for exactly
that need. Step one, have a clear path, immediately accessible
to all the many small businesses that make up the bulk of these
home improvements. Then, second, have a longer path in terms of
Gold Star where, for those contractors who want to go back and
take their knowledge up to the next level, still can do so and
have an opportunity to participate.
Senator Murkowski. OK, but it's not just about the
contractor. It's going to the little local hardware store. Are
they able to take advantage of the rebate aggregator? Are they
part of the point of sale rebate? How does that all work for
the little guys?
Mr. Laseter. If the local hardware store has a contractor
network that it uses, refers customers to, or does work on
behalf of customers----
Senator Murkowski. No, no, no. I mean like a little
hardware store that sells the building materials for the whole
community, but they don't do any of the work.
Mr. Laseter. If they don't do any of the work, the Home
Star Coalition sees the opportunity to add the do-it-yourself
component into the bill. In my remarks, both in the prepared
remarks and the oral remarks, we do think that would be an
improvement to the bill, to improve the access to more
Americans.
Senator Murkowski. Just so I'm clear, though, currently as
it's set up that smaller hardware store would not have the
ability to be a participant in the program?
Mr. Laseter. I think they would benefit from the
perspective of their local--let me use an example, Senator. So
the local contractor does an additional insulation job that
qualifies under the Silver Star program, that gives the
immediate rebate. Many times in that kind of scenario that
local contractor is shopping at those local hardware stores,
buying the insulation, the caulk, and the materials they need
to do the attic, the sealing, and the insulation to get the
rebate.
So that's how the retailer would benefit, and it moves all
the way up the supply chain with American jobs.
Senator Murkowski. I'm thinking about my Ketchikan hardware
store. Does the Ketchikan hardware store--are they looped into
this whole rebate program? Will they be able to share in the
Home Star program itself if they're not part of the bigger
supply chain out there?
Mr. Laseter. Yes, ma'am, they could participate--they have
multiple options they could participate in. One is again
selling directly to the local contractors in the market the
materials that will be installed. Second, they can participate
as a rebate aggregator if they chose to do that as well.
Senator Murkowski. That's where I'm trying to go. How
difficult is it for this little guy, this little independent
guy, to be a participant as a rebate aggregator? You don't have
a lot of options in Ketchikan. You can either get on a plane
and go down to Seattle or you can spend another $1,000 and go
up to Anchorage and then fly your materials out of Anchorage.
We don't have any other options.
So how easy is it for an independent to be a participant in
the rebate aggregator process?
Mr. Laseter. Again, the Home Star Coalition wrote this so
it would be market-based and there would be options that
market-based businesses could choose how they participate. So I
really couldn't speak for that particular local retailer.
Again, absolutely they would benefit from selling materials to
local contractors. That business would have the opportunity to
participate even further, to become a licensed contractor and-
or to become a rebate aggregator. So there's multiple paths
that small businesses----
Senator Murkowski. I'm still not sure, if you shop at your
little Frager's down here, if you're going to be able to enjoy
the benefits of the Home Star program. That's where I'm trying
to get to. I don't know if I've gotten the answer. If any of
the rest of you have anything that you can help me out with,
I'd appreciate it.
Mr. Mierzwa. I might add that where there are utility
programs in existence we do work with those local hardware
stores. So we're in effect what's being called here a rebate
aggregator. Those folks sell--they might sell water heaters.
They sell programmable thermostats, compact fluorescent
lightbulbs, those types of things. So they participate in our
rebate programs.
Senator Murkowski. Mr. Giudice.
Mr. Giudice. Yes. Scott Waterman from the Alaska Housing
and Finance Corporation actually, using stimulus money, has
dealt with this problem as it relates to stimulus money.
There's a new master energy service contract for all Alaska
communities, and for the very small Alaska communities that
won't be able to necessarily participate in that master energy
contract they're actually providing weatherization crews that
are out there working on residential weatherization, to go into
those small, more rural Alaska communities and do work in those
buildings.
I think that this is an opportunity for States to partner
with the DOE in terms of tailoring these programs, the Home
Star program, to very much parallel that kind of approach, so
that we can work together and make sure that it's coordinated
so that all communities have access to this and it's tailored
to those specific, somewhat unique needs at some of the smaller
communities in the country.
Senator Murkowski. I don't need to remind you--I know, Ms.
Epperson, in your testimony you speak of Kentucky. But it is in
so many of our rural and more remote places where, if you
really are talking about ways that you can make dramatic
differences by weatherization and energy efficiency, it's out
in some of these homes that have been cobbled together over the
years.
So I would hate to think that we would inadvertently be
putting these more remote communities, these smaller
communities that really don't have access to what we have here
in the city, that we're putting them out of the loop.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
I'm not sure who this question should go to, but I guess,
Mr. Giudice, I just want to point out that New Hampshire
intends to challenge Massachusetts and Vermont for energy
efficiency.
Mr. Giudice. I look forward to the competition.
Senator Shaheen. As you all heard, because of our unique
situation in New Hampshire, we have a lot of individual
dwellings. So this kind of legislation is very important to us.
Whatever we can do to help owners and builders with making
their properties more efficient, energy efficient, is going to
be helpful.
But as I look at the Building Star proposal, there's one
area of efficiency that I think has been overlooked and I just
wondered if someone could speak to why and whether it should be
added. That is in the electricity distribution transformers.
Was there a reason why that was not included, and should that
not also be included?
Mr. DeBoer. Senator, I would be happy, on behalf of the
coalition, to get back with you on that. Obviously, our goal
here is energy efficiency and creating jobs, and the list that
was created was created over many months with the coalition,
with engineers that looked at this. I don't have an answer for
you on that, but we'd be happy to get back to you certainly,
because if it would improve energy efficiency in a cost-
effective way we want to participate in that.
Senator Shaheen. Thank you. I've got some business folks in
New Hampshire who are very concerned about that because they
manufacture those transformers and feel like that would be a
huge benefit to builders in improving energy efficiency in
buildings.
Ms. Epperson, in New Hampshire there is strong support for
the manufactured housing legislation because 6 percent of our
total housing stock is manufactured housing. It's one of the
few ways that many people in New Hampshire get affordable
housing, as you've pointed out. We have more than 35,000 units
that are manufactured homes and 52 percent of them were built
before 1980. So this is an issue for us.
I'm very proud that in New Hampshire about 20 percent of
those manufactured housing communities are resident-owned. But
one of the things that I'm concerned about with respect to this
legislation is what assurance we can write in so that
homeowners who are receiving funds either own the land that
their homes are on or have long-term leases, so that we can
make sure that we don't have a situation where the homes are
sold out from under people or they're evicted once these
improvements are made?
Ms. Epperson. Senator Shaheen, I'll be happy to answer that
question. Some of the homes will be on land owned by the
families, but some will be on leased land. With the coalition
that I represent today, we believe that land tenure is very
important. We are recommending a land lease at a minimum of 3
years. That is consistent with the FHA Title 1 lending program.
I will admit within our own coalition this is something that we
struggled with. Some would like to see longer than 3 years, but
that's where we are as a coalition.
Senator Shaheen. I would argue for longer than 3 years. I
think that it's very important. As I said, we have done a very
good job in New Hampshire, thanks to an organization called the
Community Loan Fund that's received a national award for
helping tenants take ownership of their mobile home parks. I
would hate to see us invest money in manufactured housing that
then the tenants would lose because the parks are sold out from
under them. So I think that's a provision we ought to look very
closely at.
Ms. Epperson. We'll be happy to look at that.
Senator Shaheen. Thank you.
Thank you, Mr. Chairman.
The Chairman. Senator Murkowski, did you have additional
questions?
Senator Murkowski. I'm fine. Thank you, Mr. Chairman.
The Chairman. Thank you all. It's been very useful
testimony. We appreciate it and we will do our best to move
ahead with this legislation. Thank you.
[Whereupon, at 12:10 p.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of Cathy Zoi to Questions From Senator Bingaman
S. 1320
Question 1. What is the Department's position on this legislation?
Please include your position on amending the weatherization statute to
allow ARRA weatherization funds or annual weatherization funds to be
used to support the replacement of substandard mobile homes with Energy
Star homes or Energy Star manufactured homes? Please provide the
Committee with technical comments on S.1320.
Answer. The Committee has already submitted a request for technical
comments on S. 1320 through the Department's Office of Congressional
and Intergovernmental Affairs. The Department is currently working on
technical comments on S. 1320.
S. 3079
Question 2. What is the Department's position on this legislation?
Please provide technical comments on S. 3079, the introduced bill.
Answer. For technical comments on S. 3079, the Committee should
submit a formal request through the Department's Office of
Congressional and Intergovernmental Affairs.
Question 3. Senator Tester's Energy Efficient Manufactured Housing
Bill addresses a portion of the housing stock that cannot be
efficiently weatherized. The lowest income families often inhabit these
homes and high energy bills keep them in a cycle of perpetual poverty.
Knowing that S. 1320, after its proposed amendments, results in the
creation of over one job for every EnergyStar manufactured home built
and installed, does the Administration see this bill as achieving the
twin goals of job creation and energy efficiency, just like Home Star
and Building Star?
Answer. The Administration supports policies that achieve both job
creation and energy efficiency, like the Home Star program. For
technical comments on S. 1320, the Committee should submit a formal
request through the Department's Office of Congressional and
Intergovernmental Affairs.
(Added)
Question 1. The Committee would like the Department to clarify
whether any residential energy efficiency activities carried out
pursuant to the Home Star Retrofit Rebate Program, as currently
proposed in the Senate, would be subject to NEPA requirements, and in
particular the committee would like to know whether the Department
would be prepared to issue a categorical exclusion for the program
shortly after enactment of the program.
Answer. Assuming enactment of the Senate draft legislation (as of
March 11, 2010) authorizing the Home Star program, administration of
the program would not present a discretionary activity for which
National Environmental Policy Act analysis would be required. However,
the Department would, in an abundance of caution, issue a programmatic
categorical exclusion.
Responses of Cathy Zoi to Questions From Senator Murkowski
Question 1. Since the mid-90s the DOE and EPA has worked to create
a brand known as Energy Star, for products that meet certain standards
for energy efficiency. Please describe whether new programs, with
similar names, will cause confusion within the general public.
Answer. The Department of Energy (DOE) and the Environmental
Protection Agency (EPA) would work closely to minimize public confusion
between ENERGY STAR and Home Star during the two year period when Home
Star rebates are available. DOE and EPA would conduct marketing
campaigns to inform the public that the temporary Home Star Retrofit
Rebate Program provides up to 50 percent discounts to house holders who
wish to install energy-efficient products in their homes, if they hire
a participating contractor to perform the work. This marketing would
clearly explain that the program expires at a fixed time, thus
encouraging householders to take advantage of the opportunity while it
exists. It is not DOE's or EPA's intention to establish a competing
brand.
Question 2. Please describe programs that the DOE has implemented
that have provided rebates to contractors, such as the one proposed in
the Home Star bill.
Answer. As I mentioned during the hearing, one of the key
advantages of the Home Star program is that it would pursue a business-
to-business partnership with rebate aggregators. Other rebate programs
that the Department of Energy (DOE) has administered are somewhat
different. For example, the Appliance Rebate program provides money for
states to administer rebate programs for their residents. In the case
of the Home Star program, individuals would be able to receive rebates
for energy efficiency at the point of sale, and DOE would partner with
an experienced network of rebate aggregators in order to distribute
funds and provide accountability. Further, DOE is familiar with and
would implement the lessons learned from the Cash for Clunkers program.
Question 3. Can you describe the average energy savings of
commercial retrofits versus residential retrofits? Does one offer a
bigger `bang for the buck' over the other, on average?
Answer. Energy savings in both the commercial and residential
sectors are critical to making the Nation's homes and businesses more
energy efficient. As I mentioned in my written testimony, there are
approximately 130 million homes in the U.S. that account for about 33
percent of the Nation's total electricity demand while consuming
approximately 22 percent of the Nation's energy. Americans spend
approximately $200 billion per year in residential energy costs.
Weatherizing a single house can save 10 to 20 percent of energy
consumption on average, using basic technology (weather-stripping,
insulation, etc). Commercial buildings are much more diverse than
homes, since the category `commercial building' includes large
hospitals, small corner bakeries, and the Dirksen Senate Office
Building. Consequently, DOE does not have comparable information that
is useful for comparing 'average' commercial building energy savings.
However, both types of retrofits are very important and save energy and
money. One distinct advantage of weatherizing homes is the impact on
American families who can spend their hard earned income on school,
health care, and other priorities instead of on wasted energy.
Question 4. Please describe the process undertaken to determine
what efficiency retrofits would be eligible to receive rebates. Under
the Silver Star component, is there a process to determine which
retrofit makes sense from a financial and energy savings perspective?
Answer. The rebate values in the draft legislation (as of March 11,
2010) were established by an industry consensus process conducted by
the Home Star coalition. The Department of Energy (DOE) monitored that
process but did not directly participate in it. The rebate amounts
reflect a balance between energy efficiency and highly labor-intensive
installations. Which products or services a particular house holder
would purchase under Silver Star would be up to the consumer, and the
Department would be committed to providing consumers with the best
information to make those decisions. Additionally, DOE strongly
supports giving the Secretary discretion to modify the rebate amounts
six months into the program, in order to optimize the energy savings
being achieved per dollar spent by the program. This would be similar
to the state appliance rebate programs, which have the opportunity to
adjust the rebate amounts offered in order to increase the program
uptake and improve its overall energy savings.
Question 5. Please describe the different groups who currently
provide training for retrofit programs. How are these trainings
developed? For example, if a particular type of training or curriculum
is pursued in the legislation, what is the role of the general public
in participating in the process, or in the development of referenced
training standards?
Answer. Many different organizations--such as the Building
Performance Institute, North American Technician Excellence, and the
Residential Energy Services Network--develop their own specific
curricula to train retrofit workers. These organizations have
benefitted from a collaborative, consensus based approach to the
development of their training programs and standards. The Department
provides training and technical assistance through its Weatherization
and Intergovernmental Programs and through its cooperative efforts with
the whole house retrofit program called Home Performance with ENERGY
STAR. The draft legislation (as of March 11, 2010) also includes
consultation with the Secretary of Labor on matters related to a
certified workforce.
Question 6. The Discussion Draft calls for DOE to establish a
nationwide network of rebate aggregators who are required to distribute
rebates within 30 days after receiving applications. Please describe
what companies could create such a network in this timeframe. In
addition, has there been discussion with professional rebate
fulfillment companies who have experience processing rebates to the
extent envisioned in the draft legislation? If other companies, or
programs, offering energy efficiency products, are allowed to process
rebates, are there any potential conflicts of interest that may arise?
Answer. As discussed at the hearing, the rebate aggregators are
vital to the success of this program. The Department of Energy (DOE)
anticipates that rebate aggregators would be many different kinds of
organizations involved in the retrofit industry, such as Home
Performance with ENERGY STAR partners, regional lumber stores, large
efficiency contractor companies, hardware stores, and big box
retailers.
An entity would be eligible to be a rebate aggregator if it is:
A Home Performance with ENERGY STAR partner;
Administering a residential energy efficiency retrofit
program established or approved by a State;
A Federal Power Marketing Administration, an electric
utility, or a natural gas utility with an approved residential
energy efficiency retrofit program and an established quality
assurance provider network; or
An entity the Secretary deems able to perform the functions
of a rebate aggregator, without disrupting existing residential
retrofits in the States incorporating the Home Star program.
The rebate aggregators would serve as a manageable number--an
estimated 200 to 500--of ``touch points'' for DOE. The aggregators
would provide an important service in educating contractors about the
program, reviewing their rebate claims for completeness, and working as
partners with the Department in ensuring the program operates smoothly.
Many of the aggregators could offer energy efficiency products, but
through quality assurance testing and verification, the program is
structured to mitigate waste, fraud and abuse. Additionally, any
organization, contractor or house holder that falsely claims a rebate
would be subject to tax fraud penalties.
While Home Star would deliver job growth and energy efficiency
through a system of rebates to consumers, the program would use a more
effective structure than standard mail-in rebate coupons. DOE would
work through the network of rebate aggregators to allow contractors to
offer house holders immediate, point-of-sale discounts on the
installation of energy-efficient products. This structure involves some
aspects of the traditional mail-in coupon rebate program, but is more
similar in structure to the Cash for Clunkers program operated by the
Department of Transportation in 2009.
Question 7. Within the legislation, you exempt the Home Star
program from several laws, including the Paperwork Reduction Act.
Please describe the process undertaken to determine why the Home Star
program should be exempt from these laws, and any legal opinions you
may have for the exemption.
Answer. The Home Star program would be a short-term program that
would need to be stood up quickly to have the highest possible impact.
Given the large unemployment numbers in construction and the scale of
the energy challenges, speed would be essential in moving this program
forward. As a result, the Home Star program structure is designed for
speed while still placing a premium on transparency and accountability.
This Home Star program draft legislation, as introduced by Congress,
would establish many of the basic data items the program would need to
process rebates and is designed to streamline reporting requirements.
With respect to the draft legislation's proposed Paperwork Reduction
Act exemption, the Department is still reviewing and may have
additional analysis in the future.
Question 8. Please describe if there has been any discussion within
the DOE to limit program eligibility to homes based on the year of
construction, or by their square footage. In addition, would the DOE
support a program that targeted homes most in need for energy
improvements, such as home owners on waiting lists to have their homes
weatherized?
Answer. There are approximately 130 million homes in the U.S. These
homes account for about 33 percent of the Nation's total electricity
demand and consume approximately 22 percent of the Nation's energy.
Roughly half of these homes were built before 1973, long before modern
residential building codes came into effect. With so many older homes,
and with advances in building technologies, there is a tremendous
opportunity to upgrade home energy efficiency throughout the Nation.
Existing techniques and technologies can reduce energy use by up to 40
percent per home.\1\ As an optional program, the Home Star program
would enable house holders to decide if, when, and how to pursue taking
advantage of the new program enabling energy efficiency upgrades.
Access to the program would be open to all house holders. DOE is not
considering limiting the program eligibility to homes based on the year
of construction or size.
---------------------------------------------------------------------------
\1\ Case study in West Concord, MA: http://www.buildingscience.com/
documents/case-studies/cs-0016-concord-four-square-retrofit/?topic=/
resources/energy-retrofits. Case study in Pittsburgh, PA: http://
apps1.eere.energy.gov/buildings/publications/pdfs/building_america/
ba_cs_retrofit_asdal_builders.pdf
---------------------------------------------------------------------------
Question 9. Since 1977, the DOE weatherization assistance program
has weatherized around 3.5 million homes. Is it feasible for a program,
like Home Star, to retrofit an estimated 2 million homes in a year?
Answer. The Home Star program is streamlined to leverage the speed
of the private sector while taking advantage of structures that are
already in place. The Silver Star portion of Home Star would enable
house holders to make a few off-the-shelf efficiency upgrades, enabling
homes to be made more efficient at speed and scale. Additionally, for
house holders who want a whole-home retrofit to achieve even greater
energy savings, the Gold Star program would be available to retrofit
the entire house. The Gold Star upgrades could account for hundreds of
thousands of homes in addition to the homes retrofit under Silver Star.
Question 10. Several groups have expressed interest in having
additional products eligible to receive rebates within the Home Star
Program. The products include, but are not limited to, geothermal heat
pumps, electric tankless water heaters, and window film products.
Recognizing that there are a myriad of products that can create jobs,
and improve the overall efficiency of a home, please describe the
Administrations perspective of only including the projects developed by
the Home Star Coalition. Do you agree or disagree with their
determination of the projects included in the Majority Staff Draft,
that only a few products should be included in the Home Star Proposal.
Does the Administration agree with the process undertaken by the
Coalition to develop this eligibility?
Answer. Including a list of eligible products in the legislation
could help create clarity and certainty for potential rebate
aggregators, which may enhance the simplicity and speed in
administering the Home Star program. The product list included in the
draft legislation (as of March 11, 2010) was developed by an industry
consensus process with the intent of including proven, energy efficient
products that require significant labor to install and have high
domestic content.
Question 10a. Please describe what criteria the DOE would undertake
to determine which products should be included within a Home Star
Program. Should Energy Star Products, that improve the efficiency of a
home, be eligible for rebates?
Answer. Including a list of eligible products in the legislation
could help create clarity and certainty for potential rebate
aggregators, which may enhance the simplicity and speed in
administering the Home Star program. The product list included in the
draft legislation (as of March 11, 2010) was developed by an industry
consensus process with the intent of including proven, energy efficient
products that require significant labor to install and have high
domestic content.
Utilizing $296 million of Recovery Act funds, the Department
currently supports the ENERGY STAR rebate program for all 50 states,
five territories and the District of Columbia. The specific rebate
amount allowed for specified appliances varies by State. The Department
recommended that States use the following qualified appliances for the
program:
Boilers;
Central air conditioners;
Clothes washers;
Dishwashers;
Freezers;
Furnaces (oil and gas);
Heat pumps (air source and geothermal);
Refrigerators;
Room air conditioners; and
Water heaters.
Question 11. Recently the DOE strengthened and modified Energy Star
criteria for several products, including windows, doors and skylights.
Do you believe that these products should be eligible for Home Star
rebates? If not, please describe how you intend to pursue the Energy
Star label to encourage retailers, consumers and contractors to pursue
them, if they are not offered within the Home Star Program?
Answer. As the Committee knows, I am recused from working on
certain matters and issues. The question you raise relates to issues
from which I am recused; and thus I cannot respond.
Question 11a. Are the rebates only offered to owner-occupied units?
If so, how many non owner-occurred units would be ineligible for the
rebate?
Answer. The Department would be comfortable administering a program
open to all residents assuming they can legally make upgrades within
the context of their individual situations.
Question 11b. Are the rebates available to landlords?
Answer. Yes.
Question 11c. How can a do-it-yourself provision be effectively
offered by the federal government?
Answer. The Department is open to exploring how best to incorporate
a do-it-yourself provision into the proposed program while ensuring
health, safety, and accountability.
Question 12. Does it make more sense to incorporate DIY under
another existing program or an altogether separate DIY rebate program?
What are the options for this? How has the Energy Star Appliance Rebate
Program addressed this issue?
Answer. The Department is open to exploring how best to incorporate
a do-it-yourself provision into the proposed program while ensuring
health, safety, and accountability.
The ENERGY STAR appliance rebate program provides funds to all 50
states, five territories and the District of Columbia, and then the
States make those funds available to individuals, with do-it-
yourselfers welcome to take advantage of this rebate.
Question 13. Please explain, step by step, how the DOE will
structure a rebate aggregation function for the Program. What kind of
infrastructure needs to be in place for this to function properly?
Answer. The Home Star program is designed for speed and ease of
implementation. Therefore, it takes advantage of structures that are
already in place so that the program could be stood up quickly. The
eligibility qualifications for rebate aggregators are in the draft
legislation (as of March 11, 2010).
Question 13a. Does the program stand to cost jobs, not create them,
until the rebates are up and running? For example, will homeowners or
contractors wait to have work done, with the expectation that a program
will likely be authorized?
Answer. The Department estimates that the Home Star program may
create tens of thousands of jobs.
Question 13b. What kind of contractual relationships will exist
between rebate aggregators and quality assurance providers?
Answer. The Department's preferred approach to quality assurance is
to work with States, by providing them technical assistance to
establish quality assurance oversight programs. Upon receipt of rebate
reimbursement claims from rebate aggregators, the Department would
review the claims, issue payments to the rebate aggregators, and notify
States of retrofits made in their jurisdictions.
Question 13c. What kind of infrastructure will need to be in place,
including IT systems, etc. to implement a Quality Assurance and Rebate
program? Does this infrastructure already exist?
Answer. Information technology (IT) is critical, and the Department
of Energy (DOE) is committed to learning from the Cash for Clunkers
experience at the Department of Transportation and Recovery Act
experiences. DOE is currently working through technology configurations
used to streamline quality assurance and rebate distribution. To make
sure the Home Star program can be stood up quickly, the Department is
also working with the existing infrastructure of Home Performance with
ENERGY STAR.
Question 13d. How long will the quality assurance program take to
complete, once a job is finished?
Answer. All homes that receive a rebate for an installation under
the Silver Star or Gold Star program would undergo an initial
information review and quality check by the rebate aggregator that
submits the claim to the Department of Energy (DOE). This check would
include confirmation that the work was done by an eligible contractor,
and that eligible measures were installed. A randomly selected fraction
of homes would undergo field inspection of the installed measures to
ensure compliance with all program requirements, which would generally
be conducted under standard industry construction and renovation
quality assurance procedures.
Question 13e. What process will be in place to review these jobs,
and who has the authority to do it? What kind of information will be
required?
Answer. The Department's preferred approach to quality assurance is
to work with States, by providing them technical assistance to
establish quality assurance oversight programs. Upon receipt of rebate
reimbursement claims from rebate aggregators, the Department would
review the claims, issue payments to the rebate aggregators, and notify
State of retrofits in their jurisdiction.
Question 13f. Are there already systems in place to do this? If so,
will the systems need to be integrated? How long will that take?
Answer. States and local municipalities have thorough quality
assurance inspections and reviews for building projects and repairs.
These reviews are in place now to insure that the health and safety of
the public are not at risk. Additionally, there are national third
party companies operating in every state, that work with state and
local officials to inspect homes for the insurance and property
casualty business. Both of these groups would be leveraged to protect
consumers taking advantage of Home Star rebates.
Question 13g. Does DOE have a chart to lay out exactly what the
process will look like?
Answer. The process, from work performed to quality assurance
inspection, could roughly follow these basic steps:
Work is performed by the contractor for 50 percent of the
normal cost;
The contractor submits a rebate request to a rebate
aggregator;
The rebate aggregator collects a batch of rebate requests,
reviews them for accuracy, and submits the batch to the
Department;
The Department immediately reviews the rebate requests
electronically, releases funds to the rebate aggregator, and
notifies the relevant quality assurance providers;
The rebate aggregator reimburses the contractor within 30
days; and
In a parallel to rebate processing, the quality assurance
provider coordinates inspections of retrofits and relays
results to the Department.
Question 14. Is it your plan to run Home Star's transactions and
information through software programs and management information
systems developed for existing programs? If so, what are your
assumptions about the cost and modifications it might take to do that?
How long will it take?
Answer. The Department intends to marry existing information
technology systems for rebate programs with specific transparency and
accountability elements associated with the Home Star program. The
Department is currently working through technology configurations used
to streamline quality assurance and rebate distribution.
Question 14a. Are there security issues with this course of action?
Is cybersecurity an issue?
Answer. The Department takes cybersecurity very seriously, and
would ensure that interactions with companies and individuals are kept
confidential. Any program run by the Department would be subject to
existing cybersecurity standards and requirements.
Question 14b. Have you tried to do this ever before?
Answer. The Home Star program would build upon public-private
partnerships, taking advantage of consumer rebate processing. The Home
Star program would be a new type of program that takes into account
lessons from the Department's past and current programs, the Department
of Transportation's 2009 Cash for Clunkers program, and Recovery Act
implementation.
Question 14c. What provisions will be in place to make QA
transparent for the benefit of oversight?
Answer. The Department would work with States on oversight of
quality assurance (QA). It would also set standards for QA procedures.
In order to respect individual privacy, the Department would not
publicly disclose any individual home information.
Question 14d. How will you decide which jobs are inspected? Will it
be random? What criteria will these jobs be evaluated on?
Answer. As established in the draft legislation (as of March 11,
2010), between 10 and 20 percent of homes retrofitted would be subject
to field inspection of installed measures on a random basis. As
contractors establish good track records for installing retrofits, they
would be subject to a lower rate of inspections; similarly contractors
with a record of poor performance would be inspected more frequently
allowing the Department to maximize the effectiveness of the quality
assurance field inspection program.
Question 14e. Will DOE maintain a master list of contractors and
inspectors that participate in Home Star?
Answer. Yes.
Question 15. The Home Star program wants rebates to be paid within
30 days and inspections also done within 30 days. So potentially, a
homeowner or contractor could be waiting up to 60 days to get the
rebate paid out. Is 60 days too long to be waiting for a rebate? Is
there a faster way to get this done? Let's say it takes three months to
stand up the infrastructure of the program and another 60 days for
rebates to be paid out. That is almost half a year of waiting for the
first rebates after the legislation becomes law. Is that too long?
Answer. The Home Star program would be a point-of-sale rebate
program. Working with rebate aggregators would enable house holders to
buy efficiency products at an immediate 50 percent discount. House
holders would not submit rebate requests, but would be immediately
discounted at the point of sale.
Question 16. Is there sufficient incentive for contractors to
obtain a higher certification? Is there compelling motivation for them
to achieve a higher certification, or do you think they would rather
just be subject to more inspections?
Answer. Any licensed and insured contractor would be able to
participate in Silver Star, which would last the first year of the Home
Star program. The Gold Star component of the program would continue
into a second year after the Silver Star program ends. The Department
anticipates that contractors that participate in Silver Star would
pursue additional certifications in order to participate in Gold Star
during the second year of the program.
Question 17. Please describe how the process of requiring proper
classification of employees will be implemented. Will it require the
IRS to make a determination? If so, are there ways to improve the
efficiency of how the IRS determines the proper classification of
employees? Are there any alternatives, or mechanisms to ensure that the
legislation does not discourage independent contractors from complying
or competing for projects within the Home Star Program?
Answer. The draft legislation (as of March 11, 2010) specifies that
any contractor meeting minimum state licensing requirements and other
minimum requirements would be eligible to participate in the Silver
Star program. To participate in the Gold Star program, which involves
more sophisticated efficiency technologies, contractors would have to
additionally hold certain specific third-party certifications. Rebate
aggregators would be responsible for ensuring that contractors meet
requirements and hold appropriate certifications.
Question 18. Please describe the timeframe to develop an employee
certification program, within each state, and the Administrative costs
associated with the directive to create such a program.
Answer. The draft legislation (as of March 11, 2010) specifies that
any contractor meeting minimum state licensing requirements and other
minimum requirements would be eligible to participate in the Silver
Star program. To participate in the Gold Star program, which involves
more sophisticated efficiency technologies, contractors would have to
additionally hold certain specific third-party certifications from
organizations--like the Building Performance Institute, North American
Technician Excellence, and the Laborers' International Union of America
and others determined in consultation with the Secretary of Labor--in
addition to meeting existing state requirements. Rebate aggregators
would be responsible for ensuring that contractors meet requirements
and hold appropriate certifications. By partnering with rebate
aggregators, the Department does not expect this timeframe to be very
long. Additionally, the costs would be minimal.
Question 19. Is there a streamlined process for determining
employee certification for this type of work across the country?
Answer. The Home Star program is designed to take advantage of
already licensed and certified contractors across the Nation. The
Department would rely on existing State lists of licensed contractors
and lists provided by third party accreditors, such as the Building
Performance Institute, North American Technician Excellence, and the
Laborers' International Union of America and others determined in
consultation with the Secretary of Labor to help streamline
certification. Rebate aggregators would be responsible for verifying
that their contractors hold the appropriate certifications.
Question 20. Will the DOE need to provide a federal contractor
certification provision within the Home Star Program? If not, why does
the DOE have the opportunity to require additional standards? What
might these additional standards look like?
Answer. No, the Department would take advantage of existing
contractor certifications as established by the States and third
parties.
Question 21. How would a state certify to the DOE, that their
classification program is viable, and would not be subject to
additional requirements by the DOE? Are there alternatives?
Answer. The Department would rely on existing State licensing
requirements for contractors and would allow those who meet those
requirements participate in Silver Star.
Question 22. If the DOE decides to provide employee certification
standards under the program, what would these standards look like?
Would the IRS and Labor Department take the lead in determining
employee certification? Will the Energy Department consult with IRS and
Labor to carry out the employee certification directive? How long will
this process take? Will the IRS and Labor need to come out with new
regulations to carry out this provision? What will be the relationship
between the DOE and IRS/Labor be in administering this provision?
Answer. The Department of Energy would rely on existing State
licensing requirements for contractors and would allow those that meet
those requirements to participate in Silver Star. The draft legislation
(as of March 11, 2010) also includes consultation with the Secretary of
Labor on matters related to a skilled and certified workforce.
Question 23. What are your assumptions for the cost of conserved
energy? Are the budgeted amounts really indicative of what it's going
to take to accomplish the projected savings? It seems that there are
many parts of the program that would demand overhead. What is the cost
per unit of energy saved?
Answer. Retrofitting a single house can save 10 to 20 percent of
energy consumption on average, using basic technologies (weather-
stripping, insulation, etc), like those available in Silver Star. Gold
Star rebates upgrade a home's efficiency by at least 20 percent and as
much as 50 percent, saving money on energy for the remaining lifetime
of the home. Associated savings depend on the retrofits made and price
of energy used by and individual house holder.
Question 23a. If you look at this strictly as an efficiency
program, how do the costs line up?
Answer. The Home Star program would provide a 50 percent point of
sale rebate to house holders.
Question 23b. What are the specific costs of the rebate function,
marketing, quality assurance, and program management? What are these
costs for Gold Star vs. for Silver Star?
Answer. The draft legislation (as of March 11, 2010) authorizes $6
billion of total appropriations for the program, broken down as
follows:
$3.417 billion for Silver Star;
$1.683 billion for Gold Star;
$380 million for States to run quality assurance programs;
$200 million for State retrofit loan programs;
$300 million for rebate aggregator transaction costs and
quality assurance provider field inspections;
$150 million for Department of Energy administrative costs;
and
$10 million for the Environmental Protection Agency to
conduct public education campaign.
Question 24. At the hearing the NASEO witness expressed concern
that Home Star would overlap with existing state efficiency programs.
What do you think this means, exactly?
Answer. I cannot speak for another witness and would defer to the
National Association of State Energy Officers for elaboration of their
concern.
Question 25. If utilities are offering rebates for similar or
identical measures, must they be coordinated in some way? Should they
be in harmony? What factors will need to be coordinated? How would you
do that? Would you coordinate the marketing, incentives, or processing?
Answer. The Department of Energy (DOE) anticipates that many
utilities would apply to serve as rebate aggregators, and the
Department would welcome their participation. To the extent that
utilities are operating separate rebate programs under the guidance of
state law, they can address coordination of these programs. Indeed,
under the proposed legislation DOE would work to ensure the Home Star
program is coordinated with existing or planned state energy efficiency
programs.
Question 25a. Would such coordination make Home Star even more
difficult to implement?
Answer. The Department of Energy (DOE) anticipates that many
utilities would apply to serve as rebate aggregators, and the
Department would welcome their participation. To the extent that
utilities are operating separate rebate programs under the guidance of
state law, they can address coordination of these programs. Indeed,
under the proposed legislation DOE would work to ensure the Home Star
program is coordinated with existing or planned state energy efficiency
programs.
Question 25b. Home Star will take advantage of the knowledge
already established in a variety of market players, including
retailers, utilities, rebate processors, States, and retrofit training
and certification entities. Is the rebate aggregator function and the
quality assurance function merged together, according to your
understanding of the Majority Staff Draft?
Answer. The Department's preferred approach to quality assurance is
to work with States, by providing them technical assistance to
establish quality assurance oversight programs. Upon receipt of rebate
reimbursement claims from rebate aggregators, the Department would
review the claims, issue payments to the rebate aggregators, and notify
State of retrofits in their jurisdiction.
Question 25c. If merged together, how will you ensure that there
are no conflicts of interests between the two?
Answer. The Department's preferred approach to quality assurance is
to work with States, by providing them technical assistance to
establish quality assurance oversight programs. Upon receipt of rebate
reimbursement claims from rebate aggregators, the Department would
review the claims, issue payments to the rebate aggregators, and notify
State of retrofits in their jurisdiction.
Question 26. Please describe the process DOE will undertake to
ensure that small building material dealers and independent contactors
will have access to rebate aggregators. If the legislation does not
envision the use of these contractors, please describe why not. If the
intent is to have them participate, please describe the mechanisms in
place to ensure that they will not pay more for their administrative
costs, to operate within the program, as well as provide a descriptive
overview of how the process would work.
Answer. The Department of Energy (DOE) understands numerous trade
groups are interested in participating in the Home Star program. DOE
intends to work with these groups by providing technical support in
order to enable them to participate. All rebate aggregators would be
eligible for a per transaction fee to support their administrative
costs. Rebate aggregators would provide mechanisms for rebate payouts
to contractors and administrative costs.
Question 26a. How does the program envision doing random site
inspections? Will DOE maintain a list of all job sites? Will the
inspections be based on a random sample? How will they be done?
Answer. The Home Star program is structured to be streamlined while
maintaining ease of implementation and transparency to be accountable
to the taxpayers. DOE would maintain a list of all job sites, since all
rebate reimbursement claims that are filed by rebate aggregators would
be required to include the address of the home in which the rebated
measures were installed. DOE would conduct cross-checks to ensure that
no rebate aggregator files claims multiple claims for the same measure
installation in the same house. DOE anticipates making the list of
these addresses and lists of installed measures available to the
appropriate quality assurance providers, with instructions that the
quality assurance providers are to randomly select certain percentages
of home to be subject to site inspections. However, this list of
individual addresses would not be publicly available. Quality assurance
providers would then be required to report the findings of these
inspections to DOE.
Responses of Cathy Zoi to Questions From Senator Wyden
Question 1. The HomeStar program advocated by the Administration
appears to expect that the consumer rebates will be provided in
addition to existing 25C tax credits. The Majority Draft of this
legislation would reduce the amount of the tax credit by the amount of
any rebate, allowing consumers to continue to get the credit only to
the extent that it exceeds the HomeStar rebate. Does the Administration
support this program structure?
Answer. Yes.
Question 2. Under the existing section 25C tax credit program,
labor costs are not included in the allowable costs associated with any
of the building envelope investments--windows, doors, insulation, and
roofing. I have introduced legislation--S. 2819--that would allow labor
costs associated with envelope investments to be included in
calculating the credit since these improvements tend to be labor
intensive and the current credit does not capture true cost of such
improvements. Would the Administration support such an expansion of the
credit?
Answer. As the Committee knows, I am recused from working on
certain matters and issues. The question you raise relates to issues
from which I am recused; and thus I cannot respond.
Question 3. It is not clear to me that the lists of products
included under the Silver Star program, nor the performance standards
included in the Gold Star program, are written in such a way as to
recognize the value of energy costs associated with construction
materials actually used in the retrofits. For example, the standards do
not appear to take into account the lifecycle energy impacts of
construction materials, such as the use of locally grown lumber
products which have been demonstrated to be environmentally preferable
through government-recognized Lifecycle Assessments. These wood
products such as flooring, doors, windows, shutters, offer valuable
insulating qualities in building projects and are derived from locally
sourced, renewable US timber. Please let me know what we need to do to
improve this legislation to assure that wood products are not
disadvantaged through this legislation.
Answer. As a short-term, streamlined program, the Home Star program
must rely on existing standards and specifications for energy
efficiency savings. All products were screened for high domestic
content in addition to their energy savings potential.
Responses of Cathy Zoi to Questions From Senator Sessions
Question 1. While I understand the need to not make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films.
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
When considering the cost of installing window films is
significantly lower than completing many of other home retrofit
upgrades (including the installation of new windows), providing window
films with the $1,000 Silver Star subsidy would not only ensure more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by very small, family-
owned businesses.
Given the cost-effective energy savings that window films can
provide to homeowners, should they be included as part of the Silver
Star rebate section of the Home Star bill?
While I can appreciate there are a variety of reasons one would
want to limit the number of products eligible for the Silver Star
rebates, the bottom line is that the Silver Star rebate program will
likely be the first list that consumers look at when considering home
energy efficiency improvements. Shouldn't we avoid picking ``winners
and losers'' in the marketplace when it comes to energy efficiency
upgrades?
Answer. As the Committee knows, I am recused from working on
certain matters and issues. The question you raise relates to issues
from which I am recused; and thus I cannot respond.
Question 2. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. Specifying some qualified certifications in the draft
legislation (as of March 11, 2010), may help the Home Star program
launch more rapidly. The Department strongly supports the provision in
the draft legislation that gives the Secretary authority to approve
additional training standards not explicitly included in the
legislation, which could include those of the Home Builders Institute
(HBI), in order to provide flexibility to the program.
Question 3. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. As the Committee knows, I am recused from working on
certain matters and issues. The question you raise relates to issues
from which I am recused; and thus I cannot respond.
Responses of Cathy Zoi to Questions From Senator McCain
Question 1. In the draft language before the committee, the new
Home Star legislation would provide a $250 rebate for purchasing
certain energy efficient water heaters: (A) a natural gas or propane
water heater with a storage water heater with an energy factor of 0.80
or more or a thermal efficiency of 90 percent or more; (B) a tankless
natural gas or propane water heater with an energy factor of at least
0.82; (C) a natural gas or propane storage water heater with an energy
factor of at least 0.67;
It has been reported, however, that tankless electric water heaters
have an energy factor of at least 0.96, much higher than the other
types of water heaters listed in the draft bill. Based on the draft
bill language, are tankless electric water heaters with an energy
factor of at least 0.96 eligible for the rebate? Why or why not?
Answer. No. The specific technologies included in the draft bill
language were developed by an industry consensus process, which the
Department monitored but in which it did not participate.
Question 2. Is an energy factor of 0.96 more efficient than the
standards associated with the other types of tankless water heaters
already included in the draft bill?
Answer. The specific technologies included in the draft bill
language were developed by an industry consensus process, which the
Department monitored but in which it did not participate.
Question 3. If tankless electric water heaters are 0.96 efficient,
why are they not included in the bill?
Answer. The specific technologies included in the draft bill
language were developed by an industry consensus process, which the
Department monitored but in which it did not participate.
Question 4. Would you recommend and/or support including the
tankless electric water heater in the Energy Star program. Why or why
not?
Answer. Electric tankless water heaters require additional
examination due to their large electricity needs.
______
Responses of Jeffrey D. DeBoer to Questions From Senator Murkowski
Question 1. Please describe how you intend to leverage private
sector investment with the federal dollars of the Building Star
program.
Answer. Building STAR is designed to provide federal rebate
incentive dollars that cover only a portion of the costs for a retrofit
project in a commercial or large multifamily building. Private
investment will pay for the remaining costs incurred from the retrofit
project.
The precise rebate amounts set forth in the Building STAR bill are
intended to cover, as a general matter, about \1/4\ to ? of the costs
of the total retrofit project. Thus, private capital will be leveraged
to pay the remaining fraction of a given building upgrade. This means
that $1 of Building STAR rebate dollars will leverage at least $2-$3 of
private investment. And, if $6 billion of federal dollars are
authorized for the program (as requested in Sec. 6 of S. 3079), total
program dollars would amount to $18-$24 billion, after factoring for
private capital.
A small portion of Real Estate Roundtable member firms were
informally surveyed to obtain a sense of how they would use Building
STAR rebate dollars. They identified retrofit projects that would cover
the full suite of equipment, materials and services components offered
by S. 3079. These firms identified 19 buildings that would seek
Building STAR rebates of $1.57 million, with total project work
estimated to cost $8 million. Thus, a $1.57 million public investment
under Building STAR would translate into an $8 million total program
expenditure, for these contemplated retrofit projects.
Question 2. Would there be any overlap between the jobs created for
the Home Star program and the Building Star program?
Answer. We anticipate that Building STAR would create jobs separate
and apart from Home STAR.
The American Council for an Energy Efficient Economy (ACEEE) has
undertaken a study to estimate the jobs impact generated by both
Building STAR and Home STAR. See http://www.aceee.org/energy/national/
potential_leg.htm. ACEEE's estimates show that in 2010, Building STAR
would create 130,000 jobs; and in 2011, it would create 57,000 jobs.
Thus, through 2011, the jobs that would be solely and uniquely
attributable to Building STAR would be 187,000 jobs. In contrast, ACEEE
estimates that Home STAR would be responsible for creating 162,000
total jobs through 2011.
Question 3. What type of quality assurance programs does the
commercial industry have for retrofits that may be different from the
residential sector?
Answer. The commercial contracting market is very different from
the contractors serving the residential sector. Most, if not all,
specialty trades workers have completed an extensive, years-long
apprenticeship program that immerses them in the details and specifics
of their trade. National certifications in the commercial space are the
result of comprehensive consensus based standards used by technical
experts to ensure that each practitioner has the requisite skills,
training, and sophistication for commercial building work. These
certifications often have continuing educational and recertification
requirements, so that commercial contractors and skilled workers are
up-to-date on new energy efficiency technologies, methods, and
materials. Contractors are highly motivated to maintain their
certifications and good reputation; without them they would be unable
to compete in the commercial construction marketplace, and they would
not be hired by commercial building owners and managers.
There are a number of ways to assure quality through the existing
system. Industry standards, such as those established by the American
Society of Heating, Refrigeration, and Air Conditioning Engineers
(ASHRAE), the Sheet Metal and Air Conditioning Contractors National
Association (SMACNA), the National Fenestration Rating Council, and the
International Code Council (ICC), which form the basis of most of the
rebates in Building STAR, can be enforced through building codes at the
state and local level. Contractors must obtain permits to undertake
projects in commercial buildings, so inspection of the work by code
authorities is nearly guaranteed. Outside of the building code realm,
building owners and general contractors maintain high standards.
Building owners count on energy savings to help pay for retrofit
investments and improve the value of their assets. They are thus
motivated to ensure the work was done correctly so that those savings
can be achieved and building values improved, and they will not
countenance sub-par work on their assets. General contractors, who bear
the ultimate responsibility to deliver quality work, actively oversee
subcontractors to assure the work is done right.
Question 4. Please describe the square foot energy savings per
dollar invested for commercial retrofit programs.
Answer. An investment of $6 billion in public funding for Building
STAR would create a total public/private program worth at least $18
billion that would retrofit approximately 5.7 billion square feet of
commercial building space. This public spend of approximately $0.95 per
square foot, after accounting for the private capital leveraged into
the program, would result in total electricity savings of 31.6 Terawatt
hours and total fuel savings of 48.8 trillion BTU per year. Building
STAR thus generates 5.6 kilowatt hours of electricity savings and 8,600
BTUs of fuel savings per square foot per year.
We use a conservative assumption that the retrofit generates
savings for 10 years. An analysis of a variety of programs indicates an
average life of 13 years, with a discount rate for later savings of
about 5%. This is also in line with the lifetime of building systems
covered by Building STAR, which often last 15 to 20 years or more.
Over the 10 year life of the retrofit, the $0.95 per square foot of
public investment in Building STAR yields electricity savings of 56
kilowatt hours and fuel savings of 86,000 BTUs per square foot. Based
on average 2009 prices for electricity and natural gas of $0.1021 per
kilowatt hour and $9.47 per thousand cubic feet, as reported by the
Department of Energy's Energy Information Administration, Building STAR
saves nearly $6.50 worth of energy as a result of the $0.95 public
investment.
______
March 30, 2010.
Hon. Jeff Bingaman,
Chairman, Senate Committee on Energy and Natural Resources, 304 Dirksen
Senate Office Building, Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Senate Committee on Energy and Natural Resources, 304
Dirksen Senate Office Building, Washington, DC.
Dear Chairman Bingaman, Ranking member Murkowski and members of the
Committee: On behalf of the broad coalition working to include funds to
replace substandard mobile homes with ENERGY STAR manufactured homes in
the pending Jobs Bill, I appreciate the opportunity to testify and
respond to your questions.
Nationwide, more than two million families live in old, and often
dilapidated, mobile homes. These homes are among the nation's most
energy inefficient. Most are found in economically depressed, rural
areas and commonly are home to families that are near or below the
poverty line. These households often fall through the cracks of federal
government assistance programs yet they may be trapped in a cycle of
very high energy bills with little or no resources to make efficiency
improvements in their own homes.
As a nation, we subsidize homeownership at more than $100 billion a
year. The vast majority of these subsidies are received as tax benefits
for the mortgage interest deduction and the property tax deduction.
However, these housing subsidies are skewed to higher income
households. Only 55% of people who pay mortgage interest, actually
deduct it from their taxes. The other 45% take the standard deduction
or have an income too low to pay federal income tax. In general, low-
income owners of mobile homes do not benefit from the mortgage interest
deduction.
Other targeted homeownership deductions do not reach mobile home
buyers either. Because of regulations, these homeowners do not benefit
from other subsidies available to low-income families. Since they own
their own homes, they do not benefit from first-time housing subsidies:
for example, the $8,000 first time homebuyer subsidy was not available
to them nor is other sources of HUD or USDA down payment assistance. In
addition, weatherization funds are impractical as these homes should
not be repaired, they must be replaced but replacement is forbidden by
law.
Even the small move up housing subsidy, $6,500 was too small to
enable mobile homeowners to use it. Most programs that assist low-
income home buyers, bundle subsidies including HOME funds, Federal Home
Loan Bank Affordable Housing Program funds, Individual Development
account funds and individual's savings. These options do not exist for
the mobile home replacement buyer.
Mr. Tester's approach seeks to fill the gap to enable these
homeowners to improve their quality of life with targeted assistance.
These families do not earn enough to replace their homes on their own.
They need greater subsidy to make the monthly payments affordable.
As requested, below are our responses to the questions submitted by
Committee members.
Response to Question From Senator Murkowski
Question 1. Please describe the average cost of heating a pre-1976
manufactured home? Are these homes also eligible for weatherization
dollars or LIHEAP money?
Answer. Unfortunately, actual consumption data collected by the US
EIA and other agencies does not separate out from the general
population of manufactured homes those homes built prior to 1976. For
estimates of energy use, particularly end use data (such as heating
costs), the engineering community relies on software analysis using
tools that have been benchmarked against actual home consumption.
In such a study performed by Systems Building Research Alliance,
heating energy use for pre-1976 homes was estimated to range from $220
to $380 per month with the value depending mainly on climate and local
electric and gas costs. There are homes in very mild and very harsh
climates that are higher and lower than these values, of course, but
this range of typical costs suggests the enormous potential for energy
savings that will result from replacing an old home with a new one that
qualifies for the ENERGY STAR label.
Families with very low income or in areas with high energy costs
often make comfort sacrifices to keep their utility payments under
control. Typically these households supplement their central heating
system with free standing and generally unvented kerosene heaters or
wood stoves. Fuel for these devices is an additional cost generally not
captured by utility bill studies. They also may contribute to indoor
air quality problems and cause health problems, particularly for
children and the elderly.
Old mobile homes are likely to have highly inefficient and costly
electric resistance heating and poor air distribution, exacerbating
performance issues. As a result, the heating system may not be capable
of delivering sufficient heat to keep the home warm, encouraging owners
to use these supplementary heating devices and/or tolerate colder
temperatures. Both have a deleterious impact on comfort and the quality
of life.
While anecdotal, the utilities (particularly rural cooperatives
that have the largest share of mobile homes on their service lines)
report that older mobile homes are the major source of high bill
complaints, late or delinquent payments and related service issues.
These households will be a primary source of candidates for home
replacement assuring that those families with the greatest need benefit
from the replacement program.
Manufactured homes are definitely eligible for the weatherization
program. However, state weatherization agencies are often reluctant to
spend money weatherizing a home that is so energy wasteful and
structurally unsound. Their view is these homes represent a poor
investment and should be replaced.
Although reliable estimates do not exist, we suspect many mobile
home households are eligible for receiving LIHEAP funds.
The program would be nearly revenue neutral, creating more than
51,000 new U.S. jobs. Every dollar invested by the government in the
replacement program would result in about three to four dollars of new
lending, magnifying the benefits. Over the next decade, this program
will save more than $1.8 billion in reduced energy costs and improve
the living conditions of more than 130,000 low-income families.
Responses to Questions From Senator Sessions
Question 1. While I understand the need to not make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films.
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
When considering the cost of installing window films is
significantly lower than completing many of other home retrofit
upgrades (including the installation of new windows), providing window
films with the $1,000 Silver Star subsidy would not only ensure more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by very small, family-
owned businesses.
Given the cost-effective energy savings that window films
can provide to homeowners, should they be included as part of
the Silver Star rebate section of the Home Star bill?
While I can appreciate there are a variety of reasons one
would want to limit the number of products eligible for the
Silver Star rebates, the bottom line is that the Silver Star
rebate program will likely be the first list that consumers
look at when considering home energy efficiency improvements.
Shouldn't we avoid picking ``winners and losers'' in the
marketplace when it comes to energy efficiency upgrades?
Answer. The Silver Star rebate program and/or the inclusion of
window films is not applicable to manufactured homes.
Question 2. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. The Home Builders Institute program rebate program and/or
the inclusion of window films is not applicable to manufactured homes.
Question 3. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. The certified workforce requirement is not applicable to
manufactured homes.
______
Responses of Philip Giudice to Questions From Senator Murkowski
Question 1. Are there any large scale federal or state energy
efficiency programs that could provide a template for this type of
program, that have envisioned as many as 2 to 3 million homes over the
next couple of years? Is it realistic to assume that this many homes
can be retrofitted?
Answer. The states have learned a great deal over the past 35 years
of conducting energy efficiency programs. The variety of successful
energy efficiency programs include state-based models from across the
country, including programs in Alaska. Successful programs initiated
under ARRA were provided to both the Minority and Majority staffs at
the March 4th and March 11th hearings. Under the State Energy Program
(SEP) and the Energy Efficiency and Conservation Block Grant (EECBG),
over $800 million has been allocated by states and local governments
for residential energy efficiency retrofits. Programs operated by
states, local governments, utilities and other public benefits programs
are useful models as Congress and the Administration consider the Home
Star initiative. Massachusetts has extensive programs that are models.
We are adding to that with our SEP and EECBG funding, including our
community-based efforts. California has recently approved a $2.5
billion residential energy efficiency program.
Question 2. Within the draft legislation, there is reference to the
use of the Building Performance Institute (BPI) for both training and
quality assurance. Within the timeframe anticipated for the program to
begin to operate, can BPI provide the necessary capacity to undertake
such a large endeavor, with appropriate safeguards in place? How does
the state of Massachusetts handle training and certification within
their weatherization program?
Answer. The Building Performance Institute, Inc. (BPI) has been
expanding dramatically in the past few years. That expansion is
accelerating. They are operating in an effective manner. Massachusetts
efficiency programs for residential customers are operated by two
entities. For low income residents, ratepayer-supported efficiency
programs are coordinated with the U.S. Department of Energy's (DOE)
Weatherization Assistance Program (WAP) and coordinated by the
Massachusetts Department of Housing and Community Development, in
cooperation with local Community Action Agencies. Other residential
customers receive efficiency programs and services from the investor
owned the utilities, who for the most part work through contractors and
vendors. Those parties have been responsible for training,
certification and quality assurance.
Because of recent policy changes in Massachusetts that make energy
efficiency our ``first fuel'' and require investor owned utilities to
tap all cost effective energy efficiency resources that are cheaper
than supply, Massachusetts has developed three year energy efficiency
plans that require significant expansion of the service delivery
infrastructure.
Private sector contractors who participate in the U.S. Department
of Energy's (DOE) Weatherization Assistance Program (WAP) are required
to complete a 4 day ``Weatherization Boot Camp'' and demonstrate the
ability to meet DOE and Massachusetts Department of Housing & Community
Development (DHCD) Installation Standards. DHCD is about to enter into
an ISA with the Springfield Technical Community College (STCC) and the
MassGREEN Initiative of the Massachusetts Clean Energy Center to
implement a comprehensive weatherization contractor training program.
Energy Auditors are trained and certified by DHCD prior to performing
energy audits and quality assurance tasks.
For the market rate programs, we are in the process of moving
toward a clear statewide certification requirement. Conversations
continue about what the standard should be but it will most likely be a
BPI standard or consistent with BPI, with an additional requirement to
pass an air sealing skills test.
Question 3a. The Discussion Draft refers to BPI and the RESNET as
``standard setting organizations.'' Are these two groups similar to the
International Code Council, as it relates to being a standard setting
organization? Are either of these organizations approved by an
international Standards Developing Organization oversight body, like
the American National Standards Institute (ANSI)? Please describe the
process undertaken by BPI and RESNET to become a ``standard setting
organization?''
Answer 3(a). BPI
ESSENTIAL DISTINCTIONS OF BPI AND ICC
The Building Performance Institute, Inc. (BPI) is a national
standards development and credentialing organization for residential
energy efficiency retrofit work--providing training through a network
of training affiliate organizations, individual certifications, company
accreditations and quality assurance programs.
The International Code Council (ICC) is much broader in its
domains, and is dedicated to building safety and fire prevention
through the provision of codes, standards, products and services
concerned with safety and performance of the built environment,
primarily focused on the design of new buildings, with emphasis in the
following domains:
Buildings
Residential
Fire
Mechanical
Plumbing
Electrical
Fuel Gas
Sewage
BPI's focus is narrow: existing residential building energy
retrofits. ICC's focus is broad and mostly focused on advanced design.
In the March 12, 2010 ICC announcements of the combined
International Green Construction Code (jointly with AIA, ASTM, ASHRAE,
USGBC and IES), the standard exempts ``Low-Rise Residential Buildings''
implicitly recognizing these buildings (and their related standards)
are properly in the domains of other initiatives.
BPI STANDARDS SETTING PROCESS
BPI's standards domain includes personnel certifications,
contractor accreditations, and national technical standards that
support building systems. Since 1996 BPI has used its consensus
development processes to garner wide support of all potentially
affected stakeholders. These procedures exceed those required by the
American National Standards Institute (ANSI). In fact, BPI has applied
to ANSI for accreditation as a developer of American National Standards
and approval is expected shortly. To the best of our knowledge and
belief, BPI's standards development processes already comport with all
of the tenets of OMB Circular A-119, particularly those of openness,
due process, balance, consensus, and lack of dominance. Thus, BPI is
appropriately poised for this legislation and its reliance on private-
sector, objective, fair, open and consensus based standards. To the
best of our knowledge and belief, it fully meets the requirements of
OMB Circular A-119.
The National Technology Transfer and Advancement Act (NTTAA)
follows the basic tenets of OMB Circular A-119 to use standards
developed by voluntary consensus standards bodies, as well as
encouraging federal agencies in their deliberations. BPI programs and
standards activities have enjoyed extensive cooperation with and
participation by numerous federal and state agencies. These standards
are referred to by both DOE and EPA in their program activities and
BPI's national expansion was funded through a grant provided by DOE,
EPA and HUD. DOE holds one of five positions on BPI's Standards
Management Board, while EPA currently is sponsoring a Home Performance
with ENERGY STAR (HPwES) pilot in northern Virginia that requires the
contractors to become accredited by BPI and follow the BPI Standards in
their home energy retrofit work. Other state and utility programs
(Energy Trust of Oregon, Austin Energy, NYSERDA, and NJ Board of Public
Utilities) use BPI Standards and credentialing as the basis of their
programs. The NYSERDA HPwES program, for example, requires contractors
to follow BPI Standards in their work. To date over 35,000 ``whole
house'' energy retrofit projects have been completed in the state by
contractors accredited by BPI.
BPI also maintains a series of personnel certifications based on
these standards. In the single family realm of the HOME STAR
legislation, BPI maintains certifications in the areas of Building
Analyst, Shell/Envelope, Heating, and Air Conditioning/Heat Pump. These
certifications are based on 100 question (timed and secured) written
tests as well as a two-hour field test with diagnostic equipment
administered by a field examiner approved by BPI. BPI certifications
must be renewed every three years. If the renewing candidate has 30
Continuing Education Units (CEUs), then only a repeat of the field test
is administered. Renewing candidates with less than 30 but greater than
10 CEUs need only re-take the 50 question specialty exam for their
specialty along with the field test. Others must take both full tests.
BPI is currently in the process of applying to ANSI for an
accreditation for its personnel certifications under ANSI/IEC/ISO
17024.
More information may be obtained directly from BPI.
Answer 3(b). In its standard development process RESNET includes a
consensus process that involves review and approval of a new standard
or amendments by a formal standing RESNET committee, posting of the
drafts on the internet for a minimum 30-day public comment review,
documentation of the consideration of public comments and review by the
RESNET Standards Committee and the RESNET Board of Directors prior to
the adoption of a standard or amendment. This consensus process is
modeled on the American National Standards Institute's (ANSI) process.
RESNET standards are recognized by the U.S. Department of Treasury for
the federal tax credit for energy efficient homes, the Environmental
Protection Agency for the labeling of ENERGY STAR Homes and the U.S.
Department of Energy for the National Builders Challenge.
More information may be obtained directly from RESNET.
Question 4. Congress has authorized several approaches to encourage
both residential and commercial building owners to invest in energy
efficiency improvements. Please describe the programs that have led to
the greatest reduction in energy use. Does either the tax code or
federal grants to building owners provide any inherent advantage over
the other--for example is one more efficient, or cheaper to administer?
Answer. The State Energy Program (SEP) has historically been highly
successful in energy savings. According to a Oak Ridge National
Laboratory study, based upon 2003 data, for every federal dollar
invested over $7 in energy savings was achieved. A combination of tax
provisions and rebate programs hold great promise. For example, the
$1.80/sq.ft. commercial buildings deduction for energy efficiency
should be expanded to $3.00/sq.ft., in accordance with the Building
Star proposal. The 25C residential tax provision has been helpful, but
should not be seen as exclusive. The Home Star program would add a
critical short-term measure that should be followed up by the enactment
and funding of the REEP proposal contained in slightly different forms
in S. 1462 and H.R. 2454. In short, both direct funding and tax
provisions can be (and are) effective. SEP has been relatively easy to
administer at the state level.
Responses of Philip Giudice to Questions From Senator Sessions
Question 1. While I understand the need to not make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films.
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
When considering the cost of installing window films is
significantly lower than completing many of other home retrofit
upgrades (including the installation of new windows), providing window
films with the $1,000 Silver Star subsidy would not only ensure more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by very small, family-
owned businesses.
Given the cost-effective energy savings that window films
can provide to homeowners, should they be included as part of
the Silver Star rebate section of the Home Star bill?
While I can appreciate there are a variety of reasons one
would want to limit the number of products eligible for the
Silver Star rebates, the bottom line is that the Silver Star
rebate program will likely be the first list that consumers
look at when considering home energy efficiency improvements.
Shouldn't we avoid picking ``winners and losers'' in the
marketplace when it comes to energy efficiency upgrades?
Answer. We look forward to working with Senator Sessions and both
the minority and majority members to determine the appropriate
treatment of window films, taking into account cost, energy savings,
cost-effectiveness and persistence of savings.
Question 2. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. We are not familiar with HBI, but we remain open to working
with organizations that can work effectively and in collaboration with
other key stakeholders to achieve the goals of the Home Star
legislation.
Question 3. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. We look forward to working with Senator Sessions, as well
as the majority and minority members to ensure that small business
employees are not prevented from working in the Home Star program.
______
Responses of Bob Hanbury to Questions From Senator Murkowski
Question 1. Please describe the different groups who currently
provide training for retrofit programs. How are these trainings
developed? For example, if a particular type of training, or curriculum
is pursued in the legislation, what is the role of the general public
in participating in the process, or in the development of referenced
training standards?
Answer. Until recently, most of the training for weatherization-
related work has been under the domain of the Department of Energy's
(DOE) Weatherization Assistance Program (WAP). The curriculum used for
the WAP program is developed and approved by DOE. As of February 2009,
there were twelve recognized Weatherization Training Centers\1\ that
provide a full array of weatherization training and hands-on
opportunities. Many states also have other training requirements and
opportunities tied to their State Energy Programs (SEPs).
---------------------------------------------------------------------------
\1\ Weatherization Assistance Program Technical Assistance Center
(WAPTAC) website, accessed at http://www.waptac.org/
sp.asp?mc=training_facilities on 3/25/10.
---------------------------------------------------------------------------
There is also a vast array of private entities and organizations
that provide energy efficiency training, including Southface, the
Institute of Environmental Management and Technology, Inc. (CT),
Institute of Envelope Science (FL), Quality Built (CA), Affordable
Comfort, Inc. (PA), among many others. Most of these programs have been
developed in response to the WAP program and SEPs by private entities
looking for business opportunities. Because there are currently no
standards to which any training program must adhere, these programs
have typically been developed by the company and its team of experts
with little or no input from the public.
Finally, there are a number of initiatives underway to improve
national weatherization training--efforts that will be equally
applicable for retrofit work. First, DOE's Office of Weatherization and
Intergovernmental Program for the WAP issued its National
Weatherization Training & Technical Assistance Plan in December 2009.
The plan is designed to ``[b]uild the training capacity to support the
weatherization network Recovery Act ramp up and lay the foundation for
a sustainable national retrofit industry with ready access to a well-
trained workforce and opportunities for worker mobility and career
pathways.'' Second, the Weatherization Trainers Consortium of DOE is
developing a ``Core Competencies for the Weatherization Assistance
Program.'' This is the first step in standardizing core competencies
for various weatherization workers. While neither of these efforts will
result in short-term solutions, any legislative action should be
designed to facilitate and complement these initiatives.
Last year, the Home Builders Institute (HBI) began developing a
weatherization and retrofit curriculum designed to create job skills
and workforce development in the residential construction industry. The
curriculum was developed via a thorough skills assessment, task
analysis, and DACUM (Developing a Curriculum) process, an
internationally-recognized and legally-defensible job analysis method.
In this process, experts in the field, i.e., job practitioners, are
used to help develop curriculum instead of having curriculum developed
by instructors, college professors, interest groups, or other outside
parties. The task analyses are structured to accommodate all standards
in use, so it is flexible enough to work everywhere and is not limited
geographically. The program is also designed to be widely available
with at least two testing locations per state--total of 1382--and can
be used in home builder associations (over 800 nationwide), as well as
community colleges throughout the U.S. Currently, the weatherization
curriculum is being delivered through partnerships with the Greater
Houston Builders Association, NAHB, Goodwill Industries International,
Inc., United Brotherhood of Carpenters and Joiners of America, Adult
Reading Center, Inc., Ferris State University, Michigan Association of
Home Builders, and Detroit Environmental Justice.
The HBI program includes a 40-hour course that provides hands-on
training for four levels of job skills: apprentice, weatherization
worker, weatherization specialist, and energy analyst. Each level of
training requires different skills proficiency and different levels of
coursework and training. The coursework uses adult learning techniques
and covers the status of energy consumption, forms of energy, basic
theory, thermal envelope, vapor barriers, air barriers, anatomy of a
home terminology, and calculating heat loss. The practicum includes
actual hands-on disposable home components so workers can learn how to
install 80 different weatherization products and perform 45 activities.
The program is designed for workforce skill development and is intended
for professionals to use in a full-time career. NAHB understands that
the North American Technician Excellence (NATE) and Laborers
International Union of North America also have a retrofit training and/
or certification program. NAHB does not, however, have enough
information about the development of these training programs in order
to adequately comment on the nature of their development.
NAHB understands the Building Performance Institute (BPI) has a
certification program for retrofit work that includes class offerings
for contractors that can sign up with a BPI affiliate and then pass a
test to be certified. NAHB believes that there is no corresponding
workforce development component to the BPI certification credential,
and that it relies upon an individual's ability to master BPI
prescribed skills standards and successful completion of testing and
certification. The BPI program and its published ``standards'' are not
approved by a third-party standards organization, like the American
National Standards Institute (ANSI), and therefore do not have a
guaranteed public participation component.
Question 2. Please elaborate further on how the Lead Paint Rule
will impact the retrofit industry.
Answer. The Lead: Renovation, Repair and Painting (LRRP) rule
``applies to all renovations performed for compensation in target
housing and child-occupied facilities.'' (40 CFR Sec. 745.80) on or
after April 22, 2010, no firm may perform, offer, or claim to perform
renovations without certification from EPA unless the renovation
qualifies for one of the exceptions, which includes no children under 6
or pregnant women living in or visiting the home on a regular basis.
Considering that the most effective retrofits will occur in ``target
housing''--roughly defined as any housing constructed prior to 1978--
contractors will need a certification from the EPA before they can
legally work in older homes. As of March 15, 2010, EPA is reporting
that it has certified 50,000 renovators, but given that EPA estimated
236,000 certified renovators are needed in the first year of the rule
for good compliance, the 50,000 figure represents less than \1/4\ of
the workforce predicted. NAHB notes that the LRRP certification
supersedes any workforce or other contractor certification requirements
under Home Star and its impact on the proposal and the retrofit
industry is significant.
The Obama Administration wants to improve the energy efficiency of
millions of older homes, most of them built prior to 1978, which means
they are subject to the LRRP rule. To date, EPA has not certified
enough trainers or firms to enable widespread or sufficient compliance.
As a result, the federal government is poised to distribute millions of
dollars to retrofit older homes through the DOE, meanwhile the EPA is
erecting a chokehold on training and certification for contractors
working on this least efficient stock.
Question 3. Please describe the training and curriculum that is
provided to insure that retrofit work is performed to the highest
standard.
Answer. The majority of States have State or local contractor
licensing requirements that apply to all residential construction
activities, including retrofit work. Most require applicants to
demonstrate sufficient work experience and pass one or more tests to
demonstrate the requisite knowledge. In Nevada, for example, applicants
must provide four notarized references verifying that they have had
four years of work experience to apply for a license. All applicants
must then take the Contractors Management Survey Exam (CMS), which
covers Nevada State Contractor licensing laws and regulations; state
laws; construction project management; and business and financial
management; and a classification-specific exam that covers reading and
interpreting construction codes and regulations; Nevada Health
Department regulations; building codes; trade materials, tools,
equipment, and methods; and Nevada Occupational Safety and Health
rules. Most of the other states' requirements are similarly rigorous.
Clearly, contractors who have earned licensure must demonstrate full
knowledge of the issues in order to become licensed. In addition,
several states also require all licensed contractors to meet continuing
education requirements. In Minnesota, where contractors must earn seven
hours of continuing education credits per year, at least one hour of
that education must be related to the implementation of energy codes
for buildings and other building codes designed to conserve energy.
Further, most States have training, certification and/or licensing
requirements for conducting certain activities, thereby ensuring that
the activities performed are done so competently and professionally.
Finally, in addition to the skills and expertise that will be
demonstrated through the work, every time a contractor completes a job,
his or her credibility and business is on the line. All contractors
want to secure new jobs, so in addition to doing a job well, they seek
to get new referrals from their clients--both of which compel them to
ensure their work complies with the highest standards.
Question 4. The Home Star program wants rebates to be paid within
30 days and inspections also one within 30 days. So potentially, a
homeowner or contractor could be waiting up to 60 days to get the
rebate paid out.
a. Is 60 days too long to be waiting for a rebate? Is there a
faster way to get this done?
Answer. Compared to the ``Cash-For-Clunkers'' program, which
provided the rebate to the consumer upon purchase, 60 days is a
relatively long time. However, 60 days is relatively short compared to
the length of time consumers typically must wait for benefits from tax
credits, which are claimed on a homeowner's tax return that may not be
filed for months. If the 60 day waiting period could be reduced, all
else equal, it would make the program more effective.
In the retrofit program managed by the Builders Association of
Minnesota (BAM)--Project Reenergize--rebates to consumers were
processed in about 12 days (avg.). The BAM would verify the pre-rebate
notification and post-renovation verification information--i.e.,
perform necessary quality assurance--and then submit the rebate request
to the State's Department of Commerce (which has jurisdiction over
energy programs) and then the Department of Commerce would send the
money to BAM and BAM would issue a check to the consumer. The average
rebate to the consumer was about $2,300 and took about 12 days.
b. Let's say it takes three months to stand up the
infrastructure of the program and another 60 days for rebates
to be paid out.
c. That is almost half a year of waiting for the first
rebates after the legislation becomes law. Is this too long?
Answer. Compared to waiting until the next filing date for an
income tax rebate, or some of the delays occurring in the WAP program
authorized by ARRA, five months is not excessive, provided that
deadline can be met. NAHB is concerned that it could take considerably
longer than three months to establish the necessary infrastructure for
the program, as currently proposed, to the point where it is running
efficiently across the entire country. It may be worth considering that
expanding existing tax credits for energy efficiency measures could be
done without requiring an elaborate new infrastructure. Restrictions on
the number of contractors considered eligible to perform retrofits also
limits the speed with which a retrofitting program can be rolled out.
Question 5. What is our understanding of the work force that will
be participating in the Home Star program? What are the expectations
for what fraction of this workforce will ultimately stay in the
industry?
Answer. The pool of potential participants for an energy retrofit
program come from employees of a relatively large number of small firms
with a few employees each, as well as a number of contractors and
subcontractors who are self-employed. According to NAHB's 2009 Member
Census, 2-percent of members who characterize themselves as residential
remodelers had no employees, 17-percent had just one employee, only 11-
percent had more than 10 employees, and none had more than 50. Among
these residential remodeling businesses, the median number of employees
in 2009 was 4 and the median volume of business done in 2009 was
$506,562.
Subcontracting is also a relatively common practice in the
industry. Remodelers responding to NAHB's fourth quarter 2009
``Remodeling Market Index'' Survey reported employing, on average, 18
different subcontractors during the course of a year. Subcontracting
businesses also tend to be relatively small. Among the NAHB members who
characterized themselves as subcontractors in our 2009 Member Census,
the median number of employees was 8, and the median volume of business
done in 2009 was $866,226. Most (41.8%) of these businesses are pure
subcontractors, in the sense that they do no other type of work. About
9% also do residential remodeling, the most of any secondary businesses
activity reported by subcontractors in our member Census.
However, there is large number of very small firms without
employees in the construction industry in general, and many of these
are unlikely to be members of NAHB and therefore would not be captured
in our Member Census statistics. The Census Bureau's 2007 non-employer
statistics show 592,988 firms without employees in residential
construction and 1,921,680 specialty contracting firms without
employees in the construction industry in general. They had average
annual receipts of $85,871 (for residential remodelers) and $50,344
(specialty trade contractors). NAHB does not know exactly how many of
these small construction businesses without a payroll specialize in
residential remodeling, but given the relatively small nature of many
residential remodeling projects, it seems likely that residential
remodeling would have at least a proportional share of these small mom-
and-pop operations.
The smallest of these businesses are less likely to be Home Star
participants. Many such small businesses have limited capacity to
process paperwork or send staff great distances to participate in
training and certification programs. The more restrictive the
certification requirements, and the more complex the reporting and
record-keeping requirements, the greater will be the tendency to
exclude businesses at the small end of the spectrum.
While NAHB believes that there will be strong ongoing demand for
energy-efficiency retrofits in older buildings, providing an
opportunity in future years for Home Star participants to apply skills
learned while participating in the program, NAHB does not necessarily
believe the relatively modest Home Star proposal will lure away
builders from new construction jobs into permanent retrofit work once
the demand returns and gains for new home construction.
Question 6. Please describe the different industry options to
certify contractors. Does Home Star provide these certification
options?
Answer. Like training, there are currently many different
certification programs available for builders and contractors--most of
which have been developed by private-sector entities and none of which
have been developed pursuant to a consensus process. As a result, these
programs do not necessarily follow the same criteria, require the same
competencies, or promote the same results. As above, however, due to
the lack of any standard or basic national criteria for what an
acceptable certification program might look like, coupled with the
variety of factors, expertise, and competencies needed for retrofit
activities across the country, allowing for and facilitating the
existence of a variety of different certification programs makes sense.
First, this provides the ability to tailor the program to the
immediate needs of the targeted sector. The State of Oregon, for
example, requires an Oregon DOE Tax Credit Certified Technician to
perform any heat pump, air conditioning installation and diagnostics,
and duct sealing and testing if the homeowner seeks to obtain state tax
credits for a portion of the work. This approach ensures that the
activities are performed correctly, without requiring unnecessary
certifications for activities that will not be performed, or that are
already well-understood. Second, supporting a variety of certification
programs helps to ensure that there are a sufficient number of entities
are available to do the work. Sole reliance on a handful of
certification programs, as prescribed in the Home Star Act draft, could
result in a bottleneck that will impair and slow progress.
Question 7. Please describe the timeframe to develop an employee
certification program, within each state, and the Administrative costs
associated with the directive. Is there a streamlined process for
determining employee certification for this type of work across the
country?
a. Will the DOE need to provide a federal contractor
certification provision within the Home Star program?
Answer. In the context of Home Star, it will be extremely important
that DOE or other regulatory authorities not preclude contractors from
an ``employee certification program'' associated with the program based
on a contractor's taxpaying status. Most contractors in the residential
construction industry are organized as independent contractors and,
therefore, may be the only, or one of very few ``employees.'' The
independent contractor status is protected under existing tax rules and
regulations and any effort to layer on additional ``employee
certification'' requirements for work on Home Star-funded projects
should similarly protect that designation status.
b. If not, why does the DOE have the opportunity to require
additional standards?
Answer. The federal government should avoid referencing a single or
limited number of privately-developed standards by name in federal
legislation to avoid creating monopolies for government-subsidized
projects. In the absence of consensus-based standards that have
undergone third party approval by an unaffiliated standards
organization--e.g., American National Standards Institute (ANSI) or
American Society for Testing Materials (ASTM), Congress should be
careful not to limit the administration and outcome of public programs
to the discretion of a few privately-developed technical benchmarks.
The National Technology Transfer Act of 1996 (P.L. 104-113)
prescribes that the federal government should reference and use
voluntary industry consensus standards that have undergone approval and
scrutiny by third-party organizations (like ANSI) as preferred
benchmarks for federal agencies when they are available in the
marketplace, rather than relying upon privately-developed standards.
This gives greater weight to those consensus standards that have
undergone thorough public scrutiny and can demonstrate a development
process that is balanced among interests and stakeholders and that the
development panel is not over (or under) represented in key interest
groups. None of the groups listed by name in the definitions section in
the current draft under ``certified workforce'' are ANSI-approved
standards, i.e., they are all privately-developed.
c. What might these additional standards look like?
Answer. Additional standards should include the ICC-700 2008
National Green Building StandardTM (NGBS). Not only has the
standard already undergone the rigors of public scrutiny and received
approval from ANSI, it has a remodeling component that is in concert
with the proposed structure of the Gold Star level of the HomeStar
program. As with the Gold Star level in the current draft, homes older
than 1980 rated according to the Green Remodel path of the NGBS must
demonstrate at least 20% improvement in energy performance in tests
performed by an accredited third party verifier. Similar reductions in
water use are also required. The NGBS provides the only approved public
standard for remodeling to improve energy and environmental performance
in older homes that complies with the federal government's NTTA law and
achieves the dictated performance outcomes prescribed in the draft
legislation. Furthermore, certification to the NGBS is already
available to the market and over 300 verifiers have already been
trained and are available to check compliance, thus providing a ready-
made certification infrastructure should certification to the NGBS be
recognized as an approved means to satisfy the Gold Star program
requirements.
With regard to alternative training standards, to date, over 5000
individuals have already completed NAHB's certified green professional
(CGP) curriculum and are available to implement the work needed to
achieve the performance improvements sought by the Home Star program.
These individuals have all undergone three days of classroom training,
including two days devoted to green building training, which
incorporates a focus on energy-efficient construction.
d. Furthermore, how would a state certify to the DOE, that
their classification program is viable, and would not be
subject to additional requirements by the DOE?
Answer. States using national standards--like the NGBS, for
example--would not necessarily have to prove to DOE that their
classification is viable because it would provide a consistent
benchmark across the country. States that are using other privately-
developed benchmarks, without consistent training or implementation
requirements, would have limited ability to ensure reliable training
and work practices nationally. This could create problems if trying to
implement 50-different certification protocols.
e. Are there alternatives?
Answer. An alternative mechanism would be to require program
participants, both contractors and homeowners, to retain manufacturer
certifications of installed products' energy efficiency ratings and/or
energy performance ratings results. This is similar to the current
existing homes tax credit program (Section 25C of the Internal Revenue
Code of 1986). In this instance, the plethora of certification
credentials and contractor requirements becomes irrelevant and the
burden of proof is on the consumer, who is making the investment and
efficiency decisions for the home anyway. This would potentially
eliminate a lot of the ``red tape'' that the program could face and
would allow the government to expend the resources devoted to approving
various certification credentials and classifications for contractors
on greater rebates to consumers.
Responses of Bob Hanbury to Questions From Senator Sessions
Question 1. While I understand the need not to make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films.
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
When considering the cost of installing window films is
significantly lower than completing many of other home retrofit
upgrades (including the installation of new windows), providing window
films with the $1,000 Silver Star subsidy would not only ensure more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by small, family-owned
businesses.
Given the cost-effective energy savings that window films
can provide to homeowners, should they be included as part of
the Silver Star rebate section of the Home Star bill?
Answer. NAHB fully supports the inclusion of all energy-efficient
technologies that have measurable results to be included in the Home
Star program, as each component works to improve overall energy
performance and provides savings to consumers. NAHB supports efforts to
add and expand the products and services available for consumer rebates
because it will both increase the potential for job creation and energy
savings. NAHB would support the inclusion of window films as part of
the Silver Star rebate section of the Home Star bill.
While I can appreciate there are a variety of reasons one
would want to limit the number of products eligible for the
Silver Star rebates, the bottom line is that the Silver Star
rebate program will likely be the first list that consumers
look at when considering home energy efficiency improvements.
Shouldn't we avoid picking ``winners and losers'' in the
marketplace when it comes to energy efficiency upgrades?
Answer. NAHB agrees that the legislation should not pick ``winners
and losers'' in the marketplace for energy efficiency upgrades. Not
only does NAHB agree that the bill should not pick and choose preferred
technologies that are eligible for rebates under the program, but also
does not agree that Congress should pick and choose preferred
certification and workforce programs. NAHB would support efforts to
remove all named references to specific certification programs and
allow the Secretaries of DOE and DOL to choose legitimate workforce and
energy efficiency programs that would qualify for weatherization work
as part of a ``certified workforce.'' NAHB would also support including
additional products with demonstrated energy efficiency performance--
e.g., Energy Star-rated windows--that can achieve desired performance
outcomes and, in many cases, are a more affordable option for
consumers.
Question 2. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. NAHB believes that the HBI program has been excluded from
recognition in the legislation because it was developed through a
network of residential construction, engineering, and academic experts
that do not normally purchase certification credentials and/or
participate with the certification and training programs belonging to
those companies and organizations already referenced by name in the
legislation. Because many of the organizations that currently support
the legislation have not often worked closely with the residential
construction industry, and/or do not fully appreciate the nature and
breadth of the workforce training that the industry has been offering
and undertaking for decades, NAHB believes there has been reluctance
for some groups to support the inclusion of an industry-based training
and workforce program.
Despite its legitimacy and partnership with DOL, and its rigorous
and legally-defensible development, the current draft provides that the
HBI program is relegated to a position upon where the DOE Secretary
would have to separately approve it before it could be equally
considered alongside those programs already named. NAHB understands the
considerable delays that DOE had in issuing code determinations (10
years behind) and previously appliance standards. For example, we
assert that not being included for consideration at the outset in the
draft is equivalent to being permanently excluded from the program,
particularly in a program like Home Star that is designed to implement
rapidly and conclude within 2 years.
Question 3. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. NAHB would agree that Congress must ensure that the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficient products that are typically
employed by small businesses. As the great majority of NAHB members are
small contractors, employers, and businesses, NAHB would support any
measures to ensure that independent contractors, small businesses, and
installers participating in bona fide training programs--including
window film installation--could be eligible to participate in the Home
Star program.
According to the Energy Information Administration (EIA), the
energy consumed by older homes (built prior to 1991), comprises 17.1%
of all energy consumed in the United States. Further, 74.1% of the
existing housing stock--130 million--was built before 1991 when modern
energy codes largely did not exist. Needless to say, there is enough
work to go around and Congress should not, in any way, limit the
ability of highly-trained and skilled contractors to perform
critically-necessary upgrades in these older homes. Requiring
contractors to purchase specific certification credentials and/or
limiting the training options to only a few preferred groups for
participation in this incentive program is very short-sighted. NAHB
hopes to expand the number of qualified training programs that can be
recognized and officially endorsed by the legislation, so that it will
increase the number of available workers who can return to work,
improve property values for millions of consumers, and save energy and
resources for our country.
______
Larry Laseter, President of Masco Home Services, represented the
HOME STAR Coalition at the March 11, 2010 Hearing before the Senate
Energy and Natural Resources Committee. The HOME STAR Coalition
(referred to in these questions as ``the Coalition'') is made up of
organizations and businesses that endorse the HOME STAR program
including construction contractors, building products and mechanical
manufacturers, retail sales businesses, environmental and energy
efficiency groups and labor advocates. A complete list of the Coalition
members is attached.*
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* Document has been retained in committee files.
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Responses to Questions From Senator Murkowski
Question 1. Please describe your assertion within your written
statement that this program will result in higher home values. Are
there any case studies that have shown a direct correlation between
home energy efficiency retrofits and property values--excluding the
sale of new ENERGY STAR homes?
Answer. The study most quoted in this area is a report by Rick
Nevin and Gregory Watson published in The Appraisal Journal of the
Appraisal Institute in October 1998, entitled ``Evidence of Rational
Market Valuations for Home Energy Efficiency''. The study prominently
notes:
According to this study, residential real estate markets
assign to energy-efficient homes an incremental value that
reflects the discounted value of annual fuel savings. The
capitalization rate used by homeowners was expected to be 4%-
10%, reflecting the range of after-tax mortgage interest rates
during the 1990s and resulting in an incremental home value of
$10 to around $25 for every $1 reduction in annual fuel bills.
Regression analysis of American Housing Survey data confirms
this hypothesis for national and metropolitan area samples,
attached and detached housing, and detached housing subsamples
using a specific fuel type as the main heating fuel.
There have been numerous other studies as well, mostly focused on
new construction, where energy efficiency differences in houses sorted
by ENERGY STAR or other state or utility certification may easily
differentiate those from a baseline. These studies all reach similar
conclusions about the fact that energy efficiency is valued by
consumers if they can identify it as an attribute. A very recent study
conducted in the Pacific Northwest entitled Certified Home Performance:
Assessing the Market Impacts of Third Party Certification on
Residential Properties (by Ann Griffin, Earth Advantage Institute, with
Ben Kaufman, GreenWorks Realty, and Sterling Hamilton, Hamilton
Investments, LLC, May 29, 2009) notes the value of energy efficiency to
the consumer.
Having noted these studies as requested, the HOME STAR Coalition
views increased home valuation as an incremental benefit to the broader
legislative objectives of job creation and energy savings.
Question 2. Is the intent of the bill to move towards national
building codes for retrofits?
Answer. No. There are no requirements for new building codes in
this legislation in any way whatsoever. The only requirement is that
measures installed meet all existing local building codes.
Question 3. Please describe the process undertaken to determine
what efficiency retrofits would be eligible to receive rebates. Under
the SILVER STAR component, is there a process to determine which
retrofit makes sense from a financial and energy savings perspective?
Answer. The HOME STAR Coalition is made up of a broad range of
industry representatives, environmental groups, energy efficiency
experts and organizations. The Coalition developed recommendations for
a simple and manageable program involving about 8-10 efficiency
measures that would drive consumer demand to create jobs. The
Coalition's recommendations were developed to meet the following
objectives:
To look for measures that typically achieve measurable
savings in home energy use (heating, cooling and water
heating).
To look for measures that make sense on a national level
this was for simplicity and fast rollout. Measures that make
sense only in a specific region might be not be appropriate (or
could even be counterproductive) in other regions.
To consider the market availability of technologies,
recognizing the need for rapid penetration rather than a multi-
year ramp-up.
To look for measures that would generally not be adopted at
significant penetration levels without incentives.
Question 4. The Discussion Draft calls for DOE to establish a
nationwide network of rebate aggregators who are required to distribute
rebates within 30 days after receiving applications. Please describe
what companies could create such a network in this time frame. In
addition, has there been discussion with professional rebate
fulfillment companies who have experience processing rebates to the
extent envisioned in the draft legislation? If other companies, or
programs, offering energy efficiency products, are allowed to process
rebates, are there any potential conflicts of interest that may arise?
Answer. While final administrative procedures will be put in place
by DOE relating to the specific qualifications of the rebate
aggregators, it has always been the intent of the Coalition to promote
a rebate structure that could be implemented quickly; be available to
all contractors and retailers, large and small; and take advantage of
existing program structures at the state and utility level that are
already processing rebates.
The infrastructure for rebate aggregation already exists in all 50
states. Many of the companies that currently act as state and utility
program implementers have existing systems that quickly move rebate
requests upstream and rebates back down to contractors. Because such
programs don't already exist everywhere in the country, it was
important to envision an alternate private-sector mechanism to channel
rebate requests to the federal processing center and issue the rebates
in a timely manner. It is logical to project that large retailers,
manufacturers and/or distributors of home improvement products would
take responsibility for the bulk processing of rebate requests and
dispersal of rebates back to the contractor level.
As you noted in your question, it is also logical to expect
professional rebate fulfillment companies to be solicited by DOE to
service all other contractors not captured by the other mechanisms
mentioned above. It has been suggested, and the Coalition agrees, that
one or more ``National Default Rebate Aggregators'' should be a
component of the rebate processing system.
As for potential conflict of interest, the Coalition believes the
structure of a completely separate Quality Assurance infrastructure and
process that is independent from the contractor will avoid the most
apparent conflicts by never allowing a contractor to be a QA provider.
The Rebate Aggregator will also have specific responsibilities for the
completeness and accuracy of the rebate request through a compliance
review of each request. It is our understanding that DOE will institute
a redundant review upstream on a sampling of requests to quality-check
the Rebate Aggregator.
Question 5. Please describe the anticipated participation levels in
both the SILVER and GOLD STAR components of the HOME STAR Program.
Answer. The Coalition expects the program to be fully subscribed.
The combination of SILVER STAR and GOLD STAR paths was conceived as an
effective way to address the need for immediate rollout in today's
market while laying the foundation for a future performance-based
market for home energy retrofits. The product-based incentives provided
by the SILVER STAR path are already familiar to consumers, contractors
and retailers, and can be deployed quickly and easily by an existing
workforce. The GOLD STAR path represents the future of the efficiency
retrofit industry, with highly trained contractors implementing cost-
effective, multi-measure retrofits based on scientific modeling of a
home's potential energy performance.
For SILVER STAR work, contractors must simply be licensed (where
applicable) and insured, and they must guarantee their work. We expect
that the existing building trades, such as insulation, HVAC, window and
door contractors, are prepared to market and deliver these projects by
working through established retailers and other existing channels.
SILVER STAR will assure extremely rapid uptake and immediate job
growth.
The GOLD STAR track requires contractors to undergo a higher degree
of training, yet they will benefit from significantly higher incentive
levels. Currently there are contractors across the country that are
either fully qualified for GOLD STAR or are on track to earn the
necessary qualifications. The GOLD STAR track will create a long-term
sustainable marketplace based on the combined energy-saving performance
of various building systems (insulation, heating and cooling, water
heating, lighting, etc.) rather than on specific products or
technologies. This approach gives homeowners and contractors the
freedom to develop the most cost-effective solutions for a given home.
Question 6. Within the legislation, you exempt the HOME STAR
Program from several laws, including the Paperwork Reduction Act.
Please describe the process undertaken to determine why the HOME STAR
Program should be exempt from these laws, and any legal opinions you
may have for the exemption.
Answer. The HOME STAR Coalition does not have direct knowledge of
the specific administrative process portions of this legislation as
they were drafted directly by legislative staff who are familiar with
these administrative process acts and laws. It is our understanding,
which we strongly support in principle, that there is a critical need
to move quickly to implement the HOME STAR Program and create immediate
job opportunities for American workers. Most of the critical components
of the HOME STAR Program are embodied in the legislation so that the
need for detailed rule-making is less substantial.
Question 7. Please describe whether there is any overlap in the
labor field between residential and commercial retrofit construction
workers?
Answer. Residential and commercial construction work has
traditionally been done by different firms using different pools of
workers. Although a number of larger construction companies work in
both the residential and commercial markets, these firms often
structure their work through separate residential and commercial
divisions. With regard to energy efficiency retrofits, single-family
homes, multifamily residential buildings and commercial buildings
present separate challenges that require different skill sets and
technology. As a result, these markets remain largely distinct.
It is important to note, however, that many skills are transferable
between residential and commercial retrofit work. Many workers who
begin their careers in home construction move to work in commercial
construction. Further, many manufacturing and retail companies serve
both of these markets, so the same retailers and manufacturers that
stand to benefit from HOME STAR also would benefit from increased
investment in efficiency retrofits of commercial buildings.
Question 8. Within the draft bill there is a program to provide
seed money to states to help finance loan programs. Have you received
feedback from Fannie Mae and Freddie Mac about their capacity, intent,
and/or ability to securitize loans made under the financing provisions
in the Discussion Draft?
Answer. Specific outreach has been made by Coalition members to
Fannie Mae, and the Coalition believes they are prepared to participate
as necessary.
Question 9. How do you address the personal financial risk of
consumers accepting financing under these programs versus the assumed
energy savings that may or may not accrue to them for undertaking the
types of efficiency projects outlined in HOME STAR?
Answer. As is the case with all consumer lending, there will be
some risk. Because loans tied specifically to energy efficiency work
have the benefit of cash flow created by energy savings resulting from
retrofit work, they should perform very well as compared with other
loan mechanisms for general home improvement work. As rebates for up to
50% of the work are layered into this equation, the real cash flow
against the loan value increases by up to double, and can, depending on
the length of loan term, assure positive cash outlay from loan onset.
That is, over the loan term, the monthly energy savings exceed the
monthly loan payment.
Anecdotal evidence has been presented to Coalition members
confirming this dynamic as it relates to Fannie Mae Energy Loans.
However, because no official study using actuarial standards has
documented this, there is a provision within the HOME STAR Energy
Efficiency Loan section that requires evaluation of all loans issued
under the program.
Question 10. Do you believe the time frame for the EPA's Lead
Ruling needs to be extended? If so, what is a reasonable time frame to
ensure that contractors can meet the stipulations on the rule, as it
pertains to the HOME STAR Program.
Answer. The HOME STAR Coalition does not have a position on the
EPA's Lead Ruling. It is our expectation that the installation of
measures identified in the legislation will be installed in a manner
that meets all state, local and national laws and regulations. The
implementation of the EPA Lead Ruling is under the responsibility of
the EPA and is not addressed in this legislation.
Question 11. Several groups have expressed interest in having
additional products eligible to receive rebates within the HOME STAR
Program. The products include, but are not limited to, geothermal heat
pumps, electric tankless water heaters, and window film products.
Recognizing that there are a myriad of products that can create jobs,
and improve the overall efficiency of a home, please describe how the
Coalition made the determination that only a few products would be
included in their proposal. Please describe the criteria that was
undertaken to both include and exclude products. In addition, please
describe whether ENERGY STAR Products should be eligible for rebates.
Answer. The process for the Coalition to make recommendations on
specific measures for Silver Star is described above in our response to
Question 3. It is important to note that GOLD STAR is 100% technology
neutral, and any verified energy-saving product or measure can be used
to meet the performance targets.
In terms of the specific measures you list:
Geothermal heat pumps: The Coalition has recommended that
these be included, both on the heating side (similar to air-
source heat pumps) and on the water heating side (similar to
storage tanks and controls connected to boilers). Geothermal
heat pumps are now included in S. 3177 and the companion House
bill.
Electric tankless water heaters: The Coalition reviewed this
measure and essentially decided that when properly used, they
can save some energy, but in some applications, energy savings
will be very limited. This measure has recently been added to
the House bill.
Window films: Window films are most effective in the South
and Southwest, so different requirements would be needed in the
northern states. The Coalition recommends that DOE evaluate the
inclusion of window films.
ENERGY STAR is discussed below in our answer to Question 12.
Question 12. Please describe whether this decision, to not rely on
ENERGY STAR products, may impact the perception of retailers,
consumers, and contractors towards the ENERGY STAR Label.
Answer. The Coalition recommends and supports select measures and
eligibility levels to keep the current market share of qualifying
products to 25% or less. We did this so that federal incentives go
mostly to measures that would not be installed without the incentives
(so-called ``free riders''). ENERGY STAR, on the other hand, sets
criteria initially to qualify 25% of products on the market, and as
shown recently by several Inspector General reports, the market share
for some ENERGY STAR products is 50% or more. This is why we could
generally not use ENERGY STAR, except for some cases where ENERGY STAR
has recently been revised. For example, about 43% of current gas
furnace sales are 90% AFUE or more. The Coalition believes that this
high market share violated the principle of trying to minimize
incentives for sales that would have happened without the incentives.
Based on current sales of 90% AFUE furnaces, about $1 billion of the
HOME STAR budget would be used by ``free riders'' at the 90% efficiency
level.\1\ Instead, the Coalition recommends the setting of the
qualifying level at 92% AFUE--a level commonly used by utility
incentive programs--and a level with a current market share
significantly below 20%.
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\1\ The $1 billion cost is based on 2009 residential furnace sales
of 2,174,528 (from the AHRI Web site), an ENERGY STAR market share of
43% in 2008 (from EPA; the ENERGY STAR qualification level is 90%
AFUE), a $1,000 rebate, plus 10% for other program costs (amount set
aside in legislation).
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If the intent is to also use ENERGY STAR for incentives, then the
EPA and DOE would need to set stricter ENERGY STAR criteria so that
fewer products would qualify. ENERGY STAR does promote products with
above-average energy performance, but to maximize energy savings from
limited incentive funds, incentives must be provided only for products
with even better energy performance. The agencies have recently
announced that they are developing a higher tier to accompany ENERGY
STAR (sometimes called ``Energy Superstar''). When this tier is
developed and operating, it may be a very good tier to use for
incentive programs.
Question 13. Are the rebates only offered to owner-occupied units?
If so, how many non owner-occupied units would be ineligible for the
rebate? Are there rebates available to landlords?
Answer. It is our understanding that the legislation covers all
owner-occupied dwelling units in buildings of four or fewer units. We
have not done research to determine how many non owner-occupied units
would be ineligible for the rebate. Units that are not occupied by the
owner as a primary place of residence would not be eligible for
rebates, nor would landlords be eligible for rebates.
Question 14. How can a do-it-yourself provision be effectively
offered by the federal government? Does it make more sense to
incorporate DIY under another existing program or an altogether
separate DIY rebate program? What are the options for this? How has the
ENERGY STAR Appliance Rebate Program addressed this issue?
Answer. DIY rebates should not be incorporated into other programs,
as co-marketing DIY rebates within SILVER STAR actually enhances the
HOME STAR Program. Retailers can use the DIY rebates to incentivize
customers who either can't afford installation costs or just prefer to
install insulation on their own. At the same time, retailers will have
additional opportunities to educate their customers about the value of
installed SILVER STAR incentives. The DIY rebates can be implemented
using the same aggregator system as the other SILVER STAR incentives.
Regarding appliance rebates, the ENERGY STAR appliance rebate
program does not address the same issues as HOME STAR. The existing
appliance rebate program focuses on different products and is a state-
based program. HOME STAR is a national program, and its DIY component
is solely focused on insulation.
Question 15. Do you think that people right now are waiting for the
federal government to act upon HOME STAR, and are not currently
completing efficiency improvements because they are waiting to see if
there will be a rebate program? Does the program stand to cost jobs,
not create them, until the rebates are up and running? For example,
will homeowners or contractors wait to have work done, with the
expectation that a program will likely be authorized?
Answer. The Coalition urges Congress to move forward with all
deliberate haste. Not only will more jobs be lost every month in the
construction and building materials manufacturing sectors, but as
homeowners are becoming more aware of the potential of HOME STAR, some
who may have undertaken work are putting their projects on hold in
anticipation.
However, given historically high unemployment in construction
trades, the potential long-term benefits of the HOME STAR Program far
outweigh the costs associated with near-term loss of business due to
work that is being delayed.
The legislation has been crafted to include all eligible projects
from the date of enactment. It has also been designed to roll out
quickly, by clearly defining the criteria for eligible projects and
participation in the program.
Question 16. What kind of contractual relationships will exist
between rebate aggregators and quality assurance providers? What kind
of infrastructure will need to be in place, including IT systems, etc.?
Does this infrastructure already exist?
Answer. The final details of the rules associated with rebate
aggregators and quality assurance providers will be established by DOE.
It is our understanding that there would not be a required contractual
relationship between rebate aggregators and quality assurance
providers. In some cases, they might be the same organization or
company, but the key separation would be between quality assurance
providers and contractors performing the work.
The infrastructure for both quality assurance and rebate
aggregation already exists in all 50 states. These organizations
include existing state and utility residential retrofit programs;
RESNET and BPI quality assurance providers; and existing state-
established rebate processing organizations established to administer
the ARRA appliance rebates. There are already over 8,000 certified
workers who are capable of serving as quality assurance inspectors,
which is eight times the projected number needed. These have IT systems
for the current purposes and the ability to connect to the federal
rebate processing center. Existing national contractors and retailers
will be acting as rebate aggregators and have these IT systems already
in place.
Question 17. What process will be in place to review jobs for
quality assurance, and who has the authority to do it? How long will
the quality assurance program take to complete, once a job is finished?
What kind of information will be required? Are there already systems in
place to do this? If so, will the systems need to be integrated? How
long will that take?
Answer. The quality assurance system of independent quality
assurance providers will review a minimum percentage of each
contractor's jobs. Although the final administrative procedures will be
established by the DOE, the HOME STAR Coalition's expectation is that
the jobs completed by the contractor and submitted for a rebate will be
transmitted from the federal database to the identified QA provider to
select homes to visit for QA inspections and review of the contractor's
requirements such as insurance.
QA information requirements, including administrative forms and
procedures, will be established by DOE. The standard forms for existing
retrofit rebate programs include basic information on location of the
work, the name of the contractor and QA provider, measures performed,
prices and verification of discounts, and appropriate warranties
provided.
The systems for performing QA exist throughout the country as a
result of the QA requirements for existing residential retrofit
programs operated by states and utilities, as well as the QA program
required as part of the ENERGY STAR New Homes program that has been
operated by EPA for over a decade.
Question 18. Was it the intent of the HOME STAR Coalition to run
HOME STAR's transactions and information through software programs and
management information systems developed for existing program? If so,
what are your assumptions about the cost and modifications it might
take to do that? How long will it take? Are there security issues with
this course of action? Is cybersecurity an issue? Are you aware of any
similar program, in size and scope that has tried to do this before?
Answer. The Home Star Coalition is an ad hoc coalition created to
promote job creation through home energy efficiency. The Home Star
legislation as currently written directs the Department of Energy to
implement the Home Star program. The Home Star legislation requires two
types of software programs. First is the National Rebate Processing
System that will be created by DOE for the purpose of receiving
information from rebate aggregators and processing data to send funds
back to the rebate aggregators and QA providers. Second will be the
software used to calculate savings for the GOLD STAR path. In this
case, the software programs are existing systems approved for use by
current programs such as Home Performance with ENERGY STAR,
Weatherization Assistance Program and others approved by the DOE.
The budget for establishing the data system and administering the
program, including all federal oversight activities, is approximately
$150 million or less than 2.5% of program costs.
Regarding cybersecurity, this topic fall outside of our area of
expertise, but we understand from experience with large federal data
systems that cybersecurity measures can be easily incorporated into a
database of this type.
As for similar programs, the development and deployment of large
data systems has become commonplace in our society. For example,
national firms manage rebate processing systems for corporations and
national retailers have world-wide data systems that link all of their
stores. For the home retrofit and energy efficiency industry in
particular, there are existing firms handling utility data,
transactions and rebates in excess of $500 million and millions of
transactions per year.
Question 19. What provisions will be in place to make QA
transparent for the benefit of oversight? How will the program decide
which jobs are inspected? Will it be random? What criteria will these
jobs be evaluated on? Who will maintain a master list of contractors
and inspectors that participate in HOME STAR?
Answer. While final administrative procedures will be put in place
by the DOE, the Coalition is aware of companies which have experience
in both managing this type of system internally and working with third-
party providers of QA. Current residential quality assurance providers
working in state and utility programs have been doing QA for decades,
and most states have such a system in place. In the case of national
retailers, they have QA systems to track the quality of installed
measures that they use for work installed under their network. The
federal data system used to manage the rebate processing will handle
the information flow into the system from Rebate Aggregators and out
again to the QA providers. All data will be regularly monitored by the
DOE in addition to the RAs and QA results will be maintained in the
database.
As a standard rule, QA industry practice involves inspecting one of
the first few jobs of every contractor to insure that the basic
capabilities and requirements of the program are being followed. After
those initial inspections, then QA providers will select through a
combination or random selection or through identifying electronically
any abnormalities or patterns in the jobs. The standard criteria used
has been developed for state approved programs and is in place with a
combination of standards that rank the type and severity of deficient
work and a standard for call back requirements for contractors to
correct defective work. While DOE and the State QA oversight role will
monitor implementation of the QA role, the industry standards are in
place across the country.
It is the understanding of the HOME STAR Coalition that the program
will work in the following manner based on legislative language. In the
case of the SILVER STAR program, contractors will complete work, submit
work to the RA, which is submitted to the DOE rebate processing center.
Each state will maintain voluntary lists of participating contractors
who wish to sign up, or they can just market their services as they
currently do in the private marketplace. In the case of GOLD STAR, BPI
maintains a list of accredited contractors on their Web site that can
be linked to federal and state web sites.
In the case of QA Providers, this list will be maintained on a
state-by-state level and submitted to DOE for posting on a dedicated
Web site. National organizations such as BPI and RESNET will also
maintain electronic lists of QA providers on their Web sites.
Question 20. The HOME STAR Program wants rebates to be paid within
30 days and inspections also done within 30 days. So potentially, a
homeowner or contractor could be waiting up to 60 days to get the
rebate paid out. Is 60 days too long to be waiting for a rebate? Is
there a faster way to get this done? Let's say it takes three months to
stand up the infrastructure of the program and another 60 days for
rebates to be paid out. That is almost half a year of waiting for the
first rebates after the legislation becomes law. Is that too long?
Answer. As designed, the rebate processing is independent of the
robust QA process, so unless there is a QA finding serious enough to
halt payments to a contractor, rebates will flow independently of that
system. The HOME STAR bill (section 3(b)(1)) requires the DOE to stand
up its rebate processing system within 30 days. While contractors would
want to market the rebates soon after enactment, because rebates are
credited to customers at payment, that time frame would normally be
several weeks longer. In all cases, contractors would be wise to
understand the forms or electronic formats of rebate requests, so even
as they credit their first customers, most will wait to submit their
first batch until the system is ready.
Your point about 60 days being too long to wait prompted us to
review the exact timelines related to rebate processing, and we
identified an omission related to specific required timelines for the
rebate processing steps. The Coalition is grateful for your diligence
in pointing this out, and we recommend that section 3(b)(1) of the
legislation be amended to reflect the following:
1. Rebate aggregator uploads bundled rebate requests to the
federal rebate system within 14 days of receipt of a request
from a contractor.
2. Rebate reviewed and paid from federal rebate system to the
rebate aggregator within 14 days or receipt of the bundled
request from the rebate aggregator.
3. Rebate aggregator provides rebate to contractor within 14
days of receipt of bundled rebates from the federal rebate
system.
This timeline represents under a net 45 days from rebate aggregator
receipt of a rebate request from a contractor to the date the
contractor receives the rebate. This is fully consistent with net
payment requirements in many programs.
Question 21. What is your understanding of the workforce that will
be participating in the HOME STAR Program? What are the expectations
for what fraction of this workforce will ultimately stay in the
industry?
Answer. There are more than 100 million homes in America that could
benefit from an energy efficiency retrofit. HOME STAR is a shot in the
arm that will help produce a tipping point that will create a
sustainable market-based industry. The combination of financing and
incentives will enable homeowners to save money by retrofitting their
homes.
The HOME STAR Program will spur an industry that can continue to
grow to meet the unique challenge of fixing our existing residential
infrastructure. This industry will continue to expand beyond HOME STAR
to employ hundreds of thousands in direct contracting jobs, as well as
significant manufacturing and industry jobs in our local communities.
While a recovery in the new construction industry remains
uncertain, there is a great opportunity for the retrofitting industry
to flourish. Retrofitting is a perfect bridge until other parts of the
construction industry begin to recover. However, companies that are
refocusing on existing buildings will likely continue to grow as new
construction comes back on line, but this does not mean they will stop
servicing the retrofitting market.
Question 22. Is there sufficient incentive for contractors to
obtain a higher certification? Is there compelling motivation for them
to achieve higher certification, or do you think they would rather just
be subject to more inspections?
Answer. HOME STAR is designed to encourage investment on several
levels.
First, while certification is not required under SILVER STAR, some
level of worker certification and contractor accreditation is required
under the GOLD STAR path. This tiered approach allows for an immediate
invigoration under SILVER STAR with a signal to contractors to begin
preparing to deliver under GOLD STAR. Recognizing the greater longevity
of GOLD STAR, contractors will move toward certification.
Second, HOME STAR does not exist in isolation. The trend in state,
local and utility programs, such as home performance with ENERGY STAR,
is toward requiring the certifications currently listed in HOME STAR.
HOME STAR helps to highlight this trend for contractors, and it helps
to reduce administrate costs in states and regions were independent
efforts are already investing in and encouraging certification.
Third, the market, including contractors, increasingly recognizes
the importance of certification of workers and accreditation of
contractors. Funders and sponsors value contractor accreditation which
sets qualification standards for contractor access to incentives.
Homeowners value certified workers in their homes, and contractors
pursue certification accordingly. Contractors further value worker
certification recognizing that quality not only supports a better
business reputation, but also that it reduces defects and callbacks and
thus provides real cost savings. HOME STAR doesn't initiate this trend,
and it certainly doesn't run counter to market. Rather, it simply
builds on existing market trends and accelerates what would otherwise
be a decades-long process.
Question 23. Please describe how the process of requiring proper
classification of employees will be implemented. Will it require the
IRS to develop rules and protocols?
Answer. S. 3177 would not require states to create new systems of
worker classification, nor would the draft require the Internal Revenue
Service to develop new rules and protocols. The draft only addresses
worker classification inasmuch as it requires each state to incorporate
into its ongoing quality assurance framework for home energy retrofits
a requirement that participating contractors comply with federal and
state law and regulation governing the proper classification of workers
as employees or independent contractors.
a. Are there any alternatives, or mechanisms to ensure that
the legislation does not discourage independent contractors
from complying or competing for projects within the Home Star
Program?
Answer. Nothing in proposed HOME STAR legislation would limit the
ability of independent contractors to participate in the HOME STAR
program as long as they possess proper licenses and insurance and
comply with federal and state laws and regulations.
b. Please describe how you perceive each state, and the DOE
will execute the employee certification directive. Will each
state require contractors to again prove their status, as a
certified contractor under the bill, if the state or local
government already recognizes them as a certified contractor?
Will additional paperwork be needed? Will this certification
require states to do additional audits?
Answer. Contractors that possess the proper licenses and insurance
will be able to participate in the HOME STAR program as soon as they
register with a rebate aggregator and a quality assurance provider. No
contractor will be required to employ a certified workforce to begin
work under the HOME STAR program. Contractors that choose to employ a
certified workforce will benefit from lower inspection rates reflecting
the lower risk that such contractors will fail to correctly install
efficiency measures.
c. Please describe the time frame to develop an employee
certification program, within each state, and the
administrative costs associated with the directive.
Answer. The simplest way to implement the employee certification
provision would be for the contractor's workforce to be certified under
a national certification program that 1) has been recognized in HOME
STAR legislation or by DOE for home energy retrofits; and 2) maintains
a database of certified individuals. This would allow employers,
quality assurance providers and program administrators to quickly and
easily verify workers' credentials.
d. Is there a streamlined process for determining employee
certification for this type of work across the country?
Answer. See above.
e. Will the DOE need to provide a federal contractor
certification provision within the HOME STAR Program? If not,
why does the DOE have the opportunity to require additional
standards? What might these additional standards look like?
Answer. See above. There is no provision in the draft HOME STAR
legislation for DOE to add contractor standards beyond those specified
in the legislation.
f. How would a state certify to the DOE that their
classification program is viable, and would not be subject to
additional requirements by the DOE? Are there alternatives?
Answer. See above. States are not required to establish a new
classification system, only to ensure that contractors that violate
existing rules do not receive federal subsidy while they cheat the
system.
Question 24. What are your assumptions for the cost of conserved
energy? Are the budgeted amounts really indicative of what it's going
to take? It seems that there are many parts of the program that would
demand overhead. What is the cost per unit of energy saved?
Answer. The cost of conserved energy is a regulatory calculation
comparing the cost of efficiency improvements to the net present value
of the energy saved. The HOME STAR Program was designed first and
foremost as a job creation program and secondly as an energy saving
investment program. For that reason, some of the standard regulatory
approaches were streamlined to meet the needs of job creation. The
proposed measures were reviewed for average savings impacts and average
costs to create a menu of measures that on average are cost-effective
both for consumers and for the nation's energy budget. Consumers will
have the freedom to make their own decisions with respect to investing
in energy efficiency improvements. Because the legislation is primarily
focused on job creation, the Coalition did not specifically calculate a
cost per unit of energy saved. In spite of this, the national energy
efficiency experts who are part of the Coalition, including the
American Council for and Energy-Efficient Economy, the Alliance to Save
Energy, and the Conservation Services Group, have reviewed the eligible
measures and feel that all of the measures in the HOME STAR Program are
generally cost-effective. In most cases, the measures have significant
non-energy benefits as well, such as improved home value, enhanced
comfort of the interior environment, and reduced home maintenance
costs.
All of the costs associated with program delivery, contractor
overhead and costs have been incorporated into the program costs. The
Coalition believes that the budgeted amounts at both the total and the
individual measure level are realistic to move markets, produce jobs
and spur energy savings.
Question 25. If you look at this strictly as an efficiency program,
how do the costs line up?
Answer. According to the American Council for and Energy-Efficient
Economy, the GOLD STAR program has good performance as an energy
efficiency program, with costs to the federal government per unit of
energy saved similar to the average cost to a utility for utility-
operated programs. They noted that SILVER STAR is somewhat more
expensive, although still cost-effective. This is to be expected since
SILVER STAR is designed primarily as a jobs program, but with enough
attention to details that it is also cost-effective as an energy-
efficiency program.
Question 26. What are the specific costs of the rebate function,
marketing, quality assurance, and program management?
Answer. The costs for rebate aggregation and quality assurance will
be covered through incentives for GOLD and SILVER rebates processed and
for GOLD and SILVER quality assurance field inspections. In this way,
there is a streamlined market-based approach to securing these services
without the need for a time-consuming procurement process. The rebate
function will require data processing, financial accounting and
reporting both to the federal system and to each participating
contractor and for each completed job. The QA functions include review
of work performed, communication on quality of work performed, review
of contractor participation requirements, and working with the state QA
oversight groups. The incentives for these functions have been
established based on average real-world costs for these program
functions carried out in competitively bid state programs. Total costs
for these functions have been calculated at less than 5% of program
costs.
Question 27. At the hearing the NASEO witness expressed concern
that HOME STAR would overlap with existing state efficiency programs.
What do you think this means, exactly?
Answer. The National Association of State Energy Officials supports
the HOME STAR initiative and wants to ensure that the existing
residential energy efficiency rebate programs operated by states,
utilities, public benefit funds and others complement the new HOME STAR
effort. HOME STAR can be a vehicle to effectively expand these existing
programs. For example, the Home Performance with ENERGY STAR initiative
operated by the New York State Energy Research and Development
Authority can be expanded quickly with HOME STAR. Current legislative
language fully accommodates this objective by requiring Rebate
Aggregators to coordinate with the appropriate State entity in those
states in which they are operating.
Question 28. If utilities are offering rebates for similar or
identical measures, must they be coordinated in some way? Should they
be in harmony? What factors will need to be coordinated? How would you
do that? Would you coordinate the marketing, incentives, or processing?
Answer. State utility commissions and state energy offices work to
coordinate rebate programs now. The current Home Star legislative
language requires such coordination by the State with the Home Star
program, and is funded appropriately to do so. State and local
governments are presently expanding residential energy efficiency
programs by utilizing ARRA funding under the State Energy Program and
the Energy Efficiency and Conservation Block Grant. These residential
energy efficiency building retrofit programs should work to be in
harmony with HOME STAR, as well as the Section 25C tax credit. The
state energy offices will continue to work with the state utility
commissions and the utilities to ensure coordination. Marketing,
incentives (rebates, tax, non-tax and technical assistance), rebate
aggregator communications, and cross-walking state activities under
SEP/EECBG, Home Performance with ENERGY STAR with HOME STAR will be
critical. We also intend to continue that coordination with the
National Home Performance Council.
Question 29. Would such coordination make HOME STAR even more
difficult to implement?
Answer. The coordination discussed in response to questions #27 and
#28 will actually make HOME STAR easier to implement, rather than more
complicated.
Question 30. Is the rebate aggregator function and the quality
assurance function merged together, according to your understanding of
the draft? If merged together, how will you ensure that there are no
conflicts of interests between the two?
Answer. The final rules for this will be established by the DOE,
but the HOME STAR Coalition believes that the RA and QA functions can
be merged only if there is no conflict with the contractor installation
services. The most important separation of functions is between the QA
and contractor roles. In most existing residential retrofit programs in
the country that are overseen by the states and utility regulators, the
RA and QA functions are merged into one implementation role for both
efficiency and consistency purposes. Since these will be overseen by
the state QA oversight role, any conflict of interest will be avoided.
The only conflict would be the case where the RA is also the
contractor, which would therefore mean that there would need to be a
separate and independent QA provider. QA providers, whether they serve
an RA role or not, are also professionally trained and certified to
meet industry standards similar to a financial auditor. As we
understand it, the legislation does not require QA and RA functions to
be merged, and in fact this would be prohibited in the case of an RA
that serves as a contractor.
Question 31. Please describe the process DOE will undertake to
ensure that small building material dealers and independent contactors
will have access to rebate aggregators. If the legislation does not
envision the use of these contractors, please describe why not. If the
intent is to have them participate, please describe the mechanisms in
place to ensure that they will not pay more for their administrative
costs, to operate within the program, as well as provide a descriptive
overview of how the process would work.
Answer. The rebate aggregator approach is designed specifically to
facilitate the participation of small retailers and independent
contractors in every state, in regions of the country with urban and
rural populations alike. It does so by shifting the more complicated
administration and overhead burden away from the smaller participant
and to the rebate aggregator.
While the specific process DOE will undertake is probably best
answered by DOE, the Coalition believes that as drafted in HOME STAR,
access to rebate aggregators will be simple and universal, with
multiple options available to small and large firms alike. Rebate
aggregators will take the form of a variety of retail, contracting,
state and utility program operators, trade associations, and others
with existing infrastructure and capacity. It is further anticipated
that several regional and national providers will be able to provide
access and further market choice. As such there will be a minimum of
several options in every state and different choices available to the
smaller dealers.
As designed, there is no direct cost for a small contractor or
building material supplier to participate. The administrative cost at
the contractor or supplier level is low, with simple forms and
submission requirements.
Our understanding of how the process would work is described below,
with some recommendations for refinement. The description illustrates
that the process would be largely invisible to the homeowner and simple
for the small dealer, merely providing the required information,
physically or electronically, to the rebate aggregator of choice.
Recommendations for Step-by-Step Rebate Processing:
1. On completion of project or purchase of consumer-installed
material, the contractor or retailer uploads/faxes/delivers
standard forms and required documentation to the RA.
2. RA checks documents to ensure eligibility and amounts.
3. RA uploads bundled request to the federal rebate system
within 14 days of receipt. (We do not believe this time frame
is currently reflected in the bill, and we recommend amending
the language accordingly.)
4. Rebate is paid from federal rebate system to the RA within
14 days. (We do not believe this time frame is currently
reflected in the bill, and we recommend amending the language
accordingly.)
5. RA provides rebate to contractor within 14 days of
receipt. (Currently the bill allows 30 days for this step; we
believe this is unnecessarily long, and we recommend amending
the language accordingly.)
6. Federal rebate system notifies QA Provider of contractor
job data (in parallel, on receipt of information in Step 3,
above).
7. QA Provider contacts contractor/homeowner when applicable
and completes QA inspection.
8. QA Provider reports inspection results back into federal
rebate system.
Question 32. How does the program envision doing random site
inspections? Will DOE maintain a list of all job sites? Will the
inspections be based on a random sample? How will they be done?
Answer. While final administrative procedures will be put in place
by the DOE relating to QA procedures, our understanding is that all
relevant job data to conduct a site visit will flow upstream as data
connected to rebate requests. That way the DOE will have information on
all job sites. It is also our understanding that a random sample of
each contractor's jobs will be identified and be issued downstream to a
QA provider for the appropriate inspection visit under either SILVER
STAR or GOLD STAR protocols. The results of that visit will be
communicated back upstream to the state (as the statutory overseer of
QA), the DOE and the RA. If a deficiency exists, there is a protocol
for its remedy.
Question 33. Please describe how the Quality Assurance inspection
process will work regarding products, or improvements that are not
visible, such as door installation or wall installation.
Answer. There are numerous existing QA protocols to check program
compliance against all measures included in the HOME STAR Program. As
noted in answers above, while the exact nature of specific QA protocols
will be issued by the DOE, there is an existing infrastructure of QA
providers who will have a variety of tools and instruments at their
disposal to judge compliance. For example, infrared cameras are
regularly used to assure that all side-wall cavities have been
completely insulated. Air sealing of the attic plane can be checked
against the required documentation required under SILVER STAR, and
under GOLD STAR, air tightening claims will be checked by a blower door
analysis against claimed performance numbers.
Responses to Questions From Senator Sessions
Question 1. While I understand the need to not make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films. Given the cost-effective
energy savings that window films can provide to homeowners, should they
be included as part of the SILVER STAR rebate section of the HOME STAR
bill?
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
Given that the cost of installing window films is significantly
lower than the costs associated with many other home retrofit upgrades
(including the installation of new windows), incentivizing window films
with the $1,000 SILVER STAR subsidy would not only ensure that more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by very small, family-
owned businesses.
Answer. Window films are most effective in the South and Southwest,
so different requirements would be needed in the northern states. The
Coalition recommends that DOE evaluate the inclusion of window films.
Question 2. While I can appreciate there are a variety of reasons
one would want to limit the number of products eligible for the Silver
Star rebates, the bottom line is that the Silver Star rebate program
will likely be the first list that consumers look at when considering
home energy efficiency improvements. Shouldn't we avoid picking
``winners and losers'' in the marketplace when it comes to energy
efficiency upgrades?
Answer. The SILVER STAR program is designed to be easily understood
and quickly implemented. The Coalition recommends the listing of
specific measures that qualify. Alternatives would be to not mention
any measures and just have a GOLD STAR program, or to list any measure
that someone proposes. The former would be much slower to implement,
reducing the number of short-term jobs produced. The latter would be
hard for many consumers to understand and would result in inclusion of
many measures that are not widely available or that are appropriate for
some regions but not others, either leading to further confusion or to
misapplication of some measures. Also, this latter approach will still
require developing estimates of energy savings for each measure so as
to determine the appropriate incentive level. If dozens of measures are
added, this could be a time-consuming and contentious process. For all
of these reasons, we believe having a somewhat shorter list of easy to
understand measures is appropriate for a short-term program such as
SILVER STAR. SILVER STAR is designed to only last a year, and in the
longer term all energy-saving measures can qualify under GOLD STAR.
Question 3. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. There are longstanding certification programs that exist in
the market and have been recognized and recommended by the Coalition.
The Coalition recognizes that additional training and certification
programs might be also be suitable and supports the provision for the
Secretary to review those additional programs.
Question 4. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. The Home Star Coalition supports a home energy retrofit
program with high standards. One component of that commitment is an
incentive for contractors to employ a workforce in which installers
have been certified under a credible third-party skill standard that
covers the relevant components of retrofit work. Current drafts of
proposed Home Star legislation enumerate three nationally-recognized,
market-tested, skill standards and give the Secretary of Energy the
authority to add new standards in consultation with the Secretary of
Labor and the Administrator of the Environmental Protection Agency. The
listed certification programs are all used by small businesses.
As noted above, the Coalition recognizes that additional training
and certification programs might be also be suitable and supports the
provision for the Secretary to review those additional programs.
______
Responses of Terrence J. Mierzwa to Questions From Senator Murkowski
Question 1. Are you aware of any type of retrofit program,
excluding Weatherization, that has pursued so many homes in such a
limited time?
Answer. No, I am not.
Question 2. What is the largest utility-based retrofit program you
are aware of?
Answer. I really don't have a strong awareness of what other
utilities are doing re retrofit programs.
Question 3. What challenges have occurred in the processing of
rebates or payment for work within these programs?
Answer. The biggest challenge Consumers Energy has faced with
processing its rebates has been incompleteness of or errors on customer
applications. To mitigate this challenge, we are now asking our trade
allies (e.g., heating and cooling contractors, etc.) who sell
qualifying high-efficiency measures to our customers to work more
closely with the customers at the point of sale to ensure rebate
applications are filled out completely and accurately.
Response of Terrence J. Mierzwa to Question From Senator Stabenow
Question 1. Consumers Energy has been a leader in the area of
energy efficiency and your programs are an excellent example of what we
are trying to do nationwide.
Can you describe what the impact would be to these programs if the
federal dollars flowing into the state for energy efficiency were NOT
coordinated with the utility programs?
Answer. This is my greatest fear regarding the proposed
legislation. We have legislatively mandated energy savings targets that
we must hit each year, and we are only allowed to take credit for
energy savings for which we can demonstrate our influence. The rebates
we give to our customers are the most tangible sign of that influence.
Even then, there are those who will argue that we should not be allowed
to take full credit for the savings. For instance, we expected to give
out 2,200 rebates for high-efficiency furnaces last fall, but we gave
out more than 7,000. Part of the reason this program was so popular is
that, in addition to our rebate, customers were also able to receive a
substantial federal tax credit. Some will argue, therefore, that the
tax credits drove much of this activity, so we shouldn't get full
credit for the savings. In fact, perhaps we should only get half credit
or less. If our Commission were to agree with that assertion, that
program would no longer be cost-effective; we would shut it down until
federal tax incentives expired; and we would have great difficulty in
meeting our state-mandated gas savings goals in the meantime. Customers
and trade allies would be dissatisfied because they want to see us
operating ongoing, sustainable programs, not jumping in and out of the
market,
By the way, we do think we deserve something close to full credit,
and we will make that argument to our Commission. We have had many
heating contractors tell us that even though federal tax credits were
available for many months before we launched our program, it was only
after we launched that their sales of high-efficiency models really
took off. Our strong educational and marketing effort plus our rebates
were the tipping point.
However, if federal dollars flowed into this space that weren't
coordinated with our programs and, indeed, competed with our programs
for energy savings, we would have no argument to make with our
Commission re getting credit for any of the energy savings. Again, in
the worst case, we would have to shut down our programs that faced
federal competition until the federal dollars dried up. That would be a
shame because less cost-effective programs operated with a redundant
infrastructure would be pushing out current programs that are operating
successfully.
Responses of Terrence J. Mierzwa to Questions From Senator Sessions
Question 1. While I understand the need to not make the Silver Star
program completely open-ended to any energy efficient technology
regardless of its effectiveness, I am nevertheless concerned that at
least one very energy efficient and cost-effective product category has
been excluded: high-performing window films.
Window films are a proven, affordable means of achieving
significant energy savings in homes. Specifically, by blocking a
significant portion of the Sun's heat that penetrates a window, window
films ensure there is less strain on air conditioners that heat a
home--which, in turn, lowers overall energy costs for homeowners.
Similarly, ``low-E'' window films can actually help retain a building's
heat in colder climates, and thereby reduce heating costs in the
winter.
When considering the cost of installing window films is
significantly lower than completing many of other home retrofit
upgrades (including the installation of new windows), providing window
films with the $1,000 Silver Star subsidy would not only ensure more
homeowners complete energy-saving improvements, but also support the
thousands of jobs tied to the window film industry--including hundreds
of U.S. manufacturing jobs and an estimated 7,000 to 8,000 window film
installer jobs that are overwhelming employed by very small, family-
owned businesses.
Given the cost-effective energy savings that window films
can provide to homeowners, should they be included as part of
the Silver Star rebate section of the Home Star bill?
Answer. I would not be opposed to cost-effective window films being
included. I note that some window films currently qualify for federal
tax credits.
While I can appreciate there are a variety of reasons one
would want to limit the number of products eligible for the
Silver Star rebates, the bottom line is that the Silver Star
rebate program will likely be the first list that consumers
look at when considering home energy efficiency improvements.
Shouldn't we avoid picking ``winners and losers'' in the
marketplace when it comes to energy efficiency upgrades?
Answer. The benefit/cost ratio of various energy efficiency
measures varies quite widely. As a matter of public policy, I think it
makes sense to encourage adoption of the most cost-effective measures
over less cost-effective ones. That way, we get a lot more ``bang for
our buck.''
Question 2. In your opinion, why does the legislation exclude
recognition of qualified training and certification by the Home
Builders Institute, an existing certification program run in
conjunction with the Department of Labor that provides training for
weatherization and energy efficiency upgrades?
Answer. I do not know why the legislation excludes recognition of
this certification program.
Question 3. Would you agree that we should work to ensure the
``certified workforce'' requirement in the bill does not discriminate
against installers of energy efficiency products that are typically
employed by small businesses? If so, would you be willing to work with
us to ensure that nationally-recognized training programs--such as the
training provided by the IWFA will be recognized?
Answer. I think that any certification requirements should be
focused on ensuring that installers of energy efficiency measures have
sufficient knowledge of building science to install them properly.
Improper installation of fossil fuel burning equipment (e.g., furnaces,
water heaters) and/or building shell improvements (e.g., insulation)
can create significant health risks to homeowners from resulting
problems such as mold and carbon monoxide.
Appendix II
Additional Material Submitted for the Record
----------
Statement of Sharla Riead, Owner/Manager, Hathmore
Technologies, LLC, Independence, MO
I am Sharla Riead, Owner of Hathmore Technologies, LLC, a third-
party energy and environmental QA and testing firm, and the Accurate
Rater Network, a HERS Rating Providership, LEED for Homes Providership,
BPI Affiliate, and BPI and HERS Training Provider Organization. We have
been in business in this industry for over 30 years and have a large
network of HERS Raters, BPI Building Analysts, builders, developers,
and contractors.
We have been leading discussions around the Home Star program and
the bill as it is written and we have gathered the following concerns
and observations for your discussion:
Discomfort with States running the program
--One only needs to look at the performance record of Louisiana's
state run Road Home Program following Hurricane Katrina, or
just about every State's Stimulus funded Weatherization
Assistance Program, to see that a competitive alternative
needs to be in place that will give market forces the
opportunity to expedite the process. Furthermore, mandating
that the program be administered through the States, most
of which have proven to be totally incapable of managing a
program like this with any speed or scale (Think WAP). The
program should be administered along the same as lines as
the Builders' Energy Efficient Tax Credit, using HERS
raters that carry the appropriate PROFESSIONAL LIABILITY
INSURANCE (E & O).
Definition of QA and qualification
--Note that under the proposed Home Star legislation, there is no
requirement for contractors, auditors, or QA providers to
carry any form of E & O insurance. Also, take notice that
the QA providership is defined as ensuring contractors are
qualified with no reference to the actual WORKMANSHIP or
ROI.
RESNET Rating Providers as Aggregators and RESNET QA
Designees as 3rd party QA Alternatives
--The existing RESNET providership network has a nationwide
infrastructure that could immediately take action. That's a
free market alternative which would mean to me, as a
businessman, the option of paying for FASTER service from
industry professionals that are already federally
recognized. Allowing the builder tax credit model to be
included, would allow me to jump start my market rate
program IMMEDIATELY rather than having to wait around on
the state to get it's systems in place before I could
actually start creating jobs.
It sure would be nice to have a competitive alternative for
processing. I have a very strong interest in the free market
opportunity that is being diminished with the way the oversight and
rebate aggregation is being written. For those that chose to go through
the state programs rather than invest in 3rd party QA's that would also
be recognized by the mortgage industry (EEMs provide immediate access
to more capital as opposed to waiting on the states to pass PACE
legislation), then that would be a business decision that they would
make.
I'm looking for a faster way to scale the opportunity with complete
transparency, accountability, and oversight; using an existing QA
infrastructure that is federally recognized. No market cornering here
but rather open competition, Free Market -vs-State Control!
This isn't about BPI or RESNET, it should be about the 1.8 million
laid-off construction workers and the scalability of an industry with
tremendous environmental impacts as a bonus.
Rating Providerships as aggregators makes a lot of sense. They are
already maintaining and processing the required information. As a
contractor who is ready to 'go-to-market' immediately and having spent
the last year in the hurry-up-and-wait WAP program with little or
nothing to show for it, I'd like to see a free market alternative to
the program's scaling.
I understand that many states already have an aggressive program in
place, the states I work in don't. The Missouri and Kansas programs
have gone nowhere. Especially since the local non-profit energy agency
just spent the last year training every auditor to a local EETC
certification rather than BPI standard and Kansas doesn't even
recognize BPI or HERS or even BPI and HERS certified auditors as being
qualified for their program.
Cost of BPI Accreditation
--Many states and programs successfully utilize a consultant model
of energy upgrades. An energy expert (BPI certified)
consultant performs the test-in and creates the scope of
work. The contractor completes the work. The BPI certified
consultant performs the QA and test-out. With this option
in place, there is no justifiable reason for mandating that
a contractor be BPI accredited.
--Requisites for BPI accreditation include:
$1500 for application
Certification as an auditor and at least one more
specialty (Probably Envelope)
$2850 tuition (based on closest classes available)
Two weeks salary to attend training
Travel, lodging for 9 nights minimum
Recommended $7000 worth of equipment, minimum
A pledge to do ALL work to BPI standards within 2
years of joining
I haven't found a single contractor who is willing to invest this
much time or money in a program that does not yet officially exist. And
no one will turn down a job just because the customer doesn't want the
home built to BPI specs, not in today's market. So, Florida contractors
will likely miss out on the money and jobs, other than the one
nationally based company in Orlando.
Whatever the out come, I'm still going to have my retrofit company
become BPI accredited as a competitive advantage in the marketplace. I
just don't want to be mandated to do it. Mandating the accreditation
dilutes the Brand value of the organization. I agree 100% that every
home needs to be audited by a BPI certified Building Analyst and that
an auditable ROI be calculated by a 3rd party HERS rater. But requiring
every member of my field staff be BPI certified with not 1, but 2
certifications is unrealistic.
For the record, I think BPI analysts should be performing the
audits and be responsible for certifying the workforce, but RESNET QA
providers should be available to provide financial oversight and 3rd
party QA alternatives. I don't think RESNET should be concentrating on
competing with BPI, instead the RESNET and BPI leaderships should focus
on the strengths and weaknesses that each organization's members
possess and use that to scale the market quickly.
We appreciate your review and discussion of the above comments and
observations. I am personally available to answer any questions or
provide further information as may be requested.
______
Statement of the National Association of Realtors
INTRODUCTION
The National Association of REALTORS appreciates the opportunity
to submit a written statement to the Senate Energy and Natural
Resources Committee on the critical subject of the creation of jobs
related to energy efficiency, and especially on proposals that address
job creation in the area of energy-efficient building retrofits.
The National Association of REALTORS (NAR) is America's largest
trade association, representing more than 1.2 million members involved
in all aspects of the residential and commercial real estate
industries. NAR is the leading advocate for homeownership, affordable
housing and private property rights.
NAR AND GREEN JOB CREATION
In addition to building a certified green building, NAR has taken a
number of other important steps to raise public awareness about green
buildings and their benefits in the marketplace. For example, NAR has:
Developed the GREEN Designation program to offer advanced
training and certification for real estate professionals. Like
many professionals, continuing education classes and
professional designations are a regular part of Realtors' on-
going training. The GREEN designation helps Realtors gain the
expertise needed to advise their clients on what to look for
and consider when interested in making more eco-friendly
building purchases.
Partnered with Federal agencies and others to promote green
buildings. For example, NAR and the Department of Energy
collaborated to provide consumers with an ``Energy Savers''
brochure with the facts about reducing energy use and saving
money.
These are all examples of voluntary, incentive-based approaches
that will create jobs while improving energy efficiency and are
consistent with NAR policy.
NAR PERSPECTIVES ON THE PROPOSED HOME STAR LEGISLATION
NAR strongly supports providing property owners with the education,
incentives and resources they need to voluntarily improve their homes
and save energy and applauds the Committee's efforts to develop
legislation to achieve just that. Providing owners with voluntary,
incentive-based programs to make energy efficiency improvements to
their homes will add value to residential property, reduce electricity
use and save money on utility bills, and help stimulate a job market in
remodeling and renovation activities. We thank Chairman Bingaman for
his efforts in this area and support the goals of the discussion draft
which is the subject of today's hearing.
As drafted, the Home Star Act of 2010 proposes to offer homeowners
the resources to accomplish residential energy efficiency savings
through rebates and other financial credits. The Silver Star tier would
offer rebates of up to $3,000 for upgrades such as adding insulation,
duct sealing, and installing energy-efficient water heaters. The Gold
Star tier would offer larger rebates for whole-home energy audits and
make subsequent retrofits that achieve 20 percent energy savings, with
additional incentives for energy savings that exceed 20 percent.
NAR supports offering homeowners rebates for conducting energy
efficiency improvements. We look forward to working with the Committee
on the discussion draft to:
1. Recognize the job-creation potential of the multi-family
and commercial sectors by extending rebates to those kinds of
properties;
2. Preserve state flexibility, and limit regulatory authority
and the sole discretion provided to the Secretary regarding
home energy performance ratings and documentation; and
3. Minimize unnecessary bureaucracy and red tape while
diligently protecting consumers and private information.
NAR'S PERSPECTIVE ON THE PROPOSED RECOVERY THROUGH RETROFIT INITIATIVE
While the Home Star legislation appears to be an effective approach
to incentivize home owners to conduct energy efficiency improvements to
a home, NAR is very concerned about Administration initiatives that
take a much different approach and seem to use the home buying process
as the vehicle to implement a system of home energy use labels, while
also mandating energy efficiency improvements.
On October 19, 2009, Vice-President Biden announced the development
of a major federal government initiative, the Recovery Through Retrofit
program. This program seeks to create a national home energy retrofit
market by providing: (1) access to home energy retrofit information;
(2) access to home energy retrofit financing methods; and (3) access to
a trained home energy retrofit workforce.
If the goal is energy efficient homes and buildings, the most
effective approach would be to provide the financial resources and
incentives that educate and empower property owners to make needed
energy improvements, such as the proposed Home Star program.
Mandating an unreliable home rating system will not lead to home
energy use reductions. When buyers hold all the cards at the closing
table and too many homeowners have no equity or savings to finance
energy improvements, transaction-based triggers only serve to send
conflicting market signals--without any assurances that needed energy
improvements will be made. As a result, NAR strongly opposes this
approach.
nar perspectives on the energy performance label for existing homes
Labeling every structure in America will not, in and of itself,
improve the energy efficiency of homes or buildings. Owners must act on
the information by taking the next steps and making energy-related
improvements such as replacing aging heating and cooling systems,
appliances and windows.
Today, however, many homeowners have seen their financial well-
being undermined. Jobs have been lost, savings have eroded and property
values have plummeted. Without the savings or equity, many lack the
financial resources to make the energy improvements they already know
they need to make. Energy labels will stigmatize older properties and
make it harder for these individuals to build savings or equity. Labels
also will reduce property values when existing owners sell and are
forced to negotiate price reductions in order to compete in today's
buyer's market.
According to data collected by the American Housing Survey (AHS)
and analyzed by NAR, labeling real estate will create disproportional
impacts on older property owners. More than 60% of U.S. homes were
built prior to 1980 when the first building energy codes were
established, and face relatively larger losses in property value due to
building labels. These properties will require more improvements than
the newer properties in order to match labeling scores and maintain
their value.
According to the AHS data, a large share of these older properties
are owned and occupied by populations which tend to live on modest or
fixed incomes, and are least able to afford these improvements without
significant financial assistance. These populations include 73% of
elderly, 69% of impoverished and 64% of Hispanic and black owners.
Labels will not only stigmatize older homes but the community where
they are located, and which are struggling to maintain and attract
investment. There will also be regional disparities: The Northeastern
United States, where older homes are concentrated, could fare worse
than the other structures located in the south and west. Rural
communities could be especially hard hit, as a substantial proportion
of homes in those areas were built prior to 1980.
Before branding homes and buildings with labels, consumers require
a better understanding of energy efficiency and the tools to turn
information into action. For this reason, NAR supports:
A. Raising public awareness about energy efficiency programs
and information.
B. Encouraging the federal government and the states to
provide financial incentives to consumers to improve homes and
buildings.
By developing the infrastructure and education, and providing the
right incentives, property owners will make the energy improvements
that will achieve real energy savings.
NAR PERSPECTIVES REGARDING CERTIFICATION AND TRAINING STANDARDS
In both the Home Start and the Recovery Through Retrofit proposals,
there are provisions that address training and certification of workers
to ensure that quality work is performed. The federal government should
proceed carefully when developing a national set of guidelines and
standards that address uniform certification and training for workers
entering this new green jobs market. While NAR recognizes the need to
ensure reliability for this work, too many standards and training
criteria will stifle entrepreneurial job creation and hinder the
ability of small businesses to respond to rising retrofit demand. If
one cliche bears repeating, it is the well-worn trope that ``one size''
guidelines coming from inside the Beltway generally do not fit all the
varying markets across the country. The federal government must strike
a careful balance between creating a consistent set of guidelines that
will increase consumer confidence and promote a stable and reliable
national home retrofit workplace on one hand, while on the other ensure
that local businesses are not hindered in their ability to respond to
demand for this work
In addition, while NAR appreciates Congress' efforts to encourage
homeowners to make voluntary, incentive-based energy efficiency
improvements, the planned implementation of an EPA rule threatens to
derail these activities. The Lead Renovation, Repair and Painting
program applies to all residential and child-occupied facilities built
before 1978 where a child under the age of six or a pregnant woman
resides. Contractors disturbing a painted surface, six square feet or
greater inside the home or 20 square feet on the exterior must follow
new lead safe regulatory requirements, including training,
certification, work practices, notification, clean-up and record
keeping. As a result, a wide array of home retrofit projects envisioned
by Congress, such as new windows, weatherization, insulation and other
activities will trigger this rule. The renovators who conduct this type
of work will be required to be trained in all of the new lead-safe work
practices.
Unfortunately, the EPA has been slow in getting the required
training and certification programs in place to train a sufficient
number of workers to be available to conduct both the normal renovation
activities and the expanded energy efficiency retrofit projects
anticipated by the report. As a result, while the Act envisions massive
retrofits across the country, in reality there will be few workers
qualified to perform the work, thus hindering the very market the Act
claims to want to jumpstart. EPA should extend the compliance date for
lead paint training and certification until there are a sufficient
number of workers available.
CONCLUSION--NAR SEEKS A WIN-WIN SCENARIO
As Realtors respond to growing consumer demand for green housing,
NAR policy supports a voluntary, incentive-based approach to energy
efficiency retrofits of existing housing. Such an approach would
sustain the current green trends, and make them a more permanent
feature in the marketplace. This, in the view of Realtors, provides a
``win-win'' scenario by allowing for vigorous economic growth while
improving the environment.
The green building market is already responding to consumer demand.
For example, consider this recent headline in the Miami Herald:
``Increasing demand for energy efficient, environmentally friendly
buildings is bringing business to architects during the construction
downturn.'' McGraw-Hill Construction is forecasting that the combined
annual commercial and residential green building markets will total $62
billion by 2010. Architects, homebuilders, remodelers, real estate
agents and all the industries that rely on housing and homebuilding are
responding to consumer interest in green issues. They are responding by
building and providing products that the consumer wants. And this is
happening all without significant assistance (or interference) from the
public sector.
The Federal government does provide important public research,
capital and economic incentives, such as the current tax credit for
energy efficient home improvements which spurs demand and interest.
However, NAR believes that government should be limited to this role:
By leading the way with green Federal buildings, providing for research
that spurs innovation and most importantly, keeping the market fluid
and free of mandates, and encouraging robust consumer education
programs, the Federal government can do more to promote the public good
than with mandates that will only hinder the market at a time of
economic recovery.
NAR members have shown that green buildings are both proactive and
profitable, primarily because current programs have been allowed the
market to respond specific conservation needs in a geographic and
market area. NAR supports a national green building and home energy
efficiency retrofit program that is flexible and market-driven,
encourages continued growth in green construction that protects options
for consumers in all markets, as well as preserves, protects, and
promotes the health of our environment.
______
Statement of The National Multi Housing Council and the National
Apartment Association
The National Multi Housing Council (NMHC) and National Apartment
Association (NAA) are committed to providing safe, affordable and
sustainable apartment homes for 16.7 million American households. NMHC
and NAA represent the nation's leading firms participating in the
multifamily rental housing industry. Our combined memberships are
engaged in all aspects of the apartment industry, including ownership,
development, management and finance. We commend ongoing congressional
efforts to bolster the economy and create jobs while improving the
energy performance of the nation's built environment. We support
legislation to expand incentives for improving energy efficiency in
homes and commercial buildings and encourage Congress to implement
programs such as the Home STAR and Building STAR programs. NMHC/NAA
welcome the opportunity to provide our views on S. 3079, the Building
STAR Energy Efficiency Rebate Act of 2010.
The apartment industry is committed to improving the energy
efficiency of our buildings. The current extremely challenging economic
environment combined with long standing financial barriers, like high
upfront, capital costs, prolonged payback periods and split incentive
problems, pose a significant obstacle to the speedy adoption of more
energy efficient building systems and products. Currently available
incentives, including the Energy Efficient Commercial Buildings
Deduction, Energy Efficient Home Credit and Energy Investment Credits
provide a good framework to overcome these hurdles however, they have
not proved to be sufficiently accessible for many property owners in
part due to the relatively short time frames for which these credits
have been authorized as well as the relatively high levels of energy
efficiency that are required to be achieved.
Overlaid on this is that property owners are experiencing decreased
revenues associated with declining occupancy rates and increased
financial pressures associated with the refinancing of properties. The
continued financial downturn has put increased pressure on the
operating expenses of multifamily properties. Property owners and
managers have to do more with less; vacancy rates in many areas of the
country have increased as local economies constrict and shed jobs.
Building STAR has the capacity to jump start the much-needed flow of
capital towards energy efficiency upgrades in building systems and
components, while playing a significant role in creating jobs for the
workers involved in the manufacture, retail and installation of energy-
conserving products.
Importantly, Building STAR is designed to promote good stewardship
of federal funds by leveraging public funding to improve the operating
efficiency of the existing building stock. The Rebuilding America
Coalition has estimated that for every federal dollar expended under
the Building STAR program, it will be matched by 2 to 3 dollars of
private sector funds. By way of example, one of our members has
indicated that to complete an upgrade of a boiler and water heating
system in a 26-year old apartment property using the appliances
specified in the Building STAR legislation would cost approximately
$280,000 in addition to the $37,000 appliance rebate for a total
project cost of $317,000. In this case the federal investment attracts
over a seven-fold investment of capital by the property owner.
In addition to strengthening the economy by facilitating
rehabilitation projects on older buildings and creating jobs, an
investment under the Building STAR program will reduce the energy cost
burden of apartment residents. This will have an immediate impact for
the roughly 70% of residents of multifamily properties who pay all or
part of the cost of their utilities in addition to their cost of rent.
The Building STAR program is designed for a quick start. We believe
that the rebate system will facilitate the use of this program. The
fact that many of the current-law incentives for owner investments in
qualifying energy projects have been enacted in the form of tax credits
has worked against the utilization of these incentives by commercial
real estate that is owned by real estate investment trusts. The direct
rebate system found in the Building STAR approach will enable
commercial real estate which includes apartment buildings with 5 or
more units to participate in the energy efficiency upgrades and job
creation inherent in the program.
Moreover, the direct rebate structure of the proposed program is
advantageous in light of recent findings concerning the Weatherization
Assistance Program (WAP). Industry experience in utilizing the WAP for
eligible properties that provide homes for low income residents has
been mixed. Despite the significant influx of funding to this program
through the American Recovery and Reinvestment Act, the funds have been
slow to move out to qualified properties to finance energy
improvements. The state weatherization offices responsible for
administering the funds have pointed to a variety of administrative
reasons for the delays.
The opportunities for low income residents to save money on their
utility bills and the opportunities for job creation among the
decimated construction trades that provide weatherization services have
been limited by the slow to roll out of funds through the WAP. We would
therefore urge that Congress give careful consideration to the process
for providing the rebate and financing mechanisms under the Building
STAR program. It is essential to the success of the program that these
funds be deployed quickly in order to create jobs. We believe that the
Department of Treasury is well positioned to approve qualifying
projects and thus maximize the opportunity to jump start the economy.
As one multifamily property owner stated, ``Building STAR's greatest
benefit is that the owners can go straight to the Department of
Treasury on-line, they can execute the work themselves and they get the
funds in cash within 30 days. . . Finally, somebody is listening! It is
all about HOW you get the work done.''
While we share concerns about increased deficit spending we believe
that the funds deployed in service of increasing energy efficiency and
creating jobs will build greater national security. Thank you for your
consideration and we look forward to working with you in your efforts
to improve energy efficiency and conservation in multifamily housing.
______
Statement of Paul T. Mendelsohn, Vice President, Government and
Community Relations, the American Institute of Architects
On behalf of the American Institute of Architects (AIA) and its
more than 83,000 members, I write in strong support of the Committee's
efforts to promote energy efficiency and create jobs for the design and
construction industry. Your Committee has long understood the critical
role that energy efficiency plays in fostering energy independence as
well as the positive role that federal green incentives play in
reinvigorating our economy.
The design and construction industry is the linchpin of our
economy, accounting for one in ten dollars of gross domestic product
and millions of well-paying jobs. However, as you are aware, this
industry has been decimated by the ongoing recession. Unemployment
rates in the construction sector are near 25 percent; according to the
U.S. Department of Labor, employment in the architectural industry has
fallen by 18 percent since 2008. Because every $1 million invested in
design and construction creates 28 full-time jobs, any jobs legislation
that Congress develops must address the historic challenges this
industry faces.
As such, the AIA strongly supports the Committee's efforts to
consider energy efficiency rebate programs as a part of comprehensive
jobs legislation. The AIA supports both the Home STAR and Building STAR
proposals. In particular, we strongly support S. 3079, The Building
Star Energy Efficiency Act of 2010. We commend Senators Jeff Merkley
(D-OR), Mark Pryor (D-AR), Debbie Stabenow (D-MI), Sherrod Brown (D-
OH), Bernie Sanders (I-VT), and Ben Cardin (D-MD) for their leadership
in sponsoring this bill.
S.3079 will provide financial incentives for energy-efficient
renovations in commercial buildings, achieving the duel goals of
stimulating the design and construction industry and promoting energy
efficiency. The Building STAR program would provide rebates and tax
incentives to building owners for qualified renovations that would
result in improved energy efficiency of existing buildings. This
program would create well-paying jobs in every state across the
country, save building owners money on energy costs, and would reduce
our nation's energy use, advancing our energy security and reducing our
demands on foreign sources of energy.
The AIA and its members believe that S.3079 should be a central
component of any jobs legislation that the Senate considers. We also
support efforts to include a provision in the legislation to provide
for a rebate for the preparation of construction documents. Especially
for larger commercial buildings, the types of retrofits that would be
allowed under the plan often require complex changes to building
systems and potential structural changes as well (replacing an HVAC
system, for example, will impact mechanical, structural, electrical and
plumbing systems). These changes require the preparation of detailed
construction documents, specifications and scopes of work to ensure
that the changes can be made in ways that meet building codes and do
not unduly impact other building systems.
This intermediate ``phase 2'' document preparation can be
expensive; an owner typically has to front the cost of the preparation
of the specification and the administration and evaluation of the bids.
These costs can be as much as 10 percent of the total project cost, and
can pose a major barrier to project implementation. However, it is
vital to ensure that the projects are performed to code and done in
correct ways that protect the health, safety and welfare of the public.
Therefore we propose adding the following language to Section 3(d)
of S.3079:
(7) Preparation of Plans.--For the preparation of plans for
the installation of equipment described in 3(b) and 3(c),
including construction documents, specifications, blueprints,
and scopes-of-work, prepared by individuals licensed in the
state to prepare such plans, a rebate equal to the lesser of:
(i) $0.05 per square foot of building space, or
(ii) 50 percent of the cost of the preparation of
documents.
With Building STAR, Congress can promote significant increases in
energy efficiency while ensuring that projects are completed in ways
that protect the health, safety, and welfare of the general public by
allowing the preparation of plans and other construction documents to
be eligible for the rebates. In addition to the AIA, this proposal has
been endorsed by the Real Estate Roundtable, the U.S. Green Building
Council, the International Council of Shopping Centers, Building Owners
and Managers Association International and the American Council of
Engineering Companies.
As the Committee works to advance jobs legislation, the AIA
strongly urges the Committee to advance S. 3079 with the above
additional language. We look forward to working with the Committee as
you advance legislation designed to promote energy efficiency, energy
independence, and job creation across our economy.
______
Statement of Katherine Hamilton, President, GridWise Alliance
Chairman Bingaman, Ranking Member Murkowski, members of the
Committee, thank you for inviting me to submit written testimony on
smart grid provisions proposed by the Energy and Natural Resources
Committee. The GridWise Alliance has testified before this committee on
several occasions and sustains a positive working relationship with
both majority and minority staff by providing unbiased information
about smart grid.
The GridWise Alliance is a coalition of about 125 organizations
advocating for a smarter grid for the public good. Our members broadly
represent the nation's interest in smart grid, including leading
utilities, independent system operators, large IT and communications
companies, small technology companies, manufacturers, consultants,
universities, and research organizations. We operate on a consensus
basis and remain technology neutral, focusing on the policy issues
surrounding the deployment of a smarter grid. We believe the market
should determine which technologies prevail.
The passage of the American Recovery and Reinvestment Act serves as
a watershed event in the history of the nation's electric grid. By
providing over $4 billion in grants for smart grid projects, Congress
effectively elevated the smart grid to a national priority. Utilities
and state regulators have been quick to respond, submitting hundreds of
projects for potential funding. Over 100 projects representing nearly
every state were awarded federal grants. As a result, the transition to
a smarter grid is well underway.
Now we need to turn our attention to the ultimate beneficiary of
the smart grid--the consumer. The smart grid offers greater visibility
into, and control over, electricity consumption, thereby enabling
consumers to better manage their energy bills. To realize these
benefits, however, consumers must have access to two critical suites of
technologies--Home Area Networks (HAN) and smart appliances. Whereas
Home Area Networks process communications between the grid and the
home, smart appliances actually respond to consumer preferences and
signals from the HAN or utility, system operator, aggregator, internet
provider, or even microgrid. For example, consumers with variable rate
plans can program smart appliances to operate when electricity prices
are low, while utilities or other service providers can signal smart
appliances to discretely alter operations during periods of peak
demand. Smart appliances will be the next evolution of demand response.
To be sure, consumer participation in the smart grid is an
evolutionary process. We at the GridWise Alliance believe that the pace
of consumer participation will be determined by three underpinning
efforts: (1) consumer education; (2) support for the smart appliance
market; and (3) adoption of variable rate structures and financial
incentives. Our members are collaborating with consumer advocates,
utilities, and other service providers on the development of consumer
outreach programs; I have spoken with many state utility commissioners
on the need for rate structures that allow consumers to benefit from
their choices. However, the nascent smart appliance market is in urgent
need of support, particularly as consumer spending remains at record
lows and unemployment hovers just below 10%. For these reasons,
Congress can play a crucial role in providing early support for the
market and spurring successive rounds of investment in new
technologies. Not all homes will purchase smart appliances right away,
but support for this market will be a critical step toward encouraging
consumer participation in the smart grid.
Smart appliances will be capable of interacting seamlessly within
home systems to provide energy savings for consumers without
inconveniencing household operations. For example, a smart refrigerator
can cycle off its freezer defrost during peak periods of demand,
thereby allowing the utilities to better manage overall load and
providing consumers with opportunities to reduce their electric bill,
depending on the available incentive programs. We believe that state
rate structures and incentives should complement this technology to
allow consumers to maximize their energy and bill savings. In a weak
economy, a consumer's ability to understand and react to electric
prices will be critical. Smart appliances will offer consumers the
ability to simply and conveniently reduce demand without negatively
impacting their lifestyles.
Smart appliances will also play an important function in
maintaining grid stability. Appliance and chip manufacturers are
developing technologies that can automatically react to conditions (or
``perturbations'') on the grid, even in the absence of signals from
utilities. For example, if a substation transformer fails, a smart
appliance could detect voltage sag and shut down in order to shed load
from the system. With a multitude of such appliances interacting with
the grid, the system becomes much more stable and reliable. The
appliance then becomes important not only to the consumer, but to the
community.
Beyond the grid, the smart appliance market will create new
opportunities for a range of manufacturers. Put simply, these
opportunities can translate into economic growth and improved
competitiveness within our domestic manufacturing base. We believe that
traditional appliance manufacturers as well as innovative start-up
companies should be able to participate in this new market. Although
Congress has voiced its intent to place our country on a pathway to
leadership in the global smart grid market, we must ensure the correct
incentives are in place to realize this vision. For this reason, we
strongly support the provisions in this bill.
Given the importance of smart appliances to consumer choice, grid
stability and manufacturing competitiveness, the GridWise Alliance
strongly supports the Committee's decision to include smart appliance
language into the draft under discussion at this hearing. In
conclusion, the GridWise Alliance supports smart appliance language in
this bill as a means to prepare the market for consumer choice, reduce
disruptions on our electric utility grid, and stimulate innovation and
manufacturing in the US, providing economic stimulus and job growth.
______
Statement of Bill Minahan, Founder and President, Building Committee,
Inc., Milwaukee, WI
Chairman Bingaman and Ranking Senator Murkowski, thank you for
allowing me to offer the following remarks for the hearing record. On
behalf of Building Committee Inc. (www.bcihq.com), a private for-profit
company that offers domestic commercial building planning, design,
build, branding and energy efficiency services, I greatly appreciate
the opportunity to present my views on the proposed Building STAR
legislation, which was recently introduced as S.3079 by Senators Jeff
Merkley, Sherrod Brown, Benjamin Cardin, Mark Pryor, Bernie Sanders,
and Debbie Stabenow. BCI urges Congress to advance this legislation,
which we believe will leverage private capital investments through
federal rebates to improve building energy efficiency, reduce energy
consumption, and create jobs.
If I can leave one message with you today, it is this:
PUBLIC-PRIVATE PARTNERSHIPS ARE ESSENTIAL TO REDUCING ENERGY
CONSUMPTION IN LARGE COLLECTIONS OF SMALL-TO MEDIUM-SIZED
EXISTING BUILDINGS. WE ARE NOT CONVINCED, HOWEVER, THAT
BUILDING MANAGERS WILL INVEST IN ENERGY CONSERVING TECHNOLOGIES
UNLESS THEY ARE OFFERED A FREE OR VERY LOW-COST ENERGY
ASSESSMENT AS WELL AS FINANCING OPTIONS TO IMPLEMENT THE
ASSESSMENT RECOMMENDATIONS. FOR THIS REASON, WE BELIEVE THAT
GRANTS, RATHER THAN REBATES FOR ENERGY ASSESSMENTS SHOULD BE AN
ESSENTIAL COMPONENT OF THE BUILDING STAR LEGISLATION.
A building assessment report details the architectural and
engineering modifications in buildings that, when implemented, will
create reductions in energy usage. These reports can be expensive and
because building owners and managers have no way of knowing how much
energy savings will be identified and at what cost, they have
historically rejected paying for these studies.
And without an assessment report there is no project and therefore
no reduction in energy consumption.
There are some programs in various regions of the U.S. available to
owners of large buildings (over 100,000 Sq. Ft.) that share in the cost
of assessments or rebate all or some of the cost. However, only
buildings that have a high potential for energy savings are selectively
targeted by these programs. The problem with this approach is that most
buildings are therefore not selected, and only a small amount of energy
savings nationally, compared to the high potential, are ultimately
realized.
Ninety-eight percent of the commercial buildings in the country are
under 100,000 Sq. Ft. This segment of the market has been generally
overlooked by energy savings programs. In order to create large
reductions of energy consumption this market segment must be developed
and the only way to significantly increase participation is to offer
free assessments through a grant program.
However, just blanketing this market segment with free assessments
will not work. Assessment offers should be targeted and contain some
conditions in order to significantly increase participation rates.
These offers must also contain financing options to fund the energy
saving projects identified in the assessment reports. These can range
from owner financed options to third party shared savings programs, but
without financing options even free assessments will not produce
projects.
However, without free assessments we believe there will be few or
no projects created by this bill.
A market segment of building type such as libraries, medical
offices, small office buildings or financial buildings should be
identified. Energy service companies that have special relationships
with those market segments should be used to actively promote energy
reduction projects. Grants should be made available to those companies
on a competitive basis so that they can implement an active program of
pre-screening the market in order to selectively offer free and
conditional assessment studies.
Projects identified through the assessment exercise will be
implemented and paid for by selecting a financing option.
Programs that develop selected market segments, that pre-screen
that markets' buildings, that offer targeted free assessments with
conditions and that include various project financing options will
create unprecedented levels of participation. These programs will also
realize, for the first time in this industry, meaningful amounts of
energy savings for our country.
There have been similar target market approaches using a business
driven sales approach to provide the building owners with a single
source of responsibility to identify the project, provide guidance in
securing rebates and funding and navigating the contracting,
implementation and verification phases. These have been effective
nationally in PACE programs (Property Assessed Clean Energy programs)
for residential projects and various market driven pilot programs that
make it easier for small business owners to participate, including a
Colorado program realizing participation rates as high as 85% in
commercial building energy efficiency projects.
BCI is confident that energy assessment companies nationally are
confronting the same reluctance of building owners and managers to
invest in energy assessments. We firmly believe that companies like BCI
that have the capacity to assess large market segments can make the
biggest impact on reducing energy consumption in the commercial
building market. However, we do not foresee large-scale investments
under Building Star if building owners will not pay for an assessment
to determine their potential energy savings, as well as the return
period for this investment. Most building owners require demonstrated
cost savings through energy conserving technologies within a 3-5 year
period, and sometimes shorter. An energy assessment can help owners
achieve these savings, but only if the owner is convinced that the up
front cost of the assessment will result in this return.
ABOUT BCI
In addition to designing and building facilities, BCI also provides
strategic planning, market analysis and all aspects of branding and
market penetration. In the past year BCI has been working on a program
to address the energy consumption of credit union financial
institutions, from developing a LEED certified program to energy
efficiency programs through its partnership with Michaels Engineering.
Michaels Engineering brings 25 years of technical and mechanical
engineering expertise in auditing, energy assessment and retro-
commissioning of existing facilities. They provide the technical
experience and methodology to enable us to provide quick assessments
and practical real world actionable recommendations to reduce the
buildings energy use. Michaels staff includes experts with extensive
engineering and utility management backgrounds, including experience
creating and developing successful energy implementation shared savings
programs around the country.
BCI and Michael's Engineering have developed a cost effective
program to deliver energy efficiency programs to owners of small to
medium sized buildings, identifying financial institutions in the
initial program as a transformative target market that will, in turn,
will provide not only significant energy savings.
I again appreciate the committee's review of my concerns related to
how the Building Star bill is currently drafted. I fully support the
concept of offering rebates for the use of proven energy conserving
technologies, but I hope that the committee will consider the
importance of grants versus rebates related to energy assessments.
Thank you.
______
The Real Estate Roundtable,
April 8, 2010.
Hon. Jeanne Shaheen,
U.S. Senate, 520 Hart Senate Office Building, Washington, DC.
Dear Senator Shaheen: At the March 11, 2010 hearing of the Energy
and Natural Resources Committee on legislative proposals to enhance
energy efficiency and create jobs, you asked me whether electric
transformers might be included in the suite of rebate provisions
offered in S. 3079, the Building STAR Energy Efficiency Act. In the
intervening month I understand that some of our fellow Building STAR
supporters with expertise in this area, specifically the National
Electrical Manufacturers Association (NEMA) and the American Council
for an Energy Efficient Economy (ACEEE), have developed a proposal for
a transformer rebate and have shared it with your staff. I am attaching
the proposal to this letter.
We think your suggestion for a transformer rebate fits perfectly
with the rest of Building STAR's provisions. We would welcome the
opportunity to work with you and Senator Merkley to have it included in
the bill. The attached transformer proposal is very similar to a
suggestion from Warner Power, and contains some updated specifications
and incentive amounts.
As you know, the Building STAR program, endorsed by a broad range
of nearly 80 stakeholders including real estate, manufacturing, labor,
energy efficiency, and environmental interests, will create a
significant number of jobs, save money on utility bills, and reduce
greenhouse gas emissions. Of course, we encourage other Members of
Congress to add their ideas as this legislation continues to move.
We hope you will co-sponsor S. 3079. Additionally, thank you for
agreeing to attend the Real Estate Roundtable's Policymaker Reception
and Dinner on April 21. I look forward to seeing you there, and
discussing Building STAR and other significant issues affecting the
real estate sector.
Sincerely,
Jeffrey D. DeBoer,
President and CEO.
ATTACHMENT.--PROPOSAL FOR TRANSFORMER REBATE FOR INCLUSION IN S. 3079,
BUILDING STAR ENERGY EFFICIENCY ACT
Building STAR should include an incentive for transformers that are
30% more efficient than TP1. It would be preferable that that the
industry use a ``complete'' specification like NEMA Premium rather than
CSL-3 because:
CSL-3 exists only in draft form published by DOE in 2004 (69
FR 45397) and was immediately superseded by EPAct 2005
CSL-3 was set at the midpoint (not necessarily 30% fewer
losses) between NEMA TP-1 and CSL-5, the max efficiency in
production
For LVDT, CSL-3 was only specified for three representative
models (25 kVA, 75 kVA, 300 kVA)
The 75 kVA model happened to have 30% fewer losses, which is
not necessarily the case for other design lines
For example, DL6 (25 kVA single phase) has efficiencies of
98.0% for CSL-1 and 98.4% for CSL-3, an improvement of less
than 30%
There is wide confusion on how to interpolate CSL-3 for
other models
In most cases, there are only minimal differences between NEMA
Premium and the varying interpretations of CSL-3. The table below
compares TP1 and the NEMA Premium efficiencies.
INCENTIVE AMOUNTS
NEMA supports a sliding scale rebate amount based on the capacity
of the transformer. The scale would range from $15/kVA for three-phase
transformers smaller than 10 kVA to $5/kVA for transformers larger than
100 kVA. Rebates for single-phase transformers would be 75% of the
three-phase amount.
Sample calculations for a small transformer:
Standard low voltage dry-type (LVDT) transformers sized 1
kVA to 5 kVA cost approx. $175/kVA
The NEMA Premium standard for transformers specifies 30%
fewer losses than TP1 (about the range of TSL4, if it were
extended to low voltage)
DOE estimate for the average increase in consumer equipment
cost for TSL4 transformers was 20.4% to 39.6% (Oct 2007 FR)
Using 30% as the midpoint from the DOE estimate, the cost
differential for a NEMA Premium transformer is about $53/kVA
25%-33% of the incremental equipment cost is $13.13 to
$17.33/kVA, respectively
Similar calculations exist for larger transformers. The proposed
rebate is calculated as follows and is shown in Table 2:
Finally, some rebate proposals have been based on a 2002 document.
Commodity prices have increase considerably since that date. According
to the USGS, between 2002 and 2008 copper prices rose 422% while steel
rose 210%. Since materials can account for as much as 70% of
transformer costs, any rebate program should take into account current
market conditions.
[Figure 1 has been retained in committee files.]