Green building: an ironic truth

1 12 2009

David Dwyer's home and first green project. Close to $1 million renovation, but utilities are only $80/month. Kristen Minogue/MEDILL

Nine months after Congress passed the American Reinvestment and Recovery Act, investments in energy efficiency haven’t quite gripped the American public the way legislators hoped they would – and part of it might be because they focused too much on renewables.

“We consider the renewables to be the high-hanging fruit,” said Scott Dwire, who directs the green building firm PRC Construction and Remodeling in Utah.

In other words, renewable systems cost more and don’t always give as much payback as simpler changes like improving wall insulation so houses don’t leak as much heat, changes Dwire considers the “meat and potatoes” of energy efficiency.

Lawmakers have good reason to focus on buildings. Heating, cooling and operating them takes up roughly 40 percent of the energy use in the U.S, more than the energy needed for public and private transportation.

“When people talk about making the country more energy efficient and the country needing to get around that, the front line really is building new homes,” said Brad Peacock, owner of Summit Home Energy Solutions, also in Utah.

Peacock said most existing houses he visits could save on average 30 or 35 percent of their energy just by investing in more of the “low-hanging fruit.”

Improvements like that also cost significantly less – by a factor of ten, according to Dwire. Dwire added that while renewables can help, if a house isn’t well-insulated to begin with, a solar panel doesn’t do much good.

“Let’s say I put on a brand new shiny solar panel, but I didn’t work on any insulation,” he said. “Not only am I paying for the solar panel, but because I’m inefficiently using that energy, I’m almost like paying for it twice, because I’m having to pay the utility for it because I’m inefficient.”

Every house is different, so cost estimates vary. But insulation for a typical family home usually falls between $2,500 and $5,500 and pays for itself in five to six years. By contrast, a typical photovoltaic system can cost as much as $20,000 and take 10 to 15 years for the savings to pay off. The only solar system close to being competitive right now is solar water heating.

The federal government has passed more than a dozen incentives in the last decade to encourage builders, homeowners and businesses to make their buildings more efficient. In February, the American Reinvestment and Recovery Act enhanced several of them by injecting a few more billion dollars or removing restrictions.

But lawmakers tipped the improvements in favor of renewables, while often neglecting some of the cheaper improvements people like Dwire specialize in doing.

Example: The Residential Energy Efficiency Tax Credit offers a 30 percent tax return for projects that help a home save energy – structural changes such as insulation, improving walls, windows and heating systems, the “low-hanging fruit.” But it caps the maximum amount at $1,500 for all projects placed in service in 2009 and 2010. And it doesn’t cover the labor cost of building envelope improvements.

Meanwhile the Residential Renewable Energy Tax Credit offers the same 30 percent deal without the cap. It includes geothermal pumps, wind turbines, solar electric or solar thermal – although not for heating pools or hot tubs.

There are a few exceptions to the rule, including a $2,000 or $1,000 new homes tax credit that rewards flat reductions in energy consumption regardless of the means. But most of the emphasis remains on renewables.

As for customers, interest in improving energy efficiency has shot up in recent months, although that hasn’t necessarily translated into financial investment yet, according to Chicago renewable energy project developer David Dwyer.

Since the stimulus bill passed, he said more customers are calling and instead of asking how much a solar system or geothermal system costs, they’re asking what kind of system would be right for their homes or if the direction of their roofs matters. In other words, they’re more informed.

And because the stimulus bill is driving down the high upfront costs of renewables with subsidies, they aren’t as concerned about price.

“It’s not that they don’t care, but they understand that price is not an absolute limiting factor,” Dwyer said.

Dwyer, who founded American Renewable Energy in 2002, has a different theory about why customers may not be as inclined to buy into green energy. For him, the key barrier is the general public’s lack of understanding of what energy is and how it relates to economics. One of the biggest challenges is persuading people that while the upfront costs are high, the return (cheaper electricity for 20 years or more) more than makes up for the initial investment.

“I’ve read more misinformation about energy and economics from people with advanced degrees and leadership jobs than from PV installers and solar thermal installers,” he said. “So that’s going to be the limiting factor.”

That lack of understanding seeps through to the politicians and corporate executives who decide how the United States manages energy, and who tend to think on timescales of quarters and elections instead of decades. While many of them made choices with the best intentions, Dwyer said the time when that is good enough is running out.

“We can’t accept that anymore,” Dwyer said. “We don’t have the margin for error that our leaders even up to the recent past have had. The world is super competitive, and we’re not the big bully on the block anymore. So we’ve got to get with it.”

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