Kat Friedrich, Yale University’s Clean Energy Finance Forum
How can programs motivate homeowners to make their homes energy-efficient before installing solar panels? And how can incentives support a whole-house retrofit approach that will optimize energy savings and prevent solar systems from being oversized?
California, Wisconsin, New Jersey, and Austin Energy have been grappling with this challenge for years. Their experiences show well-designed incentives may drive the joint adoption of solar power and energy efficiency. Simply introducing energy efficiency requirements into the solar installation process may not be successful without adding financial motivation.
When homeowners want to install solar systems, why don’t they pay attention to energy efficiency? Renewable energy has an appeal to residential customers that energy efficiency may not possess.
“Efficiency is like broccoli,” wrote Bill Schutten and Kathy Kuntz in a paper for the 2010 American Council for an Energy-Efficient Economy (ACEEE) Summer Study. “Despite President Obama’s statements to the contrary, energy efficiency is not sexy.”
“Efficiency is like broccoli….Despite President Obama’s statements to the contrary, energy efficiency is not sexy.”
“The market for whole-house energy efficiency upgrades is developing slowly,” said Ria Langheim, research analyst at the Center for Sustainable Energy in San Diego. “It doesn’t have the traction that solar had.”
Energy efficiency upgrades may be less trendy than solar power, but they can deliver substantial financial benefits to both contractors and homeowners. They also often have a more rapid payback than solar installations provide.
Parallel Silos and Different Skill Sets
Langheim is the lead author of a paper on the California Solar Initiative (CSI). The paper was presented at the 2014 ACEEE Summer Study.
Langheim said her research shows that despite California’s policy loading order commitment to requiring solar installers to address energy efficiency, programs for solar and efficiency are in separate silos. Installers do not collaborate as effectively as they could.
When solar companies do not address energy efficiency in tandem with solar power, systems can be oversized – increasing costs for homeowners.
“We’ve seen more than 50 percent of homeowners have oversized [solar] systems,” Langheim said. “At the state level, California is really trying to promote the connection between energy efficiency and solar, but on the programmatic level, there’s anything but a connection.”
Langheim’s research shows solar installers may be installing photovoltaics for homeowners without paying adequate attention to energy efficiency requirements. 42 percent of the homeowners her team surveyed did not remember receiving the energy audits that are required under the CSI program. The completed audits often did not lead to energy efficiency upgrades.
Energy efficiency contractors and solar contractors in California don’t just operate separately – they also generally possess different skill sets.
“Assessing and installing comprehensive energy efficiency measures is much more complicated and time-consuming than installing a few solar panels,” Langheim said. “Installing energy efficiency involves a different knowledge and skill set. In general, solar contractors don’t train solar installers to do energy efficiency.”
The few solar contractors who have incorporated energy efficiency into their business model have invested a lot of time and money to build that extra knowledge and skill set.
California’s solar and energy efficiency companies also have different business models, Langheim said. Most solar companies focus on simple installation, keeping the engagement with the homeowners limited. “Every time you engage with the homeowner again, it costs money.”
To break down these barriers, California would have to facilitate partnerships between energy efficiency companies and solar companies, Langheim said.
Langheim also recommends incentivizing or subsidizing energy efficiency training for solar companies so they can provide both services adequately and understand energy solutions from a holistic perspective.
“It would require a bit of market transformation,” Langheim said.
Barriers versus Incentives
Repackaging incentives and financing options could potentially solve this problem. This conclusion is supported by Langheim’s research, which shows homeowners mainly install energy efficiency and solar power equipment to save money. So adjusting incentives and providing packaged financing could directly impact customers’ choices.
“We might need to create a mechanism to incentivize energy efficiency before doing solar,” Langheim said.
According to Langheim, Wisconsin’s Focus on Energy program successfully attempted to incentivize selling energy efficiency together with solar power a few years ago, but that program has since been discontinued.
A look at the numbers published by Focus on Energy staff shows the program was only partly successful.
Schutten and Kuntz described in their ACEEE Summer Study paper how Wisconsin worked to merge the work of its solar and energy efficiency industries.
“Over the last few years, we have implemented incentives and promotional strategies that… reward customers for pursuing both efficiency and renewable energy,” Schutten and Kuntz wrote. “And these strategies are working. Over three years, we have seen a marked increase in the number of customers who pursue efficiency before they install photovoltaic or solar hot water systems.”
Schutten and Kuntz wrote that in July 2007, Focus on Energy began offering a $500 bonus to residential homeowners who participated in one of two ENERGY STAR programs before installing solar power.
Before this bonus existed, only 5 percent of homeowners pursued energy efficiency before installing solar. The bonus increased interest in energy efficiency installations for solar customers by a factor of five. By 2009, 25 percent of homeowners installing solar pursued energy efficiency first.
However, from a larger-scale perspective, 25 percent of solar installations is still not a very high number when one considers the importance of merging energy efficiency and solar power throughout the solar market.
Focus on Energy also offered a solar incentive for energy-efficiency-focused home builders – a $100-$150 incentive that would cover the costs of making homes ready for renewable energy installation. This incentive received minimal uptake.
“Our initiatives are also yielding some interesting in-field partnerships between efficiency and renewable energy installers,” Schutten and Kuntz wrote.
Schutten and Kuntz wrote that Austin Energy requires homeowners to reach certain levels of efficiency before qualifying for solar photovoltaic incentives. According to the Austin Energy website, this program requirement still is in place today.
“As I process the incentives, I can say with absolute confidence that this has increased participation in the energy efficiency program,” said Tim Harvey, environmental program coordinator at Austin Energy.
Harvey also said the program has catalyzed industry changes locally. “Most of the solar contractors have formed informal relationships with the energy efficiency contractors – and some have brought the services in house.”
But an unexpected market shift has taken place that does not bode well for reaching broader populations.
“The solar contractors now tend to market to communities that are fewer than 10 years old, as these homes were constructed to stricter energy efficiency codes and do not require energy efficiency verification,” Harvey said.
New Jersey Clean Energy Program has charged a 12 percent penalty on incentives for customers who do not install efficiency measures before solar. The organization did not respond to a request for comments on the success or failure of this penalty.
This article was originally published by Clean Energy Finance Forum, a news website sponsored by Yale University. To subscribe to the organization’s newsletter, visit its website.
