Summary:

It’s no secret that some energy retrofits can save consumers significant money, but how to conduct those retrofits and how much should they cost are two big questions. The government’s answer: standardize the process of getting home energy audits and loans.

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It’s no secret that some energy retrofits can save consumers significant money, but how to conduct those retrofits and how much should they cost are two big questions. The government’s answer, announced Tuesday by Vice President Joe Biden, is to standardize the process of getting home energy audits and loans.

It’s an ambitious undertaking but one that can promote energy efficiencies on a massive scale in the long run. The other goal, of course, is to create demand for services that will lead to the creation of new companies and jobs.

So here’s the big plan: The Department of Energy will launch a pilot program called the Home Energy Score, in which the government will offer software and guidelines for energy audits. Developed by the Lawrence Berkeley National Lab, the software lists 40 items that an energy auditor should check when visiting a home, such as heating and cooling systems, lighting and insulation.

The auditor enters his observation into the software program, which then spits out a score of between 1 and 10 that reflects how energy efficient the home is compared with other houses in the neighborhood. The software also will help the contractor come up with a list of recommended improvements, their costs and the time it would take for the investment to pay off (here is an example of an audit report).

The idea is to make it easier for consumers to understand the energy audit process and pick credible companies to do the audits and upgrades. The inspiration for Home Energy Score came from the Energy Star program for appliances or fuel economy labels for cars.

The government will test this new, voluntary program in 10 communities first, and then expand it national next year, said Energy Secretary Steve Chu at the press event with Biden. The DOE will have to work with local governments, utilities and other organizations to test the consumer response to this program before launching it nationwide (here is a list of the 10 test sites).

In theory the energy audit report also will help consumers line up financing for doing the upgrades. The Federal Housing Administration will develop a 2-year pilot project to standardize low-interest loans for homeowners to do energy retrofits. The loans will likely to be around $12,500 on average (up to $25,000), and borrowers can take up to 20 years to pay it back, said the Secretary of Urban and Housing Development, Shaun Donovan, during the press conference.

The FHA is looking for banks to do this pilot program. The government wants to craft lending rules for this program so that the banks will find it profitable for them to participate in. Donovan said the FHA will guarantee up to 90 percent of the loan – that means the government will pay the loan if the homeowners default. The loan guarantee also should lead to lower interest rates and other benefits, he said.

Aside from touting the new home energy efficiency programs, Biden also used the opportunity to promote an extension of a popular Department of Treasury program that gives renewable energy project owners a rebate worth 30 percent of the cost of each project. The program is set to sunset at the end of this year, though project developers can still claim the money if they start construction before the end of the year.

The program, funded by the American Recovery and Reinvestment Act, is meant to help developers offset their project installation costs, particularly at a time when getting bank financing to do so is difficult. Biden said 4,000 projects have benefited from the program.

Both the solar and wind trade groups have been lobbying Congressional leaders to extend the rebate program. It’s unclear yet whether this program will gain support in light of a shift in the balance of power in Congress, particularly the House of Representatives. The administration will have to figure out how to extend their favorite spending programs and already, it’s had internal discussions about discontinuing a program that offer loan guarantees to renewable energy project developers.

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Photo courtesy of Robert Donovan

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