Report: Policy Changes, $500B Investment Needed for Home Retrofits

How does the U.S. spur 50 million energy retrofits (40 percent of homes) from the current low level of hundreds of thousands per year? The Obama administration could meet that goal with two major policy initiatives plus a hefty investment from the public and private sectors of about $500 billion, according to a report released this week from the think tank Center for American Progress and the public policy initiative Energy Future Coalition, which focuses on market barriers to the home retrofit industry’s growth.

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Here’s some background: Buildings account for 40 percent of total energy use, but much of the housing and building stock is old, inefficient and wasteful. Half of the buildings that will be standing in 30 years are already built, so any successful strategy to increase the efficiency of the built environment must include retrofits, the report says. Deep building retrofits can cut energy use by 20 percent to 40 percent with “off-the-shelf technologies” and pay for themselves from the energy they save. Besides reducing energy demand and lowering carbon emissions, these investments create local jobs.

With so many benefits, why hasn’t the building energy retrofit industry grown to a large scale? The report lists several market barriers including lack of consumer information; split incentives between owners and tenants; lack of access to capital; perceived costs of retrofits; high up-front borrowing costs for retrofits, and more.

But the report says the industry can’t grow through public programs alone. Rebuilding the built environment will require changes in the real estate market, new financing tools, more skilled labor to perform the construction work, and more private capital investment. Some 50 million homes, or 40 percent of the building stock, could be retrofitted by 2020 with a $500 billion combined investment from public and private sources. The report estimates such an investment would save consumers $32 billion to $64 billion a year in energy costs and generate more than 600,000 jobs.

To create the market conditions needed to perform 50 million building energy retrofits, the report calls for two major actions from the Obama administration:

? Mobilize major institutions like utilities, banks and local governments to market energy efficiency, provide improved tools for financing and repayment, and offer trusted point of access for energy-efficiency services that are certified and guaranteed.

? Encourage the growth of a high-performance, high-standards retrofit industry by enhancing confidence in consumers with strict audit, performance and verification standards; by building a strong labor market through career training and community-based pre-apprenticeship programs; and by empowering building owners and contractors to act with improved standards, incentives and data.

But while these two recommendations look focused and tidy on paper, implementing them will be a tough job. The building industry has powerful and diverse interests — from labor unions to real estate magnates — and any aggressive moves by government to shake things up, even if for the better, will be met with resistance. Still, setting strong goals can unify interests and energize groups, and the federal government has already committed billions of dollars in funding for weatherization and other building energy-efficiency upgrades through the stimulus package.