When a member of Congress asked the Energize America team to transform its concepts into material ready for Congressional action, this post opened discussion on the household economics of fossil fuel efficiency. The first draft of "The Efficient American Homes Act" adds detail to earlier provisions for government intervention in household energy efficiency.

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Energy saving and fuel type replacement are complementary strategies to reduce the nation's carbon footprint as quickly as possible. However, their perceived value to households lacks definition in the marketplace. Uncertainty about cost-effective attributes of energy saving and the affordability of energy efficiency investments undermine household commitment to reducing energy consumption.

Where financial metrics are used to justify energy efficient expenses, short-term benefits reward consumer spending on low-priced appliances. Where behavioral research is used explain energy consumption, studies demonstrate that voluntary household measures are strongly correlated to fuel price shocks or retail utility costs. At the same time, "frontier" fossil fuel integration with household activities has increased consumption in aggregate, while increasing cost burdens of household energy inefficiencies.

Very broadly, these observations help to identify and to strength historic weaknesses in public reliance on free market mechanisms to determine long-term benefits of energy choices. With a view toward sustainable household economic efficiency and demographic shifts over the next 15 years, The Efficient American Homes Act (EAHA) address incentives.

:: Draft 1

Objectives

1. To deliver financial incentives to householders and property owners that reward residential energy efficiency and
2. To accelerate the rate of investment in capital improvement to public and private property.

Description
EAHA provisions will emend US tax code (Title II), mandate energy efficiency standards, and provide budget for regulatory enforcement.

1. Enforce Energy Saving Standards.

a. Consumable and durable appliance standards.
b. Public-private Partnership in Energy Saving Education.

2. Enforce Energy Efficiency in Home Improvement

a. Residential HVAC and Envelope standards
b. State- and federal-owned Housing Investment

Guides to energy saving are widely available yet poorly supported in practice. The Energy Policy Act of 2005 (EPAct) enabled criteria and financial incentives for energy saving projects. The scope and benefit of these measures, however, are limiting. DOE has missed 34 deadlines for setting energy efficiency standards for 20 product categories.[1]

Completed DOE rules: Refrigerators, Small furnaces, Washing machines
Pending DOE rules(2011 deadline, agreed in 15-state 2005 law suit): Warm air furnaces, boilers, Water heaters (storage), Water heaters (demand), Water tanks (unfired)

State agencies and local utility companies have instituted grant ("rebate") programs to promote energy efficiency appliance and fuel type replacement that depend on DOE rules. Popular programming is concentrated in competitive electricity markets ("deregulated states"). These programs are unable to match demand due to underfunding. Increasing in the amount of funds available to householders through state-regulated energy assistance programs and educational campaigns will improve rates of adoption.

3. Expand Tax Credit Allowances by Type and Value.

a. Increase tax credt value to 50% per project, capped at $10,000 per household during the period of the Act.
b. Require home energy audit to enforce DOE energy efficiency standards.

Current financial incentives need to reflect switching costs more accurately.. The current cap on tax credit is $500 for all projects combined. Qualified projects (current credit amount) through 2008 are:
Federal rated energy saving products: gas, oil, and propane furnaces or boilers ($150); CAC, including air- and ground-source heat pump ($300); HVAC fans ($50); Water heaters, heat pump water heaters ($300)
Manufacturer-rated efficiency systems:
Insulation; Replacement windows ($200); External doors; Shell and duct repair; Pigmented metal roofs; solar or fuel cell ($2000)

Applicable tax credits fall far short of the 30% cost cap specified [2] and may be subject households to AMT red-lining. The EAHA incentives will align the retail costs of replacements to long-term benefits in terms of immediate savings in utility billing and household contribution GHG emissions.

Energy saving trends reveal lagging consumer confidence in high-value, high-efficiency projects. In 2001 at least 42% of electricity end-use has been attributed to non-durable appliances such as home entertainment equipment, swimming pool pumps, and lighting.[3] Arguably, EnergyStar labelling has helped consumers select energy saving appliances, reducing their share of utility expenses to 34% in 2005. [4] However, the contribution of heating (space and water), ventillation, and cooling (HVAC) to utility bills and fossil fuel consumption is frequently disputed.

4. Extending Affordable Financial Terms.

a. Energy Efficiency Mortgages and Lines of Credit
b. EA Neighborhood Act Maintenance of Effort

Financial intelligence and resources skew household energy consumption. The largest share of household income spent on all energy falls disproportionaly on poor and lower-income families. And the largest share of investment in energy efficient home improvement --systemic alterations-- falls primarily on the top two income deciles. These investors, like non-governmental and HUD researchers, are aware that retrofit or replacement immediately adds market value to their equity in their homes.[5]

Indeed, according to the 2005 American Housing Survey, there are 108M occupied homes. Some 20% of renters, 6.8M households, live in subsidized housing. And 78.8% of all the nation's housing stock is aged 20 years and older.[6] Because durables' lifetimes can exceed 20 years, this share implies equally significant, residual energy inefficiencies in owner-occupied as well as rental properties.

EAHA Benefits
EAHA measures will directly invest tax revenue in residential capital improvement

• Enable households to afford a greater variety of energy efficiency projects
• Stimulate demand for efficient and renewable technologies in more regions
• Drive industry development in system manufacture, construction, and installation
• Increase awareness of and application for energy efficiency benefits

Estimated Costs Over The Enactment Period
Over 10 years, EAHA programs will cost $00B.

• Foregone tax revenue, $00B
• Program expenses, $000M
• Program revenue, $000M

EAHA programs will generate federal revenue from fees and benefits associated with standards certification.

• Net EAHA Expense, $00B
• GHG savings, 00T kWh, 00T tonnes CO2

::Notes
[1] GAO pdf; dkos diary Inefficient Governance; [2] period extended through 2008 by H.R. 6111; proposed through 2012 by H.R. 5206, S.2677 and 2016 by H.R. 550, S.590, eere.gov news, seia.org news, TIAP guide, Cost vs Value Report 2004 , 2005 HTML | pdf; [3] RECS 2001; [4] consumer pie; [5] The Appraisal Journal (pdf, 1999) link, related news, HUD Valuation Analysis (Directive No. 4150); [6] AHS 2005 pdf