The five reasons for an energy-efficient stimulus

[Our guest blogger is Bob Massie, a former Democratic nominee for lieutenant governor of Massachusetts, who chaired an Energy Empowerment Rally in Boston last month. First posted in WonkRoom.]

efficient-home1.jpgAs President-elect Barack Obama prepares to tackle the vast problems ahead for America, he has consistently made two bold proposals.

First, he intends to make an immense investment in infrastructure — roads, bridges, railways — to jump-start jobs. Second, he plans to boost clean green technologies to make up for the squandered opportunities of the Lost Decade.

These are both powerful, worthy ideas. But they would be far more powerful if they were directly connected. The incoming administration has a historic opportunity to accomplish five major goals at once through a massive investment in stopping the waste of energy and dollars pouring out of American homes.

Think of this as “infrastructure spending for American families.” To date, our efforts to promote energy efficiency have been locked in a paralyzing cycle. When oil prices are high, we can’t afford efficiency improvements because our wallets are empty. When oil prices are low, we won’t pay for improvements because the payback seems too long.

So how do we fix our roofs — and windows, and heating systems — no matter what is happening to the weather or the price of oil? The solution is both simple and powerful: the government should set up a large bond fund into which institutional, pension, and other private dollars could be invested for a guaranteed rate of return.

The fund would, in turn, channel the dollars through a variety of mechanisms — most likely banks or state agencies — into $5,000-$10,000 residential chunks with zero or very low interest. The funds could only be spent on upgrading the energy performance of a house or apartment — insulating walls, weatherizing windows, swapping out heating systems, installing solar panels, digging geothermal heat pumps.

The loans would be paid back directly from the savings, perhaps through on-bill financing. Depending on heating and electricity costs, the family would begin saving money almost immediately. Renters could split the savings with the owners of their houses or apartments.

What impact would such a program have? It would accomplish five goals at once.

First, it would create local jobs at all levels of expertise — from blowing insulation into walls and training new energy auditors to installing super-efficient boilers whose computer brains would adjust the temperature in response to many factors, like a living body. Estimates of how many jobs this could create vary by region, but $50 billion — again of private money with minimal public rate guarantees — could generate as many as 1,000,000 jobs.

Second, it would improve housing values. States should fix this through mandatory disclosure of the likely energy costs — or savings — of any home on the market. An energy audit would thus become a routine part of the home inspection normally required for a mortgage. Homes with upgraded efficiency would be instantly be worth more.

Third, it would increase disposable income for families. Rather than spending endless cycles of fuel assistance dollars , or passing a blunderbuss stimulus bill that simply feeds our consumer lust for foreign products sold at Wal-Mart, let’s boost lasting, transformative investment in the basic of American structures, the home.

Fourth, it would bring new technologies rapidly to scale. One home-owner in the most densely populated neighborhood in my state dug insulated his house, then dug a 250 foot well in his postage-stamp backyard, and uses the stable temperature of the ground water to heat and cool his house for less than $150 a month. These are just the beginning of the new technologies that will revolutionize American family life. But any person familiar with business knows that to bring the price of a new technology down, you have to push the volume up.

Fifth, it will drive down green house gas emissions and slow our suicidal path towards climate change.

Is this really possible? Yes. But it will only happen if President-elect Obama takes his two good ideas — investment in infrastructure and green technology — and presses them into one. The joint gains would be astonishing.

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7 Responses to The five reasons for an energy-efficient stimulus

  1. John Mashey says:

    re: “States should fix this through mandatory disclosure of the likely energy costs — or savings — of any home on the market. An energy audit would thus become a routine part of the home inspection normally required for a mortgage. Homes with upgraded efficiency would be instantly be worth more.”

    I happened to visit a realtor in the UK recently. The typical 1-page brochure for a house now includes a standard energy-efficiency rating chart, according to UK Law.

    CA does a lot of this, but so far, we don’t have house efficiency ratings in realtor brochures in any standard way.

    CA AB 1103 mandates that utilities maintain records of usage of nonresidential buildings, starting next month. Starting in January 2010, disclosure is required of 12-month data to prospective buyer, lessee, or lender.

  2. Joe Galliani says:

    Well said, Bob and great ideas.

    We have something like this just starting to happen here in California. AB 811, signed last July by our Govenator, allows cities and counties in the Golden State to offer homeowners low interest loans for solar PV systems. The loans are treated as a property tax assessment and added to your annual property tax and then get paid back over the lifetime you own your home. If you sell the house the assessment gets transferred to the new owner.

    The challenge of the moment is our cities and counties ability to fund bonds to pay for the loans. Berkeley and Palm Desert have successful programs and the statewide program is based on their model. Santa Monica is about to offer the loans but many other cities, my own included, aren’t yet up to speed on the new law – let alone ready to facilitate funding.

    The difference for me as the owner of a modest sized home is the difference between coming up with $30,000 up front for my solar system or about $2,000 a year in loan payments. If they had the AB 811 funding available today, I’d have my new solar system up within a week.

    And I know that when Bob says “homes” he also means condos and apartments. But we shouldn’t stop there. Small and medium sized businesses have plenty of energy to save with their buildings as well, not to mention government owned facilities all over the USA.

    One idea I’ll add to this is the concept of neighbors helping neighbors do this work to their homes in a “barn-raising” style sharing of work, skills and manpower. The same way we come together to help Habitat for Humanity we can come together to help our fellow neighbors. The more experienced helping to guide the newer homeowners… The younger homeowners giving their retired neighbors a helping hand… We can do more than save energy, we can embrace our communities and come together the way we did during the campaign.

    Think of all the homeowners on a block working “barn raising” style to install solar panels on all the roofs of their homes, getting the job done as a team. Think about the buying power of purchasing the panels,inverters and mounts for ten homes instead of one. Think of the shared experience and knowledge those people then have about their systems and the help they can provide each other moving forward.

    That’s just one example. We’re a creative and innovative people and many of us are ready to engage with our neighbors in this old fashioned way to make a lot of what Bob talks about not only get funded, but also get accomplished.

  3. jorleh says:

    Great ideas. One more: You are living in a house of 250 m2. Two people. Most of time you are sitting on a chair on an area of 1 m2. Practically you must have 21 -22 degree of Celcius for 2 m2 most of time. 248 m2 in your house manages well with 16 – 17 C, even 14 – 15 C. You set some twenty automatic radiators so that they warm you where you are and only that point. You can control manually too the best radiation you like.

    Saving over 50% of the warming energy in your house, for nothing.

  4. Robin Carey says:

    Joe, great idea and in its simplicity it would appear to be simple enough to administrate without creating bureaucratic inefficiencies. I hope this plan would not negate also providing fast funds to states and localities to create consolidated efficiency and fuel solutions, like municipal geo-thermal or state-wide utility improvements.

  5. Robin Carey says:

    Oops, “administer” not “administrate”…

  6. David says:

    “The loans would be paid back directly from the savings, perhaps through on-bill financing. Depending on heating and electricity costs, the family would begin saving money almost immediately.”

    What happens in the situation where they don’t save? For example, a home is weatherized, but then immediately sold/rented to people who have much higher energy consumption, even in the more efficient home. How is repayment handled in that situation?

    What if some kind of disaster occurs and the home/apartment is destroyed? Does the loan have to be repaid? Does the insurance company repay it? If so, then won’t this additional risk taken on by the insurance company cause the homeowner’s premiums to increase?

  7. Bob Wallace says:

    If you have a choice between a house that is energy efficient and one that isn’t wouldn’t you be willing to pay more for the efficient one? Or pay more rent for a more efficient apartment?

    (I would assume that a home improvement load would either a) be tied to the title of the house along the lines of an assumable mortgage or b) be collectible at time of sale.)

    Homeowners/landlords insurance should cover replacement costs. If you add on a dining room does not your insurance premium increase?