Question: What is the Department of Energy doing to address the fact that American homeowners and businesses spend about $300 billion on energy bills per year?
Answer: Helping the private sector to create new markets that provide thousands of workers with paychecks, and launch innovative new business models for capturing energy efficiency.
The Better Buildings Neighborhoods program, formerly known as the “Retrofit Ramp-Up,” was launched in April of 2010 with the aim of jumpstarting state and locally based energy efficiency programs using Recovery Act grants as one-time seed funding. To date, $508 million in grant funding has gone out to 41 different programs, serving hundreds of communities nationwide.
The 2009 “Recovery through Retrofit” report spearheaded by Vice President Biden and the White House Council on Environmental Quality identified several key barriers that have slowed the growth of a residential energy efficiency market. These barriers to scale include:
- Access to Information: Average consumers rarely have easy and understandable data about their home’s energy usage, the return-on-investment for upgrades, or the various options available to them.
- Access to Financing: A lot of energy efficient upgrades make good financial sense over the long run, but the up-front capital costs are intimidating. Financing can soften the blow and space payments out over a period of time which mirrors the way consumers see energy bills.
- Access to Skilled Workers: Despite large numbers of construction workers being out of work, the pool of skilled labor is constrained. This can be traced to a lack of demand for these services. Who stakes their livelihood where a solid market doesn’t yet exist?
With these barriers in mind, the Better Buildings Neighborhoods programs set out to create the conditions for a scalable energy efficiency market. Their approach: strategic and creative use of ARRA grant funds as seed money (requiring recipients to leverage private capital 3:1) to get programs off the ground, build constituencies and stakeholders for these programs, and extract lessons learned to inform future program design.
Halfway through the funding and about two thirds of the way through its lifetime, the program has already demonstrated important success.
At the most recent conference gathering regional partners in Washington DC, these successes were on full display. The collaborative spirit that the Better Buildings Neighborhood program has fostered, in such a short time and with a relatively small amount of funding, is remarkable. The lessons learned give existing and future programs a way to adjust the financial, marketing, and operational aspects of their businesses.
Clean Energy Works is shooting to retrofit 6,000 homes, creating or retaining 1,300 jobs, retrofitting 2.5 million square feet of commercial space, and reduce CO2 emissions by 200,000 metric tons, all by 2013. You can read some of their individual success stories here. Their model is simple: streamline the application process, perform an energy audit, provide no-money-down financing, and then conduct retrofits.
Better Buildings for Michigan has a slightly different, community based approach. They are aiming to reach 11,000 homes and 131 commercial buildings to create 2,000 jobs through a “sweep” approach. Similar to a community organizing outreach canvass, this program targeted 27 residential neighborhoods (for about 420 homes a sweep), and reached out to local and community groups to find out what generates interest in energy efficiency, all while offering financing and retrofit services. The exciting thing about this model is the amount of marketing information the programs has developed — marketing information that the energy efficiency community desperately needs to create attractive financing, better service delivery, and foster greater public awareness of this opportunity for economic savings.
The Department of Energy’s Better Buildings Neighborhoods program is a nationally important initiative and a real success of the Recovery Act that is still working to bring energy efficiency to the streets in tangible ways. It is doing so by laying the foundation for long-term private sector investment, innovative markets and cutting edge business models that save consumers money and put construction crews back on the job.
Bracken Hendricks is a Senior Fellow at the Center for American Progress; Adam James is Special Assistant for Energy Policy at the Center for American Progress.