I wrote the following letter to California's Governor following his State of the State message outlining many things, including energy improvement and rooftop solar programs. While I was pleased to hear him set these goals, I am concerned that there are a few major roadblocks that could prevent achieving these goals. Having no place else to turn, I decided to write to the Governor in the hopes that I might be a slight influence toward making the necessary changes. You might find some of these words helpful in understanding what is preventing obvious advances from being made.
______________
Honorable Governor Brown,
As an energy engineer, general contractor and owner of a small company
in the home energy efficiency improvement business I want to applaud and thank
you for several of your comments during your “State of the State” message. Your
targets of doubling the efficiency of existing buildings and of expanding the
installation of rooftop solar and microgrids appear to be the quickest, and
cheapest, avenue for dramatically reducing our global carbon footprint. Bringing existing homes to “net zero” through
a combination of efficiency improvements and rooftop solar can potentially save
enough energy to allow the State to meet its energy needs without using fossil
fuels or the expansion of environmentally destructive large scale solar or wind
“farms.” Once homes and most businesses
achieve net zero energy use, California will have sufficient energy resources
from existing or readily achievable “renewable” energy sources such as
bio-fuels made from waste products and other carbon free sources such as
hydroelectric and geothermal to eliminate our need for energy sources that
create Green House Gases.
There are a couple of major roadblocks to achieving your goals that
need to be rectified to clear the paths to the desired solutions. As an engineer/contractor doing business in
both “rooftop” solar and building energy efficiency improvements I find the
following issues to be significant impediments to reaching the goals that you
outlined in your message.
1) Rooftop Solar –
There are four significant problems that keep getting in the way of
higher solar use. These are:
Utility company posturing – The large utilities, such as PG&E,
keep making it sound like net metered, distributed, solar is unfair to the poor
people who can’t afford it. Many studies
have shown conclusively that this is not true. Their negative ads and posturing inhibits many
people from buying in because they don’t want to be thought of as unfairly
taking advantage of others.
Solutions:
- Promote the fact that roof top solar decreases
the price of electricity for all utility customers
by decreasing the cost of overhead, facilities and production required to
produce power from fossil fuel sources. Roof
top solar is not just good for the fat cats, it helps everyone by reducing
electricity costs.
- Promote the fact that net metering
customers are helping the environment, helping to reduce the carbon footprint,
and are reducing the overall electrical costs for all customers.
Cost-benefit uncertainty – The utility companies keep lobbying to add
a surcharge or otherwise increase costs for net metered customers. This creates an uncertainty concerning the
future benefits from solar installations.
Many people are unwilling to invest in the face of this uncertainty.
Solutions:
- Pass laws that prevent the utilities from
adding a surcharge to net metering customers.
- Remove the limitation whereby net metering
customers are prevented from installing solar systems providing more than 110%
of their previous year’s electrical use. Many customers are interested in
adding additional solar for future use such as purchasing electric cars or by
changing from gas appliances to electric ones, but are prevented from doing so
because of this restriction.
Availability of money to
finance solar installations -
Homeowners and owners of small businesses are finding it difficult to obtain affordable
funding that does not impact their credit rating and line of credit.
Solution:
- Create a government financed revolving fund
to provide low interest, or no-interest loans collateralized by the solar
system itself. The loans should be of
sufficient duration to reduce the annual payments to 20% or less than the
current cost of electrical power.
Fear of not being able to
recoup the solar investment when selling a building. – Many potential customers are afraid that
they will not be able to recoup the cost of their solar investment when they
sell their home or property because they feel that the home appraisal will not
clearly separate the selling price of the home from the cost of the solar investment.
Solutions:
- Provide a means to identify the loan on the
solar system as a separate loan that is not part of the value of the
property. This will allow property
assessments to be separated from the solar investment and not become mixed into
the overall value of the property.
The original solar owner will have benefited
from reduced energy costs during their ownership. The remaining portion of the
solar loan should pass on to the new buyer with minimal fees, without impacting
the appraised value of the building. In
situations where the original homeowner self-funded the solar system, there
should be an easy affordable way for the new owner to finance the value of the
solar system.
The current practice of companies providing solar through extremely
expensive leases (with interest rates often well over 25%), or high priced
loans underwritten by counties and municipalities is supporting financial
investment companies rather than the customer or the common good. This approach of depending upon private
funding to cover the cost of investments does not adequately or fairly address
the energy problems in the State. We
need affordable sources of low, or zero, emission energy - not well financed
and funded investment corporations.
Instead of subsidizing high cost installations that carry extremely
high interest rates, the State should be lending low interest money for the
installation of vast amounts of distributed, net-metered, electrical generation
(“roof-top solar”). While it is true
that the loan companies are saving customers some money, they are overpricing
that service and taking large amounts of money out of the economy in the form
of government sponsored tax rebates, expensive solar installations, and high
interest rate loans in the form of lease agreements. These profits should go to the State and the
building owner, not to large investment corporations.
2) Increased efficiency of
buildings –
Increased efficiency of buildings, especially residential buildings, is
easily achieved because of the huge inefficiencies that are built into these
structures, even when complying with the “strict” requirements of the Title 24
energy code.
The solution to improving the energy efficiency of small buildings such
as residential properties and small businesses is pretty straightforward. There are three major problems with the vast
majority of homes and small businesses. These
problems include:
Poor insulation – There is usually very little, poorly
installed, insulation in the ceiling spaces.
Solution: Require adequate insulation for new
construction and appropriate remodel projects, including a requirement to
inspect to ensure proper insulation installation. Provide incentives in the form of no-interest
loans and cash rebates for improving insulation.
Excessive Air Infiltration – There is a significant energy loss from buildings
because of the lack of adequate air sealing between the ceiling space and the
occupied zones.
Solution: Provide incentives in the form of
no-interest loans for improving buildings that have been tested to have too
much air infiltration (are too leaky). Rebates
or other incentives for these types of projects should be prorated value upon
the difference between pre-retrofit leakage rates versus after-retrofit leakage
measurements (“test-in, test-out”).
Improperly sized HVAC systems – In most residential and small business
installations the heating and air conditioning systems are not matched to the
needs of the building. They are usually
oversized and operate at less than 50% (often much less) of their advertised
efficiency because of the mis-match between the loads and the size of the
unit.
Solutions:
Require new HVAC systems to be designed and installed to match the needs
of the building. Provide incentives in
the form of no-interest loans to retrofit poorly designed and installed HVAC
systems.
Ensure that the HVAC system is properly
design and installed requires that the following tasks be completed:
- The building is modeled to determine the
thermal loads for each conditioned room or space and for the building as a
whole.
- The HVAC system components are selected to
provide heating or cooling in each room or space within a small fraction of the
design values (for example within +-10% of the design). Any recognized engineering approach to doing
the design calculations should be allowable, but submitted for review by the
building department. The total design
approach must ensure that loads for the building are approximately equal to the
total energy loads as determined by using the appropriate version of CBECC
(California Building Energy Code Compliance) software.
There are many tools for doing load
calculations. The design engineer needs
to be free to use whichever approach they believe meets that needs of the
building. However, to ensure that the
overall HVAC sizing calculations comply with the appropriate Title 24 energy
requirements, they need to be compared with the accepted standard practice in
California. If the sum of the individual room loads equals the CBECC standard
for the total building, the method used to calculate the individual loads is
approximately correct.
- The measured energy provided to each
conditioned space as determined by supply air temperatures and air volume
measurements must match the design loads to within a small variation.
- The size of heating or cooling equipment
should not be more than 0.5 tons (12,000 BTU) larger than the calculated loads.
(The reason for the 0.5 ton bracket is to allow equipment manufacturers to only
have to provide a reasonable number of size options.)
- Bypass ducts returning supply air directly
back to the return (bypassing the building’s conditioned spaces) should not be
allowed.
The current version of Title 24
requires that a flawed SEER level criterion be used: Title 24 requires minimum SEER and HSPF
ratings for HVAC systems. However, the
test protocol for determining these values does not match the needs of
California’s relatively hot, dry climate.
The SEER ratings envision hot, humid climates that require
dehumidification to achieve comfort within the buildings. Dehumidifying air in California wastes vast
amounts of energy as “latent heat,” and results in unhealthy dry air in the
building. For a properly designed system
in California, the air flows, and supply air temperatures are very different
from what is measured by the SEER ratings.
Because manufactures are required to pass the SEER testing protocol,
they only design systems to meet the energy requirements meeting the SEER
testing protocol for humid climates.
Therefore, almost all residential HVAC systems sold in the United States
are designed to not work properly in California – creating an efficiency
penalty of 50% or more while making it extremely difficult to purchase equipment
that meets the load profiles of small buildings in the California climate.
Solutions: There are three possible solutions
for this problem.
(1)
Convince HVAC manufacturers to produce certified systems that match the design requirements for California’s climate,
(2)
provide for the prediction of system SEER and HSPF from systems designed using “mix-and-match” components (heating
unit, heat pump, fans, heat transfer coils and
air handler), or
(3)
create protocols for testing installed systems that the flexibility to
mix-and-match components.
Availability of funds to
finance HVAC retrofits or improvements: Replacing or improving a working HVAC system in existing buildings is
an expensive endeavor. In most cases,
building owners are unwilling to make that kind of investment until the
existing system fails and needs to be replaced.
Based on an average service life of over 15 years for this type of
equipment, updating and replacing existing equipment will take a couple of
decades. In order to achieve the goals
of doubling the energy efficiency of existing buildings in the near future it is
necessary to implement the necessary changes at a cost that can be covered by
the value of the avoided energy.
Solutions: Provide low or no interest loans
to cover the cost of improving or retrofitting HVAC systems at a cost that is
significantly less than the cost of energy without the retrofit. The energy savings potentials and associated
cost savings potentials should be predicted by performing before-and-after
comparisons of total building energy use using the CBECC tools.
3) Poorly structured energy
incentives:
The current approach to providing investment incentives on “big ticket”
energy improvements through tax reductions is highly regressive and does not
work for fixed income home owners. For
example, a high income homeowner can now be receive tax incentives of up to 60%
of the cost of a roof top solar installation by financing the cost of the
improvement through a PACE program. They
get a 30% rebate out of their income taxes, and since the PACE financing gets
treated as “property tax” they can deduct those payments from their taxable
income, achieving an additional 30-38% savings for a total incentive of well
over 60% financed by tax dollars and only 40% financed by them, with no upfront
out-of-pocket investment. On the other
hand, a fixed income home owner (such as a baby boomer that has paid off their
home and is living on social security and their investments) does not have
enough income to generate income taxes sufficient to benefit from the
government tax incentives.
Therefore, the current practices of providing government incentives in
the form of tax savings is only beneficial to those high income people who
could afford the improvements without the incentives. The people who really need the incentives to
make energy efficiency improvements affordable cannot get the government
incentives and therefore can’t implement the energy savings improvements that
are required to meet your goals.
The use of tax savings as the means of providing government funded
incentives eliminates a vast number of homeowners that would otherwise be
extremely willing to make the investments to reduce their energy costs. Included in this group of people are the
coming flood of “baby boomers” that are beginning to reach retirement age. The vast numbers of these people have small
or non-existent company or union sponsored retirement plans. They have planned for the retirement years by
reducing expenses by paying off their homes, setting aside small personal
investments such as IRA or 401K plans, and hoping for continued Social Security
payments. They have little, or no,
taxable income – therefore they cannot make use of the income tax based
incentives. However, they are very
interested in reducing their costs of energy and are looking for inflation
protection that can be achieved by installing solar systems to eliminate their
electricity bills.
The best way to achieve a fair, and useful, government sponsored
incentive program is to provide direct re-imbursement for energy efficiency
investments rather than tax breaks for upper income people. In order to eliminate the need for large
up-front investments, the government can provide low or no interest loans to
cover the cost of the investment. The
use of direct cash re-imbursements instead of tax breaks costs the tax payers
the same (not receiving taxes costs taxpayers the same as receiving taxes and
giving them back as incentives), but has a dramatically different impact on the
ability of low or fixed income homeowners to be able to afford the
investments. The government should
provide funds for the loans rather than relying upon private investors in order
to reduce costs to the homeowner. For
example, the current PACE programs charge 6-10% in initial fees, and then
charge interest rates on the order of 8%.
This creates very expensive loans that are only affordable because the
payments can be deducted from income taxes as property tax payments. There should be very low fees (1% or less) and
very low interest (comparable with savings account interest returns) loans to
fund energy efficiency improvements.
Taxes are once again subsidizing corporations to make very expensive
loans to those people who have high enough incomes to benefit from the tax
incentives. The government should make
the loans at zero or very small cost if the goal of increased efficiency in all
homes is to be achieved. Energy
improvement investments for homeowners is not the place to be subsidizing loan
companies that charge extremely high interest for extremely low risk
loans.
SUMMARY:
The goals of doubling the energy efficiency of existing residential and
small business buildings can be achieved with existing technology at an annual
cost that is much less than the cost of not making the changes. However, there is a problem with funding the
initial investment. Very low interest
loans are the most likely way to provide the necessary funding for the up-front
investments required for equipment and labor.
Ideally, the money will be in the form of loans and cash rebates rather
than tax reductions. Revolving funds created for this purpose are paid back and
become available for use for improving other buildings. Providing tax reduction incentives works for
people who have enough income to enjoy the tax breaks and have enough cash to
fund the work, but are not useful for low income people. However, there are many building owners that
have neither – they need help in getting the necessary upfront funding that
will immediately lower their energy costs.
Once a building has been upgraded to minimize energy use, then it is
often quite affordable to add sufficient solar generation to bring the building
to “net zero” use making as much energy over the period of a year as it
uses. Net-zero energy use should be the
minimum goal for all residential and small business buildings in
California.
Respectively,
Charles Hoes
President, Hoes Engineering, Inc.
No comments:
Post a Comment