Take the ENERGY STAR new homes program, for example, the one I’m most familiar with. Version 1 required only one inspection, a home energy rating (for the performance path), and no checklists. Version 3, which becomes mandatory for builders wanting the ENERGY STAR label on their homes starting next January, requires 2 inspections, a home energy rating, and 4 checklists.

I understand the need for it from the perspective of the program administrators. Building and energy codes are catching up with voluntary program requirements, so they have to keep moving forward. Program leaders also have attempted to clarify the ambiguity of early versions of program requirements. And they have to make sure that the program is meaningful and that when the program label appears on a home, that home is significantly better than homes without the label. I get all that.

It just seems like we’ve lost our way, that we’ve all gotten blinded by a confusion of checklists, worksheets, prescriptive measures, and certification levels. Not to mention the confusion that comes from having so many different programs out there. If you’re a builder, you have to decide if you’re going for ENERGY STAR, LEED for Homes, EarthCraft House, NAHB Green Building Standard, Environments for Living… It’s not an easy task.

One of the first points of confusion that participants in the ENERGY STAR program face is whether to certify via the prescriptive or the performance path. That sounds pretty clear-cut, right? When you take a closer look, however, you find that the prescriptive path has performance requirements (e.g., testing for duct leakage and infiltration rates), and the performance path is chock full of prescriptive requirements. Just look at the 4 checklists required in ENERGY STAR Version 3.

As constructed, the performance path is differentiated from the prescriptive path by its requirement for a HERS rating. It’s based on how the home is constructed, how it tests out, and how the software does the energy modeling. It doesn’t depend on how the house actually performs, though, and that could differ significantly from the modeled performance. One reason we do it this way is so that the homes certified will carry the program label while they’re for sale, thus helping the builder to market their homes.

But what if we included the performance of a home over its first year of occupancy? Then we could include the actual energy use and calculate the energy intensity, even separating out baseload from the energy used for heating and cooling. It seems to me that this would be one of the best ways to handle quality assurance, too. If HERS raters, builders, and trade contractors know that their work has to pass not only the initial inspections but also a full year’s worth of performance assessments, don’t you think they’ll pay a bit more attention to getting the details right?

We could simplify the requirements for the initial certification and make sure everyone knows that the initial label means only that the home has gone through a process. Even though the energy modeling may say the home will use only $900 of energy per year, for example, everyone will know that that will be compared to the actual energy consumption for the ‘real’ label.

Anyway, those are my thoughts on this Monday morning. I’m interested to hear what you think.

Top photo by acearchie from flickr.com, used under a Creative Commons license. Lower photo by Ian Sane from flickr.com, used under a Creative Commons license.

A high performance home, like the beautiful home in Hattiesburg i recently verified to the NAHB green building standard is one that takes advantage of energy efficient sustainable construction. The definition of a green built sustainable home varies widely.

The fifth edition of The Dictionary of Real Estate Appraisal defines sustainability as the practice of developing new structures and renovating existing structures using equipment, materials, and techniques that help achieve long-term balance between extraction and renewal and between environmental inputs and outputs, causing no overall net environmental burden or deficit.

In 2007 the National Association of Home Builders (NAHB) and the International Code Council (ICC) partnered to form and establish a much-needed and nationally-recognizable standard definition of what is meant by “Green Building.”

A consensus committee was formed to develop this standard in compliance with the requirements of the American National Standards Institute (ANSI). The resulting ANSI approved ICC-700-2008 National Green Building Standard defines green building for single and multifamily homes, residential remodeling projects and site development projects while still allowing for the flexibility required for regionally-appropriate best green practices.

NAHB Green Building Standard is made up of 6 chapters:

1. Land Use
2. Resource Efficiency
3. Energy efficiency
4. Water efficiency
5. Indoor Air Quality
6. Home Owner Education

The USGBC’s LEED program, the EPA ENERGY STAR, and over 100 other green programs exist in the US today. There is no  doubt that learning all the nuances of these programs is a challenge to the appraiser.  So let’s look at a couple of steps that an appraiser can take to gather data in an effort to not only define green but to properly give it value.

If the green home you’re asked to value is part of a third-party rating, like the NAHB program, there will be a paper trail to document the analysis needed to produce the appraisal data. So ask for the following:

1. Any scoring sheet of the green building program
2. A home energy rating or HERS report
3. Fannie Mae Energy Report
4. Documentation of any incentives
   1. An IRS tax credit
   2. Utility rebate
   3. Real estate tax discount
   4. Lower interest rate mortgage
      1. i.      EEM – Sponsored by FHA, VA, Fannie Mae and Freddie Mac as well as some conventional lenders, it credits a home energy efficiency in the mortgage itself and stretches the debt to income qualifying ratio allowing the home owner to qualify for a larger mortgage amount.

Another challenge to the appraiser might be describing improvements. Begin with the site and pay attention to shading, landscaping materials and water use techniques. Include language that describes the use of solar panels, low VOC paints, recycled glass counters, structural insulated panel (SIP) outside walls and energy efficient heating and cooling systems.

When comes to comparables don’t be fooled by the home with an energy efficient kitchen. That’s a far cry from a home with a green certification. Green built homes are also built “above code”, meaning that you’ll need to pay closer attention to the quality of construction line in the URAR. Actually there are three lines that need special care. Those lines are:

1. Quality of construction
2. Heating and cooling
3. Energy efficient items

If you’ve not made an adjustment in those area a comment should be made as to why they’ve been left off. Items that are not covered in quantity may be addressed in quality. Again, look for incentives, monthly energy savings, and lower maintenance items as good talking points in your analysis.

Appraiser should also remember that some loan underwriters may indicate that Fannie Mae does not allow adjustments for energy efficient features, but that is not the case. You may be called upon to support the energy adjustment, which can be done by multiplying the energy savings by the gross rent multiplier.This is a common capitalization technique and a way to place emphasis on energy efficiency contribution.

Fannie Mae’s Selling Guide includes the following:

“Special energy-savings items must be recognized in the appraisal process. Appraisers must compare energy-efficient features of the subject property to those of comparable properties in the “sales comparison analysis” grid to ensure that the overall contribution of these items is reflected in the market value of the subject property.”

Finding value in a new market can be a challenge but should not be considered impossible. Soon everyone will realize the importance of and recognize the value in building energy efficient.

Expect to see this number a lot in energy discussions over the next few years: 2.5 cents/kWh. It is the average cost of energy efficiency, a figure pegged this week in a new report by the American Council for an Energy Efficient Economy. http://www.aceee.org/press/u092pr.htm.

This number is big news because it is so small.  As a resource, energy efficiency beats out all conventional power sources on price.  (See chart below.) Moreover, it’s a price that has been dropping. Five years ago energy efficiency cost 3 cents/kWh.

But just because something is cheap, doesn’t mean people will buy it. How much energy efficiency will make it into the nation’s energy shopping cart?

Efficiency boomed in the early 1990s, but then busted later in the decade when deregulation allowed many utilities to shed their efficiency programs. It is resurging now, part of push by state and federal policy makers to green and ‘smarten’ energy supply.

Most utilities do not make money on efficiency, and this is part of the reason it busted in the late 1990s. Perhaps as important, efficiency’s branding was off. It was seen as an extra, a nicety to pursue out of goodwill when a utility or state had some extra money.

ACEEE and other efficiency advocates are trying to reshape the image. They refer to efficiency as a fuel – just like wind, sun, coal, natural gas, oil. And they want efficiency to be the ‘first fuel.’ This means that when a utility is planning its energy supply, it first applies as much efficiency as is cost effective and plausible, before it builds more expensive new power. Some eastern states are already using this planning concept. In addition, many states have set specific energy efficiency goals, some very aggressive.

That is why ACEEE’s 2.5 cents/kWh becomes so important. It is a kind of marker against which other resources will find themselves competing more and more in policy planning.

Meanwhile, an increasing number of states are decoupling utility profits from kilowatthour sales or instituting other financial incentives that inspire utility support for efficiency.

Of course, our economy cannot prosper on efficiency alone, but many studies indicate we still have a lot of waste in the system.  So as an energy planner, if you were confronted with increased demand – and are not dealing with policy or system issues that require generation or transmission as a solution – which of these would you pursue first?

Credit: Cost figures from ACEEE, “Saving Energy Cost Effectively: A National Review of the Cost of Energy Saved through  Utility Sector Energy Efficiency Programs,”  September 2009, http://www.aceee.org/press/u092pr.htm.

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Lisa Cohn of Energy Efficiency Markets interviews Ujjwal Bhattacharjee, a principal consultant with PA Consulting Group who specializes in renewable energy and energy efficiency. He evaluates energy efficiency in Massachusetts green buildings from 2004 – 2007.