Federal Government | Eco-Spec Design

III. Government Energy Policy

1. A General Overview

In the United States of America there are three main governing bodies; federal, state and local, to which tax payers must pay their dues every year. In order to provide relief to homeowners who are considering renovating their homes to improve their energy efficiency, a tax credit program was set up by the federal government. The foundation for this relief is the ENERGY STAR® Program which first began in 1992 through the efforts of the Environmental Protection Agency (EPA) and the U.S. Department of Energy (DOE)[1]. In certain states, policies have been created to further assist homeowners who follow federal energy efficiency transition protocol but these policies involve the support of local utility companies. On the state level, relief is presented to the homeowner in the form of a cash rebate given directly from the utility provider. On a local level there are far less programs that are available but in New York, two pioneering programs are found, both located on Long Island in Levittown and Babylon. The creation of these programs within the small municipalities is most likely the result of the stalling efforts for energy efficiency transition by LIPA, a topic that will be discusses in more detail.

2. Federal Incentives

The ENERGY STAR® Program began as a nationwide effort to label products that meet progressive energy efficiency standards and has evolved into the back bone of the home energy efficiency transition system with the assistance of the PHEE in 2005[2]. According to the ENERGY STAR® website, it is recommended that a homeowner who is interested in taking full advantage of the available incentives begin the process with a Home Energy Audit[3], preferably by a Building Performance Institute (BPI)[4] certified contractor if the state offers this type of program. Once the Audit is performed, the homeowner can proceed by purchasing certified ENERGY STAR® products for their renovations and then deducting a percentage of the cost from their federal taxes. The Home Energy Audit is not required for tax credits on the federal level but is required by many utility company rebates on the state level therefore this step is crucial if a homeowner wants to take full advantage of the benefits that are available.

The ENERGY STAR® program has a limit which may undermine the effectiveness of this policy. The tax breaks received are equal to 30% of the cumulative cost of the ENERGY STAR® products (including air conditioners, insulation, roof, water heaters, doors, windows) with a cap of $1500 every 2 years (with an exception on geothermal heat pumps, wind turbines, solar energy systems and fuel cells which do not have a cap). This means that 30% of the cost of materials up to $5000 (not including labor) will be taken off of taxes within a 2 year period.[5] Right away it seems that a home owner who is interested in a complete home energy efficiency transition will spend much more than $5000 in a 2 year period which diminishes the cost-benefit of this incentive.

3. New York State Incentives

There are currently 29 States that have areas within them that participate in the Home Performance with ENERGY STAR ® program.[6] Before this program to assess homes was formed, New York State was already on the path to promoting the transition to alternative fuels. In 1975, the Article 8, Title 9 of the State Public Authorities Law[7] mandated the creation of the New York State Energy Research and Development Authority (NYSERDA), a public benefit corporation that has evolved into the main organization that supports the state’s energy goals of “reducing energy consumption, promoting the use of renewable energy sources, and protecting the environment”.[8] In 1996, the New York State Public Service Commission (PSC), which is the state body that regulates public utilities, established the System Benefit Charge (SBC) [9] to help support NYSERDA’s efforts. The SBC is a fee that was originally inserted in the utility bills of all electric distribution customers (residential, commercial, institutional, and industrial) in New York State. In 1998, the PSC developed the New York Energy $mart^SM Program which used the funds generated by the SBC to support energy transition efforts and named NYSERDA as the administrator.[10]

Since then, the NYSERDA run Energy $mart^SM Program has evolved to support complete home energy efficiency transition for the majority of New York State, of which 6 utility companies service, with the exception of Nassau and Suffolk County located on Long Island which is serviced by the Long Island Power Authority (LIPA). (See following figure) LIPA split from the NYSERDA when the New York Energy $mart^SM Loan Fund was introduced in 2000.[11]

NYSERDA eligible areas (Green) and LIPA controlled areas (Red)

Both of these programs are very similar in the general process[12]^,[13] but the LIPA supported program seems to be intentionally limited in exposure. The link to LIPA’s program only appeared on a newly designed website on May 3^rd, 2010. Before this time, information on LIPA’s program could not be found. Up until October of 2009, LIPA sponsored meetings located in varied parts of Long Island each month[14] but still failed to provide concrete information on how LIPA customers could take advantage of the Home Performance with ENERGY STAR Program. It is speculated that the interests of LIPA to build more power plants and not support the reduction energy consumption[15] was behind the reason for the split from NYSERDA and the intentional ambiguity of their transition programs beyond changing standard-A light bulbs to compact fluorescent light bulbs. The transparency of the NYSERDA program is much clearer. NYSERDA is upfront about the financial incentives available to homeowners[16] and also provide an easy list of local BPI contractors.[17]

The flaw in both NYSERDA and LIPA programs and possibly any other state that follows such a program lies in the BPI certified contractors. Much like the New York State policy for licensing Residential Home Inspectors, these BPI-certified contractors can be anyone who passed their 100 question exam on Building Science. Unlike Home Inspectors, training for this certification is optional. The “contractors” are then advertised on the program websites with big disclaimers that NYSERDA and LIPA make no recommendation as to whom to select and are not responsible for the workmanship of these contractor. It is important to note that they are also the only contractors the homeowner can use in order to participate in the program. The homeowner is asked to take a leap of faith, initially spending around $300 for the Home Performance Assessment by their chosen BPI contractor who may customarily deduct the cost of the assessment off of the cost to do the needed improvements, IF the homeowner decides to use THAT contractor. But what if the contractors are people who seek to take advantage of uninformed homeowners? Contractors do have a reputation for being crooks. Who is there at this first step to protect the homeowner from being taken for a ride? The answer is simply… no one.

[1] Energy Star: History of Energy Star http://www.energystar.gov/index.cfm?c=about.ab_history

[2] Energy Star: Milestones http://www.energystar.gov/index.cfm?c=about.ab_milestones

[3] Energy Star: Home Energy Audit http://www.energystar.gov/index.cfm?c=home_improvement.hm_improvement_audits

[4] Building Performance Institute Overview http://www.bpi.org/what.aspx

[5] EnergyStar: Customer Help http://energystar.custhelp.com/cgi-bin/energystar.cfg/php/enduser/std_adp.php?p_faqid=5595&p_created=1236876860

[6] Energy Star: Home Performance with Energy Star Locations http://www.energystar.gov/index.cfm?c=home_improvement.hm_improvement_hpwes_partners

[7] NYSERDA: Article 8, Title 9 of the State Public Authorities Law http://www.nyserda.org/About/TITLE_9_NYSERDA.pdf

[8] NYSERDA: About NYSERDA http://www.nyserda.org/About/default.asp

[9] NYS Department of Public Service: Systems Benefit Charge www.dps.state.ny.us/sbc.htm

[10] NYSERDA: New York Energy $mart^SM Program http://www.nyserda.org/ny_energy_smart.asp

[11] NYSERDA Press Release http://www.nyserda.org/Press_Releases/press2000.asp#New%20Energy%20Loans

[12] NYSERDA: Home Performance with ENERGY STAR Program http://www.getenergysmart.org/SingleFamilyHomes/ExistingBuilding/HomeOwner/Participate.aspx