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Posts tagged “green tax credits

VI. Conclusion

The delusion that real change for the homeowner and for the environment can be brought about by this form of unregulation must be shattered.  Those in power who control energy distribution do not want people to conserve.  It is against human nature to expect any human run entity to give up their steak once they already took a bit of it and tasted how juicy it is.  To put a policy in their hands and leave them in charge of its success is dooming it to failure.  The policy in its current state is simply just a waste of time in terms of the environment; a slow moving effort that very few take advantage of while millions of homes continue to lose their energy efficiency and millions of dollars are wasted on inefficient fuel consumption. In terms of the economy, it serves as a building block for job creation in the green sector.  Touché!  The pro-capitalist goal somehow managed to emerge out of an initial environmental policy and thereby diminishing its original purpose.

Perhaps there may be room for the two philosophies to coexist but only with a set of green building standards that ‘all’ contractors must adhere to which are much like the building codes. For example, implementing a retrofitting guideline that say “contractor shall insulate around replacement window frames before install in order to prevent air leakage through the building envelop”.  If a contractor fails to adhere to this simple yet widely unpracticed step then they are responsible for making the proper corrections.  The burden of dealing with inefficient renovation should not be on the homeowner.  It should be on the industry. It should be part of its evolution.

If contractors were forced to adhere to green building and renovation guidelines on a daily basis, would their jobs intermix with the current and separate “green jobs” sector?  If more home owners saw the benefits of green building and renovation without being tricked into some type of scheme, would the idea catch on even faster?  If more people bought into this idea would it drive down the price of home energy efficiency transition?  It is truly my belief that if the interests of the homeowner and consequently the environment were put first, then the effects would resonate strongly into the economy for there are countless renovations and improvements to be made in this country.  It is silly to think we would ever reach a point where every building is perfect and no one will have a job in maintenance and repair.


V. Making Sense of the Game

On April 18th, 2010, the New York Newsday’s Earth Day Special that features a 2 page “Guide to Green Rebates” admitted “green incentives can be pretty confusing”.  Why is this acceptable to say especially around Earth Day?  There seems to be something else going on.  Figuring out the underlying motives of this policy can help predict its long term viability.

First of all let’s start with the facts. It is simply false advertising to insinuate that the homeowner will get one Comprehensive Home Assessment from any BPI certified contractor they list and that each contractor can provide additional important information on resources such as loans programs.  According to Mr. P, he did not know much about the state level energy incentives because they are given out by the utility companies who have a vested interest in maintaining confusion.  They do not want customers to save and conserve, they do not want to give out rebates even though the homeowners have already been paying into this program for years through SBC, they would much rather take the SBC money and put it towards expanding power generation like LIPA did and encourage people to use, use, use so they can expand their profit margin.

It is also discouraging that there isn’t a demand to make this program more informative for the homeowners before they make the first payment. The promotional lines for this program almost seem like a flashy credit card offer that promises 1% back on every dollar spent.  People are so enticed by the thought of getting something back that they are persuaded into paying more than what they hoped for or even have. This may be the difference between living in a semi-comfortable inefficient home or living in no home at all because of over spending and foreclosure.  I wanted to believe that this program was everything it advertised to be but as with many environmental policies, they are very expensive and in our financial system, not very feasible unless the homeowner plans ahead and saves for it.

So why isn’t there a real push to change this policy to better accommodate the homeowner?  I believe the answer lies in the statement previously made about politicians.  NYSERDA was created in the 1970’s to help solve the energy crisis but has been transformed into an entity that promotes energy industry competition[1] and the development of green jobs.  Currently anyone can be a BPI certified contractor.  That means anyone can jump right into the “green jobs” sector.  These types of jobs are seen as sustainable jobs since they can only be performed domestically without risk of outsourcing.  If anyone can jump right in then the green jobs sector will grow to a noticeable size and be recognition as an important economic force in our society.

The current administration supports the efforts for unregulated job creation even if it is at the expense of the people who voted them into office. The figure below shows a graph recently created by the Obama Administration promoting its success of job creation especially within the past few months.

Figure: Job Loss and Job Creation Diagram over a 2 year period[2]

[1] NYSERDA: NYS Energy Plan 2002, Section 2-1 http://www.nyserda.org/sep/sepsection2-1.pdf

[2] Barack Obama: The Economy in Recovery http://my.barackobama.com/page/content/aprileconomicrecovery

IV. LIPA and NYSERDA Case Studies

1.      The Need for Case Studies

Trying to make sense of the evolving home energy efficiency transition programs without actually going through the process was extremely difficult and mind boggling.  A single resource that put the different programs together like the proceeding sections of this report could not be found.  There was also a huge mystery of what to expect, what the overall expense would add up to or what legal requirements may arise.  If this is how I, a person with construction experience, felt when beginning this process, is it possible to imagine that an ordinary homeowner would be completely turned off by this program structure?   Fortunately, two homeowners were found who were willing to at least take the initial step to get a Home Performance Assessment.

2.      Calverton, Long Island (LIPA)

The first homeowner who was interested in increasing the energy efficiency of her home was a 34 year old single public school teacher. In 2008 she purchased her first home, a 1951 Cape Cod style home in Calverton, NY which is serviced by LIPA.  In 2009, she was informed that her property taxes would increase from $7,000 to $10,000 per year, a sizable amount that she did not expect and could not afford.  In hopes to cut down her taxes and overall utility costs, she was interested in participating in the “green” tax credit programs that she had heard of and turned to me for help.

After evaluating her home, we determined the following options were available to her that upgraded her home in accordance with the federal tax credit program; replacing her windows and doors with ENERGY STAR certified products and reinsulating her second floor attic space or possibly building out the walls to create habitable bedrooms.  Frustrated with the inability to find out information from LIPA on hiring “green” contractors or the possible financial assistance programs that she may qualify for, we decided to focus on simply replacing her windows since changing the walls of the second floor may consequently increase her taxes even more.

A list of her current window dimensions were made and brought to the local Lowe’s for a general quote for replacement windows that qualified for the ENERGY STAR tax credit program.  Since Lowe’s advertises these credits, it was understand that they sell products that help satisfy the criteria.  A return quote for materials and installation was $6,222 for 14 windows.  It was unclear how much was labor and how much was product and how much she would qualify for in tax credits.  She could not get the answer to those questions until after she purchased, installed the windows and applied for the credit.  In order to avoid a trap which would ruin her financially, all to reduce her taxes by a possible few hundred dollars, the homeowner replaced 2 windows, moved in with a friend and is now leasing out her house with the option to buy.

3.      Howard Beach, New York City (NYSERDA)

The second homeowner who was interested in increasing the energy efficiency of her home was a 76 year old married Vietnam veteran and physician who has owned her 2 family home since it was built in 1971.  In 2008 and 2009, the homeowner replaced her old rotted wood double hung windows with new vinyl ENERGY STAR certified casement windows but never applied for the federal tax credit.  Hoping to not make the same mistake, she agreed to participate in the program by hiring  a BPI certified company advertised by NYSERDA.  This contractor will be referred to as Mr. P.  An extreme amount of faith was put into Mr. P because it was thought that he had experience with the home energy efficiency transition procedure as implied by NYSERDA.[1] It was asked of him to perform the necessary tests on the home that are required to correctly take advantage of the home energy efficiency transition incentives.  We were under the impression that we would get a ‘Comprehensive’ Home Assessment as advertised by both the federal and state agencies that promote this program.  It was never stated to us that Mr. P was only certified to do a basic envelope test.

As predicted by NYSERDA, the appointment with Mr. P took about 3 hours.  He inspected for air leaks using a thermal leak detector and a door blower test but did not attempt to evaluate the mechanical systems of the house.  At the end of the appointment, $300 was charged and a few days later an estimate totaling $4,345 for insulation[2] was received without a Comprehensive Home Assessment.  Out of $4,345, $3,215 was quoted to blow in insulation over an already insulated 1,800 square foot attic space.  The homeowner was extremely discouraged as was I, the person promising guidance through this tangled web.  Mr. P made no attempt to follow up on the estimate and when asked about the Comprehensive Home Assessment, evasive excuses were made.  Finally, Mr. P agreed to put together and send out the incomplete assessment in the mail[3] and recommended a mechanical professional who was certified to audit the central air conditioning system and furnace (which would cost another $300). Ironically when we received the assessment, it was completed under the LIPA program/software and did not correspond to the homeowner’s utility company of National Grid.    Does this sound odd and confusing?  Does it seem like the homeowner paid $300 to have someone put a fan on her door and give her an inflated estimate?

Aside from myself, an independent consultant, there wasn’t anyone there to protect the homeowner from a ‘contractor’ who is overcharging for adding insulation over an already insulated attic and caulking a sill under a set of stairs.  Given that Mr. P gave the homeowner a LIPA assessment, there was an increased  red-tape possibility that the homeowner would not qualify for the National Grid rebate  after the work was completed and the rebate was applied for. If Mr. P would have given the homeowner the correct National Grid ‘Comprehensive’ Home Assessment, we could have continued to searched for contractors who were willing to give an honest estimate for the work that needed to be done.   However, there is always the red-tape possibility that she wouldn’t qualify for a National Grid rebate at the end of that road either, especially if the honest estimate came from a non-BPI certified contractor.   It is also noted that the utility companies hire a third party that evaluates the BPI certified contractors for ‘quality assurance’ but that step comes after work has been performed and a rebate is applied for.

Unfortunately these events support my originally theory that this policy is structured to benefit the quick transfer of money within a growing “green jobs” industry and not really based on helping or protecting the homeowner or the environment.  The policy makers seem eager for that monetary value that they can associate with this sector without regard to the many homeowners that were taken advantage of to get that statistical number.   The way the system is structured, it seems that a BPI certified contractor has more support and representation that a homeowner would.  The homeowner, who is the foundation of this system, is being asked to open up their wallet and if they are unhappy at the end, they can voice their ‘opinion’.  Why isn’t there more public discourse regarding the lack of initial homeowner support in this process?  Could it be that the program is so confusing that very few homeowners take the first step to call the BPI certified contractors in the first place?

[1] NYSERDA: What to Expect http://www.getenergysmart.org/SingleFamilyHomes/ExistingBuilding/HomeOwner/Participate.aspx

[2] Mr. Ps Estimate Document

[3] Mr P’s Comprehensive Home Assessment Document

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 $martSM 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 $martSM 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 $martSM 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 3rd, 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 $martSM 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

[13] LIPA: Home Performance with ENERGY STAR Program http://www.lipower.org/pdfs/cei/cw/HP-incentive.pdf

[14] Renewable Energy Long Island: Calendar http://www.renewableenergylongisland.org/calendar.cfm

[15] “LIPA Plant Problem: LIPA ratepayers to pay for inaccurate demand forecast” Mark Harrington, New York Newsday, January 23, 2010 http://sites.google.com/site/merrickgables/hot-news-1/liparatepayerstopayforinaccuratedemandforecast

[16] NYSERDA: Financing  http://www.getenergysmart.org/SingleFamilyHomes/ExistingBuilding/HomeOwner/Financing.aspx

[17] NYSERDA: List of participating contractors http://www.getenergysmart.org/Resources/FindPartner.aspx?t=4

I. Introduction

Structured civilization has brought about the ability to make life easier for the human race; a vast network of people working together, enabling even the most incapable to survive.  The human condition, at the moment, is so well under control that we are able to focus on studying how this world operates in order to improve our condition even further.  The role of government is incredibly powerful in this advancement of civilization. The power comes from the policies created and enforced by the government upon its people. A prime example of the advancement of civilization by the government is the implementation of building codes. Over time errors in building design have been observed and in an effort to prevent the repetition of these mistakes, rules of construction were created by which building designers and contractors must adhere.

In recent decades, with the ever increasing tension and conflict in the world, it is becoming harder and harder not to question the ethics behind the policies that the government creates.  In other words, are the policies that are being created and implemented today servicing the advancement of civilization (i.e. all people) or are they servicing the needs of an elite select few under the delusion that all are being helped?   New York State, which published an ambitious State Energy Plan in 2009[1], is chosen as the main area of focus.  The government policy that will be examined is the current push for homeowners to “go green” through advertised government incentives.  Through rigorous observation, research, analysis and experience, this report identifies the philosophies that help lay the groundwork for this ambitious transition effort, the tools and incentives available to homeowners, the difficulties homeowners face when trying to go through the process, and lastly, the viability of the current policies.

[1] New York State Energy Plan http://www.nysenergyplan.com/index.html