Can HP programs afford to keep subsidizing all these free-riders?

First some facts:

1. The ARRA bubble era is over. Efficiency First has a webinar coming up next week that will claim that contractors don't need incentives to sell home performance jobs. 

2. The recent process evaluation of the Energy Trust of Oregon HP program found measure-specific free ridership rates between 21-47% (slide 31) and that non-participants (!) actually installed more air-sealing and wall insulation than participants (cf., my own memo on this surprising finding).

3. The recent process evaluation of the Energy Upgrade California (EUC) program found that the majority of trained contractors are happy to use the leads but claim they don't need the incentives:

"Two-thirds of contractors (non-participating, inactive and low volume contractors) mentioned they had jobs in 2011 that would have qualified for the EUC program but chose not to send them through the program (average of 14 jobs per contractor completed outside of program in 2011). Many large volume contractors indicated that smaller HVAC and insulation contractors are selling against the program. These contractors are listed as EUC approved which helps them generate leads. However, when working with customers who need a new HVAC, they tell them that the program is too much of a hassle to work with. They can underbid the other EUC contractors that the customer may have contacted for bids by not using the WH approach and assuring the customer that this option is quicker and better. This behavior began as a reaction to the high administrative and time costs associated with participation." (see "Findings", cell: F19).

4. My own discussions with several experienced and reputable EUC contractors confirm that they offer their customers the same state-of-the-art scope of work and the option to participate, but claim that many customers choose to waive the rebate given the extra, modeling, documentation and program inspection requirements.

5. Direct incentives, by design, force utilities (and other program administrators) into having to become residential job cops, an awkward and expensive role to which few if any are well-suited.

Now my question:

With the ice caps melting, is this really the best use we can make of limited public funds? Doesn't it make more sense to shift funding away from incentives and focus instead on stimulating demand for home performance services, improving codes and product standards, enhancing training and certification standards, and bolstering local building department enforcement capabilities?

Tags: Energy, Star, Upgrade, design, free, home, incentives, performance, policy, program, More…rebates, ridership

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Initial replies appear to have been censored (admittedly some were sophomoric or off-topic).  Anyone else willing to venture an opinion? Or is this question too controversial for open discussion?

Hi Tom,

I have long supported allowing HP to sell itself.  Public funds should have been used right from the start to educate the public and emphasize the benefits of an efficient home.  There are a lot of other issues that have been done wrong, but moving forward with HP, it isn't too late to educate.



When I got in (2008) contractors sold away out of fear.  Once they figured out process that went away, at that time incentive was greater than risk.  

One of the great things GOOD programs teach is comprehensive design and consultative approach.  

I can't tell you how many program and non program jobs I've seen where bad design, and "selling" to meet the contractor needs caused tremendous missed opportunity for the homeowner.  At that time most qualified for a 10% incentive for almost ANY energy saving measure.  People got $3000 for $30,000 worth of windows.  Not a thoughtful design.  

So what did they do?  Took incentive for windows away all together!  They went from STUPID on the right to STUPID on the left!  Hey, smart is in the middle folks!!!  (Windows save energy, right?  People want windows, so make the incentive based upon the savings, and you can FAIRLY incentivize windows.)

People want things, and they want to know what things cost.  If a program will help with that cost, even better.  A Contractor Registry will help homeowners be confident in NET cost, which will help rebuild comprehensive.  (You want this $8000 worth of work for $35 a month or this $18,000 worth of work for $28 a month?  If the numbers have a leg to stand on, this decision is a no-brainer, right?)

The problem arises when programs create impediments to a smooth flowing process.  Uncertainty around what will and won't qualify wastes tremendous time and kills opportunity.  Program designer hubris, thinking they are better determiners of what is or isn't a good investment, without knowledge or understanding of the sales process, is a major problem.  

We need an orientation shift.  The homeowner is the best determiner.  Let them decide.  Pay incentive based upon energy saved, not arbitrary and unsophisticated opinions about "payback".  

Regarding "Claims" by contractors that they are doing good work... where's the accountability?  I'm calling that a lie.   Prove it. 

Good work results in projected energy savings being realized.  If they aren't tracking savings achieved to savings promised, claims of "good work" are hooey.  They can't claim what they don't measure.  

I like this renewed focus on savings actually delivered (what evaluators and policy wonks like to call "ex post" impacts). I've always been surprised more residential contractors aren't willing to guarantee the performance of their work. This is actually quite common in the commercial sector, ESCOs do it all the time, and typically even put their own financing at risk. Of course, they depend on accurate measurement (Green Button should make this infinitely easier), and have contractual clauses to exclude significant operational/behavioral changes.

I hope to see more performance guarantees in the future.

I think performance guarantees in small scale is a very expensive proposition. Like spending $20 for a 3 year warrantee on a toaster.

What doesn't disproportionally add cost but provides the same and possibly more confidence at the consumer level is historical proof case by case and overall.

At least this would be more valuable to me. Even a free toaster warrantee has no value to me, I toss all that crap (and promises that may sound like marketing hokum may actually decrease credibility).


When you say pay incentives based upon energy saved, do you mean predicted energy savings or actualized energy savings?  In either case, what is your experience adn/or thoughts on selling around performance savings based incentives; and the role of energy modeling in determining savings?

Hi Matt, thanks for engaging the conversation!  

Since incentive must be defined and paid up front to arrive at net cost for the consumer, it would be based upon predicted.  

The rest of your question could fill volumes.  In summary, I want something that is real rather than smoke.  The path I see to that is incentive.  Always ask what is the incentive, and design solutions around that question.  

How do you make an incentive to perform accurate modelling?  To not game results for greater incentive or project sale-ability?  Track and publish results.

Whats the incentive in that?  Published results become a tremendous marketing tool.  A new competitive playing field where contractors can actually compete, and be rewarded for delivering quality.  Actual results everyone can sink their teeth into.  

They become a new competitive metric with REAL meaning to the consumer.  They provide the ability to make decisions based upon net cost rather than gross cost.  They provide an opportunity to understand where modeling tools are weak and where they are strong.  An opportunity for modelers, contractors and programs to learn what REALLY saves energy, and what doesn't.  (I know the guys at NYSERDA scratch their heads about realization failure and scatter.)

I have a project that saved double what we expected.  Imagine the opportunity to learn!  Was it a modeling error?  Was it a design error (that we clearly would want to repeat)?  Was it something about the installation quality?  By tracking results real learning can occur.  Not only can contractors improve realization once they know it, what they learn will reduce variability (scatter).  If I'm buying on a promise of savings I want to know not just your average, but after removing outliers, what is your deviation?  

Turns out for this project the homeowner had abandoned setback, and almost never touched the thermostat.  This modern house had a LOT of glass, and summertime comfort used to be a challenge.  "I used to adjust the thermostat 3-4 times A DAY.  Now if I touch it once a week that's a lot".  

The new, smaller, modulating communicating equipment ran nearly continuously - very little start stop losses, and never had to ramp way up, so the duct worked efficiently and static stayed very low, and condensing efficiencies on both the furnace and the 2 stage heat pump were always optimized.  

Without tracking, everything is unverified guessing.  Opportunities to learn what ACTUALLY works are not supported by anything but anicdote and "intuition" without basis.  Homeowners decisions of affordability are gross cost based, not net cost based. 

Modeling and design for gross cost is very different than modeling and design for net cost.  It's not very gratifying, doesn't result in large comprehensive projects, and often results in savings that are hard to detect.  

I want to model and design based upon net cost.  Comprehensive projects are rewarding to homeowners, contractors, and the impact and savings are significant and easy to see.   But people will not buy net cost if they don't have very high confidence the savings portion will show up.  


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