November 5, 2013

RE:     Linked-in Post by Allison Bailes
          Is the ENERGY STAR New Homes Program Dying?

I appreciate Allison's article and description of the challenges faced by his Raters and builder’s lack of adoption of the ENERGY STAR version 3 program. I would like to offer a counter point and perspective.

ENERGY STAR for Homes version 3 (ESv3) has been, and remains, a strong part of the Arizona home building market, in Phoenix and Tucson anyway.  There are several “ingredients” to our success, which I recently shared with Raters in Raleigh at the annual NC Rater Conference.  First, a tip of the hat goes to the EPA and their ability to listen and provide clarity and flexibility in the ESv3 program as it evolved from initial launch in April of 2010 to the latest Revision 7 released in June of this year.  We had our fair share of problems and concerns with ESv3 in 2010, but in almost all instances, when we presented a sound case for a change or alternative or exception, based on building science and/or our extensive experience with on the ground implementation of ENERGY STAR for the past 14 years, the EPA accepted our proposal.  The fact that we are now in Revision 7 may be considered by many to be a clear indication of a flawed energy efficiency program.  However, I see it as a much clearer sign that EPA is listening, and evolving ESv3 as it becomes necessary and, ultimately, strengthening the program with each Revision.

Second, in Arizona we have utility partners (Arizona Public Service, Salt River Project, Tucson Electric Power, and Southwest Gas) who have embraced the ESv3 program and worked in every way possible to help builders to be successful.  They have worked with Advanced Energy to customize a “Success with ENERGY STAR” training program for builders and their trade partners, paid 100% of the cost to deliver that training, spent hundreds of thousands of dollars promoting the ENERGY STAR program and builders who are building ESv3 homes, and increased incentives for builders to help defray some of the costs of meeting the more stringent requirements.

Third, most of the nation’s largest home builders are building homes in Phoenix and Tucson, and selling homes, like most everywhere, is highly competitive.  For this reason, where goes the “bell cows”, i.e. industry leaders, so goes the rest of the home building market.  Out of the gate, the leading builders in Phoenix were Meritage Homes, Pulte, Beazer, KB and others, not only embracing ENERGY STAR, but going beyond ENERGY STAR to stay out in front of the competition.  At one point shortly after the launch of ESv3 in Phoenix, one of my clients who was struggling to meet all of the program requirements admitted that doing ENERGY STAR in Phoenix was simply “a cost of doing business,” because if they didn’t, the competition was going to eat their lunch.

Fourth, unlike many parts of the country, the very large home building market in Phoenix (producing 60,000 homes annually in the heyday, now on target for 12-13,000 homes this year) has the benefit of very large trade contractors, meaning 2 to 3 HVAC companies, 3 to 4 framing companies, and 3 to 4 insulation companies that do 90% of the production building work.  This obviously makes training and implementation a more focused endeavor, and also allows for great buying power for the parts and pieces, and processes, necessary to make ESv3 a success.

Fifth, and finally, Arizona is dominated by 3 to 4 large Rating companies that do 90% of the verification and program administration for ENERGY STAR.  We are competitors, to be sure, but we’re not afraid to pick-up the phone and communicate with one another about something we are sure the rest of us are struggling with.  That communication has brought increased, though not perfect, uniformity to how we test and inspect homes across builders and trade contractors.  It has also helped to create a more, though again not a perfect, level playing field in the Phoenix and Tucson markets when it comes to the delivery of home energy ratings and ENERGY STAR labeled homes.

Arizona is certainly unique in our mix of “ingredients” for success, but I wonder sometimes if my Rater colleagues in other parts of the country are following the path of least resistance, which is understandable, if not human nature, when they could choose to clear their own path to success that includes the irresistible draw embodied in the ENERGY STAR brand.  If you asked any builder if they want the label, it’s pretty clear from past experience that the answer in almost all cases is a resounding “YES”.  So right from the start, we have the builder client leaning in favor rather than trying to convince them that the blue cube is a good thing that consumers recognize and desire.  Those Raters who choose to capitalize on this inclination will walk away with the cream of the home building market, i.e. the best builders with the best of intentions.  And then there is always the code, i.e. the path of least resistance.

Daran Wastchak