Require home energy performance testing at time of sale or renovation (RECO)

Assumptions

• Time of sale spending cap of $1,300 plus the cost of a home energy rating at $150 is invested in energy efficiency at every property transfer
• Home energy ratings boost the efficiency of RECO-related upgrades to 20 percent more efficient than an average San Francisco home
• life cycle of energy efficiency improvements is 10 years

Analysis

Home energy performance tests could boost the efficacy of upgrades required by the Residential Energy Conservation Ordinance, because they can outline the most cost-effective upgrades, customized to any particular home or building. If required as part of RECO, they also should make it easier for property owners to comply with the ordinance, because the tests will identify the best way to spend the limit of $1,300 for each one or two unit building, and will outline additional upgrades the property owner could voluntarily implement. Requiring this type of testing, and raising the spending cap for RECO to accommodate the test cost, is a cost-effective way to update RECO. Furthermore, because of cumulative energy savings, this change to RECO policy could consistently abate 123,650 tons of carbon dioxide equivalent, beginning in the policy’s 10th year, and save $68 million in private energy costs.

What we do now
Home energy performance testing allows property owners to assess the performance of energy systems such as air conditioning, insulation and ductwork, and receive recommendations for cost-effective energy efficiency improvements. The California Energy Commission developed a program to certify home energy rating services in 1999.¹

In certain climate zones in California — ones that experience more extreme temperatures than coastal San Francisco — homeowners are required to employ a HERS rater to verify duct performance any time they replace heating or cooling equipment. Comprehensive energy analysis, including water heating and lighting systems, is required for new construction under Title 24, California’s energy code. HERS ratings also are used to verify home performance for energy efficient mortgages, energy audits and Energy Star ratings. HERS raters are independent, third-party contractors. San Francisco has no requirements for home energy performance testing.

What we could do
Home energy performance testing could be required as part of an upgraded RECO. The cost to require home energy performance testing, or to include it with RECO, is negligible, requiring only a change to the RECO ordinance. If such testing is not required, home energy performance testing also could be marketed and promoted at sale or renovation transactions. The city could form a partnership with real estate firms and lenders to provide information about energy testing and energy efficient mortgages at when a building is sold or renovated.

Cost
Private costs for a home energy rating typically run from $150 to $300², and recommendations often come with information that allows homeowners to weigh the cost and annual savings of various options. PG&E provides rebates to residential customers for attic and wall insulation upgrades, as well as for heating, ventilating and air conditioning system improvements and energy-efficient appliances.

The cost to homeowners of this option includes the existing RECO cap of $1,300 for smaller buildings, plus the $150 cost of a performance test. The annualized cost is $18.9 million, with the government’s share 1 percent — the same $200,000 it costs to enforce RECO without the test requirement. Because an only slightly higher level of investment – $1,450 vs. $1,300– reaps an energy efficiency gain of an additional 10 percent in this model, this version of an energy requirement begins to pay off in a shorter time frame than the previously discussed update of the RECO law, about four years. Thereafter, the initial private cost turns into a savings. After 10 years, the cumulative savings could be $68.8 million.

Carbon savings potential
According to the CBPCA, a typical California homeowner may be payingas much as 20 to 40 percent of their energy bill on wasted energy. For an average San Francisco home³, a 20 percent energy use reduction of 1,320 kilowatt hours and 106 therms saves nearly one metric ton of carbon and $360 per year⁴.

Energy performance testing only identifies further opportunities for energy efficiency investments, and does not in itself result in an actual carbon savings. But an energy performance test included in RECO could help homeowners make the most cost-effective upgrades under the RECO spending requirement. If a performance test included under RECO finds efficiencies for homeowners that result in the most cost-effective improvements being made and thus creates a more aggressive savings of 20 percent of home energy use, and if 12,800 homes with the average San Francisco energy profile are sold each year⁵, that means approximately 12,365 additional tons of carbon could be removed each year (see RECO Section) Citywide, as more homes are enrolled, the program could regularly abate 123,650 tons of carbon dioxide equivalent, beginning in the 10th year.

The cost per ton of carbon abated, assuming a 10-year life of energy efficiency improvements, is $153. The government cost is $2 per ton saved.

Endnotes:
¹ source: CEC, http://www.energy.ca.gov/HERS/
² source: http://www.cheers.org/faqs.htm
³ According to the CAP (2004), p. 2-11, the average household in San Francisco used 3,800 kilowatt hours of electricity and 586 therms of natural gas in 1990. Instead of these very low estimates, we use the Home Energy Saver average home profile for San Francisco: 6,600 kWh and 530 therms. The Home Energy Saver (http://hes.lbl.gov/hes/about.html), published in 2007, uses climate-based estimates and assumptions based on methods developed at Lawrence Berkeley National Laboratory.
⁴ Using PG&E’s calculator for the energy mix of its service territory, 0.524 pounds of carbon dioxide per kilowatt hour and 13.445 pounds of carbon dioxide per therm. www.pge.com/about/environment/calculator/assumptions.shtml
⁵ According to data provided by the Assessor’s Office and analyzed by SPUR, 12,879 buildings comprising condominiums, single family homes, multifamily homes and tenancies in common were sold in 2007.