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Driving Energy Efficiency
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Lost Opportunities - True Stories of what can go wrong!

Lost Opportunity #1: Katie’s attempt to “do the right thing” 


Katie was uncomfortable in her home. The back bedrooms were too hot in the summer and too cold in the winter and she was spending a lot of money on energy bills running her HVAC system in an attempt to stay comfortable. Evelyn keeps a thriving garden and is always looking for way to mitigate her impact on the environment, so she called a solar company and asked them to install solar panels. The solar company came out, asked to see her energy bills, and leased her (because they said leasing was the best way to purchase solar panels) enough panels to offset her entire electricity bill. Sounds good, right? Solar panels are a great deal, and good for the environment, right?

Next, since solar panels do nothing to fix indoor comfort issues, she discovered she was still uncomfortable and so she called an HVAC contractor and told him she was uncomfortable and concerned about the environment. The HVAC contractor told her that since she was uncomfortable, he would increase the size of the Air Conditioning mechanical equipment from a 4 ton to a 5 ton unit and since she was concerned about the environment and wanted energy efficiency, he recommended SEER 18 (super-high efficiency rated) equipment. She had him do it. So far so good, right?

Wanting to learn more, Katie came to a CHERP workshop and learned about the importance of getting a whole-house energy assessment so she had a Best-of-Class Home Performance contractor come to her home and this is what she found out:

(1) The solar company sold her too much solar, netting the solar company larger profits while depriving Katie of the opportunity to benefit and profit from energy efficiency measures: This is known as an “opportunity cost”, and in this case, it is very high. What do we mean when we say she was sold too much solar, and how can that be a bad thing?

The first of many things that the Home Performance contractor noticed (simply by looking) was that there was absolutely no insulation – literally none - in the attic or in the walls. No insulation means that the house functions more like a cardboard box than a thermos. To keep a cardboard box cool in the summer means that the HVAC system has to work harder, which costs more money, in order to stay cool and comfortable. (So, if you can follow the next few sentences, you will understand a lot about building science and the interconnectedness of all a building’s interdependent energy systems.) Without insulation, which is relatively cheap, the HVAC system costs more money to run (in both summer and winter) increasing energy bills (both electricity and gas) while never really providing optimal comfort. If a solar company now comes along and sizes the number of solar panels to meet the unnecessarily inflated kilowatt usage without addressing the underlying problem of no insulation, then they are over-selling solar. After solar panels are installed, if the homeowner decides to add insulation to the home to increase comfort and decrease energy costs, then the homeowner is in a situation of overproducing electricity and feeding it back into the grid for far less than it costs to make with solar panels – buying high and selling low! And, so far, we are only talking about insulation. The ultimate opportunity cost of an oversized solar system installed before energy efficiency measures are taken into consideration becomes quite dramatic when you consider that most houses are wasting about 50% of their current usage – electricity that could be saved by addressing air leaks, insulation, duck leakage, HVAC efficiencies, plug loads, pool pumps, etc. So, this is the reason for our mantra “Reduce then Produce” – first, reduce the waste, then produce the rest. Doesn’t it make more sense to reduce the wasted energy first and get all the benefits of a more comfortable, quieter, healthier, safer home? And then you need 40%-50% fewer solar panels to supply your remaining electrical needs. Don’t forget, solar is the most expensive way for you to create kilowatt savings, while insulation and other energy efficiency measures are the least expensive. Let us repeat: the kilowatt savings you create with insulation is far less expensive than the kilowatt you create with solar panels, and overall, our ultimate goal is maximum energy efficiency with the minimum dollars expended.

(2) The solar company leased her the solar system instead of offering to sell her the panels, thereby depriving her of up to half of her potential savings over the life of her system. This is a huge opportunity cost easily adding up to $50,000 of lost savings (opportunity cost) on an average 7Kw system over the 25 year guaranteed life-span of the system!  

The truth is that right now solar offers such high returns for dollars spent that the solar companies can afford to charge extremely high financing charges and still leave substantial savings for the homeowner.  The incentive (profit) for the solar company to lease you the system is so high most of them will actively dissuade you from buying your system outright, suggesting that potential costs of the maintenance, the inverter, the insurance and the possible panel malfunctions are so great that it’s better for you to give them the responsibility through a lease than for you to assume the responsibility yourself through a purchase. The flaw in this assertion is that first, the potential problems are not as great, or expensive, as they claim, and second, the cost of addressing those problems - if they did all come true - could never amount to the approx. $50,000 they are charging in interest, because the total cost outlay for the whole system was only about $25,000 to begin with (see chart above)! This is such an important subject so, in order to learn more, please watch the CHERP webinar “Why Solar Matters, and Why How You Purchase it Matters Even More!”

(3) The next things Katie discovered through the whole-house energy assessment is that the HVAC contractor sold her an HVAC system that was also too large (too many tons), and too complicated (unnecessarily high SEER and unnecessarily complicated), and then installed it incorrectly and without pulling permits. (What you are discovering from this conversation is that many solar and HVAC companies think that bigger is better – and for them it is!)

What’s wrong with a bigger, more powerful HVAC system? The issue is that the underlying problem, once again, is that without air-sealing and insulation, the house was performing more like a cardboard box than a thermos! It truly does take a bigger compressor and more air to cool a cardboard box than a thermos. But why then, didn’t the HVAC company deal with the cause of the problem – air-sealing and insulation – rather than installing an oversized system? Two reasons: One, they don’t do insulation and therefore can’t sell it and make money on it, and two, it’s way easier and more profitable to simply install a larger system without paying much attention to proper engineering  and installation details and hope to oversized equipment makes up the difference. The results of the poor HVAC installation were obvious in the performance testing of the system during the energy assessment: massive duct leakage, and a total system efficiency performance of around 45% instead of an expected 90% - all due to poor installation procedures – on a brand-new system! And it’s convenient for the HVAC contractor that they talked Katie out of paying for a permit (with attending inspections) for the job. The final opportunity cost to Katie is not only that she paid too much for a system that was too large and installed improperly but also that the HVAC contractor never brought up rebate possibilities (up to $4,500 through the Energy Upgrade California program) because they are not qualified to the professional level required to be a part of the state-wide program that offers them.

Lost Opportunity #2: Amy and Dan heard that insulation is a good thing...

Amy and Dan heard that insulation is a good thing, which is very true. They called a friend who is an insulation contractor and had lots of insulation blown into their attic and felt more comfortable immediately. Then, bolstered by their positive experience and wanting to learn more, they came to a CHERP workshop and learned the value of getting a whole-house energy assessment in order to evaluate all the other systems in their home so they could plan for future energy upgrades. Sounds good, right?

What’s wrong with installing blown-in attic insulation? Nothing - if the attic preparation is done correctly, the air-sealing is done correctly, the insulation is not installed over exposed electrical connections and non-insulation rated recessed ceiling lights, it’s installed to recommended R values, and it’s installed in the proper “loading order” with other necessary energy retrofit work – like the HVAC duct system. What Amy and Dan discovered with the energy assessment is that their home is very “leaky” and that many of those leaks were in the ceiling around their recessed light fixtures and in the tops of walls terminating in the attic where electrical wires and plumbing pipes ran through large holes – all now under freshly installed insulation! They also discovered that even though they had recently purchased new HVAC equipment, their ducts in the attic were old, not insulated and very leaky (40% leakage!). Once again, since the insulation contractor only sells and installs insulation, he did not take into account or fix all these other interdependent energy measures before he installed the insulation so he did not install it in the proper “loading order” to maximize their overall energy reductions and comfort levels. What’s more, in order to now go back and fix these very important energy systems a good Home Performance contractor will have to move aside all the brand-new insulation and work around it while air-sealing and fixing the ducting which increases the cost and headache of the work in a 140° attic! Proper attic preparation, air-sealing, and duct installation can have a huge effect on energy efficiency and comfort and installing insulation over exposed electrical connections and non-insulation rated ceiling fixtures is illegal and a fire hazard!