Energy retrofit funding: Checks in the mail?

There’s been a lot of talk and, to a lesser extent, money coming out of Washington these days in the area of energy efficiency. The federal and many state governments are already offering numerous rebates and tax incentives for energy-efficient products and retrofit projects, and with President Obama’s recent proposal, nicknamed “Cash for Caulkers,” the question stands: Where is the money?

The short answer is: It’s still on its way.

There are many tax credits, rebates and grants available through the $16.7 billion allocated from the Department of Energy through the 2009 Federal Recovery Act in regard to energy efficiency (a breakdown of which can be found at energy.gov/recovery/breakdown.htm). Of them, three apply directly to consumers in the home channel.

The State Energy Efficient Appliance Program, which accounts for $300 million distributed from the DOE to the individual states, has only just started to take effect. To date, only 10 states have initiated their rebate program, with only seven slated to begin in February. Considering that overall appliance sales were down 6.8% in 2009, according to the NPD Group, and the fact that most states aren’t slated to put their programs into effect until March or April, it is too soon to tell who, if anyone, the program is going to benefit.

But Mark Delaney of NPD said that this program might not be enough to get people off the sidelines and into the game.

“Seventy-five dollars to $100 isn’t going to be a huge incentive given that energy prices aren’t that high right now,” he said. Delaney added that most consumers are still reeling from the tough economic climate of 2009. “There is a lot of consumer uncertainty out there,” he said.

Even so, Delaney said he has a lot of confidence in retailers’ ability to exploit opportunities. Once the programs are in full effect, retailers will be doing everything in their power to educate consumers on exactly what rebates they will qualify for.

“I’m assuming you’ll see retailers jump on this with additional rebates and markdowns of their own,” he said. One such example comes from north of the border, where Rona piled on to the Canadian government’s rebates for remodelers with RONAd-vantage incentives—bringing additional marketing and savings to the government’s program.

Here in the United States, another program called the Existing Home Retrofit Tax Credit offers a 30% tax credit up to $1,500 for such retrofit projects as insulation and installing energy-efficient windows and doors.

Yet while this program has been in effect since February 2009, not much of the $5 billion allocated has been spent.

“We’re at the very early stages of impact…we’re just starting to see movement of the needle,” said Frank O’Brien-Bernini, VP and chief sustainability officer for Owens Corning.

O’Brien-Bernini, who said that very little has been done to educate the consumer about the program by the DOE, recently gave a lecture at the National Association of Home Builders-International Builders’ Show in Las Vegas entitled, “Winning today with public funding.”

In his lecture, O’Brien-Bernini highlighted the tax credit and showed builders how to go out and educate potential customers.

“That’s significant. That’s like you’re bringing somebody a 30% reduction on the material cost for their project,” he said. “Insulating your attic is a really good deal without a tax credit, in terms of price versus savings. When you get a 30% credit on top of that, it’s even better.”

O’Brien-Bernini said he believes the program has potential to put a lot of skilled professionals back to work, and sees insulation as a big player in that.

“This is a retrofit program. When you look across the country, a large portion of these retrofits are going to be insulation,” he said.

He added that retrofits are a definite growth area for contractors who can take the time to educate consumers.

“This is a new business for many contractors, and it only represents a small percent of their business, but it’s meaningful as far as their portfolio.”

At the Owens Corning booth during the Builders’ Show, staffers wore shirts emblazoned with President Obama’s recent statement made during a stump speech for Cash for Caulkers: “Insulation is sexy.”

But not surprisingly, there are some companies that believe their products are sexier—for instance, energy-efficient window and door manufacturers. During a press conference at the show, representatives from Andersen Windows and a Minnesota program to tap federal dollars for home retrofits explained that customers like to see their investments in home efficiency. And windows and doors are very visible.

“What we’ve seen through working with homeowners is they are predominately using federal tax credits for windows, and doors,” said Shawn Nelson, president of remodeler New Spaces, in Burnsville, Minn.

And the opportunity for more window replacements is strong, according to Maureen McDonough, director of corporate communications at Andersen. Citing Department of Energy statistics, she said 90% of America’s 130 million homes still have single-pane glass windows. “That’s a huge opportunity to increase energy efficiency across America.”

Whether through windows or attic insulation, retailers too are getting involved in educating their consumers. Home Depot, for instance has launched a rebate finder on its Web site, which is dedicated to teaching customers what products are eligible for Energy Star appliance rebates in their state. They’ve also created a page dedicated to showing customers how they can take advantage of the 30% weatherization rebate.

Clearly, the biggest buzz in the weatherization movement is the proposed $80 billion Home Star retrofit program, which goes by the catchy nickname “Cash for Caulkers.”

Many of the initial savings outlined in the Energy Star Rebate program and the Existing Home Retrofit Tax credit would be combined into one program, which would allow incentives for each measure taken, as opposed to the current tax credit program, which offers only one credit per household, up to $1,500.

As of the writing of this article, the numbers proposed allocated $6 billion to $8 billion in residential retrofits. While it’s hard to say if the program will be effective, many are looking to it as a positive step toward recovery in the construction industry.

“Without knowing the specifics of this proposal, we think any program that provides incentives to consumers to make their homes more energy efficient is a positive,” said Jean Niemi, a spokeswoman for Home Depot. “In addition, a national program on this topic would help bring visibility to the simple things that can be done to reduce household energy use.”

The National Lumber and Building Material Dealers Association (NLBMDA) agreed. “As the representative of over 6,000 building material dealers nationwide, we are pleased that the President has proposed a program that will create jobs in an industry composed mainly of small businesses and improve our nation’s energy efficiency,” said Michael O’Brien, president and CEO of NLBMDA.

Owens Corning’s O’Brien-Bernini said that the program has a real potential to help boost jobs in the construction industry, but it will depend on how it is run.

“The more you can simplify, streamline and make it easy for people to understand, the more likely it will be successful,” he said.

He said one way to increase its potential effectiveness is to offer a rebate instead of a credit. That way, consumers can see a more immediate return. “It has to be direct, simple and fast and accessible to the existing skilled contractors who are currently underemployed,” he said. “If the bill passes the very next day, people need to be able to understand what it is and how to take advantage of it,” he said.

Then he cautioned: “It won’t work if it takes a year for people to understand it.”