Volume 10, Issue 6 - July/August 2009

eye on energy

ARRA Tax Credits
Breathing New Life into Energy Star®—Not Ringing the Death Knell
by Arlene Zavocki Stewart

When I earned my Home Energy Rating System (HERS) certification, I was determined that it would be a real credential. My small ratings practice continues to be one of the most valuable parts of my consulting firm. Seeing how all the codes, standards, rules and regulations get played out in the field is priceless. So I had a distinctly different reaction from the rest of the fenestration industry when .30/.30 hit at the end of February.

I went through the same hullabaloo on the Energy Star Homes side when the $2,000 builder tax credit came out a few years ago. My builder clients and colleagues all wanted to know what they needed to do to get the credit, which turned out to cost twice the credit amount. None of them pursued the tax credit but at least half started taking a more serious look at building Energy Star homes. Not all actually did, but definitely more did than before. The tax credit provided the jolt.

Since history is doomed to repeat itself, I tend to think this tax credit will not ring the death knell of Energy Star. Rather, it’s the warning bell—the bellwether of the storm to come. The tax credit doesn’t provide the same jolt to the building industry. For my home builder association colleagues, $1,500 for remodeling is nice, but more disposable cash has to be spent to get the credit—dollars people are concerned about spending, even if it does save them money later. They are interested but not excited.

Weatherization Program: Worth Participation
So, if the tax credit is only a small squall, what is the real storm? That would be the Weatherization Assistance Program (WAP) for low-income families. Many in the industry may have never even heard of it, as historically, it has been very difficult for windows to participate. This is due to limited funding and low return on investment (ROI) ratios compared to other energy-saving provisions. My experience is that the low-income participants wanted new windows, but windows almost never rank high enough on the proposed improvement list to be approved by the auditor.

With the stimulus package, the WAP rules, qualifications and available dollars have been expanded. For my state, by the end of 2008, the program will grow by 5,000 percent. No, that’s not a typo—there really are three zeros in that number and millions of dollars allocated.

This is the jolt the homebuilders need. Roughly $5,000 government dollars are available per house for improvements. Contractors are paid directly by the community action agency that engages them, and that, in turn have to spend the dollars within 36 months. Many WAP auditors will be directed to bundle as many other available state and utility rebates and grants into each audit recommendation as they can. Auditors will most likely look into the windows tax credit, but just as with Energy Star homes, a readily available Energy Star window may actually turn out to be more cost-effective with a bigger return on investment. Everyone knows Energy Star provides value.

If you haven’t talked to your dealers about this program yet, you should. If your dealers’ installers are not already participating, they will need to find out how to become approved, because the program is highly regionalized. WAP generally requires its contractors to lock in rates for 12 months at a time, because fixed pricing is critical to determining which measures yield the biggest bang for the buck. Work with your suppliers and dealers to create an attractive package to compete with all the other provisions from which an auditor can choose. After all, they’re the same competitors—HVAC, insulation, etc.—you have for the tax credit.

So, while Energy Star may no longer be at the top of the heap, second is sometimes the better place to be.

Arlene Zavocki Stewart is president of AZS Consulting Inc., specializing in sustainable building advocacy, certification, training and promotion. She can be reached at azstewart@azsconsultinginc.com. The views and opinions expressed in this article do not necessarily reflect those of this magazine.

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