The Anatomy of a Successful New Homes Energy Efficiency Program

A utility-sponsored new homes energy efficiency program provides a great mechanism for utilities to incentivize energy efficiency. These programs benefit customers by helping to improve the efficiency of new homes in a market, they benefit builders by allowing them to capture rebates for efficient building practices, and they benefit utilities by allowing them to strategically reduce and control demand, improve their brand, satisfy energy efficiency regulatory requirements, and defer infrastructure costs.

A good new homes energy efficiency program has the following components:

  • Financial Incentives to drive builders to build more energy efficient homes.

  • An energy modeling tool to calculate energy efficiency.

  • A reference home (or baseline home) used to calculate how much energy was saved for rebate calculations and regulatory savings claims.

  • Quality Control / Quality Assurance to ensure that the data being collected to process rebates is accurate.

  • A streamlined submission and processing workflow that minimizes labor of all parties involved.

Here’s a quick look into each of these components:

Financial Incentives:

There are three major methods for an efficiency program to structure financial incentives, with many variations on each of these methods:

  1. Performance-based incentives (sometimes called Pay for Savings). This means that the dollar amount of the rebate a builder receives is directly related to the amount of energy savings their home is predicted to achieve. Some examples of performance-based rebate structures are:

    • A simple dollar per energy saved payout, e.g. offering $0.15 per annual kWh saved.

    • A payout based on percent of energy savings. E.g. offering a home $50 for each percentage point of energy savings compared to the reference home.

    • A blended payout approach. For example, a $500 rebate for being 10% more efficient than the reference home, plus $0.20 per annual kWh saved beyond that 10%. Programs can also add “kickers” like an extra $100 incentive for smart thermostats or a bonus incentive of $500 if the home achieves 20% improved efficiency over the baseline home.

  2. Tier-based incentives. This means that the home needs to meet certain thresholds to receive rebates. Some examples include:

    • A single-tier system, e.g. the home needs to meet ENERGY STAR and a HERS Index of 70 in order to receive a flat rebate amount.

    • Multi-tier systems, e.g. a payout of $500 for a HERS Index of 70 or lower, $1,000 for a HERS Index of 65 or lower, and $1,500 for a HERS Index of 60 or lower.

  3. Prescriptive-based incentives (sometimes called measure-based). This means that a home receives pre-determined chunks of rebates for individual improvement measures, like installing an efficient HVAC system. The total rebate is the sum of all the measures implemented.

Generally, performance-based incentives are strongly preferred because they directly incentivize the end goal, which is energy savings. Sometimes prescriptive-based or tiered programs are preferred for their simplicity, but the complexity of a performance-based program can be easily eliminated by implementing good submission, calculation, and processing solutions. Here at Ekotrope, we focus on solutions that enable the best of both worlds - a robust performance based program with low administrative costs and excellent participant experience. The goal is to tune the program to properly incentivize what is most valuable to the stakeholders involved.

The Energy Modeling Tool

An energy modeling tool is a critical component of a new homes program, because it is required in order to determine energy savings and incentive payout. Most new homes programs leverage the HERS Rating system and use RESNET Accredited HERS Rating software for their savings calculations. Ekotrope is one of three RESNET Accredited HERS Rating tools, utilizing a proprietary hourly-based simulation engine that is both fast and accurate.

Ekotrope is the software partner of choice for over 40 Residential New Construction Programs across the country. More than 50% of all residential new construction program submissions in the US are completed in partnership with Ekotrope. Our suite of tools provide utility programs with access to builders and raters at the most critical points of the home energy modeling process, ensuring increased program participation and more energy efficient homes. Learn more about our utility solutions here.

The Reference Home

A reference home is also a critical component of a new homes program, because it serves as a baseline for the energy savings calculation. Typically a reference home is defined as a set of energy specifications that fairly well match the new home energy code for the region. Thus, savings can be claimed for any improvement that a builder makes to their homes beyond the required energy code. Ekotrope allows programs to define fully customized reference homes, and we embed these reference homes into our modeling software to make it very easy for raters and builders to estimate their rebates during the design process.

Some examples of common reference homes are:

  • A local or state energy code performance path reference home.

  • A national IECC (e.g. IECC 2015) performance path reference home.

  • A performance path reference home (see above examples) with federal minimum equipment. This allows a utility program to incentivize high efficiency HVAC systems, which are not given savings credit in most energy codes.

  • A completely custom reference home, typically based on a “Baseline Study” performed in the program region.

Ekotrope supports all of the above examples of reference homes in programs across the country.

Quality Assurance / Quality Control (QA/QC)

High quality data is of utmost importance to a utility program to ensure that savings claims are valid and defensible. To assure that data is high quality, programs typically implement at least two layers of QA/QC:

Field Inspection and Modeling Oversight

Most new homes energy efficiency programs leverage HERS Raters, who must contract with a HERS QA Provider and abide by RESNET’s strict QA/QC policies, which means that 10% of modeling files undergo a detailed review by a Quality Assurance Designee, and 1% of field inspections must be verified in-field by a Quality Assurance Designee. HERS Raters also have strict training and education requirements. This provides a base level of quality and oversight and ensures proper inspections and modeling. Many programs also go above and beyond this level of QA/QC and perform their own model reviews and/or field QA.

Automated QA/QC

A good new homes program also includes a strong set of automated QA/QC checks that run on every home submission. This dramatically reduces administrative time and improves data quality. At Ekotrope, we recommend implementing QA/QC checks embedded directly into the submission process (see below) so that the checks are applied upstream from the program administration team.

The Submission Process

A well designed submission process is essential for a smoothly operating program. There are several options for a submission process for new homes programs:

  1. Email-based submission. Raters email reports or files to a program administrator to process savings and incentives. This is typically only sustainable for very low volume programs.

  2. Web-based submission portals. This involves a stand-alone web portal where raters can upload their homes, and it can sometimes involve automated processing and QA steps. This type of system typically scales better than an email-based submission process, but it requires the rater to use multiple tools and it means that QA checks happen downstream of the modeling for each home. Participant experience is a major concern with this type of submission process.

  3. HERS Rating Tool embedded submission process. This allows the rater to simply click a button from within their HERS Rating tool to submit the home to the program. QA/QC checks and incentive calculations are embedded natively into the rating tool, making the results easily accessible and ensuring the rater and builder together can quickly make energy design tradeoff decisions. Ekotrope highly recommends this type of submission process for programs that want to operate and scale effectively with low administrative resources.

A new homes program can be extremely effective, productive, and rewarding. Our recommendation for any program is to thoughtfully consider each of the above elements, implement the appropriate solutions, and assemble a quality personnel team. If those three steps are taken, the program is bound for success!

If you have any questions about energy efficiency programs or how to leverage Ekotrope as a solutions partner, please contact us at info@ekotrope.com.

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