What If Home Builders Had to Pay the Energy Bills?

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air conditioner ducts outdoors

Three questions have been nagging at Rick Chitwood over the past 5 or 6 years. First, why is the HVAC industry in California, where he lives and works, so pathetic? Second, why have California’s strict energy standards, which have been in effect since 1978, not corrected the problem? Third, how is it that he, who came to the HVAC business through a nontraditional route, has become a leader in the industry?

The origin of a radical idea

This week at the Forum on Dry Climate Home Performance, Rick gave a short talk on the difference between what the models show and whas actually been achieved, and he concluded with 7 measures he believes should be required in California. The measures originated from some deep thinking he did upon re-reading Leverage Points: Places to Intervene in a System by Donella Meadows while he was on vacation last year. In that paper, Meadows argues that your best bet at achieving transformation is to change the paradigm. The least effective avenue is through standards and codes.

The best way to create a system that works well, Rick told me, is not to adopt the wrong paradigms in the first place. "That was me. I never learned the conventional HVAC approach. I didn’t learn the bad habits."

4 steps to transformation

As Rick thought about those nagging questions, he realized that four things needed to happen.

1. We have to pay attention to human nature. People will take the easier path when there are no negative consequences for doing so.

2. Move from energy models to reality. At the Dry Climate Forum this week, 'modeling' has been taboo. It's referred to here as 'the M word,' and speakers who talk about it risk not being invited back to the conference. These folks are into measured results.

3. Take the narrative away from the box manufacturers. Most installed HVAC systems perform like crap because HVAC companies follow the lead of the manufacturers, who just push the heating and cooling equipment and ignore the distribution side and commissioning.

4. Train the workforce. A great many of the installers and technicians are woefully undertrained in proper installation of HVAC systems.

Rick Chitwood's 7 Mandatory Measures

Rick works in California, which has a lot of requirements due to their building code, Title 24. One of those requirements is for HERS raters to do Title 24 compliance inspections and verification, and most builders, according to Rick, would like to eliminate the cost of that third party verification.

Here's his 7 step plan to accomplish that objective and, at the same time, transform the construction industry in California.

1. Downrate HVAC performance 50% in models. You can get credit for the other 50% by measuring full delivered performance once the system is installed.

2. Post the energy model results where everyone can see them. Energy compliance documentation includes predicted energy use in each category (heating, cooling, WH, base) in dollars (site energy & current rate structure) and these predictions must be posted on the electrical panel in every new home.

3. Publish energy model results and identify stakeholders. Place predictions (numbers from the computer models) for every new home in the registry and list the builder, energy consultant, HVAC contractor, & insulation/air sealing contractor. Make this info public.

4. Assure quality and hold stakeholders accountable. Installers test the delivered performance of their work on every system and record the results to the registry. Eliminate all HERS verification. Have the California Energy Commission do quality assurance on 1 in 100 systems. If cheating or errors occur every system installed in the last year must be tested - at the contractor’s expense.

5. Register actual disaggregated energy usage for every house every year. Compare actual with predicted.

6. Exempt home builder from Title 24 requirements if builder claims net zero energy and registers the actual performance every year. Registry is public info and home is connected to the builder, energy consultant, HVAC contractor, and insulation/air sealing contractor.

7. Every builder pays the utility bills on every home he builds for the first three years of occupancy.

Imagine home builders paying the energy bills

I think the last of his 7 measures has the power to reconstruct the construction industry. It is absolutely brilliant. I don't know how much of a chance he has of getting this adopted, but wow, what a change it would bring if he's successful. In California, it really could work because the builders would get some benefits by doing away with the current third party verification system.

Just imagine how energy efficient new homes would become if builders were on the hook for the first three years of energy bills! It wouldn't take them long to get all the air sealing, duct sealing, HVAC location, and insulation effectiveness right.

Can this work outside California? Maybe. It may sound onerous to home builders initially because they'd see it as another cost they're asked to bear. But I think the good ones would jump on it.

In fact, it could even become something that builders do voluntarily as a sales tool. They probably wouldn't do a full three years in that case, but home buyers would certainly take notice of a home that comes with the first year's energy bills covered by the builder. It's really the next logical step from guaranteed energy bills, which some companies offer.

What do you think? Genius, right?


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Jamie Kaye

Your friend Ken Fonnorow has some good info on that last item of his contractors paying energy bills! I think his builder in Florida is up to 2 years. I think that is amazing and the way to go! 
I love Chitwood's comment about his not having bad habits to break. I feel lucky in the same respects.  

Sean @ SLS CBS

Brilliant : ) 
In all seriousness, may I ask what you are all smoking or drinking? 
As for #6 - well I am sure you would see a bunch of solar bling with a ton of crappy equipment like naturally vented appliances, etc... 
As for #7 - oh you want me to pay for their 5 big screen TV's, no problem I will just take this here HERS projection & multiply by 3 & roll that into the cost. More profit for me - thanks


Give me a break! That's like saying, "What would these houses look like if these Green Geeks had to build them, sell them, and actually compete and make a profit?"

Bill Spohn

Great points!  
How about the builder funds the difference between the (negotiated) projected and actual energy use for the first year? 
That is still a commitment but gives leeway for both parties.


As long as it's voluntary on the builders part, I'm all for it !!!


Some builders in our area have already agreed to a maximum utility bill. They will pay the difference if the bills are higher. 
Another plan could be that the build pays HALF of the bills, each party has some skin in the game.

Mark Farver

If builders had to cover energy costs for the first X years of a home's life they would have no incentive to make any improvements that did not payback within that time limit. A lot of building technology improvements take a few years more than that to payback.  
In the automotive industry "We'll pay the gas for the first (year/life of lease)" incentives appear occasionally when gas prices spike. They are almost always applied to the LEAST efficient vehicles. This isolates the customer from the real lifecycle cost and gets those gas guzzlers and their large profit margins off the lot.

Chris Kaiser

I like everything except point 7. I mean, it's great in theory, but if a homeowner knows the home builder will be footing the bill, what's to stop the homeowner from going on an energy spending spree? Why bother turning down the thermostat in the summer? If anything, it should be up to the homeowner to interview their builder and ask them how they approach energy efficiency. Maybe a simple, easy to understand rating system that energy companies rank builders on so the layperson can understand.

Eric Werling

I like where Rick is going - toward measured performance, transparency, and accountability for results. These all work well in other industries (and even in governement). But - and this is a big BUT - I don't think we want a solution that removes occupant responsibility from the equation. If occupants don't pay their own bills, their part in energy waste will probably get worse. Maybe we can find a way to share the utility bills between the builder and the owner? Afterall, both have significant influence on how high or low it goes.

Skye Dunning

I like having the predicted and actual energy use public. I think any time you make things more transparent, everyone wins (except the cheaters). You could probably apply an open source model to this whole area.  
I also strongly agree with the "measured approach". I think modeling has been a challenging but useful tool for us, but something I don't see the reason to be using as our primary source of information much longer. With our data-driven society of today the barriers to using real numbers are coming down rapidly.  
But 4 and 7 I don't agree with. Small HVAC contractors could go for years without having a system tested. And 7 would just be complete chaos for many reasons. There aren't enough fingers on our hands to cover the blame slinging that would occur. 
There is another approach to this which is already in place. Heating/cooling bill guarantees. Right now we're using utility bill disaggregation to do this in different building programs around the country, and it works well. 
A different, but similar, approach could be space and water conditioning as a service. This service, sold by the energy consultant, would offer guaranteed HVAC and hot water set points for x dollars (btu's really, subject to change from utility price changes) per month. And these services could be expanded. I would like to offer those features plus clean water (the real elephant in the room of building performance/green building programs IMO) and clean air, verified at appropriate intervals. 
As with energy modeling, I think it's about time for utility bill dissagregation to take a step back, in favor of measuring actual electrical/fuel usage via home automation systems which are rapidly becoming affordable and accessible to the main stream. 

David Eakin

All this talk about new home construction is all well and good (but I am a larger proponent of USA-wide stretch goals for air sealing and insulation; ALL builders are required to meet building codes). 
What about existing homes (like your image)? How about this - all residences must comply with all new home construction requirements prior to title transfer? Will this re-energize the building industry? You bet! Will it require that millions of outmoded, unsafe energy hogs with no historic significance will be torn down and replaced (because it will cost less)? Sure - and everyone will benefit. Will it turn the real estate business on its ear? Yes - and this is where the largest resistance will be seen.

geoff hartman

Not a new idea, but one worth repeating.  
I worked with a builder in the dark ages of EE (early 1980s) who included the first year (somtimes 2) as a sales incentive. So in addition to guaranteeing energy bills, he wrote a check for the projected heatibg and cooling energy use and handed it to the buyer at closing. Then, if ht/cool energy exceeded the estimate, ge would cover tgat at the end of the year. 
Crazy? Crazy smart! He generally got asking price and the homes were the most comfortable and efficient in town. I never had a comfort, or high bill complaint from these homes.


Picture is frightenly common - customer wants cool, and asks contractor to do it cheapest way possible: 
Is it fair to blame the contractor? Is it fair to punish the contractor? Is it EFFECTIVE to punish the contractor, or is change better accomplished with INCENTIVE?  
Yes, people are providing guarantees:  
http://bit.ly/energywise-hersratingsdontcorrelatetoenergyuse http://bit.ly/ThermalInertia 
Recognize and reward excellence is the positive side of expose and punish crap. People aren't going to compete around quality unless there is REWARD for doing so.  
If we are going to move the WHOLE market, there needs to be POSITIVE incentive. People need to be PAID for doing better work, and how they are paid does not need to be money. It can be reputation. Tangible proof of who does the best work, or is most accurate has significant reward potential:  
Here's the premise outlined: 

Andy Wahl

Great list.  
I would change item #7 to: The architect and the builder would be bonded for the first 10 years of utility bills. If the building is not net Zero the bond would be required to determine why and pay to fix.

Dan Wildenhaus

t would certainly make Guaranteed Performance sales go up :-) 
I actually like the 50% credit until commissioned rule the best.  
Builders will never pay the bills though. That implies way to much responsibility after the homeowner moves in and starts doing weird stuff to and in the house. If you could instead allow a guaranteed performance plan to qualify you for code, you might be in business. 
Of course looking at real billing data compared to modeled data is a cool idea. Perhaps a matrix that gives heating/cooling/water heating projections based on number of residents, children and the elderly....compare that to real billing for heating/cooling/water heating (if they have a teenage daughter, that will impact hot water use!) would be a more realistic and easier to side by side metric. 
You could tie it in to homeowner bonus incentives if they can use 10% less than the matrix predicted if you had a willing utility.

Danny Gough

Since we started investigating high bill complaints in Energy Star homes some 3 years ago, I so identify with Rick's sentiments here. But I imagine some of his recommendations more driven by frustration than literality. Unintentional misrepresentations made by well meaning, poorly trained industries are still misrepresentations that damage the owner. Rick's intent is righteous - why not give the homeowner what they pay for. If a consumer buys a dozen eggs and gets home only to find only 8 in the carton, he got cheated. Our industry predicts there are a dozen in the carton, but we don't expect anyone to actually peak inside.