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Letters: November/December 2011: November/December 2011

November/December 2011
This article originally appeared in the November/December 2011 issue of Home Energy Magazine.
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Remembering Darin Hughes

The home performance community lost a star when Darin Hughes, the founder of HughesCo, Incorporated, died of apparent cardiac arrest at his home in Grand Island, New York, on August 24. He was forty-eight years old.

His obituary in the Buffalo News gave details about his life, noting his success as a home performance contractor, his regular appearance on local TV as the energy efficiency guru, and the fact that his was one of the first companies approved through Home Performance with Energy Star. Many of us knew him, and his story, as told a few years ago in Home Energy, has inspired many more of us. Here are some excerpts:

It would be hard to imagine a more ardent, outspoken proponent of home performance principles than Darin Hughes, president of HughesCo, Incorporated, in Amherst, New York.

Occasionally homeowners don't see the savings he predicts, but with a little sleuthing Hughes can usually figure out why. Hughes worked on the home of Linda Pellegrino, a cohost of AM Buffalo, a television show that Hughes appears on regularly. One day when he walked on the stage of the live show, Pellegrino was waving her bill at him from across the room, saying that she hadn't seen any savings. A quick look at her bill told Hughes that the usage was an estimated amount. "Wait until your next bill, when you will get the actual usage," he said on live TV, "and you will see at least a 50% savings on your heating bill." Four weeks later, as he approached the set, Pellegrino was waving around a different bill. Her savings were closer to 70%. "That afternoon, after that segment, I got 30 phone calls from new customers," says Hughes. ("Remodeling a Business," HE Sept/Oct '04 p. 42)

[Larry] Zarker's favorite anecdote of a successful sell to a homeowner was told to him by Darin Hughes, who described his first two home performance contracts after he transitioned from a successful career as a remodeler. On both occasions, Hughes was asked to find what he describes as the "pain points" in the home, which in these cases was the homeowners' inability to keep the second story of the house cool in the summer or warm in the winter. When the services had been completed, the invoice paid, and the customers well on their way to comfort, the contractor returned for a follow-up test to see if the efficiency numbers and the customers' comfort matched. On both occasions the contractor and his entire crew were met with "big bear hugs." That's a happy customer. ("The Smart Sell," HE Jan/Feb '08, p. 30)

There are more than a few big personalities in the home performance community, but Darin was unique. He will be missed.

Erratum

The bio for author Andrew Rudin was inadvertently cut from his article, "My Experience with Solar Electric and Solar Hot-Water Systems" (Sept/Oct '11, p. 50). The editors regret the error. Here is the missing bio: Andrew Rudin lives in Melrose Park, Pennsylvania, where he serves as an energy consultant to non profit organizations.

Readers' Forum: Do I Really Have to Eat My Vegetables?

Home Energy occasionally receives and publishes letters from readers that do not refer to previous articles but reflect a common concern of the home performance community. We invite readers to send letters expressing opinions and ideas for this section of the magazine.

As an efficiency industry, we sometimes mistake what makes good public policy for what is actually the best deal for our customers. Sealing ducts and blowing in attic insulation is equivalent to eating all your vegetables before being allowed to move on to dessert; everyone knows it's the right thing to do but, boy, does that dessert look good! A prime example of this can be seen in the solar-power industry. We often talk about how much better it is for homeowners to reduce than produce. Clearly, from an energy policy perspective it makes a lot of sense to reduce energy usage before investing in expensive generation.

However, when you look through the lens of the customer — with public policy such as the 30% solar tax credit, combined with financial tools such as the Solar Lease and Power Purchase Agreement (PPA) — it is an open question if it is really a better deal to do efficiency first.

The solar industry is booming like never before, based on its ability to provide consumers with a simple no-risk value proposition. The solar industry says to its customers, "We will guarantee your monthly energy savings with nothing up front, and we will remove all performance-related risk down the road." Contrasted with energy efficiency, which asks people to buy ten years' worth of savings up front, typically with little data to substantiate our prediction. Is it surprising so many consumers are choosing solar? It's a no-risk, all-reward proposition.

In the energy efficiency industry, financing is often treated as the Holy Grail. However, in programs and states where very low-rate financing is available, relatively small numbers of consumers are taking advantage of it. While financing is important, by itself it does not appear to be the major driver of demand that we once considered it to be.
Unlike a solar PPA, energy efficiency financing does not reduce risk; in essence it allows people to take on risk that they might not have otherwise been able to afford. And there are real and significant risks in home performance. Are homeowners really going to see the savings they are promised? Unfortunately, the answer for many homeowners will be no. That does not mean home performance does not work. It does mean that even our most advanced models are not able to predict savings perfectly on a house-by-house basis.

Even if energy savings are right on average, there are always winners and losers. And if you were promised 20% savings, and are one of the unlucky folks who, for a variety of reasons, end up only seeing a 10% reduction on your bills, you are no happier when you find out that someone else saved 30%. Now compare this to the solar PPA. Rather than having risk stay with a homeowner, aggregators such as SunRun create a pool of homes, and are then able to provide every homeowner with a guarantee of performance.

While energy efficiency is clearly a more volatile and harder-to-predict commodity than solar, it is also cheaper, and has the added advantage that people are not buying efficiency on price alone.

So the question is, Could the home energy efficiency industry offer our customers a value proposition similar to the solar PPA?
To get there, we need data and certainty about our ability to predict and then deliver on savings. This is not to say that we need to be correct 100% of the time, but rather, that we need to know how right we are on average. The less variance, the less it will cost to insure that risk and hedge the bet in the market.

To start with, if we take just heating and cooling energy, and control for behavior with an Internet-enabled thermostat, we could quickly have something that we are pretty good at predicting. Rather than buying insulation and ductwork, we start to sell consumers on "cold beer and warm showers" — which in home performance is guaranteed heating and cooling energy use and guaranteed comfort. A consumer will choose their monthly bill by choosing a plan that guarantees a set point with a certain number of degrees of variance, combined with a number of demand response events. The more flexible the consumer, the less their bills will be.
This does not have to mean giving up control. If Grandma comes over for a visit and the homeowners want it to be 78°F inside to make her comfortable, they simply override the thermostat. But those homeowners can expect a surcharge on their bill at the end of the month for the extra energy they used. Not only does this put the energy efficiency retrofit into terms homeowners understand; it also puts the industry in the value chain where it belongs. Now it can be profitable to produce quality work that delivers real savings — versus the current reality, where quality tends to mean less profits in a market with little price elasticity.
This alignment of interest means that standards and quality assurance will move from being things that are enforced on the industry by regulators to things required by the market.

Solar is a great example. Solar PPA and lease companies currently have installation standards that are significantly more rigorous than anything that has previously been required by solar installation programs, with 100% quality assurance. Once the home performance industry starts to view savings as a profit center (as well as a potential risk if savings are not delivered), the industry will be incentivized to police itself.

It is working in solar and it can work for energy efficiency. When we align the interests of homeowners to avoid risk while saving money and gaining comfort with the bottom line of industry, we will see this industry grow up and finally start to achieve the promise of jobs creation and energy savings that we all believe is possible. So next time you look down at the solar industry, or tsk at a consumer with an old air conditioner and 5 kW of solar, you should ask yourself why you expect your customers to pay you to eat lima beans when they can have a milkshake for free.

— Matt Golden

Founder and advisor, Recurve

San Francisco, California

 

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