By David Kolata, Vice President of Policy at Sealed When we spend $4B to make homes energy efficient, failure is not an option

As a country, if we can make the most of the $4.3 billion from HOMES, we will have nailed this once-in-a-generation opportunity to decarbonize our homes and lower millions of Americans’ energy bills.

As a country, if we can make the most of the $4.3 billion from HOMES, we will have nailed this once-in-a-generation opportunity to decarbonize our homes and lower millions of Americans’ energy bills.

There are more than 141 million households in the U.S. today, and everything that powers them—including the electricity that runs our appliances, the gas that cooks our food, and the heating and cooling systems that keep us comfortable—represents one-fifth of all U.S. carbon dioxide emissions.

State agencies will soon be making a crucial decision that will either unlock or hinder our ability to slash those emissions and lower energy costs for millions of Americans: whether to measure and reward energy efficiency in the federal government’s HOMES program using models or actual measurements of energy reduction.

As is so often the case with big, ambitious programs like HOMES, administrative decisions on how to turn federal funding into benefits for average Americans will make all the difference.

The ability to shape and support those administrative processes to maximize benefits–whether they’re measured in kilowatt-hours saved or tons of carbon emissions reduced–is a big reason why I joined Sealed’s executive team. 

The aptly named HOMES program, which was included in the Inflation Reduction Act of 2022, is a landmark, $4.3-billion initiative that holds the promise of both changing the way we invest in energy efficiency and realizing the full potential of home energy efficiency as an energy-saving climate resource. 

The modeled approach to HOMES incentives is the status quo. Contractors estimate energy savings using models of how they expect energy use to decline after efficiency improvements. Incentives are then based on these estimated energy savings regardless of whether they represent reality or not. Historically, they have not—most traditional programs realize 50% or less of the estimated savings. The HOMES framework takes a step in the right direction to improve on this poor past performance by requiring models to adhere to BPI-2400, a stronger standard that uses actual bill data to calibrate and improve models over time. But the measurement-based approach provides the best option of all for tracking and rewarding efficiency gains.

The measured pathway of the HOMES program bases incentives on actual, measured energy savings. Under the measured pathway, companies known as aggregators are responsible for paying incentives to contractors and customers upfront and measuring the energy savings over time. If an aggregator overestimates the energy savings, they lose money. In other words, the private sector takes on the energy savings performance risk, not taxpayers. Even better, analysis from Sealed and other sources shows that the measured pathway will lead to more incentive dollars flowing to homeowners than the modeled pathway.

State and federal energy efficiency initiatives have been around since the 1970s, and have facilitated incremental progress in energy savings and GHG reductions over the last few decades. But today, incremental progress just isn’t enough. The HOMES program is the best chance we’ve ever had to make significant, nationwide progress on energy efficiency. We may not get another opportunity like this for a decade, or possibly longer, and with climate impacts intensifying and the country’s political future deeply uncertain, we cannot afford more of the same.

The International Energy Agency estimates that we can meet 40% or more of our climate change goals through energy efficiency—but this will only happen if we change how we invest in energy savings, and if we treat energy efficiency like a Virtual Power Plant.

Right now, approximately $3 billion is spent each year by states and utilities on energy efficiency, and nearly all of them rely on modeled estimates to determine how much participants in efficiency programs are rewarded. 

So why estimate savings instead of actually measuring energy use before and after energy efficiency improvements? 

The simple answer is that those kinds of measurements only recently became possible. Energy efficiency companies of all types and sizes are using new technologies to do it every day, and open source standards, like OpenEEmeter, are creating consistent calculations that anyone can use to determine actual—not estimated—home energy reductions.

In 2020, Americans voted for change. The Inflation Reduction Act is a reflection of that desire for change, including when it comes to energy efficiency.

Polling data from YouGov shows voters across the ideological spectrum are supportive of government investment that incentivizes weatherization and electrification. However, regardless of their personal politics, they want accountability for government spending on energy efficiency.

American businesses large and small are also excited about changing the way this country invests in energy efficiency. More than 60 companies just sent a letter to the U.S. Department of Energy expressing support for the HOMES program’s measured savings pathway, with an emphasis on empowering aggregators, the companies that will be accountable for realized energy savings.

The difference between measured and modeled savings for the HOMES program alone could be more than 4,000 TWh, about the same amount of electricity consumed by the entire U.S. in 2022. In the next few weeks, the U.S. Department of Energy will publish guidelines to determine how states can spend the $4.3 billion getting doled out for the HOMES program. Those guidelines will also make a call on whether energy usage data will be required for most, if not all, projects in order to measure results.

State Energy Offices will then need to decide if and how to spend their respective allocations, including whether to include the measured savings pathway. They would be foolish not to: Meeting the climate goals of the 21st century can only be achieved by measured savings, the clearest way to turn energy efficiency into a true clean-energy resource.

As I begin my work with Sealed, I’m finding that sourcing and utilizing data to make homes more comfortable and efficient is at the heart of everything we do here.

That’s what makes Sealed the perfect partner for promoting and maximizing the effectiveness of the HOMES program and others like it. This is a company built on data that succeeds by building new systems–hardware, software, financial, and more–that turn data into happy customers and climate progress.   

The Inflation Reduction Act is a historic federal investment in clean energy, but it’s just a start. At Sealed, we expect to help hundreds of thousands of Americans put HOMES funding to its best possible use. If the Department of Energy and state energy offices make the right decision and make hard data the foundation for HOMES, then our work will touch even more households and save even more energy. 

As a country, if we can make the most of the $4.3 billion from HOMES, we will have nailed this once-in-a-generation opportunity to decarbonize our homes and lower millions of Americans’ energy bills.

July 13, 2023