Retrofitting homes is a key tenet of President BidenJoe BidenPredictions of disaster for Democrats aren't guarantees of midterm failure A review of President Biden's first year on border policy Vilsack accuses China of breaking commitments in Trump-era trade deal MORE’s $2 trillion American Jobs Plan. The proposal he unveiled in April sets aside $213 billion to upgrade homes for affordability and energy efficiency, and deservedly so: Ushering in a carbon-free future will fall short if we don’t tackle home-energy use, which accounts for one-fifth of total emissions in the U.S.
Now, Congress is getting into the act: In May, it re-introduced the Hope for Homes Act. First put forward last summer, the legislation provides financial support for companies and homeowners looking to install modern energy upgrades to America’s aging housing stock. If passed, Hope for Homes would unlock almost $9 billion in incentives and training for a variety of home energy retrofits, including replacing old HVAC systems with new, more efficient equipment like heat pumps.
While Hope for Homes would represent an unprecedented investment in home decarbonization, the devil is in the details, specifically when it comes to how the money is spent. In order to learn the lessons of the past, Hope for Homes must ensure that the incentives are accessible to many trade allies (not just the installing contractor), given out based on energy savings performance, and are flexible. These incentives must be investments in market development, to businesses that will continue to grow the home energy retrofit market, even after the money runs out. Hope for Homes can succeed, but only if the program is truly aligned with the market.
Succeeding where others have failed
The U.S. is fortunate to have a guide on what not to do when it comes to rolling out a program like Hope for Homes. While we may have recently reaffirmed our special relationship with the U.K., in the case of home retrofits, the British example is one we should be careful not to copy.
In the summer of 2020, the administration of Prime Minister Boris Johnson revealed its own retrofitting scheme, a $2 billion plan to upgrade 600,000 homes. The money was to be doled out via Green Homes Grants, whereby homeowners and landlords could get up to $6,900 for various efficiency improvements — many of the same improvements (insulation, heat pumps, etc.) targeted by the Hope for Homes Act.
From the beginning, though, the U.K. employed a top-down method for administering funds. In order to apply for grant money, building owners had to get quotes from accredited contractors. In order to get accredited, contractors had to go through an expensive, tedious process, with no guarantee that it would translate to new work. Some contractors lost work while they waited on homeowners applying for grant money. Others went through with installing modern heating and cooling systems, but waited weeks for payment. In March of 2021, just six months after the program was announced, the U.K. cancelled the program for good.
Performance-based incentives or bust
For Hope for Homes to succeed, the U.S. needs to steer clear of this top-down approach. The easiest way to do that is to change up how the incentive money is distributed. Forget about just issuing customer rebates. Mass eligibility is the goal here: We want to encourage energy savings, not dictate how those savings are ultimately achieved or how the incentives are invested by the market.
Doing so relies on a market-aligned approach so that a diverse group of companies can work directly with homeowners however they see fit. That might mean a company like Angi advertising home-energy retrofits, generating leads for contractors who don’t have the same digital marketing budgets as big companies. Roofing or solar outfits might be able to bundle together package deals, whereby a new roof comes with upgraded attic insulation. Lenders who extend credit lines for home upgrades might offer better rates for homeowners swapping out their old HVAC system for a home heat pump.
Most of all, we need retrofit incentives that are performance-based. Incentive dollars shouldn’t be doled out according to what is upgraded in the home; instead, they should be put toward whether energy use is actually curtailed as a result of the upgrades. The current Hope for Homes Act already outlines a structure to make it happen, with many of the incentives based on the success of retrofits at the meter. In other words, Hope for Homes provides monetary incentives based on performance, with more money going to projects that reduce the most energy. This orients investments around calculated energy savings rather than complicated program rules based on measures, project costs, and lots (and lots) of paperwork.
To kickstart a home-energy revolution, the U.S. needs to pass the Hope for Homes Act and unlock the monetary incentives to drive the adoption of energy-saving retrofits. But to make that revolution stick, it’s important to support a market-wide push so a broad group of players can access the capital: After all, it will take many different approaches to pave the way toward cleaner, more comfortable homes. Only then will a retrofitting plan ultimately succeed — and put the U.S. well on its way toward meeting its broader emissions goals.
Andy Frank is the founder and president of Sealed, a New York-based home wellness company on a mission to modernize every home to be healthy, comfortable, and clean for the planet. He also serves on the boards of the Alliance for Clean Energy New York as well as the Energy Efficiency Alliance.