Is energy efficiency broken?

If you’re a regular Shelton Group client, reader or follower, you’ve heard our party line about the problems with successfully marketing energy efficiency:

  • You’re dealing with a consumer market that doesn’t think they need what you’re selling.
  • They don’t think they need what you’re selling because the industry keeps selling “energy efficiency,” and nobody wants to buy energy efficiency. They want to solve a problem, and generally improve the comfort, health and safety of their homes … which allows them to feel relieved/smart/in control/like rock stars.
  • The end result is that we spent $7 billion on utility energy efficiency programs in this country last year alone (that’s all in – program administration costs, rebate money, sales & marketing, etc.) … and two-thirds of the population is blissfully unaware that those programs exist.

So, clearly, we have big issues with making the marketing of energy efficiency programs, products and retrofits much more cost-effective (and Shelton Group is working with our clients every day to turn this around). But a bigger question has been raised lately about the cost-effectiveness of energy efficiency programs altogether. Specifically, the recent EPIC study calls into question whether or not low-income weatherization programs actually deliver the projected savings they promise. Here’s an excerpt from the overview on the website:

Participating low-income households were provided with about $5,000 worth of weatherization upgrades (e.g., furnace replacement, attic and wall insulation, and weather stripping) per home at zero out-of-pocket costs. While the researchers found that the upgrades did reduce the households’ energy consumption by about 10 to 20 percent each month, that only translated into $2,400 in savings over the lifetime of the upgrades – half of what was originally spent to make the upgrades, and less than half of projected energy savings.”

Many organizations highly invested in energy efficiency have responded to this study’s assertions, and the best response, I believe, comes from ACEEE. Their response reminds us all that some of the bigger benefits of energy efficiency have nothing to do with utility bill savings. Which gets us back to the point I made at the beginning: what people really want to buy is not energy efficiency itself and not even just energy savings. We must understand the emotional value delivered by energy efficiency and market THAT.

For a real-world perspective on this, I reached out to Nate Adams, one of the country’s premier Home Performance thought leaders and implementers (we speak at a lot of the same conferences and write for a lot of the same media). Nate’s a guy who’s in the field every day working with homeowners to not only convince them to pull the trigger on energy efficiency upgrades, but then doing the work and tracking ALL the data points related to results. Here’s an edited version of his response to the question, “What do you make of this study’s findings?” I’ve bolded a few of his key points that happen to agree with the point I’m making here.

A core problem begins from the assumption that energy efficiency measures must or should “pay for themselves.” Very few things in life are free; it’s more of a question of how much are they worth? By expecting efficiency to be free, an impossible expectation is set.

Currently, low utility costs in much of the U.S. make “cost-effectiveness” from energy cost savings alone impossible. Our $15,000 projects often only save $300-500/year. This is typically a 30-70% drop in heating and cooling costs. Even at a $5,000 project cost, which is typically too little to deliver substantial energy savings, the math is challenging at best.

From my understanding, the energy cost savings are only a portion of WAP [Weatherization Assistance Program] cost-effectiveness calculations. Weatherization upgrades (taxpayer subsidized) and Home Performance upgrades (private market) often come with substantial health benefits, like reduced asthma and absenteeism.

In the private market, fixing problems other than utility costs are the drivers of almost all of our projects. In the rare cases where projects are cost-effective, the client first reached out to solve a problem like ice dams or uneven comfort, not energy bills. Fixing these problems has real value to both weatherization and Home Performance clients, but they aren’t part of a simplistic cost-effectiveness test.

The cost-effectiveness of weatherization programs is a stickier subject than for private programs, since government money is being used, but keeping “non-energy benefits” (NEBs) in mind is critical. By all means, put a value (and track the savings) on energy use reductions, but putting a value on health and community benefits is critical as well.

On the private side of things, programs need not pay for entire upgrades. Homeowners determine the value of solving problems they want solved. Energy efficiency is merely an after-effect of these upgrades, if they are well designed and implemented.

Focusing entirely on cost-effectiveness from energy savings alone is not a tenable path. Consumers care more about cost than cost-effectiveness. Can I afford it and will it solve my problems?

So, for weatherization programs, target low-income families with children who are frequently in the hospital with respiratory issues and fix those homes with healthcare money. Reduced healthcare costs may pay for that project in a year or less, according to Kevin Kennedy of Children’s Mercy Hospitals in Kansas City.

In the private market, focus on clients who have a real problem they want to solve. It’s working for my company, Energy Smart Home Performance.

The key, again, is in leveraging BOTH energy benefits and non-energy benefits. That is about as simple as you can make this complex beast. Until that happens, utility efficiency programs and weatherization programs will continue to struggle with uptake and cost-effectiveness, and we’ll continue to see studies that make us all look bad. Let’s fix that!

I couldn’t agree more. Let’s fix it … and the way to fix it in the private sector is NOT to conclude that energy efficiency doesn’t work, but instead, to “get it” that the way we’ve been marketing it doesn’t work, and to start marketing the benefits people actually care about.

About the Author

Suzanne Shelton

Where Suzanne sees opportunity, you can bet results will follow. Drawing on her extensive knowledge of both the advertising world and the energy and environment arena, Suzanne provides unparalleled strategic insights to our clients and to audiences around North America. Suzanne is a guest columnist in multiple publications and websites, such as GreenBiz, and she speaks at around 20 conferences a year, including Sustainable Brands, Fortune Brainstorm E and Green Build.

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