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COLUMN-Housing upgrades best 1st step to cut energy bills: Wynn

Gerard Wynn
Thursday, 24 Oct 2013 | 10:52 AM ET

(The author is a Reuters columnist. The opinions expressed are his own)

LONDON, Oct 24 (Reuters) - Taxpayer- or consumer-funded incentive programmes to push all private homeowners in Britain and the United States to improve energy efficiency are likely to produce savings in energy bills that far exceed their cost, besides cutting carbon emissions.

So far, governments have targeted efficiency programmes on social housing and have left private homeowners to pay for their own improvements - except for some complicated, voluntary schemes that have had few takers.

A study by researchers at the U.S. government's Lawrence Berkeley National Laboratory (LBNL) shows that there are easy energy efficiency pickings to be had in the wider housing market.

In the United States, heating and cooling account for nearly half of all residential energy consumption, which in turn is responsible for nearly a quarter of the nation's energy use.

In Europe, governments are seeking ways to reduce residential energy bills due to higher gas prices and the high costs of subsidising renewable energy. Efficiency efforts can achieve the same carbon goal as renewable energy at lower cost.

A renewed focus on efficiency makes sense in a world where political qualms are being increasingly expressed about the cost of cutting carbon emissions.

SAVINGS ESTIMATES

The LBNL study, published this week, found substantial potential savings from insulating all 114 million U.S. households by improving air-tightness to a modest level and boosting ventilation to maintain internal air quality. ("Energy impacts of envelope tightening and mechanical ventilation for the U.S. residential sector")

The study estimated the potential savings from requiring all housing to achieve the average energy saving that is now reached under the Westernization Assistance Program (WA) for low-income homes.

That would cut energy use for heating and cooling by 14 percent, which would save an estimated $11.5 billion a year, the study estimated, or about $100 per household if applied to all homes.

Savings would differ widely, however, depending on the local climate, state-regulated energy prices and type of housing, the study found. Potential savings exceed $1,000 annually for homes in the worst condition in northern states, for example.

A more advanced standard would achieve the level of efficiency (as regards air-tightness) now seen in the top 10 percent of the present housing stock.

That higher standard would cut consumption by 28 percent and save about $22 billion in bills annually, the study estimated. In such a programme, higher-income homeowners as well as poor homeowners could make substantial energy savings.

THE QUESTION OF COSTS

It was beyond the scope of the study to compare these savings with the cost of home improvements, which are clearly required to calculate the net benefit.

For the WAP scheme, the U.S. government's Oak Ridge National Laboratory (ORNL) has calculated energy savings amount to $1.80 for every $1 invested. Low-income homes tend to be in relatively poor conditions, however, so the savings from a wider national rollout would be less.

WAP is the largest residential energy efficiency programme in the United States and targets households with incomes less than double the official poverty line. It has provided services since 1976 to more than 6.4 million households.

Typical improvements include installing insulation, sealing ducts (for air conditioning), tuning and repairing heating and cooling systems, reducing air infiltration and reducing electric baseload consumption.

Average annual savings in 2010 were $436 per household, according to ORNL.

The agency calculated total average costs per household of $5,704 and energy savings of $10,253 (in 2008 dollars).

BRITAIN'S PROGRAMMES

Britain's 1.3 billion pound ($2.1 billion) annual Energy Company Obligation (ECO) programme provides upgrades to low-income housing and passes on the cost to all power consumers.

It funds measures including boiler replacement, cavity wall insulation, and attic insulation.

In January the government introduced the so-called Green Deal as an initiative for efficiency upgrades across all of Britain's 26 million households, but take-up has been poor so far.

The scheme allows households to borrow money to fund whole-home improvements, and its aim is for the value of monthly savings on energy bills to exceed the cost of monthly debt repayments.

Households would have to borrow at a relatively high rate of nearly 7 percent through one major provider, the Green Deal Finance Company. As of September, the number of deals totalled only 2,456, government data show.

The programme has attracted few takers primarily because homeowners must bear the costs, rather than all ratepayers.

A focus on social housing makes sense in order to upgrade the worst buildings and reduce bills for those who spend the biggest share of their income on energy.

But it also may make sense to roll out the same centrally-funded approach across the entire housing stock.

More data is needed to estimate the net benefit after including the cost of improvements. And a nationwide programme still could target types of homes and regions that tend to achieve the highest savings for every dollar or pound spent.

($1 = 0.6168 British pounds)

(editing by Jane Baird)