The Home Star Energy Retrofit Act of 2010: Operational and Market Considerations

Congressional research reportJul 29, 2010

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The Home Star Energy Retrofit Act of 2010:

Operational and Market Considerations

-name redactedSpecialist in Energy and Infrastructure Policy

July 29, 2010

Congressional Research Service

7-....

www.crs.gov

R41273

CRS Report for Congress

Prepared for Members and Committees of Congress

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Summary

The Home Star Energy Retrofit program as proposed is intended to promote both greater

residential energy-efficiency and increased employment in the home remodeling, energy services,

and related manufacturing industries. Two very similar Home Star programs are detailed in

legislation proposed in the House and Senate. The House of Representatives version, the Home

Star Energy Retrofit Act of 2010 (H.R. 5019), was introduced on April 14, 2010, by

Representative Peter Welch and 44 cosponsors. H.R. 5019 passed with amendments on May 7,

2010, and was referred to the Senate Finance Committee. The latest Senate proposal was included

as Division C Title XXX of the Clean Energy Jobs and Oil Company Accountability Act of 2010

(S. 3663) introduced by Senator Harry Reid on July 28, 2010.

Home Star would employ a two-tiered structure for energy-efficiency rebates. Its Silver Star

program tier would provide up to $3,000 per home in prescriptive rebates for straightforward

home upgrades, including insulation; efficient heating, ventilation, and air conditioning units;

new windows; and other measures. The Gold Star program tier would offer $3,000 rebates for

more comprehensive energy retrofits achieving at least 20% energy savings, with rebates

increasing up to $8,000 per home for retrofits achieving 45% energy savings. The Senate version

would also offer up to $1,200 per home for comprehensive water efficiency retrofits. Quality

assurance inspectors would visit 10% to 20% of participating homes to ensure measures are

properly installed. H.R. 5019 authorizes $6 billion in funding for the program. S. 3663 authorizes

$5 billion.

In both the House and Senate versions, the proposed Home Star program may present an

opportunity for both energy-efficiency and employment in the United States. The program targets

the residential sector, which numerous studies have shown to be among the largest sources of

cost-effective energy-efficiency opportunity in the United States. It also targets a wide base of

currently unemployed or under-employed residential contractors. Structurally, the Home Star

program seeks speedy implementation by building upon prior experience with both federal and

state energy-efficiency programs to provide operating models that might be replicated

nationwide. Nonetheless, several operational aspects new to such a federal program, or not

previously tried for a program of Home Star’s scale, may warrant further attention from

Congress. These include the use of rebate aggregators, a two-tiered rebate structure, technical

standards, and the general availability of rebates to all who may want them. Key market issues

include the inclusion of a “Do-it-Yourself” rebate option, high expectations for program

participation, and promoting the growth of a self-sustaining home weatherization industry. Given

that it would be a new federal program, the level of homeowner participation implied by the

rebate funding provisions in the Home Star proposal would far exceed that achieved by

comparable programs in their initial years.

Taken together, Home Star’s key operational requirements may present greater challenges than

some proponents suggest, and may present unanticipated obstacles to speedy and consistent

program implementation across the country. As Congress examines details of the Home Star

proposal, focusing on tradeoffs between rapid implementation, operational complexity, and

energy-efficiency impacts may be important. Balancing the twin goals of short-term job creation

and long-term investment in cost-effective energy savings could also be an ongoing challenge.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Contents

Introduction...................................................................................................................................... 1

Operational Issues ............................................................................................................................ 1

Rebate Aggregators ................................................................................................................... 2

Two-Tiered Rebate Structure ..................................................................................................... 3

Technical Standards ................................................................................................................... 4

Availability of Rebates .............................................................................................................. 5

Market Issues ................................................................................................................................... 6

“Do-it-Yourself” Option ............................................................................................................ 6

High Expectations for Program Participation ............................................................................ 7

Promoting Growth of a Weatherization Industry ....................................................................... 9

Conclusion ....................................................................................................................................... 9

Figures

Figure 1. DOE Weatherization Assistance Program—Cumulative Homes ..................................... 8

Figure 2. New York Home Performance with ENERGY STAR Program ....................................... 9

Contacts

Author Contact Information........................................................................................................... 10

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Introduction

Congress is concerned about widespread U.S. unemployment in the wake of the recent economic

recession. As of June 2010, the nation’s jobless rate stood at 9.5%.1 Particularly hard hit have

been workers in the residential contracting industry, which, by some estimates, faces

unemployment on the order of 25%.2 At the same time, policy makers have been concerned about

volatility in global energy prices, and the environmental and economic impacts of climate change.

Both Congress and federal agencies have been promoting policies to improve the energyefficiency of the U.S. buildings stock as a means to substantially reduce U.S. energy costs and

associated CO2 emissions. According to the Department of State’s 2006 Climate Action Report,

“by using commercially available, energy-efficient products, technologies, and best practices,

many commercial buildings and homes could save up to 30 percent on energy bills.”3

The proposed Home Star Energy Retrofit program is intended to promote both greater residential

energy-efficiency and increased employment in the home remodeling, energy services, and

related manufacturing industries. Two very similar Home Star programs are detailed in legislation

proposed in the House and Senate. The House of Representatives version, the Home Star Energy

Retrofit Act of 2010 (H.R. 5019), was introduced on April 14, 2010, by Representative Peter

Welch and 44 cosponsors. H.R. 5019 passed the House with amendments on May 7, 2010, and

was referred to the Senate Finance Committee. The Senate proposal was initially introduced

under the Home Star Energy Retrofit Act of 2010 (S. 3177), which was introduced by Senator Jeff

Bingaman and two cosponsors on March 25, 2010. This proposal was superseded by the Home

Star Energy Retrofit Act of 2010 (S. 3434), which was introduced by Senator Bingaman and 15

cosponsors on May 27, 2010, and also referred to the Finance Committee. A third Senate version,

the Home Star Retrofit Act of 2010, was included as Division C Title XXX of the Clean Energy

Jobs and Oil Company Accountability Act of 2010 (S. 3663) introduced by Senator Harry Reid on

July 28, 2010. H.R. 5019 authorizes $6 billion in funding for the program. S. 3663 authorizes $5

billion. The program would be administered by the Department of Energy (DOE) in both cases.

This report focuses primarily on operational and market aspects of the proposed Home Star

program. In particular, it addresses only limited aspects of job creation and economic stimulus

potential of the program. For the sake of brevity and clarity, the report does not cite specific

sections in the House or Senate bills related to Home Star; the provisions discussed below are

found in both bills. Accordingly, the report refers to one Home Star program, even though the

program appears in slightly different forms in the House and Senate bills. Some significant

differences between the House and Senate versions are noted. Other differences between H.R.

5019 and S. 3663 may be significant in other policy contexts that are beyond the scope of this

report.

Operational Issues

Home Star would employ a two-tiered structure for energy-efficiency rebates. Its Silver Star

program tier would provide up to $3,000 per home in prescriptive rebates for straightforward

U.S. Department of Labor, Employment Situation Summary, USDL-10-0886, July 2, 2010, http://www.bls.gov/

news.release/empsit.nr0.htm.

Home Star Coalition, “Senate Hearing Puts HOME STAR’s Job-Creating Potential in the National Spotlight,” press

release, March 11, 2010, http://www.homestarcoalition.org/documents/HSC_Release_031110.pdf.

U.S. Department of State, U.S. Climate Action Report—2006, July 2007, p. 40.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

home upgrades, including insulation; efficient heating, ventilation, and air conditioning units;

new windows; and other measures. The Senate version would also offer rebates for water-saving

products or services certified under the U.S. Environmental Protection Agency’s WaterSense

program. Under Silver Star, contractors are guaranteed a fixed rebate amount for installing

qualified measures, as long as they complete the necessary rebate applications and agree to postinstallation quality assurance inspections. Silver Star rebates would be paid automatically to

contractors upon job completion and submission of a rebate request. Quality assurance inspectors

would visit 10% to 20% of Silver Star participating homes (depending upon the certification of

the contractor) to ensure measures were properly installed.

The Gold Star program tier, by contrast, would offer $3,000 rebates for more comprehensive

energy retrofits achieving at least 20% energy savings, with rebates increasing to as much as

$8,000 per home for retrofits achieving 45% energy savings. The Senate version would also offer

up to $1,200 per home for comprehensive water efficiency retrofits. Under Gold Star, contractors

would use specialized software to model a home’s baseline energy/water use, then propose a set

of retrofit measures to improve that baseline, based on the modeling software calculations.

Retrofit measures could include those covered under Silver Star, or additional measures that could

yield significant savings. Before paying rebates, Gold Star would require “testing out” to

document actual energy/water savings once installation had been completed. Quality assurance

inspectors would visit 10% to 15% of Gold Star participating homes.

The proposed Home Star program may present a significant opportunity for both efficiency

improvements and employment in the United States. The program targets the residential sector,

which numerous studies have shown to be among the largest sources of cost-effective energyefficiency (and water-efficiency) opportunities in the United States.4 It also targets a wide base of

currently unemployed or under-employed residential contractors. Structurally, the Home Star

program seeks speedy implementation by building upon prior experience with both federal and

state energy-efficiency programs to provide operating models that may be replicated nationwide.

Nonetheless, several operational aspects of the program would be new to a federal program, or

have not been tried for a program of Home Star’s scale. CRS has identified a number of key

considerations which may warrant further attention as Congress reviews the Home Star program’s

operational details.

Rebate Aggregators

The Home Star proposal requires the DOE to implement a federal rebate processing system and

website with information about the program. It also directs the DOE to develop a network of

“rebate aggregator” intermediaries to administer the program on the agency’s behalf—facilitating

participation, processing rebates, and supporting quality assurance of energy retrofits. The DOE

has stated that it expects “a couple of hundred” organizations to serve as aggregators, including

home improvement retail stores (e.g., Lowe’s, Home Depot, True Value), existing energyefficiency programs, state agencies, and, potentially, trade groups and other contractor

associations.5 Rebate aggregator applicants would have to demonstrate the ability to administer

the rebate process and would need to have financial systems to process and track rebate

See, for example: McKinsey & Company, Unlocking Energy Efficiency in the U.S. Economy, July 2009, p. 10;

National Academy of Sciences, Real Prospects for Energy Efficiency in the United States, National Academies Press,

2010, pp. 31-84.

Cathy Zoi, Assistant Secretary for Energy Efficiency and Renewable Energy, U.S. Department of Energy, Testimony

before the Senate Committee on Energy and Natural Resources, March 11, 2010.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

transactions in conjunction with the DOE. The rebate aggregator function is intended to speed

program implementation by taking advantage of existing energy-efficiency program infrastructure

and contractor relationships.

Stakeholders have raised a range of questions regarding Home Star’s rebate aggregator function.

Some are examining the ability of the DOE to establish and manage rebate operations with a

multitude of potential aggregators in a timely and consistent manner. Contractor groups have

expressed concerns that, by virtue of their size, location, or sophistication, some rebate

aggregators may have an advantage in promoting rebates among the groups they serve, leading to

potentially inequitable distribution of rebates among contractors or homeowners. To address these

concerns, some have proposed that the DOE serve directly as the sole, national rebate aggregator,

or as an additional default national aggregator, to ensure the availability of rebate aggregation

services to every community or contractor in the United States.6 Whether the DOE is capable of

fulfilling such a role, especially the processing of individual contractor rebates, is unclear. As an

alternative to a national default aggregator, S. 3663 would give priority to reviewing the

applications of prospective rebate aggregators that offer to serve all qualified contractors within a

defined geographic region.

Because of the volume of anticipated rebate transactions under Home Star (2 to 4 million homes

or more), some stakeholders anticipate that specialized rebate processing firms may be contracted

by aggregators for Home Star transaction processing. For example, one national home

improvement retailer has stated that, should it choose to be a Home Star rebate aggregator, it

would likely contract out Home Star rebate processing to its existing rebate processing

contractor.7 Such processing companies focus exclusively on rebate transactions and offer the

advantages of quick execution, economies of scale, and the ability to adapt existing capabilities to

accommodate new rebate programs. However, such arrangements among numerous rebate

aggregators raise questions about the complexity, speed, and cost of establishing and maintaining

the administrative “back office” of the Home Star program—especially the requirements for data

and financial computer system integration with the DOE’s systems. Since some rebate processing

companies reportedly have experienced problems with consumer access or transactions, in some

cases linked to information technology (IT) failure, some stakeholders have expressed concerns

that the current Home Star proposals provide insufficient time for implementing and testing new

software and systems required under the program.8 Such stakeholders suggest that any errors,

limitations, or inconsistency in administering the program’s rebate processing functions could

create transactional bottlenecks or confusion among contractors and thereby reduce Home Star’s

overall market effectiveness.

Two-Tiered Rebate Structure

While Home Star’s two-tiered rebate structure offers a mechanism to capture the highest levels of

energy savings from very inefficient homes, some have expressed concerns that this structure

may unintentionally discourage energy-efficiency investments due to “cream skimming.” Cream

skimming of energy-efficiency opportunities, “in which relatively certain (but relatively shallow)

energy savings opportunities are selected in favor of more promising but more complex and

uncertain measures,” has long been documented as a challenge to efficiency retrofits in

Larry Laseter, Masco Home Services on behalf of the Home Star Coalition, Response to questions for the record from

the Senate Energy and Natural Resources Committee, March 30, 2010.

Jay Rebello,Vice President, Lowe’s Companies, personal communication, March 5, 2010.

Brian Gaar, “Comptroller Looks Hard At Appliance Rebate Foul-Ups,”Austin American-Statesman, April 9, 2010.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

buildings.9 Because the Silver Star rebates are simple, require no simulation or testing

capabilities, require no post-installation performance documentation, and involve no risk of

underperformance, they may be substantially more attractive to general contractors than Gold

Star rebates. The added complexity and administrative requirements of Gold Star may prove too

burdensome to some contractors if they believe they have a sufficient pipeline of Silver Star

opportunities. Moreover, many contractors with no additional training could begin work under the

Silver Star program immediately. Financially constrained homeowners might also prefer the

Silver Star program because it would require less investment and less risk on their part.

To the extent that contractors participating in Silver Star are from specialized trades (e.g.,

plumbers) rather than general contractors or integrated weatherization contractors, the structure of

Silver Star rebates could also concentrate participation in certain categories of measures. For

example, window installation companies may not be able or willing to install water heaters,

another Home Star measure. Likewise, plumbing companies promoting efficient water heaters

may not offer other weatherization services. General contractors could offer all the Silver Star

measures through their existing networks of subcontractors, but there may not be sufficient profit

opportunity to attract them to this kind of work. So participating homeowners in some markets

may face the prospect of dealing with multiple specialty contractors if they seek to take advantage

of the full array of Silver Star retrofit opportunities—an inefficient and inconvenient prospect.

Consequently, homeowners may choose to pursue only one or two Silver Star measures, even if

they could benefit from additional measures or a whole house energy retrofit. A result could be

widespread adoption of a few categories of Silver Star measures that end up being the most

economically attractive or the most aggressively marketed by installation contractors, with a

resulting concentration of program benefits among those contractor groups and associated

manufacturers.

For the reasons above, Home Star may experience lower-than-anticipated participation in some

Silver Star measures and in the Gold Star program overall. To the extent that homes are highly

inefficient, but participate only in one or two Silver Star rebates, some of their energy inefficiency

might become locked in because additional measures would become less cost-effective to address

later, after the “lower-hanging fruit” of Silver Star measures had been implemented. Such

behavior, if it materializes under the Home Star program, might not affect the overall number of

jobs associated with the program as a whole, but it could have important implications for the

distribution of expenditures within the program, the immediate capture of energy savings, and its

ultimate impact on the long-term energy-efficiency of the nation’s housing stock.

Technical Standards

An implementation issue of interest among some stakeholders is how the Home Star program’s

technical standards requirements may influence the speed and breadth with which the program

might be implemented. For programs like Home Star, technical standards can help to ensure home

services are provided at an appropriate level of quality and consistency across numerous

contracting companies. The selection of particular standards for the program also may determine

which contractors initially would be eligible to participate in the program and what home energy

information they would be able to provide for program management and evaluation.

Consequently, the choice of standards influences both the complexity of program deployment and

its administrative needs.

Evan Mills, Steve Kromer, Gary Weiss, and Paul A. Mathew, “From Volatility to Value: Analysing and Managing

Financial and Performance Risk in Energy Savings Projects,” Energy Policy, vol. 34, no. 2, January 2006, p. 191.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Home Star’s requirements for whole home simulation software to be used by contractors include

(explicitly or by reference) software packages authorized by the DOE’s Weatherization Assistance

Program, the Internal Revenue Service, and equivalent programs certified by states. By adopting

these widely used home simulation software packages, Home Star intends to facilitate contractor

participation, since many are already skilled in using one or more of these software programs.

From an administrative perspective, however, approving multiple software programs and versions

on a national scale may also complicate efforts at quality control because of differences in the

format, content, or transferability of home simulation information. The inclusion of waterefficiency measures and modeling in the Senate version adds additional modeling complexity to

the program. Such differences also may make comparisons of buildings and contractors

participating in Home Star more difficult.

Contractors who satisfy Home Star’s training certification standards would face less frequent

quality inspection than uncertified contractors. For workforce certification, the program

specifically authorizes existing skills standards established by the Building Performance Institute

(BPI), North American Technician Excellence, and the Laborers’ International Union of North

America (LIUNA). The Senate version also authorizes standards from the Home Builders

Institute. Unlike the home simulation software requirements, however, there may be other

training standards in widespread use that are not initially approved for Home Star certification.

Other standards could be authorized for Home Star if approved by the Secretary of Energy, in

consultation with the Secretary of Labor and the U.S. Environmental Protection Agency (EPA)

Administrator. However, the Home Star proposal offers limited process or approval criteria for

such authorizations. As a result, contractors may need to undertake additional, potentially

redundant, training or wait for the program to accept other standards. Retraining or certification

delays may put them at a competitive disadvantage.

Taken together, Home Star standards provisions for home simulation software and contractor

certification illustrate the attempt to balance quick program execution against operational

simplicity. The EPA’s recent experience with residential contractor certification under its 2008

lead rule demonstrates that such certification can be an unexpected bottleneck for program

implementation.10 If contractors wishing to participate in Home Star believe they face timeconsuming or costly training requirements, they may forgo certification altogether, accepting

higher job inspection rates as an acceptable alternative. Such an outcome might undermine the

intended purpose of the employee training standards—a more capable workforce, better contract

work, and lower costs for quality control.

Availability of Rebates

An issue related to the distribution of rebates is the availability of rebates to all homeowners who

want them. Some stakeholders have raised the possibility that uneven implementation of Home

Star may lead to the uneven distribution of rebates geographically or across specific measures if

Home Star’s rebate funds are quickly committed. Since Home Star rebates would be available

nationwide on a first-come, first-served basis, no state or contracting sector would be guaranteed

any amount of rebate funding. So it is conceivable that a limited number of states or contracting

sectors could capture the bulk of the rebate funding available if they are faster “out of the gate”

than others. Well-prepared Home Star initiatives in larger states could capture all of the Home

Star funding before aggregators in smaller states could catch up.

Dan Testa, “With New EPA Lead Requirements, Contractors Scramble to Get Certified,” Flathead Beacon,

Kalispell, MT, April 18, 2010.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Allocation of Home Star funds by state has been suggested as one way to ensure a broad

distribution of rebates, but some stakeholders believe that the allocation process could be timeconsuming and contentious. A reservation system for rebates could also be used, but such

reservation systems have sometimes led to rapid oversubscription of rebates when they first

become available, and they may not address the potential concentration of rebates among a

limited number of measures. For example, well-organized window installers in a particular state

could pre-sell numerous window retrofits in anticipation of the Home Star program, then reserve

rebates for the anticipated jobs en masse in the first hour of the program. Oversubscription of

reservations for appliance rebates occurred in a number of states implementing appliance rebate

programs under the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5), so it

may be a possibility for Home Star as well.

S. 3663 would review the distribution of rebates among the states during program

implementation, offering “technical assistance funding” to states that “have not sufficiently

benefited” from the Home Star program.11 What “technical assistance” and “sufficient benefit”

entail is unclear, however, and whether such remedies could be implemented quickly enough to

help an underperforming state is an open question. Consequently, the ultimate concentration of

Home Star rebate benefits among a limited number of states or home contracting sectors might be

an issue for Congress. Of course, if homeowner interest in Home Star is less than expected, the

availability of rebate funding may not be a barrier to participation, but it may raise other

questions about the overall impact of the program discussed further below.

Market Issues

In addition to the specific operational issues discussed above, three overarching market issues

may also warrant further congressional consideration—a “do-it-yourself” option, expectations for

program participation, and anticipated growth in the weatherization industry.

“Do-it-Yourself” Option

An issue of ongoing debate is the inclusion of “do-it-yourself” (DIY) rebates for Home Star

products purchased without installation services. The Home Star proposal contains such rebates,

up to $250 per home, for insulation and air sealing products. DIY rebates are viewed by some as

important to ensure sufficient consumer demand for qualified products and to make Home Star

funds accessible to homeowners with limited budgets for home weatherization projects.12

Because DIY products would not necessarily increase employment opportunities for contractors,

however, some policy makers do not favor a DIY option under Home Star. Others are concerned

that it would be difficult to ensure the quality of DIY installations, so that the federal government

would not know how much energy savings could be attributed to them. They favor funding only

measures installed by professionals with explicit and formalized quality control. As Congress

continues to debate the Home Star proposal, the size and scope of a DIY option may warrant

further attention.

§ 3016(i)(2)

U.S. Chamber of Commerce, Letter on the “Home Star Act of 2010,” Washington, DC, March 10, 2010,

http://www.uschamber.com/issues/letters/2010/100310homestar.htm.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

High Expectations for Program Participation

In its first two years as a new federal energy-efficiency initiative, Home Star may face challenges

achieving the high levels of homeowner participation implied by its level of appropriations. The

Home Star proposal in H.R. 5019 authorizes appropriations of $6 billion through FY2011, to

remain available until expended. The proposal in S. 3663 authorizes $5 billion through FY2012.

Under the House proposal, if $6 billion in appropriated funds were expended through 2012, and

combining both Silver Star and Gold Star, CRS estimates that total participation in Home Star

could be nearly 2 million homes in the first two years of the program or 1.6% of all U.S.

residential housing units in 2008. Others have projected participation rates as high as 5 million for

the program.13

Experience with programs similar to Home Star offers some perspective on the aggressiveness of

these participation goals. For example, under the DOE’s Weatherization Assistance Program

(WAP), home weatherization projects directly funded by the program reached approximately 2

million in 1992, 15 years after the program was initiated (Figure 1).14 The WAP program’s peak

year of annual participation was 1981, during which the program weatherized 353,000 homes.

The ARRA sharply increased funding for the WAP program and raised associated weatherization

goals to 586,015 homes over the three-year life of the act, but the program has not been meeting

these goals. Although weatherization rates under ARRA funding have since accelerated, the

DOE’s Inspector General reported that only 30,297 of the planned 586,015 weatherization

projects were completed by February 16, 2010.15 According to the DOE, 25,231 homes were

weatherized in May 2010, for a total of 134,167 homes weatherized with ARRA funding through

May 2010.16

Bracken Hendricks and Tom Kenworthy, “HOME STAR: Putting Americans Back to Work,” Center for American

Progress, Washington, DC, February 23, 2010, http://www.americanprogress.org/issues/2010/02/

home_star_back_to_work.html.

The DOE estimates that approximately 2.8 million additional homes were weatherized through 2008 by state

programs leveraging core weatherization funding from DOE.

U.S. Department of Energy, Office of Inspector General, Progress in Implementing the Department of Energy’s

Weatherization Assistance Program Under the American Recovery and Reinvestment Act, OAS-RA-10-04, February

2010, Appendix II.

U.S. Department of Energy, “Homes Weatherized by State for May 2010,” online table, July 21, 2010,

http://www.energy.gov/recovery/documents/Homes_Weatherized_by_State_for_May_7.21.10.pdf.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Figure 1. DOE Weatherization Assistance Program—Cumulative Homes

(Millions)

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

0.0

Source: U.S. Department of Energy, Office of Weatherization and Intergovernmental Program, Personal

communication, March 7, 2010, and “Homes Weatherized by State,” February 19, 2010, http://www.energy.gov/

recovery/documents/Homes_Weatherized_By_State_Dec2009.pdf.

New York’s Home Performance with ENERGY STAR Program, which is similar in most respects

to the Gold Star component of the Home Star program, served just under 30,000 homes over its

first nine years of operation (Figure 2). This total represents 0.75% of the 4.0 million homes in

New York potentially eligible for the program.17 Achieving this enrollment rate among the 97.1

million similar homes across the entire United States would yield approximately 728,000

program participants.

Comparing participation rates expected for Home Star with those experienced by the WAP

program or the Home Performance program in New York is only suggestive. There are significant

differences in the structure of these programs as well as in their funding, target markets, and the

time periods of their operation. In particular, the ARRA-funded weatherization under the WAP

program have been hampered by Davis-Bacon wage requirements, Buy American requirements,

historic preservation requirements, and other administrative issues that the Home Star program is

not expected to face. Furthermore, it is possible that general economic conditions in the United

States over the next few years may lead to comparatively higher or lower participation in Home

Star than those realized by the WAP or New York programs. Nonetheless, these comparisons

suggest that the level of homeowner participation implied by the rebate funding provisions in the

Home Star proposal would far exceed that achieved by comparable programs in their initial years.

Implementation experience and supporting infrastructure developed through the WAP program,

Home Performance with ENERGY STAR, and similar state programs could help Home Star

achieve higher market penetration more quickly than the earlier programs, but to what extent

remains to be seen. Consequently, Congress may consider alternative options for Home Star

U.S. Census Bureau, The 2010 Statistical Abstract, “Table 954 - Housing Units by Units in Structure and State:

2007,” 2010, http://www.census.gov/compendia/statab/2010/tables/10s0954.pdf. Potentially eligible homes are

assumed to include 1-unit detached homes and up to 4-unit attached homes. There are 5.2 million homes in these

categories statewide in New York, but approximately 1.2 million homes are either ineligible for this program because

they are in the service territory of the Long Island Power Authority, or are not targeted by the program for other

reasons.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

program administration and funding if its enabling legislation is enacted and initial participation

rates differ significantly from its initial goals.

Figure 2. New York Home Performance with ENERGY STAR Program

(Cumulative Homes)

35,000

30,000

25,000

20,000

15,000

10,000

5,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: New York State Energy Research and Development Authority, Home Performance with ENERGY

STAR Program, personal communication, March 8, 2010.

Promoting Growth of a Weatherization Industry

One of the motivations for the Home Star program, particularly the Gold Star rebates, is to

support the development of a self-sustaining energy-efficiency contracting industry in the

residential sector. As one group supporting the program has stated, Home Star “invests in building

a sustained market for energy-related home construction jobs that will keep producing economic

benefits well into the future.”18 However, while Home Star would undoubtedly benefit companies

currently engaged in for-profit home weatherization services, such contractors comprise only a

fraction of the home construction workforce the program seeks to benefit with new jobs. There is

little evidence that, after Home Star rebates are expended, contractors from the traditional home

construction industry will continue to pursue home energy retrofit services in favor of

conventional homebuilding and remodeling. Indeed, some home building contractor associations

believe that the contractors they represent will return to their traditional homebuilding work as

soon as U.S. home sales begin to improve. Furthermore, CRS has found little market evidence of

a growing, self-sustaining home weatherization industry across the states without the benefit of

federal or state weatherization incentives. Although some Home Star proponents believe that the

federal program will motivate states and localities to continue similar efforts after Home Star is

completed in 2012, such an outcome is highly uncertain.

Conclusion

The proposed Home Star program may present an opportunity to improve residential energyefficiency and increase related employment, but it contains a number of operational elements that

have yet to be tested—and may be challenging to implement—on a national scale. Key market

aspects of Home Star are also unpredictable. In particular, achieving the program’s high

expectations for homeowner participation would appear to be unprecedented for the types of

Hendricks and Kenworthy, February 23, 2010.

Congressional Research Service

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

contractor-installed measures it includes. Taken together, Home Star’s key operational

requirements may appear more challenging than many may anticipate, and may present

unanticipated obstacles to speedy and consistent program implementation across the country. As

Congress examines details of the Home Star proposal, focusing on tradeoffs between rapid

implementation, operational complexity, and energy-efficiency impacts may be important.

Balancing the twin goals of short-term job creation and long-term investment in cost-effective

energy savings could also be an ongoing challenge.

Author Contact Information

(name redacted)

Specialist in Energy and Infrastructure Policy

/redacted/@crs.loc.gov, 7-....

Congressional Research Service

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