What is Demand Response?

Demand response is a new way for utility companies and co-ops to deliver power to customers. It has the potential to significantly change the way customers and utilities work together. So what exactly is demand response? Pretty much what it sounds like!

Electricity meter with demand response caption

What you need to know about demand response

Demand response is a way for utility companies and co-ops to more efficiently deliver electricity to homeowners, based on how much electricity is in demand at any given time. Peak demand in the home is in the morning, when we’re all getting ready for work and school, and in the evening, when we all come home to fix dinner, do our household chores, watch TV, or have the neighbors over for a visit.

It’s common sense: when we’re at home we demand more electricity from our utility. When we’re not at home, that level of demand drops. We might only have the HVAC system on, and the usual appliances and electronics humming along in the background. Demand response helps utilities balance that peak demand in the morning and evening with the lower demand in the afternoon and late at night, when we’re out of the house or asleep.

How you can take advantage of demand response

A basic programmable thermostat from Honeywell

Demand response programs may be offered by your utility company or co-op. Check out those inserts in your next utility bill! You may be eligible for real savings every month, just by using your dishwasher and laundry machines in times of lower power demand. Your utility might also offer you “time-based rates,” which can be more or less expensive, per kilowatt-hour, based on the time of day and the demand on the utility’s power generation capabilities. Most time-based rates (they’re also called “peak pricing,” “variable pricing,” “real time pricing,” or similar names) follow the basic law of supply and demand. When demand is high, in the morning and evening, prices are a little bit higher. When demand is low, in the afternoons and late at night, prices will be a little bit lower.

Utilities offer demand based rates to encourage you to use your major appliances, like your dishwasher and laundry machines, at the low-demand times of the day. This can be a win-win situation. . Your utility wins, because they save wear and tear on their equipment. You win because you save money on your electricity costs by using your major appliances in those lower demand times of the day.

What’s next for demand response?

According to the Department of Energy,

The electric power industry considers demand response programs as an increasingly valuable resource option whose capabilities and potential impacts are expanded by grid modernization efforts. For example, sensors can perceive peak load problems and utilize automatic switching to divert or reduce power in strategic places, removing the chance of overload and the resulting power failure. Advanced metering infrastructure expands the range of time-based rate programs that can be offered to consumers and smart customer systems such as in-home displays or home-area-networks can make it easier for consumers to changes their behavior and reduce peak period consumption from information on their power consumption and costs.

Demand response programs are created and managed by utility companies and co-ops. But homeowners, renters, and landlords who choose to participate in utility programs will find real benefits, including saving money on their electricity bills every month.

Shaheen-Portman, the SAVE Act, and the All of the Above Energy Policy

Shaheen-Portman, the SAVE Act, and the All of the Above Energy Policy

Last month we reported on President Obama’s “All of the Above” energy policy following his State of the Union speech. Especially important for the home performance industry are proposed laws like Shaheen-Portman and the SAVE Act. These will help homeowners take basic steps, like performing home energy audits, and undertaking weatherization, air sealing, and HVAC retrofit and upgrade work, that can be part of everyone’s personal energy policy.

Secretary of Energy Dr. Ernest Moniz wrote a letter to BreakingEnergy.com explaining why and how “All-of-the-Above is Making a Difference Across America.” Dr. Moniz focused on generation in his letter, noting that California’s Ivanpah solar thermal plant will power 100,000 homes thanks to a successful public-private partnership and a loan from the Energy Department.

In Waynesboro, Georgia, a $6.5 billion loan will help start construction on advanced nuclear reactors at Plant Vogtle, powering “1.5 million homes while preventing 10 million tons of carbon pollution annually.” Projects like these will satisfy the supply side of the energy equation. But what about the demand side?

Residential energy efficiency, energy costs focus of new laws

Senators Shaheen (D-NH) and Portman (R-OH) reintroduced their Energy Savings and Industrial Competitiveness Act on Thursday. The bill focuses on enhancing energy efficiency in residential, commercial, and federal buildings. Senator Shaheen told New Hampshire Public Radio that “energy efficiency is the cheapest, fastest way to deal with our energy needs.” She’s right.

On the home front, Shaheen-Portman provides for expanding proven programs like weatherization of existing homes, and a new amendment would pay for the SAVE Act. This bill would require federal mortgage underwriters to account for a home’s projected energy costs when calculating mortgage affordability. This simple rule change would finally tell homeowners the true cost of home ownership, the PITE Payment: Principal, Interest, Taxes, and Energy. Why are energy costs so important to home ownership?

Utility bills are usually larger than either real estate taxes or homeowners insurance, but they are currently ignored in mortgage underwriting.

We agree with the Institute for Market Transformation’s assessment of the SAVE Act, and we support both Shaheen-Portman and the SAVE Act. Shaheen-Portman, the SAVE Act, and the All of the Above Energy Policy together will help grow the home energy efficiency market, and they will help us make our homes more affordable, more comfortable, and more energy efficient. And that’s an “All of the Above” home energy policy we can all agree with.

All of the Above: US Energy Policy in Action

Last month we reported on President Obama’s “All of the Above” energy policy following his State of the Union speech. Especially important for the home performance industry are the parts of All of the Above that apply to residential energy efficiency. Performing home energy audits, and undertaking weatherization, air sealing, and HVAC retrofit and upgrade work can be part of everyone’s personal energy policy.

Secretary of Energy Dr. Ernest Moniz wrote a letter to BreakingEnergy.com explaining why and how “All-of-the-Above is Making a Difference Across America.” Dr. Moniz focused on generation in his letter, noting that California’s Ivanpah solar thermal plant will power 100,000 homes thanks to a successful public-private partnership and a loan from the Energy Department.

In Waynesboro, Georgia, a $6.5 billion loan will help start construction on advanced nuclear reactors at Plant Vogtle, powering “1.5 million homes while preventing 10 million tons of carbon pollution annually.” Projects like these will satisfy the supply side of the energy equation. But what about the demand side?

Senators Shaheen (D-NH) and Portman (R-OH) reintroduced their Energy Savings and Industrial Competitiveness Act on Thursday. The bill focuses on enhancing energy efficiency in residential, commercial, and federal buildings. Senator Shaheen told New Hampshire Public Radio that “energy efficiency is the cheapest, fastest way to deal with our energy needs.” She’s right.

On the home front, Shaheen-Portman provides for expanding proven programs like weatherization of existing homes, and a new amendment would pay for the SAVE Act. This bill would require federal mortgage underwriters to account for a home’s projected energy costs when calculating mortgage affordability. This simple rule change would finally tell homeowners the true cost of home ownership, the PITE Payment: Principal, Interest, Taxes, and Energy. Why are energy costs so important to home ownership?

Utility bills are usually larger than either real estate taxes or homeowners insurance, but they are currently ignored in mortgage underwriting.

We agree with the Institute for Market Transformation’s assessment of the SAVE Act, and we support both Shaheen-Portman and the SAVE Act. Shaheen-Portman, the SAVE Act, and President Obama’s All of the Above Energy Policy together will help grow the home energy efficiency market, and they will help us make our homes more affordable, more comfortable, and more energy efficient. And that’s an “All of the Above” home energy policy we can all agree with.

Home energy efficiency program success and challenges

Home energy efficiency program success and challenges

City’s energy efficiency program falls short of goals.” A recent article in the Greensboro, NC News & Record by observed the performance of Greensboro’s “Better Buildings” home energy efficiency program. Lehmert found that 1,280 homes owned by low income homeowners received benefits of $4.7 million: a free home energy audit and $2,000 to $3,000 worth of improvements to their home. That sounds like a pretty good success, but what happens when you look behind the numbers?

Greensboro’s Better Buildings home energy efficiency retrofit and upgrade work focused on the high impact, high return on investment areas of the home: air sealing, insulation, HVAC improvements. One homeowner saw an immediate savings of $50 on his heating fuel bill. He told all of his program-eligible family members. They applied to the program, and received the home energy audit and retrofit work. These families are saving money this heating season, and will for years to come, because of the program. What works?

  • Qualifying homeowners through an initial screening process
  • Hiring local home performance contractors to conduct whole house energy audits
  • Hiring those contractors to make effective repairs and upgrades to the building envelope
  • Using the homeowner’s heating fuel bill as quality assurance verification

These steps are replicable in home energy efficiency programs everywhere, and the homeowner’s immediate savings and word of mouth advertising prove that this approach works.

Residential energy efficiency programs create the market

Greensboro officials estimated that the average homeowner would see a 17 percent reduction in home energy consumption and a corresponding savings in home heating fuel costs. That’s a good deal for any homeowner. Demand was high. At the end of the program 400 low-income families were on a waiting list for 70 remaining contracts. That tells us that a market exists for “bundling” home energy audits and retrofit work.

But that market may be unsustainable. City officials reported that higher-income homeowners who were eligible for rebates and low-interest loans did not participate at the expected rate. 950 fewer households applied for the rebates. 600 homeowners qualified for program incentives but did not hire contractors to do the work. These homeowners were to subsidize part of the program. Their low participation put the program’s overall goals at risk.

Lehmert concludes that

the lack of interest from homeowners who could pay their own way gets to the crux of Better Buildings’ shortfall in private investment and job creation.

Greensboro-area home performance contractors, on the other hand, suggested that a lack of awareness about the program among higher-income homeowners also played a role.

How a home energy efficiency program succeeds

Greensboro’s Better Buildings program did succeed in connecting home performance contractors and low-income homeowners. These homeowners received a free home energy audit, typically a $300-$800 expense, and up to $3,000 in home energy efficiency retrofit and upgrade work. These homeowners will receive long term heating energy cost savings. Additionally, they will find their homes are more comfortable and their families are healthier, thanks to air sealing and HVAC system improvements. All of these are quantifiable measures of the Greensboro Better Buildings program’s success.

Future programs should do a better job of marketing available incentives to higher-income homeowners. These homeowners may not know how to start a home energy efficiency project, but they have the means to undertake larger projects, and create local jobs.

Programs can use performance based home energy assessment tools to quickly qualify existing homes and prioritize projects based on the estimated return on investment. This also helps home performance contractors schedule their teams and equipment to work more efficiently.

Programs should devote resources to business development for home performance contractors. Public-private partnerships help create sustainable markets after program funds are exhausted.

It’s well known that once homeowners pick the low-hanging fruit of home energy efficiency they are likely to take additional steps, including major retrofit and upgrade work. Home performance contractors should look at program participants as future customers.

Home energy efficiency program success and challenges are a major part of our larger energy efficiency debate. We know there is strong demand for home energy efficiency, and that there are steps everyone can take to make their homes cheaper, healthier, and more comfortable. Greensboro’s program is a good case study for future programs and for industry professionals looking to grow their businesses.

Remodeling your home for energy efficiency

Homeowners who remodel for energy-efficiency can take a credit of up to $500 over their lifetime. This provision has existed since 2006, so many taxpayers have already used the credit.

“It looks at your prior credits that you’ve taken so there is a little bit of a look back, and you may not get the full amount,” Spritz says.

There is a separate $500 credit available for energy-efficient appliances.

If you haven’t used the credit yet, there are still two months left to install new windows or buy an energy-efficient washing machine.

What qualifies for the home energy efficiency tax credit?

Have you got your home energy efficiency tax credit yet? This credit, 10% of the total value of your project, up to $500, was part of the American Recovery and Reinvestment Act, and it was extended to cover projects completed in 2012 and 2013.

A house sitting on a stack of money
Go green and save some green!

Wondering what qualifies for the home energy efficiency tax credit? Here is a list of eligible project or upgrade work and how much you can expect back? Here’s a list from the Department of Energy:

  • Insulation or insulating material. 10 percent of the total cost of your project.
  • Exterior windows or skylights. 10 percent of the total cost of your project, up to $200.
  • Exterior doors. 10 percent of the total cost of your project.
  • Metal roofing with a pigmented coating, or asphalt roofing with cooling granules. 10 percent of the total cost of your project.
  • Main air circulating fan. $50.
  • Natural gas, propane, or oil furnace, or hot water boiler. $150
  • Electric heat pump water heater. $300.
  • Electric heat pump. $300.
  • Central air conditioner. $300.
  • Natural gas, propane, or oil water heater. $300.
  • Biomass stove. $300.

If you want to take advantage of the home energy efficiency tax credit, there are a couple of things to keep in mind.

This is a one time tax credit. If you already received tax credits between 2006 and 2011 you won’t be eligible for this credit. However, you may be eligible for additional credits if you did not use the full value of the 2006-2011 tax credit. A professional account may be able to tell you more about your eligibility.

Your home energy efficiency project or new appliances must be for your primary residence. It is only available for homeowners – sorry renters! Finally, labor costs aren’t normally eligible for tax credits. Check with your home performance professional to be sure.

If you have additional questions, or need more information about qualifying projects, visit energystar.gov for all of the home energy efficiency tax credit program details.

Want more tips like this? Just sign up for our bi-monthly Home Energy Performance Newsletter. We’ll keep you up-to-date on incentive and rebate programs, and give you practical advice to save money on your home energy costs.

President Obama, Zillow CEO Rascoff, and First Time Home Buyers

Early August saw the Obama Administration begin a series of campaign-style events to address concerns about the still fragile economy, including the housing sector. Among the Administration’s first events were a major policy speech in Phoenix and a town hall Q-and-A for first time home buyers hosted by Zillow CEO Spencer Rascoff.

President Obama and Zillow CEO Spencer Rascoff discuss first time home buyers
President Obama and Zillow CEO Spencer Rascoff discuss first time home buyers.

Home prices in Phoenix are up 30% from April 2012, and local businesses are reporting increased demand from a growing population. President Obama’s choice of Phoenix for his housing policy speech was not merely allegorical, but based on a real economic recovery in the residential real estate market. Five “next steps” were included in the speech:

  • Mortgage refinancing and current low interest rates, to keep more money in homeowners’ pockets
  • Cutting regulations that prevent well qualified buyers from getting mortgages quickly
  • Immigration reform, in the hope that new immigrants will buy houses
  • Analyzing existing home stock to repair rundown houses and tear down the derelict
  • Creating more, and more affordable, rental units

A key piece of mortgage accessibility is winding down federal guarantees of mortgages through Fannie Mae and Freddie Mac, which would be replaced by private capital, and keep financial risk in the face of supply bubbles local, not national.

Will first time home buyers go for it?

Reaction to the President’s Phoenix speech was generally positive. U.S. News & World Report’s Rebekah Metzler observed that “additional money and new housing policies” should have a positive effect on local and regional housing markets.

We support a more efficient and transparent housing market. Housing reform should be combined with pending legislation including the SAVE Act, which uses home energy costs in evaluating mortgage affordability. We support these targeted bills in the House and Senate designed to reform and enhance U. S. energy policy, strengthen the real estate market, and make home buying and operations more affordable and accessible for everyone.