Senators Snowe, Bingaman and Feinstein recently introduced the “Cut Energy Bills at Home Act” (S. 1914), a new performance-based tax credit that rewards homeowners for making whole-home energy efficiency improvements. The bill encourages homeowners to make investments in energy efficiency – such as insulation, air sealing, and high efficiency equipment – that will save them money on their energy bills, while decreasing pollution and creating jobs, both in the ailing construction industry and throughout the economy as energy bill savings are respent on other goods and services.
S. 1914 provides a performance based incentive that rewards home owners with a tax credit from $2000 to $5000 for making whole-home improvements. Unlike existing incentives that offer incentives for equipment or measures meeting certain efficiency criteria, the S. 1914 tax credit is based on the total percentage reduction in energy costs compared to the existing home. This technology-neutral approach encourages consumers to invest in the most cost-effective measures first, while also incentivizing deeper energy savings at lower costs. This works because deeper, cheaper savings can often be found when analyzing the building as a whole system, rather than measure by measure. For instance, additional insulation and air sealing can allow for a smaller (and therefore cheaper) HVAC system to be installed, reducing the overall cost of the efficiency improvement. The tax credit in S. 1914 is also performance based, meaning that the amount of the tax credit is tied to the amount of energy saved rather than the cost of the energy efficiency measure. This eliminates a perverse incentive to increase the cost of efficiency to obtain a greater credit.
So how would the credit actually work? To obtain the credit, a homeowner would hire a contractor accredited by the Building Performance Institute (BPI) or a preexisting BPI accreditation-based state certification program, or who is part of a Residential Energy Services Network (RESNET) Energy Smart Home Performance Team. The contractor would create a computer model of the home’s baseline energy use and calibrate this model to the home’s actual energy bills according to BPI/RESNET standards. The software used to create this model must meet RESNET specifications.
After the baseline model is created, the contractor would recommend energy efficiency measures to the homeowner and model their projected energy cost savings. The contractor would then install the measures as modeled and ensure that systems are installed properly by conducting test-out according to RESNET/BPI procedures. The amount of the credit varies from $2000 to $5000—$2000 for 20 percent energy savings, increasing by $500 for each additional 5 percent in energy savings, up to a maximum of $5000 for a 50 percent improvement. The amount of the credit is also capped at 30 percent of the amount spent by the homeowner on the retrofit.
Last Congress, Senator Snowe included a similar whole-home performance based credit for the Home Star legislation Congress was considering. NRDC also strongly supported this credit, which offers home owners a tax incentive for making whole-home energy improvements. This year’s bill has the same intent, but with structural differences. S. 1914 is supported by the home performance industry, efficiency advocates and environmental groups.
For more information on how the bill works and perspectives from various stakeholders, check out a webinar being hosted by Efficiency First at 3:40 ET on December 6th. Click here for more information about the webinar.
S. 1914 is exactly the kind of bill we need to jump start the ailing construction industry while providing significant energy bill savings for consumers. We applaud Senators Snowe, Bingaman and Feinstein for introducing the bill.