The ACI Home Energy Summit last month in San Francisco covered a lot of important issues with a level of frankness that was refreshing. Affordable Comfort, Inc. (ACI) is a not-for-profit organization focused on providing information, education and best-practices in the home performance and weatherization industry. At the Summit, speakers examined the issue of efficiency and how it can become a resource –standing alongside renewable energy and
not just the ‘nerdy brother’ — as one reporter described it.
Here are some of the more salient highlights:
Building Efficiency as a Resource
Matt Golden, Co-Founder of Recurve, spoke about the need to think less about incentive programs and more about eliminating risk for the homeowner, in order to make investing in energy efficiency improvements a rational decision.
In an industry that has long relied on government and utility funded incentive programs, Matt explained the role of the public sector as stepping in to help define the risk and act as a proxy for market forces that don’t exist yet by providing incentives, reducing financing costs, setting quality standards and accelerating market expansion.
Matt challenged the room with the crux of the current problem. Contractors make more money doing poor work, because they don’t share in the long-term financial benefit of doing it right. He stressed the need to move to a market where contractors predict energy savings and are on the hook for the results of their work. That cultural change will mean homeowners can invest in comfort and guaranteed savings, and the industry can tackle the marketing challenge to turn negawatts into a resource.
Capital Investment in Energy Efficiency
This power panel brought insight from the private investment world into a packed room of entrepreneurial contractors intent on learning as much as possible during the 60-minute session. Led by moderator Aaron Goldfeder, CEO of Seattle-based start-up EnergySavvy, Paul Holland of Foundation Capital, Joshua Raffaelli of Draper Fisher Jurvetson, Byron McCann of Ascent Partners Group and Co-Chair Northwest Energy Angels, and Sheeraz Hiji, CEO of Cleantech Group provided information on what venture capital investors look for, where they’re willing to invest and what an entrepreneur needs to bring to the table to get their attention.
Sheeraz Hiji kicked off the discussion with some of the high-level trends his clean tech market research and intelligence firm is tracking, including a bounce-back of global investment in clean tech, with good activity from corporations, and joint ventures moving from 4 billion on 2009 to 14 billion last year. Transportation is a rising trend, as is the supply side, with investments in solar and wind. Efficiency is the fastest growing, but solar is still number one. Home energy management software is an area his firm monitors closely.
The top question on most attendees’ minds: How do we get your money?
The panelists were unanimous that the right mindset and a unique value proposition are must-haves for anyone approaching an angel or venture capital investor. A strong team, proactive approach and watertight strategy are paramount, stressing the need to be highly proactive, without being obnoxious. A strong relationship built on trust is going to be fundamental to receive funding. And of course the big idea—and it has to be a better idea than the other ones under consideration. Third party validation of assumptions and a strong understanding of the market you’re going into with the ability to sell it to the investor and demonstrate the opportunity. Know where the constraints are and how they can actually be an advantage to your firm.
The panelists discussed the opportunities facing the energy efficiency industry, noting financing models, consumer behavior tools, energy monitoring and modeling technologies and smart grid innovations as areas of interest.
A discussion of the investor’s role in influencing clean tech policy uncovered that the venture capital industry tends to work with policy makers, but never rely on policy when making investing decisions. Instead, they back big ideas they think will win without help, and know they’ll have a smash hit if policy turns out to be favorable to an investment.
“We know people will pay more for technology. Policy can drive the incentives to jump start market demand. We’re seeing positive signs with government agencies getting involved and crossing the divide,” said Hiji. “There is a divide, but there is also a willingness to close the gap.”
“Let’s face it; we’re selling to the lunatic fringe of green, the lunatic fringe of efficiency. The market is this small strata right now. And of course we want to grow the market outside of the small strata,” said Holland. “We need less kumbaya in this industry and less expectation. We preach to each other, when we really need to become better marketers.”
“The key of unlocking the industry is in the financing. Consumers don’t care that much. You have to lower the transaction cost. Some of the companies in the solar side have done this very well. They’ve made it very easy. If anyone is doing that in the home energy retrofit industry, they need to stand up on the table and scream about it,” said Hiji.
Engaging and Motivating the Homeowner: Driving Demand for Home Energy Improvements
Merrian Fuller of Lawrence Berkeley Laboratory presented the findings of a research project into 14 incentive programs in operation across the country, and what has and has not worked in those programs to foster homeowner participation.
Uncovered drivers include competitiveness between neighbors, increased sensitivity to losses over gains, a bias toward maintaining the status quo and the fact that homeowners are overloaded with too many choices. And they often assume they are performing better than the average person, or that they’re already doing all that they can. They don’t think they have an energy problem.
Engaging trusted messengers, like local opinion leaders, providing local control, models of success and encouraging contact with peers helps elevate acceptance and interest, often leading to increased participation.
Most importantly, sell something people want: comfort, practical investment in the asset, self-reliance and reduced energy dependence, social norms, improved health, or whatever their particular pain point may be.
Led by moderator Keith Aldridge of Advanced Energy, this panel of experts in homeowner behavior, including Joan Glickman of the Department of Energy, Allison Forbes of Sierra Club, Sean Penrith of Earth Advantage Institute, Aaron Goldfeder of EnergySavvy and Merrian Fuller of Lawrence Berkeley Laboratory discussed their real-world findings.
One challenge is that homeowners don’t really understand the energy impact of their homes compared with other areas of their lives, such as cars. Establishing tools like the Home Energy Scorecard that provides a miles-per-gallon rating for homes helps homeowners understand benchmarks and where they are now, and where they can be post-upgrade.
The idea is to confront some of the market barriers, one of them being information. One discovery during the development of the Home Energy Scorecard—the pilots, the focus groups and social science research—is that people really like simple information. They can’t process a lot of information up front. They want to know how they’re doing, and how they might do in the future. Money is a motivator up front. They are not motivated by carbon. They really, really care about how they relate to their peers.
“We talk about energy, and people don’t care about energy. They care about their kids. They care about their jobs. They care, briefly, about the events in Japan. They don’t care about energy. Emotion matters,” said Glickman.
One potential way to transform the energy efficiency market is to bundle it in with traditional remodeling projects, a segment that remained stable throughout the economic downturn and is recovering quickly.
This break-out panel session dug into the current state of financing for home energy efficiency upgrades, including the current state of PACE, FHA Powersaver based on Title 1 Home Improvement Loans, on-bill financing from utilities and property assessment structures.
The ACI Home Energy Summit is a high-level gathering of industry thought leaders that kicks off the week-long ACI National Home Performance Conference, the largest event of its kind, with an expected 2,000 attendees who are interested in and passionate about improving the energy efficiency, comfort, health, safety and durability of homes.
Security through Residential Energy Efficiency
This closing session was a panel discussion moderated by Steven Crouch of Johns Manville and featured industry thought leaders Mike Rogers of GreenHomes America, John Tooley of Advanced Energy, Steven Cowell of Conservation Services Group and Joan Glickman of the Department of Energy, as they explored the challenges and opportunities facing the home performance and weatherization industry at this pivotal moment in the industry’s growth, and in its future.
John Tooley spoke of the need for the industry to police itself tightly in order to foster trust with homeowners. From training standards to personal certifications, company accreditations and quality assurance programs, the need to create tools and rules that ensure the highest quality work in the field.
Steven Cowell discussed the major advances in standards, work specifications, policy initiatives and public awareness that the industry achieved in the last 12 months. Despite the failure of the proposed HOME STAR legislation in Congress, the momentum that began with the movement, coordination and collaboration within the construction industry at large has caused a tidal shift for home energy efficiency improvements.
Mike Rogers addressed the need for a coordinated, simple message and the type of focus that allows it to be effectively communicated. Marketing outreach needs to be a priority. Clarity needs to be achieved to generate the consumer pull-through that will establish a sustainable industry that is economically, environmentally and socially sound.
Last, Joan Glickman spoke of optimism and definitions of success from different perspectives. She called for big changes within the industry to extend its reach. New technologies, new collaborations, new approaches and new, wider ways of thinking about the challenges in the industry.