Looking ahead to 2015, I see a lot more of the same from 2014 for contractors in the residential energy and efficiency arenas. What that says to me is that contractors who figure out how to run their businesses well will thrive. Those who are hoping for programs, mandates, and high energy prices to run their businesses for them won’t do as well.
Here are a few guesses at what we’ll see over the next 12 months.
Savvy HVAC Contractors Will Continue to Expand into
Home Performance (and vice-versa)
I’ve certainly been talking a lot about this over the last couple of years. The reasons that “HVAC-2-HP” makes so much sense remain the same. Now I’m also seeing strong interest from those who practice home performance but don’t offer HVAC in-house to move to integrate the HVAC into their existing business. ACCA has been hosting it’s “Building Performance Forum” for a couple of years, and in 2014 BPI partnered with them on the event. In the program arena, many of those producing the most work and most savings are from the HVAC trades. More interestingly, HVAC contractors are looking at the pure market opportunity–and seeing that it fits their businesses well. Those who ignore the connection will be at a real competitive disadvantage.
(As an aside, I’m very excited to be joining a group of non-competing contractors next month in a frank peer exchange, sharing what works and what doesn’t. I expect more of these group to form as contractors, regardless of the trade background, recognize the ability to greater reduce their learning curves across all aspects of their businesses.)
Energy Prices, Up and Down?
The economy continues its recovery, and the indicators look a lot less bleak than they did six years ago. I expect some upward pressure on energy use as people consume more.
In some places, and California in particular, it looks like we can expect significant electricity rate hikes. Ditto in parts of the Northeast.
And yet at the same time, and in many of the same areas, natural gas prices are dropping through the floor1.
Energy costs aren’t usually the big drivers in more comprehensive efficiency retrofits. But that shifts a bit when prices are higher—and especially when they’re rising. (We get used to plateaus, but we seem to notice changes.) For some contractors in areas with skyrocketing electricity costs, there may be an incremental boost in demand for efficiency, but probably not at the game-changing level.
Unfortunately, the dropping gas prices send a powerful current (bad pun purely intended) in the other direction, away from concern about energy prices. There are reasons natural gas and petroleum prices are not likely to stay low forever, but I don’t think we can expect the trend to reverse in 2015. (NY’s move to ban fracking is one example of what might alter the landscape)
In sum, at the end of the day, at least in 2015, it will continue to be comfort, durability, comfort, IAQ, and comfort. And maybe solar…see below.
Contractors who figure this out will do fine. Contractors who focus on efficiency alone, maybe not as fine. In 2015, energy prices won’t take care of marketing, sales, and operational efficiency for most contractors.
Solar PV Continues to Grow More and More Mainstream
Prices for solar continue to drop, and solar contractors are growing in size and number.
A boost for the market is that reality that there is an array of options to pay for residential systems. It’s still not clear to me whether leasing will displace ownership in the residential market. Each have their advantages and disadvantages. But leasing has certainly driven a surge in installations on the roofs of homes in the U.S., and regardless of how it’s paid for, in some markets, solar is cooking. San Diego, for example, is seeing big growth even as incentives have ratcheted down.
Developments in energy storage–whether utility level or behind the meter–will only make this hotter.2 And according to a new National Academy of Sciences paper, renewables including solar have the lowest life-cycle costs of producing new electricity. That’s a big deal, and it means solar isn’t going away. Utilities will be forced to use low cost generation…and they already are!3
How this impacts home performance work depends on who is doing the talking. Many companies are simply pushing PV, and they compete for dollars with efficiency services. Others, though, use demand for solar to engage in a much bigger conversation, and solar serves as a entrée to efficiency. If you don’t talk solar at all, you risk not being part of the discussion.
PACE (Property Assessed Clean Energy) was set to revolutionize residential efficiency a few years ago, until it was effectively squashed by FHFA.
But maybe Miracle Max was right when he observed “It just so happens that your friend here is only MOSTLY dead. There’s a big difference between mostly dead and all dead. Mostly dead is slightly alive.” And PACE does look alive, and growing in strength. Out in front is California, where municipalities across the state are authorizing it, lenders are offering it, and early-adoptiong contractors and homeowners are already loving it. This will be HUGE in California in 2015. And it’s not just in CA–there seems to be a smattering of initiatives reemerging (and I’m talking about real property assessed products, not just simple consumer loans using the “PACE” moniker”). Keep tabs of them at PACENow.
Some crazy weather over the past couple of years has people thinking about what happens when the doo-doo hits the spinning blade. One of the great things about very efficient homes is the fact the when disaster strikes and you are without power for days or weeks, even in the middle of winter or a brutal heat wave, your home is still livable. This “passive survivability“, or “resilience” has started to enter the conversation, and I expect that to continue as we see 100-year storms, 100-year droughts, 100-year heat waves, 1oo-year floods, freak wind storms, or maybe even human-induced mischief with increasing regularity. The insurance types are looking at all this, and the big money at stake will shift the conversation over time. Still a small factor now, it’s growing and over time will add to the recognized benefits of and motivators for efficiency.
Nest and other Connected Thermostats
Despite some who insist that programmable thermostats offer no savings, there is some interesting early research coming out showing some pretty significant space heating/cooling savings using Nest thermostats. An Oregon study found 12% heating savings (and 4% of total kWh)4. Studies from the Midwest (sorry, not released yet) seem poised to confirm numbers in this range, with even higher savings on the cooling side. And back in Oregon, they’re now studying a free Nest, self-install program. If this pans out, it will be the short-term death knell for home performance programs which are very expensive for small and poorly predicted energy savings. This won’t be limited to Nest. Other connected thermostats are gaining traction, too. But installing a thermostat is a lot easier than insulating and air-sealing! True, it’s hard to get 70 mpg in a Hummer, but for utility programs looking for an easy way to claim savings, self-learning thermostats which can take the difficult behavioral changes and the blinking VCR lights phenomena (does anyone still have a VCR plugged in?) out of the equation, I expect positive results here mean fewer programs to drive home performance over the next several years.5
So, you’d better figure out how to deliver–and market and sell–benefits that a nifty thermostat can’t.
This is just the tip of the iceberg!
Things are changing rapidly in the energy and efficiency space. The potential of being able to bank on efficiency savings, massive restructuring of utility regulation, aging infrastructure woes, climate concerns, catastrophic events, and nascent technology all have the capacity to turn things on a dime. You’ll be well-served to keep an eye open in this rapidly changing environment.6 While I don’t think we round the corner in 2015 on the reflecting the value of home performance in real estate transactions, I do expect more progress. (Track #visiblevalue or follow Elevate Energy. on the issues yet,
Which trends do you see as being particularly relevant to home performance, and your business, in 2015?
Please let me know what the big things you’re looking at for 2015 are and how they’ll affect you.
1Gasoline prices at the pump are also falling (although Burlington, VT did have the highest prices in the continental U.S. for a time last week–and we’d like to know why?!). I think those bodes ill for those who focus on the energy savings message exclusively. In my experience, the strongest energy price signal that many people see at the price is at the gas pump. No, few people heat or cool their homes with gasoline nor use it to power the big screen TV to watch the Super Bowl. But it’s the energy price they see. And when prices at the pump are low and dropping, energy savings gets pushed further back in people’s minds and further down on their priority lists.
2Read about Southern California Edison’s grid modernization plan for a glimpse into some of the looming changes.
3“May you live in interesting times.” While the real origins of this purported Chinese curse are obscured, it may apply to the utilities. Most utilities are in a tightly regulated space, unable to respond to changing market dynamics. Solar, with net metering, grid tie-in tarifs, new storage, systems designed soley to shave tiers for usage rate determinations, many folks are nibbling (or gnawing voraciously) as the profitable elements of the utilities’ business. The playing field is changing quickly, and the regulators are behind the curve in addressing this. They’re not keeping up. Assuredly, though, in the long run, something is going to change–and it will likely be different in every state. Interesting times indeed.
4The link to the Oregon study was added to the originally published version of this blog. (Thanks, Michael Blasnik, for the link).
5Note also, that the kWh savings may be the small part of this story Utilities are certainly interested in the kW savings and Nest and its ilk are being tested as demand response tools–giving the utilities the ability to tweak the settings over the interwebs in real time to shave load as needed. Big bucks here. And some interesting intersections between efficiencies and peak that haven’t been explored enough. (That reminds me–I need to hunt down a John Proctor presentation on that very topic.)
6These changes seem to be impacting my backpacking and canyoneering schedules, too. Now it’s personal!