Home Energy Retrofits Green Real Estate

by The Real Estate Buyers



Home Energy Retrofits Green Real Estate

Green Apples to Apples:  A Case-by-Case or Model-Based Approach Toward Green Real Estate?


By: Luke Bujarski

In 2008 the Chicago Climate Action Plan set out an ambitious goal of retrofitting 400,000 residential units by 2020.  As the green real estate movement picks up steam, national and local initiatives like Obama’s proposed HomeStar legislation and the Chicago Region Initiative for Better Buildings (CRIBB), might actually offer the needed tailwind to give the ambitious plan a run for its money.  But, with a $2.0 billion dollar price tag and a the current retrofit rate of only 7,000 residential units per year, efforts will certainly miss the 2020 mark, unless something is done to speed and cheapen up the process.   As a work around, Chicago based think tank and advisory service RW Ventures have proposed a model-based energy efficiency scoring system as a possible solution.

A home energy retrofit refers to the upgrading of mechanical systems, building envelope, appliances, electrical systems, and regular building management to achieve significant reductions in energy usage.  This saves homeowners on energy costs, reduces carbon emissions and improves the asset value of real property.

Currently, the process involves a case-by-case approach, where each property is first required to undergo an energy audit by a certified professional.  Through this design and performance-based assessment, an energy audit serves two objectives:  First, it establishes the most appropriate retrofit strategy for the said property.  Second, it establishes an energy performance score for the home, similar to a miles-per-gallon (MPG) rating used for automobiles.

Establishing a widely-accepted performance scoring system for the green real estate market is important because it allows energy performance to be factored into the  assessed value of a home.  Likewise, it gives buyers the ability to “shop around” and compare properties based on their energy performance.  As more and more homes obtain a performance score, the theory goes that this will prompt other homeowners to improve their scores, by investing in a retrofit.

Obtaining a performance score can be done in one of two ways:  A model-based system or today’s case-by-case system.  The difference is that a model-based system uses statistical sampling to estimate a home’s performance score.  And, while not as accurate as the case-by-case method, it saves time and money because it eliminates the need to conduct a full energy audit on each property.

Effectively, the model-based system would cut out the middle man because it would allow homeowners to assess their home performance directly via an online system, instead of hiring an auditor.  In addition to providing a simple energy score, the proposed model could also provide a design-focused assessment of the property via questionnaire, educating homeowners with automated advice on how to improve their home’s performance.

With the average cost of a retrofit now estimated at $5,000, the total bill for the Chicago region could run upwards of $2.0 billion dollars.  Given the current economic climate, coordinating bodies like the Chicago Metropolitan Agency for Planning might be hard pressed to drum up the public and private sector support need to meet Climate Action Plan goals.  Given the average cost of an energy audit at $600 dollars, a model-based approach could shave as much as $240 million off the regions price tag.

However, the model-based approach is not without controversy.   That’s because building retrofit initiatives like CRIBB are also about economic development and job creation.  Much of these jobs will come from the armies of energy auditors and raters needed to implement the case-by-case approach.  Alternatively, proponents for a model-based approach would argue that the system does not completely eliminate the need for energy auditors.  Homeowners would still have the option to hire an auditor to establish a performance score for their homes, on a consultative level to optimize energy efficiency.  Likewise, home certification by standards bodies including the EPAs EnergyStar program, still require a licensed professional to assess the home’s energy performance.

Whether case-by-case or through a model-based system, establishing a widely-accepted MPG function will be crucial to the success of large-scale retrofit initiatives across the country.  And, as the market for green real estate slowly but surely develops, the debate over energy performance scoring will inevitably continue to make headlines.

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  3. Green Real Estate Improves Home Values (14.3)
  4. Green Real Estate Investment Trusts – Green REITs (13.4)
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