In rough numbers, let’s say there are 100 million houses in the U.S. that could benefit from one of these standard greening investments:
- – Solar panels
- – Whole house fans
- – Improved wall insulation
- – Better windows
- – Sealing and insulating all ducts
- – Improved roofing with radiant barriers
Each of those investments would pay for itself if only you could solve the financing problem. No one wants to plunk down a pile of cash today for a house he might sell tomorrow. And if your payback is over ten years, it’s no wonder most homeowners are saying no thanks.
The city of Berkeley came up with an interesting financing approach. The city will pay the cost of having solar panels installed on your home and then get the money back over many years through a special property tax on the property. The tax stays with the property even if it is sold. The homeowner gets little or no financial benefit, but it’s good for the planet, so a typical Berkeley resident accept the inconvenience of the installation process and paperwork, and the bother of hosing down the panels every week. I like where this plan is heading, but I don’t see it working too well outside of unselfish Berkeley.
And so I decided to apply the awesome brainpower of all you Dilbert Blog readers to come up with a better plan for financing the green retrofitting of homes, both for solar panels and for the more mundane improvements, such as whole house fans. If you succeed, you will put millions of people to work, save the environment, and end dependence on foreign oil (as soon as we all have electric cars).
The first part of the puzzle is coming up with a way to calculate savings for these various green investments. I’m in the process of sizing the solar panel installation for my new home construction and I can tell you that it’s more guessing than science. Given all the other green engineering in the home, no one knows how much electricity it will really need. So I can only hope that my whole house fan, for example, will pay for itself over time. Every home is different, so calculating returns for green upgrades is dicey.
One solution would be for the government to mandate some sort of average payback for each sort of greening investment. You might have to tweak the number for region, size of home, and a few other simple variables. But that’s a start.
This approach works for Energy Star appliances. Each appliance is assigned one number that is the estimated annual energy cost even though everyone knows that the actual cost will vary a great deal based on region and how many times you open the fridge door, for example. So while the numbers are inaccurate for any particular user, they still guide people toward lower energy consumption on average. I could see similarly inaccurate yet helpful average numbers applied to other greening investments.
If I knew that on average a whole house fan pays for itself in ten years, it wouldn’t matter too much if the real payback for my particular home was closer to five or fifteen years. It would still be a good investment as long as the investment stayed with the house, as with the Berkeley model, when I sold it.
The problem with the Berkeley model is that the homeowner doesn’t get much if any financial benefit from participation. To make this work in other parts of the country you need to appeal to people’s more immediate self-interest. They need to see money in their pockets on day one.
One solution would be to mandate that banks wrap any greening investments into existing mortgages, so long as the borrower is current on payments. That should work for banks since the investment would free up cash for the borrower, through lower energy costs, that is more than the cost of the extra loan payments. In theory it would reduce the banks’ risks while increasing their profits. And they could use the government’s inaccurate generic estimates for green investments when evaluating these mortgage add-ons.
The next problem is that when you sell a home you get little benefit for any of the greening investments. Green home improvements are somewhat invisible to the potential buyer who makes his or her decision on factors such as location and square footage and the loveliness of the kitchen. To fix this situation, imagine the government mandating that all homes have an annual energy rating, similar to the Energy Star program. For existing homes it could be as simple as disclosing the average power bills for the past three years and the average number of occupants. The energy figure should be prominently displayed, by law, on the real estate listing. When buyers can see those costs, the green investments immediately have resale value.
If every home in the U.S. spends $10,000 on solar panels and other green upgrades, that’s a trillion dollars in economic stimulus. It would fix the economy, solve global warming, and reduce dependence on foreign oil (assuming electric cars).
This concept needs lots of tweaking to work. Go.