Making a market in energy efficient homes

Energy Efficiency in Tallahassee, Florida

I attended the "Law and Sustainability Symposium: the Energy-Land Use Nexus" at Florida State University College of Law today. The program panel discussion led to the difficulty of getting consumers to invest in sustainable homes and lifestyles. I drew out the following hypothesis:

The perceived cost to consumers (i.e. higher cost of house) is a difficult hurdle, because the future benefits (of energy efficiency, LEED construction, renewable energy add-on systems, etc) are not transparent to most people today. Perhaps over time, as the market develops, we reach a point where the future value is seen and appreciated, and incorporated into market prices. (Note the lack of progress made in so-called "energy efficiency mortgages.") The key today is that a buyer wants to be confident he can sell his asset in the future at a price that is reflective of his investment in the stated improvements. Until that is the case, until there is an understanding in the marketplace that two otherwise identical homes -- one with a high-efficiency HVAC design and the other with a standard design -- have a different value, and that this difference is equal to the discounted future savings on energy costs, the consumer will choose the lower first cost.

I believe the solution will be found in improved "product labeling." As consumers already find it relatively easy to make a benefit/cost calculation when comparing various refrigerator models by looking at the bright yellow "energy rating" tag, I expect that soon similar information will be presented on each new home, and eventually on each existing home. The "yellow tag" is already starting to be presented on LEED and other green-standard homes. My expectation is that the development of Smart Grid systems in many utility systems will allow for the development of better energy scores for all homes. In Tallahassee, which has built one of the nation's first Smart Grid systems (and the first to include Gas and Water utilities in addition to the more common Electric Smart Grids), consumers will have access to detailed information about their energy consumption. This, along with existing diagnostic tests, will lead to the ability to develop the home energy ratings necessary to attract the desired investment.