Buildings and the Climate Bill
I know many builders who would like to build better, more energy-efficient houses. They don't do it, because "the builder down the street" is not doing it. Most energy-efficiency measures are literally invisible. Since the added advantages don't "show well," they are not perceived by buyers to add value. No builder can add extra features without recovering the cost, so we keep building "stupid" buildings even though we have known for 30 years how to build smarter.
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Getting All the "Builders Down the Street" on Board
The way improvements in building technology achieve widespread adoption is through building codes. If everyone has to do it, everyone does it.
When the Waxman-Markey comprehensive energy and climate bill was first introduced as a discussion draft on March 31, many criticized its failure to take strong action on buildings. Though the draft called for a national "model" energy building code that states should adopt, it had no teeth.
An arduous campaign would have ensued for adoption in all 50 states, where special interest lobbying campaigns would likely stop or delay many. If someone like Alaska Governor Sarah Palin wanted to grandstand and oppose requirements for better energy efficiency in buildings, there was then nothing in the bill that could be done about it. Pockets of America would continue with no advancements in building energy codes.
This might be acceptable if there were no overarching national and global crisis. However, global warming now threatens to inundate our coastlines and turn vast stretches of fertile American farmland into dustbowls.
The Committee "got it" and strengthened the bill. The bill that passed the full House Energy and Commerce Committee in late May — H.R. 2454 — no longer speaks of a national "model" energy building code. Instead, it establishes enforceable "national energy efficiency building codes" for new residential and commercial buildings.
States and local governments will be required to adopt the new national codes, or codes that achieve equal or better energy savings. Noncompliance will result in loss of significant funding. If they still do not do so, the Federal government itself will step in and enforce the national energy-efficiency building codes. (Nobody actually wants that to happen, but you have to be willing to enforce compliance.)
In other words, if the bill as passed by the House Energy and Commerce Committee becomes law, new buildings around the country will actually need to be built better, to achieve greater energy savings. It will actually happen.
(The building energy-efficiency codes are contained in Section 201 — page 214 of the May 18 version of the bill [1.5MB PDF]).
How Much Better Buildings?
Major reductions in building energy use are required by the bill — over time, reaching 75-percent reductions from current energy use standards.
The bill begins with baseline standards which are the minimum energy-efficiency requirements in the 2006 International Energy Conservation Code (IECC) for residential, and the 2004 ASHRAE code for commercial. It then sets target dates for specific percentage reductions in energy usage from these baselines.
The bill is complicated to read, and might give the impression of earlier action than will actually occur. Each date below is the date the target must be set by the Department of Energy (DOE). and the national codes to enforce each target would need to follow within one year, with state adoptions to be achieved by one year later than that. So, if you add two years to each date, you will be at the probable time of actual enforcement:
- 30% reduction in energy usage from baseline immediately upon passage of the act. — i.e. enforcement probably by 2012.
- 50% reduction from baseline for residential by 2014 and for commercial by 2015 — i.e. enforcement probably by 2016 and 2017, respectively.
- 55% reduction from baseline for residential by 2017 and commercial by 2018 — i.e. enforcement probably by 2019 and 2020, respectively.
- 60% reduction from baseline for residential by 2020 and commercial by 2021 — i.e. enforcement probably by 2022 and 2023, respectively.
- 65% reduction from baseline for residential by 2023 and commercial by 2024 — i.e. enforcement probably by 2025 and 2026, respectively.
- 70% reduction from baseline for residential by 2026 and commercial by 2027 — i.e. enforcement probably by 2028 and 2029, respectively.
- 75% reduction from baseline for residential by 2029 and commercial by 2030 — i.e. enforcement probably by 2031 and 2032, respectively.
- Further reductions? Beginning in 2033, DOE is to evaluate if further reductions should be set.
- Zero-net-energy buildings are to be supported by DOE efforts to support "distributed renewable energy technology" as part of this entire process.
Actual Standard Set
While the bill sets the above energy conservation targets, the actual standard set by the bill is the "maximum level [DOE] determines is life-cycle cost justified and technically feasible." That's a mouthful — basically it means, does it "cash flow"? In other words, do the energy savings more than pay for the cost of doing them?
If DOE determines that greater amounts of energy savings are feasible and cost-justified, it can set new codes that achieve more savings than the above targets.
On the other hand, if DOE determines the above targets are not feasible or cost-justified, it doesn't have to meet them. It can instead set new codes that achieve less savings than the above targets.
Congress is punting here to the technical experts — setting energy conservation targets that Congress wants to see achieved, but allowing for better or worse results if the DOE says so. I think a lot of these "technical" determinations will actually depend (more than they should) upon what political party controls the White House at the time.
The only reason I am bothering to write about a bill that still has a very long way to go (i.e., the Senate) is because of the sweeping changes to be wrought to the energy and building industries if Section 201 of this act actually becomes law.
Some initial impressions and predictions:
- Enormous boost to jobs related to making buildings more energy-efficient — e.g., energy raters; insulation contractors; contractors who perform blower door air leak tests; and manufacturers of high-efficiency windows, high-efficiency furnaces and air conditioners, high-reflectance roof coatings, etc.
- Changes by lenders to incorporate energy savings may be needed. The DOE methodology will likely require boosts to energy savings if the cash flow from energy savings exceeds the extra mortgage payments to pay for it. However, will lenders be willing to loan the extra dollars up front?
- Utility forecasts of growth in energy demand from new buildings will need to be drastically adjusted downward. This will eliminate the need for billions of dollars in new power plant construction that otherwise would have been required.
- Achieving the higher levels of savings (e.g. more than 50%) is likely to involve renewable energy resources, such as solar hot water and photovoltaics. Many of these are already cost-effective, so they should meet the DOE test. (More jobs — lots more jobs — in these fields.) Also, regional differences in codes will be needed — and this is anticipated by the act.
Something to Fear or Promote?
Change can be frightening, and this bill will definitely require major changes in how buildings in the United States are designed, built, and possibly financed. There is likely, therefore, to be intense lobbying against the strong provisions described in this article. Many builders will be reluctant to change practices, fearful about how well they can prosper under the new code requirements.
Although every one of the changes will actually have zero or negative cost — they will have a life-cycle cost less than the life-cycle energy savings — the biggest fear voiced will be that these measures will make buildings cost more. Congress and the lending industry need to work together to develop solutions to this "up-front cost" stumbling block.
In the end, we must keep in mind why this bill exists in the first place: the threat of climate catastrophe from global warming is real.
Do I want my new home to be energy-efficient, or under water?
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Craig A. Severance, CPA, is the editor and founder of the blog Energy Economy Online. He is a co-author of The Economics of Nuclear and Coal Power (1976) and author of Business Risks and Costs of New Nuclear Power (Center for American Progress web-published, January 2009). He has served as assistant to the chairman and to commerce counsel, Iowa State Commerce Commission, and as finance manager of the Iowa Railway Finance Authority. He was the founder and served as executive director of the Iowa Center for Local Self-Reliance, a nonprofit renewable energy and energy conservation center in Des Moines. His CPA practice is in Grand Junction, Colorado.
This discussion of the building code aspects of the American Clean Energy and Security Act of 2009 (ACES) — also known as the Waxman-Markey bill, after Henry Waxman (D-CA), chair of the House Energy and Commerce Committee, and Edward Markey (D-MA), chair of the House Energy and Environment Subcommittee — was published by Craig Severance in his Energy Economy Online blog, and in the Climate Progress blog. We present it here with our illustrations and their permission.