Building Energy Efficiency

May 1992

OTA-E-518

NTIS order #PB92-169267

GPO stock #052-003-01280-4
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Building Energy Efficiency, OTA-E-518

(Washington, DC: U.S. Government Printing Office, May 1992).
Foreword

This report was prepared as part of the ongoing OTA assessment, ‘ ‘U.S. Energy

Efficiency: Past Trends and Future Opportunities,” carried out in response to requests from

the Senate Committees on Governmental Affairs and Energy and Natural Resources; the

House Committee on Energy and Commerce; and an endorsement from the Chairman of the

Subcommittee on Environment of the House Committee on Science, Space, and Technology.

Other reports in this assessment examine energy use in the Federal Government, industry,

transportation, and the role of utilities in energy efficiency.

This report focuses on energy use in buildings, which account for over one-third of all

energy used in the United States. Significant energy savings in buildings are possible through

the use of commercially available, cost-effective, energy efficient technologies; yet adoption

rates for these technologies are often low. Interviews with industry, property managers,

homeowners, and others were used to explore why technology adoption rates are so low. Past

Federal efforts to encourage energy efficiency are reviewed, and policy options for

encouraging the adoption of energy efficient technologies are discussed.

OTA benefited greatly from the substantial assistance received from many organizations

and individuals in the course of this study. Members of the advisory panel provided helpful

guidance and advice, interviewees helped to ensure that all perspectives were accurately

portrayed, and reviewers of the draft report contributed greatly to its accuracy and

completeness. OTA and the project staff sincerely appreciate their time and effort.

~zf & # AL-- ,

JOHN H. GIBBONS

- Directo r
Advisory Panel—Building Energy Efficiency

Dale Compton

School of Industrial

Purdue University

Mark Cooper

Consumers Federation

Robert deHaan

Engineering

 of America

Amana Refrigeration Co.

Daniel A. Dreyfus

Gas Research Institute

Clark W. Gellings

Electric Power Research Institute

David B. Goldstein

Natural Resources Defense Council

Cheryl Harringtonl

Regulatory Assistance Project

Kenneth Hickman

Applied Systems Division

The York International Corp.

Edward McInerney

GE Appliances Division

General Electric Co.

Alan Miller

Center for Global Change

University of Maryland-College Park

James F. Gibbons, Chairman

Dean, Stanford University

Terman Engineering Center

1 formerly Cornrnissioner, Maine Public Utilities Commission.

The Honorable Gary Nakarado

Public Utility Commission of Colorado

John W. Rowe

New England Electric System

Maxine L. Savitz

Garrett Ceramic Components

Garrett Processing Co.

Sherwood Smith

Carolina Power & Light Co.

Richard Tracey

Ryland Homes

B.C. Waycaster

Hydrocarbons and Energy Department

Dow Chemical

Irvin White

Battelle, Pacific Northwest Laboratories

Mason Willrich

Pacific Gas and Electric Enterprises

James L. Wolf

The Alliance to Save Energy

Eric R. Zausner

Strategic Performance Management

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members.

The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the

report and the accuracy of its contents.

iv
OTA Project Staff—Building Energy Efficiency

Lionel S. Johns, Assistant Director, OTA

Energy, Materials, and International Security Division

Peter D. Blair, Energy and Materials Program Manager

Project Staff

Paul S. Komor, Project Director

Andrew H. Moyad, Research Analyst

Administrative Staff

Lillian Chapman, Office Administrator

Linda Long, Administrative Secretary

Tina Aikens, Secretary

Contributors

Helene Kirwan-Taylor

Gretchen Kolsrud
Reviewers

Fred Abel

U.S. Department of Energy

Renn Anderson

National Renewable Energy

Laboratory

Jim Barron

New York State Energy Research

and Development Authority

Rosina Bierbaum

Office of Technology Assessment

G.Z. Brown

University of Oregon

Dave Conover

Battelle/Pacific Northwest

Laboratories

Alan Crane

Office of Technology Assessment

Rick Diamond

Lawrence Berkeley Laboratories

Robert Friedman

Office of Technology Assessment

Robert Gants

Association of Home Appliance

Manufacturers

Jeff Harris

Lawrence Berkeley Laboratories

Willett Kempton

Princeton University

Karen Larsen

Office of Technology Assessment

Denise Mauzerall

Harvard University

Andrew Nicholls

Battelle/Pacific Northwest Laboratories

Ron Nickson

National Association of Home Builders

Bill Raup

U.S. Department of Energy

Beth Robinson

Office of Technology Assessment

Robin Roy

Office of Technology Assessment

Michael Samsa

Gas Research Institute

Joanne Seder

Office of Technology Assessment

Richard Tempchin

Edison Electric Institute

Daniel Yoon

Princeton University

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the reviewers. The reviewers do not,

however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and the accuracy

of its contents.

vi
Report Contents

Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

CHAPTER l. Energy Use in Buildings: Past, Present, and Future . . . . . . . . . . . . . . . . . . 13

CHAPTER 2. Technologies for Improving Energy Efficiency in Buildings . . . . . . . . . 37

CHAPTER 3. If Energy Efficiency Is Such a Good Idea,

Why Haven’t We Done More of It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

CHAPTER 4. A Review of Federal Efforts To Increase Energy Efficiency

in Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

CHAPTER 5. Policy Options for the U.S. Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Summary
—

Summary

INTRODUCTION

Residential and commercial buildings account for

about one-third of U.S. energy consumption, at an

annual cost of $170 billion. Using commercially

available, cost-effective technologies, building energy consumption could be reduced up to one-third

by 2015, compared to a business-as-usual projection

(figure 1).l Many other estimates of this savings

potential exist and, although the results vary, there

is general agreement that the untapped potential for

improved energy efficiency in buildings is significant. Along with saving both energy and money,

wider use of efficient technologies would address

multiple environmental concerns, offset the need for

additional electricity generating capacity, and reduce national dependence on imported oil. This

report assesses technologies for enhanced energy

efficiency in buildings, discusses why they are not

widely used, and offers Federal policy options for

encouraging their use.

BACKGROUND

Energy use in buildings has grown in the last 20

years (figure 1). Sheer increases in numbers underlie

much of this growth-more people, more households, and more offices. Increased service demand

—more air conditioning, more computers, larger

houses—has contributed as well. However, the

application of improved technology has moderated

this growth. Energy efficient building shells, appliances, and building designs have lowered energy

intensity in residences (energy use per household per

year) and stabilized energy intensity in the commercial sector (energy use per square foot per year).

Building energy use in the future will be driven by

technological change but will also be influenced by

Figure l—Building Energy Use: Two Future Scenarios

Building energy use (quads/year)

45 -- ‘- .

4

+ Business4 0

,---

t

as-usual

, -

3 5 <

30 ‘

1

,-”

~—

25 _- “ ‘ “ ‘

I

/

20

I

15

10 I

5{

E

_l — –,

,. 14 quads

:-[-” -

I

J costeffective

o~ ~-– ~ – .._–-T --- – ~ -––-–T .–- . ~.– —7 ‘~-–—T ‘–- ‘ T

– J

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 202 5

NOTE: “Business-as-usual” is OTA’s estimate of future consumption without policy change. “Cost-effective” is OTA’s

estimate of future consumption if all energy efficient technologies with a positive net present value are

implemented. There is considerable uncertainty in both estimates. See text for details.

SOURCE: Office of Technology Assessment, 1992 (see ch. 1).

1 Cost-effective is defined here as positive net present value to the consumer at a 7 percent real discount rate. See ch. 1 for a detailed discussion of

energy savings estimates.

–3–
4 ● Building Energy Efficiency

Table l--Cost-Effectiveness of Selected

Energy Efficient Technologies

Typical payback

Technology (years)

Additional insulation. . . . . . . . . . . . . . . . . . . . . . .

Compact fluorescent lamps. . . . . . . . . . . . . . . .

Condensing gas furnace-95% + efficient. . . . .

Electronic ballasts for commercial lighting. . . . .

Improved burner head for oil furnaces. . . . . . . .

Residential duct repair. . . . . . . . . . . . . . . . . . . . .

Highly efficient room air conditioner. . . . . . . . . .

Water heater tank insulation.. . . . . . . . . . . . . . .

6 to 7

Less than 2

4 to 7

3 to 4

2 to 5

Less than 2

6 to 7

Less than 1

well, such as longer life, quieter operation, and

greater ease of use. For example, many new commercial lighting technologies can provide a higher

quality of light and use far less energy.

While many efficient technologies cost more to

purchase, energy savings often more than repay the

extra capital cost (table 1). The financial returns

offered by these technologies are typically far better

than those offered by other personal financia1

investments.

NOTE: Payback is the amount of time for the energy savings to exceed the

additional first costs. Paybacks shown here are based on the

incremental first cost and undiscounted savings of the highly

efficient unit relative to a standard efficiency unit. Actual, measured

savings rather than predicted savings are used where available.

Paybacks will vary depending on climate, use patterns, and other

factors.

SOURCE: Office of Technology Assessment, 1992 (see ch. 2).

other factors, including population and economic

growth, changes in household size, changes in

lifestyle, and migration patterns. Although the

complexity and interactions of these factors make it

difficult to predict accurately future levels of building energy use, OTA estimates that, in a ‘‘businessas-usual’ scenario (i.e., assuming no policy

change), building energy use will continue to grow

at a moderate pace, reaching roughly 42 quads by

2015. An alternative perspective, assuming all

energy efficient technologies with a positive net

present value to the consumer are implemented,

suggests building energy use could actually decrease

to about 28 quads by 2015. This corresponds to an

annual energy savings of 14 quads by 2015 (figure

1), worth $80 billion at today’s energy prices.

ENERGY EFFICIENT

TECHNOLOGIES

As suggested by the modeling results described

above, there is considerable potential to further

improve energy efficiency in U.S. buildings. For

most major energy uses, there is a large efficiency

gap between the average new units and the most

efficient new units available. For example, residential gas furnaces are available with an efficiency of

97 percent, compared to the 78 percent typical of

new units sold today. The most efficient room air

conditioner on the market today uses 28 percent less

energy than the average new unit. Many houses in

the United States still lack basic efficiency features,

such as storm windows and ceiling insulation. In

many cases new technologies have other benefits as

IF IT’S SUCH A GOOD IDEA, WHY

HAVEN’T WE DONE MORE OF IT?

If cost-effective technologies are available, why

aren’t they in greater use? OTA interviews suggest

commercially available, energy efficient technologies are not used for ‘good’ reasons-reasons quite

understandable from the perspective of the individual decisionmaker. These reasons include the following:

●

●

●

●

●

There is often a separation between those who

purchase energy-using equipment and those

who pay to operate the equipment, which

undermines existing incentives for efficiency.

For example, one-third of housing, and onequarter of commercial building floor space, is

leased or rented rather than owned.

Decisions on purchasing energy-using equipment require comparisons across many attributes, such as frost cost, performance, appearance, features, and convenience. These other

attributes often overshadow energy efficiency

considerations.

Individuals pursue several goals when making

energy-related investment decisions—for example, minimizing the time to make a decision,

spending the least amount upfront, or minimizing risk by obtaining the same item that worked

before. Very few pursue the goal of minimizing

life-cycle costs (the sum of capital and operating costs over the life of the equipment), which

energy efficient technologies achieve.

When trading off frost cost and energy savings,

consumers will not invest in efficiency unless

it offers very short payback periods-less than

2 years for home appliances, for example. In

contrast, personal financial investments generally offer much lower returns.

Energy costs are relatively low (about 1 percent

of salary costs in a typical office, for example),
—

Summary ● 5

●

so those concerned with cost reduction often

focus elsewhere.

Energy efficiency is often (mis)perceived

requiring discomfort or sacrifice, limiting

appeal.

as

its

These reasons have slowed the acquisition 

POLICY OPTIONS

There are numerous policy options available to

the U.S. Congress that could be used to encourage

greater use of cost-effective energy efficient technologies. Increasing energy efficiency is in the

Nation’s interest, yet there are arguments both for

 and and against changes in Federal policy. Arguments

use of many proven energy efficient technologies.

For example, despite their attractive 3- to 4-year

payback, less than 4 percent of all fluorescent light

ballasts shipped in the United States in 1990 were of

the efficient electronic design. These reasons suggest that policy changes may be needed to encourage

cost-effective efficiency.

REVIEW OF PAST

FEDERAL EFFORTS

The Federal Government has in the past supported

efforts to increase energy efficiency, with mixed

results. The multiple Federal programs aimed at

saving energy in buildings are often narrow in scope,

overlooking critical barriers that prevent costeffective investments in efficiency. Many programs

stress only two strategies: providing information or

funding retrofits for low-income households and

small firms.

Cost-effectiveness criteria are generally not

used in program planning or evaluation, particularly in those programs offering grant monies.

Federal programs aimed at saving energy in buildings often achieve measurable energy savings, but

the cost-effectiveness of those savings remains

unclear. Program evaluation is infrequent. For

example, the Federal Trade Commission (FTC)

appliance labeling program was evaluated only once

in its 12-year history, and the Department of

Energy’s Weatherization Assistance program (WAP)

was evaluated only once in its first 15 years. To

understand the successes and failures of program

goals and implementation, all programs should

undergo regular evaluations. Such evaluations require relatively few resources compared to other

program activities, and they have the potential to

improve greatly program benefits by fine-tuning (or

revamping) efforts to save energy in buildings.

for Federal policy change include the market imperfections noted above (e.g., short payback requirements and a separation between those making

investment decisions and those paying operating

costs), the large untapped potential for energy and

financial savings from increased efficiency, and the

existence of environmental and other externalities.

Arguments against changes in Federal policy include: attempts to increase energy efficiency

through regulation or other similar methods may

have unanticipated administrative or other costs;

past Federal efforts to implement energy efficiency

have had mixed success; current levels of energy

efficiency reflect consumer preferences given existing economic incentives and levels of information;

and there is often little consensus on the best

methods to promote efficiency.

Federal policies for improving building energy

efficiency must be considered in the context of the

diverse State and utility efforts already underway. In

almost all areas of energy efficiency policy—

incentives, information, research & development,

regulation-States and utilities are often more active

than the Federal Government. Increased Federal

efforts would be most effective if they complemented these existing efforts. In most cases, States

and utilities would welcome Federal support and

assistance, however in a few areas-notably building codes and utility regulation—an enhanced Federal role would be controversial.

OTA identifies a number of policy options to

promote greater use of cost-effective energy efficient technologies. These options make use of

several strategies, including:

Changing the incentives for efficiency. Individuals often have few or mixed financial incentives for

energy efficiency. Federal policies can address this

issue by enhancing these incentives, for example,

through pricing changes and tax policy.

Federal leadership through procurement, public recognition, and demonstration. The Federal

Government has considerable purchasing power due
6 . Building Energy Efficiency

to its size, and this power can be used to increase the

sales and distribution of energy efficient technologies.

Research, development, and demonstration

(RD&D) for efficiency. The Federal Government

conducts RD&D on buildings technologies, and

changes in RD&D planning and execution could

help ensure the applicability and usefulness of the

results.

Encouraging utilities to invest in efficiency.

Utilities are well-equipped to implement efficiency,

and Federal actions such as technical support for

least-cost planning can aid their efforts.

Mandating efficiency through codes and standards. In some cases regulation may be needed to set

minimum efficiency levels, and such regulation may

be most appropriate at the Federal level.

Improving information and awareness of efficiency opportunities. The Federal Government can

provide information to enhance and support other

efficiency programs such as rebates and incentives.

OTA offers a number of specific options of each

type. These specific options are grouped into three

distinct levels, in order of increasing Federal involvement and energy savings. The basic level

includes relatively low-cost, simple policy measures

that require little or no new legislation or change

from present practice (box A). If Congress determines that changes are needed to effect improvements in energy efficiency, then the basic level

could be considered as a first step. The moderate

level includes several options that are more ambitious, and in some cases require changes to existing

legislation and increased Federal spending (box B).

The aggressive level includes options that require

new legislation, an increased Federal role in energy

regulation, and increased Federal spending (box C).

Many such packages could be constructed; the three

described here are intended only to illustrate the

range of options Congress could consider.

I n summary, energy efficient technologies that

save energy and money are commercially available,

yet often underutilized. The indirect benefits of these

technologies-reduced environmental damage, enhanced economic competitiveness, and increased

national security-would be considerable. OTA

offers three levels of policy options to promote

greater use of these technologies.

It is useful to compare the options in this report to

those contained in the National Energy Strategy

(NES), a comprehensive strategy proposed by the

Administration in 1991. OTA finds that the NES

options do not represent the range of options

Congress could consider to implement energy

efficiency in buildings. This report expands the

menu of options for the U.S. Congress to consider to

implement energy efficiency in buildings.
—

Summary ● 7

Box A—The Basic Package

Incentives

● Direct the Departments of Energy (DOE) and Health and Human Services to set aside an adequate amount

of program spending for program evaluation; particularly to determine the cost-effectiveness of low-income

weatherization.

. Direct and fund DOE to expand research on the measurement and pricing of externalities associated with

energy production, distribution, and consumption.

Federal leadership

● Encourage energy efficiency in Federal buildings by upgrading procurement guidelines for energy-using

equipment so as to incorporate energy efficiency.

. Extend the Environmental Protection Agency (EPA) Green Lights concept to other end users.

Research, development, and demonstration

● Require all DOE Office of Building Technologies applied research projects reaching the demonstration stage

to conduct some minimum level of technology transfer and market assessment.

. Encourage or require DOE to define specific technological goals that relate to program objectives in the DOE

Conservation multiyear planning process.

. Conduct regular RD&D program evaluations for Congress to identify the successes, failures, and future

direction of projects in the DOE Office of Building Technologies.

Utilities

●

●

●

Instruct DOE to expand its research and development related to the design, operation, and evaluation of

utility efficiency programs.

Instruct DOE to increase its activities as an information clearinghouse for efficiency program design,

operation, and evaluation.

Instruct DOE to evaluate whether the Northwest Power Planning Council represents a useful model for

energy planning that could be applied to other regions of the country.

Mandates

●

●

●

●

Assess compliance with and enforcement of existing State building codes as they pertain to energy

efficiency.

Ensure that section 109 of the Cranston-Gonzalez Affordable Housing Act of 1990 (Public Law 101-625)

requiring the use of the Council of American Building Officials Model Energy Code, 1989 Edition (CABO

MEC ’89) in Department of Housing and Urban Development assisted housing is implemented.

In conjunction with organizations such as the Council of American Building Officials and the American

Society of Heating, Refrigerating, and Air-Conditioning Engineers, instruct DOE to continue to improve

Federal building standards and guidelines and provide implementation materials and support services to

promote their use on the State level.

Instruct DOE to examine the feasibility and likely impacts of extending the coverage of the National

Appliance Energy Conservation Act of 1987 to include appliances and equipment not covered by the

program.

Information

● Instruct the Federal Trade Commission (FTC) to revisit its 1979 exemption rulings for appliance energy

labeling.

. Instruct the FTC and/or DOE to assess the feasibility of extending labeling requirements to commercial

sector equipment.

. Extend labeling requirements to windows and lamps.

. Instruct the FTC and/or DOE to investigate alternative label designs that might inform consumers better.
8 . Building Energy Efficiency

Box B—The Moderate Package

Incentives

● PaSS legislation making utility rebates nontaxable.

● Enact or increase taxes on the production and use of fuels consumed in the buildings sector.

● Direct and fund DOE to provide technical and financial assistance to States interested in measuring and

pricing energy externalities.

. Direct the Federal housing and national mortgage agencies to simplify and expand their energy efficient

mortgage programs.

Federal leadership

● Allocate (or increase access to) funds for efficiency improvements in Federal buildings.

● Encourage manufacturers, utilities, and other interested parties to extend the Golden Carrot concept to other

technologies for demonstration and marketing.

Research, development, and demonstration

●

●

●

●

●

Make greater use of market surveys to assess manufacturer and consumer response to potential new

technologies prior to initiating Office of Building Technologies (OBT) RD&D projects.

Increase industry involvement in RD&D project planning, funding, and execution.

Examine the feasibility of both least-cost and net-benefit planning for DOE applied conservation RD&D

programs.

Establish an ambitious level of technology transfer and marketing efforts for RD&D projects of OBT beyond

that currently pursued.

Increase OBT funding for RD&D work.

Utilities

● Direct the Tennessee Valley Authority and the power marketing administrations to integrate better least-cost

planning techniques and principles into their operations and management.

● Instruct the Federal Energy Regulatory Commission to examine its rate setting and other regulatory actions

to determine their consistency with State-approved utility least-cost plans.

● Instruct DOE to support through grants, technical support, or other means State and utility efforts related

to the design and implementation of least-cost planning.

● Encourage or require States not already doing so to consider adopting least-cost plans.

Mandates

●

●

●

●

●

Direct and fired DOE to provide technical and financial support to those 34 States with residential building

codes less stringent than CABO MEC ’89 to evaluate the cost-effectiveness of upgrading their codes to the

CABO benchmark.

Direct and fired DOE to provide technical and financial support to States considering the adoption of more

stringent commercial building codes.

Direct and fund DOE to provide technical and financial assistance to communities and States instituting

retrofit-on-resale rules.

Direct and fund DOE to enlarge their efforts at code official training and education.

Extend National Appliance Energy Conservation Act of 1987 coverage to include residential and

commercial equipment not currently covered by the program.

Information

● Direct DOE to explore methods for producing an accurate, verifiable whole- building rating, and to provide

technical support for State and utility programs that rate whole buildings.

. Encourage DOE to work with manufacturers, designers, and builders to demonstrate energy efficient

equipment that works.

● Encourage DOE to set Up a building energy audit program involving architecture and engineering schools.
-————

Summary ● 9

Box C—The Aggressive Package

Incentives

● Mandate the measurement and pricing of energy externalities.

Federal leadership

. Instruct DOE to promote actively the demonstration of efficient technologies in Federal buildings to

strengthen markets for energy efficient goods and services.

Research, development, and demonstration

● Require DOE to market buildings conservation RD&D results to utilities, State agencies, and its own

regulatory programs, including the Office of Codes and Standards (within the Office of Building

Technologies).

. Require DOE to perform least-cost or net-benefit conservation RD&D planning.

Utilities

● Direct federally owned utilities to provide incentives to, or require, its customer utilities to adopt least-cost

plans.

Mandates

● Require States to meet or exceed federally set minimum building efficiency standards, such as the Building

Energy Performance Standards (BEPS).

. Adopt more stringent cost-effective National Appliance Energy Conservation Act standards by identifying

equipment efficiency levels that represent longer paybacks than most current standards allow.

. Encourage or require secondary mortgage market institutions (e.g., the Federal Home Loan Mortgage

Corporation) to require residences to meet the Council of American Officials Model Energy Code 1989

Edition (or some other major code).

Information

● Require point-of-sale disclosure of whole-building energy ratings.

297-936 0 - 92 - 2 : QL 3
Chapter 1

Energy Use in Buildings:

Past, Present, and Future

Box I-A--Chapter Summary

Energy issues are of continuing policy concern, due to the crucial role played by

energy in environmental quality, economic vitality, and national security. In recent reports

OTA has suggested that energy efficiency is a critical component of a comprehensive policy

framework to further these issues. This report addresses energy use and efficiency in U.S.

buildings, which account for over one-third of U.S. energy consumption.

Energy use in buildings has grown in the last 20 years. Sheer increases in numbers

underlie much of this growth-more people, more households, and more oftices. Increased

service demand—--more air conditioning, more computers, larger houses----has contributed

as well. However the application of improved technology has moderated this growth.

Energy efficient building shells, appliances, and building designs have lowered energy

intensity in residences (energy use per household per year) and stabilized energy intensity

in the commercial sector (energy use per square foot per year).

Building energy use in the future will be driven by technological change but will be

influenced by other factors as well, including population and economic growth, changes in

household six, changes in lifestyle, and migration patterns. The complexity and

interactions of these factors make it difficult to predict accurately future levels of building

energy use, however OTA estimates that, in a “business-as-usual” scenario (that is,

assuming no policy change), building energy use will continue to grow at a moderate pace,

reaching roughly 42 quads by 2015. An alternative perspective, assuming all energy

efficient technologies with a positive net present value to the consumer are implemented,

suggests that building energy use could actually decrease to 28 quads by 2015. Although

predicted savings estimates are extremely uncertain, there is general agreement that the

technical and economic potential for savings is considerable.
Contents

Page

INTRODUCTION: THE POLICY CONTEXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ENERGY TRENDS AND CHANGES SINCE 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Residential Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Commercial Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BUILDING ENERGY USE IN THE NEXT 20 YEARS:

THE ENERGY SAVINGS POTENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Where Are We Headed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Where Could Technology Take Us? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDIX l-A: Scenarios of Future Energy Use...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDIX 1-B: Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDIX l-C: Sources for ’’Business-as-Usual” Forecasts . . . . . . . . . . . . . . . . . . . . . . . .

13

15

15

21

25

25

25

26

31

33

34

Boxes

Box Page

l-A. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

l-B. International Comparisons of Energy Efficiency in Buildings . . . . . . . . . . . . . . . . . . . . 16

l-C. Technology and Behavior: Effects on Building Energy Use...... . . . . . . . . . . . . . . . . 20
Chapter 1

Energy Use in Buildings: Past, Present, and Future

INTRODUCTION:

THE POLICY CONTEXT

Recent events have once again brought energy

issues to the forefront of national policy debate. In

1991 the Persian Gulf War and its effects on world

oil markets seized world attention. The same year,

the administration released a National Energy Strategy,

l and numerous legislative options are being

considered by Congress in its wake. This renewed

interest in energy, however, is different from the

prevailing concerns of the 1970s when fears about

oil price and availability were triggered by the major

oil supply disruptions of 1973 and 1979.

In the 1990s, concerns about U.S. energy production and use are broader, longer term, and more

complex. 2 In 1990, prior to the Persian Gulf War,

pressing energy concerns related to environmental

quality-including regional issues of urban air

quality, acid rain, and nuclear waste, as well as

global issues such as the role of fossil fuels in

climate change. Indeed, the Clean Air Act Amendments of 1990 are among the most significant

energy-related national legislation in recent years.

The Persian Gulf War returned energy security to

the national policy agenda after a decade of absence,

but even the nature of energy security concerns has

changed.3 Concerns about U.S. reliance on imported

oil, which has risen steadily from 22 percent of total

oil use in 1970 to 42 percent in 1990 and is expected

to rise to 62 percent by2010,4 has as much to do with

the role of oil imports in the U.S. trade deficit as with

the concerns over supply reliability or price volatility.

The role of energy in economic production is also

changing as the structure of the U.S. economy

changes. For many years, the conventional wisdom

held that energy use and gross domestic product

(GDP) were immutably linked, moving in lock step.

We learned from the energy shocks of the 1970s,

however, that ingenuity and innovation can substitute for energy supply when the price is right. When

energy prices rise, people respond over time by

shifting their market basket of purchases and by

developing more efficient ways to provide energy

services. The energy consumed per unit of GDP fell

2,4 percent per year between 1972 and 1985, mostly

due to improved energy efficiency (figure 1-1).5 This

steady drop in energy intensity also reflects changing patterns of consumer demand, a shifting balance

of imports and exports for both energy and nonenergy goods, and a changing market basket of

goods produced and consumed in the United States.

Understanding these trends is essential to grasp

the complex interdependence of energy with broader

national issues of economic vitality, national security, and environmental quality.6 Indeed, a critical

lesson of the 1970s and 1980s is that energy policy

must integrate with these three issues, and in recent

reports OTA has suggested several policy goals that

address these issues, including limiting oil import

dependence, improving international competitiveness of U.S. goods and services, and addressing both

1 U.S. Department of Energy, NationaZ Energy Strategy: Powefil Ideusfor America, 1st ed. (Washingto% DC: February 1991).

2 The changing nature of U.S. energy policy concerns is addressed in U.S. Congress, OffIce of Technology Assessment, Energy Technology Choices,

Shaping Our Future, OTA-E493 (Washington DC: U.S. Government Printing Office, July 1991).

3 Energy security and oil import issues are addressed in U.S. Congress, Office of ‘lkchnology Assessment, U.S. Oil Zmport Vulnerability: The

Technicu/ Replacement Porenriaf, OTA-E-503 (Washington, DC: U.S. Government Printing Office, October 1991).

4 Data arc total net imports of petroleum as a percent of total U.S. consumption. Historical data from U.S. Department of Energy, Energy Information

Administration ArmuaZ Energy Review 1990, DOE/EIA-0384(90) (Washington, DC: May 1991), p. 129. ForMast from U.S. Department of Energy,

Energy Information Adminis@ation, AnnuaZ Energy Outlook 1992, DOE/EIA-0383(92) (Washington, DC: January 1992), p. 3, reference case.

S About two-thirds of the reduction in energy use per unit of GDP was due to energy efficiency improvements, and the remaining one-third was due

to structural changes in the economy. U.S. Congress, Office of lkchnology Assessment, Energy Use and rhe U.S. Economv, OTA-BP-E-57 (Washington,

DC: U.S, Government Printing Office, June 1990).

6 ~ese relationships MC discuss~ h more dep~ in John H. Gibbons, Director, U.S. Congress, Office Of Technology Assessment, “Ener8Y PolicY

Context for the 1990s: Considerations for a National Energy Strategy, ’ testimony before the House Committee on Energy and Commerce, Subcommitt&

on Energy and Power, Feb. 20, 1991; and Peter D. Blair, Program Manager, Energy and Materials Program, Office of Technology Assessment,

“Considerations for National Energy Policy, ” testimony before the House Committee on Banking, Finance, and Urban Affairs, Subcommittee on

Economic Stabilization, Oct. 17, 1991.

–13–
14 . Building Energy Efficiency

local and global environmental concerns.7 In virtually all of this work, energy efficiency is shown to

be a critical component of a comprehensive

policy to further these goals and is a focus of this

report. g

accounts for an increasing share of total U.S. energy

consumption: 27 percent in 1950, 33 percent in

1970, and 36 percent in 1990.9 At present, buildings

account for over 60 percent of all electricity used in

the United States and almost 40 percent of all natural

gas. 10 Otherr OTA reports, recently completed or in

preparation, address energy use and efficiency in

This report addresses energy use and efficiency in U.S. buildings. Energy use in buildings

Figure I-l—Index of U.S. Energy Use, Gross Domestic Product (GDP), and Energy Intensity

1972 ● 1,0 0

1

1.6

1.5

1.4

1.3

1.2

1.1

1.0

0.9

0 . 8

0.7

0 . 6

0 . 5

0.4

=

0 . 0

.-. ,

r . ,-

l r -

/

<

—

.

4-

4 }

1 1 1 L

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988

— Btu GDP (1982$)

—L---J Intensity (Btu/GDP)

Energy use (Btu) and economic growth (GDP) grew in parallel from 1952 to 1971, causing the energy intensit y (Btu/GDP) to be relatively

flat. After 1971, GDP continued to grow, but energy use stayed relatively constant, resulting in a decline in the energy intensity until 1986.

Due to an increase in energy use after 1985, the energy intensity stayed level from 1986 to 1988.

-.

SOURCE: U.S. Congress, Office of Technology Assessment, Energy Useandthe (J.S. Economy, OTA-BP-E-57 (Washington, DC: U.S. Government Printing

Office, June 1990), p. 2.

7 ~ae ~~cy ~o~S we ~ddress~ ~ more de~ h U.S. Con@eSs, Ofiice of lkchnology Assessment U.S. Oil Import Vulnerabiliv: The Technical

Replacement Potential, O“E4-E-503 (Washington DC: U.S. Government Printing OffIce, October 1991); and U.S. Congress, Office of ‘IMmology

Assessment Energy Technology Choices: Shaping Our Future, OTA-E-493 (Washington DC: U.S. Government Printing Office, July 1991).

8 me god of ~prol,~g enm~ efflciaw Stas in pm horn a recognition that ener~ is used not for its ow tie but to supply CZImSY ‘ ‘~i~s’

(e.g., lighting, heating, and transportation). Thinicm“ g interma of energy services, rather tbanordy energy supplies, provides acontextfor understanding

the appropriate role of energy effkiency, as eftlciency may be able to supply the needed services at a lower economic and environmental cost.

9 ~dus~ (37 Pement) ~d ~gflation (27 ~rc~t) a~ount for ~ rest, Dam include energy losses in tie Wnvemion and hZIIISIIIkSiOIl Of

electricity. U.S. Department of Energy, Energy Information Adrninistratio% Annual Energy Review 1990, DOIYEL4-0384(90) (Washington DC: May

1991), p. 13.

10 ~id,, pp. 173, 215.
Chapter I-Energy Use in Buildings: Past, Present, and Future ● 15

other sectors of the economy, including the Federal

Government, l1 industry, transportation, and the role

of electric and gas utilities in efficiency .12

A recent OTA study has shown that the use of

cost-effective, commercially available technologies

could reduce total building energy use by about

one-third by 2015, relative to a‘ ‘business-as-usual’

baseline .13 The use of these technologies would save

money and in addition would reduce the environmental damage associated with energy production.

However, the buildings sector presents some distinct

policy challenges for capturing these savings. For

example, buildings in the United States are technically complex; the building industry is decentralized

and fragmented; and buildings are subject to a mix

of Federal, State, and local requirements that can

frustrate or even discourage improvements in energy

efficiency. The nature of buildings, with occupants

that are often not owners, creates market imperfections that can be difficult to overcome. Finally, past

Federal efforts to improve building energy efficiency have a mixed record, and tools for measurement and evaluation of energy savings are imperfect.

This report assesses technologies for improving energy efficiency in buildings, discusses why

these technologies are not widely used, and offers

policy options for encouraging their use. Several

questions are explored:

●

●

●

●

●

How much energy could be saved through the

use of energy efficient technologies? (chapter

1)

What specific technologies are available, and

what are their cost and performance characteristics? (chapter 2)

What prevents the widespread use of these

technologies? (chapter 3)

What policies have been used in the past to

encourage efficiency, and how well have they

worked? (chapter 4)

What policy options are available to the U.S.

Congress to encourage greater energy efficiency? (chapter 5)

The remainder of this chapter discusses recent

trends in building energy use and the factors

affecting this use. The future of energy use in

buildings is then discussed from two perspectives:

the likely future of building energy use, and what

that future could be if energy efficient technologies

were used more widely.

ENERGY TRENDS AND

CHANGES SINCE 1970

Energy use in U.S. buildings has increased

steadily-from about 22 quadrillion British thermal

units (quads) in 1970 to about 30 quads in 1989.14

Several factors have contributed to this growth,

while others have acted to constrain it. Understanding these factors illuminates the role of technology

in building energy use. (These factors also provide

some insight into the efficiency of U.S. buildings

relative to other countries-see box l-B.)

The Residential Sector

In 1989, residential buildings used 16.8 quads of

energy at a cost of $104 billion dollars15-the

majority in the form of electricity, followed by

natural gas and oil. Space heating is responsible for

almost half of total energy use, followed by water

heating, refrigerators and freezers, space cooling,

and lights (figure 1-2). In the last 20 years, residential energy use increased at an average annual rate of

about 1.2 percent (figure 1-3). More recently (1985-

89), this growth accelerated to an annual average

rate of 2.1 percent. The major factors contributing to

this growth include a growing population, shrinking

household size (people per household) leading to a

greater number of households, and increasing demand for energy-intensive services such as air

conditioning (table l-l).

11 us. Conwess, Office of Tec~ology ~sessmeng Energy Eficiency in fhe Federal Government: Government by Good Example?, OTA-E-492

(Washington, DC: U.S. Government Printing Office, February 1991).

12 Reports Covering these other sectors are forthcoming.

13 us conwe~~, offlcc of TeC~OIOgy Assessment, c~angi~g By Degrees: ~tep~ TO Reduce Greenhouse Gases, OTA-O-482 ~tiShkgtO~ DC:

U.S. Government Printing Office, February 1991). This and other estimates of the savings potential are discussed in detail in this chapter.

14 so~cc 15 OTA 1 $)92, see app. 1-B. A q~d is 1015 Btus, WOfi about $5.7 billion at today’s prices for energy used h buildings.

15 sowce i5 o~ 1992, s= app. I-B. ~s includes energy us~ for space heating, space cooling, hot water heating, arid vdOUS apphICtX, but

excludes energy used for transportation. Throughout this report, electricity is converted to energy (Btu) units using a primary conversion factor that

includes generation losses. See app. 2-C for a discussion of energy conversion issues.
16 ● Building Energy Efficiency

Box 1-B—International Comparisons of Energy Efficiency in Buildings

International comparisons of Figure l-B-l—Residential Energy Use in Five Countries

energy use can be a useful way to MBtu/household-degree day-year Btu/sq. ft.-degree day-year

examine energy use and energy 35

efficiency, however care must be

taken to-consider all the factors 

that might account for differences

30

~35

among countries. In the resi- 25

dential sector, for example, climate, household size, floor space, 20

indoor temperature, and appliance saturation can all be as or 15

more important in determining

total household energy use than 10

the thermal properties of homes

or the efficiencies of their appli- 5

ances.

l As a result, simply calculating the average household energy 0 1

I

3 0

2 5

I

2 0

I

15

t

10

use among different nations will -

USA France West Italy Japan USA France West Italy Japan

not always provide a useful meas- Germany Germany

ure of relative efficiency.

= Energy per household m Energy per sq. ft. A simple example illustrates

this point. After adjusting for The bars on the left show residential energy use per household, while the bars on the right

climatic differences, consump- show residential energy use per square foot of living space. The effects of climatic

differences have been removed.

tion data indicate that the United NOTE: Includes losses associated with electricity generation.

States uses more energy per house- SOURCE: U.S. Department of Energy, Energy Information Administration, /r#&ators of Energy

hold than France, Germany, Italy, f~f~emy:%/nternatiom/ Comparison, SR/EMEW90-02(Washington, DC:JuIy 1990), pp.

or Japan (see figure l-B-l),

-.

which-might at first glance suggest that U.S. households are less efficient. However, energy use per unit of floor

space in the United States is actually lower than in France or Germany (see figure 1-B-1 ).2 And although Italy and

Japan use less energy per unit of residential floor space than the United States, these countries generally have lower

indoor temperatures and use central heating less than the United States,3 factors that may account for most of the

differing consumption levels.

As this example suggests, international comparisons of energy efficiency should be viewed with caution and,

where possible, the variables and assumptions underlying such comparisons should be understood. Differences may

indeed stem from differing energy efficiencies but may also be related to temperature settings, appliance saturation,

and other, nontechnical factors that influence energy use.

1 sw L. Scbipper, A. Ketoff, and A. ~, “Explaining Residential Energy Use by International Bottom-Up Comparisons,” Amwuf

Review of Energy f985 (Mo Alto, CA: Annual Reviews, I.ne., 1985), vol. 10, pp. 341405.

2 U.S. &p_nt of Energy, Wrgy ~o~tion~“ “stratiow Indicators of Energy Efia”ency: An International Compan”son

S~METJ~ (Waal@gon, DC: July 1990), pp. 11-12.

s L. sC~pPr, A. K~tOff, ~dA+ -e, 1‘fipl~gResiden~ Energy use by ~te~tio~ BO~Orn-Up @Ilp~SOIIS,’ Annual Review

of Energy 1985 (Palo Alto, CA: Annual Reviews, Inc., 1985), vol. 10, pp. 352-353.

The U.S. population increased by 45 million factors was an almost 50 percent increase in the

people from 1970 to 1990.16 At the same time the number of households in just two decades. As each

average number of people per household dropped household requires space conditioning, hot water,

considerably, from 3.24 in 1970 to 2.68 in 1990 and other energy services, these changes drove the

(figure 1-4). The combined effect of these two growth in energy use in the residential sector.

16 us, D~~~~~t of co-er~c, BWM~ of tie Cemus, Stati~tiL.u/Ab~fruct o~rhe l-Jnited Stares: 1991 ~ashkgto~ DC: 1991), p. 7.
Chapter 1--Energy Use in Buildings: Past, Present, and Future ● 17

Figure l-2—Residential Sector Energy Use by End Use and Fuel Type, 1988

Spac

Space heating

e coolin

9%

Lighti

Other

7%

13%

Wat torage

%

NOTE: Includes energy losses associated with electricity generation (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. l-B).

20

15

10

5

0

Figure 1-3—Residential Sector Energy Use

by Fuel Type, 1970-89

Energy use (quads/year)

1

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988

- Oi l ~~~ Othe r

1

---.1 Natural gas ~= Electricity

NOTE: Inciudes energy losses associated with electricity generation (see

app, 2-C).

SOURCE: U.S. Department of Energy, Energy Information Administration,

State Energy Data Report: Consumption Estimates, 1960-1989,

DOE/EIA-0214(89) (Washington, DC: May 1991), p. 24.

Increased demand for particular energy-intensive

services also contributed to the growth in residential

energy use. The popularity of central air conditionElectricity

Other

3%

Oil

7%

Natural gas

29%

Table l-l—Major Factors Influencing

Residential Energy Use

Factors causing an increase in consumption:

Larger population—more households

Fewer people per household-more households

Increased demand for energy-intensive services

Factors causing a decrease in consumption:

New housing more efficient than existing stock

New appliances more efficient than existing stock

Retrofits to existing housing

Migration to the South and West

More multifamily units

Factors causing fluctuations in consumption:

Occupant behavior, changes in thermostat settings

Fuel shifts-more electricity and less oil, changes in wood use

Price changes

SOURCE: Office of Technology Assessment, 1992.

ing has grown, and it is now routinely installed in

over three-fourths of new single-family homes.17

Increasing market penetration of energy-intensive

appliances such as clothes dryers is also contributing

to increased energy use. 18 And there is some

evidence that residences are becoming larger as

well, requiring more energy for space heating and

cooling. 19 At present almost all households have

space heating of some kind, water heating, and at

least one refrigerator. Over 90 percent of existing

households have color TVs, about three-fourths

have clothes washers, about two-thirds have clothes

17 ~ 107’() ~~Ut ~ne.~fid of new ~lngle-f~ly homes ~d cen~~ air conditioning; by 1990 ~S figllre reached 76 percent. Pacitlc Northwest

Laboratory, Residential and Commercia[ Data Book—Third Edition, PNL-6454 (Richland, WA: February 1988), p. 3.28; U.S. Department of

Commerce, Bureau of the Census, Characteristics of New Housing: J990, C25-9013 (Washington, DC: June 1991), p. 4.

18 ~ 198260 percent of households ~d clo~es dgem; by ] 987 fhis ~d c]imb~ [o 66 percent, us. Dep~ent of Energy, Energy hlfOITMitiOIl

Administration, Housing Characteristics 1982, DOE/EIA-0314(82) (Washington, DC: August 1984), p. 69; U.S. Department of Energy, Energy

Information Administratio~ Housing Characteristics 1987, DOE/EIA-0314(87) (Washington DC: May 1989), p. 83.

19 me average new s~gle-f~ly house ~ 1986 ~d 1,825 ~ume feet of floor Space, by 1990 MS wasup102,080” ~Uare feet. The same trend occurred

in new multifamily units as well—from an average of 911 square feet of floor space in 1986 to 1,005 square feet in 1990. U.S. Department of Commerce,

Bureau of the Census, Characreris(ics of New Housing: 1990, C25-9013 (Washington, DC: June 1991), pp. 33,40.
18 ● Building Energy Efficiency

Figure 1-4--Changes in Household Size, 1970-90

People/household

3.3

3.2

3.1

3

2.9

2.8

2.7

2.6

2.5 

19701972197419761978 19801982198419861988 1990

From 1970 to 1990the average household size dropped from 3.24

people to 2.68 people.

NOTE: Y-axis not set to zero.

SOURCE: Office of Technology Assessment, 1992 (see app. l-B).

dryers, and about one-third have central air conditioning.20

Although total residential energy use increased

from 1970 to 1989, energy intensity-energy consumption per household per year-actually decreased by 15 percent in the same period (figure 1-5).

Several factors contributed to this intensity drop, but

improved technology and building practices were

key: older houses were retrofit to improve energy

efficiency, newer houses make greater use of energyefficient building practices, and the energy efficiency of equipment in homes has improved dramatically.

Considerable effort has been made to improve the

energy efficiency of the existing building stock.

National retrofit data are scarce but, by one estimate,

from 1983 to 1988 about 26 million owner-occupied

U.S. households added storm windows and/or doors,

and 17 million added insulation.21 Careful evaluations of retrofit efforts have shown that energy

savings are often substantial.22 New houses benefited from greater use of energy efficient techniques.

For example, new houses built in 1985 were better

220

210

200

190

180

170

160

Figure 1-5-Energy Use Per Household

Dropped From 1970 to 1985,

But Increased From 1985 to 1988.

Million Btus/household/vear

‘\\\

“’-–~

, , , ! , 1 , T 1 ,

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988

NOTE: Three-year moving average shown. Y-axis not set to zero. Includes

energy losses associated with electricity generation (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. l-B).

Table 1-2-Changes in Construction Practices

for New Single-Family Detached Homes

1973 1985

Average R-valuea of insulation

Ceiling. . . . . . . . . . . . . . . . . . . . . . . 14.4 26.9

Exterior Wall.. . . . . . . . . . . . . . . . . . 10.0 12.5

Floor. . . . . . . . . . . . . . . . . . . . . . . . 4.0 10.2

Window type (percent)

Single-pane. . . . . . . . . . . . . . . . . . . 60 19

Double- or triple-pane.. . . . . . . . . . 40 81

aR.value is a measure of resistance to heat flow. A higher R-value means

a better insulating value,

SOURCE: Adapted from S. Meyers, “Energy Consumption and Structure

of the U.S Residential Sector: Changes Between 1970 and

1985,” Annual Review of Energy 1987 (Palo Alto, CA: Annual

Reviews, Inc., 1987), vol. 12, p. 90.

insulated and had more energy efficient windows

than those built in 1973 (table 1-2).

Residential equipment is now more energy efficient as well. The typical new gas furnace sold in

1975 had an efficiency of 63 percent; by 1988, this

increased to 75 percent. The efficiency gains in

appliances were even greater-the typical new

m u.S. Department of Energy, Energy Mormation ~. ‘ tration, Housing Characteristics 1987, DOFYEIA-0314(87) (_Wshi.ngtom DC: May

1989), pp. 77-79, 83. As noted previously, however, over three-fourths of new single-family homes have central air conditioning.

21 U.S. ~~ent of Comerce, B~au of the Cemus, A~rican Hou~ng ~~~eyfo~ t& ~nife~ stares in 1985, H-150-85 (WMhh@oQ ~:

December 1988), p, 98; U.S. Department of Commerce, Bureau of the Census, American Housing Survey for the United States in 1987, H-150-87

(Washington+ DC: December 1989), p. 12Q U.S. Department of Commerce, Bureau of the Census, American Housing Surveyfor the United States in

1989, H150/89 (Washington DC: July 1991), p. 122.

22 s=, for Cmple, S, cohe~ C. G1*ad J. l-kin-k, Measured Energy Savings andEconomics of Retrofitting Existing W@Fa~.Jy Ho~s:

An Update of (he BECA-B Darabase, LBL-28147 (Berkeley, CA: Lawrence Berkeley Laboratories, February 1991), vol. 1.
Chapter I-Energy Use in Buildings: Past, Present, and Future ● 19

Table 1-3-New and Existing Housing Types

Percent of Percent of

existing households, new units

Structure 1987 started, 1988a

Single-family detached. . . . . . . . 62

Single-family attached. . . . . . . . 5 (include~~above)

Multifamily: 2 to 4 units. . . . . . . . 11 3

Multifamily: 5+ units. . . . . . . . . . 16 18

Manufactured (mobile) home. . . 6 15

aPrivately owned only.

NOTE: Mobile home data are “placed for use.”

SOURCES: Existing: U.S. Department of Commerce, Bureau of the

Census, American Housing Survey for the United States in

1989, H-1 50/89 (Washington, DC: July 1991), p, 34. New:

U.S. Department of Commerce, Bureau of the Census,

Statistical Abstract of the United States: 1991 (Washington,

DC: 1991), pp. 720, 722.

refrigerator sold in 1990 used less than half as much

electricity as a comparable unit sold in 1972.23

Other factors acted to dampen total energy

demand in residences, although their effects were

minor. There was a slight shift in the types of

homes—the share of single-family homes in the

United States shrank slightly from 68.7 percent in

1982 to 66.5 percent in 1987.24 This means slightly

lower heating and cooling requirements, as multifamily units have fewer exterior walls. However,

single-family detached homes remain the most

common type of housing unit (table 1-3). There has

been a slight migration to the South and West in

recent years,25 which has probably decreased space

heating needs and increased space cooling needs.

The overall effect of this migration is thought to be

a small net decrease in energy use.26

Several other factors affected residential energy

use, although the direction of their effect was either

unclear or variable in recent years. Examples include

occupant behavior, shifts in fuel types, and energy

prices.

The behavior of building occupants can significantly influence energy use. One measure of behavior in residences is the thermostat setting. There is

some evidence that heating thermostat settings

decreased from 1973 to 1981, increased slightly to

1982, were flat from 1982 to 1984, and then

increased again from 1984 to 1987.27 The impacts of

these shifts on energy use are difficult to determine,

but higher heating thermostat settings clearly mean

more energy for space heating, all else being equal.

Broader behavioral factors, such as the fraction of

time spent on leisure activities, the trend toward

two-career families, and economic shifts from manufacturing to service, may have affected energy use

in buildings as well (box 1-C).28

The fuel mix of residential energy use has

changed as well. Electricity has become increasingly

prevalent for both space and water heating, while

oil’s share of the space heating market has dropped

sharply .29 In 1970, electricity supplied 41 percent of

residential energy; by 1988, this had climbed to 61

percent. 30 Yet this trend toward greater electrification maybe changing; electricity’s share of the space

heating market in new single-family homes dropped

sharply in recent years, from 49 percent in 1985 to

33 percent in 1990. Natural gas’ share jumped from

23 S= ch. 2 for sources and definitions.

~ Includes single-family detached houses and mobile homes. U.S. Department of Energy, Energy Information Administration, Housing

Characteristics Z982, DOE/EIA-0314(82) (Washington, DC: August 1984), p. 17; U.S. Department of Energy, Energy Information Administration

Housing Churac(eristic.s 2987, DOE/EIA-0314(87) (Washington DC: May 1989), p. 18.

25 In 1970, 52 Percent of homes were ~ tie Northe~t ~d Midwest; by 1983 Ws ~d f~]en to 47 pe~ent. S. Meyers, “Energy cOIISU.mptiOII and

Structure of the U.S Residential Sector: Changes Between 1970 and 1985, ” Annual Revienl of Energy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987),

vol. 12, p. 87.

‘b L. Schippcr, R. HowartlL and H. Gellcr, “United States Energy Use From 1973 to 1987: The Impacts of Improved Efficiency, ” Annual Review

of Energy 1990 (Palo Alto, CA: Annual Reviews, Inc., 1990), vol. 15, p. 482.

27 S. Me}ers, ‘ ‘Energy Consumption and Structure of the U.S. Residential Sector: Changes Between 1970 and 1985,” Annual Review ofEnergy 1987

(Palo Alto, CA: Amual Reviews, Inc., 1987), vol. 12, p. 92; U.S. Department of Energy, Energy Information Administration, Housing Characteristics

1987, DOE/EIA-0314(87) (Washington DC: May 1989), p. 3.

M ~ese factor5 me di5cuss~ h U.S. Conwe55, office of Technology Assessmen~ Technology and the Aun”can Economic Tran~ition!

OTA-TET-283 (Washington, DC: U.S. Government Printing Office, May 1988); also L. Schipper, Energy Use and Changing Lfestyles, EPRI CU-7069

(Palo Alto, CA. Electric Power Research Institute, November 1990).

z~ The efficiency implications of this shift depend on the technologies used to convert energy into heat. An electric heat pump, for example, is of

comparable efficiency to an oil-fired furnace, if one accounts forelectricirygeneration losses. An electric resistance heater, however, is much less efficient

than an oil furnace, if one accounts for electricity generation losses.

JO fiW~uivalcnt. Source is OTA 1992 (see app. 1-B).
20 ● Building Energy Efficiency

Box I-C-Technology and Behavior: Effects on Building Energy Use

This assessment focuses on technical means to improve the efficiency of energy use in buildings. Technology,

however, is not the only determinantt of building energy use. Human behavior-how people operate equipment, how

many children they bear, where they reside, and so on-can strongly influence building energy use as well.

In recent years, there has been increased interest in learning how human variables affect energy use in

buildings. A major stimulant of this interest was the emerging uncertainty in electrical utility planning. Whereas

electricity demand had increased at a fairly steady 7 percent per year from 1950 to 1973, increased prices, appliance

saturation, and other factors slowed this increase to 1 to 2 percent per year.1 An annual rate of 1 to 2 percent

represents a doubling time of anywhere from 70 to 35 years, and therefore considerably greater uncertainty than the

decadal doubling rate of earlier years. With saturation, patterns of equipment use-rather than the steady growth

of new demand introduced by their acquisition-became a primary factor in determining energy demand. And

equipment use is a function of human behavior.

Human behavior can be studied on two significantly different levels: the observable behavior of people and

the underlying values and attitudes that drive those behaviors. Our understanding of both is imperfect, as is our

ability to predict exactly how and when they will change. It is difficult to quantify and compare the contributions

of family size, time spent cooking, work habits, and the myriad other behaviors that jointly affect residential energy

use. Nor can we predict when, and how strongly, people will be motivated to conserve or stop conserving energy

in buildings, beyond the expectation that rather gross changes, such as a steep rise in energy prices, will significantly

influence behavior. Despite our limited understanding, it is clear that human behavior and values contribute

substantially to variations in building energy consumption. The following paragraphs provide supporting evidence.

Major influences on household energy use are family size, income, average length of daily occupancy, and

whether both household heads are employed; all but the last of these influences tend to increase energy use. 2

Although larger families consume more residential energy than smaller ones, this relationship reverses when

calculated on a per capita basis.3 Other relevant factors are the ages of family members and whether or not there

are children. Elderly singles, most of whom are not employed, tend to use more residential energy than younger

singles, most of whom are employed and spend less time at home.4

One estimate of the importance of behavioral differences in residential energy use comes from a careful study

that examined variation in winter natural gas consumption of 205 townhouses in Princeton, New Jersey. Physical

features-such as the position of the townhouse (end or non-end unit), the number of bedrooms, and the amount

of insulated glass-accounted for 54 percent of the variation in energy use. Differences in occupant behavior were

associated with much of the remaining 46 percent variation.5

In the future, many factors will affect human behavior and its influence on energy demand in residential and

commercial buildings. A number of demographic trends are expected to influence future demand but in uncertain

ways. For example, the “graying” of the U.S. population will continue; the proportion of those older than 65 is

projected to grow from about 12 percent today to about 20 percent by the year 2030. 6 However, the elderly of

tomorrow may be different than the elderly of today in terms of health, activity levels, and other characteristics,

which could substantially alter their influence on building energy demand.

2p. G-B. MOITkOIIj and B, b~, “HOW@@ ~erfjy, “ in P. Gladhartj B. MorrisoQ and J. Zuiches, Energy and Futtu”lies (E.

Lansing, MI: Michigan State University Press, 1987), p. 131.

3 L. Schipper, S. Bartle& D. Hawk and E. v~e, “Linking Life-Styles and Energy Use: A Matter of Time?’ Annual Rew”ew ofl?nergy

1989, (Palo Alto, CA: Annual Reviews, Inc., 1989), vol. 14, p. 304.

4 Ibid., p.305.

5 R, Smolow (@~r), Swing Energy in the Ho~: p~incet~n’s Experi~~S at Twz”n Rivers (Cambridge, MA: Ballinger I%bli+4@

Company, 1978), pp. 227-228.

6 pop~~on Refe~nce Bur~~ A~rica in the 2]st Cenmry: Gov~~nce a~politics (W-01+ DC: pOpUkiliOIl Reference B-u,

rnc., 1990), p. 3.
—

Chapter 1--Energy Use in Buildings: Past, Present, and Future ● 21

The number of households is growing faster than the U.S. population. Household growth is expected to

continue to outpace population growth, although by a slower rate than before.7 Thus, the trend toward smaller

households is expected to continue, which in the past has been associated with increased per capita residential

energy demand.

As a final example, changes in the ethnic composition of the U.S. population could affect residential and

commercial building energy demand but the potential effect is unknown. Due to immigration and differential

fertility, the proportion of minorities in the U.S. population has been increasing steadily. In 1980, about 20 percent

of Americans were black Hispanic, or Asian. By 2030, these groups are projected to represent 38 percent of the

U.S. population.8

The future contribution of behavioral and demographic variables on energy use is unclear. In the absence of

better understanding, it maybe prudent for policies to focus on technology, where the links to energy use are better

understood. Nevertheless, it is important to recognize that policies affecting behavioral and demographic variables

(such as changes in the tax treatment of child care, which could change the incentives for two-career households)

could have important effects on future energy use in buildings.

7 Ibid., pp. 4, 12.

8 Ibid., p. 5.

44 to 59 percent in the same period.31 Wood use for dential sector increased during the period 1975 to

space heating has fluctuated; in 1978, 2.5 percent of

U.S. households reported that their main heating fuel

was wood, and this increased to 7.5 percent in 1984,

but then dropped down to 5,6 percent by 1987.32

The price of energy underlies many of the changes

discussed above. There is little agreement on exactly

how energy prices and energy costs influence

efficiency. There is general agreement that, all else

equal, higher prices are an incentive for more

efficiency, but the exact relationships between price,

cost, and efficiency are not understood. The expectation of future price increases maybe as important as

the actual current price, especially in influencing

consumer decisions on capital investments. Price

changes may substantially change short-term behavior; for example, the changes in residential thermostat settings discussed above may have been so

influenced. However, the longer term impacts on

capital equipment selection decisions are unclear.

As shown in figure 1-6, energy prices in the resi1985, in most cases faster than the consumer price

index (CPI), but have dropped or held steady since

then.

The Commercial Sector

Commercial buildings used 12.9 quads of energy

at a cost of $68 billion in 1989.33 About two-thirds

of this energy was in the form of electricity. Space

heating, lighting, and space cooling were the principal end uses (figure 1-7). Today, commercial buildings are used for diverse functions, but the predominant ones are retail/service, office, warehouse,

assembly, and education. Figure 1-8 details commercial building square footage and energy use by

function. Note that the most energy-intensive uses

(those with the greatest energy consumption per

square foot) are offices, health care, and food.

Energy use in the commercial sector has increased

rapidly since 1970--at an average annual rate of 2.3

31 me Sme ~end ~~~ed ~ ~UI~@y home~T per~nt of new m~tiftiy ~fi Md el~tric spac~heating systems in 1985, (hopping to 53

percent in 1990. U.S. Department of Commerce, Bureau of the Census, Chamctetistics o~New Housing: ]989, C25-8913 (Washington DC: July 1990),

pp. 20, 39; U.S. Department of Commerce, Bureau of the Census, Charucretisrics ofNew Housing.’ 2990, C25-901 3 (Washington DC: June 1991), pp.

20,39.

32 U,S. Dep~ent of E~~gy, ~erfl ~omation Admirlis@ation, Housing Characren”srics 1987, DOE/E~-0314(87) (w~~gtom DC: MY

1989), p. viii.

33 Sowce is OTA 1992; see app. 1-B. me comerci~ s~tor is difficult to def~e but can& ~OUght of as encompassing all btidhgs tht durable

products are not made in and that people do not live in. This includes energy used in oftlces, stores, schools, churches, and hospitals but excludes energy

used in factories and apartment buildings.
22 ● Building Energy Efficiency

Figure 1-8-Energy Prices in the Residential Sector Rose From

1970 to 1985, Then Dropped From 1985 to 1990

Energy prices

10

T

8 -

Natural gas

($/1,000 cubic ft.)

6

I

I

4

2

0 IL

1970

—

1980 1990

Electricity (cents/k Wh)

1970 1980 1990

CPI

—–——~ 150

CPI

1970 1980 1990

- 1 2 0

-

9 0

- 6 0

1

3 0

‘ o

SOURCE: U.S. Department of Energy, Energy Information Administration, Annual Energy Review 1990, DOE/EIA0384(90) (Washington, DC: May 1991), pp. 179, 225; U.S. Department of Commerce, Bureau of the

Census, Statistical Abstract of the United States: 1991 (Washington, DC: 1991), p. 476.

Figure 1-7—Commercial Sector Energy

Spac ting

Water heating 5%

4%

NOTE: Includes energy losses associated with electricity generation (see app.

Use by End Use and Fuel Type, 1988

Electricity

69%

22%

2-c).

SOURCE: Office of Technology Assessment, 1992 (see app. l-B).

percent (figure l-9).34 As in the residential sector, a 1-10). Heating, cooling, and lighting these new

number of factors contributed to this growth (table buildings has considerably increased energy con1-4), the most important being the rapid growth in sumption in the commercial sector. Furthermore

new commercial buildings. The stock of commercial many of these new buildings are offices, retail/

buildings, as measured by total square footage, grew service buildings, and other commercial buildings

more than 50 percent from 1970 to 1989 (figure that are, on average, relatively energy intensive (i.e.,

~ Sowce for co~~ption data is OTA 1992; see app. l-B. Note that GNP grew even more qu.iekly in the same Pefiod-at awrallc ~U~ ~t~

between 2.8 and 2.9 percen~ in constant dollars. U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States: 1991

(Washington DC: 1991), p. 433.
C`hapter I-Energy Use in Buildings: Past, Present, and Future . 23

Figure 1-8-Breakdown of Energy Use and Square Footage by

Commercial Building Type, 1986

Percent

2 ’ ~

— — ‘

- 1

2 0 -

1 5 -

1 0 -

O

Retail/ Office Ware- Assembly Edu- Health Food Other

service house cat ion care

_ Floor space m Energy use

SOURCE: U.S. Department of Energy, Energy Information Administration, Commera’a/ Bui/ding Consumption and

Expenditures 1986, DOHEIA-0318(86) (Washington, DC: May 1989), p. 29.

Figure 1-9-Commercial Sector Energy Use

by Fuel Type, 1970-89

Table 1-4-Major Factors Influencing

Commercial Building Energy Use

Energy use (quads/year)

14 ~—–-—-

——.————

12

10

8

6

4

2 -

0

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988

m Oil ~~ Other

~~.-”] Natural gas = Electricity

NOTE: Includes energy losses associated with electricity generation (see

app. 2-C).

SOURCE: U.S. Department of Energy, Energy Information Administration, State Energy Data Report: Consumption Estimates, 1960-

1989, DOE/EIA-021 4(89) (Washington, DC: May 1991),

p. 25.

Factors causing an increase in consumption:

More buildings

More service demand-such as space cooling and office

equipment

Factors causing a decrease in consumption:

New buildings more efficient

New appliances more efficient

Retrofits to existing buildings

Factors causing fluctuations in consumption:

Fuel shifts-more electricity and less oil

Price changes

SOURCE: Office of Technology Assessment, 1992.

requiring more energy use per square foot per year)

as compared to the sector as a whole (figure 1-8).

Increased demand for energy-intensive services has

further increased commercial building energy use.

Most commercial buildings constructed in the past

20 years were built with air conditioning, while

many older commercial buildings were not. There

has been rapid growth in the use of computers and

related electronic office equipment-in 1984 there

were about 1.8 million personal computers in use in

businesses; by 1989 this had climbed to 14.0

million.35

35 U.S. Dep~en~ of Comerce, B~eau of tie Cemus, .ytan”~~ca/ Abs~act ~~the fJnlred ~rafes: ]990 (Washingto& w:Jan~ 1990), p. 95 [.

For the commercial sector as a whole, however, ofllce equipment is still a small energy user, accounting for only 3 to 4 percent of total commercial-sector

electricity use. See ch. 2.
24 . Building Energy Efficiency

Figure I-l O-The Stock of Commercial Buildings (as measured by total square

footage) Has Grown Rapidly, But the Energy Intensity (energy use per square foot

per year) Has Held Steady.

Billion sq. ft. 1,000 Btu/sq. ft./year

7 5

6 0

4 5

3 0

15

0

2 5 0

200

150

100

50

0

1970 1975 1980 1985 1989 1970 1975 1980 1985 1989

, Square footage m Energy intensity

SOURCE: U.S. Department of Energy, Energy Information Administration, State Energy Data Repxt: Consumption

Estimates, 1960-1969, DOE/EIA-0214(89) (Washington, DC: May 1991 ),p.25; D. Belzer, Paafic Northwest

Laboratories, personal communication, September 19, 1991.

Despite growth in the number of energy-intensive

buildings (e.g., offices and stores) and increases in

air conditioning and other equipment, energy intensity (energy use per square foot per year) actually

stayed flat in the commercial sector from 1970 to

1990 (figure 1-10). As in the residential sector,

improved technology has helped to dampen the

growth in commercial building energy use. New

commercial buildings use improved windows and

shells, more efficient space conditioning equipment,

and better lighting systems. For example, commercial buildings constructed from 1980 to 1989 made

greater use of ceiling and wall insulation, multipane

and reflective windows, and shadings or awnings

compared to buildings constructed in earlier years.36

Computer hardware and software improvements

allowed for more use of computer-aided building

design and analysis methods. In addition, the energy

Table 1-5-Commercial Building Retrofits

Action Percent of floor spacea

Energy management system. . . . . . . . . 12

Efficient light ballasts.. . . . . . . . . . . . . . . 24

Ceiling insulation. . . . . . . . . . . . . . . . . . . 20

Weatherstrip/caulk. . . . . . . . . . . . . . . . . . 22

aThe percent of all commercial building floor space for which the associated

action was added after construction, as of 1986.

SOURCE: U.S. Department of Energy, Energy information Administration,

Characteristics of Commercial Buildings 1966, DOE/EIA0246(86) (Washington, DC: September 1988), p. 24.

efficiency of the existing building stock has been

improved through retrofits (table 1-5).

Several other factors have influenced energy use

in commercial buildings. Electricity has replaced oil

and natural gas to a considerable extent.37 As in the

residential sector, a greater share of new commercial

building construction has been in the South and

West,38 which may have led to a slight net increase

in energy consumption due to an increased need for

36 I-J-s. Dep~ent of Energy, Ener~ ~o~tion~“ “stratio% Commercial Building Characteristics 1989, DOWEIA-0246(89) (WashingtorL

DC: June 1991), p. 202.

37 ~ 1970, 49 ~r=nt of ener= ~d ~ ~o-~c~ b~ldirlgs w= ~ tie fo~ of el~~city; by 1988 m W h~ti to 69 percent Qequivalent, see app. 2-C). Source is OTA 1992; see app. l-B. The efficiency implications of this shift depend on the technologies used (see footnote 29

above).

38 U.S . Dep~ent of Energy, Ener~ Information Administratioxq Characteristics of Commercial Buildings 1989, DOWELWW6(89)

(Washington DC: June 1991), p. 42. Commercial buildings tend to need more energy for space cooling and less for space heating than residential

buildings; therefore this geographic shift would be more likely to increase overall consumption in commercial buildings than in residential buildings.
.—

Chapter l--Energy Use in Buildings: Past, Present, and Future ● 25

Figure 1-1 l—Energy Prices in the Commercial Sector Rose From 1970 to 1985,

Then Dropped From 1985 to 1990.

Energy Prices CPI

10

8

6

4

2

0

-. .

.

Electricity (cents/kWh)

Natural gas

($/1,000 cubic feet)

\

L..[ I I

CPI

I I

1970 1980 1990 1970 1980 1990 1970 1980 1990

150

120

90

60

30

0

SOURCE: U.S. Department of Energy, Energy Information Administration, Annual Energy Review 1990, DOE/EIA0384(90) (Washington, DC: May 1991), pp. 179, 225; U.S. Department of Commerce, Bureau of the

Census, Statistica/Abstract of the United States: 1991 (Washington, DC: 1991), p. 476.

space cooling. Finally, energy prices in the commercial sector increased from 1970 to 1985 but dropped

after that (figure 1-1 1).

Summary

Energy use in both the commercial and residential

sectors has grown in the last 20 years. Sheer

increases in numbers underlie much of this growth—

more people, more households, and more offices.

Increased service demand-more air conditioning,

more computers, larger houses—has contributed as

well. However, the application of improved technology has moderated this growth. Better building

shells (windows and insulation), better appliances

(furnaces, air conditioners, refrigerators), and better

building design have lowered energy intensity in

residences (energy use per household per year) and

stabilized energy intensity in the commercial sector

(energy use per square foot per year).

BUILDING ENERGY USE IN THE

NEXT 20 YEARS: THE ENERGY

SAVINGS POTENTIAL

Where Are We Headed?

As in the past, building energy use in the future

will be driven by technological change but will be

297-936 0 - 92 - 3 : QL 3

influenced by other factors as well, including

population and economic growth, changes in household size, changes in lifestyle, and migration patterns. The complexity and interactions of these

factors make it difficult to predict accurately future

levels of building energy use. Nevertheless, it is

useful to project these levels under different conditions to illuminate potential policy issues.

One way to consider future energy use is in terms

of intensity (defined as energy use per household per

year in residential buildings, and energy use per

square foot per year in commercial buildings). As

discussed above, since 1970 residential intensity

dropped and then increased (figure 1-5), while

commercial intensity stayed relatively constant (figure 1-10). OTA has modeled future intensity levels

in terms of scenarios-projections of possible futures, based on differing assumptions about future

levels of intensity and other factors. Uncertainties in

household size and new commercial building construction rates make it difficult to specify precisely

the levels of future consumption; however assuming

that recent historical trends continue-specifically

that commercial sector intensity remains flat, and

that residential sector intensity drops slowly—

yields a residential consumption of 18.9 quads per

year in 2010 and a commercial sector consumption
26 . Building Energy Efficiency

of 19.9 quads per year in 2010. A complete

description of the model used to build the scenarios

is in appendix l-A.

The scenarios presented here can be compared to

those made by other groups. Figures 1-12 and 1-13

show the OTA estimates, as well as those by five

other groups (see appendix 1-C for a detailed table

and sources for these other estimates). The simple

mathematical average of these consumption scenarios is 20.2 quads for the residential sector and 18.5

for the commercial sector. This is not to say that the

mathematical average is the ‘‘correct’ number, for

all the estimates may be wrong; but the average does

provide a single number summarizing the different

estimates. While there is a range of estimates, there

is reasonable agreement on future business-as-usual

consumption in 2010; the difference between the

average and the outlier (i.e., the estimate farthest

from the average) is less than 16 percent for both

sectors .39

Where Could Technology Take Us?

The preceding discussion summarized different

forecasts of building energy use in a business-asusual assumption. An alternative method of forecasting future energy use is to consider what energy

use could be if greater use was made of energy

efficient technologies. At one extreme is the true

technical potential-i. e., the energy savings that

would result from maximum use of all technologies,

regardless of cost. From a policy perspective,

however, it is more useful to consider the energy

savings resulting from optimal use of all costeffective technologies.

Estimating cost-effective savings is a difficult

task. Technology is just one of many factors

affecting energy use, and the effects of technological

change may be masked by population increases,

demographic shifts, and other factors. Technology is

not stagnant; costs, performance, and efficiencies

change as technology is improved and refined. The

diversity of the building stock, climatic variations,

and uncertainty over future fuel costs all make

estimates of technical and economic potential for

energy savings a very uncertain exercise. Furthermore, defining ‘‘cost-effective” can be problematic.

There are several measures of cost-effectiveness,

including the cost of conserved energy (CCE), net

present value, and payback (these terms are defined

in appendix 2-B). One can consider different perspectives, such as the consumer, the utility, and

society as a whole. Finally one can vary the values

of inputs to these definitions, notably the discount

rate. There is little agreement on the best measure,

perspective, or assumptions to use in projecting

energy use.

Nevertheless, it is useful to review estimates of

the energy savings that could result from greater use

of cost-effective technologies, recognizing the effects of different definitions of cost-effective. If

there is general agreement that a significant gap

between the business-as-usual forecasts and the

cost-effective forecasts exists, then one may reasonably conclude that the market is not performing

optimally and that policy change may be appropriate. Alternatively, if there is general agreement that

there is little or no gap between the two forecasts,

then policy intervention may not be appropriate.

Previous work by OTA has estimated that energy

use in buildings could be reduced about one-third by

2015, relative to a business-as-usual scenario,

through the use of technologies with a positive net

present value to the consumer.

40 Adjusting this

model’s results to the projected business-as-usual

consumption discussed above yields a 2015 costeffective consumption of about 27.7 quads per year

(figure 1-14). This is about a 2 quad decrease from

1989 to 2015,41

Numerous other estimates of this savings potential have been made:

● A modeling effort by the Energy Information

Administration, 42 conducted as part of the

National Energy Strategy, estimated the business39 Much of ~e~c differences ca ~ ~amd to different ass~ptio~f~r ex~ple, me Natio~ Energy Smtegy estimates i3SSUmt? I.hX GNP grOWS

at an average annual rate of 2.9 percent from 1990 to 2010, while the DFU study assumes a rate of 2,3 to 2,0 percent in the same period. See app. 1-C

for sources.

40 Bw~ on ~ OTA model des~-i~ ~ U.S. Congess, office of ~c~olo~ As~ssmen~ Ctinging by Degrees: Steps To Reduce Greenhouse

Gases, OTA-O-482 (Washingto% DC: U.S. Government Printing Office, February 1991), app. A, pp. 313-326. This model assumes full penetration of

all cost-effective technologies and a 7 percent real discount rate.

41 The ‘‘bus~ess+.+usu~’ estimates discussed above were recalculated for 2015, yielding 19.4 quads per year (residential) ~d 22.1 quds per yw

(commercial). The one-third reductio% therefore, corresponds to a 13,8 quad savings in 2015.

42 ~c J2ner= ~omtion Adbismtion (HA) i5 an Mdcpendent statistical and analytical agency titithe U.S. Dep~ent of Ener8Y @E)”
Chapter I-Energy Use in Buildings: Past, Present, and Future ● 27

Figure l-12—Residential Energy Use in 2010: Comparison of Different

Business-as-Usual Forecasts

Residential energy use (quads/year)

25 

- ..+ NES

---

I

.. ..

2 0

.t

GRI

.., -

-. ORNL - EIA

..- OTA

DRI

“ +--’=L””””’ ‘-

10 1

5

i

I

1970 1975 1980 1985 1990 1995 2000 200 5 2010 2015

KEY: DRI = Data Resources, Inc., EIA = Energy Information Administration, GRI = Gas Research Institute, NES =

National Energy Strategy, ORNL = Oak Ridge National Laboratory, OTA = Office of Technology Assessment.

NOTE: Includes losses associated with electricity generation (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. 1 -C).

Figure l-13-Commercial Sector Energy Use in 2010: Comparison of Different

Business-as-Usual Forecasts

Commercial sector energy use (quads/year)

25 ~

-—

t NES I

20 I

5 ’

0 T

~-

T

r

– r

i DR I

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

KEY: DRI = Data Resources, Inc., EIA = Energy Information Administration, GRI = Gas Research Institute, NES =

National Energy Strategy, ORNL = Oak Ridge National Laboratory, OTA = Office of Technology Assessment.

NOTE: Includes losses associated with electricity generation (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. 1 -C).
28 . Building Energy Efficiency

Figure l-14-Building Energy Use: Two Possible Futures

Building energy use (quads/year)

45 ~ ‘- ‘

- — – --- “-” ‘“ ‘-

‘- ‘--–- – -- 

- ‘-

”

-– ” -----

I

+ Business4 0

,.

.,

- t

as-usual

.- —

3 5

1

3 0

I

/

—.

25 , ,- --’ ‘-- ‘ “

,.

,. I 14 quads 1

I

‘--[ ‘- J

+ costeffeetive

2 0 -

I

1 0 -

O

~- –7 T

~ - .. T __ - -.

T – ‘T--- T ‘T J

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

NOTE: Business-as-usual is OTA’s estimate of future consumption without policy change. Cost effective is OTA’s

estimate of future consumption if all energy efficient technologies with a positive net present value are

implemented. There is considerable uncertainty in both estimates. See text for details. Includes losses

associated with electricity generation (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992.

as-usual and cost-effective (see table 1-6 for ●

definition) levels of energy use in buildings in

2010. This study estimated that, relative to the

predicted business-as-usual 2010 consumption,

13 percent of energy used in buildings could be

saved with cost-effective technologies, and that

26 percent of energy could be saved with

technically feasible, but not necessarily costeffective technologies (table 1-6).43 These estimates are at the low end of the range of

cost-effective savings found in other studies,

probably due in part to conservative assumptions concerning building shell retrofits.44

A recent study by the National Academies

examined the energy and carbon savings potential in the residential and commercial sectors.45

The study examined a range of supply curves46

and examined in depth data from the Electric

Power Research Institute (EPRI). The Academies’ analysis of the EPRI data found an

aggregate electricity savings potential of 45

percent in existing buildings at a cost of

conserved energy of less than or equal to 7.5

cents per kWh.47 Natural gas and oil savings of

50 percent in existing buildings were claimed,

at a cost of less than $5.63 per MBtu.48 These

results are not directly comparable to those of

43 The EIA notm that costs for me techni~ Potential case may not be prohibitive, due to the economies of scale resulting from large production IUIIS

and cost reductions from R&D. U.S. Department of Energy, Enexgy Information Adrninistratio~ Energy Consumption and Conservation Potential.’

Supporting Analysis for the National Energy Strategy, SR/NES/!XW2 (WashingtorL DC: December 1990), p. 7.

44 The EM as,suma tit pre-lgTs residenti~ buildings yield a 16 percent reduction in heating service demand and a 4 pereent reduction iKI Cootig

service demand in the “high conservation” case by 2030, while OTA assumes a 20 percent savings by 2010 in the “moderate” case. Ibid., p. 6; U.S.

Congress, Office of ‘lkchnology Assessment Energy Technology Choices: Shaping Our Future, OTA-E-493 (Wshingtoq DC: U.S. Government

Printing OffIce, July 1991), p. 130.

45 me Natio~ Ac~~es me tie Natio~ ~ademy of Scienws (NAS), the Natio~ Academy of ~@~@(NW), ~d the ktitUte of Medicine

(IOM). The report is “Policy Implications of Greenhouse Warmin g,’ Report of the Mitigation Panel, prepublication manuscript.j National Academy

Press, Washington DC, 1991.

46A SU@y curve is a graphid method Of summarizing the costs and energy savings potential of energy efficient technologies.

47 Sensitiviv ~lyses feud the 45 percent savings at dkount rates of 3,6, md 10 percent. ‘‘Policy Implications of Greenhouse Warming, “ Report

of the Mitigation Panel, prepublication manuscript, National Academy Press, Washington, DC, 1991, ch. 3, p. 3-3 and table 3.7 (chapter dated 613/91).

46 Ibid$
Chapter I-Energy Use in Buildings: Past, Present, and Future . 29

Table 1-6—Forecasts of Building Energy Use by

the Energy Information Administration

Sector Energy Use (quads/year)

1990 2010 2010 2010

Business-as-usual Cost-effective Technical potential

Residential. . . 10.7 11.7 10.2 8.3

Commercial. . 6.8 8.7 7.5 6.8

Total. . . . . . . 17.5 20.4 17.7 15.1

NOTE: Does not include losses associated with electricity generation.

SOURCE: U.S. Department of Energy, Energy Information Administration,

Energy Consumption and Conservation Potential: Supporting

Analysis for the National Energy Strategy, SFVNESI’90-02

(Washington, DC: December 1990). Business-as-usual forecast assumes “current government policies and programs

remain in effect” (p. 56). Cost-effective forecast is the “high

conservation excursion,” and assumes “full penetration of

cost-effective, energy efficient technologies and other conservation measures” where “cost-effectiveness is defined as an

energy savings investment that generates a positive net present

value.” (p. 59). A 10 percent discount rate is assumed (p. 68).

Technical potential is the “very high conservation excursion,”

and assumes that the most efficient technologies are installed

when in-place units fail. There is no premature scrapping of

capital equipment in either case (p. 3).

OTA or the Energy Information Administration

(EIA). This study assumes a “frozen efficiency’ baseline; in other words no allowance

is made for efficiency improvements expected

to occur under existing economic and political

conditions. However the specific measures

proposed in the Academies’ study appear to fall

somewhere in between the OTA moderate and

tough scenarios, suggesting that the Academies’ measures would yield savings of from 20

to 38 percent in 2010, relative to a business-asusua1 scenario. A separate OTA analysis of all

energy-using sectors found that the Academies’

●

●

results, when forecasted relative to a base case,

yielded results comparable to OTA’s moderate

scenario .49

A study entitled America’s Energy Choices

estimated the energy savings resulting from

greater use of technologies for which the

additional frost cost is less than the cost of new

supply, at both existing supply prices and those

estimated by including environmental and security costs in energy supply prices. Relative to

reference consumption in 2010, estimated energy savings were 28 and 37 percent.50

Several other studies have examined energy

savings for specific fuels, sectors, or geographic regions. A comprehensive analysis of

electricity use in U.S. residences, for example,

found that 37 percent of residential electricity

could be saved by 2010 at a cost below that of

supplying the electricity.

51 A comprehensive

study of electricity use in Michigan estimated

that a 29 percent savings by 2005 would be

‘‘achievable’ at a reasonable cost.52 A study of

electricity use in New York State found that

present day consumption could be reduced by

34 percent in the residential sector and 48

percent in the commercial sector at a cost below

that of supplying the electricity .53

The results of some of these studies are summarized in table 1-7. The results vary widely, as do the

analytical techniques, assumptions about cost and

performance, and definitions of cost-effectiveness.

49 StX JohrI ~de]i~ Assis~t Director, U.S. Congress, office of Technology Assessment, testimony before the House Committee on Science, sPaW

and Tkehnology, July 17, 1991.

m The 28 percent savings is under the ‘‘Market’ scenario, defined m “making use of cost-effective energy-efficiency and renewable energy

technologies, assuming market penetration rates, and with no accounting for environmental or security costs beyond those embodied in current trends

and policies. ” The 36 percent savings corresponds to the “Environment” scenario, which includes additional technologies, “to the extent justified by

the environmental and security costs of fossil fuels, and assuming more rapid penetration rates.” America’s Energy Choices, Executive Summary

(Cambridge, MA: The Union of Concerned Scientists, 1991). A 3 percent real discount rate is assumed. Savings estimates include losses in electricity

generation and exclude solar and geothermal energy. America’s Energy Choices, Tkchnical Appendixes (Cambridge, MA: The Union of Concerned

Scientists, 1991), pp. A-1, G-4 to G-7.

51 That is, wi~ a cost of conserved energy (CCE, see app. 2-B for definition) below 7.6 cents/lcWh. The baseline is a‘ ‘frozen efficiency’ one, which

does not give credit for eftlciency improvements that would result from naturally occurring efficiency improvements (it does, however, exclude from

the baseline predicted savings resulting from future appliance efficiency standards). A 7 pereent real discount rate is assumed. J. Koomey, C. Atkinsom

A. Meier, J. McMahorL S. Boghosian, B. Atkinson, I. ‘Ibriel, M. Uvine, B. Norm P. CharL The Potenrialjior Electricity Eficiency Improvements

in the U.S. Residential Sector, LBL-30477 (Berkeley, CA: Lawrence Berkeley JAmatory, July 1991), pp. 35-36.

5Z Cticulatiom ~e relative t. a ~ ~bu~fies~ as usual” b~el~e, The “achievable’ potential assumes the use of co~erciWY av~~ble tec~olo@~

and aggressive conservation programs. F. Krause, J. Brown, D. Connell, P. DuPont, K. Greely, M. Meat, A. Meier, E. Mills, B. Nord~ Final Report:

Analysis of Michigan’s Demand-Side Electm”city Resources in the Residential Sector, Volume 1: Exeeutive Summary, LBL-23025 (Berkeley, CA:

Lawrence Berkeley Laboratory, April 1988).

53 Comcnation memwes With a cost of saved elm~ci~ below 7 cen~/kwh we included. Costs me for t~hnology ~d titillation ordy, ad do nOt

include marketing and other implementation costs. Interestingly, however, adding a 50-pereent implementation “penalty’ to the cost of saved energy

for these measures would still allow savings of 32 pereent (residential) and 41 percent (cmnrnereiat). A 6-percent discount rate is assumed. American

Council for an Energy-Efficient Economy (ACEEE), ‘‘The Potentiat for Electricity Conservation in New York State, ’ published by the New York State

Energy Research and Development Authority (NYSERDA), report 89-12, September 1989, pp. S-5, S-6.
30 . Building Energy Efficiency

Table 1-7-Summary of National Cost-Effective Savings Estimates

Percent savings

relative

Source to baseline Year Coverage Definition of cost-effective

Office of Technology Assessment. . . 33 2015 Residential/commercial Positive net present value

all fuels

National Academies. . . . . . . . . . . . . . 1986 Existing buildings

45 Electricity CCE less than or equal to 7.5 cents/kWh

50 Gas and oil CCE less than or equal to $5.63/MBtu

Energy Information Administration. . . 13 2010 Residential/commercial Positive net present value

all fuels

Union of Concerned Scientists. . . . . . 28 2010 Residential/commercial CCE less than cost of supply

all fuels “Market” scenario

Lawrence Berkeley Laboratory. . . . . . 37 2010 Residential electricity CCE less than 7.6 cents/kWh

NOTE: Results are not directly comparable. See text for sources and limitations. CCE - cost of conserved energy.

SOURCES: See text.

As discussed above, the Academies’ results appear

to fall between the OTA moderate and tough

scenarios, corresponding to 20 and 38 percent

savings, respectively. The EIA savings estimate of

13 percent is lower than the OTA moderate scenario,

due in part to their more conservative assumptions

concerning shell retrofits. While there is considerable uncertainty in all of these modeling efforts,

there is general agreement that, despite gains

made to date, there remain significant opportunities for increased energy efficiency in U.S. buildings through the use of cost-effective technologies. 54

The gap between what appears to be cost-effective

and what is actually used suggests that there maybe

a role for Congress in ensuring that cost-effective

efficiency improvements are implemented. There

are many benefits of such actions, the most important being they save both energy and money.

Furthermore, calculations of cost-effectiveness discussed above generally do not incorporate environmental and other externalities, and doing so would

most likely increase the gap between cost-effective

and actual energy use. overcoming barriers to wider

use of these technologies may require direct policy

actions, as the existence of barriers suggests that

current market conditions will not result in optimal

use of cost-effective energy efficiency opportunities.

The remainder of this report focuses on the critical

question of implementation of energy efficient

technologies. Chapter 2 takes a closer look at the

technologies themselves, with a focus on their

availability, costs, and other attributes. Chapter 3

examines how the markets function, with a focus on

why energy efficient technologies are often not used

despite their apparent cost-effectiveness. Chapter 4

reviews past Federal efforts to encourage energy

efficiency in buildings, and Chapter 5 distills the

analyses of the first four chapters in a discussion of

policy issues and options for Congress.

$$ ~e ~mdie~ dism~~ ~~ve ~= ~ “fie~ of deffitio~ of ~st.eff=tive. AI&Ou@ tie SW@ Potmti varies by the epeciflc deftition used, by

most deftitions it is clear that a considerable potential exists for saving energy through greatex use of technologies with positive net benefits. However,

some argue that these studies calculate costs. incorrectly, and that there is little evidence of rmuket imperfections tbat would yield such a potential. W.

David Montgomery, “The Cost of Controlling Carbon Dioxide Emissions, ’ Charles River Associates Inc., WashingtoXL DC, December 1991.
Appendix 1-A

Scenarios of Future Energy Use

The scenarios of future energy use in the residential and commercial sectors presented in this chapter

are based on two factors: changes in the energy

intensity of the buildings and growth in the number

and size of buildings.

For the residential sector, changes in household

energy intensity (energy use per household) and

changes in the number of people per household

(which when combined with population growth

yields the number of households) are analyzed. For

household energy intensity, three levels are considered:

●

●

•

There is no further improvement in intensity—

energy use per household stays at its current

level.

Intensity drops at half the rate it has dropped in

the past. As noted in figure 1-5 intensity has

actually increased in recent years; it is not clear

if this trend will continue. It appears unlikely,

however, that intensity will continue to drop as

it has over the last two decades; therefore this

level is, in OTA’s view, the most likely future

path for intensity.

Intensity continues to drop at the rate it has

dropped in the past two decades (-0.9 percent

per year).

Population growth is assumed to be 0.61 percent

per year.

l In order to reflect uncertainty in future

changes in household size, three different assumptions of future trends in household size are considered:

Table l-A-l—Energy Intensity and Household

Density: Effects on Residential Building Energy Use

●

●

●

Low: Household size (number of people per

household) stays at its current level (2.68

people per household).

Middle: Household size shrinks at half the rate

it has shrunk in the past (-0.45 percent per year,

half of 0.9 percent per year), leading to more

(but smaller) households. As the historical

shrinkage in household size has slowed in

recent years, this is in OTA’s view the most

likely trend.

High: Household size continues to shrink at the

historical rate observed from 1970 to 1989 (-0.9

percent per year), leading to many more households.

The results are summarized in table l-A-l. For

each intensity scenario, three levels of 2010 consumption are shown corresponding to the three

different assumptions as to household size.

A similar analysis is shown below in table l-A-2

for the commercial sector. The two variables analyzed are changes in intensity and growth in square

footage. Intensity scenarios are as in the residential

sector:

●

●

●

There is no future improvement in intensity

(energy use per square foot). As shown in figure

1-10 this is consistent with trends since 1970,

and is therefore, in OTA’s view, the most likely

future path for intensity.

Future improvements in intensity are slow.

Future improvements in intensity are moderate.2

Table l-A-2—Energy Intensity and Square Footage:

Effects on Commercial Building Energy Use

Consumption in 2010

Actual consumption, 1989 (quads): 16.8 (quads)

Low Middle High

If there are no further drops in intensity: 18,9 20.7 22.7

At half historical rates: 17.2 18.9 20.7

If historical intensity drops continue: 15.6 17.2 18.9

Consumption in 2010

Actual consumption, 1989 (quads): 12.6 (quads)

Low Middle High

If there are no further drops in intensity: 16.2 19.9 24,4

At half historical rates: 14.8 18.2 22.3

With moderate future intensity drops: 13.4 16.5 20.3

SOURCE: Office of Technology Assessment, 1992. See app. l-A. SOURCE: Office of Technology Assessment, 1992. See app. l-A.

I This is a weighted average of population projections as reported in U.S. Department of Commerce, Bureau of the Census, Projections of rhe

Population qfStates by Age, Sex, and Race: 1989 to 2010, Series P-25, No. 1053 (Washingto~ DC: January 1990), p. 2.

2 AS shorn in fiWc 1-]0, CnerW ~temity in co~ercial buildings has been relatively flat in the ki.st 20 yws. ~erefore ~ a ProxY for slow ~d

moderate future improvements in intensity, the observed historical intensity change horn the residential sector (-0.9 percent/year) is applied to the

commercial sector as well. As in the residential sector, “slow” is set at half the historical rate and ‘‘moderate” set at the historical rate.

-31-
32 . Building Energy Efficiency

Uncertainty in future growth of the building stock As in the residential sector, for each intensity

(the total square footage of commercial buildings) is scenario three levels of2010 consumption are shown

incorporated via three different assumptions of corresponding to the three different assumptions as

Low: Annual growth of 1.1 percent per year in 2).4

total commercial building square footage.

Middle: Annual growth is 2.1 percent per year.3

This is, in OTA’s view, the most reasonable

assumption.

High: Annual growth is 3.1 percent per year.

growth rates in the building stock: to commercial building square footage (table l-A-

●

●

●

3 ~iS he “~Ue ~S~ ~ me Natio~ fi~~ s~te~; w NUtio~/ Energy ~fiategy Technica/Ann~ 2, Mt (w&ShhlgtO~ ~: Mlly 1991), p.

A-5.

4 It is ~ter=~g t. note tit, for ~~ ~tors, tie low~ tie intensity tie lower tie ~ce~ty in fti consumption due tO different &KSllmptiOXIS

as to the size of the building stock. In other words, lower intensity means both lower energy use and lower uncertainty. Uncertainty in energy demand

has a cost, difficult to determine but surely nonzero; therefore decreased uncertainty can be seen as a benefit of lower intensity.
Appendix 1-B

Data Sources

References to “OTA 1992” in this report refer to

databases assembled by OTA from many different

sources. These sources are listed below.

D. Belzer, Battelle, Pacific Northwest Laboratories, personal communication, September 19,

1991.

Gas Research Institute (GRI), Baseline Projection Data Book, 1991 ed. (Chicago, IL: April

1991).

Pacific Northwest Laboratory, Residential and

Commercial Data Book—Third Edition, PNL6454 (Richland, WA: February 1988).

U.S. Department of Commerce, Bureau of the

Census, Characteristics of New Housing:

1990, C25-9013 (Washington, DC: June 1991).

U.S. Department of Commerce, Bureau of the

Census, Statistical Abstract of the United

States: 1990 (Washington, DC: January 1990).

U.S. Department of Commerce, Bureau of the

Census, Statistical Abstract of the United

States: 1991 (Washington, DC: 1991).

U.S. Department of Energy, Energy Information Administration, Annual Energy Review

2990, DOE/EIA-0384(90) (Washington, DC:

May 1991).

U.S. Department of Energy, Energy Information Administration, Commercial Building

Characteristics 1989, DOE/EIA-0246(89)

(Washington, DC: June 1991).

U.S. Department of Energy, Energy Information Administration, Commercial Building Consumption and Expenditures 1986, DOE/EIA0318(86) (Washington, DC: May 1989).

U.S. Department of Energy, Energy Information Administration, Household Energy Consumption and Expenditures 1987--Part 1:

National Data, DOE/EIA-0321(87) (Washington, DC: October 1989).

U.S. Department of Energy, Energy Information Administration, State Energy Data Report: Consumption Estimates, 1960-1989, DOE/

EIA-0214(89) (Washington, DC: May 1991).

U.S. Department of Energy, Office of Conservation and Renewable Energy, Energy Conservation Multi-Year Plan 1990-1994 (Washington,

DC: August 1988).

–33–
Appendix 1-C

Sources for “Business-as-Usual” Forecasts

Table l-C-l-Comparison of Residential Energy Use Forecasts (quadrillion Btu)

Percent

change

Forecast 1990 1995 2000 2010 (1990 to 2010)

DRI/McGraw-Hill (DRI) (1991). . . . . . . . . . 15.5 16.7 17.5 18.3 +18

Energy Information Administration

(EIA) (1991 ). . . . . . . . . . . . . . . . . . . . . . 16.6 17.7 18.3 19.7 +19

Gas Research Institute (GRI) (1991). . . . 16.7 17.5 18.6 20.5 +23

National Energy Strategy (1991). . . . . . . . 18.2 — — 23.3 +28

Oak Ridge National Laboratory (1990). . . 17,2 — 18.4 20.4 +19

NOTE: To allow direct comparisons, OTA has adjusted the DRI, EIA, and GRI end-use forecasts of residential energy

consumption for all years to primary units to reflect electricity generation losses.

SOURCES: See app. l-C.

Table l-C-2-Comparison of Commercial Energy Use Forecasts (quadrillion Btu)

Percent

change

Forecast 1990 1995 2000 2010 (1990 to 2010)

DRI/McGraw-Hill (DRI) (1991) . . . . . . . . . . 12.2 13.3 14.3 15.8 +30

Energy Information Administration

(EIA) (1991). . . . . . . . . . . . . . . . . . . . . . 12.4 13.6 14.8 17.7 +43

Gas Research Institute (GRI) (1991). . . . 12.3 13.3 14.5 17.5 +42

National Energy Strategy (1991). . . . . . . . 13.8 — — 21.3 +54

Oak Ridge National Laboratory (1990). . . 13.1 — 16.0 18.8 +44

NOTE: To allow direct comparisons, OTA has adjusted the DRI, EIA, and GRI end-use forecasts of commercial energy

consumption for all years to primary units to reflect electricity generation losses.

SOURCES: See app. l-C.

Tables l-C-l and l-C-2 summarize the data

presented in figures 1-12 and 1-13, Sources for these

figures and tables include:

DIU/McGraw-Hill, Energy Review: Winter

1990-91 (Lexington, MA: 1991).

Gas Research Institute, Baseline Projection

Data Book, 1991 ed. (Chicago, IL: April 1991),

pp. 38, 121.

U.S. Department of Energy, National Energy

Strategy: Powerful Ideas for America, 1st ed.

1991/1992 (Washington, DC: February 1991),

p. C-15.

Oak Ridge National Laboratory, Energy Efficiency: How Far Can We Go?, ORNL/TM11441 (Oak Ridge, TN: January 1990), p. 7.

U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook

1991, DOE/EIA-0383(91) (Washington, DC:

March 1991), Reference Case, p. 44.

–34--
Chapter 2

Technologies for Improving Energy

Efficiency in Buildings

Box 2-A--Chapter Summary

Recent advances in equipment design have yielded remarkable efficiency improvements, and there is considerable potential for further gains. For example, while the typical

new gas furnace in the 1970s was only 63 percent efficient, new gas furnaces are now

available with 97 percent efficiency. New windows are available with an insulating value

of R-8—an eight-fold improvement over the old R-1 single-pane window-and window

designs in the laboratory suggest R-10 to R-15 may soon be available. Computerized

controls can cut commercial building energy use by 10 to 20 percent. Improved design can

reduce both energy use and construction costs in large office buildings.

In many cases these improved technologies are commercially available yet are rarely

used, even though they offer attractive paybacks (the amount of time needed for the initial

investment to be recovered by the reduced energy costs). For. example, highly efficient

electronic ballasts for fluorescent lights typically pay back in 3 to 4 years-yet accounted

for less than 4 percent of U.S. balIast shipments in 1990.

. If these efficient technologies were used more widely, energy use in buildings would

be reduced considerably.

. The large gap between what is already available on the market and what is actually

used suggests that implementation, rather than just technical advancement, is key

to increasing energy efficiency.
Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SPACE CONDITIONING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Space Conditioning in Residential Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Space Conditioning in Commercial Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIGHTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lighting in Residential Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lighting uncommercial Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

WATER HEATING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residential Water Heating Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial and Multifamily Water Heating Technologies . . . . . . . . . . . . . . . . . . . . . . . . .

FOOD REFRIGERATION/FREEZING . . . . . . .

Residential Refrigeration and Freezing . . . . . .

Commercial Refrigeration and Freezing . . . . .

OTHER ENERGY SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clothes Dryers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clothes Washers .. . . . . . .. .. ... ......’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDIX 2-A:

APPENDIX 2-B:

APPENDIX 2-C:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definitions of Energy and Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . .

Financial Indicators for Energy Efficiency Investments. . . . . . . . . . . . . .

Conversion of Electricity Into Energy Units . . . . . . . . . . . . . . . . . . . . . . . . .

37

37

38

46

50

51

54

57

57

59

60

60

63

64

64

65

66

66

68

69

70

Boxes

Box Page

2-A.chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-B. How a Building Gains and Loses Heat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-C. Indoor Air Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-D. Smart Design Reduces First Cost by $500,000 and Cuts Operating Costs in Half..

2-E. Introduction to Lighting Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-F. Plastic Tanks: A Technical Advance That May Hinder Energy Efficiency . . . . . . . . .

35

42

47

51

53

59
Technologies

Chapter 2

for Improving Energy Efficiency in Buildings

INTRODUCTION

Chapter 1 discussed how changes in technology

influenced past energy use in buildings and argued

that technology will continue to influence strongly

future energy use. This chapter examines specific

technologies used to convert energy into useful

services (heating, cooling, lighting, etc.) in buildings. The discussion focuses on three specific

questions:

. What technologies are currently used to provide energy services in buildings?

. Are there technologies available that can provide the desired services while using less

energy?

. What are the costs and other attributes of these

energy saving technologies?

The discussion is organized by end-use service,

starting with space conditioning, followed by lighting, water heating, food refrigeration and freezing,

and other energy services (figures 2-1 and 2-2).1

Figure 2-l—Residential Sector Energy Use by

End-Use Service, 1989 (quads/year)

Water heating

2.6

SPACE CONDITIONING

Space conditioning (heating, cooling, ventilation,

and humidity control) requires more energy than any

other service in both residential and commercial

buildings, accounting for more than half of total

residential/commercial energy use. In the residential

sector space heating accounts for about 46 percent,

and space cooling for about 9 percent, of energy use;

while in commercial buildings space heating and

cooling account for about 32 percent and 16 percent,

respectively, of energy use.2

There have been impressive advances in the

efficiency of space-conditioning equipment in recent years. New residential gas furnaces, for example, are now available that are 97 percent efficient,

a vast improvement compared to the 63 percent

efficient units commonly sold in the 1970s. New

room air conditioners are now available that require

only half the energy to provide the same amount of

cooling as units sold in 1972. The efficiency of

building shells has advanced as well: one can now

purchase windows with an R-value of 8, an eightFigure 2-2—Commercial Sector Energy Use by

End-Use Service, 1989 (quads/year)

Li

Food s

1. ace cooling

2.1

e cooling Water heating

Other 1.5 0.5

2.2 Food storage

0.6

‘\>sP-!J!ym

NOTE: Primary conversion used (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. 1 -B).

“~h~rc’spac’h’ating NOTE: Primary conversion used (see app. 2-C).

SOURCE: Office of Technology Assessment, 1992 (see app. 1-B).

1 This chapter is intended to be comprehensive and broad rather than exhaustive and to provide a sense of the opportunities rather than a complete

list of all technologies. This report focuses on efficiency improvements; a separate OTA report in preparation will address renewable energy technologies.

2 For sowces, see app. 1-B. unless o~e~ise noted, energy cons~ption data in MS repofl refer to prig energy-i. e., el~~Ci~ 1S COnVefied

to energy units using a conversion factor that reflecLs the energy used to generate the electricity, as well as the energy equivalent of the electricity itseIf.

See app. 2-C for a comparison and discussion of different methods of converting energy units.

–37–
38 . Building Energy Efficiency

Figure 2-3—Residential Space Heating Fuels

(percent of households, 1989)

/

Electricity

25% /&

Oil

L

A

13% A

Wood

5%

Liquefied petroleum gas other

4%. ,-

2%

Natural

5?%

gas

SOURCE: U.S. Department of Commerce, Bureau of the Census,

Ametican Housing Survey for the United States in 1989,

H1W89 (Washington, DC: U.S. Government Printing Office,

July 1991), p. 42.

fold improvement over the single-pane windows

still found in many buildings.3

This section reviews space conditioning and shell

technologies-those currently in use, those improved technologies commercially available, and

those still under development. It is found that highly

efficient, commercially available technologies are

often not utilized, despite their technical and economic advantages over conventional technologies.

Space Conditioning in Residential Buildings

Both the efficiency of the space conditioning

equipment and the design of the building itself influence the amount of energy needed to maintain

comfort in a residential building. A very efficient

furnace will still use a lot of energy to heat a poorly

insulated, drafty building, while a well-insulated

building in a moderate climate may need no

additional energy for space conditioning. This section discusses equipment and shell technologies

separately.

Residential Space Heating Equipment

A variety of fuels and technologies are used to

heat U.S. residences (figure 2-3). More than half (51

Figure 2-4-Trends in the Efficiency of

Natural Gas Furnaces

•~m Efficiency (AFUE, percent)

I vu

80 I

I

6 0 -

4 0 -

2 0 -

—— —

1975 1978 1980 1983 1988 1992 1989

new new new new new NAECA highest

NOTES: ‘New’ is shipment-weighted average of all units shipped in that

year. ‘NAECA’ is the minimum allowable according to the national

standard. ‘Highest’ is the most efficient commercially available.

See app. 2-A for a definition of AFUE.

SOURCES: 1975 to 1983: SAIC, Trends in the Energy Efficiency of

Residential Electti Appliances, EPRI EM-4539 (Palo Alto,

CA: Electric Power Research Institute, April 1988), pp. 2-9.

1988 and 1989: American Council for an Energy-Efficient

Economy, The Most Energy Efficient NewAp@iances-1989-

90 edition (Washington, DC: 1989), pp. 21-22.1992 NAECA:

Public Law 100-12.

percent) of U.S. households use natural gas for space

heating; the remainder use electricity (25 percent),

oil (13 percent), and other fuels.4

Natural gas fired warm-air furnaces, currently

found in about41 percent of households,5 have made

impressive gains in energy efficiency in recent years

(figure 2-4). The use of electronic ignition, vent

dampers, and other design improvements contributed to an efficiency increase of 12 percent in new

units between 1975 and 1988. Further improvement

is mandated by the National Appliance Energy

Conservation Act (NAECA, Public Law 100-12),

which sets minimum efficiency standards for gas

furnaces. 6

There are many commercially available gas furnaces, however, that are far more efficient-in the

range of 95 to 97 percent. These units use ‘ ‘condensing’ ‘ technology, in which the latent heat of the

~ R-value is a memwe of resist~ce to heat flow. The higher the R-value, the better the insulation value. These R-values are for center-of-glass.

J ~esc ~~cr fue]s ~clude ~~od (5 percent), ]Iqucfied pe~ole~ g~ (~G) (4 percent), ad V~OUS other fuels. Data refer to percent of occupied

households using that fuel as their main space heating fuel. U.S. Department of Commerce, Bureau of the Census, American Housing Survey for the

Unifed Stafes in 1989, H150/89 (Washington DC: U.S. Government Printing Office, July 1991), p. 42.

5 U.S. Department of Energy, Energy Information Administration, Housing Characteristics 1987, DOE/EIA-0314(87) (Washington, DC: May

1989), p. 33.

G As required by NAECA, units manufactured on or after January 1, 1992 must have a minimum efficiency of 78 percent. NAECA is discussed in

more detail in ch. 4.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings ● 39

combusted gas is recovered. At present, sales of

condensing furnaces are low, due in part to their high

price--typically about $1,500 to $2,000, or about

$500 more than a noncondensing furnace.7 These

costs may drop, however, if production volumes

increase. The cost-effectiveness of these furnaces

depends on the climate; however, economic analyses of measured energy savings resulting from

condensing furnace installations in colder climates

found simple paybacks of 4 to 7 years.8

Electric resistance space heating units are

relatively simple and inexpensive to install but are

quite expensive to operate and therefore are more

common in milder climates. Electricity costs about

2.3 cents per 1,000 Btus of delivered heat, while

natural gas costs about 0.8 cents per 1,000 Btus; that

is, heat from an electric resistance heater costs two

to three times as much as heat from a natural gas

furnace. 9 There are essentially no opportunities for

technical improvement in the heating units themselves, as efficiencies are about as high as physically

possible.

Electric heat pumps, however, hold considerable

promise for future energy savings. A heat pump is

essentially an air conditioner in reverse. Just as an air

conditioner pumps heat from a relatively cool room

into the warmer outside air, a heat pump moves heat

from the cooler outside air into the warmer room.10

The efficiency of a heat pump is typically about

twice that of an electric resistance heater. 11 Most

heat pumps installed in residential buildings can be

run as air conditioners as well, meaning that one

device provides both heating and cooling. Heat

pumps are growing in popularity. Although they are

found in only about 7 percent of U.S. households,12

heat pumps were installed in 23 percent of all new

single-family homes in 1990.13 The typical heat

pump sold today has a heating efficiency (HSPF) of

about 6.9 Btus per watthour and a cooling efficiency

(SEER) of about 9.1 Btus per watthour.14 The best

units currently on the market have efficiencies of

about 9.2 and about 16.4, respectively (table 2-1).15

These best units cut heating and cooling costs by

Table 2-l—Electric Heat Pump Efficiencies and Annual Operating Costs

Heating efficiency Cooling efficiency

HSPF cost/yr SEER cost/yr

Average for new units sold, 1988. . . . . . . . . . 6.9 $380 9.1 $170

Best commercially available, 1989. . . . . . . . . . 9.2 290 16.4 90

NAECA standard, effective 1992. . . . . . . . . . . 6.8 390 10.0 150

NOTE: HSPF and SEER are defined in app. 2-A.

SOURCES: Average 1988: “Integrated Heat Pump System,” EFW/Jourrra/, vol. 15, No. 2, March 1990, p. 41. Best

commercially available: American Councii for an Energy-Efficient Economy, The Most Energy Effia’ent

New App/ianees-1989-90 edition (Washington, DC: 1989), p. 18. NAECA standard: for split systems,

from NAECA (Public Law 100-12), sec. 5. Operating costs are for energy only, and assume a heating load

of 33.8 MBtus/yr and a cooling ioad of 19.6 MBtus/year (from J. Koomey, J. MeMahon, and C. %dley,

Improving the Thermal Integrity of New Stngle-Family Detached Residential Buildings, LBL-29416

(Berkeiey, CA: Lawrence Berkeiey Laboratory, July 1991), p, 32). Eiectrieity price of 7.8 eentskwh

assumed.

7 S. Cohen, C. Goldman+ and J. Harris, Measured Energy Savings and Economics of Refitting Exist% Single-Family ~omes.’ An up~te of the

BEC’A-B Database, LBL-28147, vol. 1 (Berkeley, CA: Lawrence Berkeley Laboratory, Februmy 1991), p. 22.

8 Simple payback is defined in app. 2-B. The 4-to 7-year payback discussed here is based on the additional f~st cost and savings of the condensing

unit over a new, 75-percent efficient baseline unit, Ibid., p. 15.

9 Ass uming an electricity price of 7.8 cents/k~ 100 percent of electricity comumed is conv~~ to h~~ a XMturd g~ Price of $5.61/l@ Btu, ~d

a 70-percent natural gas furnace conversion efficiency (AFUE, see app. 2-A for deftition).

10 Heat Preps cm ex~act heat from tie ~~d or from outside water (typically from a well or pond), but us@Y ~ outside fi ~ tie ‘Wt ‘oww.

11 me 1992 NAECA requirement for heat pumps 5etS a minimum Heating Seasonal Perfo rmance Factor (HSPF) of 6.8 (there are several measures

of heat pump efficiency currentiy in use, see app. 2-A). This corresponds to about 6,800 Btus of heat for each kwh consumcd, An electric resistance

heater will deliver at most 3,412 Btus for each kWh consumed.

il? us Dep~ent of Comerce, Bureau of the Cemus, American Housing s~~eyfor the United states in 1989, H150/89 (W~hhgto~ DC: U.S.

Government Printing Office, July 1991), p. 40.

13 U.S. Dep~ent of Commerce, Bureau of the ce~ust Characrenstics of New Housing: 1990, C25-9013 (Washington DC: June 1991), p. 22.

14 HSpF ~d SEER are defined in app. 2-A.

15 ~altemtive heat pup desi~ is the them~ly activat~ hat pup, which uses a fuel such as mmid gas rather than electricity. Thk design M

the potential to offer even higher efficiencies, although costs and perforrnan ce are uncertain. See Oak Ridge National Laboratory, Energy Technology

R&D: What Could Make a Deference, ’ VO1. 2, Part 1 of 3, End-Use 7kchnology, ORNL-6541/V2/Pl (Sprin@leld, VA: National Technical Information

Service, Dwcmber 1989), p. 33.
40 . Building Energy Efficiency

about $160 per year, relative to units meeting the

1992 NAECA standard, in a typical new house.

With heat pumps, as with most other residential

energy-using equipment, there is a large efficiency gap between units currently being installed and the most efficient units commercially

available.

Oil-fired space heating systems are currently

used in 13 percent of U.S. households but are being

installed in only about 5 percent of new singlefamily homes and 1 percent of new multifamily

units. 16 These new installations are found almost

entirely in the Northeast, presumably in areas

without natural gas service. The high perceived

variability in oil prices has limited the demand for oil

furnaces in new construction. The 1992 NAECA

standard for oil furnaces is 78 percent (AFUE).

Currently available units, however, perform far

better. The best on the market achieve efficiencies

over 90 percent.17

Distribution systems and controls are frequently

overlooked opportunities for improving the efficiency of space heating and cooling systems. For

example leaky air distribution ducts can result in

significant energy losses, suggesting that greater

attention to quality control in duct installation is

warranted. Although much of the research to date

has focused on space cooling, the findings apply in

principle to space heating as well. For example, a

study of air-conditioned homes in Florida found that

air conditioner energy use was reduced 18 percent

simply by repairing leaky ducts. The payback for

this relatively easy fix was less than 2 years.18

Similarly, measured data in a study of California

households indicated that 20 to 40 percent of peak

cooling day consumption was due to duct leakage.l9

Night setback, dual zone, and programmable thermostats can all reduce energy use through better

system control. In multifamily buildings, the addiPhoto credit: U.S. Department of Energy

Oil-fired space heating systems are used in 13 percent

of U.S. households, mostly in the Northeast.

tion of reset and cutout controls can increase

efficiency as well.20

Retrofits to improve the efficiency of space

heating systems already in place are usually limited

to simple maintenance, such as replacing filters,

oiling motors, and cleaning burners. Older oil-fired

furnaces can benefit from the use of a flameretention burner head, which better atomizes the fuel

and thereby allows more complete burnin g; paybacks for this simple retrofit were 2 to 5 years in

16u.s. Dep~ent of commerce, Bureau of the Census, Characteristics ojNew Housing: 1990, C25-9013 (W@@@u DC: Jwe 1991), PP. 20,

39.

17 ~eficm CoWci] for an Energy-Efficient Economy, The Mosr Energy E’cienr New Appliunces-1989-90 edition (Wmh@tOXL DC: 1989), P.

23.

18 J. Cummings, J. Tooley Jr., N. Moyer, R. Dunsmore, ‘‘Impacts of Duct Leakage on Infiltration Rates, Space Conditioning Energy Use, and Peak

Electrical Demand in Florida Homes, ’ Proceedings of the ACEEE 1990 Summer Study on Energy Efi.ciency in Buildings (Washingto~ DC: American

Council for an Energy-Efficient Economy, 1990), p. 9.65.

19 M. Moder% ‘CResidenti~ Duct Systa ~~ge: ~~itude, ~pac~, ad Potcntid for RcductioU’ ASHRAE Transactions, VO1. 96, Pti 2, 1989.

20A ~5et ~lowS ~iler hot water temwra~e t. c~ge ~ ~spo= to ou~ide temp~a~e, md a cutout dlOWS the boilfx to shut off when outside

temperature is such that no space heat is needed. See F. Jablonski, “Rethinking Multifamily Resets and Cutouts, ” Home Energy, vol. 8, No, 4,

July/August 1991, p. 40.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 41

recent evaluations using measured consumption

data. 21

Residential Space Cooling Equipment

Over two-thirds (69 percent) of U.S. households

have air conditioning-+0 percent with central

systems and 29 percent with room units.22 The trend

in new construction has clearly been toward greater

use of central air conditioning; about 76 percent of

new single-family homes and 78 percent of new

multifamily buildings have central air conditioning. 23

Central air conditioning systems are integrated

into the building ductwork and come in two basic

designs: cooling-only systems and heat pumps

(discussed above). Cooling-only systems typically

have an outdoor unit housing the compressor,

condenser coil, and fan; and an indoor unit built into

the existing ductwork containing the evaporator coil.

Central air conditioning systems show a trend of

increased efficiency; the average unit sold in 1981

had a SEER of 7.8 Btus per watthour,24 while the

best units available in 1989 achieved SEERS of up

to 16.9.25 This impressive efficiency increase came

from continual free-tuning and adjustment: larger

condenser and evaporator coils, better motors, improved insulation, reduced airflow-path resistance,

and better fan blade design.26 NAECA sets a

minimum SEER of 10 for split systems manufactured on or after January 1, 1992.

Room air conditioners, like refrigerators, are

free-standing appliances that are generally selected

and installed by consumers. The energy efficiency of

room air conditioners has improved, due to higher

efficiency compressors, improved fan designs, and

larger heat exchangers. 27 The average new uni t

bought today needs about 30 percent less electricity

Figure 2-5—Trends in the Efficiency of

Room Air Conditioners

Efficiency (EER)

14

i

6

4

2

n

v 

R

1972 1978 1982 1986 1989 1990 1990 1990

new new new new new new NAECA highest

NOTES: ‘New’ is shipment-weighted average of all units shipped in that

year. ‘NAECA’ is the minimum allowable according to the national

standard. ‘Highest’ is the most efficient commercially available.

See app. 2-A for a definition of EER.

SOURCES: 1972 to 1989: Association of Home Appliance Manufacturers

(AHAM), Major Home Appliance Industry Fact Book 1990/91,

(Chicago, IL), p. 27.1990 new: R. Gants, Vice President,

Association of Home Appliance Manufacturers, personal

communication, Oct. 18, 1991.1990 highest: Association of

Home Appiiance Manufacturers (AHAM), “1 991 Directory of

Certified Room Air Conditioners,” Edition No. 1, Cctober 1990,

1990) p. 10.1990 NAECA: Public Law 100-12, sec. 5; refers

to a 8,000 to 13,999 Btu/hr unit without reverse cycle, with

louvered sides.

to deliver the same cooling as the average unit

bought in 1972; even more efficient units are

commercially available in some size categories

(figure 2-5). Note that the most efficient new units in

1990 consume only about half the electricity to

deliver the same cooling as the average unit bought

in 1972.

The incremental costs of high-efficiency air

conditioners are unclear. Highly efficient models

often come with additional features such as better

21 s. c~he~ C. Gold_ ~d J. H~s, MeaSu~ed En~~g~ SaV,ings ad Economics of Retrofitting Existing Single-Family Homes: An Updilte of the

BECA-B Database, LBL-28147, vol. 1 (Berkeley, CA: Lawrence Berkeley Laboratory, February 1991), p. 15.

Z? U,S. Dcp~ent of Comerce, Bu~a~ of the Cemus, Amer-i~a~ HoUSing Sun!eyfor the united s(~(es in 1$’&?, H150/89 (W~hingto~ DC: U.S.

Government Printing Office, July 1991, p. 40.

23 U.S. Dep~ent of Comerce, B~~~ of he Census, c~racterisfics of New Housing: ]99~, C25-9013 (Washington, DC: June 1991), pp. 4,

36.

24 SMC, Tre&s in the Energy Eficl~nCy ofRe~identialElecm”c Appliances, Ep~ EM-4.539 @~o Alto, CA: EIw&ic power Research Institute, Apd

1986), p. 2-2. See app. 2-A for a deftition of SEER.

25 ~e~c~comcil for ~ Ener~-Efficient ~onomy, The ~osrEnergyEficient New App/iance~1989-90 edition (WashingtorL DC: 1989), pp.

16-17.

26 Batte~e-Col~bUs Division ad Envi~o-mgement and Res@c~ ~c., ~S~ Techno/ogyAlrer~tiVes, EPRI EM-5457 (pdO ~tO, CA: Electric

Power Research Institute, October 1987), p. A-42.

27 SMC, Tre~s in (he Energy Eficiency of Residential E/ectn”c Appliances, Ep~ EM-4539 (p~o Mto, CA: Electric Power Research Imtihlte,

April 1986), p. 2-5.

297-936 0 - 92 - 4 : QL 3
42 ● Building Energy Efficiency

consumer of buying the most efficient unit, relative

to a standard unit, is about 6.4 years.28

Photo credit: Electric Power Research Institute

Wall insulation can significantly reduce energy use for

space heating and cooling.

temperature control, more fan speeds, and improved

air circulation, making it inappropriate to charge the

additional cost of the efficient unit solely to the

efficiency feature. Nevertheless if one considers

only the energy savings benefit, the payback to the

Residential Shell Technologies

The amount of energy needed to keep people

comfortable is determined in part by the efficiency

of the heating and cooling equipment, discussed

above, but also by features of the building shell. A

well-constructed building with plenty of insulation,

tight-fitting doors and windows, well-designed windows, and other energy saving features can use

significantly less energy than a poorly constructed

building. For example superinsulated houses, which

often have double the usual amounts of insulation,

can use 80 to 90 percent less space-conditioning

energy than conventional houses.29

Opportunities to enhance the energy efficiency of

a building shell occur throughout a building’s

lifetime. Prior to construction, siting and orienting

a building with careful attention to natural features—

sunlight, wind, earth-sheltering-can reduce energy

use. In the design of a building, specifying adequate

insulation levels, designing overhangs to block out

Box 2-B—How a Building Gains and Loses Heat

Heat can be lost from a building several ways.1 Much of the heat in a typical single-family residence is lost

as conduction through the ceiling, walls, windows, and floor. Increasing the insulating value of all surfaces can

reduce these conductive losses. Some heat is lost from air infiltration through gaps in windows, doors, and other

areas. Reducing infiltration losses by reducing air flows throughout the building reduce heat losses as well. A

building gains heat from its occupants, from the space heating equipment, from the Sun, and from other interior

equipment (all the energy consumed by a refrigerator, for example, ends up as heat in the kitchen.)

The space conditioning requirements of a building are strongly influenced by the climate-and climatic

conditions vary widely in the United States. Heating requirements are often measured by heating degree-days,2

which vary from 100 in southern Florida to over 10,000 in mountainous areas. Cooling requirements, measured by

cooling degree-days, also vary tremendously.

1~~ di~~ussion of ~t 10SS applies to “cool” losses (more accurately bt llfi) ~ Well.

@e~.~ys ~ ~ic~y rn~ur~ relative to a base temperature, usually 65 d-s F. ~ ~ d~y ave~e ~w~ o~ *Y is W

degrees F, tiea that day has 5 (65 minus 60) heating degree-days. Degree-days me usually given on an annual basis, by adding up 1 year’s worth

of daily degree-days.

28 Bu~ on reti pnces quoted in Washington, ~in 1991; ~ suming Washington+ DC climate and ekxtricitypnce of 7.8 cents/kWh. Payback period

will of course depend heavily on climate. Another perspective on the economic analysis is that of the electric utility. Since residential space-cooling often

occurs at or near times of peak demand, the additional first cost of the most efficient unit can be compared to the cost of on-peak generation to meet

the demand of the standard unit. For the two air conditioners considered here, the most efficient unit costs about $70 more but uses about 250 watts less

of power, which works out to about $280AW. For comparison a gas-turbine for electricity generation costs abut WJWCW @lectric Power Res~ch

Institute, TAG Technical Assessment Guide, Elec~”cily Supply-1989, EPRI P-6587-L (Palo Alto, CA: Electric Power Research Institute, September

1989), p. 7-56).

29 D. H~emeister and L, Wall, “Energy Conservation in Buildings md ApPfim@s, “ in R. Howes and A. Fainberg (eds.), The Energy Sourcebook

(New York NY: American Institute of Physics, 1991), p. 445. The additional construction costs of superinsulation vary, but one estimate puts them at

about $4,000 to $7,500 for a 1,50@uare-foot house. 1991 Residential Building Cost Guide, Boeckh/American Appraisal Associates (Milwaukee, WI:

1991), p. R75.
.

Chapter 2—Technologies for Improving Energy Efflicieney in Buildings ● 43

1

u)

>

a

\ ) \ h UJ I

-------A--% I

+

a ~

A’

-1
44 ● Building Energy Efficiency

unwanted sunlight in summer, specifying highquality windows, and installing whole-house fans

where appropriate will reduce energy use. In construction, careful attention to sealing joints and

corners, window and door fits, and ensuring adequate and well-distributed insulation is important. In

operation, keeping doors and windows closed when

appropriate, using blinds to block out unwanted

sunlight in summer, and other occupant actions will

affect energy use. And retrofit--one-time actions

taken to improve the energy efficiency of an existing

building, such as the addition of caulk and weatherstripping, insulation, and storm doors and windows—

can help as well.

Technologies for improving building shell efficiencies are discussed in two earlier OTA reports.30

The best ways to improve building shells—

generous and careful installation of insulation,

careful caulking and weatherstripping, taking

natural features such as trees and terrain into

account, using high-quality windows—have been

recognized since at least the 1970s. 31 Recent

research has essentially refined these ideas. For

example, methods for sealing buildings to reduce

infiltration have improved, and the use of greater

insulation levels in walls and ceilings is becoming

more common. The use of factory-assembled components and structures has increased, which has

allowed for tighter tolerances and therefore reduced

infiltration. 32

Significant efficiency advances have occurred in

window technologies. These improvements are important, as by one estimate 25 percent of the heating

and cooling requirements in the United States are

due to losses through windows.33 A single pane of

glass has an insulating value of about R-1, which is

very low relative to the R-15 typical of a wall in a

n ew house. 34 One way to increase the insulating

value of a window is to add a second or even a third

pane, increasing the R-value to about R-2 and R-3,

respectively. However more panes add weight, limit

K

LO

COATINGS II 1 // 1

Photo credit: Lawrence Berkeley Laboratory

New window technologies offer up to eight times the

insulating value of old single-pane windows.

natural light, and raise costs considerably. A recent

innovation has been the addition of clear coatings to

glass surfaces. These so called low-emissivity (or

low-e) coatings allow the transmission of solar

radiation into the interior, but reduce radiative heat

losses back out again. The addition of a low-e

coating can increase the insulating value of a

double-pane window from R-2 to about R-2.5 to

R-3.2. Low-e windows cost 10 to 20 percent more

than regular windows but are quite popular. About

half of all new double-pane windows incorporate the

low-e coating. 35 Large window manufacturers now

offer low-e glass in many of their products.36

Window frames have improved as well, with greater

use of thermal breaks to limit conduction losses

through the frame.

Jo IJ.S. Congress, office of TwhnoIogy Assessment, Energy Eficiency of Buildings in Cities, OTA-E-168 (WMtigto% DC: U.S. bv~ent

Printing OffIce, March 1982); U.S. Congress, Office of Technology Assessment, Residential Energy Conservation, OTA-E-92 (Washington, DC: U.S.

Government Printing OffIce, July 1979).

31 SW, e.g., R. SOCOIOW (cd.), Saving Energy in the Home (Cambridge, MA: B~~ger* 1978).

32155ue5 of automtion fi tie com~ction ~dus~ we discuss~ iII U.S. Congress, ~fice of ~hology Assessment, Technology and the Future

of the US. Construction Industry (Washington, DC: AIA Press).

33 R. &v~gton and A. RoSe~eld, ‘‘Energy for Buildings and Homes,’ Scientific American, vol. 263, No. 3, September 1990, p. 80.

34 * *RJ ~ is a me=we of ~esis~ce t. hat flow, wi~ ~K of ho~-sq~e f-t -degr~ Fyr Bti. The higher the R-value, the better the hlsdil~ vdlle.

35 Adv~~ed Sciences, ~c., ‘‘Wtidow ~ovatio~, ” CARIERS, Silver Spring, MD, February 1990.

36 ‘‘Wtidow Compmy Standardizes hw-E GkMs, ’ Home Energy, vol. 7, No. 3, May/June 1990, p. 6.
Chapter 2—Technologies for improving Energy Efficiency in Buildings ● 4 5

Several additional window innovations are commercially available. Gas-filled windows, which

substitute argon for air in the space between the

panes, offer insulating values of about R-4. A

window using gas-filled spaces and two suspended

reflective films achieves R-8.37 However these very

advanced windows are expensive, which suggests

they may be economically justified only in severe

climates. 38

Retrofits: Energy efficiency improvements can

be applied to existing buildings as well. Many older

residential buildings in the United States were built

with little regard for energy efficiency. Retrofitting

these buildings could save considerable energy;

however, the cost-effectiveness of these retrofits

depends on the specific design of a building, the

climate, energy costs, and other factors. Estimating

the cost-effectiveness of a shell retrofit with simple

engineering calculations is not as straightforward as

it may seem; buildings are surprisingly complex, and

engineering estimates of energy savings are often

inaccurate. Measuring actual savings-the difference in energy use before and after the retrofit--is

preferable. 39 The most comprehensive effort to

collect and analyze actual savings from building

retrofits has been conducted by Lawrence Berkeley

Laboratories (LBL), where information and data on

building retrofits from across the United States are

collected and analyzed. A summary of some typical

results is shown in table 2-2. Results vary considerably, however it appears that additions to insulation

Photo credit: U.S. Department of Energy

Caulking gaps around windows and doors can reduce

infiltration, and thereby reduce energy use for space

heating and cooling.

offer typical paybacks of about 5 to 7 years (table

2-2).

In addition, there are numerous case studies of

building retrofits. Although the results of these case

studies may not be applicable to all buildings, they

do illustrate the potential and diversity of retrofit

opportunities.

● In the Twin Rivers study performed at Princeton University in the 1970s, a cluster of typical

Table 2-2-Cost-Effectiveness of Residential Shell Retrofits

Average savings

Average cost (percent of main Typical payback

Action (1989 dollars) space heat fuel) (years)

Ceiling insulation. . . . . . . . . . . . . 500 to 970 12 to 21 6.0

Wall insulation. . . . . . . . . . . . . . 810 to 1,600 12 to 17 6.8

Foundation insulation. . . . . . . . . 1,020 NA 5.7

NOTE: Foundation insulation data are for interior of conditioned spaces.

SOURCE: S. Cohen, C, Goldman, and J. Harris, Measured Energy Savings and Economics of Retrofitting Existing

Sing/e-Family Homes: An Update of the BECA-B Database, LBL-281 47, vol. 1 (Berkeley, CA: Lawrence

Berkeley Laboratory, February 1991), p, 2. Paybacks are calculated at the midpoint of t he costs and savings

estimates, and assume the saved fuel is natural gas at a price of $5.61/106 Btu.

37A, Wilson, ‘‘An Improved Outlook’ Architecture, August 1990, p. 95. All R-vxlues grvcn are center-of-%’indow values.

38 us Conge-.s Office of Te~~olo~ Assessment, E~er~} TeCh~ologV Choices,. Shuping Our Future, OTA-E-493 (Washington, DC: U.S.

Government Printing ’Office, July 1991), p. 33.

,,

39‘fil$ method also has ,[s ~rob]em~, wea~er fluCtu~tions, ~h~ges in occup~t ~~vior, and d~~ requircIIICIltS COlllpllCatC SaVing5 CSti~teS;

however innovative evaluation tools, notably the PRISM (PR1nceton Scorckecping Model), have impro~cd the accuracy of these estima[es. See hf. Fels,

“PRISM: An Introduction, ’ Energy and Buifdings, vol. 9, Nos. 1/2, February/May 1986, pp. 5-18.
46 ● Building Energy Efficiency

Photo credit: U.S. Department of Energy

Many houses in the United States still lack basic efficiency

features such as storm windows.

townhomes were retrofitted with movable window insulation, careful sealing of joints and

corners, and increased insulation throughout.

The result was a two-thirds reduction in the

energy needed for space heating, with no

change in indoor temperature and no changes in

the space heating furnace.40

. In a comprehensive research project in the

Pacific Northwest in the mid-1980s (known as

the Hood River Conservation Project), homes

were retrofitted with increased insulation, improved windows and doors, and several other

measures. The result was an average reduction

in space heating electricity use of 36 percent.41

Given the diversity in the building stock, climate

and energy price variability, and the dependence of

costs on the building design, it is difficult to provide

blanket recommendations on building retrofits. Adding insulation can offer reasonable paybacks (table

2-2), but final determinations must be site-specific.

When replacing space conditioning equipment, highly

efficient equipment should be considered, but again

the optimal level of efficiency will depend on the

building, climate, energy prices, occupant behavior,

and other site-specific factors.

There is some evidence that many residences in

the United States lack basic efficiency features. For

example 39 percent of U.S. households lack storm

doors, 22 percent lack wall insulation, and 12

percent lack ceiling insulation. 42 Although th e

economic justification for such features will depend

on climate and other factors, these data suggest that

there is considerable potential to improve the

energy efficiency of the existing building stock,

As further evidence of this potential, the Hood River

Conservation Project (mentioned above) resulted in

homes that use about one-fourth less energy for

space heating than the average U.S. home.43

Space Conditioning in Commercial Buildings

Larger commercial buildings are quite different

from residential buildings.44 They have much larger

and more complex heating and cooling systems, they

usually have active ventilation systems (since natural airflow is insufficient to maintain air quality), and

40 R SOCOIOW (cd,), ~a~i~g Energy in the Home (Cambridge, MA: B~~ger, 1%’8)J P. ‘“

4 I Space hea~g elec~ci~ Consmptiou Prc. versu5 pOSI-, all housing types. The economics of these retrofits are dependent On ~etirne assumptions*

discount rates, and other assumptions, but the cost of conserved energy (CCE, see app. 2-B for definitions) was about 7.1 to 7.9 cents/kWh. E. Hirst,

The Hood River Conservation Project, DOE/BP-l 1287-18 (Washingto~ DC: U.S. Department of Energy, June 1987), pp. 34,41.

42 U.S. Department of Energy, Energy Information~“stration, Housing CharacrerMics 1987, DOE/EIA-0314(87) (Washington DC: May

1989), p. 109.

43 ~c Hood ~ver ~ojwt ac~eved apo5t-re~ofit ~teml~ of 2+6 Btu pr square foot-degre~day (s. (Johe~ C. Gold~ and J. Harris, Measured

Energy Sa\ings and Economics of Retrofitting Existing Single-Family Homes: An Update of the BECA-B Database, LBL-28147, vol. 1 (Berkeley, CA:

Lawrence Berkeley Laboratory, February 1991), p. 74), while the average electrically heated single-family home required 3.4 Btu per square

foot-degree-day (U.S. Department of Energy, Energy Information Administratio& Household Energy Consumption and Expenditures 1987--Part 1:

Nationu/ Data, DOE/ELA-0321(87) (Washington DC: October 1989), p. 11).

~‘ ‘Larger” refers to comrnerciat buildings with more than 10,000 square feet, representing about 79 percent of total commercial floor space. U.S.

Department of Energy, Energy Information Administration Commercial Building Churacferistics 1989, DOE/EIA-0246(89) (Washington DC: June

1991), p. 17.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 47

Box 2-C—Indoor Air Quality

Homes obtain fresh air through natural infilltration—uncontrolled airflow through doors, windows, and leaks in the

building shell. Recent efforts to reduce energy use by reducing infiltration, however, have raised concerns about indoor

air quality. In some situations, concentrations of pollutants such as carbon monoxide, nitrogen oxides, radon, and various

organic compounds can reach unhealthy and even dangerous levels-for example, when gas stoves or unvented kerosene

heaters are used for space heating, or in very “tight” (low infiltration) houses.

Field research has shown that the strength of the pollutant source maybe more important than the tightness of the

building, as tight buildings can have no indoor air problems while leaky buildings can have severe problems. There are

several methods for responding to air quality concerns, but the best method is often to isolate and remove the source of

the problem, rather than merely to increase the ventilation rate. In the case of radon, active ventilation systems may be

necessary regardless of building tightness.

Determining minimum ventilation rates for residences is difficult; however, there is some agreement that a

minimum of 0.3 air changes per hour is acceptable. 1 In very tight houses some advocate the use of active ventilation such

as air-to-air heat exchangers to maintain minimum air exchange rates.

Ism J, Nisson ad G. Dut~ The Superinsu/ared Home Book (NCW York, NY: WflcY, 1985), ch. A.

Plywood

and particle

Cooking /

A

and gas stove

—

Stored

garden

n“’v’;’’ycleaners

Infiltrating outdoor air

paints, fuels,

chemicals

>

Drapes

/

Carpets

Cigarette

/

smoke

—..— Paneling

/“ ‘‘“ ;nace Radon in soil gas

Photo credit: U.S. Department of Energy

Indoor air quality problems often are best dealt with by addressing the source of the problem.
48 . Building Energy Efficiency

Table 2-3—Space Heating Technologies in

Commercial Buildings

Technology/type Percent a

Gas furnace/boiler . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Oil furnace/boiler . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Electric boiler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Electric heat pump . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

aThe percent of all commercial square footage heated with the technology,

in 1988.

SOURCE: Gas Research Institute, “Baseline Projection Data Book,” 1991

ed. j Washington, DC, p. 127.

they are ‘‘load-dominated, ’ meaning that much of

the space conditioning needs arise from the activity

within the building-people, lights, and energyusing equipment—rather than from the influence of

the outside (ambient) conditions. In a large commercial building, the space conditioning (commonly

called HVAC, for heating, ventilating, and air

conditioning) system might simultaneously be heating an exterior office, cooling a computer room, and

ventilating a kitchen. HVAC systems in commercial

buildings can be extraordinarily complex, and the

opportunities for efficiency improvements complex

as well. In general, energy efficiency improvements

can come from:

●

●

●

●

●

●

improving the efficiency of the energy-using

device (e.g., using a higher efficiency chiller);

improving the design of the overall system

(e.g., routing and designing ducts to minimize

losses);

switching to a different system (e.g., using a

heat pump rather than electric resistance heating);

improving the control of the system (e.g., by

using outside air for cooling when appropriate);

improving maintenance (e.g., by changing filters as needed); and

reducing demand for the services provided by

the system (e.g., installing more efficient lights

to reduce the need for space cooling).

Space Heating in Commercial Buildings

A range of technologies is used to provide space

heating in commercial buildings, including residentialstyle oil and natural gas furnaces in smaller buildTable 2-4—Selected Technologies for

Improving Energy Efficiency in

Commercial Space Conditioning

Space heating

-High efficiency furnaces and boilers

-Substitute heat pumps for electric resistance heat

-Heat exchangers to reclaim heat from vented air

-Packaged cogeneration systems

Space cooling

-High efficiency electric chillers

-Direct evaporative cooling

-Outside air economizers

Air handiing

-Variable air volume (VAV) systems

-Energy efficient motors

-Variable-speed drive motors

-Reduced outside air ventilation if excessive

-Improved duct layout

-Reduced duct leakage, reduced air flow

if excessive

Overall system

-Dual fuel heat pump

-Ground source heat pump

-Energy efficient motors

-Variable-speed drive motors

-Improved system control/energy management

system

-System shut-off/set-back during unoccupied hours

-Heat recovery systems

SOURCE: Office of Technology Assessment, 1992.

ings, oil and natural gas boilers, heat pumps, and

electric boilers (table 2-3). Energy use for space

heating in commercial buildings is almost double

that of space cooling;

45 however, much Of the recent

research on improving energy efficiency has focused

on the latter. Despite the relative lack of research,

opportunities for efficiency improvements in commercial building space heating do exist (table 2-4).

Gas boilers and furnaces produce almost half of all

commercial space heat (table 2-3), and highefficiency units are available in the smaller sizes

(less than about 150,000 Btu per hour). A typical

commercial gas furnace has an efficiency of about

70 percent, while a high-efficiency unit can achieve 46 The diversity of com--

over 90 percent efficiency.

mercial buildings makes it difficult to generalize

about the energy savings potential, however there is

some evidence that this potential is large. For

example, a computer simulation of a new office

building in New England found that the addition of

45 In 1988, primary conversion used. For sources, SCC ripp. I-B.

46 DeciSion FOCUS Inc., TAG ~ec~n~ca/~sseSSmenf Guide, Ep~ P.4.463-SR, vol. 2, pm 2 (pa]o A]Io, CA: El~~c Power RCs~ch Institute, October

1988), p. 5-60.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 49

a heat recovery device reduced heating energy use

by 44 percent. The estimated payback on the

investment was about 8 years .47

Very large commercial buildings in warmer

climates often require very little space heat during

occupied periods. A large office building in Tennessee, for example, generates all its space heat from

internal sources—lights, computers, and people.48

The only energy needed for space heating is that

required to move the heat from the warmer interior

offices to the cooler exterior offices. Smaller buildings and those in colder climates, however, do

require space heating.

District heating is an entirely different approach

to space heating in commercial buildings and

involves the production of heat (in the form of hot

water or steam at a central plant), which is then

distributed directly to buildings through underground pipes. Such systems currently heat 11

percent of commercial building floor space in the

United States.49 Many European countries apply

these systems more widely—in Denmark, for example, almost half of all building space heating needs

are met with district heating systems .50 Such systems are appropriate mainly in colder climates with

large space heating needs. The efficiency of such a

system depends on the method used to produce the

heat. If a cogeneration system is used to produce

both heat and electricity, for example, the overall

system efficiency can be quite high,51 but one must

have a demand for hot water large enough to justify

the system.

Space Cooling/Air Transport in

Commercial Buildings

Space cooling technologies for commercial buildings have been the focus of considerable research

and development, as a large portion of peak electricity demand is due to commercial building space

cooling. Many commercially available technologies

could provide space cooling with less energy; some

of these technologies are listed in table 2-4. The

applicability and energy savings potential of these

technologies will vary from building to building.

Case studies, however, have shown that better

cooling system design and operation can save

significant amounts of energy. The use of variable

speed drive motors in the air distribution system of

a large office building in New Jersey reduced fan

energy consumption by 52 percent, with a payback

of 5 years.52 Improved valving and control of a large

space cooling system in a hospital cost $32,000 and

saved $45,000 in electricity costs, with a payback of

less than 9 months.53

A number of technologies can improve the energy

efficiency of both space heating and space cooling

systems (table 2-4). Energy management systems

provide computerized control of space conditioning

equipment and can reduce energy use by 10 to 20

percent.

54 The use of an energy management system

in a large office building in New Jersey reduced

energy costs by about $57,000 per year, with a

payback of less than 4 years. 55 Despite attractive

paybacks, less than one-quarter of all commercial

building floor space is controlled by energy management systems .56

47 Northast Utilities, Energy ond Economics--$trategies for Ofi”ce Budding Design @tiord, CT), P. 45.

48 M. McCarley, ‘‘Tune-up of a Modem Office Building, ’ Proceeding From the [nternationul Symposium Energy Options for the Year 2000, Center

for Energy and Urban Policy Research, University of Delaware, Newark DE, 1988, p. 3-181.

49 u s Dcp~ent of Energy, Energy Infomtion ~miniswation, Commercia/ Building Characteristics 1989, DOE/EIA-0246(89) (Washington

DC: Junc 1991), p. 128.

‘

0

P. Kunjecr, ‘‘District Heating and Cooling: Solution for the Year 2000, ’ Proceedings From the International Symposium Energv Options for the

Year 2000, Center for Energy and Urban Policy Research, University of Delaware, Newark, DE, 1988, p. 1-109.

51 Cogencratlon is dlScuSSed in detail ~ U.S. Congress, Office of Technology Assessment, lndU$trla/ and Conlmercial c~gener~ltion, OTAE

-

9

1 2

(Wi~shington, DC: U.S. Government Printing Office, February 1983).

5Z With ~tatlc pressUe reduction. S. Engl.mdcr and L. Nofiord~ “Fan Energy Savings: Analysis of a Wriable Speed Drive Retrofit, ” Proceedings

of the ACEEE 1988 Summer Stud] on Energy EJj6ciency in Buildings (Washington, DC: American Council for an Energy-Efficient Economy, 1988),

p. 3.51.

53 R.J. Parson, ‘ ‘Simplified Retrofit of a Large chilled Water System, ” in F. Payne (cd.), Strategies for Energy Eficient Plants and Intelligent

Bzuldings (Lilbum, GA: Fairmont Press, 1987), p. 599.

54 Dccl~lon Focus InC,, TAG Technical A~sc,$smen/ Guide, EpRI p-44tj3-SR (Palo Alto, CA: Electric POWCr Research In-$ti~tc, @tobcr 1988), ‘O1.

2, Part 2, p: 5-106.

55 A U51bc111 s. (jrccnbcrg M, Mea], A Mitchell, R, Johnson, (j swci~cr, F, Rubinstein, D. Arastch, Commercial-sector CO/lSen’UfiOfl

,

Technologies, LBL-18543 (Berkeley, CA: Lawrence Berkeley Laboratory, February 1985), p. A-9.

56 In ]9~9, [~,s, Dep~mcnt of E1lcrm, Encr~ ]nfomltioll A~iministration, CovlnlerC-ia/ Bui/ding Chaructcrisrics 1989, DOE/EIA-0246(89)

(Washington, DC: June 19°1 ), p. 211.
50 . Building Energy Efficiency

There are numerous examples of other innovative

technologies to reduce space conditioning energy

use. Energy efficient motors can reduce motor

energy use by 3 to 8 percent at a cost of $100 to $300

per kW, by one estimate.57 A combination of

improved maintenance and improved scheduling of

HVAC equipment reduced energy costs at the

Houston airport by 20 percent, saving $400,000 per

year with no capital investment.58 Electronic controls for space conditioning systems (often called

direct digital controls, or DDC) offer improved

management of temperature and air flow; in one

analysis, the paybacks for using electronic controls

instead of pneumatic controls in new construction

were 1 to 3 years.59 Heat recovery technologies,

which recover the waste heat from space cooling

equipment and use it to supply hot water, space

heating, or other needs, can offer considerable

energy savings.

Commercial Shell Technologies

Opportunities for shell improvements in smaller

commercial buildings are similar to those in residential buildings. Increased insulation to reduce heat

transfer, tighter construction to reduce infiltration,

and the use of high-R windows can all reduce energy

requirements for space conditioning.

Larger commercial buildings often have somewhat different requirements; their space conditioning needs are typically influenced more by internal

loads (lights, people, office equipment, etc.) than by

external loads (sun, outdoor temperature), as shown

in table 2-5. For a typical office building in San

Francisco, for example, more cooling energy would

be saved from a 25 percent reduction in lighting

energy use than from completely eliminating all the

windows (table 2-5). This is not to suggest that shell

and window design are trivial components of energy

efficient building design; only that as building size

increases internal loads become increasingly important.

Table 2-5-Annual Cooling Loads for a Typical Large

Office Building in San Francisco

bad Component Percent of load

Internal loads

Lights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Air handling system . . . . . . . . . . . . . . . . . . . . . .

Miscellaneous equipment. ... , . . . . . . . . . . . .

External loads

Windows . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . .

Roof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Walls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

floor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outside air ventilation . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

21

19

9

13

-1

- 0

-1

-15

100

SOURCE: A. Usibelli, S. Greenberg, M. Meal, A. Mitchell, R. Johnson, G.

Sweitzer, F. Rublrrstein, D. Arasteh, Commercial-SectorConservation T~no/ogies, LBL-1 8543 (Berkeley, CA: Lawrence

Berkeley Laboratory, February 19S5), p. 2-105. Office equip

ment, notably computers, is becoming an important additional

cooling load in offices. See “Other Energy Services” section of

this chapter.

LIGHTING

Lighting is the single largest consumer of electricity in commercial buildings. About 41 percent of

electricity, and 28 percent of total energy, consumed

in the commercial sector is for lighting. In the

residential sector, lighting energy use is small

though not trivial, representing about 7 percent of

residential energy use. 60 The opportunities for improved lighting efficiency-delivering the same or

better quality of light with less energy—are considerable. Using technologies already on the market,

electricity use for residential lighting could be cut by

about one-third.6l Similarly, electricity use for

commercial lighting could be reduced considerably—

with estimates of 39 to 83 percent—using commercially available technologies.62

These energy savings come largely from the use

of new, efficient lighting technologies. Lamps,

ballasts, reflectors, and lighting control technologies

57A. Usibelli, S. Gr~nberg, M. Me~, A. Mitchell, R. JohnsoQ G. Sweitzer, F. Rubinste@ D. Arasteh, Commercia/-Secror consena~’on

Technologies, LBL-18543 (Berkeley, CA: Lawrence Berkeley Laboratory, February 1985), p. 2-73.

5S R Bevington and A. Rosenfeld, ‘‘Energy for Buildings and Homes, ’ Scientific American, vol. 263, No. 3, September 1990, p. 78.

59 C.E. Lundstrom, “Comparison of Cost and Performance of HVAC Controls, ” in F. Payne (cd.), Strategies for Energy Eficient Plants and

Intelligent Buildings (Lilb~ GA: Fairmont Press, 1987), p. 55.

w SW app 1-B for data sources.

61 SW c~culatio~ in this KXtion.

62 ~ 4L1ght~g the Comercid World, Ep~Journa/, vol. 14, No. 8, D~ember 1$)89, p. 6; esti~tes 39 to 55 percent Swings. M.A. Piette, F. fiaUSe,

and R. Verderber, Technology Assessment: Energy -Eficient Commercial Lighting, LBL-27032 (Berkeley, CA: Lawrence Berkeley Laboratory, March

1989), p. 6-2; estimate 78 to 83 percent technical potential for savings.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 51

Box 2-D—Smart Design Reduces First Cost by $500,000 and Cuts Operating Costs in Half

Anew office building in Pittsburgh cost $500,000

less to build, and about haIf as much to operate, due

to the use of smart design and innovative energyefficient technologies. The 10-story, 175,000

square foot (gross) Comstock building, completed

in 1983, uses heat pumps to provide heating and

cooling, innovative air-return windows, highefficiency light fixtures, and an energy management

system. High insulation levels and careful placement and design of windows allowed for the use of

a smaller HVAC (heating, ventilating, and air

conditioning) system than would otherwise be

needed; and the heat pump system cost about half

as much as a conventional system. Net savings,

even after covering the additional costs of the

windows, exceeded $500,000. Careful monitoring

of building energy use has shown that consumption

is well below the target, and operating costs are

about one-half those of other large office buildings

in the area.l

Similarly, a detailed computer simulation of a

new 60,000-square-foot office building in the

Northeast found that a well-designed building using

commercially available equipment would cost the

same to build as a standard new building, yet would

cost 37 percent less to operate.2

1 p. Mtte_ ~d P. SCanlOU “HVAC Design Delivers

Twin Benefits,” Building Design and Construction, November

1984.

* Nofi~st Utilities, Energy and EconomicsAtrategies for

Ofice Building Design (Hartford, CT,), pp. 96-97.

Photo credit: Burt Hill Kosar Rittelmann Associates

Smart design allowed this building to be less expensive to

both build and operate.

have all advanced considerably in recent years. This modest efficiency improvement. Other technologisection reviews some of these recent technical

advances and provides an indication of the costs and

benefits of energy efficient lighting.

Lighting in Residential Buildings

Improved Incandescent Lamps

cal improvements on the standard incandescent

technology include infrared-reflective coatings and

the use of halogen-filled tubes inside the bulb. This

halogen lamp offers a modest efficiency gain and a

significantly longer life than the standard incandescent.

Table 2-6-Characteristics of Improved

Incandescent Lamps

Incandescent lamps provide most lighting in the

residential sector (box 2-E). There are several

technologies available to improve incandescent

lamp efficiency (table 2-6), although even the

advanced incandescent lamps are still far less

efficient than fluorescent lamps. Improved filaments

and the use of krypton gas inside the bulb provide a

Standard Improved Halogen

Rated energy consumption (watts). . 100 90 100

Rated light output (lumens). . . . . 1,750 1,620 1,925

Efficiency (lumens per watt). . . . . . . . 17,5 18.0 19.3

Rated life (hours). ... ., . . . . . . . . 750 750 2,250

Retail purchase price (dollars). . . . . . 0.67 0.90 4.19

NOTE: Data and prices are for lamps available in Washington, DC, in 1991.

SOURCE: Office of Technology Assessment, 1992.
52 . Building Energy Efficiency

\

\

.

\

Compact fluorescent

"Laugh if you will, but my kind once ruled the earth.’)

Drawing by Ziegler; @1991 The New Yorker Magazine, Inc.

Fluorescent lamps are about four times more

efficient than incandescent lamps, but their use in

residences has been limited by their higher frost cost,

unattractive light, and inability to fit in incandescent

fixtures. In 1984, however, a lighting manufacturer

introduced the compact fluorescent, a lamp providing reasonably attractive light and fitting regular

incandescent fixtures yet using the efficient fluorescent technology .63 The compact fluorescent achieves

an efficiency of 61 lumens per watt, or 3.8 times the

efficiency of a comparable incandescent (table 2-7),

This means that a compact fluorescent can provide

the same light as a standard incandescent with just

one-fourth of” the energy. 64 In addition, the life Of a

compact fluorescent is typically about 10,000 hours,

Table 2-7—Technical Comparison of Incandescent

and Compact Fluorescent Lamps

Standard Compact

incandescent fluorescent

Rated energy consumption (watts). . . . 75 18

Rated light output (lumens). . . . . . . . . . . 1,190 1,100

Efficiency (lumens per watt). . . . . . . . . . 15.9 61.1

Rated life (hours). . . . . . . . . . . . . . . . . . 750 10,000

Retail purchase price (dollars). . . . . . . . 0.67 20.00

NOTE: Data and prices are for lamps available in Washington, DC, in 1991.

SOURCE: Office of Technology Assessment, 1992.

about 13 times as long as a standard incandescent

(table 2-7).

The technical potential for energy savings from

using compact fluorescent lamps is considerable.

Compact fluorescent are not suitable for all residen63 Compact fluorescent Ue a different size and shape than the standard incandescent and therefore may not fit all lamps or fixtures designed for

incandescent.

@me compact fluorescent shown in table 2-7 supplies slightly less light, as measured in lumens, than the 75-wait standard incandescent. However,

lumens arc only one measure of light. Light has several other quatities, including color and shadowing patterns, which may differ for the two technologies

shown in table 2-7.
. . —.

Chapter 2—Technologies for Improving Energy Efficiency in Buildings ● 53

Box 2-E—Introduction to Lighting Technology

Most lighting in the residential sector is performed by standard pear-shaped incandescent lamps. These lamps

use a simple filament that produces light when an electric current passes through it. These lamps are simple to install,

cheap to manufacture, familiar to consumers, and widely available. Their disadvantages are short life (typically

1,000 hours) and very low energy efficiency. Lighting energy efficiency is typically measured in lumens per watt,

where lumens can be thought of as the quantity of light 1 and watts are the electric power input. A typical

incandescent lamp achieves only about 18 lumens per watt, far lower than other technologies. The low efficiency

is due to much of the energy input being converted to heat, rather than light, which is easily demonstrated by

touching a lit incandescent lamp.

Fluorescent lights represent an entirely different approach to producing light from electricity. These lights

consist of two components—a ballast, which regulates current and voltage, and the lamp itself. When a fluorescent

lamp is switched on, a current is generated between two electrodes in the lamp. Mercury ions in the lamp emit

ultraviolet energy in the presence of this current. This ultraviolet energy then strikes the inner walls of the lamp,

which are coated with a phosphor powder. This powder then emits radiation seen by the human eye as light. The

efficiency of this complex process is quite high--typicalIy about 60 to 80 lumens per watt, or 3 to 5 times as efficient

as the incandescent lamp. Fluorescent lamps usually have much longer lives as well—typically 10,000 to 20,000

hours, or 10 to 20 times longer than incandescent. Disadvantages include a higher initial cost due to increased

complexity and a differing quality or type of light. In the past, fluorescent light has been perceived as cold or sterile,

although recent improvements have narrowed the gap between the quality of light emitted by fluorescent and

incandescent lamps. Fluorescent lamps are widely used in commercial buildings.

A third lighting technology is HID, or high Table 2-E-l—Efficiencies and Lifetimes of

intensity discharge. This includes high-pressure Lighting Technologies

and low-pressure sodium lamps, as well as metalhalide lamps. These lamps are very efficient (table Typical lighting efficiency Typical lifetime

2-E-l), but their use is limited to areas where light Technology (lumens per watt) (hours)

quality is less crucial, such as street lighting, Incandescent. . . . . . . 17 to 20 750 to 1,000

parking garages, and warehouses. They typically Fluorescent. . . . . . . . 60 to 85 10,000 to 20,000

HIDa

. . . . . . . . . . . . . . 100 to 125 24,000+ require several minutes to warm up and are not

designed for frequent on-off cycles.

aHID - High Intensity Discharge.

SOURCE: Office of Technology Assessment, 1992.

1 one linen on ~ ~e. of 1 ~We fwt ~ ~uiv~ent to one footc~dle. Lume~ per Watt ~ ~ ~O@t of ~ analogous to miles per

gallon for cars-a useful way to compare different technologies, where larger is more efficient.

tial applications, however if compact fluorescent reasonable paybacks—for example less than 2

replaced just half of all residential lighting presently years for compact fluorescent.

supplied by incandescent, electricity consumption

would drop 36 terawatt-hours per year, which is Operation and Design

approximately equivalent to the combined annual Improved lighting operation and design—turning output of six full-size coal-burning powerplants.65

The payback for a compact fluorescent is 1.7 years off lights when not needed, using automatic (dusk-tofor a light used 6 hours per day.66 dawn) switches on outdoor lights, and designing

fixtures that reflect rather than absorb light--can

In summary, there are alternative technologies improve lighting efficiency. These opportunities are

that can significantly reduce lighting energy use. difficult to quantify, and their savings potential will

These come at an increased first cost but offer depend on the specific situation.

65 ~ 1990 ~c-ldential llgh~g ~on~u~ about 105 ~.Assuming 90 percent of W.S is co~umed by inc~descent l~ps, ~d hdf Of ~S

incandescent lighting is supplied instead with compact fluoresccnts, 47.3 TWh of incandescent are replaced with 11.3 TWh of compact fluorescent.

The net savings is 36 TWh. A 90@megawatt (MW) coal-burning powerplant operating at 80 percent capacity factor produces about 6.3 TWh/yr. Note

that half of incandescent lighting energy, not incandescent lights, are replaced with compact fluorcscents in this example.

M ~,~smlng ~lecmiclty price of 7.8 cen~/kWh, O labor COStS, ~d the dues shown in table 2-7.
54 ● Building Energy Efficiency

Photo credit: U.S. Department of Energy

Compact fluorescent, which use 75 percent less energy

than standard incandescent lamps, are available in a

variety of designs.

Lighting in Commercial Buildings

Lighting is the single largest user of electricity in

commercial buildings, accounting for about 41

percent of commercial sector electricity use.67 The

lighting technologies currently used in commercial

buildings mirror the diversity of the sector itself:

standard fluorescent lamps in offices, high-intensity

lamps highlighting merchandise in retail stores, a

mix of fluorescent and incandescent lamps in

restaurants, and so on. This section provides basic

information on widely used commercial lighting

technologies, their alternatives, and their costs and

other attributes.68

Lamps

Fluorescent lamps consume about 55 percent of

lighting electricity in the commercial sector (table

2-8), Fluorescent lamps vary widely, but many are

the familiar 4-foot cylindrical-shaped units. These

lamps typically consume 34 to 40 watts of electricity

and supply about 3,000 lumens of light. Other

popular fluorescent lamps are the 8-foot long

cylinders, typically consuming 75 to 100 watts and

producing 6,000 to 9,000 lumens; and the U-shaped

lamp, typically at 40 watts and 3,000 lumens. Most

fluorescent lamps found in commercial buildings are

one of these three types.

Table 2-8—Lighting Technologies in Use in

Commercial Buildings (1989)

Percent of

Type of Percent of lighting Total electricity

lighting floor spacea

electricity b (TWh per year)

Incandescent. , . 15 41 141

fluorescent. . . . . 77 55 190

HIDC. . . . . . . . . . . 9 4 14

Total. . . . . . . . . . 100 100 345

aThe approximate percent of commercial building floor space that is lit

predominantly by that technology.

bThe approximate percent of electricity used for lighting in the commercial

sector that is consumed by that technology. Assumes all technologies are

used the same number of hours per year, all technologies deliver the same

number of lumens per square foot, and the following energy efficiencies:

Incandescent 18 lumens per watt, fluorescent 70 lumens per watt, HID 110

lumens per watt.

C

HID - High Intensity Discharge.

SOURCES: U.S. Department of Energy, Energy Information Administration, Commercial Building Characteristics 1989, DOE/EIA0246(89) (Washington, DC: June 1991), p.195. Floor space

total does not sum to 100 due to rounding. Total electricity for

lighting from OTA 1992; see app. l-B.

There are countless variations on the regular

fluorescent technology. Color of light, starting

technology, shape of electrical connector, diameter,

length, and of course energy consumption can all

vary, depending on the specific model and manufacturer. The focus here is on those technologies that

can influence energy consumption.

There is some evidence that many older commercial buildings are overlit, meaning that the installed

lighting fixtures supply more light than needed.69 In

such buildings the standard 4-foot, 40-watt fluorescent lamp may be replaced with a ‘high-efficiency’

34-watt lamp, recognizing that much of the energy

savings from this lamp comes from reduced output,

not higher efficiency. The reduced wattage lamp

described in table 2-9, for example, is filled with a

higher fraction of krypton than a standard lamp and

is therefore slightly more efficient than the standard

lamp. It uses 15 percent less energy, but delivers 12

percent less light (as measured in lumens). Despite

their reduced output, these lamps now supply about

one-third of the total U.S. market for new 4-foot

67 Sm app I-B for sources. ‘l%is does not include indirect effects on HVAC consumption.

68 nose interested in ~ ~orc de~]~ tecfic~ &scusslon of 1igh~g tec~ologies we referred to M.A. piette, F. Krause, ~d R. Verderber,

Technology Assessment: Energy -E’cienr Commercial Lighting, LBL-27032 (Berkeley, CA: Lawrence Berkeley Laboratory, March 1989).

69A Usibelfi, S. GrWn~rg, M, Me~, A. ~tchell, R. Jo~o% G. fjwei~er, F. Rubfite@ D. Arasteh, Commerciui-Secfor CO?lSefVdO?l

Technologies, LBL-18543 (Berkeley, CA: Lawrence Berkeley Laborato~, February 1985), p. 5-26. The Illurnina ting Engineering Society (ES) sets

recommendations for lighting levels, but there is some evidence that in the past most commercial building lighting systems supplied much more light

than the IES recommends.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 55

Table 2-9—Standard and Reduced Wattage Versions

of the 4-Foot, 40-Watt (T-12) Fluorescent Lamp

Energy use Light output Efficiency

Description (watts) (lumens) (Iumens per watt)

Standard. . . . . . . . 40 3,250 81

High efficiency, . . 34 2,850 84

NOTE: Both are rapid start, T-1 2 (1.5 inch diameter) lamps with a rated

lifetime of 20,000+ hours.

SOURCE: GE Lighting, “Seleetion Guide for Quality Lighting,” Form 9200,

20th cd., Cleveland, OH, 1990, pp. 90-91.

fluorescent lamps.70 As with all lighting retrofits,

however, careful attention is required to maintain a

level and quality of light that meets occupant needs.

Several fluorescent lamp technologies offer additional efficiency improvements. Smaller diameter

lamps (known as T-8, with a 1 inch diameter) are

somewhat more efficient, due to their greater surfaceto-volume ratio. Lamps with improved phosphors

also offer efficiency gains.

Ballasts

The fluorescent lamp requires a ballast, which

regulates the voltage and current received by the

lamp. Ballasts consume energy internally and also

affect the energy efficiency of the lamp through their

voltage and current control. There are two major

types of ballast technologies—magnetic and electronic. For many years, ballasts used a simple iron

core and aluminum core windings to regulate

voltage and current. This magnetic technology was

well-proven and in universal use but was relatively

inefficient. The use of larger iron cores and copper

rather than aluminum windings provides about a 10

percent improvement in energy efficiency,71 with no

change in light output or quality.

The use of electronic (solid-state) ballasts, which

control voltage and current electronically, can both

increase the energy efficiency of the ballast it self and

improve the operation of the lamp through improved

Photo credit: Advance Transformer Co.

Electronic ballasts can cut fluorescent lighting energy

use by 20 to 25 percent.

current control. The efficiency of the ballast-lamp

system is typically improved 20 to 25 percent when

electronic ballasts are used.72 These ballasts come at

a higher frost cost—typically about $10 more than an

efficient magnetic ballast73—but offer typical paybacks of 3 to 4 years.74 In addition, electronic

ballasts are often smaller, lighter, and quieter.

Despite their benefits, electronic ballasts have yet to

acquire a large market share-less than 4 percent of

all ballasts shipped by U.S. manufacturers in 1990

were electronic.75 Although some early models of

electronic ballasts had moderately high failure

rates,76 these ballasts have since been improved and

are now routinely offered with long-life warranties.

Their reputation for unreliability still persists, however, and may be contributing to their slow market

penetration.

In 1988 the U.S. Congress passed the NAECA

amendments (Public Law 100-357), which set minimum efficiency levels for balIasts. Standards were

set for four types of ballasts, representing about 85

70A, ~vlm and R. sar~insky, The State of rhe Art. Lighting (old Snowmas s, CO: Competitek, Rocky Mountain Institute, March 1988), p. 122.

7 I A Usibel]l S Gr@nbcrg M. Mea] A. Mitchell, R. Jo~o~ G. Sweiwer, F. Rub~tei~ D. Armteh Com??lercia/-Sector COn~er\’dO”On

,. , ,

Technologies, LBL-18543 (Berkeley, CA: Lawrence Berkeley Laboratory, February 1985), p. 5-4.

72 Relatlve t.smdmd magnctlc ball~ts. R. Verderbcr, Sfam.$ andApp/icarion of New Lighting Technologies, LBL-25@$3 @erkcley! CA: bwrence

Berkeley Laboratory, June 1988), p.3.

73 me incremen~~ addltiom~ fWst cost of ~ e~w~o~c ballast over ~ efficient (tit is, one mce[~g the NAECA Arnen&nent Stmdmds) magnetic

ballast, based on quotes from manufacturers for large purchase orders in 1991.

74 Assuming $10 incremen~l first cost, 15 watt savings, operation for 10 hours per&y ~d 250 &ys per yc~, ~d an elecmicity COSt of 7.3 CentS/kwh.

75 u s Dep~ment of commerce, BUMU of the Census, current Industrial RcPorts* . . “Fluorescent Lamp Ballasts-Surnmwy for 1990, ”

MQ36C(90)-5, Washington, DC, issued July 1991.

76 R, Verdcrbcr, sfafil~ ~~ App~ica~i[7n of Ne~, Lighting Tech/* o/ogie~, LBL-25043 (Berkeley, CA: Lawence Berkeley Laboratory, June 1988),

p. 3.
56 ● Building Energy Efficiency

Table 2-10—Alternative Lighting Designs for a Large Office

Standard design High efficiency design

Lamps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-watt fluorescent 34-watt ‘miser’ fluorescent

Ballasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Standard magnetic Dimmable electronic

Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 lamp, flat lens 2 lamp, parabolic reflector

Initial cost

(per square foot-year) . . . . . . . . . . . . . . . . $2.77 $4.08

Operating cost

(per square foot-year) . . . . . . . . . . . . . . . . $0.54 $0.34

NOTE: Electricity price assumed: 7.3 cents per kWh.

SOURCE: Decision Focus Inc., TAG TAchni@/ Assessment Guide, EPRI P-4463-SR (Palo Alto, CA: Electric Power

Research Institute, Cktober 1988), vol. 2, Part 2, pp. 6.29-6.33.

percent of the ballast market.77 Efficiency levels set

by this legislation will probably prevent the use of

the very inefficient standard magnetic ballasts, but

will allow for the use of improved magnetic ballasts

and electronic ballasts.78

Fixtures

The design of the entire lighting fixture can

significantly influence performance, A poorly designed fixture will absorb light and reduce useful

output. Conversely, a well-designed fixture will

reflect light to where it is needed, thereby reducing

wasted output. Fixtures consist of several parts: the

lamp itself, the ballast, the reflector to direct the light

in the desired direction, the lens or louver to reduce

glare, and the housing. There are thousands of

fixtures on the market, each with its own design and

characteristics. The quality of light given off by a

fixture is difficult to measure, making it difficult to

quantify the effectiveness or value of various fixture

designs. There are some general design features,

however, that clearly contribute to energy efficiency.

The addition of a specular reflector can increase

the light output of a fixture. For example, removing

two lamps from a four-lamp fixture and then adding

a specular reflector will yield about 60 to 80 percent

of the initial light output with a 50 percent reduction

in energy use, and a payback of usually less than 1

year.

79 Locating fixtures nearer to areas needing

light can reduce wasted output. Changing, cleaning,

or removing the lens covering fixtures can increase

light output.

The potential savings from combining improved

fixtures, lamps, and ballasts is significant. For

example, an analysis by the Electric Power Research

Institute (EPRI) found that the use of commercially

available lighting technologies, including electronic

ballasts, reflectors, and reduced wattage lamps,

reduced energy consumption by 37 percent relative

to a standard design with no reduction in light output

and with a payback of less than 7 years (table 2-10).

Actual installation of similar technologies in an

office building in New York City yielded significant

savings, with a payback of 6.2 years.80

Controls

Lighting controls can reduce lighting energy use

by ensuring that lights are used only when and where

required. Options include manual or automatic

dimming to reduce output when appropriate, manual

switches to allow lights to be turned off when not

needed, occupancy sensors to switch lights on

automatically when a room is occupied, and scheduled switches to turn lights on and off on a

prearranged schedule. The economic attractiveness

of improved controls are building-specific, as they

depend on hours of operation, occupant behavior,

77 U.S. Conwess, Senate Committee on Energy and Natural Resources, ‘‘Senate Report No. 100-345 on the National Appliance Energy Conservation

Amendments of 1988,” May 13, 1988, p. 3.

78 me N~CA ~en~ents set Pefiomace stand~ds, ~a~er than technic~ req~emen~, so one cannot conclude from the legislation itself exactiy

which technologies will be used. The performan ce standards, however, are set at levels that seem to prohibit the least efficient magnetic ballasts. It is

interesting to note that, when the NAECA amendments were passed, seven States had already set their own statewide ballast standards, which were then

superseded by the Federal standard.

79 Decision Focus ~c., TAG Tec~~~ca/A~~e~~~e~f G~~&?, Ep~ p4463.SR (Palo ~to, CA: Elec@ic Power Research hlstitute, October 1988), VO1.

2, Part 2, pp. 6-27.

80 Bm~ on predlct~ energ savings and exclu~g predicted maintenance savings. R. wa~o~ ‘ ‘cue Smdy in Energy Efficient office Renovation:

NRDC’S Headquaners in New York City, ” Proceedings of the ACEEE 1990 Summer Study on Energy Efficiency in Buildings (Washingto~ DC:

American Council for an Energy-Efficient Economy, 1990), p. 3.225.
.—

Chapter 2—Technologies for Inlproving Energy Efficiency in Buildings . 5 7

electricity prices, and other factors. Examples include the installation of occupancy sensors in a

section of the World Trade Center, which reduced

lighting energy use by 57 percent,81 and lighting

control retrofits in eight commercial buildings that

yielded an average 19 percent energy savings, with

an average payback of 3.7 years. 82

Daylighting

The use of natural sunlight, rather than light from

electricity, has many attractions. In addition to the

electricity savings, daylighting typically offers better views and the feeling of more space, The

potential electricity savings are quite high+. g., a

70 percent reduction in perimeter lighting electricity y

use,

83 In one case study, a retail/office Space was

retrofit with daylighting technologies to provide a

more attractive space, and although energy savings

were not the primary intent, lighting energy use was

reduced 59 percent. w There can be increased first

costs, however, due to the need for additional

windows and, depending on climate, an increased

space cooling load.85 Designing a building to exploit

daylighting is complex and can require specialized

skills.86

WATER HEATING

Water heating accounts for about 15 percent of

residential and 4 percent of commercial energy use.

Slightly more than half of U.S. households use

natural gas to heat water and 37 percent use

electricity (table 2-11 ). In residences, hot water is

used for personal washing (in showers and baths),

clothes washing, dish washing, and other miscellaneous uses, The bulk of hot water use in the

Table 2-1 l—Water Heating Fuels in

Residential Buildings (1989)

Type Percent of households

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Bottled gas . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

100

SOURCE: U.S. Department of Commerce, Bureau of the Census, American Housing Survey for the United States in 1989, HI 50/89

(Washington, DC: U.S. Government Printing Office, July 1991),

p. 42.

commercial sector is in the service sector—in

restaurants, laundromats, and other facilities requiring hot water as part of their business.

Residential Water Heating Technologies

Essentially all U.S. households have hot water

service. In single-family homes and in some multifamily buildings, 40 to 50 gallon water heater tanks are

used both to heat and to store hot water. Natural

gas-fired tanks typically have somewhat higher first

(purchase) costs than electric units,87 and can cost

more to install as well, as they require gas service

and external ducting.

88 The costs of operation,

however, are typically about 50 percent lower for

gas-fired tanks (this will vary depending on fuel

costs and unit efficiency).

The efficiency of residential-size water heaters

has improved in recent years (figure 2-6), due largely

to increased tank insulation, smaller pilot lights, and

improved heat transfer from combustion gases to the

water in the tank. The most efficient commercially

available water heaters sold today use thick polyurethane foam insulation, carefully designed heat trans8 I M.A. piettc, F. IGaUSe, ~n~ R. Vcrderber, Technoloq} Asscssrnertt. Energv-Eflcient Commercial Lighting, LBL-27032 (Berkeley, CA: Lawrence {.

Bcrkclcy Laboratory, March 1989), p. 5-4.

8Z K. Grccly, J. Harris, and A, Hatcher, ‘ ‘Measured Energy Savings and Cost-Effectiveness of Conservation Retrofits in Commercial Buildings, ”

Proceedings of the ACEEE 1990 Summer Srudy on Energy Eficienc-y in Buildings (Washington, DC: American Council for an Energy-Efficient

Economy, 1990), p. 3.103, table 3,

83 A. Uslbelll, S. Greenberg, M. Mea], A, Mltchcll, R. Johnson, G, Swei[zcr, F. Rubin.~[cin, D, Armteh, commercial-sector COnSe~’an”Ofl

Techrrologlcs, LBL-18543 (Berkeley, CA: Lawrence Bcrkcley Laborato~, February 1985), p. 6-3, Perime[cr refers to the area near the windows in a

building, as distinct from the core where daylighdng often camot penetrate.

84 kf, A, plcttc, F. Krause, ~d R, Vcrdcrkr, Tech~o/o~y A~~essmcnl. Energy -Eflcient Commercial Lighting, LBL-27032 (Berkeley, CA: Lawrence

‘

Berkeley Laboratory, March 1989), p. 5-2.

85 ~c “SC of fewer ~]u~lcal ]ights W1ll r~uce space cooling needs; howcvcr$ ~is may bc more (~ offset by the increased heat coming from the

sun.

B6 A u~lbelll S, Grmnbcrg M. Meal, A, Mitchell, R. Joh~~on, G, swci~cr, F, Rubinstcin, D, Arm[eh, Commcrciai-Secror c’O/lSen’Ufl’011

Technologies, LBL-18543 (Bcrkclcy, CA: Lawrence Berkeley Laboratory, February 1985), p. 6-2.

87 Nfitur:~] gas Units we typically abut 20 to 30 percent more expensive th~ compmable C]CCtiC units, excluding installation and operating costs.

88 Approximately onc_~ird of households in the united states do not have access to natural gas. LJ.S. Department of Encrgyt Energy rnfo~tion

Administration, Housing Characteristics 1987, DOE/EIA-0314(87) (Washington, DC: May 1989), p. 35.

297-936 0 - 92 - 5 : QL 3
58 ● Building Energy Efficiency

fer surfaces, and electronic ignition, but these

features are found only in a few models. As was

found for other residential appliances, there is a

considerable efficiency difference between the

average new water heater and the most efficient

commercially available new water heater (figure

2-6).

The costs of the very efficient units are quite

high-but it is not appropriate to attribute this

additional cost solely to energy efficiency. For

example, a 40-gallon gas water heater with an

efficiency of 74 percent costs about $780, but this

89 special design to

unit has a lifetime warranty,

eliminate corrosion, and several other features not

found on a $35061 percent efficient unit.90 According to a sales manager for a water heater manufacturing firm, the main marketing advantage of the highly

efficient unit is the warranty and not the energy

efficiency. 91 (chapter 3 of this report discusses in

more detail how energy-using devices are marketed

and selected.)

Other methods of improving water heating efficiency include demand reductions, retrofits to existing units, and technical improvements in new units.

The simplest method to reduce energy use for water

heating is by reducing consumption of hot water.

The largest users of hot water in residences are

showers and baths (41 percent of hot water), clothes

washing (24 percent), and kitchens (27 percent),

with the remainder (8 percent) used in bathroom

sinks.92 Low-flow showerheads can reduce shower

flow rates by about 50 percent.93 Although consumer

acceptance of these devices is a concern, designs

have improved in recent years and consumer satisfaction is reported to be quite high.94

Retrofits to existing hot water systems can reduce

their energy use. Popular retrofits include tank

wrapping (adding a layer of insulation to the outside

Figure 2-6-Trends in the Efficiency of

Water Heaters

Efficiency (percent, site conversion)

‘“”~

8 0 -

6 0 -

40-

20-

0 -

.

-r- 111 N t ral g s

—

1-

—

?-

—

E

T [

tr

—

~.

1972 1978198019901990 19721978198019901990

new new new NAECA highest new new new NAECA highest

NOTES: ‘New’ is shipment-weighted average of all units shipped in that

year. ‘NAECA’ is the minimum allowable according to the national

standard. ‘Highest’ is the most efficient commercially available.

SOURCES: 1972 to 1980: Pacific Northwest Laboratory, Residential/ and

Commercial Data Book—7hird Edition, PNL4454 (Richland,

WA: February 1968). 1990 NAECA: Public Law 100-12, for a

50 gallon tank. 1990 highest: Gas Appiiance Manufacturers

Association, “Consumer’s Directo~ of Certified Efficiency

Ratings,” October 1990, Arlington VA, pp. 134, 163.

of the hot water tank), reducing tank temperature,

and insulating hot water pipes. Adding R-1 1 insulation blankets to water heaters in homes in the Pacific

Northwest, at a cost per blanket of about $20,

resulted in an average annual savings of 714 kWh

per household .95 A separate study found water heater

wrapping to be the most cost-effective building

retrofit measure, with an average payback of 0.6

years.

96

Several new water heating technologies show

considerable promise for improved efficiency. Heat

pump electric water heaters, which pump heat from

an external heat source (usually outside air) into a

hot water tank, are commercially available from

as For example, one company provides a warranty in effect for as long as the original purchaser owns his or her home.

90 COSK md efficiencies from “Sears Spring/Summ er 1991 Catalog,” Sears Roebuck Co., Downers Grove, IL, pp. 1073-1077.

91 me simple payback considering only the difference in energy efficiency is an unimpressive 15 y-.

92 w. Kempto~ ‘‘Residenti~ Hot Water: A Betivioralty-Driven system ‘‘ in W. Kempton and M. Neiman (eds.), Energy E@ciency: perspech”ves

on Individual Behavior (Washington, DC: American Council for an Energy-Efficient Economy, 1987), p. 233.

!)3 Measued dab from actul showers ~ was~gton Smte, ~ reported in B. Mancl~k, ‘‘~w-mow Showers save Water, ” ~orne Energy, VO1. 8,

No. 4, July/August 1991, p. 28. This does not necessarily mean that the use of low-flow showerheads will reduce shower hot water consumption by 50

percent, as people may take longer showers once the low-flow showcrhead is installed.

94 ~ one s~dy, tie percent of cons~ers reporting tkt they were “very satisfied” with their showerheads went from 37 to 56 percent after

replacement of old showerheads with new low-flow units. Ibid., p. 29.

95 M. Brow D. ~lte, ad S. ~ck~r, Impact of the Hood River Conservation project on Electricity Use for Residential Water Heating,

ORNL/CON-238 (Oak Ridge, TN: Oak Ridge National Laboratory, October 1987), pp. xii, 8.

96 S. Cohen, “Fifty Million Retrofits Later, ” Home Energy, vol. 7, No. 3, May/June 1990, p. 16.
.

Chapter 2—Technologies for Improving Energy Efficiency in Buildings ● 59

Box 2-F—Plastic Tanks: A Technical

Advance That May Hinder

Energy Efficiency

The natural turnover in appliance stock has

allowed newer, more efficient appliances to penetrate the market. Recent developments in materials,

however, may decrease turnover and thereby slow

the implementation of new, efficient appliances.

Almost all residential-size hot water storage

tanks are made of steel. These tanks typically last 10

to 15 years, and when they fail it is almost always

due to corrosion of the steel seam. Recently,

however, plastic-lined one-piece tanks have appeared on the market. These tanks are available with

warranties that are good for as long the purchaser

owns the tank, implying that the manufacturer does

not expect these units to fail. Although these units

are at present quite efficient-with efficiencies of

94 to 97 percent due to the use of thick insulation,

heat traps, and other devices-their use may reduce

the use of improved technologies such as heat pump

water heaters in the future, as the replacement

market will shrink drastically. Furthermore as

plastic-lined tanks become more popular and less

expensive, they may find use in less efficient

electric water heaters.

several U.S. firms. The energy efficiency of these

units is in the range of 150 to 340 percent.97 Costs are

quite high—about $900 to $2,00098-but may drop

in the future if production volumes increase.99

Add-on heat pump units, which can be retrofit to

existing water heaters, can also be used, but here

again prices are high. 100 Heat recovery water heaters,

which capture waste heat from space conditioning

equipment, are available for an installed cost of

about $550.101 Performance of these units depends

heavily on climate. A prototype condensing gas

water heater, which recaptures the latent heat in the

Table 2-12—Water Heating Fuels in

Commercial Buildings

Fuel Percent a

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... , . 40

District heat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Fuel oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Propane , ., , , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

aThe approximate percent of commercial building floor space whose hot

water is supplied by the corresponding fuel. Total sums to more than 100

as some commercial buildings use more than one fuel for hot water.

Excludes commercial buildings with no hot water.

SOURCE: U.S. Department of Energy, Energy Information Administration,

Commercial Building Characteristics 1989, DO13EIA-0246(89)

(Washington, DC: June 1991), p. 150.

combustion gases, has been built with an efficiency

of 83 percent.l02

Commercial and Multifamily Water

Heating Technologies

As in residential buildings, natural gas and

electricity are the leading fuels for water heating in

commercial buildings (table 2-12).103 The methods

and systems used for heating water in commercial

buildings vary widely. Many older buildings have a

hot water tank that is heated by a submerged coil,

heated in turn by the main space-heat boiler. This

design is rarely used in new buildings, as it requires

the main boiler to be operated year-round to provide

hot water. A second design is a storage tank with a

smaller, dedicated boiler. This boiler can provide

only hot water or can provide both hot water and

space heating as necessary. A third type of system is

a commercial tank, which is essentially a large-scale

version of a residential tank. This last design is

increasingly popular, as it is simple and relatively

inexpensive to install.

The options for improvements are similar to those

for residential systems. Demand reductions, including repairing leaks and reducing temperature settings, can reduce energy use. Retrofits to systems

97 Efficiencies of over 100 percent are possible as the useful output includes the pumped heat obtained from another soume, while tie o~Y ~Put is

the electricity used to pump the heat from one place to another. Source is EPRI, Electric Water Heating News, vol. 4, No. 1, spring 1991, p. 4.

98 Average COStS Ior an integral (i.e., includes tank) heat pump water heater. mid.

99 ~onomles of scale ~ pr~uction rqulre higher sales vol~es, yet fiese vol~es wil! not be achieved as long as prices are high.

100 ~obably $450 to $800, Epw, E/ecfiic Wufer Heating NeW$, VO1. 4, No. 1, spfig 1991$ P 4.

10 I ~s@~ costs Vw Wide]y, depending on tie specflc equipment Used and tie difficulty of installation. Average value of $550 fiOm SynergiC

Resources Corp., Review of Energy-Efi”cient Technologies in the Residential Sector, EPRI EM-4436, vol. 1 (Palo Alto, CA: Electric Power Research

Institute, February 1986), p. 1-12.

!02 E H~~t J. cl~ton, H, Geller, W, fioner, Energy Eflciency in Buildings. progre$S and Promise (washingto~ DC: fieticm cOucil ‘or m

Energy-Efticie~t Economy, 1986), p. 85.

l~s Much of his discussion applies to large multifamily buildings m well.
60 ● Building Energy Effiiciency

can include those used in the residential sector, such

as increasing tank insulation, as well as some more

innovative features including electronic ignitions,

electronic flue dampers, and boiler tune-ups. For

example, the addition of an electric flue damper to

a 70-gallon natural-gas-fired water heater tank in a

recent field test increased effficiency from 61 to 65

percent, with a payback period of 5.3 years.l04

New technologies for commercial water heating

include the use of heat pumps, heat recovery devices,

and other methods for integrating water heating into

other heating and cooling systems. For example, a

heat recovery heat pump recently installed at a large

resort complex in Arizona uses heat from the chillers

(space cooling devices) to heat water for the laundry,

swimming pool, and spa. The new system replaces

a natural-gas water heating system and thereby

reduces the annual natural gas costs by about

$61,000 per year. The estimated payback for the

system is 3.5 years.105

FOOD REFRIGERATION/

FREEZING

Keeping food cold requires a significant amount

of energy—about 10 percent of residential energy

use and about 5 percent of commercial sector energy

use 

106 The energy efficiency of food refrigeration

equipment has improved tremendously in the last

10 to 20 years, and considerable potential for

further improvement remains. This section reviews the recent history of refrigeration equipment,

the present-day technologies, and the most promising technologies for the future. Residential equipment is emphasized, as it uses the bulk of food

refrigeration energy, but commercial technologies

are mentioned as well.

Residential Refrigeration and Freezing

Almost every U.S. household has at least one

refrigerator, and some-about 14 percent—have

two or more.107 The energy consumption of residential refrigerators tripled from 1950 to 1972, due to

increased size (from 7 to 17 cubic feet), addition of

energy-cons uming features such as automatic defrost, and reduced insulation. 108 In the 1970s,

however, several factors led to a sharp drop in

refrigerator energy consumption. Increased energy

prices, energy consumption labels (required by the

Energy Policy and Conservation Act of 1975, Public

Law 94-163), and State-level energy efficiency

standards (California set minimum refrigerator energy efficiency standards in 1976) all led to the use

of improved, more efficient refrigerator technologies. A number of innovations and improvements,

rather than a single technical breakthrough, led to a

55 percent drop in the energy consumption of the

typical refrigerator from 1972 to 1990 (table 2-13,

figure 2-7). Among these improvements were the

use of polyurethane foam rather than fiberglass

insulation, more efficient motors and compressors,

improved door seals, and improved air flow between

cold coils and food compartments.

The typical refrigerator sold today is an 18-cubicfoot, top-mount (meaning the freezer is above the

refrigerator), automatic defrost unit using about 900

kWh per year.

109 Although this energy use level is

far below that of the typical units sold in the 1970s,

it is far above that which the Department of Energy

(DOE) has determined to be ‘‘technically feasible’

(table 2-13). According to DOE, it is technically

feasible to build a refrigerator using less than 500

kWh per year that retains the features expected by

consumers-including 18-cubic-foot interior volume and automatic defrost. A 16-cubic-foot manual

Iw R. Ncvitt and V. Stefanson, ( ‘Evaluating the Perfo rmance of a New High Efficiency Commercial Tank Water Heater, ’ Proceedings of the ACEEE

1988 Summer Study on Energy Eficiency in Buildings (Washington DC: American Council for an Energy-Efficient Economy, 1988), p. 2.155.

105 EpRI, E/eC.@-ic Wu~er Healing News, VO1. 3, No. 3, Winter 1990-91, pp. 1, 3.

106 -W~ulv~ent, see app. 1-B for so~ces.

107 u.S. Dep~entof J7~e~~, ~ner= ~omtion~~s~atio~ Ann~~/EnergyRevieW 1990, ~E~IA-0384(90) (Washingto~ DC: hhy 199 1),

p. 45. The term “refrigerator” refers to a combination refrigerator-freezer, unless noted otherwise.

10S “Appliance Efficiency on the Fast Track” EPRIJournal, vol. 12, No. 2, March 1987, p. 33.

10S Sizes given here refer t. tie sm of tie r~frigerator~d frwzcr~,ol~~. ~c adjusted volume (AV), dcfin~ as refrigerator volume p]US 1.63 times

ficezcr volume, is 20.8 cubic feet.
Chapter 2—Technologiesfor Improving Energy Efficiency in Buildings . 61

Table 2-13—Trends in the Energy Consumption of Refrigerators

Energy use

Description (kWh/year) Annual operating costa

1. Average new 1972. . . . . . . . . . . . . . . . . . . . . . . 1,990

2. Average new 1978. . . . . . . . . . . . . . . . . . . . . . . 1,440

3. Average new 1981 ........, . . . . . . . . . . . . . . 1,200

4. Average new 1986. . . . . . . . . . . . . . . . . . . . . . . 1,070

5. Average new 1987. . . . . . . . . . . . . . . . . . . . . . . 970

6. Average new 1990. . . . . . . . . . . . . . . . . . . . . . . 880

7.1990 NAECA standard . . . . . . . . . . . . . . . . . . . 960

8. 1993 NAECA standard . . . . . . . . . . . . . . . . . . . 690

9. 1990 technically feasible (DOE) . . . . . . . . . . . . 490

$155

112

94

83

76

69

75

54

38

aElectricity price of 7.8 cents/kwh assumed.

NOTE: Entries 1 to 6 are shipment-weighted averages; 7 to 9 are for top-mount automatic defrost units, no

through-the door ice, 18 cubic feet actual volume, 20,8 cubic feet adjusted volume.

SOURCES: 1 to 6: R. Gants, Vice President, Association of Home Appliance Manufacturers, personal communication,

Oct. 18, 1991.7 to 9: 54 Federal Register 47918 (Nov. 17, 1989).

defrost refrigerator using only about 280 kWh per

year is commercially available.l10 The NAECA

standards, which include both technical and economic considerations, will require energy use levels

no higher than 690 kWh per year by 1993.111

Several technologies could further improve refrigerator energy efficiency. Refrigerators use energy to maintain a temperature difference between

the food storage area and the surrounding environment; by reducing the amount of heat that penetrates

into the refrigerator, one can reduce the energy use.

This can be done by improving the insulation

surrounding the food storage area. The foam insulation used in refrigerators today has an insulating

value of about R-8 per inch.l12 Simply adding more

insulation may not be practical, as increasing the

external dimensions of the refrigerator makes it

difficult to fit the unit in kitchens, while decreasing

the internal dimensions reduces the available food

storage space. Therefore materials that provide more

insulating value while still fitting in the narrow shell

of the refrigerator are needed. A further constraint on

refrigerator insulation is related to the use of

chlorofluorocarbons (CFCS). Foam insulation commonly used in refrigerators contains CFCS, which

are being phased out of international production due

to their harmful effects on the stratospheric ozone

layer.

Figure 2-7—Trends in the Energy Consumption

of Refrigerators

Annual operating cost,

1990 (dollars/year)

160 —

Annual energy use

(kWh/year)

‘

- “~ 2,000

1972 1978 1981 1986 1987

I

~ 1,500

1,000

h

t 500

0

1990 1990 1993 1990

new new new new new NAECA new NAECA feasible

NOTES: Operating cost includes energy only. An electricity cost of 7.8

cents/kWh is assumed. ‘New’ is shipment-weighted average of all

units shipped in that year. ‘NAECA’ is the max~mum allowable

according to the national standard. ‘Feasible’ is DOE’s estimate of

the lowest technically feasible unit. Applies to a top-mount

automatic defrost unit, no ITD (through-thedoor) ice, 18.0 cubic

feet actual volume, 20.8 cubic feet adjusted volume.

SOURCES: 1972 to 1990 new: R. Gants, Vice President, Association of

Home Appliance Manufacturers, personal communication,

Oct. 18, 1991. NAECA: 54 Federal Register 47918 (Nov. 17,

1989). Feasible: U.S. Department of Energy, Technical

Support Documenf: Energy Conservation Standards for Consumer Products: Refrigerators and Furnaces, DOVCE-0277

(Washington, DC: November 1989), p. 3-36.

110 ~ufacturer’S data at 70 degree F ~blent tcmperaturc, from Sunfrost, Arca[a, CA, model RF-19. Actual interior dimensions of 8.0 cubic fWt

for refrigerator and 8,0 cubic feet for frcerxr. This unit has larger than usual exterior dimensions, is hand-built, anit COSIS about $2,500. The manufacturer

claims tht mass-production would drop the per-unit cost to about $1,000. M. Shepard, A. LQvins, J. Nqrnark, D. Houghton, H. Hccdc, The State of

the Art Appliances (Old Snowmass, CO: Competitek, Rocky Mountain In..titute, August 1990), p. 76.

I I I For a top_momt ~ulomatic defrost refrigerator/frcczcr with an adjuwcd VOlUmC of 20.8 cubic feet.

112 u s Depa~cn[ of Energy, Tech~lc~[L~upportDocum~ nt,’” ErICr~+, Consenfution Stundardsf[~r Consumer pr[jdu~ts’ Refriserut~~rs ‘ind Furnuce$* , . . .

DOE/CE-0277 (Washington, DC: November 1989), p. 3-4.
62 ● Building Energy Efficiency

Table 2-14—improved Refrigerator Technologies

Considered by DOE in Setting the NAECA

Standards (partial list)

Double door gasket

Improved insulation

Evacuated panels

High efficiency compressor

Adaptive defrost

Fan and fan motor improvement

Anti-sweat heater switch

Condensor gas heating

Improved evaporator

Improved expansion valve

Two-compressor system

Relocation of components

Variable-speed compressor

SOURCE: U.S. Department of Energy, T&nical Support Document:

Energy Conservation Standards for Consumer Products: Refrigerators and Furnaces, DOHCE4)277 (Washington, DC:

November 1989), p. 3-4.

In an effort to develop insulation that is both

compact and CFC-free, much of the recent R&D has

focused on the use of vacuums. One such technology, compact vacuum insulation, uses two thin

sheets of steel held apart by glass beads, with a

vacuum between them.113 Several prototype panels

using this technology have been built, however

costs, performance, and feasibility of large-scale

production are still uncertain. Other promising

vacuum-related technologies under development

include powder-filled vacuum panels and silica

aerogels, both at about R-20 per inch.114

Many other technologies could be considered to

improve further the energy efficiency of refrigerators (table 2-14). Improving compressor design,

installing separate compressors for the freezer and

the refrigerator (dual compressors), and moving the

compressor from the bottom to the top of the

refrigerator to reduce heat flow from the compressor

into the refrigerator, can all improve energy efficiency. Some of the highly efficient technologies

provide additional consumer value as well. Vacuum

panels, for example, could allow for thinner walls,

thereby providing more interior storage space without increased exterior dimensions.

Photo credit: National Renewabie Energy Laboratory

Compact vacuum insulation panels (shown on the left) can

provide an insulating value of R-10 in just 1/10

inch. Over 1 inch of standard insulation is required to

provide the same insulating value.

Some of these technologies, such as dual compressors, are already in commercial use, and therefore their costs are known. Others, notably vacuum

panels, are not yet commercially available, and

therefore costs are uncertain. It should be noted,

however, that according to DOE it is possible to

meet the 1993 NAECA standard through the use of

commercially available technologies.115

Approximately 34 percent of U.S. households

have separate freezers.

116 As with refrigerators, the

energy consumption of freezers has dropped sharply

113 The exp~ted ~Su]ating value for this technology is R-10 per 1/10 inch. T. Potter and D. Benson, “Petiorman ce ‘Iksts of Compact Vacuum

Insulation for Refrigerators, ’ Proceedings of the ACEEE 1990 Summer Study on Energy Eficiency in Buildings (Washingto~ DC: American Council

for an Energy-Efficient Economy, 1990), p. 1.177.

114 uS. Dep@ent of Ener~, Techni calSuppor tDocument: Energy Consenyation Standards for Consumer products: Refrigerators andFurnaces,

DOE/CE-0277 (Washingto& DC: November 1989), p. 3-5.

115 Ibid,, p, 3-37,

116 ~ 1987, usDep~ent of Energy, Energy ~o~tion Admifis@ation, Annual Energy Review 1990, DOE/EIA-0384(90) (Wash@tOU DC:

May 1991), p. 45.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings ● 63

in recent years (table 2- 15). The prospective technologies for residential freezer improvement are quite

similar to those for refrigerators.

Commercial Refrigeration and Freezing

In commercial buildings requiring food refrigeration and freezing, such as supermarkets and other

retail food stores, refrigeration systems can account

for about half of total electricity use. 117 The design

and use of this equipment, unlike residential refrigerators, varies widely from site to site. This section

reviews some promising technologies for improving

the design of this equipment.

Commercial refrigeration systems, like space

cooling systems, are used to move heat from one

place to another. Energy efficiency opportunities

include reducing the amount of heat requiring

transfer, capturing the transferred heat and using it to

perform useful work, and designing the equipment

to move heat more efficiently.

Reducing the amount of heat that needs to be

moved, or load reduction, is often the simplest

improvement. The addition of plastic strips on

refrigerated display cases can reduce energy use by

15 to 45 percent.

118 Glass doors, although more

expensive, can reduce energy use by 30 to 60

percent.

119 It is Sometimes thought that these devices

will reduce sales by making the product less

accessible, and also make product loading more

difficult. As with other energy efficiency improvements, the perception that they reduce comfort or

convenience is a significant barrier to widespread

use.

Heat recovery devices, which capture the waste

heat from refrigeration systems and use it for space

and/or water heating, are being installed in most new

systems. Although they do not contribute to the

energy efficiency of the refrigeration system per se,

they do capture energy that would otherwise be

Table 2-15-Trends in Energy Consumption

of Residential Freezers

Energy use Annual

Description (kWh/year) operating costa

1. Average new 1972. . . . . . . . . . 1,300 $101

2, Average new 1978. . . . . . . . . . 1,080 84

3. Average new 1987. . . . . . . . . . 780 61

4. Average new 1990. . . . . . . . . . 680 53

5. NAECA 1990 standard. . . . . . . 710 55

6. NAECA 1993 standard. . . . . . . 530 42

7. Technically feasible. . . . . . . . . . 420 33

aElectricity price of 7.8 cents/kWh assumed.

NOTE: For an upright manual defrost freezer with an interior volume of 15.1

cubic feet (26.1 cubic feet adjusted volume),

SOURCES: 1 to 4: R. Gants, Vice President, Association of Home

Appliance Manufacturers, personal communication, Oct. 18,

1991.5 to 7: % Federal Register 47918, 47919 (Nov. 17,

1989).

wasted and thereby reduce overall energy use. Their

value is limited by the on-site need for heat. For

example, a supermarket may have a limited need for

hot water, and may need space heating only in

winter.

Improvements to the refrigeration system itself

offer the largest energy savings. The list of possible

technologies is quite long, and just a few of the most

promising options are mentioned here. Compressors

use much of the energy of commercial refrigeration

systems. These compressors operate most efficiently

at full load, therefore the use of several, unequally

sized compressors in parallel, along with microprocessor controls to match the compressor operation

with the load, can reduce energy use 13 to ,27

percent.

120 Variable-speed drive for compressors,

along with pressure and temperature controls, could

provide significant energy savings.121 Most refrigeration systems operate at a fixed pressure, set to meet

the load on the hottest days. Allowing this pressure

to float, or drop to meet actual demand, led to a 23

percent drop in compressor energy use in a recent

field test.122

117 Battellc.Columbus Division ad Enviro-M~gement and Research, Inc., DSM Technology A/ternafi~’es, Ep~ EM-5457 (p~o ~to~ CA: E1ectric Power Research Institute, October 1987), p. B-31.

I 18 A US1&]ll S GreC~&+r, M, M~l, A, Mi[chell, R. Johnson, G. Sweit=r, F. Rubi~tefi D. Arasteh, commercia~-sector conse~)afl”on !,

Technologies, LBL-18543 (Berkeley, CA: Lawrence Bcrkclcy Laboratory, February 1985), p. 3-2.

I 19 Ibid.

120 Ibid,, p. 3-1,

‘ZI Ibid., p. 3-6.

1 zz G Whce]cr ~d G. Smih $ ‘Refrigeration Energy Savings Witi ~oating ‘ad ‘esswe~ ‘‘ Proceedings of the ACEEE 1988 Summer Study on

Energy E~cient in Buildings (Washington, DC: American Council for an Energy-Efficiency Economy, 1988), p. 4.123
64 . Building Energy Efficiency

Table 2-1 6-Approximate Energy Consumption of Selected Appliances

Approximate annual Percent of total

Appliance consumption—1 988, primary trillion Btus sectoral energy use

Residential

Clothes dryers. . . . . . . . . . . . . . . . . . . 480 about 3

Clothes washersa

. . . . . . . . . . . . . . . . . 100 less than 1

Dishwashers. . . . . . . . . . . . . . . . . . . . 70 less than 1

Cooking appliances. . . . . . . . . . . . . . . 570 about 3

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 740 about 4

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,960 13

Commercial

Electronic office equipment. . . . . . . . . 260 about 2

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600 about 12

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,860 15

aDoes not include energy for water heating.

NOTE: Individual numbers may not sum to totals due to rounding.

SOURCES: Office of Technology Assessment, 1992 (see app. l-B); J. Harris, J. Roturier, L. Norford, A. Rabl,

Twhnology Assessment: Electronic Office Euubnent, LBL-25558 Rev. (Berkelev.. CA: Lawrence . Berkeley -kboratory, November 1988). ‘

The technical and economic savings potential is

well illustrated in a recent field test of advanced

commercial refrigeration technologies. An advanced

system (utilizing floating pressure, unequally sized

compressors, and other innovative technologies)

was installed next to a conventional system in a large

supermarket in northern California. The two systems

were alternately operated in order to measure

performance and energy use under the same conditions. Actual energy savings were 23 percent, or

about $10,000 per year with the new system. The

initial cost premium of the system was estimated at

about $20,000, yielding a 2-year payback.123

OTHER ENERGY SERVICES

In addition to the previously discussed energy

services (space conditioning, lighting, water heating, food refrigeration and freezing), there is a wide

range of other energy services in buildings. For the

residential sector this includes clothes washing and

drying, cooking and cleaning (including dishwashers), home entertainment (notably televisions), and

various other uses such as waterbeds and humidifiers. For the commercial sector this includes cooking

and cleaning in restaurants, office equipment (computers, copy machines, printers, etc.), clothes washing and drying in laundromats, and so on. These

miscellaneous energy services account for about 13

percent of residential energy use and 15 percent of

commercial energy use (table 2-16).l24

For most of these individual appliances the energy

use is quite small; however in aggregate their energy

use can be considerable. Residential electric clothes

dryers, for example, use about 41 TWh of electricity

per year,

125 or the combined annual output of 6.5

large coal-burning powerplants.126 Office electronic

equipment uses about 25 TWh per year (1988),127 

or

the equivalent of about four large coal-burning

powerplants. Furthermore some of these appliances,

notably computers in offices, are growing in popularity and may become significant energy users in

the future. This section discusses technologies for

reducing the energy use of three energy users in the

miscellaneous category---clothes washers, clothes

dryers, and office equipment (table 2-16).

Clothes Dryers

About 68 percent of U.S. households have clothes

dryers,128 and about 4.5 million new clothes dryers

123 ‘{~tting tie Freeze on Refrigeration COStS, ’ EPRI Journal, vol. 13, No. 8, December 1988, p. 21.

124 ~ 1988, using Primw conversion factors. See app. 1-B for soumes.

125 ~ 1988, See app. 1-B for SOwCeS.

IZ6 Assum~g a 9WMW plant operating at 80 percent capacity faCtOr.

127 J H~5, J. Rot~er, L, Norfor~, A. ~bl, ~ec~no/ogy Assessment: E/ec(ronic Ofice Equipment, LBL-25558 RCV. (Berkeley, CA: hwrenCe

Berkeley Laboratory, November 1988), p. 3-20.

128 ~ s ~ep-cnt of EnerW, BUeau of tie Cemus, Anlerican Housing Sun,ey~or the United Sfa/e~ in ]989, H15fJ/89 (Washington, DC: U.S.

. .

Government Printing Office, July 1991), p. 40.
Chapter 2—Technologies for Irnproviing Energy Efficiency in Buildings ● 6 5

129 The energy efficiency of are shipped each year.

dryers increased moderately over the years, showing

a 7.8 percent efficiency increase from 1972 to

1980. 130 Technologies are available for greater

improvements in dryer efficiency. Some of these

technologies are addressed by NAECA (Public Law

100-12) and subsequent DOE rulings. The original

NAECA prohibited the use of pilot lights in gas

dryers, and subsequent rulings by DOE set minimum

efficiency standards for dryers manufactured after

May 13, 1994. These standards could be met with

the use of automatic moisture or temperature termination and increased insulation, but as they are

performance, not prescriptive, standards they do not

require the use of any specific technology. Additional technologies considered and rejected by DOE

in setting standards include the use of heat-pump

clothes dryers (a technology already used for commercial drying), microwave clothes dryers (prototypes do exist),131 and recycling of exhaust heat.

These technologies were rejected for economic, not

technical reasons; although DOE found that the

life-cycle costs of these appliances were lower than

that of dryers without these technologies, they

determined that the increased first cost may reduce

sales and thereby reduce manufacturers’ return on

equity. 132

There are other options to reduce dryer energy

use. The use of natural gas rather than electricity as

the primary fuel for the dryer can be much more

financially attractive; gas units typically cost about

$40 more to purchase but about $90 less to operate

per year, with a payback period of less than 6

months.l33 Faster spin speeds for washers could help

as well, by reducing the amount of water the dryer

would need to remove.134

Clothes Washers

About 76 percent of U.S. households have electric

clothes washers, 135 and about 5.9 million new units 136 The energy efficiency ‘f

are shipped each year.

washers improved considerably in recent years-by

over 50 percent from 1972 to 1989.137 Most of this

efficiency increase came from more cold wash and

rinse options, less hot and more cold in the warm

water mix, and improved control of washer water

level.138

As in dryers, there are several technologies that

could further increase washer efficiency, some of

which are addressed by NAECA and subsequent

DOE rulings. The original NAECA legislation

required that a cold rinse option be available, and

subsequent rulings set minimum efficiency levels

effective in 1994 that could be met with the

elimination of warm water rinse. 139 One promising

technology, the use of horizontal axis rotation, was

not included by DOE, because there was insufficient

1291989 U.S. jIIdUS~ shlprnenls minus exports plus imports, from Association of Home Appliance Manufacturers (AHAM), Major Honre Appliance

Induslry Fact Book 1990/91 (Chicago, IL), pp. 11, 15, 17.

130 Ufits we pounds water remo~,cd per kwh ~on~umed. From SAIC, Tr~n~s in the Energy Eficienc~, of Residenhal Electric .4pp/iances, EPRI

EM-4539 (Palo Alto, CA: Electric Power Research Institute, April 1986), p. 2-18.

131 DOE found that microwave clothes dryers Were ‘‘technically feasible” (see 56 Federal Register 22265 [May 14, 1991]); however, manufacturers

have raked questions of safety and performance (R. Gants, Vice President, Association of Home Appliance Manufacturers, personal cornmunicatjon,

Oct. 18, 1991).

132 See 56 Federal Register 22273 (May 14, 1991).

133 ASS~ptlo~: ~lec~lc u~t ~scs 5,800 watts, gas tit Uses 500 Wat[s electricity plus 22,000 B~ of natti gas, electricity at $.078/kWh and gas

at $5.63/l@ Btu, 6 hours use pcr week. Purchase prices from ‘‘Scars Spring/Summer 1991 Catalog, ’ Sears Roebuck Co., Downers Grove, IL.

134 By one ~stfiate, rcmovlng water mcch~ically (by spiming) requires only lf70th the energy required to rcmove the sarnc amount of ‘ater

thermally (with heat}. From I. Tbriel, D. Berman, P. CharL T. Chan, J. Koomey, B. bbot, M. Levine, J. McMahon, G. Roscnquist, S. Stoft, “U.S.

Residential Appliance Energy Efficiency: present Status and Future Directions, ’ Proceedings of the ACEEE 1990 Summer Study on Energy Efficiency

in Buildings (Washington, DC: American Council for an Energy-Efficient Economy, 1990), p. 1.230.

135 U.S. Dep~ent Of commerce, BUeau of tie Cemus, American Housing Surleyjor the United States in 1989, H150/89 (Washingto~ DC: U.S.

Government Printing Office, July 1991), p. 40.

1361989 uss~pments m~us expo~s plus imports, from Association of Home Appliance ~ufac~ers (AI-JAM), Major Home Appliance ~ndUSt~

Fact Book 1990/91 (Chicago, IL), pp. 11, 15, 17.

137 s~pment Weighted average enera factors, as estirnat~ by Association of Home Appliance Manufacturers (AHAM,), ibid., p. 29.

136 ~c bulk of enera USC in clothes washers is for water heating.

139 56 Federa/Registe~ 22267, 22279 May 14, IW 1), Note t~t tie s~dard cou]d bc met with the e]imi~tion of warm water riIISC but could be met

in other ways as well, and according to DOE there are currently models on the market with warm rime that already meet the standard. 56 Federal Register

22264 (May 14, 199 1).
66 . Building Energy Efficiency

information during the public comment period.140

Higher washer spin speeds (to reduce dryer energy

use) were also not considered, as the test procedure

for washers does not appear to give credit for

reductions in clothes dryer energy use.

Office Equipment

Although the energy use of office equipment is

quite small-only about 3 to 4 percent of total

commercial electricity use 141—it is growing rapidly

and is an important new energy user in office

buildings, where it sometimes consumes more

energy than lighting. A typical personal computer

uses about 100 to 170 watts142 -about the same as the

typical refrigerator. The technology of office equipment changes rapidly, making it difficult to forecast

future demand. However one estimate suggests that

office equipment energy use could increase 160 to

360 percent by 1995 (relative to 1988).143

There are a number of technologies available that

could sharply reduce the electricity needs of office

equipment. These include greater use of laptops,

CMOS chips (which, unlike the traditional NMOS

technology, uses almost no power when not in

use), l44 

liquid-crystal display (LCD) screens, and

various alternatives to laser printing. Software

allowing computers to shift to a dormant mode after

a period of inactivity would help reduce energy use

as well. The use of these and other technologies,

most of which are already commercially available,

could hold office equipment electricity use at about

its current level,145 despite the continued rapid

proliferation of computers and other electronic

devices.

SUMMARY AND CONCLUSIONS

Recent advances in equipment design have yielded

remarkable efficiency improvements, and there is

considerable potential for further improvement. For

example, while the typical new gas furnace in the

1970s was only 63 percent efficient, new gas

furnaces are now available with 97 percent efficiency. New windows are available with an insulating value of R-8-an eight-fold improvement over

the old R-1 single-pane window-and window

designs in the laboratory suggest R-10 to R-15 may

soon be available. Computerized controls can cut

commercial building energy use by 10 to 20 percent.

Improved design can reduce both energy use and

construction costs in large office buildings.

As discussed in chapter 1, there is some disagreement on the amount of energy that could be saved

through the use of cost-effective energy efficient

technologies. Reasons for this disagreement include

differing definitions of cost-effective and different

assumptions as to technology costs and performance. There is general agreement, however, on the

following points:

●

●

●

Technical advances have led to impressive

improvements in the energy efficiency of

energy-using equipment, and further improvement is likely.

If these efficient technologies were used, energy use in buildings would be reduced considerably.

A variety of highly energy efficient equipment

is commercially available but is not being used,

140 ~cor~g t. one ~lysis, a horizont~ axis washer uses 61 percent less energy and 39 percent less water than a standard vetical-=is w=her (B.

hbot, I. Thriel, G. Rosenquist, “Horizontal Axis Domestic Clothes Washers: An Alternative Technology That Can Reduce Residential Energy and

Water Use,” Proceedings of rhe ACEEE 1990 Summer Study on Energy Efficiency in Buildings (Washington, DC: American Council for an

Energy -Effi~ient Economy, 1990), p. 1.155.); however, manufacturers have expressed concerns about retooling costs and consumer preferences.

]~ 1 By one estimte, office elec@o~c ~~pment consumed about 25 TWh/year in 1988. J. Htis, J. Roturier, L. Nofiord. A. ~bl, Technology

Assessmen(:Electronic Oj6ce Equipment, LBL-25558 Rev. (Berkeley, CA: Lawrence Berkeley Laboratory, November 1988). This corresponds to about

3 percent of commercial sector electricity use, or about 12 percent of office building electricity consumption (for sources, see app. l-B). The US. Census

Bureau estimates that about 37 million keyboards (including electric typewriters, CRT terminals, and personal computers) were in use in oflices in 1988.

U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United Stares: J990 (Washington, DC: January 1990), p. 948. Assuming

150 watts per keyboard, 12 hours per day, 250 days per year, and a doubling for printers, copy machines, and other equipment yields about 33 TWb/year

or about 4.1 percent of commercial sector electricity use.

142 ~~M ~~i~ a ~d~sk uses about 115 wa~,~ BM AT ~th a ~ddisk uses about 165 watts. J. ~s,J. Roturier, L. Norford, A. Rabl,

Technology Assessment: Electronic Ofice Equipment, LBL-25558 Rev. (Berkeley, CA: Lawrence Berkeley Laboratory, November 1988), p. 3-2.

143 J. Hmis, J. Rotfier, L. Nofiord, A. fibl, Technology Asse~s~enf: E/ec~onic ofice Equipment, LBL-25558 Rev. (Berkeley, CA: Lawrence

Berkeley Laboratory, November 1988), p. 3-20, scenarios 1995(a) and 1995(b).

144 CMOS stmds for complement met~-ofide semiconductor; NMOS st~ds for n-ctie] metaI-oxide semiconductor.

145 J. H~s, J. Ro~er, L, Nol-ford, A. fibl, Technology Assessment: E/ec~onic Ofice Equipment, LBL-25558 Rev. (Berkeley, CA: hWXWKX

Berkeley Laboratory, November 1988), p. 3-20, 1995(c) scenario.
Chapter 2—Technologies for Improving Energy Efficiency in Buildings . 67

●

even though it would be cost-effective to do

so. 146 .

Improved efficiency does not mean reduced

comfort or lifestyle changes. More efficient

technologies produce the same product—heat,

cool, refrigeration, etc.—but with less energy.

Technologies for improving energy efficiency can

be conceptualized into three types: 1) those that are

cost-effective (but perhaps not used), 2) those

available or technically proven but not cost-effective

at present fuel prices, and 3) those not yet available

or not yet technically feasible. Policy implications

for improving or encouraging the use of these three

types of technologies differ:

1. The gap between what appears to be costeffective and what is actually used is due in

part to mixed incentives, capital constraints,

and other factors. Furthermore, calculations of

cost-effectiveness generally do not incorporate

environmental and other externalities, and

doing so would most likely increase the gap

between cost-effective and actual energy use.

The barriers to wider use of these technologies

may require explicit policy actions, as their

existence suggests that the current market

structure may not make optimal use of costeffective energy efficiency opportunities.

2,

3.

The gap between the most efficient technologies and the cost-effective technologies can be

narrowed by decreasing technology costs

(through subsidies, R&D, or market pull 147),

increasing energy costs (through taxes or other

fees), 148 or changing the definition of costeffective.

Research and development can further increase efficiency levels or generate new technologies. Existing technologies generally do

not approach the theoretical limits for energy

efficiency, and the technical frontier for energy

efficiency could be pushed well beyond current levels.149

The large gap between what is already available on the market and what is actually used

suggests that implementation, rather than just

technical advancement, is key to increasing energy efficiency. There are many commercially

available technologies and methods that can reduce

energy use while still providing needed energy

services. The key to increasing energy efficiency lies

in implementing these technologies, and that in turn

requires an understanding of how the market for

energy services functions, and how energy-related

decisions—selecting and operating energy-using

equipment—are made. This is the focus of chapter 3.

146 me s[udl~S dlSCuSscd ~ ~h, ~ “se a ~~cty of def~itions of cos[.effcctivc, Although ~c savings po[cn[ial does vary depending on the specific

definition used, by most definitions a considerable cost-effective savings potential exists.

147 ~ mmy CaScS, hlgh~y efficient tcc~o~ogie~ ~c expemivc (ad ~erefore not cos(.eff~tive) ~cause dcn~d for them is Smd]. hICreaShIg he

market cicmand (market pull) for high efficiency products could reduce costs of these products by taking advantage of economics of scale in production.

148 For exmple, some ~gue tit cos(_cffect1venc5s Cfitcria should Incorporate he env~onmental costs of energy production ad U.Se.

149 Onc might ~rge t~t gas furnaces at 97 percent ~fficlcncy provide Ill(le room for [cchnical improvement, however gas-fired hat puIIIpS could

provide space heating at efficiencies of over 100 pcrccnt.
Appendix 2-A

Definitions of Energy and Energy Efficiency

Energy

Btu: British thermal unit, the amount of heat

needed to raise the temperature of one pound of

water 1 degree F.1 Equivalent to 252 calories.

Quad: 1 quadrillion, or 1015, Btus.

kWh: Kilowatthour, the amount of energy contained in 1,000 watts consumed for one hour.

Usually used for electricity. For example, a 100-watt

light bulb burning 10 hours will use 1 kWh of

electricity.

Efficiency

Efficiency is a useful way to think about energy

technologies, but there are numerous ways to define

it. Here some of the common measures used to

measure the efficiency of energy-using devices

found in buildings are defined.

AFUE: Annual fuel utilization efficiency. The

fraction of the energy content in the

incoming fuel (typically natural gas)

consumed that is converted into useful

heat. No units, usually expressed as a

percent. A typical new natural gas

furnace has an AFUE of about 78

percent, and the most efficient commercially available furnaces achieve an

AFUE of 97 percent.

COP: Coefficient of performance. The number of Btus a device can supply to or

remove from the conditioned space per

Btu of energy consumed (where electricity is converted to Btus at 3.412

Btus per watthour). No units. Typical

values are 2.0 to 3.0, equivalent to an

efficiency of 200 to 300 percent.

EER: Energy efficiency ratio. Used to measure the cooling performance of heat

pumps and room air conditioners. The

number of Btus of heat removed from

the conditioned space per watthour of

electricity consumed. Units are Btus

per watthour. Typical values for room

air conditioners are 8.0 to 12.0 Btus per

watthour,

HSPF: Heating seasonal performance factor.

Used to measure the seasonal heating

efficiency of heat pumps. Incorporates

performance under varying outdoor temperatures, losses due to cycling, defrosting, and backup resistance heat.

The number of Btus of heat added to the

conditioned space per watthour of electricity consumed. Units are Btus per

watthour. Typical values are 7.0 to 9.0

Btus per watthour,

SEER: Seasonal energy efficiency ratio. Used

to measure the seasonal cooling efficiency of heat pumps. Similar to EER,

except it incorporates performance under

varying outdoor temperatures and losses

due to cycling. The number of Btus of

heat removed from the conditioned

space per watthour of electricity consumed. Units

typical values

watthour.

are Btus per watthour;

are 9.0 to 12.0 Btus per

] At 39.1 degrees F.

-68–
Appendix 2-B

Financial Indicators for Energy Efficiency Investments

There are many methods for evaluating the

cost-effectiveness of energy efficiency. Here several

such methods are illustrated, using an example of a

simple efficiency improvement: the addition of

insulation to a roof. It is assumed that the insulation

costs $1,000 (including labor and materials), and

saves about 35 million Btus (MBtus) of natural gas

per year, natural gas costs $5.61 /MBtu, the house

and insulation last 20 years, fuel prices do not

increase over time, and the appropriate discount rate

is 5 percent,

Payback is the simplest method for measuring

cost-effectiveness. It is simply the number of years

required for the savings to equal the upfront costs.

For the example here the payback is:

Initial cost $1,000

= 5.1 years

Annual savings = 35 MBtus/yr X $5.61 /MBtu

Therefore it will take 5.1 years for the savings to

equal the initial $1,000, and all savings after that will

be profit. Payback is simple to understand and

allows easy comparison to other measures, but

ignores the time value of money, the value of the

savings after the payback period, and the limited life

of some measures.

Life-cycle cost is a general term for incorporating

all costs associated with the measure over its entire

lifetime. One way to measure life-cycle cost is with

net present value (NPV), which translates all future

costs and savings into their equivalent in today’s

dollars. For the example here, the savings occur over

the next 20 years. If one ignores the time value of

money, the total savings are:

20 years X 35 MBtus/yr X $5.61 /MBtu = $3,900

The net savings, or savings minus costs, are:

$3,900 (total savings) -$1,000 (initial costs) = $2,900

A more realistic calculation would recognize

that a dollar received a year from now is less

valuable than a dollar received today (because a

dollar received today can be put in an interestearning account, and will grow to $1.05 in 1 year in

an account paying 5 percent interest). Future savings

can be discounted to reflect the time value of money.

The choice of a discount rate will strongly influence

the financial attractiveness of an investment and is

an area of significant controversy.1 For this example,

an illustrative discount rate of 5 percent is used.

Discounting the total savings of $3,900 at 5 percent

per year for 20 years yields a net present value

equivalent of $2,450:

$2,450 (total savings with discounting) –

$1,000 (initial costs) = $1,450

Therefore this investment is equivalent to $1,450

received today,

A somewhat different but quite useful measure of

cost-effectiveness is the cost of conserved energy

(CCE), which measures how much one pays for each

unit of energy saved. Its advantage is that it is

independent of fuel price. The CCE can be compared

to the cost of the supplied energy it displaces. The

CCE is defined as the initial cost times the capital

recovery factor (CRF, which converts an initial

investment into an equivalent series of annual

payments), divided by the annual energy savings (in

energy units).2 For the example here:

Initial costxCRF = $1,000X0.08024 =$2.30/MBtu

CCE=

Annual savings 35 MBtus/yr “

Therefore the insulation can be said to supply

energy at less than half the cost of natural gas

($5.61 /MBtu).

1 Sec for example the discussion of discount rates for setting appliance standards in 56 FederaZ Register 22261 (May 14, 1991).

2 The equation for capital recovery factor (CRF) is (i(l+i)n)/((l+i)n-l) where i is the discount rate and n is the number of years. For the example

here, the CRF corresponding to a 5 percent discount rate and a 20-year lifetime is 0.08024.

-69-
Appendix 2-C

Conversion of Electricity Into Energy Units

Analyses of energy use often require that different

forms of energy (natural gas, oil, electricity) be

combined into one common measure, typically Btus.

The conversion of electricity into Btus is problematic, as there is no one correct conversion method. If

one converts 1 kWh of electricity directly into heat,

the amount of energy released is 3,412 Btus. This

conversion ratio of 3,412 Btus per kWh is known as

the ‘site’ conversion ratio. Site conversion ignores

the energy used to produce that 1 kWh of electricity.

A typical coal-burning power-plant, for example,

requires about 10,240 Btus of energy in the form of

coal to produce 1 kWh of electricity.

An alternative to the site conversion ratio is the

“primary” conversion ratio of 10,240 Btus per

kWh, which includes the energy used to produce the

electricity. This ratio better captures the actual

energy savings resulting from increased electric

efficiency, however it too has its drawbacks. The

primary conversion ratio does not account for energy

losses occurring during transportation of fuels;

however these losses occur for all types of fuel

(including those being delivered to the powerplant),

suggesting that failure to account for transportation

losses may not result in a bias toward any one fuel

type. The primary conversion ratio also overstates

the energy needed to produce electricity from

hydropower; however in the United States less than

10 percent of electricity comes from hydropower,l

making this issue less of a concern for this report.

This report uses the primary conversion ratio for

electricity in most calculations. This allows for a

more accurate comparison of the true energy savings

resulting from increases in the efficiency of electricity use. Furthermore the price of electricity is

comparable to that of other fuels when the primary

conversion ratio is used (table 2-C-l), making

primary conversions useful for comparing dollar

savings as well.

Table 2-C-l-Comparison of Fuel Prices Using Two Electricity Conversion Ratios

Site conversion Primary conversion

Fuel Price Units price ($/MBtu) price ($/MBtu)

Natural gas. . . . . . . . . . 5.61 Dollars per MBtu $5.61 $5.61

Oil. . . . . . . . . . . . . . . . . . 1.06 Dollars per gallon 7.08 7.08

Electricity. . . . . . . . . . . . 7.8 Cents per kWh 22.86 7,62

NOTE: Prices are 1990 residential. Conversion ratios assumed are oil at 149,700 Btus per gallon, electricity site at

3,412 Btus per kWh, electricity primary at 10,240 Btus per kWh.

SOURCE: U.S. Department of Energy, Energy Information Administration, Annua/ Energy Review 1990, DOE/EIA0384(90) (Washington, DC: May 1991), pp. 159, 179, 225, 294.

1 U.S. Department of Energy, Energy Information Administration, Anrrud Energy Review 1990, DOE/EIA-0384(90) (Washington DC: May 1991 ),

p. 209.

–70-
Chapter 3

If Energy Efficiency

Is Such a Good Idea,

Why Haven’t We Done More of It?

Box 3-A-Chapter Summary

If energy efficiency is technically and economically feasible, why doesn’t it happen

on its own? Interviews with consumers, builders, and others are used to explore the reasons

behind this apparent paradox.

The methods used by consumers to make energy-related decisions often work against

energy efficiency. Goals of minimizing first cost, time to make a decision, and risk are often

pursued; minimizing life-cycle costs is rarely mentioned. When future savings do enter a

decision, they are heavily discounted. There are few incentives for efficiency; for example,

repair contracts are often awarded based largely on first cost, which leads to the use of low

first-cost, inefficient equipment. Energy costs are about 1 percent of labor costs in a typicaI

office building, so management attention and capital are directed elsewhere. Many

attributes, such as first cost, familiarity, and convenience, often overshadow energy

efficiency. Efficiency is a relatively intangible feature with benefits that are seen as

uncertain, and therefore loses out to more tangible, visible attributes. Builders and

manufacturers often believe that consumers are relatively unwilling to invest in efficiency,

and therefore often offer and emphasize other features.

The net result of these market characteristics is that energy efficiency investments are

often neglected.
Contents

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RESIDENTIAL BUILDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Design and Construction of New Residential Buildings . . . . . . . . . . . . . . . . . . . . . . .

Residential Equipment Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Retrofit and Repair. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Owners and Occupants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COMMERCIAL BUILDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Owners and Developers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial Building Architects, Designers, and Builders . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial Building Equipment Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Building Managers and Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tenants and Occupants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73

73

73

77

78

78

81

81

82

83

83

84

85

Boxes

Box Page

3-A. Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

3-B. Interview Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Chapter 3

If Energy Efficiency Is Such a Good Idea,

Why Haven’t We Done More of It?

INTRODUCTION

Many energy efficient technologies offer financial rates of return exceeding those available from

other financial investments. Therefore one would

expect consumers to take advantage of these efficiency investments. However there are numerous

untapped opportunities for cost-effective efficiency

improvements, as discussed in chapter 2, suggesting

that the issue is more complex than a simple

financial analysis would indicate. If energy effiBox 3-B—Interview Methodology

The results presented in this chapter are based in

part on a series of interviews conducted by OTA in

the spring of 1991. These interviews were conducted with building owners, architects, homeowners, engineers, equipment manufacturers, and

others whose decisions influence building energy

use. The interviews made use of ethnographic

interviewing techniques, in which the respondent is

allowed to guide much of the discussion. This

technique has been used by several researchers to

explore perceptions of energy use and energy

efficiency. l Our intent was to explore the respondent’s beliefs and concerns related to energy use; to

do so in an unbiased manner we encouraged

respondents to raise issues they felt important. For

example, rather than asking “do your tenants care

about energy costs,” we asked “what factors do

your tenants seem most concerned with?” Although the number of interviews was relatively

small, we believe they captured many of the key

issues affecting energy-related decisions.

lsee, ~.g., W. K~pton and L. Montgome~, ‘Fo~ @mtilcation of Energy,’ Energy, vol. 7, No. 10, 1982; R. Wilk and H.

Wilhite, “Why Don’t People Weather-h Their Homes? An

Ethnographic Solution,” Energy, vol. 10, No. 5, 1985; P. Komor

and R. Katzev, “Behavioral Detenninanw of Energy Use in

Small Commercial Buildings: Implications for Energy Efficiency,” Energy Systems and Policy, vol. 12, 1988.

ciency is such a good idea, why haven’t we done

more of it?l

This chapter explores why energy efficiency has

not been implemented to the level that appears

economically justified. Energy use in buildings is

determined by decisions about equipment selection

and operation, and these decisions are made to

satisfy a number of needs and constraints. Implementing greater energy efficiency in buildings will

require policies that influence these decisions; these

policies will be most effective if they are based on a

clear understanding of how and why decisions about

equipment selection and operation are made. This

chapter provides such an understanding through the

use of interviews (box 3-B) and other evidence. The

focus is on how these decisions are made, as distinct

from how they should be made.

RESIDENTIAL BUILDINGS

Decisions affecting the energy use of residential

buildings occur throughout the lifetime of the

buildings. Perhaps the most important decisions are

made in the initial design and construction, but

appliance replacement, shell retrofits, and equipment operation can affect residential energy use as

well. This section describes how decisions affecting

energy use are made, including those related to

design and construction, those made by equipment

manufacturers, those related to retrofit and repair,

and those of owners and occupants.

The Design and Construction

of New Residential Buildings

The energy efficiency of new residences plays a

critical role in determining overall residential sector

efficiency. It is generally much less expensive to

build an energy efficient residence than to retrofit an

inefficient one; and some energy saving technologies, such as passive solar design, cannot easily be

retrofitted to an existing residence. By 2010 a

significant fraction of the total housing stock will

1 From D. Morell, “Energy Conservation and Public Policy: If It’s Such a Good Idea, Why Don’t We Do More of It?” Journal of Social Issues,

vOI. 37, No. 2, 1981, p. 8.

–73–

297-936 0 - 92 - 6 : QL 3
74 ● Building Energy Efficiency

Table 3-l-Construction of New Residential

Housing, 1990

Table 3-2—The Residential Construction

Industry, 1989

Number of units

started

Type (thousands) Percent

Single unit . . . . . . . . . . . . . . . 895 64

2 to 4 units . . . . . . . . . . . . . . . 37 3

5+ units . . . . . . . . . . . . . . . . . 261 18

Mobile homes . . . . . . . . . . . . 205 15

Total . . . . . . . . . . . . . . . . . . . . 1,398 100

NOTE: Privately owned units only. Mobile home data are ‘placed for use’ in

1989.

SOURCE: U.S. Department of Commerce, Bureau of the Census, Statistica/Abstractofthe UrritedStates: 1997 (Washington, DC: 1991 ),

pp. 720, 722.

have been built in the period 1990 to 2010,2

highlighting the importance of new construction in

overall efficiency.

In 1990 the residential construction industry built

1.4 million new residences (table 3-l), at a value of

$187 billion.3 Almost two-thirds of these were

single unit residences, the remainder were in multiunit buildings and manufactured (mobile) homes.

This industry is usually perceived as a very decentralized business consisting of thousands of very

small firms, each building only a few houses each

year. This is only partially true: there are about

100,000 residential building firms in the United

States, with an average size of about five employees

each. 4 These small firms, however, build only 13

percent of new housing units. Larger firms (defined

as firms building over 100 units per year) build over

two-thirds of new housing units (table 3-2). Larger

building firms tend to make greater use of preassembled components and structures (table 3-3), which

can reduce construction costs by allowing for

standardization of design and economies of scale in

assembly.

Large Builders and Developers

Decisions affecting the relative energy efficiency

of homes built by large builder/developer companies

are driven by several factors. One of the most

important factors is the company’s perception of

what will satisfy the consumer—both to sell the

Percent of Percent of

Type of firm firms new units built

Small (1 to 24 units per year) . . . . . . 74 13

Medium (25 to 99 units per year) . . . 16 20

Large (100+ units per year) . . . . . . . . 9 67

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100

NOTE: Includes high-rise and multifamily residences. Totals may not add

to 100 due to rounding.

SOURCE: National Association of Home Builders (NAHB), Housing Economics, June 1990, p. 6.

home initially, and to keep the consumer satisfied

after moving in. Those in the builder/developer

business often believe that consumers are relatively

unwilling to invest in energy efficiency. For example, if a builder invests $1,000 in insulation, then

most of this investment will be invisible to the

prospective purchaser-but the additional cost of

the insulation will be extremely visible, in the form

of a higher priced house. From the builder’s perspective, it may make more sense not to invest the $1,000

and thereby reduce the house price, or alternately to

invest the $1,000 in a feature that is more visible to

the prospective buyer (e.g., landscaping or more

expensive doors).

Photo credit: Paul Komor

Single-family houses account for over two-thirds

of new home sales.

2 For comparison, in 198940 percent of the total existing housing stock had been built in the preceding 19 years (i.e., in the period 1970 to 1989).

U.S. Department of Commerce, Bureau of the Census, American Housing Survey for the United States in 1989, H150/89 (Washington DC: U.S.

Government Printing Office, July 1991), p. 1.

3 U.S. Department of Commerce, Bureau of the Census, Srarisrical Abstract ofrhe United States.’ 1991 (Washington, DC: 1991), p. 716.

4 Ibid., p. 715.

s This discussion excludes larger high-rise multistory buildings, because the institutions and decisions affecting energy use in these buildings are

similar to those in commercial buildings, which are discussed below.
Chapter 3-if Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? . 75

Table 3-3-New Residential Building Construction in the

United States: Definitions and Market Shares

Type Definition

High-rise . . . . . . . . . . . . . . . . . . . . Two or more stories, has an elevator.

Manufactured (mobile) home . . . . Also called a ‘HUD-code’ home, assembled entirely at the factory

and installed on a semi-permanent foundation.

Modular . . . . . . . . . . . . . . . . . . . . . Approximately 95 percent of assembly occurs at the factory,

usually shipped as several pieces and installed on a permanent foundation.

Panelized . . . . . . . . . . . . . . . . . . . Major components, including walls, floors, and ceilings are

preassembled at factory; final assembly and finish work done

on-site.

Production . . . . . . . . . . . . . . . . . . Usually uses preassembled roof and floor trusses; remainder of

unit built on-site.

Stick-built . . . . . . . . . . . . . . . . . . . . Built entirely on-site; no major preassembled components used.

Market share (percent) Unit sales (thousands)

Type 1980 1989 1989

Manufactured (mobile) home . . . . . . . . . . . . 19 15 202

Modular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 79

Panelized . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 36 487

Production a . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 43 573

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 1 ,341

a

lncludes Stick-built, which is estimated at less than 5 percent of total (Automated Builder, January 1991, P. 15).

Percents may not add to 100 due to rounding.

NOTE: Market share and unit sales data apply only to one to four family housing starts.

SOURCE: R. Berg, G. Brown, and R. Kellett, “An Analysis of U.S. Industrialized Housing,” Center for Housing

Innovation, University of Oregon, October 1990, p. 24. Sales and market share are uncertain, and varying

estimates can be found (see NAHB, Housing Economics, October 1989 for a discussion).

Builders often market homes as a ‘‘base’ home,

and then offer a series of upgrades. An upgrade

might consist of more expensive bathroom fixtures,

wood floors, or a finished basement. Energy efficiency upgrades, however, are rarely offered, as

some builders fear that offering such an upgrade will

give consumers the impression that their base house

is not energy efficient. The energy efficiency of a

building can vary widely, but some argue that

consumers see energy efficiency as an all or nothing

attribute, and that offering an energy efficiency

upgrade will lead consumers to think that, without it,

the house is not energy efficient.6

When selecting space conditioning appliances for

new houses, builders often select those brands and

models that they have found reliable and easy to

work with in the past. There is always competitive

pressure to keep first costs low, and investments in

energy efficient units, although perhaps costeffective on a life-cycle basis, may increase the first

cost of the house and thereby put the residence at a

competitive disadvantage relative to other, lowerpriced residences.

Interviews and discussions with larger homebuilding firms revealed a considerable knowledge

and understanding of energy efficient technologies

and construction methods. The decisions of these

firms to adopt or not adopt innovative energy

efficient technologies were not based on ignorance

or lack of information but on their perceptions of the

economic interests of their company. The director of

architecture at one large home building firm, for

example, had previously taught passive solar design

at an architecture school. However he did not

consider solar orientation when designing a new

subdivision, because to do so would apparently

reduce by 15 percent the number of homes he could

fit into the subdivision, which would in turn reduce

the firm’s revenues.

b A director of marketing for a large home building firm interviewed by OTA indicated that many home-buyers think of energy efficiency as ayes/no

feature, similar to a garage or central air conditioning, i.e., the home either has it or doesn’t have it.
76 . Building Energy Efficiency

Small Builders

Most residential construction firms are quite

small; about three-fourths of all residential construction firms build less than 25 units per year (table

3-2). Smaller firms typically build more expensive

custom homes, while the larger firms typically build

less expensive, tract-style homes.

Residential construction is largely a trade learned

from experience, rather than through schooling or

other formal training, so adoption of new technologies and construction techniques can be quite slow

due to a preference for using past practice. The risk

associated with innovation is also a barrier, as small

firms often cannot carry the financial burden of a

house that may not sell due to an innovative

characteristic that may prove unpopular.

Moreover, even builders well-versed in energy

technologies may not use them. Reported one

interviewee, ‘ ‘I’d like to build more energy-efficient

homes, I know how to do it, but I can’t afford to. ”

From his perspective, potential home-buyers are often unwilling to pay more for a feature that

is largely invisible and whose benefits may be seen

as uncertain. Building an efficient home costs more

upfront, which puts him at a competitive disadvantage relative to builders offering a home that looks

the same but costs less.7

Slightly more than one-third of new single-family

homes are built for a specific owner, rather than on

speculation. 8 The design of these homes is influenced by both the builder and the owner. According

to owners and builders interviewed by OTA, owners’ interest and concern regarding energy varies.

Some owners are interested in payback of energyrelated investments such as increased insulation, for

example; but many decisions are motivated by other

factors. For example, natural gas heat is seen by

some as more comfortable than electric heat pumps

due to the higher register outlet temperature, and in

the opinion of one builder those consumers committed to gas are not interested in paybacks of other

technologies, Capital constraints are also an issue;

even if an investment offers an attractive payback

Photo credit: Paul Komor

Manufactured (mobile) homes account for about 15

percent of new home sales.

the owner may not have sufficient capital for the

investment (or the source of the capital, typically a

bank, may be unwilling to supply it).9

Manufactured Homes

The manufactured home (also called mobile home

or HUD-code home, for Department of Housing and

Urban Development) industry sold about 202,000

units in 1989 (table 3-3). These units are entirely

assembled at the factory and then shipped to retail

dealers, who then sell them to consumers. Manufactured homes are typically the least expensive type of

new housing. The construction of these units is

regulated by the HUD Manufactured Home Construction and Safety Standards (MHCSS), which

include energy-related requirements.

Industry decisions as to the energy efficiency

level of their new units are bounded at the minimum

level set by the HUD code but can exceed the HUD

code if there is a demand for greater efficiency. For

example, one large manufacturer reported that its

basic unit for one climate area has R-14 insulation in

the ceiling, but that a utility-sponsored incentive

program has resulted in dealer requests for units with

R-28 in the ceiling instead.

7 It should be recognized that other attributes often accompany efficiency. For example, a well-insulated house may be more comfortable due to

smaller temperature fluctuations, as well as more efficient. These attributes, however, suffer from the same problems as efficiency; they are invisible,

occur in the future, and are somewhat intangible.

8 In 1990, about 36 percent of single-family homes were built for a specific owner, 61 percent on speculation and the remaining 3 percent for rental.

U.S. Department of Commerce, Bureau of the Census, Churacferistics cfNew Housing: 1990, C25-9013 (Washingto% DC: June 1991), p. 3.

~ One Pollcy ~e~ponse t. this problem, the Use of mortgages as a source of funds for energy efficiency improvements, is discuss~ in ch 5.
Chapter 3-if Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? ● 77

Table 3-4—Shipments of Selected New

Appliances, 1989

Appliance Units shipped, 1989 (thousands)

Microwave . . . . . . . . . . . . . . . . . . . . . . . . . .

Washer . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Refrigerator . . . . . . . . . . . . . . . . . . . . . . . . .

Room air conditioner . . . . . . . . . . . . . . . . . .

Dryer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dishwasher . . . . . . . . . . . . . . . . . . . . . . . . .

Electric range . . . . . . . . . . . . . . . . . . . . . . .

Gas range . . . . . . . . . . . . . . . . . . . . . . . . . .

Freezer. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,600

6,250

7,100

5,090

4,570

3,670

3,050

2,170

1,220

5,010

48,730

SOURCE: Association of Home Appliance Manufacturers (AHAM), Major

l-lorne App/iancelndustry Fact f300k1990/97 (Chicago, IL),p,

11,

The manufactured home industry markets its units

somewhat like the automobile industry. with a basic

unit offered at lowest first cost and a number of

additional cost packages, which may include energy

efficiency features, offered at additional cost. According to a manufacturer, consumers buying the

more expensive units are often willing to invest in

energy efficient packages, but those looking for less

expensive units often cannot afford to upgrade and

want the unit with the lowest first cost.

Residential Equipment Manufacturers

Residential equipment manufacturers can be divided into two general types: 1 ) home appliance

manufacturers, who make refrigerators, freezers,

clothes washers and dryers, room air conditioners,

and other appliances; and 2) heating and cooling

equipment manufacturers, who make furnaces, heat

pumps, boilers, and central air conditioning systems.

Since the manufacturers and market distribution

systems differ for these two types, they are discussed

separately below. Space heating and cooling equipment is discussed under the Commercial Buildings

section.

In 1989 the home appliance industry shipped

about 49 million new appliances (table 3-4), worth

about $12.4 billion.l0 ” Relatively few of these

appliances are exported or imported. The industry

exported only 6 percent of its production in 1989,

and only 16 percent of the appliances bought in the

United States in 1989 were imported, two-thirds of

which were microwave ovens. 11

As discussed in the preceding chapter, the energy

efficiency of home appliances increased dramatically from about 1970 to the present (see, for

example, chapter 2, figure 2-7). The technologies

used to achieve these gains were discussed previously as well. It is useful to consider the factors that

motivated the manufacturers to make these changes.

Several are relevant:

Technology changes made for reasons other

than energy efficiency, such as lower cost,

improved reliability, or a simpler manufacturing process, sometimes had the incidental

benefit of reduced energy use. For example, the

switch from fiberglass to polyurethane foam

insulation in refrigerators was done mainly for

manufacturing process reasons, but also had the

benefit of improved energy efficiency.

In 1976 California adopted energy efficiency

standards for refrigerators and air conditioners,

and as California was a significant fraction of

the total United States market, these standards

influenced national average efficiency levels

for these products. Other States followed California’s lead, contributing further to the increase.

Although consumer awareness of energy issues

in the 1970s may have motivated manufacturers, OTA interviews with appliance manufacturers suggest that energy efficiency is not seen

as a primary consumer product cue; in other

words efficiency is not thought to be a primary

determinant of consumer purchase decisions.

Therefore consumer preference may not have

contributed significantly to the historical increase in home appliance energy efficiency.

At present, the requirements of the National

Appliance Energy Conservation Act (NAECA, Public Law 100-12, discussed in ch. 4) are driving

appliance manufacturers’ decisions as to the energy

efficiency of their products.

10 p~~UCt~ i~CIUded he~~ ~~ ~tch~~ ~~~~s ~d ~OOktOPS, ~lCrOW~vC Ovens, clothes w,~hc~ ad d~~ers, dishw~shcrs, refrigerators, freezers, room

air conditioners, dehumidifiers, disposers, and trash compactors. Association of Home Appliance Manufacturers (AHAM), Major Home App[iance

Indusfry Fact Book 1990191 (Chicago, IL), pp. 8, 11.

11 rbl~, Pp, 11, 15, 17 ~s Cxcludes home en[e~a~cn[ equipment, such as telcvisi~~S and radios, mports of major home appliances increased

from 1970 to 1987 but have dropped smcc 1987.
78 . Building Energy Efficiency

Retrofit and Repair

Approximately $57 billion was spent in 1989 to

improve, repair, or retrofit existing residences.12 It is

not clear how much of this was spent on energyrelated changes, but by one estimate about one-third

of all single-family households perform an energyrelated retrofit or repair each year.13 Energy-related

retrofits and repairs to many residences are performed by general contractors or specialized tradespeople such as heating and cooling specialists,

plumbers, and remodelers. This field is dominated

by small businesses, typically with less than 10

employees.14 These firms are either hired directly by

a building owner/manager or as subcontractors.

The contractor typically selects the specific type

and model of energy-using equipment to install.

Many contractor jobs are awarded based on cost

estimates, and therefore there is always pressure to

reduce first cost. In the view of many contractors,

most homeowners do not want to pay extra for

energy efficiency. 15 Contractors also reported other

reasons for avoiding the use of new, energy-efficient

technologies, including:

●

●

●

●

●

●

New technologies often require new installation procedures, increasing both the time required for installation and the risk of incorrect

installation;

Their dependability/reliability is unproven;

There is perceived risk of consumer dissatisfaction due to poor performance and/or mechanical breakdowns;

Current building standards may make innovation difficult (i.e., changes in equipment may

require other design changes, further increasing

project cost and complexity);

The insurance industry often requires that the

same materials be used when rebuilding a

damaged structure; and

There is suspicion and distrust of the energy

savings claims of new technologies.l6

Contractors and other home-repair professionals select and install energy-using equipment

in existing residences, and these decisions strongly

influence the subsequent energy use of these

residences. These decisionmakers weigh heavily

attributes of first cost, reliability, and familiarity y,

and have few incentives to consider energy

efficiency.

Owners and Occupants

Building occupants can directly improve the

energy use of buildings in several ways: by operating equipment efficiently, by replacing failed equipment with more efficient equipment, and by retrofitting existing buildings with energy efficient technologies and features. In addition, occupants can

indirectly influence energy use of new residences by

expressing a desire, through purchase behavior, for

more efficient technologies and features.

Equipment Operation

Opportunities for building occupants to reduce

energy use by improving equipment operation

include reducing thermostat settings, turning off

lights, taking shorter showers, and other behavioral

changes. Although these actions can save significant

amounts of energy, they can also reduce comfort

and/or convenience. The perception that energy

efficiency requires sacrifice is very persistent and

acts as a significant barrier to wider use of energy

efficient technologies. Survey and interview research has found that a majority of people, when

asked what they could do to reduce energy use,

typically mentioned turning off lights, reducing

thermostat settings, and other behavioral changes

involving reduced comfort; improved technology

(e.g., a more efficient energy-using device) was

rarely mentioned.l7

Some behavioral changes can save significant

amounts of energy with little or no discomfort, such

as night setback of thermostats. According to

12 us. Dep~ent Of commerce, E3WWU of the census, Statistical Abstract ofrhe United States: 199] (w~tigto% DC: 1991), p. 717.

13 U.S. Dep~rnent of Energy, Energy Information Administration, Housing Characteristics 1987, DOE/EIA-0314(87) (wmfigto% DC: May

1989), p. 118.

14 Employms pere~tabhs~ent forrelevmt indus~es. U.S. Dep~entof Comerce, Bw~u of the Cemus, Sratistica/Ab~ract o~fhe UnitedSrates;

1991 (Washington DC: 1991), p. 715.

15 p~cipmt~ ~ a ~or~hop of re~ofit con~actors estimated tit “90 percent of hom~wne~ do not wmt to pay extra for energy efficiency. ” P.

Mihhnester, J. Gonos, L. Freeman, M. Browu Technology Adoption Sfra(egyfor the Existing Buildings Eficiency Research Program, Oak Ridge

National Laboratory, ORNL/CON-286 (Springfield, VA: National T~hnical Information Service, June 1989), p. 34.

lb Bm~ on a worhhop of contractors. Adapted from ibid., pp. 39-41.

17 w. Kempton et ~., “Do Consumers Know ‘What Works’ in Energy Conservation?” Marriage and Family Review, vol. 9, No. 1/2, fall 1985.
Chapter 3--If Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? ● 79

surveys based on self-reports of behavior, 48 percent of U.S. households turn down their heat at

night. 18 The energy savings from reducing thermostat settings at night typically range from 6 to 16

percent. 19 Similarily, the use of cold rather than warm

rinse in clothes washing machines reduces heated

water consumption about 23 percent per wash cycle

and is generally agreed to have no adverse effects on

washer performance, yet consumers still use warm

rinse about 25 percent of the time.20

Equipment Selection and Purchase

Consumers can affect energy use through the

energy efficiency of new appliances they purchase.

Understanding how consumers make appliance selection decisions, and how these decisions are

influenced by labels, rebates, and other factors, is

needed to design effective programs and policies for

encouraging energy efficiency.

Consumer equipment selection decisions can be

divided into two types: 1) smaller home appliances

(refrigerators, room air conditioners, washing machines, and lights), for which consumers typically

make product selection decisions themselves, and 2)

larger equipment (furnaces, heat pumps, central air

conditioning systems, and water heaters), for which

product selection decisions are typically shared with

or made by a contractor or other outside agent.

When purchasing a home appliance, consumers

try to satisfy many goals. These goals may include

spending the least amount of money, spending the

least amount of time to make the purchase decision,

or buying whatever will fit in the available space.

Reducing energy consumption may or may not be a

goal, but there is some evidence that energy efficiency must be extremely financially attractive for

consumers to invest in it. This can be measured with

an ‘‘implied discount rate, ’ calculated by comparing the first cost increment to the annual energy

savings (table 3-5). The very high implied discount

Table 3-5-implied Consumer Discount Rate

Estimates for Energy Efficiency Investments

Appliance/action Discount rate estimate (percent)

Refrigerator . . . . . . . . . . . . . . . . . . . . . . 45 to 300

Room air conditioner. . . . . . . . . . . . . . 5 to 89

Water heater blanket . . . . . . . . . . . . . . 67

Clock thermostat . . . . . . . . . . . . . . . . . 310

Replacement furnace . . . . . . . . . . . . . 70

SOURCES: Refrigerator: D. Gately, “Individual Discount Rates and the

Purchase and Utilization of Energy-Using Durables: Comment,” The Bell Journal of Economics, vol. 11, 1980, p. 374.

Room air conditioners: J. Hausman, “Individual Discount

Rates and the Purchase and Utilization of Energy-Using

Durables,” The Be//Journa/of Ewnomics, vol. 10,1979, p. 53.

Water heater blanket: P. Komor and L. Wiggins, “Predicting

Conservation Choice: Beyond the Cost-Min imization Assump

tion,” Energy, vol. 13, No. 8, 1988, p. 641. Clock thermostat

and replacement furnace: Cambridge Systematic, Inc.,

Implicit Discount Rates in Residential Customer Choices, vol.

1, EPRI EM-5587 (Palo Alto, CA: Electric Power Research

Institute, February 1988), p. 4-11.

rates shown in table 3-5 suggest that consumers will

invest in energy efficiency only if the annual energy

savings exceed the additional frost cost within just a

few years.

There are many potential reasons why consumers

do not invest in energy efficiency. Consumers often

pursue other attributes, such as comfort, convenience, or simplicity, which may take precedence

over energy efficiency. They may be unaware of the

energy features of an appliance, or unfamiliar with

the concept of trading off initial cost and operating

cost. They may intend to own the appliance for only

a short period of time, making an energy efficiency

investment financially unattractive. There may be

other undesirable attributes associated with energy

efficiency; for example, an energy efficient model of

an appliance may be available only with other

expensive features that the consumer does not want

to purchase. 21 Whatever the reason, the outcome is

clear. Consumers often do not invest in energy

efficiency unless it offers a fairly short payback—

typically less than 2 years for home appliances.

IS [J.S. Dcp~ment of Energy, Energy Information Administration, Housing Churacteris(irs 1987, DOE/EIA-0314(87) (Was~gtoU DC: May

1989), p. 122. There is evidence, however, that self reports of thermostat settings are often lower than actual settings, suggesting that somewhat less than

48 percent of households actually turn down their heat at night. See W. Kempton and S. Krabacher, ‘‘Thermostat Management: Intensive Interviewing

Used To Interpret Instrumentation Data,‘‘ in W. Kempton and M. Nieman (eds.), Energy E“cierrcy. Perspecfi”ves on ~ndividual Behavior (Washington,

DC: American Council for am Energy-Efficient Economy, 1986), p. 261.

IS Unlls Me h~ting fuel savings per household. T. Wilson, ‘‘Good News on the Setback Front, ’ Home Errcrgy, vol. 8, No. 1, Jan./Feb. 1991, p. 12,

table 1.

‘“ U.S. Department of Energy, Technical Support Documenf: Energy Conservation Stanaivds for Consumer Products: Dishwashers, Clothes

Washers, and Clorhes Dryers, DOEKE-0299P (Washington, DC: December 1990), pp. 3-11, 3-12.

2] For example, as described inch. 2, some very efficient water heaters come with a special finish and a lifetime warranty, and a consumer may not

want to pay for these other features.
80 ● Building Energy Efficiency

Investments in larger equipment (furnaces, water

heaters, heat pumps, and central air conditioners) are

made somewhat differently. Most of these investment decisions are not made solely by the consumer,

but by a contractor or other individual hired to fix or

replace the equipment. As this equipment supplies

essential services (heat, hot water), there is usually

a high cost to delaying the purchase; contractors will

often install the unit that is easiest to obtain, rather

than the most efficient. Consumers may be unaware

that they can choose a more efficient unit, or they

may want the contractor to put in the cheapest unit

that will deliver the needed service. For example, in

an OTA interview a homeowner replacing a central

air conditioner unit in summer reported that, ‘‘I had

three contractors come and give estimates, and then

I chose the contractor who gave the lowest estimate. Here again, it is quite easy to see why energy

efficient equipment that may be less expensive on

a life-cycle cost basis is often not used: consumers

usually do not consider life-cycle costs when

selecting equipment.

Rental housing is an especially challenging sector

for energy efficiency. About 35 percent of U.S.

households are rented. In slightly over half of these

rented households the tenants pay the energy bill

directly, while the remainder pay energy bills

through the rent.22 In Situations where the tenant

pays the bills the owners have little incentive to put

in energy efficient equipment, because they receive

no direct financial benefit from doing so. Conversely, tenants paying for energy through the rent

often do not pay for their actual consumption, and

therefore have no direct financial incentive for

operating equipment efficiently.

Retrofits

The third means for consumers to influence

energy use is by retrofitting their homes with energy

efficient features. These improvements can range

from very simple, low-cost measures (e.g., caulking)

to more involved retrofits such as adding wall

insulation.

As with other aspects of residential energy use,

there is some evidence that retrofits are not made

primarily to save money. Survey data have shown

that other factors, such as hassle avoidance, frost

cost, and perceived effects on comfort, are more

important than perceived savings.23 It has also been

argued that the simplified methods of analysis used

by consumers in making energy conservation decisions result in lower energy efficiency than would

result from the use of economically “rational’

methods.

24 For example, using payback as an

efficiency investment criterion ignores savings accruing after the payback period regardless of their

value. Similarly, high discount rates discourage

investment in any option for which the returns

accrue in the future, such as energy efficiency. These

simplified methods are also used by those with

technical energy training,25 suggesting that information alone is not sufficient to correct these biases.

Extensive market research on how consumers

make energy-related decisions has suggested that

residential consumers can be divided into distinct

groups, based on their values and concerns (table

3-6). For example, ‘‘hassle avoiders’ try to limit the

time required to make energy-related decisions and

are less concerned about cost and other attributes.

Utilities use these market segmentation techniques

to improve the marketing of their conservation

programs. For example, in communities with a large

number of ‘pleasure seekers’ a utility might stress

the improved comfort and convenience resulting

from a clock thermostat, rather than the energy

savings. According to the scheme shown in table

3-6, only 13 percent of the U.S. population is

concerned primarily with value when making energyrelated decisions. Therefore it is quite clear why

cost-effective measures are often not pursued: because much of the population makes decisions based

on attributes other than operating cost.

22 U.S. @~ent of Energy, Encrg ~omation Admifis@ation, ~~~~~~g c&~uC~eriSriCS 1987, DOE/EIA-0314(87) (Wmhhgto~ DC: May

1989), p. 18.

23p. KOrnOr and L. Wiggti, “Predicting Conservation Choice: Beyond tbe Cost-Minimization AssumptiorL” Energy, vol. 13, No. 8, 1988, pp.

633-645.

24 Commer ~e~ods ‘ ‘tie Systematically biased ~ ways hat came less energy conservation than would be expected by eCOnOmicdly mtiOMl

response to price. ” From W. Kempton and L. Montgomery, “Folk Quantification of Energy,” Energy, vol. 7, No. 10, 1982, p. 826. Specifically,

consumers focus on end-uses that are perceptually salient (e.g., electric mixers) but that are not necessarily large energy users, use peak dollars rather

than actual energy consumption to measure savings, and do not account for price and weather effects.

25 Ibid., p. 817.
—..

Chapter 3-if Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? ● 81

Table 3-6—Market Segmentation of Residential Energy Users

Percent of

Type Description market

Pleasure seekers . . . . . . . . . . . . . Interested in comfort, convenience, and

personal control. 21.5

Appearance conscious . . . . . . . . . Most concerned with appearance. 18.4

Lifestyle simplifiers . . . . . . . . . . . . Less concerned with comfort; pursue

simplicity, often rent or low income. 16.9

Resource conserves . . . . . . . . . . Concerned with environment, will pursue

conservation for its own sake. 16.7

Hassle avoiders . . . . . . . . . . . . . . Minimize hassle (time and effort) in

making energy-related purchases,

less concerned with cost. 13.4

Value seekers . . . . . . . . . . . . . . . . Most concerned with value, will invest time

and effort in making decisions. 13.1

SOURCE: National Analysts, Synergic Resources Corp., CIEl, Inc., Residential/ Customer Preference and Behavior:

Market Segmentation Usinq CIA SSIFY, EPRI EM-5908 (Palo Alto, CA: Electric Power Research Institute,

March 19{9), p. 10, -

COMMERCIAL BUILDINGS

The energy use of a commercial building is

largely determined by the design of the building and

the efficiency of the equipment within it, However,

occupant decisions in areas such as lighting and

thermostat operation also influence energy use. This

section describes energy-related decisions as they

occur in the lifetime of a typical commercial

building-starting with owners/developers, followed

by architects/designers and builders, equipment

manufacturers, managers/operators, and concluding

with tenants/occupants.

Owners and Developers

Commercial building owners include both speculative owners, who lease or sell buildings after

construction, and owner-occupants who occupy

buildings after construction.26 Speculative owners’

decisions as to energy efficiency are determined in

part by first cost and perceived “leasability.”

Energy efficient designs may require more capable

(and therefore more expensive) building designers,

more time to construct if builders are unfamiliar with

a technology, and more time to work with building

inspectors to demonstrate that a design meets health

and safety requirements. From the speculative owners’ perspective, these are costs that must be

compared to the potential benefits. The leasability,

or market appeal, of a building is determined by

location, appearance, access to transport, lease costs,

and other factors. A typical rent (including energy)

for a large office or retail building is about $19.70

per square foot per year, while energy costs are only

about $1.70 (table 3-7). Therefore a 25 percent drop

in energy costs would yield only a 2 percent drop in

rent costs—probably not enough to influence significantly a prospective tenant’s decision.27 From the

perspective of a speculative owner, the costs of

energy efficiency in terms of time and effort are very

visible, but there may be little or no financial

return .28

Many commercial buildings are master-metered,

meaning that one meter measures energy consumption for the entire building. This prevents determination of actual energy consumption for an individual

tenant occupying part of the building. Many have

argued that submetering would reduce consumption

by allowing for the billing of actual consumption,

thereby providing a financial reward for efficient

behavior. This may be difficult in large commercial

buildings, however, because much of the energy use

is associated with the central heating, ventilating,

and air-conditioning (HVAC) unit; furthermore,

submetering might also lead to a rate increase as

utility rates are often discounted for large users.

26 In 1989 ~~ut 26 ~erccn[ of nongovcmmcnt_o~Cd ~omrncrcla] space was le~~ or rcn(ed, us. Dep~ent of Energy, Energy hlformaticm

Administration, Commerciu/ Building Churac[eristics 1989, DOE/EIA-0246(89) (Washington, DC: June 1991), P *3.

27 Some property managers note, however, that in a competitive market a small advantage in operating costs can be enough to influence aprospectivc

tenant. See ‘ ‘Citicorp Managers Call Efficiency Key to Tenant Draw, ” Energy User News, June 1991, p. 18.

‘~ “The goal of the developer is to build a quality building in the least amount of time at the lowest first cost, ” reported onc mtervieww.
82 . Building Energy Efficiency

Table 3-7—Breakdown of Rental Costs for an Average

Large Office/Retail Building in the

United States, 1989

Dollars per square

Type of expense foot per year

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.70

Repair/maintenance . . . . . . . . . . . . . . . . . 1.30

Cleaning . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10

Administration/other . . . . . . . . . . . . . . . . . 0.90

Roads/grounds/security . . . . . . . . . . . . . . 0.50

Fixed expenses, loan amortization,

profit, etc.a. . . . . . . . . . . . . . . . . . . . . . 14.20

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.70

aCalculated as the difference between average rent and variable operating

costs shown.

NOTE: Excludes nonbuilding expenses, such as salaries and office

equipment.

SOURCE: Adapted from Building Owners and Managers Association

International (BOMA), “1990 BOMA Experience Exchange

Report,” Washington, DC, p. 27.

According to a large building owner/manager

interviewed by OTA, tenants prefer fill-service

leases that include everything from energy to

security to cleaning. This reduces hassle for the

tenant as there is only one monthly bill for the space,

and simplifies budgeting as this kind of monthly bill

does not fluctuate.

Owner-occupied buildings are somewhat more

amenable to energy efficient technologies. Owneroccupants are typically more concerned with operating costs, as they are clearly the ones paying these

costs. They often work more closely with the

building designers, and they may be more willing to

invest the time and effort needed to understand and

even promote the use of innovative technologies. In

fact, many highly energy efficient new buildings are

built for clients interested in their high-tech appeal

and as a demonstration of environmental awareness—

not for their reduced operating costs .29 Reported one

architectural/engineering (A/E) firm interviewed by

OTA, ‘‘our clients who want energy efficiency seem

to be motivated by an ecological ethic or concern,

and not by dollar savings.

Commercial Building Architects,

Designers, and Builders

About 1.1 billion square feet of commercial

buildings were built in 1989 (table 3-8), with a value

of about $84 billion.30 The process by which

commercial buildings are planned, designed, and

built varies, but typically the owner or developer will

hire an architectural/engineering (A/E) firm to

design the building and a general contractor to

oversee the actual construction. The A/E firm

designs and specifies the building design, the

building shell, and the energy-using equipment to be

installed, and therefore plays perhaps the most

important role in determiningg building energy use.

Commercial building architects and engineers

interviewed by OTA felt that opportunities for

energy efficiency in new commercial buildings are

considerable, and that some of these opportunities

may not require an increase in construction (first)

cost (see chapter 2, box 2-D). Building designers

interviewed by OTA were confident that energy

efficient designs would operate well, and in many

cases would have important nonenergy benefits as

well. Well-designed lighting, (e.g., making use of

daylighting where appropriate) is thought to enhance productivity as well as energy efficiency.

Using a cooling system with a larger temperature

differential means smaller pumps and smaller pipeswhich means lower frost cost, lower energy consumption, and a smaller portion of valuable interior

space taken up by the space cooling system.

The implementation of such features, however, is

often difficult for several reasons. The lack of

incentives for energy efficient design is probably the

single most important barrier to greater use of

innovative energy technologies by A/E firms. Using

a different design, even if it has many advantages,

entails some risk. It may not perform as intended, the

builders may be unfamiliar with it and install it

Table 3-8—New Commercial Building Construction

in the United States, 1989

Type/purpose Million square feet Percent of total

Retail and offices . . . . . . . .

Educational . . . . . . . . . . . .

Hospital . . . . . . . . . . . . . . .

Social/recreational . . . . . .

Public buildings . . . . . . . . .

Religious . . . . . . . . . . . . . .

Miscellaneous . . . . . . . . . .

Total . . . . . . . . . . , . . . . . . .

782

138

71

45

36

27

34

1,133

69

12

6

4

3

2

3

100

NOTE: Percents may not add to 100 due to rounding.

SOURCE: U.S. Department of Commerce, Bureau of the Census, Statistica/Abstractof the United States: 1991 (Washington, DC: 1991),

p. 718.

29 This is similar to the “conservation ethic” often raised as an important motivation for homeowners to invest in energy efficiency.

30 us, Dep_ent of Comerce, B~~~ of tie cemu~, Srafi~~”ca/ Abstract @the Unire~~tates; 1991 (lVmhingto~ DC: 1991), p. 718.
Chapter 3--lf Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? . 83

incorrectly, or it may require changes in other

building components. The rewards for energy efficient design are usually small. Clients are typically

concerned with appearance, comfort, leasability,

and other factors and are rarely willing to pay more

for energy efficiency, The traditional business relationship between risk and return-that a higher risk

choice has a higher return as well-does not appear

to hold for energy innovations. It is usually easier for

the designer to follow accepted, standard practice,

especially if the designer’s fee is the same in either

case. As one interviewee said, “The path of least

resistance does not include energy innovative design .

Commercial Building Equipment

Manufacturers

Equipment in commercial buildings consumes

energy to provide space conditioning (heating,

cooling, and ventilation), lighting, and various other

needs, depending on the building. The manufacturers of this equipment vary widely in size. For

example, there are about 10 major manufacturers of

large air-conditioning systems, while there are many

small manufacturers of fluorescent light fixtures.

The diversity of the business makes it difficult to

generalize about how these firms incorporate energy

efficiency into their production and marketin g

decisions. There are, however, several issues tha t

apply to most of the industry.

The building equipment business is very competitive. Even in the relatively concentrated businesses,

such as air conditioning equipment, companies

typically compete for contracts. First cost is probably the most important, but certainly not the only,

criterion on which manufacturers compete. Other

factors raised as important by manufacturers include

reliability, performance, features, and energy efficiency.3

1

Equipment manufacturers see energy efficiency

as one of several important attributes that could

differentiate their product from their competitors

and thereby increase their market share. It is not

clear how these attributes (first cost, reliability,

performance, etc.) are valued or traded off by

consumers, but from the manufacturers perspective,

energy efficiency is typically of only moderate

importance to most consumers. Features that add

new functions (e.g., computerized control of an

HVAC system to allow free-tuning of temperature in

individual offices) are seen as having more marketing appeal than a less visible improvement such as

energy efficiency.

The channels through which equipment manufacturers market and distribute their equipment vary.

For very large building equipment, such as a large air

handling unit, the A/E firm or the mechanical

engineering firm subcontracting the HVAC work

specifies the equipment, which is then built to order

and delivered to the job site. Standardized equipment (such as lighting ballasts) is distributed

through a private wholesaler or through a manufacturer-owned distribution system.

Building Managers and Operators

Large commercial buildings and commercial

complexes typically have building operators or

managers who operate, maintain, and repair the

energy-using equipment. Their chief responsibility

is to maintain occupant comfort and to respond to

complaints. Very large complexes sometimes have

energy managers, whose sole responsibility is energy management.

Building managers and operators are often hesitant to use innovative energy efficient equipment

and practices, as from their perspective the costs are

high and the benefits minimal. As discussed above,

an innovation often carries with it an increased risk

of poor performance,32 and typically a change in

building operation must go through a period of

adjustment and free-tuning. The costs to the operator

are in the form of increased complaints, as he or she

is expected to fix the problem. The chief benefit,

reduced energy costs, typically flows to the institution or owner and not to the operator. In addition,

complex systems such as computer-controlled energy management systems are sometimes installed

without adequate operator training. Reports a facilities manager for a large commercial building complex, “We simple folk who operate and maintain

31 In Ou inteniew5 wc typically asked ‘‘what do your customers look for when selecting equipment?’ rather than ‘‘how important is energy

efficiency to your customers?’ as the former would allow us [o see how energy efficiency compares with other attributes.

3Z A S*CY ~,f~~tdmmerclal ~o~t customers found ‘‘performance of the conservation equipment’ ranked as the highest concern when considering efficiency of money saved’

improvements. and ‘ ‘payback’ ranked somewhat lower. Temple, Barker, & Sloane, Inc., Xcncrgy, Inc., Marker

Research on Demand-.Side .i4anagement Programs, EPRI EM-5252 (Palo Alto, CA: E1ectric Power Research Institute, June 1987), p. 3-4.
84 . Building Energy Efficiency

systems are given state of the art equipment to

operate, and when things don’t go well we are

frequently told we don’t know what we are doing. ’ ’33

Bad experiences with energy efficient equipment,

in which the equipment failed prematurely, performed poorly, or was otherwise inadequate, have

made operators and managers wary. For example,

variable-air-volume (VAV) systems for large commercial buildings are a popular retrofit and are

common practice in new construction, due in part to

their large efficiency advantage over traditional

constant volume systems. One interviewee reported

that VAV systems are quite popular with tenants—

not for their energy savings, but for their reduced

noise. However VAV systems are very design

sensitive, and reports one facilities manager, ‘‘I have

never seen or known of a fully functional variable air

volume system. ’34

Tenants and Occupants

About one-quarter of commercial building space

is leased or rented, rather than owner-occupied. This

fraction varies by building use—for example, less

than 10 percent of commercial building floor space

used for assembly or health services is leased or

rented, while 30 percent of office space is leased or

rented. 35 In most commercial buildings, opportunities for tenants to influence building energy use are

somewhat limited. Control of drapes and blinds,

proper use of space heaters, and turning off equipment (e.g., computers and printers) when not needed

can all contribute to reducing consumption. However, indoor temperature often cannot be adjusted

and lights often are centrally switched, limiting

occupant control over energy use. 36 And as energy

costs are typically buried in overall rental costs,

there is little incentive to reduce energy use. Many

larger commercial buildings have multiple tenants

but only one energy meter, and energy costs are

apportioned according to square footage or other

criteria, rather than actual use, thereby reducing

further the financial incentive for efficiency.

There are some opportunities for implementing

efficiency when the space is initially set up. Those

renting commercial space are often responsible for

supplying all interior fixtures and equipment, and for

retail space this usually includes lighting futures as

well. However, turnover in the retail space market is

quite rapid, and therefore many renters of retail

space have a short time horizon when making

lighting equipment choices. Therefore first costs and

lighting quality are the chief criteria when making

these choices, and operating costs are of less

concern.

The relative insignificance of energy costs in

comparison to labor costs often results in management attention and interest being directed elsewhere.

A typical office building in the United States

contains about 270 square feet of floor space per

office worker.37 If one assumes an average cost

(salary plus benefits) per employee of $40,000 per

year, this works out to about $150 per square foot per

year for salaries, which dwarfs the $1.70 per square

foot per year spent on energy (table 3-7). In other

words, energy costs are on the order of 1 percent

of labor costs in a typical office building.

This problem is compounded by the persistent

perception that efficiency means discomfort and

inconvenience. As noted throughout this report,

energy efficiency does not have to reduce comfort—

indeed, many technologies enhance both comfort

and energy efficiency. However the perception that

efficiency means “freezing in the dark” persists,

and if an owner believes that a technology may

reduce productivity then he or she will not allow its

use, because any energy savings would pale next to

the perceived productivity loss.38 A survey of small

businesses found that energy efficiency was thought

to require turning down heat or turning off lights,

33 R F Bmch, 1‘Whine Have We Failed? Problems in Facilities Operation and Maintenance,‘‘ in F. Payne (cd.), Strategies forEnergy Eficient Plants

undlnfe~li~ent Buildings (Lilb~ GA: Faimnont Press, 1987), p. 205.

34 Ibid., p. 203.

35 Excludes ~ovement.omed buildings. U.S. Dep~ent of Energy, Energy ~o~tion Adrninistratio% Com?nercia/ Building C’haracterish’cs

1989, DOE/EIA-0246(89) (Washingto~ DC: June 1991), p. 83.

36 For exmple, o~y 35 Pement of comerci~ floor space alIOws occupant con~l of h~~g a.nd/orc~~g eqtipment. U.S. Department of Energy,

Energy Information Adrninistratiom Commercial Building Characteristics 1989, DOE/EIA-0246(89) (Washington DC: June 1991), p. 212.

37 Bulld~g Omers ad M-gers Association ~tematioml @oMA), ~99~ Bow Experience Exchange Report, washiIIgto~ DC, p. 27. Them iS

considerable uncertainty in this number; a separate survey estimates it at 430 square feet per ofilce worker (U.S. Department of Energy, Energy

Information Administration, Commercial Building Characteristics 1989, DOE/EIA-0246(89) (Washington DC: June 1991), p. 13).

M ~is is espwi~ly a concern with lighting retrofits. See 4 ‘Lighting the Commercial World, EPRIJournal, vol. 14, No. 8, December 1989, p. 9.
Chapter 3-If Energy Efficiency Is Such a Good Idea, Why Haven’t We Done More of It? ● 85

and these were not considered acceptable options,

because a cold, underlit store would discourage

customers .39

SUMMARY AND CONCLUSIONS

Understanding how and why energy efficient

technologies and practices are often neglected—

despite their apparent attractiveness on a life-cycle

cost basis—is essential for designing policies to

encourage greater use of these technologies.

The methods consumers use to make energyrelated decisions often work against energy efficiency. Individuals pursue several goals when making energy-related decisions, such as minimizing

first cost, minimizing time to make the decision, or

minimizing risk by using the same thing that worked

previously. Very few pursue the goal of minimizing life-cycle costs. For example residential building contractors typically select equipment based on

first cost, ease of installation, and brand familiarity.

And when future savings do enter into a decision,

they are heavily discounted. For example implied

consumer discount rates in appliance selection can

exceed 50 percent.

There are often no incentives, financial or

otherwise, for efficiency. A contractor bidding on

a job will often win the job if he or she has the low

bid—which often requires specifying low first-cost,

inefficient equipment. And although energy costs in

the aggregate are considerable, they are often low in

relation to other costs. In a typical office, for

example, energy costs are on the order of 1 percent

of labor costs; therefore management and capital are

often drawn to other areas. Designing a low-energy

commercial building may require the use of innovative designs that might not work as predicted, and

unless this greater risk is rewarded it will not be

taken.

Over one-third of households, and one-quarter of

commercial building floor space, is rented or leased

rather than owner-occupied; in these buildings there

is a reduced incentive both to invest in efficient

equipment and to operate equipment efficiently.

Energy efficiency is just one of many attributes to

consider when making complex choices, and its

benefits are often seen as relatively intangible and

uncertain. For example, a builder faced with the

decision of investing $1,000 in insulation or $1,000

in landscaping will probably choose landscaping, as

prospective buyers often value visible, tangible

objects more highly. When making complex decisions that require the consideration of many attributes, people may focus on a limited number of these

attributes-typically the most visible and tangible.

For example, one room air conditioner may be small,

quiet, and have electronic controls, while another is

larger but with more cooling capacity and a different

first cost; these features, rather than energy efficiency, often dominate the choice process.40

Energy efficiency is often (mis)perceived as

conflicting with other goals. For example, small

business owners equate efficiency with dark, cold

stores, which is bad for business, and as a result

show little interest in efficiency.

Many people believe that consumers are relatively unwilling to invest in energy efficiency.

Whether or not this is true is difficult to determine;

nevertheless the belief that it is true influences

decisions of builders and manufacturers on what to

build, manufacture, and sell.

The result of these factors is that cost-effective

and societally beneficial opportunities for increased energy efficiency are often neglected.

This somewhat gloomy list of good reasons for a

less than optimal outcome can be seen as an

opportunity and a challenge, rather than as an

insurmountable barrier. Considerable progress has

been made in overcoming technical and economic

barriers, as discussed in chapter 2. What remains is

to correct some key market imperfections. Chapter

4 discusses past Federal actions to implement energy

efficiency in buildings, and chapter 5 offers policy

options to overcome these market imperfections and

to encourage the use of cost-effective energy efficient technologies in buildings.

39P. Komor and R. Katzcv, ‘‘Behavioral Dctcrmimmts of Energy Usc in Small Commercial Buildings: Implications for Energy Efficiency, ’ Energy

.$ys[ems und Policy, vol. 12, 1988, p. 237.

Ul 1n some ~ltwtlons ~e ~onslderation of o~er attributes lcad~ to increased energy effi~icncy. As mentioned above, for example, SOmC COmmeXIZd

building owners invest in very efficient technologies not to rcducc operating costs but to demonstrate their environmental ethic.
A Review of Federal

To Increase

Chapter 4

Efforts

Energy

Efficiency in Buildings

Box 4-A--Chapter Summary

This chapter reviews past and present Federal programs promoting energy efficiency in

buildings. These programs have adopted numerous strategies, including incentives (tax credits,

weatherization grants, loan subsidies); Federal leadership (providing public recognition for

voluntary energy savings); research, development, and demonstration (RD&D); codes and

standards; and information (appliance labels, building energy audits, and technical assistance).

A review of these programs suggests that Federal efforts to reduce energy use in buildings often

generate significant and cost-effective energy savings, but inappropriate performance measures

and a lack of ongoing evaluation have prevented many of them from attaining the full range of

cost-effective energy savings available. In fact, the authorizing legislation that establishes

building efficiency programs often fails to focus on the promotion of cost-effective energy

savings. In addition, many Federal programs were never implemented as planned. Major

programs were targeted for elimination, experienced massive budget cuts, suffered delays, or

were simply never implemented because of changes in administration priorities in the early 1980s.

Specific options for improving the cost-effectiveness of Federal programs are offered.

State, local, and utility programs are reviewed briefly as well. Although this chapter focuses

on Federal programs, many State and utility programs surpass Federal efforts in promoting energy

efficiency in buildings. The wide variety of nonfederal activity suggests that Federal programs

will be most effective if they complement and support, rather than duplicate, these other activities.
Contents

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REVIEW OF FEDERAL PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Incentive Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research, Development, and Demonstration Programs . . . . . . . . . . . . . . . . . . . . . . . . . . .

Building Codes and Appliance Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NONFEDERAL PROGRAMS TO PROMOTE ENERGY EFFICIENCY

IN BUILDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Local Programs .0

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .

utility Programs . . . . . . . . . . .

. . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Box

4-A,

4-B.

4-c.

4-D.

4-E.

Boxes

Chapter Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Major Legislation Authorizing Federal Energy Programs for Buildings . . . . . . . . . .

Major Federal Programs Designed To Reduce Energy Use in Buildings . . . . . . . . .

DOE Conservation Research and Development for Buildings:

Four Successful Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A Brief History of the National Appliance Energy Conservation Act of 1987....

4-F. Examples of State Energy Conservation Program Projects. . . . . . . . . . . . . . . . . . . . . .

4-G. Examples of Energy Extension Service Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

89

89

89

103

104

107

113

123

123

124

124

Page

87

90

91

105

110

122

123
Chapter 4

A Review of Federal Efforts To Increase

Energy Efficiency in Buildings

INTRODUCTION

The preceding chapters have discussed trends in

U.S. building energy use, the technologies available

to make that use more efficient, and barriers limiting

the adoption of these technologies. This chapter

reviews Federal, State, and utility programs designed to promote building energy efficiency, many

of which have been designed, at least in part, to spur

the wider use of some of the technologies noted

earlier. 1 The purpose of this chapter is to indicate the

goals of building energy programs, identify the

barriers to energy conservation and efficiency they

attempt or have attempted to resolve, indicate their

results (where known), and highlight key implementation issues associated with each.

A major lesson from this review is that Federal

efforts to reduce energy use in buildings have led

often to significant and cost-effective energy

savings, but inappropriate performance measures and a lack of ongoing evaluation have

prevented many of them from attaining the full

range of cost-effective energy savings available.

In fact, the authorizing legislation that establishes building efficiency programs often fails to

focus on the promotion of cost-effective energy

savings. To help improve existing programs and

policies, this chapter offers options—both general

and program-specific-for Congress and the Department of Energy (DOE) to consider. The programrelated issues discussed in this chapter are given

with the expectation that these programs (and others

like them) would be valuable vehicles for achieving

significant, cost-effective energy savings available

in U.S. buildings, as suggested in chapter 1.

Another major lesson from this review is that

many Federal programs were never implemented

as planned. Major programs were targeted for

elimination, experienced massive budget cuts, suffered delays, or were simply never implemented.

Many of these changes stemmed from specific

Federal policy changes exerted by the administration in the 1980s. Several Federal programs initiated

in the late 1970s and early 1980s had been in

operation only a few years before they were scaled

back (or eliminated) by shifts in Federal political

priorities.

The first part of this chapter is organized by the

several types of building energy efficiency and

conservation programs directed by the Federal

Government: incentives (tax credits, weatherization

grants, loan subsidies); Federal leadership in promoting voluntary energy savings through public

recognition; research, development, and demonstration (RD&D); codes and standards; and information

(appliance labels, building energy audits, and technical assistance). Many programs apply several of

these approaches, but they are organized here

according to their primary focus. The enabling

legislation authorizing the major Federal programs

discussed in this chapter is listed in box 4-B. Major

building conservation and efficiency programs administered by the Federal Government in the last

two decades are described briefly in box 4-C. As

used in this chapter, a program is an effort designed

specifically to reduce energy use in buildings or

building-related equipment.

REVIEW OF FEDERAL

PROGRAMS

Incentive Programs

As suggested in chapter 3, financial incentives can

encourage consumer investments in energy efficiency. The Federal Government has offered several

incentive programs to reduce energy use in buildings, including tax credits, weatherization grants,

and loan subsidies.

Tax Credits

The Energy Tax Act of 1978 (Public Law 95-618;

ETA), as amended by the Crude Oil Windfall Profit

1 A variety of other programs have had and will have important effects on building energy use, but they are not discussed in this report, because

their primary focus lies beyond building energy use. The Clean Air Act Amendments of 1990 (Public Law 101-549), for example, allow utilities to earn

pollution reduction credits for reducing the energy demands of their consumers, but the focus of that program is emissions reductions, not building energy

con.servalion per se.

-89-

297-936 0 - 92 - 7 : QL 3
90 ● Building Energy Efficiency

Box 4-B—Major Legislation Authorizing Federal Energy Programs for Buildings

The statutes listed below generally covered multiple energy policy issues and programs, but only those

elements concerning building energy use are mentioned below. Most of these statutes have been amended since their

original passage but, for simplicity, only the initial legislation is given below. The statutes are listed in chronological

order, and the dates in parentheses indicate when the measures were signed into law.

Energy Policy and Conservation Act (Public Law 94-163; December 22, 1975)-Directed the Federal Trade

Commission to develop and promulgate labels listing energy use for new appliances; directed the Federal Energy

Administration and later the Department of Energy (DOE) to develop voluntary appliance efficiency standards; and

established the State Energy Conservation Program to provide technical assistance for energy conservation efforts

at the State and local level.

Energy Conservation and Production Act (Public Law 94-385; August 14, 1976)_Required the

development of national mandatory Building Energy Performance Standards for all new U.S. buildings; these

standards were later made voluntary for all nonfederal buildings (public Law 97-35); and created the Weatherization

Assistance Program to fund energy saving retrofits for low-income households.

National Energy Extension Service Act (Public Law 95-39; June 3, 1977)-Established the Energy

Extension Service, a State-administered energy information, education, training, and demonstration program

overseen and funded by DOE.

Energy Tax Act (Public Law 95-618; November 9, 1978+Granted residential energy conservation and

renewable energy tax credits for income tax years 1978 to 1985.

National Energy Conservation Policy Act (Public Law 95-619; November 9, 1978)-Established the

Residential Conservation Service, which required large electric and natural gas utilities to provide residential energy

audits to their customers; created the Institutional Conservation Program, a matching grant program providing

monies for energy audits and energy saving retrofits in nonprofit institutional buildings (colleges, schools, and

hospitals); required the voluntary appliance efficiency targets being developed under the Energy Policy and

Conservation Act to become mandatory standards; and required the national mortgage associations to encourage

lending institutions to offer extended mortgage credit for the purchase of energy efficient homes.

Energy Security Act (Public Law 96-294; June 30, 1980)-Established the Commercial and Apartment

Conservation Service, which required large electric and natural gas utilities to offer energy audits for commercial

and multifamily buildings; and created the Solar Energy and Energy Conservation Bank at the Department of

Housing and Urban Development to provide grants and loan subsidies for energy conservation and solar energy

retrofits in low- and moderate-income households and in commercial and agricultural buildings with nonprofit

owners or tenants.

Low-Income Home Energy Assistance Act (Public Law 97-35; August 13, 1981)-Established the

low-Income Home Energy Assistance Program (LIHEAP), a block grant program administered by the Department

of Health and Human Services that provides funds to low-income households for heating and cooling expenditures.

As amended, this legislation allows states to allocate 15 percent of their L IHEAP monies to weatherization; upon

request, HHS may raise this amount to 25 percent.

National Appliance Energy Conservation Act (Public Law 100-12; March 17, 1987)-As amended (Public

Law 100-357), this statute established energy standards for the 13 categories of new appliances covered under the

Energy Policy and Conservation Act as amended. The NAECA requires DOE to review and update these standards

to keep pace with technological improvements.

Tax Act of 1980 (Public Law 96-223), revised the

Internal Revenue Code of 1954 to encourage inter

alia residential energy conservation and renewable

energy investments. The residential credits applied

to income taxes and were available for investments

made between April 20, 1977 and December 31,

1985. The discussion here is focused on the conservation credits.

The ETA income tax credits for residential

conservation investments were limited to 15 percent

of the first $2,000 expended for a maximum

potential credit of $300. Conservation expenditures

were limited to residential units in the United States

that were substantially complete by April 20, 1977

and that were the principal residences of occupants

claiming the credit. Conservation expenditures eligi-
Chapter 4-A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 91

Box 4-C—Major Federal Programs Designed To Reduce Energy Use in Buildings

The Arab oil embargo of 1973-74, several major domestic natural gas shortages, and other events fueled

national concerns about U.S. energy security in the 1970s. In response, the U.S. Congress established a variety of

national programs aimed at reducing energy use in all sectors. The major programs designed to reduce energy use

in buildings are described below. Several of these programs no longer exist.

Department of Energy

Appliance energy standards were initially devised as voluntary energy efficiency targets that the Federal

Energy Administration, predecessor agency to the Department of Energy (DOE), was directed to promulgate under

the Energy Policy and Conservation Act. These targets were to represent energy savings of at least 20 percent for

the covered products, as measured by expected 1980 energy use levels relative to known 1972 levels. Under the

National Energy Conservation Policy Act of 1978 (Public Law 95-619), however, the targets were changed to

mandatory standards. In January 1981, after DOE had announced that promulgation of the standards was imminent,

a series of internal Department policy changes made by the newly arrived Reagan administration delayed their

issuance. After 6 years, two major legal actions by environmental and consumer groups, and a pocket-vetoed bill

that restated Congress’ intent to have mandatory national appliance efficiency standards, the National Appliance

Energy Conservation Act (Public Law 100-12; NAECA) became law on March 17, 1987.

The NAECA, as amended, designates minimum efficiency or maximum energy consumption levels for 13

categories of covered products and requires DOE to update and strengthen these standards on a regular basis in order

to keep pace with technological improvements. Thus far, the Department has revised standards for refrigeratorfreezers, freezers, small gas furnaces, dishwashers, clothes washers, and clothes dryers--all at levels more stringent

than the original NAECA requirements.

Building Energy Performance Standards (BEPS) were originally the responsibility of the Department of

Housing and Urban Development (HUD). The BEPS were originally intended to be mandatory national energy

performance standards for all newly constructed buildings, as required by Title III of Public Law 94-385. Later

amendments to this statute transferred these responsibilities to DOE (Public Law 95-91; 1977), directed the issuance

of interim standards for new Federal buildings by August 1981 (Public Law 96-399; 1980), and made the standards

voluntary for all nonfederal buildings (Public Law 97-35; 1981). At present, DOE has issued mandatory interim

standards for all Federal residential buildings and voluntary standards for all commercial and multifamily high-rise

buildings. Voluntary interim standards for nonfederal residential buildings are still pending (as of January 1992).

Institutional Conservation Program (ICP) is a Federal institutional grant program administered by the

States through DOE regional offices. Program grants fund energy audits and energy conservation measures in

nonprofit schools (primary and secondary), colleges and universities, and hospitals. Originally, only buildings

constructed before April 20, 1977 were eligible for ICP grants, but recent legislation extended that cutoff date to

buildings constructed before May 1, 1989 (Public Law 101-440; 1990). The purpose of this program is to provide

conservation retrofit funds for institutions with limited capital resources, hence the exclusive participation of

nonprofit organizations. A recent national evaluation of ICP energy savings determined that program costs through

1988 totaled almost $1.4 billion (1987 dollars) and resulted in an estimated 1987 cumulative energy savings of 0.3

quadrillion Btus (317 trillion Btus) worth an estimated $1.9 billion (1987 dollars). The total cost figure includes

both DOE grant outlays and the matching funds required of participating institutions. By this simple measure, ICP

has exceeded its break-even payback costs by $500 million. In addition, DOE estimates that ICP-funded measures

completed by 1988 will save an extra $400 million per year over their remaining lifetimes.1

Residential Conservation Service (RCS) required large electric and natural gas utilities to offer residential

energy conservation audits to their consumers. The operating assumption of the program was that residential

consumers would invest in energy saving retrofits if they had adequate information about the energy and financial

savings potential of their homes. This assumption proved optimistic. However, State and utility programs that

included financial incentives in their programs enjoyed the highest audit request rates, and the highest retrofit

activity, in the Nation. By law, the RCS expired in 1989.

1 U.S. DeP~ent of Ener~, ASSis~t secret~, co~~ation ad Renewable Ener~, An Estitife of Aggregate Energy Savings Due

m the ICP Program, DOE/SF/00098-H2 (Washington DC: March 1988), pp. vi, 33.

(Continued on next page)
92 ● Building Energy Efficiency

Box 4-C—Major Federal Programs Designed To Reduce Energy Use in Buildings--Continued

State Energy Conservation Program (SECP) requires States to develop and implement energy conservation

programs as a condition to receive Federal monies for a variety of State and local financial and technical assistance

programs designed to save energy. All 50 States, the District of Columbia, and six U.S. territories participate in this

program, which offers professional and consumer energy education programs and materials, demonstration

programs, and technical assistance for conservation efforts in all sectors. As an effort to enhance existing State and

local energy conservation efforts, SECP is administered with another DOE program, the Energy Extension Service

(EES); both channel Federal resources and expertise to participating States.

Weatherization Assistance Program (WAP) was authorized in 1976 to provide grant monies for the

weatherization of low-income households in order to reduce their fuel expenses. Funds are used for retrofits, related

repairs, and consumer education. WAP funds are disbursed by DOE through State and local agencies to community

organizations that are responsible for client selection, weatherization installation and repairs, financing, and

consumer education. Roughly 1,200 local organizations participate in WAP, most with staffs of only 5 to 10 people. 2

Using DOE and other Federal weatherization funds, these groups reach about 250,000 households annually.3

Department of Housing and Urban Development

Manufactured Home Construction and Safety Standards are Federal standards with minimum quality

requirements that apply to manufactured housing. These standards provide a means to administer Federal energy

efficiency guidelines to this specialized portion of the new housing market.

Minimum Property Standards (MPS) are residential construction requirements that apply to federally

financed housing, and they include provisions for energy efficiency. New homes are required to meet MPS standards

to qualify for Federal Housing Administration and Veterans Admini “ ‘stration loans.4

Solar Energy and Energy Conservation Bank was authorized to provide financial assistance for

conservation and solar measures to low- and moderate-income households, as well as commercial and agricultural

buildings with nonprofit owners or tenants. The Bank suffered early uncertainties over resources-Congress

rescinded virtually all program funding in fiscal year 1981-but the program appeared to make very promising

progress in later years. According to HUD estimates, conservation investments made during the last year of the

program (1987) achieved average simple paybacks of 4.4 years.s

Department of Health and Human Services

Low-Income Home Energy Assistance Program (LIHEAP) is a block grant program that provides financial

assistance to low-income households for their energy expenses. Up to 25 percent of LIHEAP monies may be used

for weatherization, but States spend on average only about 9 percent for that purpose. In fiscal year 1990, LIHEAP

serviced roughly 6 million households, but only 148,000 homes received weatherization assistance.6

Federal Trade Commission

Appliance efficiency labeling is required under Title V of the Energy Policy and Conservation Act of 1975

(Public Law 94-163), as amended. Administered by the Federal Trade Commission, the labeling program became

effective in May 1980 and covers 13 categories of appliances and equipment. As required, the labels indicate

estimated annual energy costs and list the range of estimated costs for similar products to provide consumers

comparative information.

2 M. Schweimr, ‘%nqy Conservation for Low-Income Households: A Study of the Organization and outcomes Of WMherkUiOn

Assistance Programs,” Energy Systems and PoZicy, vol. 12, No. 2, 1988, pp. 1(L2, 105.

3 U.S. Dep~~nt of ~erm, ~lce of tie Ass~~t s~e~ for co~~ation ~d RWwable EIIer~, “Report on tk X%e!Wnt

Weatherization Grant Program,” prepared for the U.S. Senate, Committee on Appropriations, Aug. 29, 1989, p. 5.

4 E. ~~ J. ~~tom H, Geller, W. fio~r, ~d F.M. O’Ham (cd.), Energy Eficiency i?I ~w”tiings: %ogmss & pro~”se (w*tPow

DC: Amrican Council for an Energy-lMcient Economy, 1986), p. 167.

5 u-s. Dep~@t of Hous@ ~ Urti ~velopment, Sok E~rgy ~d Eu1-gy co~~ation B-, solar Energy and Energy

Conservation Bank: FY1987Annual Report to the Congress (Washington DC: 1987), pp. 3,6.

c U.S. Department of Health and H~ Services, Division of Energy Assistance, LowlncomeHomeEnergy Assistance Program: Report

to Congressfor Fiscal Year 1990 (Washington+ DC: September 1991), p. vii.
.——

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 93

other Federal Programs

Green Lights is a voluntary commercial lighting retrofit program formally initiated by the Environmental

Protection Agency (EPA) in January 1991. The program encourages major corporations to perform cost-effective

lighting retrofits at all their U.S. facilities to lower electricity use and thereby reduce the pollution associated with

its generation. In exchange for technical assistance and Federal Government recognition, Green Lights participants

agree to conduct lighting retrofits in at least 90 percent of the total square footage of their U.S. facilities within 5

years of signing an agreement with EPA. Program participants are expected to implement only those lighting

retrofits that will be cost-effective and that will not compromise lighting quality. As of December 1991, roughly

150 companies had enrolled in the program.

Residential energy conservation and renewable energy tax credits were available for income tax years

1978 to 1985. Conservation expenditures were limited to residential units located in the United States that were

substantially complete by April 20, 1977 and that were the principal residences of occupants claiming the credit.

Allowable conservation expenditures included insulation, exterior storm windows, exterior storm doors, automatic

setback thermostats, caulking, weatherstripping, and all associated installation costs. The residential conservation

credits were limited to 15 percent of the first $2,000 invested for a maximum potential credit of $300. For a variety

of reasons, participation in the program was low.

I

ble for the ETA credits included insulation, exterior for conservation and renewable investments, the

storm windows and doors, automatic setback thermostats, caulking, and weatherstripping.2 To be

eligible for the credit, conservation expenditures had

to originate with the taxpayer and remain in operation at least 3 years. Credits applied to both materials

and installation costs.3

There are no reliable determinations of the

economic costs and benefits of the ETA residential

conservation credits. A variety of policy and market

changes were working simultaneously to motivate

conservation investments in the residential sector.4

As a result, determining the incremental effect of the

Federal tax credits on residential energy investments

has been elusive.5 By reducing consumer first costs

credits clearly created social benefits but at undetermined social costs.

As these comments suggest, studies analyzing the

effectiveness of the Federal residential tax credits as

inducements to energy conservation and renewable

energy investments have been inconclusive.6 One of

these studies suggested that the increasing price of

energy relative to other goods and services was the

principal factor behind the decline in residential

energy consumption at the time the tax credits were

available. 7 Average U.S. household energy costs

rose sharply (nominally by about $400) from 1978

to 1984.8 And a decline in real income in the early

2fibllc~w95.61 g, 92 s~[$ 3175.77, SW, lol(a), Other co~ervation expendit~es eligible for the residential tax credit were energy SaVing flllllilce

replacement burners, flue adjustment devices, electrical or mechanical furnace ignition systems that replaced gas pilot lights, exterior thermal windows,

extm-ior thermal doors, and meters displaying energy costs. Public Law 95-618, 92 Stat. 3177, sec. IOl(a).

3 Public Law 95-618, 92 Stat. 3176-77, sec. IOl(a).

4 Nmely, Fede~l, s~te, ~d utility energy conservation programs were encouraging COnSUKnerS to save energy ~ough information ‘d ‘tier

incentives, the 1979 Iranian revolution pushed oil prices up for several years, and public commitment to energy consemation generally increased during

this period.

5 E. fi5t, R. Goel@ ~d H wng, Househo/d Re[rofit Expe~itures and the Federal Residential Energy conservation T~ Credit ,

ORNL/CON-95 (Oak Ridge, TN: Oak Ridge National Laboratory, July 1982), pp. 5,37.

c See, for example, references cited in footnotes 5, 7, 14, and 17.

7 US. Library of Congress, Congressional Research Service, An Economic Evaluation of Federal Tax Credit.rfor Residential Energy Conservation,

Report No. 82-204E (Washington, DC: December 1982), pp. 7-10, 41-61. An OTA analysis completed shortly after the tax credits became available

suggested the same. See U.S. Congress, OffIce of Technology Assessment, Residential Energy Conservafi”on, OTA-E-9* (Washington, DC: U.S.

Government Printing Office, July 1979), vol. 1, pp. 6, 20-22.

g Specifically, the nominal increase in household energy costs was from $724 (1978) to $1,123 (1984). (These figures refer onty to site energy use

and exclude household transportation costs.) See U.S. Department of Energy, Energy Information Administration, Residenfi”al Energy Consumption

Surve}: Trends in Consumption andExpenditures, 1978-1984, DOE/EIA-048* (Washington DC: June 1987), p. 19.
94 ● Building Energy Efficiency

Table 4-l—Use of the Residential Energy Conservation Tax Credits by Income (1983)

Family income $10,000 $15,000 $20,000 $30,000

less than and

$10,000 $14,999 $19,999 $2&99 higher Total

Percent of homes that claimed a

tax credit on their 1983 return . . . . . .

Percent of homes that claimed a

tax credit on their 1983 return

that would have made all the

same improvements if the tax

credit had not been available . . . . . .

Percent of homes that made at

least one conservation improvement in 1983 but did not claim a

tax credit, for the following

major reasonsa:

Unaware of the credit. . . . . . . . . .

Expenditure too small to claimb . . .

Did not file the long formC

. . . . . . .

Total with at least one reason . . . .

9 11 17 21 26 17

100 89 93 84 88 88

38 37 30 20 19 26

18 16 22 22 28 23

34 28 28 19 12 21

86 87 83 81 86 85

aAJthough respondents could list more than one reason, percentages are below 100, because not all reasons are listed

here. The other reasons given for not claiming the credits were minor, were not reported by the Energy Information

Administration due to large statistical variance, or both; those reasons included reluctance to file tax forms, use of the

maximum credit in previous years, ineligible home, and no taxes filed in 1983. bThe Energy Tax Act of 1978 (public Law 95-618) disallowed residential conservation credits less than $10 (sec. 101 a).

As the credits amounted to 15 percent of the f first $2,000 expended, this meant that the minimum expenditure eligible

for the credit was just over $66,

cFiling the IRS long form was required to claim the tax credit.

SOURCE: U.S. Department of Energy, Energy Information Administration, Residerrtia/ Energy Consumption Survey:

Housing Characteristics 1984, DOE/EIA-0314(84) (Washington, DC: October 1986), p. 27.

1980s may also have contributed to the drop in

residential energy use during the period the credits

were available.9

From 1978 to 1985, there were about 30 million

claims for the residential conservation credits, amounting to nearly $5 billion (nominal dollars) in lost

revenues to the U.S. Treasury. The largest number of

annual claims for the conservation credits came in

the first year-about 6 million. For the next 5 years

(1979-83), the total number of returns declined

steadily (to 2.4 million in 1983), but climbed again

the last 2 years (2.7 million in 1985).10

A 1983 household survey conducted as part of the

DOE Energy Information Administration’s (EIA)

Residential Energy Consumption Survey (RECS)

suggests why national use of the conservation credit

waned. The survey determined that 85 percent of

U.S. households that had conducted conservation

retrofits in 1983 bypassed the conservation tax

credits entirely. The nonclaimants in the survey

explained that they were unaware of the credits, they

did not use the Internal Revenue Service (IRS) long

form (required to claim the credit), or the amount of

their investment was too small to claim a credit.

Other, less common reasons given for foregoing the

credit included the difficulty in filling out the tax

credit forms and ineligibility (table 4- 1).l1

Actual claims for the conservation credits correlated directly with income; the highest level of

participation (26 percent) was in the highest income

category ($30,000 and up), and the lowest levels of

participation (9 to 11 percent) were in the lowest

income categories (less than $15,000). Perhaps the

most interesting finding in the 1984 RECS study was

that most respondents claimed they would have

made the same conservation investment without the

credit. Eighty-eight (88) percent of respondents who

9 U,S, Llbrq of congre~~, conwe~~loml Research Semice, An Economic. Eva/uari~n Of Federul TW Credits for Residenfi”al Energy Conservation,

Report No. 82-204E (Washington DC: December 1982), pp. 9,58.

10 ~ese we summv fi~rcs Compllcd by OTA from unpublished IRS data. John Kozielec, Internal Revenue Service, personal communication, June

24, 1991.

11 u,S, Depwfient of En~r~, Energy lnfo~ation A~inis[~tion, Residential Energy consumption Survey: Housing Charac(eris[ics 1984,

DOE/EIA-03 14(84) (Wasingtom DC: October 1986), p. 27.
Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 95

had claimed the conservation credit asserted they

would have made the same expenditures without the

tax credits.12 This suggests that the incremental

value of the credits as inducements to perform

retrofits may have been negligible, and the credits

may have created a windfall for many energy

investors who would have made the same conservation investments anyway .13

The IRS required claimants to indicate the nature

of their expenditures. From 1978 to 1981, about 85

percent of credited conservation expenditures were

for insulation, storm windows, and storm doors;

caulking and other conservation retrofits comprised

the small remainder of expenditures in this category.

Though more homes in this period made insulation

investments, the total cost of storm doors and

windows for program participants was slightly

higher. 14 Experience in other Federal programs,

however, suggests that many of the credited retrofits

(particularly storm doors and windows) were among

the least cost-effective.ls In addition, the program

did not establish incentives or guidelines to promote

cost-effective retrofits; the principal goal was to

encourage retrofits that consumers judged worthwhile (by whatever criteria they chose).

The rental housing market was minimally affected

by the residential energy tax credits.l6 Under the

principal residence requirement necessary to obtain

the credits, landlords were generally ineligible,

while renters generally had little financial incentive

to retrofit their units (especially if they did not pay

their energy bills directly). This lost market was

important because, at the time the credits were

available, one-third of the 80 million housing units

in the United States were rented.17

In sum, the conservation credits established under

the Energy Tax Act appear to have been bypassed by

most consumers that performed retrofits. Apparently, other factors motivated retrofits more strongly.

This suggests that the tax incentives were a windfall

for most claimants. There are several explanations

(given below) for this general disregard of the

conservation credits, which Congress should be

aware of if it considers re-enacting such credits in the

future.

●

●

The conservation credits were poorly advertised and were restricted to claimants using

the IRS long forms. The 1984 RECS study

determin ed that these were the two most

common reasons for not c1aiming the credits.

First, the study revealed that a significant

portion of consumers were unaware of the

credits (between 19 and 38 percent, depending

on income). In fact, awareness decreased with

decreasing income, suggesting that the relative

need to advertise incentive programs to lowincome groups is greater than for higher income

groups. Second, low-income households and

renters may have been discouraged or prevented from claiming the credits, because many

of them generally do not file long forms.

The rate of the conservation credits (15

percent) was probably too low to motivate

widespread retrofitting. This was a major

reason given for all income groups in the 1984

RECS study. Interestingly, Congress considered extending and increasing the conservation

credits to 25 percent for tax years 1985 to 1988

for households earning less than $30,000,18 but

no measure was enacted.

lz u s DepW~cnt ~f Enerfl, EncrD I~o~ation Adm~is~~tion, Residential Energy Conwnpfion su~vey.’ ff~u~ing Characfen”stics 19WJ

DOE/EIA~0314(84) (Wmhington, DC: October 1986), p. 27.

13 Yet tie ~w,ey ~d ~[ ]=~t N. &awbacks, F1rs(, respondents were question~ we]] af[cr [hey made ~eir inves~ents; they were not asked the extent

to which the availability of the credits motivated them to undertake the investments in the first place, or whether learning about the Federal credits was

connected to their seeking energy improvements in their principal residences. Also, the survey did not determine the potential effwts of a larger credit.

14 us, Dep~mc[lt of Energy, Encr~ In fo~tion Admirlis~ation, An Economic E\,a/uafi”on of Energy c~nsenvation and Renewable Energy Tax

Credifs, DOE/NBMAOO0728 (Washington, DC: October 1985), Service Report, p. 12.

IS SW, c,g., J, Schlegcl, J. McBride, S. Thomas, and P. Berkowitz, ‘‘The State-of-the-Art of Low-Income Weatherization: Past, present, and Future, ’

Proceed~ngs of /he ACEEE 1990 .$ummcr Srudy on Energy Efj2ciency in Buildings (Washington DC: American Council for an Energy-Efficient

Economy, 1990), vol. 7, p. 7.212.

16 J, Cllnton, H. Gcllcr, and E. Hirst, ‘ ‘Review of Government and Utility Energy Conservation Programs,’ Annual Re~tiew of Energy 1986 (Palo

Alto, CA: Annual Reviews, Inc., 1986), vol. 11, p. 109.

] 7 u.s Dep~mCnt of Encr~, Energy Iflo~tlon Adminis~~tion, Residertfia/ Energy Consumption Sun’e}’: Trends in c~nsumption and

Expenditures, 1978-1984, DOE/EIA-0482 (Washington, DC: June 1987), p. 118. See also P. McDcvitt and R. Peterson, ‘‘Residential Energy

Conscrvatlon: An Investigation of the Post Tax Credit Era in the U.S., ” Journal of Public Policy & Marketing, vol. 4, 1985, p. 45.

18 u s Dep~men[ of EnCr~, Ener~ I~omtion A~nis~ation, An ECo~~mic E\,a/ua~”on of Energy Consenvution and Reneu’able Energy Tti

Cred[ts, DOE/NBM—@300728 (Washington, IX: Octokr 1985), se~ice RcPofi+ P V.
96 ● Building Energy Efficiency

●

●

●

The principal residence requirement under

the ETA prevented landlords (and those

owning two or more homes) from using the

credits. If landlords had been able to use the

conservation credits, a larger portion of the

sizable rental market, which comprised from 26

to 31 million units between 1978 and 1984,19

probably would have received retrofits.

Other economic changes (notably the rise in

household energy costs and the drop in

personal income) during the late 1970s and

early 1980s were probably more significant

inducements to perform retrofits than were

the energy tax credits. A change in energy

prices, depending on the relative level, may

exert a stronger influence on conservation

investments than tax credits.

The lag time between financing retrofits and

enjoying the tax credits (from several

months to a year or more) probably diminished the value of the credits as a financial

incentive for many consumers. This issue was

not addressed in the 1984 RECS, but the more

distant the enjoyment of financial incentives,

the less likely that consumers will pursue them.

Therefore, U.S. experience with residential energy conservation tax credits reveals uncertainty

about their merits as financial incentives. Although

nearly 30 million credit claims were made, their

ultimate economic benefits have not been reliably

determined. Greater efforts to target low-income

groups and renters, to encourage the adoption of

cost-effective measures, to advertise the program

and, perhaps, to increase the allowable credit limits

could have increased participation in the program

and maybe improved its benefit-cost ratio, which is

still undetermined.

Weatherization Grants

The Federal Government currently offers two

major weatherization assistance programs for lowincome households.20 Based on historical budget

allocations, low-income weatherization is the major

focus of Federal efforts to conserve energy in U.S.

buildings. The combined budgets of these two

programs have consistently been higher (about $330

million in 1991) than any other Federal program

aimed at energy conservation in buildings. (For

example, the 1991 DOE buildings conservation

research and development (R&D) budget was about

$43 million.) The DOE Weatherization Assistance

Program (WAP), the older of the two, is authorized

under Title IV of the Energy Conservation and

Production Act (Public Law 94-385), as amended.

The WAP funds weatherization measures for

low-income households to reduce their energy use.

The other program, the Low-Income Home Energy

Assistance Program (LIHEAP) authorized under

Title XXVI of Low-Income Home Energy Assistance Act (Public Law 97-35) as amended, primarily

subsidizes energy bills for low-income households.

However, States may use 15 percent of their

LIHEAP funds for low-income weatherization (up

to 25 percent with an approved waiver application).

The weatherization components of these programs are intended to reduce residential energy costs

for low-income families, which typically spend

larger fractions of their incomes on energy relative

to higher income households. For example, families

earning less than $5,000 per year spend on average

25 percent of their household income on energy,

while higher income families (earning $15,000 or

more) spend 5 percent or less of their income on

energy.

2l And families earning less than $5,000 Per

year consume on average 68 percent more energy to

heat a square foot of living space than those earning

$15,000 or more.22 Low-income residences are often

older and in greater disrepair than those of higher

income groups. According to DOE, energy savings

of 25 percent or more are possible for a substantial

number of low-income homes eligible for Federal

weatherization monies .23

19 us. Dep~ent of Energy, Energy Itio~tion Administration, Residential Energy Consumption Survey: Trends in COWmpfiOn and

E.rpenditures, 1978-1984, DOE/EIA-0482 (Washington, DC: June 1987), p. 118.

zo In ~~ ~ontcxt, ~mtherlzation ~efcr~ t. ~emwes designed to save heating ~d cooling energy by shell, equipment, ~d behavioral changes applied

to existing homes.

21 U.S. DcpU~ent of Ener~, Ener~ ~o~tlon Adminis~atio~ Household Energv consumption and Expenditures 1987, Part 1: National Data,

DOE/EIA-0321/1(87) (W,a.shington, DC: October 1989), p. 50.

~’2 Bawd on natural gas heating expenditures and adjusted for climate. This difference across the income groups is somewhat smaller for electrically

heated households (about 52 percent). These OTA calculations are based on data in ibid., pp. 101, 104.

23 U.S. Department of Energy, Office of the Assistant Secretary for Conservation and Renewable Energy, ‘‘Report on the Present Wcathcrization

Grant Program,” prepared for the U.S. Senate, Committee on Appropriations, Aug. 29, 1989, pp. v, 35.
——.

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 97

The other major Federal weatherization grant

program in operation is the Institutional Conservation Program (ICP). This program provides match

monies to nonprofit schools and hospitals for energy

audits and retrofits and is discussed after the

low-income programs,

Weatherization Assistance Program--Administered by the Weatherization Assistance Program

(WAP) Division, which is within the Office of

Technical and Financial Assistance (formerly the

Office of State and Local Assistance Programs) at

DOE, WAP funds energy conservation measures for

low-income households at no charge to the residents.

With its creation by the Energy Conservation and

Production Act (ECPA) in 1976, WAP supplemented an existing Federal weatherization program

overseen by the Community Services Administration (CSA). The CSA authorized its local grantees in

1974 to assist low-income households burdened

with rapidly rising fuel prices caused by the Arab oil

embargo of 1973. The CSA program was the first of

its kind but was eliminated in 1981, leaving WAP as

the sole Federal program designed exclusively to

weatherize low-income households.24

State requirements vary, but households with

incomes less than 150 percent of the Federal poverty

line, incomes less than 60 percent of their State’s

median income level, or receiving welfare are

generally eligible for WAP funds. State expenditures were limited to an average of $1,600 per

household, which includes apartments, but recent

legislation allows that amount to adjust annually

with inflation or by 3 percent, whichever is smaller,25

These funds are available for materials and labor

(installation and related repairs), and priority is

given to households having elderly or handicapped

residents.

Until recently, at least 40 percent of WAP funds

were required to cover materials costs, but recent

legislation allows States to bypass this requirement

if they apply energy audits to client households to

determin e optimal retrofit needs and if they establish

weatherization criteria that ensure cost-effective

retrofits-not merely energy saving ones.26 No more

than 10 percent of WAP monies may be used for

administrative costs.27

As with the former CSA program, a WAP priority

is to use nonprofit, nongovernmental community

action programs (CAPS) to manage weatherization

services locally. Local agencies, whether CAPS or

others, install the conservation measures for participating households. Roughly 1,200 such groups

participate in WAP, with average staff sizes of only

5 to 10 people.28 As a result, the program is highly

decentralized, and most major efforts-client selection, weatherization installation, and financing-are

provided by these generally small, local groups.

The WAP has changed considerably in its 15-year

history. Initially, 90 percent of grant funds were

restricted to materials costs; all labor was provided

by trainees working under the Comprehensive Employment and Training Act (CETA); priority was

given to households with elderly or handicapped

residents; and rental units could be weatherized if

the resultant benefits accrued mostly to tenants

rather than their landlords. (ECPA disallowed landlords to raise rents on the basis of weatherization

improvements .29) Subsequent statutory and rules

changes, however, have altered the program.

In recent years, DOE regulations have allowed

WAP to fund furnace repairs and adjustments, raised

the program eligibility limit twice (currently at 150

percent of the poverty level, up from 100 percent in

1979), granted States additional discretion to adminM J. Schclegel, J. McBride, S. Thomas, and P. Berkowitz, “The State-of-the-Art of Imw-Income Weathcrization: Past, Present, and Future,”

Proceedings of [he ACEEE 1990 Summer ,$fud~ on Energy Eflciency in Buildings (Washington, DC: American Council for an Energy-Efficient

Economy, 1990), vol. 7, p. 7.206.

25 State Energy Efficiency Programs Improvement Act of 1990, Public Law 101-440, 104 Stat. 1013, sec. 7(e)(2).

26 Ibid., sec. 7(d)(3).

‘7 This requirement wm identified as a major program impediment in a national sumey of local programs. Sce M. Schweitzer, ‘ ‘Energy Conservation

for bw-Income Households: A Study of the Organization and Outcomes of Wcatherization Assistance Prograrn.s, ” Energy System.r and Policy, vol.

12, No. 2, 1988, p. 111. However, recent legislation partially corrects this problem, because agencies receiving less than $350,000 per year may use an

additional 5 percent for administrative costs. See State Energy Efficiency pro~ams Improvement Act of 1990, Public Law 101-440, 104 stat. 1013, sec.

7(d)(2).

28 Ibid., pp. 102, 105.

29 J. Schelegel, J. McBride, S. Thomas, and P. Berkowitz, ‘‘The State-of-the-Art of Low-Income Weathenzation: Past, Present, and Future, ”

Proceedings of [he ACEEE 1990 Summer Study on Energ} Eflciency in Building$ (Washington, DC: American Council for an Energy-Efficient

Economy, 1990), vol. 7, p. 7,206.
98 . Building Energy Efficiency

ister their WAP programs, established a maximum

average spending cap of $1,600 per household, and

provided the option to spend as little as 40 percent

of program costs on materials.30 The minimum

materials costs were lowered in response to growing

evidence that more emphasis on labor, especially for

related repairs, could result in important energy

savings. 3l In addition, household cooling efficiency

retrofits are now eligible for WAP funds.32

The only national WAP evaluation was completed in 1984 and represented program results

through 1981. The study determined that average

annual household energy savings were roughly 10

percent. 33 The numerous statutory and rule changes

to the program since 1981, however, render this

early national assessment of the program obsolete.

Although DOE recently initiated the second national

evaluation of the program, the final report will not be

available until the end of 1993.34

Until the second national evaluation is finished, it

is encouraging to consider that WAP has evolved

from a largely volunteer, inexperienced labor force

(under CETA) into a skilled force using more

sophisticated diagnostic technologies in weatherization assessments. Moreover, the goal of achieving

cost-effective energy savings has become increasingly common in State and local planning. Seemingly obvious in retrospect, the notion of costeffective weatherization—that is, funding retrofit

options for which the energy savings, discounted

appropriately, exceed the initial investment-is not

required by the legislation that authorizes WAP.

That now obvious oversight is being addressed

somewhat on the State and local levels, but no

Federal legislation has yet required all WAP projects

to be cost-effective.

OTA has identified several major issues for

Congress to consider regarding WAP.

●

●

●

Though WAP pursues a variety of goals in

selecting clients for weatherization (e.g.,

targeting the handicapped and the elderly),

stressing or even requiring cost-effective

weatherization (with paybacks generally ranging, for example, no longer than 5 to 8 years)

would better ensure that program monies

are spent more carefully.

The State allotment scheme for the disbursement of Federal WAP funds could be reassessed. Federal regulations require DOE to

determine State WAP allotments based on

several criteria: climate, the relative number of

low-income households, and the share of residential energy consumption for each State. This

WAP disbursement scheme, however, has apparently allowed colder States to receive a

higher proportion of WAP funds than other

States with relatively larger low-income populations or relatively greater low-income energy

expenditures. One proposed alternative is to

adjust WAP funding according to the size of a

State’s low-income population and on the

State’s household energy expenditures. This,

apparently, would result in a different flow of

WAP funds to the States.35 Recent legislation

requires DOE to update annually the data used

to determine WAP allotments but does not

direct the agency to revise its scheme accordingly. 36

Delays (both State and Federal) in reimbursing local weatherization programs have been

identified as a major impediment to WAP

success, affecting long-range planning, sol30 Ibid,

3‘ Ibid.

32 ~ese ficlude replacement air conditioners, ventilation cquipmen~ window films, and shading devices. See State Energy Efficiency progr~

Improvement Act of 1990, Public Law 101-440, 104 Stat. 1012, sec. 7(a).

33 GE. Peabody, U.S. Dep~ent of Energy, Energy Information Administration Weatherimrion Program E\lafuution SR-EEUD-84-1

(Washington DC: August 1984), Service Report, pp. 1, 18.

34 D.A. Beschen and M.A. Brow U.S. Department of Energy, ‘‘Evaluation Plan for the Weatherization Assistance program,’ October 1990, figure

A-1 .

35 me~~~~ a different allocation scheme tit pfidly corr~ts his s~e problem. ~ p~CUIM, tie second of two allocation fOllIlldaS USed

in LIHEAP resolves this presumed inequity. The selection of a formula in a given year depends on the amount of appropriations in that year. When

appropriations are below $1.975 billion, which has been the case for several years, the first formula is applied. That formula favors colder States, because

it stresses climate and total State heating costs, When appropriations exceed $1,975 billion, thoug~ the second formula is used, which bases State

LIHEAP allocations according to each State’s actual share of heating costs for low-income households—not the climate nor the total State heating costs.

See M.F. Smith and J. Richardso& U.S. Library of Congress, Congressional Research Service, ‘‘ Weatherization Assistance Programs of the Departments

of Energy and Health and Human Services, 90-285 EPW, June 1990, p. 7.

36 s~tc Energy Efficiency programs Improvement Act of 1990, Public LAW 101-440, 104 S~t. 1013, SCC. 7(c)(2).
. — . .-

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 99

Figure 4-1 —Use of Funds in the Low-Income Home

Energy Assistance Program, Fiscal Year 1991

(in millions of current dollars)

Heating assistance

“’”n

Crisis

I stance

\

\

ization

1

Y 1992

assist

211

s

SOURCE: Unpublished data from U.S. Department of Health and Human

Services, Office of Energy Assistance, July 1991. These 1991

data are based on estimates from a 1991 LIHEAP telephone

survey.

vency, and local performance. A recent review of local performance indicated that the

average time to reimburse local agencies was

roughly 30 days. About 25 percent of the

agencies participating in the same review,

however, had to wait an average of at least 38

days or longer to receive funds for performed

work,37

Resolving these critical WAP issues is likely to

improve the timeliness, quality, and costeffectiveness of the program. Regarding timeliness,

combined WAP/LIHEAP weatherization efforts reach

about 250,000 households annually, which suggests

that reaching the 15 to 18 million households that

have not yet participated in the program (by DOE

estimates) 38 would require an additional 60 to 70

years. Addressing the issues discussed above, leveraging more State and utility resources for lowincome weatherization and, perhaps, allowing a

greater percentage of LIHEAP funds to apply to

low-income weatherization could substantially shorten

this projected period.

Low-Income Home Energy Assistance Program—

Since 1982, the WAP has been supplemented by the

Low-Income Home Energy Assistance Program,

which is administered by the Department of Health

and Human Services (HHS). The LIHEAP is an

outgrowth of Crisis Intervention, a program initiated

in 1974 under the auspices of the now defunct

Community Services Administration low-income

energy assistance program. 39 Enacted by Title XXV I

of the Low-Income Home Energy Assistance Act of

1981 (Public Law 97-35), LIHEAP disburses funds

to States to assist with heating and cooling bills for

their eligible low-income households.

At their discretion, States may use up to 15

percent of their LIHEAP funds for low-income

weatherization; with HHS approval, that maximum

can increase to 25 percent. The uses of LIHEAP

funds in 1991 are given in figure 4-1. In recent years,

WAP and LIHEAP together have weatherized more

than 250,000 households a year at a Federal cost of

about $300 million annually.40

As figure 4-2 illustrates, States expend on average

between 7 and 10 percent of their LIHEAP funds on

weatherization. If more LIHEAP funds were directed to weatherization, the need to assist many

low-income households with their energy bills in

outlying years could diminish, but then the Federal

Government may not be able to reach as many

households in a given year. For example, LIHEAP

heating assistance payments have averaged around

$200 per household,41 far less than the average

amount allowed for weatherization in WAP (about

$1,600 per household). By this simple comparison,

directing all current LIHEAP monies to weatheriza-

~7 M. Schweitzer, “Energy Conservation for Imw-Income Households: A Study of the Organization and Outcomes of Weatherization Assistance

Progranls, ’ Errerg) Systems and Policy, vol. 12, No, 2, 1988, p. 110. This source indicated that most States further restrict local agency administrative

expenses to about 5 percent.

38 U.S. Department of Ener~, office of the Assistant .%cretary for Conservation and Renewable Ener~, “Report on The Present Weatherization

Grant Program, ’ prepared for the LT.S. Senate, Committee on Appropriations, Aug. 29, 1989, p. 41. These estimates of nonparticipating households do

not exclude those prcv]ously weatherized in separate State and utility programs. The actual number of nonparticipants, therefore, is overstated to some

degree.

39 J. ScMCgcI, J. TvicElride, S. Thomas, and P. Berkowi@ ‘ ‘The State-of-the-Art of Low-Income Weathm-ization: Past, Present, and Future,”

Proceedings of the ACEEE 1990 Sl~mmer Study on Enercqy Efficiency in Buildings (Washingto~ DC: American Council for an Energy-Efficient

Economy, 1990), vol. 7, pp. 7.206-7.207.

4~ M,F, Smith and J. Rick(Json, U,S. Library of Congress, Congressional Research Semicc, “Wcatherization Assistance Programs of the

Departments of Energy and Health and Human Scrviccs, ’ 90-285 EPW, June 1990, p. 4.

A1 Unpubllshcd data provided by U.S. Department of Hc~th and H~ Semiccs, Office of Energy Assistance, to OTA, July 31, 1991.
100 . Building Energy Efficiency

Figure 4-2--Weatherization Funding in the LowIncome Home Energy Assistance Program,

Fiscal Years 1982-91

Current dollars (millions) 2,500 ~ - -

2,000

1,500

1,000

500

.

.

“ 1982 83 84 85 86 87 88 89 90 91

m Weatherlzatlon “...., Fuel assistance and other

SOURCE: Unpublished data from U.S. Department of Health and Human

Services, Office of Energy Assistance, July 1991, The 1991 data

are based on estimates from a 1991 LIHEAP telephone survey,

and the remaining data are historical.

tion would reduce the number of households serviced annually by a factor of about eight, but placing

greater emphasis on weatherization could reduce the

ultimate energy requirements of eligible households

over time.

Although LIHEAP is principally an energy assistance program, there are several important issues

worth considering about its weatherization efforts:

The cost-effectiveness of weatherization measures funded by LIHEAP is not being assessed, nor are there clear program policies

or measures that encourage cost-effective

weatherization.

Federal requirements or policies to leverage

LIHEAP weatherization monies with State

and utility resources are appropriate to

consider. The private U.S. utility industry

benefits secondarily but substantially from

Federal LIHEAP outlays, because these funds

are used to assist low-income households that

might not otherwise pay their energy bills as

quickly or at all. By providing energy assistance, LIHEAP offsets utility arrearages from

delayed or missed payments by low-income

households. (Utility arrearages from delayed

residential payments amount to hundreds of

millions of dollar-s annually. )42 As a result,

Congress could determine whether private

utilities should provide greater assistance to a

Federal effort from which these firms benefit.

Institutional Conservation Program—The ICP

is a Federal institutional grant program administered

by States through DOE regional offices. Since 1980,

ICP grants have funded energy audits and the

application of energy conservation measures to over

20,000 schools (primary and secondary), colleges,

universities, and hospitals.43 The program is designed to assist the financing of energy audits and

retrofits in the nonprofit institutional sector, where

resources are generally limited.

Until 1990, ICP eligibility was limited to nonprofit institutional buildings constructed before

April 20, 1977. Recent legislation, however, shifted

the eligibility to such buildings constructed before

May 1, 1989.44 By 1988, ICP spending totaled

almost $1.4 billion and resulted in an estimated

cumulative energy savings of 0.3 quads (317 trillion

Btus) worth an estimated $1.9 billion.45 This spending figure includes both DOE grant outlays and the

matching funds required of participating institutions. By this measure alone, the ICP has exceeded

its break-even payback costs by $500 million.ti

There are two kinds of ICP grants. Technical

analysis (TA) grants fund energy audits to determine appropriate energy conservation measures

(ECMS) for participating institutions. ECM grants

fired the design, acquisition, and installation of

energy conservation measures for participating institutions. Except in cases of demonstrated hardship,

ICP grants are limited to 50 percent of participant

costs. Where hardship has been demonstrated, ICP

will fund up to 90 percent of the TA or ECM. By the

end of 1987, ECM grants resulted in an average

42p. Rodgers, M Foley, and ~. ~&er, Sun.ey of EleC~l~ and Natural Gas utility Unco]leetab[e Accounts and Service Disconnections for 1984

(.Washington, DC: National Association of Regulatory Utility Commissioners, October 1985), pp. 41-48.

43 NE. Collfi, R,C, K_emd, ~d p,H. ~er, Energv conservation in Hospita[s, colleges and (Jniver.rities, and Public School Districts: Results

of a National Evacuation (Argome, IL: Argonne National”Laboratory, May 1988), p. 30.

44 Sbte Ener~ Efficiency ~ogms Improvement ~t of 1990, public IAW 101-44O, 104 Stat. 1011, SW. 6(b)(l).

45 us. Dep~en[ of Ener~, Office of co~e~ation and Renewable Energy, An Estimate o~Aggregare Energy Savings Due fO fhe ICP program,

DOE/SF/00098-H2 (Washington, DC: March 1988), p. vi. Figures in this section are expressed in 1987 dollars.

46 ICp_fWded ~easmes completed by 1988 are ex~cted to save @ additional .$4t)() million per year over their reIIlaillklg MetirIleS. Ibid., p. 33.
— —

Chapter 4--Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 101

energy savings of 12 percent for participating

educational facilities and 8 percent for participating

hospitals. 47

As of 1988, approximately 115,000 schools,

colleges, and hospitals comprised the institutional

sector. Ninety percent of these institutions were

schools, but they accounted for only 35 percent of

the total institutional energy use. This suggests that

the energy intensity (energy use per square foot of

floor space) of schools is far lower than colleges or

hospitals. 48 Given the large number but low energy

intensity of schools, a separate Federal effort could

target colleges and hospitals, because they are

relatively less numerous but more energy intensive.

As of 1988, however, 80 percent of ICP grants were

awarded to schools .49

Summary figures confirm the point that ICP

program monies are reaching the less energyintensive buildings eligible for assistance: ICP

grants have reached 29 percent of the eligible

institutional floor space but that space consumes

only 27 percent of the total energy in the eligible

portion of the institutional subsector.50 Nevertheless, paybacks are favorable for all subsectors,

averaging 3.6 years. The cost of conserved energy

has been estimated at just over $2 per million Btu.51

If this figure accurately reflects true ICP savings,

this program is probably the most cost-effective

Federal energy grant program in operation, and the

use of energy audits invariably contributes to this

success.

Loan Subsidies

Solar Energy and Energy Conservation Bank—

The SEECB (or the “Bank”) was authorized by the

Energy Security Act of 1980 (Public Law 96-294) to

subsidize the purchase and installation of conservation and renewable energy measures in households

(one to four families), multifamily buildings (more

than four families), and nonprofit commercial and

agricultural buildings with low- and moderateincome owners and tenants. The goal of the program,

which was administered by the Department of

Housing and Urban Development (HUD), was to

encourage energy conservation and the use of

renewable energy sources (solar, wind, and wood) in

buildings to reduce national dependence on foreign

energy supplies. 52 Although later extended 6

months, the original statutory sunset date for the

Bank was September 30, 1987.53

Bank monies were disbursed through cooperative

agreements executed with States, all of which

participated in the program at least 1 year.54 The

original funding authorization for the Bank was

unprecedented for a Federal conservation and renewable energy incentive program designed for

low-income groups-over $3 billion for fiscal years

1981 through 1984.55 Before the program was

implemented, however, the newly arrived Reagan

administration proposed cutting the 1981 Bank

budget from $300 million to $250,000, which

Congress did.56 The revised 1981 budget was

intended to cover only administrative expenses;

funding authorized for 1982 to 1984 reactivated the

47 Ibid., p. vi.

48 In fact, measured in thousands of Btus per square foot per year (kBTU/sq ft/yr), median energy intensities for ICP-eli@ble buildings me tie

following: schools 130, colleges 240, and hospitats 420. N.E. Collins, R.C. Kammerud, and P.H. Kier, Energy Conservurion in Hospitals, ColZeges and

Universities, und Public School Districts: Results of a National E\’aluation (Argonne, IL: Argonne National Laboratory, May 1988), pp. 14-15.

49 Ibid., p. 43.

50 Ibid,, p. 44.

5 I Ibid,, p. 43. For ~omp~son, tie average cost of ~lec~icity in 1987 (tie yea represented ~ he Icp energy savings estimates) for be residentkd

and commercial sectors has been estimated at $21.18 per million Btu and natural gas at $5.12 per million Btu the same year. See U.S. Department of

Energy, Ener~ Information Administration, Armuu/ Energy Review’ 1990, DOE/’EIA-0384(90) (Washington DC: May 1991), p. 69.

52 Enerm SxUlty Act of 19~0, Public Law 96-294, 94 Stat. ~ 19* ‘~” 503

53 EnerW security ~t of 1980, fibhc ~w 96_294, 94 slat, 722, sec. 505(a). House Joint Resolution 395 (December 21, 1987) extended SEECB

authorization to March 15, 1988. Congress officially withdrew all unspent monies in 1990, although Bank activities had essentially ceased by mid-1988.

Public Law 101-507, 104 Stat. 1364.

54 u s Dep~cnt of Housing ~d Urbm Deve]opmcnt, SOIM Ener~ and Energy Consewation B~, So/ar Energy a~Energy Conse~Ylfi”On ~Unk:

.

FY 1987 Annual Report to the Congress (Washington, DC: 1987), p. 7.

55 me $S,OZS bllllon o~glndly au~orimd for the B* were designated prim~ly for conservation mefiures ($2.5 billion for fiscal years 1981 to

1984), with the remainder designated for renewable measures ($525 million for fiscal yews 1981 to 1983). Public Law 96-294,94 Stat. 737, sec. 522(a)-

(b).

56 ~~nlbus BudgC& Rec~ncilia[ion Act of 1981, Public Law 97-3S. See associatd senate Report @ud@ Committee) No. 97-139> June 17, 1981,

p. 384,
102 ● Building Energy Efficiency

program, but at substantially reduced levels.57 By

the time the Bank effectively expired in September

1987, program expenditures totaled only $76 million

and assisted about 98,000 projects .58 All administration requests for the Bank budget after 1981 were

zero.

59

The virtual elimination of the Bank budget in

1981 contributed to the delay in program implementation. Interim rules establishing program requirements were not promulgated until May 1983,60 and

final rules were not issued until March 1984.61

Given the 1987 sunset date, program planners could

expect only 3 1/2 years of operation. In fact, Congress

enacted no new budget authority for the Bank afte r

1985; budget authority for fiscal years 1986 and

1987 was zero, although $1.7 million of recaptured

1985 funds were reappropriated for 1988.62

Bank funds subsidized loans (either the principal

or interest portions) for energy conservation and

renewable energy measures installed in newly constructed or existing (pre-1980) buildings; grants for

energy conservation measures were also available

under the program. Any Bank funds allocated to

States but not expended within prescribed periods

were recaptured and redistributed; this was intended

to encourage the timely use of Bank funds and to

prevent States from hoarding program resources.

Also, the Energy Security Act prevented Bank

participants from claiming energy conservation or

renewable energy credits available under the Energy

Tax Act (Public Law 95-618).63

The Energy Security Act directed the Bank to

decrease assistance with increasing income according to enacted guidelines to ensure that the lowest

income groups would receive the greatest assistance.

64 As a result, by the end of 1987,65 percent of

program funds had been disbursed to the lowest

income group defined in the statute. In 1987, the last

year of major program activity, average loan subsidies were $1,053 and average matching grants were

$720. 65 Ninety percent of total program funds were

allocated to conservation measures.66

The Energy Security Act directed HUD to analyze

annually the cost-effectiveness of the Bank program,

by comparing total expenditures against total energy

savings, 67 but the statute did not impose limits on

program assistance according to any measure o f

cost-effectiveness. Nonetheless, HUD proposed i n

the 1983 interim rule that energy conservation and

passive solar measures should achieve a 7-year

simple payback, as determined by an energy audit,

to receive Bank assistance.68 Although this payback

test was based on DOE guidance issued for the

Residential Conservation Service (RCS), there were

objections to the HUD proposal, and later that year

Congress prohibited any limits on Bank assistance

that were based on projected energy savings.69

57‘rhC omnibus Budget Reconciliation Act of 1981 (Public Law 97-35) sec. 1071 reduced the Bank budget to $150 million for fiscal Yms 1982 to

1984. Subsequent legislation reduced this funding even further, to $135 million. Public Law 98-181, 97 Stat. 1235, sec. 463(f)(l).

58 IJ.S, Dep@ent of Housing and Urban Devclopmen~ Solar Energy and Energy Cm.servation BardG Solar Energy andEnergy conservation Bunk:

FY 1987 Annual Report to the Congress (Washington, DC: 1987), p. 2.

59 Walter ~eysW, U.S. Department of Housing and Urban Development, former Program Director, SEECB, personal commtication, Nov. 25,

1991.

6048 Federal Register 24254 (May 31, 1983).

6149 Federal Register 9865 (I$4w. 16, 1984).

6Z u s Dep~ent ofHous~g ~d Urb~Developmcnt, Solar Energy and Energy Conservation B@ Solar Energy andEnergy COnsen’atiOn ‘ank:

FY 1987”Annual Report to the Congress (Washington, DC: 1987), p. 12.

63 ~bllC ~w g6_zCJd, 94 Stat+ 723, sm. soG(f)$ The residential credits ~der tie Energy Tax Act were available for tax ytXUS 1$)78 to 1985. k additioq

the Energy Security Act prevented Bank assistance from being counted as income for any individual participating in the program. Public Law 96-294,

94 Stat. 726, sec. 509(c).

64 ~bllc ~w 96-294, 94 Sta[. 726-729, s~, 511-512 For example, o~ers or te~ts of s~gle f~ly residenms earning less tharl 80 percent Of

their median area income (MAI), the lowest income group in the prograrm were eligible for $1,250 of assistance, while those e arning between 80 and

100 percent of their MAI, the second lowest income group, were eligible for only $875 of assistance. See 48 Federal Regisfer 24265 (May 31, 1983).

65 us, Dep~ent of Housing ad Urb~Developmen~ Solar Energy ad Energy Conservation B* So/ar Energy andEnergy Conservafi’ofl Bank:

FY 1987 Annual Report to the Congress (Washington, DC: 1987), p. 4.

66 Ibid., p. 9.

67 Public Law 96-294, 94 Stat. 736, sec. 519(a)(3).

6848 Federal Register 24262, 24265 (My 31, 1983).

69 Hous~g ~d Urb~-Ru~ Recovery Act of 1983, ~blic ~w 98-181, sec. 463(c)(2). According to thc former SEECB program manager, thiS

prohibition was imposed to prevent further delays in program implementation. U.S. Department of Housing and Urban Development, former Program

Director, SEECB, personal communication, Nov. 25, 1991.
.— —.

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 103

Despite HUD objections to this prohibition,70 the

Bank appears to have conducted an extremely

cost-effective program. According to HUD estimates, SEECB conservation investments made in

1987 achieved average simple paybacks of 4.4

years. 71 AS with RCS, however, these estimates Were

based on State reports that summarized audit estimates of energy savings potential; no Federal effort

was made to test the reliability of these estimates or

the actual effect of the retrofits by using fuel use

data, surveys, or other methods.72

The implementation lessons applicable to the

Bank and worthy of attention by Congress are the

following:

●

●

Encouraging or requiring energy audits

prior to the disbursement of Federal funds

for building retrofits may be appropriate.

Energy audits inform consumers about economical retrofit options, which will encourage

them to spend their (and Federal) monies as

effectively as possible. Of course, performing

audits requires resources that could be used for

retrofits, but audit costs are relatively minor

compared to major retrofits, and they can

indicate the most cost-effective retrofit opportunities.

The use of mandatory cost-effectiveness requirements for Federally subsidized residential retrofit assistance has not been tested.

The Bank was never able to test this option, but

it is likely that such Federal requirements

would improve the cost-effectiveness of residential retrofit programs.

Federal Leadership

Providing Public Recognition for Voluntary

Energy Savings

Green Lights Program-Green Lights is a voluntary, cooperative corporate program formally initiated by the Environmental Protection Agency (EPA)

in January 1991. The program is intended to reduce

commercial building energy use by encouraging

companies to conduct voluntarily all possible costeffective lighting retrofits at their U.S. facilities. To

participate in the program, companies sign nonbinding agreements to survey lighting at all their

U.S. facilities and to perform retrofits in at least 90

percent of their total floor space. Retrofits are

required only where they would be cost-effective

and where they would not compromise lighting

quality. By reducing lighting energy use, the program aims to reduce the air and other pollution

associated with extracting and burning fossil fuels

for electricity generation.

The Green Lights program operates on the assumption that a variety of highly efficient lighting

technologies have been developed but insufficiently

implemented in the last decade.73 To address all of

the relevant barriers to energy efficiency, ranging

from inadequate information to financing, the Green

Lights program consists of several distinct arms.

The first program arm is the Decision Support

System designed to assist companies with lighting

surveys, the identification of retrofit options, and the

final selection of a retrofit option that maximizes

energy savings without compromising lighting quality. A separate Green Lights effort, the National

Lighting Product Information Program, is designed

to provide reliable information about lighting technologies and options to interested companies that

may question product claims or potential employee

response to lighting changes. Beyond such information about technical performance, the Green Lights

program also offers a support project to inform

participants about retrofit financing options, including assistance offered by utilities, government,

energy service companies, and other more conventional lending institutions such as banks.

The Green Lights program distinguishes several

participant groups: corporate partners, manufacturer

allies, electric utility allies, and lighting management company allies. To join the program, each

group must sign a nonbinding memorandum of

understanding with EPA that describes the responsibilities of EPA and the participant. As of December

70 ‘‘Jn [he opinion of the Bank. . .the ncw legislation ~blic Law 98-181] has impaired the Bank’s ability to focus appropriately on the most

cost-effective expenditures. ’ 49 Federal Register 9867 (Mar. 16, 1984).

71 u,S, Dep~entof Housing ~d urban Devc]opmcnt, solar Energy and Energy Conservation B@S~/ar~nergy an~EnergJt COnse~’OfiOn Bank:

FY 1987 Annual Report to the Congress (Washington, DC: 1987), pp. 3, 6.

72 Walter ~ey~nfl U,S, Dcp~mcnt of Housing and Urbm Dcvclopn~cnt, former Program Dir~tor, SEECB, pcrsorxd communication, NOV. 25,

1991.

73 Scc EPA pamphlet, “Green Lights: A Bright Investment in the Environment, ” July 1991.
104 ● Building Energy Efficiency

1991, roughly 150 companies had enrolled in the

program.

Although few actual measured energy savings

data are available at present, the Green Lights offers

an innovative approach to saving energy in the

private sector that is worth duplicating, because it

stresses cooperation, public recognition, costeffective energy savings, and voluntary participation.

Research, Development, and

Demonstration Programs

This section reviews the budgets and several

major accomplishments of the DOE energy conservation research and development (R&D) program

for buildings. This DOE program is administered by

the Deputy Assistant Secretary for the Office of

Building Technologies, who is under the Assistant

Secretary for Conservation and Renewable Energy.

The other Conservation and Renewable Energy

offices at the level of Deputy Assistant Secretary are

Industrial Technologies, Transportation Technologies, Utility Technologies, and the Office of Technical and Financial Assistance. This organizational

scheme was adopted in April 1990 to consolidate

better the office’s efforts by end-use sector. The

fiscal year 1991 Office of Conservation and Renewable Energy budgets by office are shown in figure

4-3.

With few exceptions, the most successful DOE

conservation R&D projects related to buildings were

initiated, and some completed, before the Department’s conservation budget was severely cut in the

early 1980s (box 4-D). Solid-state fluorescent light

ballasts, for example, were developed through DOEfunded work between 1976 and 1980, accounting for

a total Federal R&D investment of about $3 million.

These efficient ballasts represent a 20 to 25 percent

energy efficiency improvement over conventional

magnetic ballasts, and their use is expected to save

billions of dollars in lighting energy costs over the

next several decades.74

However, not all conservation R&D funding

results in major successes nor should this be

expected. One goal of conservation R&D is to

Figure 4-3--U.S. Department of Energy

Conservation Research and Development Budget

by End-use Sector, Fiscal Year 1991

(in millions of current dollars)

Transportation Industrial

te ies

Utility Building

technolog

4.2 echnologies

43.1

Policy and

\

j management

Technical and financial assistance

276.5

SOURCE: U.S. Department of Energy, United States Department

of Energy Fiscal Year 1992 Congressional Budget Request,

DOBCR-0001 (Washington, DC: February 1991), vol. 4, p. 273.

explore the potential for improving the efficiency of

energy use; much of that exploration requires trial

and error. Indeed, even when technology is improved in the laboratory, high costs, inadequate

marketing, or poor consumer response often limit or

prevent its adoption. For example, commercially

available heat pump water heaters consume about

one-half the energy used by conventional electric

resistance water heaters, but high first costs have

slowed their market penetration.75

The low penetration of several important

energy efficient technologies indicates that Federal research cannot be limited strictly to technical improvements—there should be a commensurate Federal effort to demonstrate and market

these technologies once they are developed. Such

marketing requires ongoing evaluations of consumer, builder, and manufacturer preferences, as

well as a detailed understanding of the barriers that

prevent the wider adoption of these technologies. To

assist the marketing effort, there could be more

aggressive implementation of newer, efficient technologies in the building retrofit programs administered by DOE.

74 H, ~cller, J.p. Hml~, MD ~v~c, and AH, Rosenfc]d, ‘‘~c Rolc of Federal Resc~ch ~d Development in Advancing Energy Efficiency: A

$50 Billion Contribution [o the US Economy,” Annual Re}’iew of Energy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987), vol. 12, pp. 381-382.

75 ~.A. BroW, L,G+ Be~, ~d R.K, Goel, c~mmerciolizing ~ov,ernment.,$ponsored Inno\,ations: lke[~!e succes.~fil Buildings Case Studies,

ORNL/CON-275 (Oak Ridge, TN: Oak Ridge National Laboratory, January 1989), pp. 70-81.
Chapter 4-A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 105

Box 4-D—DOE Conservation Research and Development for Buildings:

Four Successful Projects

A variety of energy conservation technologies associated with buildings has emerged from DOE-funded R&D

projects. Many of the most important successes resulted from work initiated prior to the drastic cuts in the DOE

conservation R&D budget that occurred in fiscal year 1982. A brief history of the development of four of these

DOE-sponsored technology projects is given below: high-efficiency refrigerator compressors, high-efficiency

refrigerator-freezers, solid-state fluorescent ballasts, and low-emissivity window coatings. This history is a limited

but useful indication of the Federal R&D contribution to advancing building energy conservation.

High-efficiency refrigerator compressor—Using DOE funds, the Oak Ridge National Laboratory (ORNL)

funded the development of a prototype high-efficiency refrigerator compressor from 1977 to 1981. This work was

conducted by the Kelvinator Co., a major appliance manufacturer. Refrigerators and freezers account for about 10

percent of primary energy use in the residential sector, and compressors use between 70 and 85 percent of that

energy. Through design changes in the refrigerator motor and suction muffler, Kelvinator achieved an improvement

in compressor efficiency of 44 percent. By one estimate, this improvement will save $1,1 billion in consumer energy

costs annually by 2005. According to the same source, DOE involvement in this project hastened commercialization

by 2 years.1

High efficiency refrigerator-freezer—From 1977 to 1983, ORNL funded a project conducted by Amana

Refrigeration, Inc. in cooperation with Arthur D. Little, Inc. to improve overall refrigerator-freezer efficiency. Six

design changes were selected for the prototype model, including thicker cabinet insulation, relocation of the fan

motor outside the freezer, improved door gaskets, and separate evaporators for the freezing and refrigerating

sections. The resulting energy savings were 60 Percent.2

Although these refrigerators were not widely marketed, the success of this research contributed to the

development of the 1990 and 1993 refrigerator standards under the National Appliance Energy Conservation Act

(Public Law 100-12). In brief, the successful design changes in the prototype model compelled DOE to consider

them in its refrigerator efficiency rulemaking under the National Energy Conservation Policy Act (Public Law

95-619; NECPA) in the early 1980s. Although the Department never promulgated real legally binding standards

under NECPA, the California Energy Commission (CEC) set its 1992 refrigerator standard based on the DOE

analysis behind this NECPA effort, which indicated the feasibility and cost-effectiveness of adopting the

technologies incorporated in the DOE prototype. Subsequently, the 1992 CEC standard was used to develop the

1990 and 1993 NAECA refrigerator standards. Thus, DOE-funded research was instrumental in demonstrating

technologies that were eventually used to guide the development of Federal appliance efficiency standards.3

1 H. GeUm, J.P. l-brris, M.D. Levine, and A.H. Rosenfeld, “The Role of Federal Research and DeVeloprnent in ~v~c~g ~agy

Efilciency: A $50 Billion Contribution to the US Economy,” AnnuaZReview oJEnergy 19W (Palo Alto, CA: Annual Reviews, Inc., 1987), vol.

12, pp. 36G361, 391,

2 Ibid., p. 391.

3 David B. Goldste@ Na~~ Resomc~ Defeme Comcfl, @tten com,m@@ion to OTA, oct. 11, 1991.

(Continued on next page)

Despite major successes in building and other Congress horn fiscal years 1983 through 1990. In

energy technology R&D in the late 1970s and early fiscal year 1983, the administration’s conservation

1980~, the DOE- conservation R&D budget was R&D budget request for buildings, industrial, and

severely cut in the 1980s (figure 4-4). These cuts transportation activities was zero. 76 ConWeSs constemmed from a major Federal R&D policy change tinued funding these conservation programs but at

introduced by the Reagan administration, which levels far below the 1979 to 1981 fiscal years.

advocated a shift toward private sector fimded R&D.

As a result, DOE conservation R&D budget requests The sharpest drop in the overall DOE conservawere lower than the actual budgets authorized by tion R&D budget was experienced in fiscal year

76 U,S, CongcSS, Gencr~] ~counfig OffIce, Energy R~: DOE’S Allocation of Fu~s for Basic and Applied Research and Development,

GAO/RCXD-90-148BR (Gaithersburg, MD: May 1990), p. 24.

297-936 0 - 92 - 8 : QL 2
106 ● Building Energy Efficiency

Box 4-D—DOE Conservation Research and Development for Buildings:

Four Successful Projects-Continued

Solid-state fluorescent ballast-In 1977, researchers at Lawrence Berkeley Laboratory (LBL), another

DOE-funded national energy lab, began work on solid-state fluorescent ballasts, a technology that had promising

theoretical potential at the time but had not yet been developed. With DOE funding, LBL began working with two

small contractors to develop these ballasts; none of the major ballast manufacturers decided to participate in this

effort. DOE was involved in this effort until 1980, shortly after the efficacy of the new ballasts was demonstrated

in several test projects, including one at a Veterans Admini “ “stration medical facility in Long Beach, California. These

ballasts allow about a 25 percent reduction in fluorescent lighting energy use without losses in illumination. By one

estimate, DOE involvement hastened commercialization of this technology by 5 years.4 At present, solid-state

ballasts are installed only in 3 percent of fluorescent fixtures in the United States.5 However, their penetration in

the new ballast market reached 10 percent in the first 6 months of 1991,6 and future sales are projected to increase.7

Low-E window coating--Low-emissivity (low-e) coatings are designed to reduce heat loss or gain through

windows. Similar to other DOE projects begun in the late 1970s and early 1980s, initial industry interest in

researching and developing this technology was low. Windows account for significant heat transfers in buildings;

as noted in chapter 2, the R-value (or resistance to heat transfer) of atypical wall in the United States is 15, whereas

a single-pane window has an R-value of just 1. Low-e coatings increase window R-values. As noted in chapter 2,

low-e double-pane windows presently on the market have R-values ranging from 2.5 to 3.2, an improvement over

the uncoated double-pane R-value of 2. As with solid-state ballasts, DOE funded this project through LBL. The

initial DOE interest and financial backing in the low-e project contributed to its early progress, which prompted

window manufacturers to invest $150 million of their own funds in this effort by the mid-1980s. Commercialization

of the first low-e window coatings, despite a few early setbacks, occurred in 1983, an estimated 5 years sooner than

it would have without DOE support.8 Today, large window manufacturers offer low-e glass as an option for almost

all of their products.9

4 H. &LIa, J.P. -s, M.D. bvb, ~ A.H. RosenfelL ‘The Role of Federal Research and Development in Adv~C@ mffgy

Efficiency: A $50 Billion Contribution to the US Economy,” Annual Review ofEnergy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987), vol.

12, pp. 360,379-383.

5 U.S. ~p~at of q, Office of Conservation and Renewable Energy, A Compendium of Energy Conservation success Stotie$

90, DOIZKH1OO93-83 (Wshin@oIA DC: December 1990), P. 1%

6 F~mfm t. ~es for~ fmt W. q~rs of 191. U.S. ~p~~ of co~me, BIKCRU of the Census, currentMiwrz”alReports:

Fluorescent Lamp BaZlasts, Second Quarter 1991 (WashingtoIL DC: September 1991), p. 1.

7 *D+ Li~~, ~c-, Supply ~~De~& ofComp~~tFl~oresce~ ~mps a&EJec~O~C Ballasts (Cambridge, MA: J5nu~ 1991),

p. 17.

8 H. ~~w, j~.-s, M.D. ~vine, ~ ASH+ Ro~feld, “me Role of Fed- R~~h ~d Development in AdVWIChg Energy

Ef13ciency: A $50 Billion Contribution to the US Economy,” Annual Review ofEnergy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987), vol.

12, pp. 360,383-390.

9 J. Tmmbly, ‘tw~dow Compay S~&&s ~w.E Gks,” Home Energy, May/June 19N, pp. 6-7.

1982, when funding dropped 71 percent from $300.1 as a benchmark for other fiscal years, because it was

million to $87.2 million (current dollars). While the

total DOE conservation R&D budget has been

increasing modestly since 1982, the 1991 budget in

current dollars was only 62 percent of the 1980

budget. The 1991 DOE buildings conservation

R&D budget in current dollars was only 44

percent of the 1980 budget.77 This is not to suggest

that the 1980 tiding level was optimal, but it serves

the largest conservation R&D budget in DOE

history.

While funding is critical, the Federal commitment

to energy conservation R&D cannot be measured

solely by budget size. Other important measures of

Federal coremitment to energy conservation R&D

include the actual division of overall funding between basic and applied research, the mix of R&D

77 ~ ~Went do~ws, me to~ DOE ConseNatlon R&D budget was $’34’3,7 million h Iggo and $214.7 million in Iggl. The DOE building conservation

R&D budget in current dollars was $98,3 million in 1980 and $43.1 million in 1991. The 1980-82 data are from F.J. Sissine, U.S. Library of Congress,

Congressional Research Service, IB85 130, Energy Conservation: Technical Eflciency and Program Effectiveness, CRS Issue Brief, April 1991. The

1991 data are from U.S. Department of Energy, United Stares Department of Energy Fiscal Year 1992 Congressional Budget Request, DOE/CR-0001

(Washington DC: February 1991), vol. 4, p. 273.
Chapter 4--Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 107

Figure 4-4--U.S. Department of Energy

Conservation Research and Development

Budgets, Buildings Versus Nonbuildings

Funding, Fiscal Years 1978-91

Current dollars (millions)

4 0 0

197879 80 81 82 83 84 85 86 87 88 89 90 91

_ Nonbulldlngs R&D . . . . Buildings R&D

. . . . .

SOURCE: Fiscal years 1978 to 1989 from F.J. Sissine, U.S. Library of

Congress, Congressional Research Service, Energy Conservation: Technical Efficiency and Program Effectiveness, CRS

Issue Brief 85130 (Washington, DC: Congressional Research

Service, April 1991 ); fiscal years 1990 and 1991 from U.S.

Department of Energy, United States Department of Energy

Fiscal Year 1992 Congressional Budget Request, DOEfCR0001 (Washington, DC: February 1991), vol. 4, p, 273.

funding divided between end-use sectors and fuel

types, the degree to which technology demonstration

and transfer play a role in R&D, and the level of

private sector involvement and cost sharing. Thus,

simply raising the DOE conservation R&D budget

will not by itself ensure program success. At least as

important, for example, will be a well-defined R&D

plan along with a steady level of funding, at

whatever level, particularly if Congress hopes to

maximize private sector cooperation in DOE R&D

efforts.

Building Codes and Appliance Standards

Building codes are legally binding requirements

that apply to structures and their occupancy to

ensure public health, safety, and welfare. Although

the traditional focus of code efforts has been health

and safety (e.g., sanitation and fire protection),

energy efficiency has assumed greater prominence

in building code development in the last two

decades. While codes are adopted and enforced

locally, few municipalities develop their own codes;

instead, four major organizations develop and publish model building codes for State and local use: the

Building Officials & Code Administrators International, the International Conference of Building

Officials, the Southern Building Code Congress

International, and the Council of American Building

Officials, which is a federation of the first three

organizations .78

Appliance efficiency standards are legally binding requirements designed to ensure minimum

efficiency levels in new products. As discussed

below, Federal programs in the last 20 years have

been involved in building codes and standards, as

well as appliance efficiency standards.

Building Codes and Standards

Two Federal agencies, the Departments of Energy

and Housing and Urban Development, have been

active in the development of model or actual

building energy codes and standards. Although the

number of buildings constructed annually for Federal Government use is limited, the government

directly finances about 27 percent of new home

mortgages through the Federal Housing Administration, the Veterans Administration, and the Farmers

Home Administration.79 Eligibility requirements for

Federal financing can directly influence building

design and construction.

Building Energy Performance Standards

(BEPS)—Under authority of the Energy Conservation and Production Act (Public Law 94-385), DOE

first issued draft building energy performance standards (BEPS) in 1979 for new commercial and

residential buildings. The BEPS compliance approach was highly innovative, and DOE considered

it to be a ‘‘radical departure from standard practices

of the building community. ’ ’80 Yet BEPS offered no

T~ Nati~m~l Association of Home Builders, Understanding Builtiing Codes and Standards in the United Stafes, rev. ed. (Washir@on+ DC: 1989), PP.

7-8.

79 ~lsfigure reprcscnB tic ~ofiion of total mortgages ~pp]ylng t. new, p~vate]y owed one-f~i]y houses sold in 1990. S= U.S. Department of

Commerce, Burca of the Cemus, .$tatisrical Abstract of[he Unired State.~: 1991, 11 lth ed. (Washington, DC: U.S. Government Printing Office, 1991),

p. 721.

8052 Federa~Re,*i~ter 17053 way 6, 1987) ~c ~lost slgnificmt aspect of tie proposal was ~C introduction of the ‘ ‘whole building energy budget. ’

The standards set a maximum energy consumption level for a type of building in a given climate, In all, DOE approved 21 types of buildings and 78

climate zones; mch commercial building type had an assigned energy budget for each climate zone. The proposed standard required the use of computer

simulation to demonstrate that a proposeci building design met the prescribed energy level. The residential proposal included prescrip(ivc packages, but

the standard was unclear about whether compliance with (he prescriptive pack?gc also met the energy budget requirements.
108 . Building Energy Efficiency

guidance on how to comply with defined energy

budgets. Although the performance approach had

been available in the prevailing building standard

issued by ASHRAE,81 builders rarely used it. Given

this unfamiliarity with performance criteria, therefore, most of the 1,800 comments DOE received on

the initial proposed rule claimed that BEPS was unsuitable for a mandatory building standard. Many

comments stressed the difficulty of calculating energy performance formulas and the likely costs of

computer analysis necessary to demonstrate compliance.

More than 1,000 comments maintained that the

ASHRAE standard would be a preferable substitute.

82 Many States had already adopted the

ASHRAE standard, which contained the traditional

criteria familiar to the building community. The

following year, Congress restricted mandatory building energy standards to the Federal sector, making

BEPS voluntary for all other sectors.83 DOE was

also required to project the impact of the standard on

construction costs, design, and expected energy

savings; the impacts of the residential standards on

the ability of low- and moderate-income persons to

purchase or rent buildings had to be assessed as

well.84 In addition, Federal building standards were

required to meet the life-cycle cost criteria detailed

in the Code of Federal Regulations.8s

DOE has established three separate standards to

comply with its revised mandate. The frost, the

interim mandatory standards for new Federal residential buildings, was proposed in 1986.86 The crux

of the standard is the Conservation Optimization

Standard for Savings in Federal Residences (COSTSAFR) program, a computerized calculation procedure designed to select the most cost-effective

measures available for the building on a life-cycle

basis. The program assigns values to the measures,

allowing builders to decide whether to meet or

exceed the energy consumption goal for the building

type, A DOE economic analysis of these energy

standards concluded that life-cycle cost savings

would average about $760 per unit.87

The second, voluntary standards for new commercial and multifamily high-rise residential buildings, were published in 1989.88 DOE planned to

publish the third standard, voluntary nonfederal

residential guidelines (VOLRES), in June 1991.89

Minimum Property Standards—Through a variety of legislation, Congress has directed HUD to

issue an energy standard for housing programs

within the agency and for manufactured homes. The

Federal Government first issued the Minimum

Property Standards (MPS) in the 1950s to establish

energy criteria for homes using federally financed

mortgages. 90 The standard limited the level of

household utility expenses and reduced the rate of

default on home mortgage loans. The latest MPS is

the 1984 version developed by HUD. In November

of 1990, HUD issued a proposed rule for adopting an

updated energy standard. The rule proposes that ‘all

detached one and two family dwellings and one

family townhouses not more than three stories in

height shall comply with CABO Model Energy

Code, 1989 Edition, including 1990 supple81 AS~E is tie American Society of Heating, Refrigerating and Air-Conditioning Engineers. ASHRAE stantids are Commoldy Usd in b~lding

design.

13Z 52 Federal Register 17054 (May 6, 1987).

83 Housing and CommW@ Development Act of 1980, Public Law 96-399, sec. 326; and Omnibus Budget Reconciliation Act of 1981, ~blic Law

97-35, Title X, Subtitle D.

8442 U.S.C. 6833(a)(l)-(2).

8510 cm pm 436, Subpm A. Life. cycle cost (L(_’C) is a me~od of economic eval~tion tit es~tes the COStS and savings Over the hfe Of the

item in question. Federal agencies are required to use the method when evaluating new building designs.

8651 Federal Regi~ter 29754 (Aug. 20, 1986). This proposal became a find hterb 11.de in 1988. A f~mlemg cannot ~ Promulgat~ ‘til

DOE conducts a demonstration of the final interim standards and reports the results to Congress. See 53 Federal Register 32536 (Aug. 25, 1988).

87 us+ Dep~ent of Ener~, Office of Building and Commmity Systems, Economic Analysis in support ofInterim Energy Conservah”on Stan&rds

for New Federal Residenh”al Buildings, DOEKE-0223 (Washingto% DC: June 1988), vol. 4, pp. vi, 3.8.

8854 Federal Regis[er 4538 (Jan. 30, 1989). See 10 Cm pm 435.

89 B< Reid Detchon, fi~cip~ Deputy Assis~t secretary, office of Consemation and Renewable Energy, U.S. Department of Energy, teStimOny

at hearings before the Senate Subcommittee on Energy Regulation and Consematio@ Committee on Energy and Natural Resources, Mar. 19, 1991, p.

2. As of December 1991, these standards had not been issued.

90 me Natloml Housing Act, 12 U,S<C. 1702 au~o~es tie s~re~ of Housing and Urban Development to prescribe standards for determining

the acceptability of dwellings for families and care-type facilities. The standards are to ‘‘establish the acceptability of. . properties for mortgage

insurance. . .’ 12 U.s.c. 17151(0.
 .

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 109

Table 4-2—Federal Energy Standards for New Buildings

Code Application Status

HUD Minimum Property Residential buildings receiving To be replaced with

Standards (1950s) Federal mortgages Council of American

Building Officials

‘Model Energy Code’

(1989 edition)

National All manufactured housing Active

Manufactured Housing

Construction and

Safety Standards (1974)

DOE Building Energy

Performance

Standards (1979)

DOE Mandatory

Performance

Standards for New

Federal Residential

Buildings (1989)

DOE Energy Mandatory for Federal commercial Active

Performance buildings. Voluntary for private

Standards for New sector commercial buildings.

Commercial Buildings (1990)

DOE voluntary Voluntary standards for nonfederal Under development;

guidelines for residential buildings issuance pending

nonfederal residential

buildings

All new construction Never implemented;

supplanted by performance

standards listed below

Federal residential construction Active

(95 percent is military housing)

ments. . ."91

SOURCE: Office of Technology Assessment, 1992.

An interim rule has been drafted and is

awaiting approval by the Office of Management and

Budget (as of December 1991).

Manufactured Home Construction and Safety

Standards—The National Manufactured Housing

Construction and Safety Standards Act of 1974

(Public Law 93-383) sought to reduce the number of

accidents in manufactured homes and assure their

quality and durability .92 The construction standard

that emerged from the act also contained provisions

for building shells and heating and cooling systems.

In 1990, Congress passed legislation directing HUD

to assess current Federal standards on manufactured

homes.93

Table 4-2 lists Federal standards bearing on

building energy efficiency.

Appliance Standards

National Appliance Energy Conservation Act—

This legislation was passed nearly 12 years after

Congress first became concerned about appliance

energy use (box 4-E). The statute and its amendments establish minimum efficiency or maximum

energy use standards for appliances listed as covered

products under the Energy Policy and Conservation

Act (Public Law 94-163) as amended. The current

group of covered products is listed in table 4-3. The

NAECA standards apply to these covered products.

The NAECA established numerical standards for

most (7 of 13) of the appliance categories (e.g.,

refrigerators, room air-conditioners, central airconditioners, furnaces, and fluorescent lamp ballasts); other covered products were given design

standards. As required by law, subsequent DOE

rulemakings have strengthened the energy requirements

9155 Feder~[ Register 46637 (NOv. 5, 1990).

9Z 42 U.S,C. 5wI-5425,

9J fiblic ~w 101.625, ~W ,$&at, 44]4, ~ec, 943(d) ~recently prows~ ~en~en~ [0 ~ese s(~dards. 57 Federu/Register 6420 (Feb. 24, 1992).
110 ● Building Energy Efficiency

Box 4-E—A Brief History of the National Appliance Energy Conservation Act of 1987

In 1975, Congress passed the Energy Policy and Conservation Act (EPCA), requiring the Federal Energy

Administration (FEA), later succeeded by the Department of Energy (DOE), to develop voluntary appliance

efficiency targets. These targets were required to represent reductions in energy use of new appliances of at least

20 percent by 1980 compared to their known 1972 levels.

By the end of 1978, the new Federal DOE had been established, assuming the duties of the now defunct FEA,

and had been directed to develop mandatory appliance efficiency standards for 13 categories of new products under

the National Energy Conservation Policy Act (NECPA); the statute identified nine of these covered products as

priorities for standard setting. On January 2, 1979, DOE published an advance notice of proposed rulemaking for

the nine priority products.1 As required by NECPA, this required DOE to promulgate final standards by January

2, 1981.2

DOE proposed standards for 8 of the 13 covered products in June 1980.3 The following January, DOE notified

Congress that the new appliance standards were essentially complete.4 Later that month, however, the newly arrived

Reagan administration requested that Congress repeal the DOE appliance standards program on the grounds that

it represented inappropriate regulatory policy. The next month, after Congress had not acted on the administration

proposal, DOE announced that a new review of the economic analysis underlying the standards was necessary

before the Department could promulgate them.s In October, a citizen suit was brought against DOE to compel

promulgation of the standards, which by then were delinquent 10 months.6 The suit was settled in 1982, after DOE

published a notice of proposed rulemaking for eight of the nine priority covered products; the notice proposed that

“no standards” standards be adopted.7

Arguing that standards were neither economically justitified nor likely to result in significant energy savings,

DOE actually promulgated the proposed “no standards” standards through rulemakings for eight of the covered

products in late 1982 and 1983.8 This prompted the filing of a second citizen suit in late 1983 in the U.S. Court of

Appeals for the District of Columbia Circuit. The suit challenged the “no standards” standards as contrary to law.

Agreeing with the petitioners, the Court voided the DOE rules in July 1985 as arbitrary and capricious

interpretations of the EPCA as amended and directed DOE to initiate a new rulemaking.9

144 Fe&r~l Register 49.

z $(A ~e ~~b~ ~ ~m= ~lcieq s~~d for a type (or class) Of COVcW7?d prOdUCtS. . .@be pub~~. . .~ ~ ‘vent ‘m *

2 years after publication of the advance notice.” Public Law 95-619,92 Stat. 3262, sec. 422.

345 FederaZRegister 43976 (June 30, 1980).

4 R, mm ~, L.R. s-, ~d M. Case, “Overview of Legal Issues Arising in the Development of Federal and State Ap@*e

Efficiency Standards,” Columh Journal of Environmental Law, vol. 11, No. 2, 1986, p. 322.

5 Ibid., p. 322.

6 Na~al R~ources Defense Council v. Edwara%, Civ. No. 80-2546 @D.C.).

747 F&feral Register 14424 (Apr. 2, 1982).

8 S= 47 Federal Re8ister 5’7198 (Dec. 22, 1982) and 48 Federal Register 39376 (Aug. BO, 1983).

gNa~ra[ResO~ceSDefeme Council v. Herrington, 768 F.2d 1355 (D.C. CK. 1985).

mandated by NAECA. The covered products and is often a large difference between the energy use or

their corresponding energy use, efficiency level, or efficiency of appliances meeting the NAECA standdesign requirements under NAECA are listed in ards and the same for the best models that are listed

table 4-4. as commercially available. However, these products

As there are multiple NAECA standards for most are not always comparable. For example, the criteria

of the product categories, table 4-4 lists for simplic- used to determine what constitutes commercial

ity only one standard based on a generally represen- ava.ilability can vary considerably; some commertative size and design. 94 & table 4-4 indicates, there cially available products may be more expensive,

94 F~~ ~.mple, there we seven sep~ate NAECA n~ericd s~&& for refrigerator-ffwze~, b~d on varying sizes ~d designs (e.g., with or

without through-the-door ice service), but the standard shown in table 4-4 applies to units having designs that account for approximately 73 percent of

new refrigerator and refrigerator-freezer sales. See 54 Federal Register 47935 (Nov. 17, 1989).
—

Chapter 4-A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 111

During the 1970s and 1980s, California and a few other States had established their own appliance efficiency

standards. The emerging mix of State standards, in fact, motivated the appliance manufacturing industry to seek

uniform national standards. As a result, the major appliance manufacturer organizations began negotiations in early

1986 with the Natural Resources Defense Council to develop national standards. An agreement was reached in July

1986, which was subsequently written as proposed legislation and was based on previously enacted State standards.

This legislation was introduced in August 1986 in both Houses of Congress (H.R. 5465, S. 2781). After waiting

nearly 7 years for standards, Congress passed H.R. 5465 on October 15, 1986. Unlike previous legislation, H.R.

5465 proposed actual minimum standards to be established by statute for the EPCA covered products. However,

President Ronald Reagan pocket-vetoed the measure on November 1, 1986 on the argument that appliance

efficiency standards were not consonant with the administration’s policy of minimal Federal regulatory involvement

in the marketplace.l0

The next year, however, Congress passed an essentially identical bill (S. 83, or the National Appliance Energy

Conservation Act) on March 3, and President Reagan signed it on March 17,1987. Amendments to NAECA, passed

in 1988 (Public Law 100-357), added fluorescent lamp ballasts to the list of EPCA covered products and established

minimum efficiency levels for them. As discussed in the text, DOE has already upgraded many of these standards,

as required by law.

10 me Offlcid MernOradw of J)isapprwal maintained that” [t]he bill intrudes undtiy on the fiec market, limits the ftiorn Of choi~

available to consumers who would be denied the oppotity to purchase lower-cost appliances, and com.itutes a substantial intrusion into

traditional state responsibilities and prerogatives.” Senate Report No. 100-6, Jan. 30, 1987, p. 4. See U.S. Code Congressional and

Administrative News, IOOth Congress-First Sessiom 1987, vol. 2, p. 55.

may serve only niche markets, or may not provide Table 4-3—Covered Products Under the Energy .

identical or comparable services as their more Policy and Conservation Act, as Amended

widely sold counterparts. The intended point of the

table is that there is often a large efficiency gap

between the average product sold and the best

commercially available one. Chapter 5 offers options to encourage greater use of cost-effective

energy efficient appliances.

Energy savings—Researchers at the Lawrence

Berkeley Laboratory (LBL) examined the effect of

the NAECA appliance standards before DOE began

updating the original statutory targets. The study

determined that NAECA would yield a total estimated electricity savings of 822 terawatthours

(TWh), or roughly 2.8 quadrillion Btus (quad) of

end-use energy, for appliances purchased between

1990 and 2015. This energy savings translates to net

dollar savings estimated at $24.5 billion.95

A major strength of the LBL study was that it

measured the energy and economic impacts separately by each DOE region, finding that net social

benefits of NAECA will be positive for all regions.96

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

Refrigerators, refrigerator-freezers, freezers

Room air conditioners

Central air conditioners (CACs) and CAC heat pumps

Water heaters

Furnaces

Dishwashers

Clothes washers

Clothes dryers

Direct heating equipment

Kitchen ranges and ovens

Pool heaters

Television sets

Fluorescent lamp ballasts

SOURCE: 42 U,S.C. 6292(a). Under certain conditions, EPCA authorizes

the Secretary of Energy to add appliances to the list of covered

products. 42 U.S.C. 6292(b).

The study estimated that national electricity savings

will be 2.5 percent, while the savings for all fuels

will be less, about 0.8 percent.97

The effective dates for the NAECA standards are

1988, 1990, 1992, and 1993, depending on the

appliance. DOE is required to review (and update

9S Exprcss~ as 1gf.3’7 dollm ~d based on ~ S_ Percent ~~] discount r~te ~s fi~e represen~ the s~ of elec~ici~ savings ($30.7 billion) ~d fuel

savings ($8.2 billion) less incremental appliance costs ($14.5 billion). The LBL researchers estimated the lifetime energy savings of NAECA appliances

purchased between 1990 and 2015, These estimates, therefore, include energy savings beyond 2015. J.H. Eto, J.E. McMahou J.G. Koomey, P.T.Cand M.D. Levine, The Regional Energy and Economic Impacts of The National Appliance Energy Conservation Act of 1987, LBL-25471 (Berkeley,

CA: Lawrence Berkeley Laboratory, June 1988), pp. 11, 13.

‘c Ibid., p. 19.

97 Ibid., p. 11.
112 . Building Energy Efficiency

Table 4-4-National Appliance Energy Standards and Efficiencies

Covered product NAECA standard Average shipped Best available

Refrigerator-freezers a. . . . . . .

Freezers b. . . . . . . . . . . . . . . .

Room air conditionersc. . . . . . .

Heat Pumpsd. . . . . . . . . . . . . .

Water heaterse:

Electric. . . . . . . . . . . . . . . .

Natural gas. . . . . . . . . . . . .

Furnaces f

. . . . . . . . . . . . . . . .

Dishwashers. . . . . . . . . . . . . .

Clothes washersh. . . . . . . . . . .

Clothes dryersl. . . . . . . . . . . .

Direct heating equipment. . . . .

Kitchen ranges and ovens. . . .

Pool heaters. . . . . . . . . . . . . .

Television sets. . . . . . . . . . . . .

Fluorescent lamp ballasts. . . .

960 kWh/yr(l 990)

688 kWh/yr (1 993)

706 kWh/yr (1 990)

533 kWh/yr (1 993)

9.0 EER (1990)

10.0 SEER (1992)

6.8 HSPF (1 992)

88.4% EF (1990)

52.50/’ EF (1990)

78.00/’ AFUE (1 992)

Shall have option to dry without heat (1988)

Energy factor 0.46 (1994)

Shall have option to rinse without heat (1 988)

Energy factor 1.18 (1994)

Gas operating machines shall not be

equipped with constant burning pilots (1988)

Energy factor 3.01 (1994)

See 42 U.S.C. 6295(e)(3)

Gas operating machines having an electrical supply cord

shall not be equipped with constant burning pilots (1990)

Thermal efficiency of at least 78%(1 990)

Reserved by NAECA; DOE may

prescribe rule no sooner than 1992J

See 42 U.S.C. 6295(g)(5)-(6).

884 kWh/yr (1 990)

679 kWh/yr (1 990)

8.7 EER (1990)

9.1 SEER (1988)

6.9 HSPF (1988)

—

750/0 AFUE (1988)

Energy factor 0.37 (1990)

Energy factor 0.99 (1990)

N/A

N/A

N/A

—

N/A

—

840 kWh/yr (1 989)

585 KWh/yr (1 989)

12.0 EER (1990)

16.4 SEER (1 989)

9.2 HSPF (1989)

98.0% EF (1 990)

74.0% EF (1990)

97.30/0 AFUE (1989)

.

—

N/A

N/A

N/A

—

N/A

—

aNAECA refrigerator-freezer standards shown here are for automatic defrost units with top-mounted freezers, no through-thedoor ice, and with adjusted

volumes of 20.8 cubic feet. Data for 1990 average shipped products from Robert M. Gants, Association of Home Appliance Manufacturers, written

communication to OTA, Oct. 18, 1991. Data for 1989 best available products refer to automatic defrost units with top-mounted freezers having unadjusted

volumes of 18.0 cubic feet. See American Council for an Energy-Efficient Economy, The Most Energy-Efficient Appliances -1989-90 Edition (Washington,

DC: 1989), p. 5.

bNAECA freezer standards shown here apply to upright, manual defrost units with an adjusted volume of 26.1 cubic feet. Data for 1890 average shipped

products from Robert M. Gants, Association of Home Appliance Manufacturers, written communication to OTA, Oct. 18,1991. Data for 1989 best available

product refers to an upright, manual defrost unit with an unadjusted volume of 15.8 cubic feet. See American Council for an Energy-Efficient Economy, The

Most Energy-Efficient Appliances -1989-90 Edition (Washington, DC: 1989), p. 8. Note: Using DOE methods for adjusting freezer volumes, this best available

unit has an adjusted volume of 27.3 cubic feet. See 10 CFR Part 430, Subpart B, Appendices Al and B1.

c

NAECA room air conditioner standard shown here applies to units without reversecycle, with Iouverd sides, and with capacities ranging from 8,000 to 13,999

Btus. Data for 1990 average shipped products from Robert M. Gants, Association of Home Appliance Manufacturers, written communication to OTA, Oct.

18, 1991. Data for 1990 best available product from Association of Home Appliance Manufacturers, 1991 Directory of Certified Room Air Conditioners, Edition

No. 1 (Chicago, IL: October 1990).

dNAECA heat pump standards shown here apply to split (rather than single package) systems. The NAECA SEER standards appiy to central air conditioning

systems as well. Data for average shipped from “Integrated Heat Pump System,” EPRIJournal, vol. 15, No. 2, March 1990, p. 41. Data for best available

from American Council for an Energy-Efficient Economy, The Most Energy Efficient New Appliances -1989-90 Edition (Washington, DC: 1989), p. 18.

eNAECA water heater standards are adjusted in inverse proportion to heater volume; i.e., the standards are eased with increasing size. The standards shown

here apply to 50 gallon units. Data for best available from Gas Appliance Manufacturer’s Association, Consumer’s Directory of Certified Efficiency Ratings

(Arlington, VA: October 1989), pp. 134, 163.

fData for average shipped and best available gas furnaces from American Council for an Energy-Efficient Economy, The Most Energy Efficierrt New Appliances

1989-90 Edition (Washington, DC: 1989), pp. 21-22.

gEnergy factor refers to cycles per kWh. Standard shown here refers to standard size dishwashers (exterior width of 22 inches or greater), 1994 standard for

compact dishwashers (exterior width less than 22 inches) is energy factor 0,62. See 56 federal Register 22279. By DOE estimates, this standard level will

correspond to an average annual energy consumption of 498 kWh for new dishwashers. See U.S. Department of Energy, Technical Support Document:

Energy Conservation Standards for Consumer Products: Dishwashers, Clothes Washers, and Clothes Dryers, DOE/CE-0299P (Washington, DC: December

1990), p. 5-2.

hEnergy factor refers to Cubic feet per kilowatts per year, Standard shown here applies to top loading standard models (capacities of 1.6 cubic feet or greater).

Revised NAECA standard for top loading compact units (capacities less than 1.6 cubic feet) is an energy factor of 0.90. See 56 Federal Register 22279. The

1988 standard for top loading semiautomatic, front-loading, and suds-saving clothes washers were unchanged by this rulemaking.

iEnergy factor refers to pounds per kilowatts, Standard shown here refers to standard size (capacities of 4.4 cubic feet or greater) electric clothes dryers. There

are three additional standards for clothes dryers (two for compact electric units and one for natural gas units). See 56 Federal Register 22279. Average and

best available energy factors for clothes dryers are not readily available, because the FTC exempts these appliances from its energy labeling program. See

U.S. Department of Energy, Office of Codes and Standards, Technical Support Document: Energy Conservation Standards for Consumer Products:

Dishwashers, Clofhes Washers, and Clofhes Dryers, DOE/CE-0299P (Washington, DC: December 1990), p. 4-5.

jSee 42 U.S.C. 6295(i)(3).

KEY: kWh/yr - kilowatthours per year; EER - energy efficiency ratio; SEER - seasonal energy efficiency ratio; HSPF - heating seasonal performance factor;

EF = efficiency factor; AFUE - annual fuel use (or utilization) efficiency; N/A = not readily available. Appliance energy information for these products is

not readily available, because FTC rules exempt these appliances from Federal labeling requirements.

NOTE: The figures for average sold and best available products are preliminary and are subject to change.
Chapter 4---A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 113

where necessary) all of these standards within 3 to 10

years, depending on the appliance. New or amended

standards are required to achieve the maximum

improvement in energy efficiency (or the maximum

reduction in energy use) that is both technologically

feasible and economically justified.98 In no case may

DOE revisions to NAECA standards allow a decrease in the efficiency, nor an increase in the energy

use, of covered products. Table 4-5 lists DOE

statutory deadlines for revising NAECA standards,

As table 4-5 indicates, DOE has issued two final

rulemakings that update the original NAECA statutory standards: refrigerators, refrigerator-freezers,

freezers, and small gas furnaces (November 1989)

and dishwashers, clothes washers, and clothes dryers

(May 1991). LBL researchers have estimated that

the two revised rulemakings will generate additional

savings (beyond the original, unrevised standards)

of about 7.5 quads primary energy for appliances

purchased from 1993 through 2015. These savings

are worth an estimated net present value of about

$11.4 billion.99

Information Programs

Appliance Labels

The Energy Policy and Conservation Act (Public

Law 94-163; EPCA), as amended, requires the

Federal Trade Commission (FTC, or the Commission) to develop and promulgate appliance energy

labels for 13 covered products, *m The FTC is

directed to label only those covered products for

which DOE has prescribed test procedures that

measure either the efficiency or energy use of a

given appliance. An underlying principle of this

program is that lack of information about comparative product efficiencies and operating costs prevents consumers from identifying and purchasing

more efficient appliances. As a result, EPCA requires appliance labels to list estimated annual

operating costs for each product, as well as the range

of operating costs for other commercially available

products in the same appliance class. The estimates

of annual operating costs are provided in the belief

that consumers can make more informed appliance

purchase decisions when they possess reliable information about comparative product efficiencies.l0l

The Commission promulgated the first labeling

rule in November 1979, establishing label formats

for 7 of the 13 covered products: refrigerators and

refrigerator-freezers, freezers, dishwashers, water

heaters, clothes washers, room air conditioners, and

furnaces, l02 The remaining covered products were

exempted, because the Commission determined that

labeling them would not be economically feasible,

would not assist consumers in making purchase

decisions, or both. In many cases, the estimated

added costs of product labeling resulted in a labeling

exemption on economic grounds.103

The Commission’s decision to exempt the five

covered products from labeling were based on DOE

estimates of energy use and appliance industry

analyses of labeling costs. In most cases, the FTC

appliance labeling exemptions appear to have been

9842 U.S.C. 6295(l)(2)(A).

99 Expre~~~ as 1987 dollars using a real discount rate of 7 percent. (~eses urnmary figures include savings from small gas furnaces purchased from

1992 through 2015.) Estimated savings for the November 1989 rulemaking are given in U.S. Department of Energy, Office of Consemation and

Renewable Energy, Building Equipment Division, Technical Support Document: Energy Conservation Standards for Consumer Products: R#rigerators

and Furnaces, DOE/CE-0277 (’Washington DC: November 1989), pp. 5-7 to 5-15. Estimated savings for the May 1991 rulemaking are given in U.S.

Department of Energy, Office of Consewation and Renewable Energy, Office of Codes and Standards, Technical Support Document: Energy

Consenation Srandardsfor Consumer Products: Dishwashers, CZofhes Washers, and Clothes Dryers, DOE/CE-0299P (Washington, DC: December

1990), pp. 5-3 to 5-14.

100 As orig~lly ~a~sed, E~A covered products were the fo~o~g: 1) refrigerators and refigemtor-freezers, 2) freezers, 3) dishwashers, 4) CIO~eS

dryers, 5) water beaters, 6) room air conditioners, 7) home heating equipment (not including furnaces), 8) television sets, 9) kitchen ranges and ovens,

10) clothes washers, 11) humidifiers and dehumidifiers, 12) central air conditioners, 13) furnaces, and 14) any other type of consumer product defined

by the Administrator of the Federal Energy Agency as covered. These duties were assumed by the Secretary of Energy when that Department formed

in 1977, In addition, the Natioml Appliance Energy Conservation Act of 1987 (Public Law 100 12; NAECA) and its 1988 amendments (public Law

100-3S7) added pool heaters and fluorescent lamp ballasts to this list (42 U.S.C. 6292). These statutes also extended the labeling requirements to the

IWO new covered products (42 U.S.C. 6294). For a complete list of current EPCA covered products see the discussion in this chapter on appliance

efficiency standards and table 4-3.

101 R.F. Dyer, ‘‘A Longitudinal Analysis of the Impact of the Appliance Energy Labeling Program--Final Report, ’ November 1986, prepared for

the Federal Trade Commission, Office of Lrnpact Evaluation, p, 2.

102 The decl~lon t. la~l heat Preps and central air conditioners was poslponed, bCcause DOE had not completed ‘est Procedmes ‘or ‘ese ‘0

products. Label requirements for these covered products were promulgated in a Iatcr rulemaking. See 52 Federal Register 46888 (Dec. 10, 1987).

103 ~c appliances Cxempted from la~llng were ~]othes dvers, home heatir)g equipment other man f~ces, television sets, kitchen ranges ad ovens,

and humidifiers and dehumidifiers. 44 Federal Register 66466 (Nov. 19, 1979).
114 . Building Energy Efficiency

Table 4-5—DOE Schedule for Revising the

NAECA Standards

Covered product Final rule date

Round I

Refrigerators, refrigerator-freezers,

freezers, and small gas furnaces . . . . . .

Dishwashers, clothes washers,

and clothes dryers . . . . . . . . . . . . . . . . . .

Room air conditioners, water heaters,

pool heaters, direct heating equipment,

fluorescent lamp ballasts, furnaces,

clothes washers,c television sets,

and kitchen ranges and ovens . . . . . . . .

Central air conditioners and central air

conditioning heat pumps . . . . . . . . . . . . .

Round II

Furnaces . . . . . . . . . . . . . . . . . . . . . . . . . .

Refrigerators, clothes dryers, and

dishwashers . . . . . . . . . . . . . . . . . . . . . . .

Kitchen ranges and ovens, and

room air conditioners . . . . . . . . . . . . . . . .

Water heaters, pool heaters, and

direct heating equipment , , . . . . . . . . . . .

Central air conditioners and central

air conditioning heat pumps . . . . . . . . . .

Round Ill

Furnaces . . . . . . . . . . . . . . . . . . . . . . . . . .

November 17, 1989a

May 14, 1991b

January 1, 1992

January 1, 1994

January 1, 1994

January 1, 1995

January 1, 1997

January 1, 2000

January 1, 2001

(Name of Corporation)

Refrigerator- Freezer Model(s) AH503 AH504 AH507

Capacity 23 Cubic Feet Type of Defrost Full Automatic

Estimates on the sccale are based

J

or I r m d,,l .7 lb 2: 5 to ?4 4

on d nd!~oncjl averaqe elect,, c [ ,,t ft>~ t <r,. .m[ Ir,14

rate of 4 9’c oer k low Jlt hour r] thi. ,[ d<,

Model with

lowest $; energy cost $91 c THIS ~ MODEL

Your cost will vary depending on your local energy rate and how

you use the product. , ,

How much will this model cost you to run yearly?

I Yearly cost

Cost per 2C < ;,

kilowatt

hour 4C >

6C 510 I

8C s 1 1(,

1 0c s 1 %,’

Ask your salesperson or local utility for the energy rate (cost per kilo

watt hour) In your area

1, ,

January 1, 2007

a

54 Federal Register 47916. See 10 CFR Part 430. This revised rule was

due July 1, 1989.42 U.S.C. 6295.

b

56 Federal Register 22250. See 10 CFR Part 430. This revised rule was

due January 1, 1990.42 U.S.C. 6295.

C

DOE is reevaluating the NAECA standards for clothes washers so soon

after revising the original standard, because horizontal axis technology

was not considered in the May 1991 rulemaking from lack of public interest

during the comment period. Because they require considerably less water

than conventional vertical axis machines, horizontal axis products, which

are common in Europe, consume far less energy.

SOURCE: Adapted from U.S. Department of Energy testimony in hearings

before the House Subcommittee on the Department of the

Interior and Related Agencies, Committee on Appropriations,

Apr. 30, 1991. See Department of the Interior and Related

Agencies Appropriations for 1992 (Washington, DC: U.S.

Government Printing Office, 1991), part 11, p. 1438.

well considered. For example, the Commission

found that all humidifiers operate at the maximum

possible efficiency (exceeding 95 percent) and their

operating costs are all basically equal, the difference

between the lowest and highest energy users amounting to less than $1 per year. As a result, the

Commission reasoned that the additional costs of

labeling humidifiers were not warranted and that

Photo credit: Federal Trade Commission

The Federal Trade Commission requires many new

appliances to display labels that indicate the units’

expected energy use or efficiency.

such labeling would not assist consumers in making

their purchase decisions. And television sets and

some kitchen ranges and ovens were exempted,

because their annual operating costs were extremely

low, suggesting again that labels would not assist

consumers in making their purchase decisions.l04

However, the FTC exempted clothes dryers and

heating equipment other than furnaces based on

narrow ranges of appliance efficiencies and operating costs that existed in 1979. The rulemaking failed

to evaluate (or at least indicate) opportunities for

future improvements in either efficiency or operating costs. Electric clothes dryers, for example,

showed a narrow range of operating costs in 1979

($39 to $45 per year), but these total costs were not

small. For some products, therefore, the FTC criteria

IW # Federal Register 66468-66469 (Nov. 19, 1979).
——.

Chapter 4--Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 115

for determining the merits of labeling may be

inadequate, because they fail to assess potential

product improvements. And energy labels may spur

improvement by encouraging manufacturers to increase product efficiencies, lower operating costs, or

both when technical opportunities exist. Of course,

the degree of that potential must be evaluated in

relation to the costs of labeling.

The Commission has performed one evaluation of

appliance label effectiveness in the 1 l-year history

of the program. Completed in 1986, the study

determined that roughly one-third of clothes washer

buyers and nearly half of refrigerator buyers who

were aware of the labels claimed that the information

affected their purchase decisions. 105 In addition, the

evaluation suggested that appliance labels served an

increasingly important role in purchase decisions as

the program progressed. The portion of consumers

noting energy efficiency as an important attribute for

refrigerators, for example, increased during the

study period from nearly 12 percent in 1979 to about

21 percent in 1983. Questions about important

appliance attributes were unaided and preceded any

mention of energy use in the questionnaire. The

actual role of the FTC labels in that change of

consumer preference, however, was not assessed.l06

Aside from this early and limited evaluation, the

Commission has not performed any formal assessments of appliance energy labeling, even though

new appliance efficiencies and operating costs have

changed in the 12 years since the original rulemaking. At present, the Commission has no plans to

conduct another labeling evaluation. Current efforts

are focused on the completion of a rulemaking

process begun in 1988, Dubbed the “cleanup

rulemaking," because it will refine current labels,

the Commission is considering several policy questions for this effort, such as whether the new

NAECA standards will raise product efficiencies

enough to render labels relatively unimportant.

Also, the Commission is considering whether the

required labels could be limited to display models—

rather than every salable appliance-as a way to

save costs,107

After 12 years, U.S. experience with appliance

labeling is fairly extensive, but the value and impact

of that experience remain poorly understood, primarily from a lack of regular program evaluation.

The FTC appliance labeling program, however,

reveals several interesting points for Congress to

consider.

. Although consumers may consider energy

information when making their appliance

purchases, the actual value to consumers of

the current FTC labels remains unclear.

Regular evaluations covering more products

would provide data on the merits of the

appliance labels, whether and how to improve them, and the potential effects of

limiting labels to display models. More regular evaluations would suggest whether consumers use the information on current labels and the

kind of information that would best assist their

appliance purchase decisions. Furthermore, if

the FTC performs additional labeling evaluations, it should reassess the products currently

exempted from the program.

The 1986 FTC evaluation confirmed that consumers use the information on appliance labels but did

not determine if the labels could be improved. Also,

program costs might decrease if labels were limited

to display models, but consumers may be less likely

to notice the labels as well. In fact, stores do not

always display all of their appliance models. As a

result, potential cost savings would have to be

considered in relation to the primary program goal of

providing information meant to assist consumer

purchase decisions.

. Providing information about life-cycle costs

might improve the value of current appliance energy labels, but determining such

IOS R.F. Dyer, ‘‘A Longitudinal Analysis of the Impact of the Appliance Energy Labeling Progr am-Final Repo%’ November 1986, prepared for

the Federal Trade Commission, Office of Impact Evaluatio~ p. 7. However, the telephone questio nnaire used in the surveys quizzed consumers about

energy prior to the question about purchase decisions, suggesting that respondents may have been inadvertently cued (’‘aided”) for the question about

purchase decisions.

106 Ibid,, ~. s, In no~~ terns, us residential elec~ici~ pfices rose a~ost 55 per~nt iII tic smdy period (1979-83). This ~Se WaS CX@dd tO

a real price increase of 17 percent (1982 dollars). See U.S. Department of Energy, Energy Information Adrninistratio& Annual Energy Review 1989,

DOE/ELA-0384(89) (Washington, DC: May 1990), p. 217. Thus, rising prices may have been far more important than labels in motivating consumers

to consider appliance efficiencies in their purchase decisions, but the FTC labels at least allowed consumers to make informed decisions about energy

use if they were so interested.

10T James Mills, Attorney, Division of Enforcement, ITC, personal communicatiorL Mar. 25, 1991. The notice for the proposed ‘cle~up mlemtig”

is at 53 Federal Register 22106 (June 13, 1988).
116 . Building Energy Efficiency

costs may be difficult. Life-cycle costs are the

sum of purchase and operating costs discounted

over the life of a product. At present, this

information is not included on appliance energy labels, but it could influence consumer

purchase decisions and drive the market to

produce more efficient goods. Life-cycle cost

information would impart more complete information about comparative appliance costs, but

making allowances for retail price shifts and

determining appropriate discount rates could

complicate such an effort.

Where labeling is not economically feasible

or is not likely to assist consumers in making

purchase decisions, other policy actions to

improve energy efficiency, such as standards

or incentives, may be more appropriate. For

example, FTC furnace labels convey only

information on how to use them efficiently;

they are not designed for purchasers, because

many furnace purchasers (builders, landlords)

are generally not their users, effectively excluding users from purchasing decisions. As a

result, standards or incentives may override

critical market barriers to efficiency that exist

when appliance purchasers are not users.

In addition, FTC appliance labels may increase

the probability that consumers will be informed

about comparative product efficiencies in their

purchase decisions, but such information is not

necessarily a critical determinant in those decisions.

Concerns about first cost, reliability, warranty coverage, color and design, and special features (e.g.,

refrigerators offering through-the-door ice) may be

more important to the majority of consumers. As a

result, labels can be expected to inform consumers

interested in appliance efficiency but not necessarily

to inspire that interest.108

. The likelihood that the National Appliance

Energy Conservation Act will compress the

●

range of comparative efficiencies in new

appliances suggests a need to reassess the

value of the FTC labels as an information

tool. The NAECA, passed in 1987, sets energy

standards for new appliances. If this statute has

the effect of compressing the efficiencies of

new appliances, the costs and benefits of the

FTC labels need to be reevaluated. The continued use of appliance energy labels could exert

a market pressure that might spur appliance

efficiency improvements even greater than will

be realized under NAECA; alternatively, their

continued use could represent an unwarranted

administrative cost in a market that may

become relatively uniform in terms of efficiency. l09

The information on the FTC labels is often

used by utilities to determine rebates in their

appliance efficiency programs. Utility programs offering rebates for the purchase of

efficient appliances are becoming increasingly

comnon,

ll0 and the FTC labels provide an

accepted benchmark by which U.S. utilities can

determin e and advertise the efficiency of individual products.

Through regular evaluation and possible improvements or expansions, the FTC appliance labeling

program could better fulfill the original rationale for

its creation: to help consumers make more informed

purchase decisions regarding appliance energy efficiency. The costs of such changes as well as their

likely effects on consumer purchase decisions,

however, need to be assessed before final determinations of their desirability can be made, especially

given the new NAECA standards.

Building Energy Audits

There have been two major Federal programs

designed to provide building owners and occupants

with building-specific information about energy use

108 Omer Poliq approache+such as rebates, higher energy prices, or standards-maybe better tools to achieve efficiency, but they introduce tkk

own costs as well. The tradeoffs (including estimations of cost-benefits) of using any policy tool need to be understood, but information programs

generally exert effects, especially in relation to energy efficiency, that are dit%cult to measure.

109 J7xperience wi~ applimce stand~ds ~ California prior to the development of Federal stand~ds SuggeStS tit such pro~ams o~y temPo~Y

compress the range of new product efficiencies. As noted by a staff member of the California Energy Commission, “data taken from manufacturer’s

[sic] directories before and after the adoption of [the California] standards indicate that the range of efficiencies available narrows only slightly in the

frost year and expands to its pre standards range in the course of 2 to 3 years, ” See M. Messenger, ‘‘An Overview of California’s Appliance Efficiency

Programs, ” Proceedings From the ACEEE 1986 Summer Study on Energy Eflciency in Buildings (Washington DC: American Council for an

Energy-Efficient Economy, August 1986), vol. 6, p. 6.52.

110 For example, a smey of utility demand-side management efforts identified 91 appliance efficiency programs offered by 75 electric utilities and

determined that rebates were the most common incentive used to promote these programs. See Battelle, 1988 Survey of Residential-Sector Demund-Side

Management Programs, EPRI CU-6546 (Palo Alto, CA: Electric Power Research Institute, October 1989), pp. 4-1,4-10.
Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 117

and potential savings through utility-sponsored audits. Neither exists today, because participating

utilities lacked sufficient incentives to conduct the

programs, State regulatory efforts have encouraged

many utilities to develop their own conservation

programs, and the administrative requirements for

conducting the Federal programs were often onerous.

The two programs were the Residential Conservation Service (RCS), which expired in 1989, and the

Commercial and Apartment Conservation Service

(CACS), which was repealed in 1986. Though both

of these programs have been terminated, at least one

(RCS) offers clues about some of the key barriers

and implementation problems confronted by Federal

programs aimed at reducing energy use in buildings.

In particular, national experience with the Residential Conservation Service illustrates that utilities can play a vita] role in implementing building

energy conservation programs, especially when

they are given adequate incentives for participat ion.

In addition, the RCS experience suggests the need

to incorporate flexibility in the administration of

national programs to allow States and utilities to

tailor their programs according to their regional

circumstances. Lessons from the RCS could assist

Congress and Federal agencies working on similar

demand management programs today, such as the

DOE Weatherization Assistance program (discussed

earlier).

Residential Conservation Service—The RCS

was created with the expectation that residential

consumers would invest in energy saving retrofits if

they were given adequate information on how to

reduce energy use in their homes. As with appliance

labels, there was a general belief that lack of

information was the decisive barrier preventing

investments in residential energy efficiency. The

expectation, however, proved optimistic, failing to

recognize that other important barriers prevent

investments in energy conservation, even when

consumers are aware of the potential value of such

investments. And even after retrofits have been

completed, changes in occupant behavior (’ ‘rebound

effect’ or poor quality materials or workmanship

can diminish actual savings. As designed, the

Federal RCS program did not address either the

availability and costs of financing conservation

retrofits nor the varying regional availability of

conservation supply and installation services. In

addition, and perhaps most importantly, the program

did not address the strong disincentives investorowned, profit-driven utilities confront in attempting

to encourage conservation, an activity that can lower

their revenues when successful.

The focus of the RCS program was the ‘Class A’

audit, which involved an on-site inspection by a

trained professional, typically assisted by computer

analysis, to determine potential energy savings.

Required by the National Energy Conservation

Policy Act (Public Law 95-619; NECPA), the

on-site audits represented the major cost of the RCS

program. Each audit typically lasted several hours

and cost an estimated $130 in 1983. Although DOE

rule changes relaxed some program requirements,

the national average audit cost was only $30 lower

6 years later (table 4-6).111

Utility audit offers were typically conveyed by

mail. During the program, the nearly 74 million

eligible RCS customers received more than 296

million audit offers; in other words, an average of

four audit offers each during the IO-year operation of

the program (1980-89). On a yearly basis, the ratio

of audits requested to those offered was low, ranging

from 1,9 to 4.3 percent (figure 4-5). By the end of the

program in 1989, 11 percent of the eligible population had participated in the program.112 This was at

the low end of the initial DOE participation goal of

7.5 to 35 percent expected by 1985.113 The cumulative national participation rate, however, was actually above the level (4 to 7 percent) at which DOE

estimated the program would be cost-effective.l14

111 FIWe. here UC ~xpleSSed in 1984 doll~s, See ~ble ~6. ~c DOE mle c~ges allow~ at least one s~te (California) to cut its average audit tkle

in half, which reduced its program costs by one-third. See J.A. Walker, T.N. Rauh, and K. Griffin, ‘‘A Review of the Residential Conservation Service

program, ” Annual Re]liew of Energy 1985 (Palo Alto, CA: Annual Reviews, Inc., 1985), vol. 10, pp. 302-303.

1 IZ u s Dep~e~[ of Energy, Office Ofstate and ~caI Assistance programs, Sumry and Highlight ofRCSAnnual Repo~s: 1982 ‘o 1989! ‘@l

. .

1990, p. 6. Note: The DOE RCS participation figures may not be adjusted for multiple audit requests from single households, suggesting that there may

be some double counting of audit requests.

11 ~ us, Consess, General Accounting OffIce, Federal Home Energy Aud;t Program Has Not Achieved Expectan’ens, GAO/RCED-87-38

(Gaithersburg, MD: December 1986), p. 3,

11447 Federal Register 27771 (June 25, 1982).
118 . Building Energy Efficiency

Table 4-6-Residential Conservation Service: Average Program

Expenditures Per Audit 1983-89 in Constant 1984 Dollars

1983 1984 1985 1986 1987 1988 1989

Utilities . . . . . . . . . . 128.00 129.00 100.00 110.00 115.00 92.00 99.00

States . . . . . . . . . . . 1.76 1.56 1.21 2.50 2.36 1.63 1.25

Federal (DOE) ... , 0.69 2.19 0.56 0.43 0.13 0.15 0.20

Total. . . . . . . . . . . . 130.45 132.75 101.77 112.93 117.49 93.78 100.45

SOURCE: U.S. Department of Energy, Office of State and Local Assistance Programs, Summary and Highlights of

RCS Annual Reports: 1982 to 1989, April 1990, p.1 O.

The cost-effectiveness of the early RCS program

appears to have been marginal. A 1984 program

evaluation concluded that participants performed

less cost-effective retrofits than nonparticipants; the

evaluation suggested that actual savings were lower

than estimated savings due to previous retrofits,

imperfect engineering estimates, and customer rebound effects.ll5 A subsequent evaluation suggested

that program cost-effectiveness improved in later

years, where measured benefit-cost ratios for RCS

participants ranged from 0.9 to 2.1. (Benefit-cost

ratios greater than 1 indicate that benefits exceed

Costs.)116

It is important to note that NECPA did not require

utilities to conduct a cost-effective RCS audit

program-perhaps because utilities were intended

to pay for the bulk of program costs, and it was

assumed they would minimize these costs. Moreover, by stressing primarily the on-site audits rather

than follow-up retrofits, NECPA created a program

far too narrow in scope. The RCS would likely have

enjoyed better success if utilities were directed or

encouraged to conduct cost-effective programs, if

the performance of conservation retrofits subsequent

to audits had been stressed more strongly, and if

program administrators had monitored whether the

retrofits suggested by the auditors as most economical were those actually installed by consumers.

Although the ultimate cost-effectiveness of RCS

is uncertain, the program created an important

precedent for many State and utility residential

conservation efforts by providing experience in

program implementation, suggesting the value of

providing incentives for consumer participation, and

highlighting the need to develop better tools for

determining the effectiveness of residential conservation programs. Today, State and utility conservation programs typically encourage household energy

audits and retrofits, suggesting that the lessons from

this defunct national program have current value for

the Federal Government as well. In particular, if

Congress decides in the future to mandate a national

audit program similar to the RCS--or if it wishes

merely to assist related Federal, State, or utility

programs-it would be well served to consider the

factors behind low RCS participation rates and how

to correct them to ensure more cost-effective energy

savings in conservation programs.

● Consumers and utilities lacked sufficient

incentives to participate in the program.

Although many consumers were aware of the

RCS, providing financial incentives for them to

participate would almost certainly have improved program success.117 One of the major

barriers to conservation investments is high

first cost (i.e., purchase cost), even when such

investments pay back relatively quickly. Not

115 M.L. Frankel and J.A. Duberg, “Energy Audits as an Investment: The Residential Conservation Service Program Analyzed,’ Public Utilities

Fortnight/y, Apr. 12, 1984, pp. 21-22. In this context, a ‘‘rebound effect’ refers to changes in consumer behavior that diminish the savings expected

from a conservation retrofit.

116 us.Dep~entof Energy, Up&te of the E~al~ation of the Residential conse~afion Service program, DOE/CS/1w7—T1~aShill@Ol& DC:

September 1986), vol. I, p. ES-2. This range of estimated benefit-cost ratios was based on evaluations of eight utility programs from several regions and

was calculated assuming a 5-percent discount rate, Many analyses of RCS program cost-effectiveness are unreliable, because they are based on

inconsistent State or household reports that used varying methods of calculating RCS energy savings, but the 1986 DOE study is an exception. That

analysis considered only programs that provided actual residential fuel use dat&--not household or other estimates of energy saving~which made it

far more reliable.

117 As dlscuss~ ewher, Feder~ ~come t= ~edi~ were av~lable for residenti~ consemation investments made in tax years 1978 tO 1985 but were

probably too small and not advertised well enough to have much effect on consumer behavior. In fact, as discussed earlier, a DOE survey found that

most households conducting retrofits in 1983 neglected to claim any of the tax credits.
Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 119

Figure 4-5—Residential Conservation Service Audit

Offers and Requests, 1983-89

Millions

60 —-——- —— —

-

- ‘1

50

40 “

30 1

20“

10

1

0 ’L4.3%

1983 84 85 86 87 88 09

_ RCS audit offers ~lj;] RCS audit requests

SOURCE: U.S. Department of Energy, Office of State and Local Assistance Programs, Summary and Highlights of RCS Annual

Reports.’ 1982 to 1989, April 1990, p. 6.

surprisingly, States offering special consumer

incentives—such as no- or low-cost loans for

retrofits--consistently showed higher participation rates in the RCS program. For example,

Massachusetts, Rhode Island, and Connecticut

offered consumers financial or other incentives,

and their participation rates were among the

highest in the Nation—between 16 and 20

percent, well above the national total of 11

percent. Moreover, the 10 utilities with the

highest participation rates all offered financial

or other incentives for participation. These 10

utilities experienced participation rates ranging

from 17 to 53 percent, roughly one-and-a-half

to almost five times the national average.118

Utilities generally lacked incentives to participate

in the RCS program as well. The large electric and

natural gas utility industry in the United States is

largely investor-owned and profit-driven. As a

result, successful conservation programs have, from

the perspective of many utilities, the perverse effect

of reducing their revenues, especially under the

prevailing State utility regulatory structure of the

late 1970s and early 1980s, which generally prevented utilities from profiting directly from consumer energy savings. Though many States are

revising their utility regulatory programs to allow

these companies to profit from conserving energy,

some investor-owned utilities still have few incentives to promote consumer energy savings. For

utility-oriented conservation programs to achieve

optimal results under an investor-owned system,

utilities in the future will have to be able to enjoy

profits from both providing and saving energy.

●

●

●

Utilities and States were burdened with

complex RCS program requirements not

directly related to promoting cost-effective

energy savings. As enacted, the RCS placed

large administrative burdens on utilities: the

program required them to announce and provide audits, compile lists of retrofit contractors

for their customers, arrange for customer retrofit financing, and establish procedures for

resolving customer/contractor disputes. These

requirements placed utilities in the undesirable

position of acting as liaisons between customers and contractors without ensuring the utilities any economic return for their efforts.

Among other things, these controversial program requirements prevented most States from

participating in the RCS program until 1982 or

1983. As late as 1983, about 10 States had not

initiated any RCS program.119

The availability of retrofit installation services may have been limited in many areas. At

the time the RCS was created, the Edison

Electric Institute estimated that accomplishing

the program’s ambitious goals would require

320,000 auditors and 2.5 million insulation

installers, 120 a growth in this service industry

that appeared unlikely given the original 5-year

life of the program. Any future national effort

to promote residential energy conservation

retrofits through audit or other programs should

first ensure that the growth of the accompanying service industry occur gradually over a

longer period—to allow for sufficient time to

develop auditor and installation personnel and

expertise.

Insufficient program marketing to lowincome households and renters. Significant

energy savings opportunities are common in

low-income and rented households. These units

118 ~eSe fiwreS ~eprcScnt~~cipation ~ough the 1987 qofig pefiod. seUS, Dep~ment of Energy, Office of State md hCd PIU~amS, f 987

Genera[ and Summary Reports to Congress on the Residenh’al Conservation Sen’ice Program (Washingto& DC: December 1987), pp. 18-21.

I 19 JA, Walker, TN. ~uh, ~d K, Grlffln, ‘ ‘A Review of tie Residenti~ come~ation sc~i~e pro~~ Annual Review o~Energy 1985 ~dO Alto,

CA: Annual Reviews, Inc., 1985), vol. 10, pp. 290291.

lzo Ibid., p. 288.
120 ● Building Energy Efficiency

●

●

are often older, needing repair, and thus less

energy efficient, yet they were not specially

targeted in most States. Department of Energy

surveys for the RCS program confirmed the

low participation of these groups.121

Many consumers had performed retrofits

before the Federal program was initiated.

Several States had conducted their own residential conservation programs prior to the

creation of the RCS. Also, natural gas shortages

in the winter of 1977 and rising oil and

electricity prices in the late 1970s motivated

many consumers to conduct retrofits before the

RCS program was even initiated. In fact, many

utilities reported that energy savings in their

own conservation programs were greater than

those from the Federal RCS,122 and many may

have promoted their own energy conservation

programs more aggressively than the DOE

effort.

The uncertain future of the RCS program

after 1985 coupled with energy price drops

in the late 1980s probably contributed to

dwindling participation rates at the end of

the program. Moves to repeal the RCS before

its apparent sunset date of January 1, 1985 left

program planners uncertain of its future; in fact,

the program was largely in limbo during 1985

and 1986, when there were disputes about

whether it needed reauthorization. 123 It was not

until the passage of the Conservation Service

Reform Act (Public Law 99-412) in August

1986 that DOE, State, and utility program

administrators were fully certain that the program would continue. In those 2 years, however, audit offers dropped nearly 50 percent. At

the same time, the real price of energy had been

falling, making its largest drop in 1986. These

events suggest why annual RCS participation

rates (measured as the annual fraction of audits

requested to those offered) were the lowest in

the last 2 years of the program-2.3 percent

(1988) and 1.9 percent (1989). See figure 4-5.

Commercial and Apartment Conservation Service—The impetus behind the CACS program was

similar to the RCS: to provide information through

energy audits to induce building owners and occupants to conserve energy through retrofits and

operational changes. The CACS required large

electric and natural gas utilities to offer energy

audits to small commercial buildings and centrally

heated or cooled multifamily apartment buildings

with five or more units.l24 Unlike the RCS program,

however, only a few States submitted implementation plans, and only one State (Michigan) initiated a

program.

In the event that any States did not submit CACS

implementation plans, the Energy Security Act

directed DOE to implement a Federal Standby Plan,

which the Department issued in September 1985.125

Though the Standby Plan became effective 1 month

later, Congress repealed the program the next year

(Public Law 99-412). According to a DOE official in

the office that administered the program, State

disinterest in the CACS stifled the program from the

outset, funds appropriated to the program were

always low, and no final report or final evaluation of

the program was completed.126

Technical Assistance

DOE administers two major programs that offer

education, technical assistance, and demonstration

services to nonfederal organizations such as State

and local governments, commercial businesses,

academic institutions, and other, generally smallIzI U.S. Dep~ent of Energy, office of State and Local programs, 1987 General andSummary Reports to Congress on theResidential conservation

Service Program (Washington, DC: December 1987), p. 4.

122 U.S. Conwess, Gener~ Amounfig Office, Federal Home Energy Audit Program Has Not Achieved Expectations, GAO/RCED-87-38

(Gaithersburg, MD: December 1986), p. 4.

123 me dispute centered on tie me-g of tie exp~ation date for req~g RCS progam ~o~cements, as allowd in the National Ener~

Conservation Policy Act (Public Law 95-619). The DOE interpreted that date (January 1, 1985) as the implied termination date for the entire program.

Others, such as the General Accounting Office, disagreed with that positio% arguing that utilities had a continuing obligation to conduct their other RCS

program activities. See Harry R. W.n Cleve, U.S. General Accounting Office, testimony at hearings before the House Subcommittee on Energy

Conservation and Power, Committee on Energy and Commerce, Sept. 5, 1985.

124 me Ener~ secufi~ Act of 1980 (public Law 96-294) defined sti commercial buildings as those COIIS uming less than 4,000 kwh per mont4

1,000 therms of natural gas per month, or 100 million Btus of any other fuel. In addition, Title V of the Act expanded the RCS program to include as

of January 1, 1982 all multifamily apartment buildings with five or more units that lacked central heating or cooling systems.

125 so F&ra/ Register 37818 (Sept. 17, 1985).

126 ~~eM Rest, u s Dep~en~ of Ener~, office of Conservation and Renewable Energy, former DOE manager of the Commercial and . .

Apartment Conservation Service, personal communication, Mar. 27, 1991 and Feb. 4, 1992.
Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 121

scale energy users. These are the State Energy

Conservation Program (SECP) and the Energy

Extension Service (EES), Their combined budget

history is given in figure 4-6. All 50 States, the

District of Columbia, and six Territories participate

in both programs, each of which requires a 20

percent finding match.127

State Energy Conservation Program—Under the

Energy Policy and Conservation Act (Public Law

94-163), States are required to develop and implement conservation plans through the State Energy

Conservation Program (SECP).128 The 1975 statute

directed the Federal Government to oversee and

assist States in the development and implementation

of their own conservation programs, which were

required to reduce the energy demand in each State

by at least 5 percent of its anticipated 1980

consumption level. To be eligible for financial

assistance under the Act, each State had to submit a

conservation plan indicating how the statutory

conservation goal would be reached.

State plans were required to contain five basic

elements, two of which related to building energy

efficiency: mandatory lighting efficiency standards

for public buildings (except those owned or leased

by the Federal Government) and mandatory thermal

efficiency standards and insulation requirements for

new and renovated buildings (except those owned or

leased by the Federal Government).129 All States

have implemented programs that meet the five

EPCA requirements, and most States have developed additional conservation programs that supplement the SECP. These programs include energy

education, energy technology demonstration, and

technical assistance. 130 Examples of several SECPrelated buildings efforts convey a sense of the

program (box 4-F).

SECP appropriations have decreased since 1979,

but monies transferred from Petroleum Violation

Escrow funds (from Exxon and Stripper Well

Figure 4-6-Combined Funding for the State Energy

Conservation Program and the Energy Extension

Service, 1976-89

Current dollars (millions)

350 ~. .

250 -

200 “

150 -

100 “

197677 78 79 80 81 82 83 84 85 86 87 88 89

[:;:! SECP = EES

NOTE: The sharp increase in SECPfunding since 1987stems entirefyfrom

newly available oil overcharge funds. In current dollars, actual

SECP appropriations have been decreasing since 1979. In recent

years, administration requests for SEC P/EES funding have sought

only these overcharge funds.

SOURCE: U.S. Department of Energy, Office of Technical and Financial

Assistance, Eleventh Annual Report to Congress and the

Secretary of Energy on the Nationwide Energy Extension

Service Program, DOE/CE-0291 P (Washington, DC: July 1990),

p. 6; Office of State and Local Assistance Programs, Annual

Report to the President and the Congress on the State Energy

Conservation Program for Calender Year 1989, DOE/CEO296P (Washington, DC: December 1990), p. 3.

judicial rulings stemming from oil overcharge suits)

since 1987 have expanded program resources in

recent years far beyond original funding levels

(figure 4-6).

DOE does not estimate the cost-benefits of SECP

energy savings, because there are great uncertainties

in calculating savings from such a diversity of

relatively small-scale activities; measuring the incremental energy savings that have resulted from

past SECP efforts would be difficult and almost

certainly unreliable.131 On the other hand, program

funding has increased dramatically in recent years

with the availability of petroleum violation monies,

and Congress and DOE may wish to determine if

127 us. Dep~cn[ of Ene.n, unltedstote~ Dep~~f~~nt ~fEn~~8Y FiSC~l year 1992 Con8reSSiO~lB~8et ReqUeSl, rloE/~-~1 (wash@to~

DC: Februmy 1991), vol. 4, p. 470.

{MI A state is my State, tie Dis@lct of Columbia, Werto Rico, ad the territories ~d possessio~ of tie Ufitd ‘tates

12942 U.S.C. 6322(c).

130 us Dep~ent of EnerW, AnnualReport (. the President and the Congress on the State Energy Consen*ation program for Calender year 1989,

DOE/CE-0296P (Washington, DC: December 1990), pp. 1-2.

1s 10ne review of tie SECP suggested that typical residential energy Savhgs ste mming from the program have been small, perhaps 5 percent, but the

review suggested that savings could reach 10 percent if feedback on personal energy use was provided. Yet published estimates of SECP energy savings

are often unreliable, because they are commonly based on household reports of energy savings rather than actual fuel-use information. See J. Clinto~

H. Geller, and E. Hirst, ‘ ‘Review of Government and Utility Energy Consemation Programs, ‘‘ Annuaf Review of Energy 1986 (Palo Alto, CA: Annual

Reviews, Inc., 1986), vol. 11, p. 104.

297-936 0 - 92 - 9 : QL 3
122 ● Building Energy Efficiency

Box 4-F—Examples of State Energy Conservation Program Projects1

● Cultural Heritage Center (Pierre, South Dakota): This demonstration project was conducted under the

auspices of the gubernatorial Office of Energy Policy and the State Historical Society and involved the

installation of passive solar, efficient lighting, and automated control designs and technologies at the center.

Eight separate efficiency measures, ranging from earth sheltering to heat recovery ventilation, are now

demonstrated to the Center’s 25,000 annual visitors.

● Cabell Couny Courthouse Demonstration Project (Huntington, West Virginia): This project involved the

installation of a commercially available, but seldom used, natural gas pulse boiler and heat distribution

system in the Courthouse to demonstrate the applicability of this technology as an alternative to larger,

centralized boilers. Typical of the 55 courthouses in the State, the Cabell County building is a brick and stone

structure that had proven difficult to heat. This project is expected to save 53 percent of previous energy use

in the Courthouse.

● Community Energy Management Program (Oklahoma Department of Commerce): The CEMP is a

community-oriented, technical assistance effort designed to implement cost-effective energy efficiency and

conservation options for local governments in the State. Trained Local Energy Officers operate the program

and receive input from local groups and interested individuals.

1 Us. Department of-, Annual Report to the Presi&nt and the Congress on the State Energy Conservation Program for Calender

Year 1988, DO~93P (’Wasbm@oQDC: “ oetober 1989), p. 5; U.S. DqwOmmt o~Enugy, AnnualReport to the Presi&ntandthe Congress

on the State Energy Conserwm”on Program for C’alen&r Year 1989, DOQCE-0296P (Waahingt~ DC: Decem& 1990), pp. S-6.

more rigorous evaluations of program effectiveness general information dissemination as the least effec-

(including cost-benefits) should become integral to

SECP planning and evaluation.l32

Energy Extension Service--EES provides basic

information, education, and training-such as audits

and self-help workshops—to homeowners, farmers,

small businesses, local governments, and other,

small-scale public institutions. The purpose of the

program, which is administered with the SECP, is to

maintain a decentralized system of information to

serve the local needs of small-scale energy users;

technical assistance and demonstration projects are

offered as well. EES programs are State designed,

and DOE disburses funds through grants to State

energy offices or other State entities designated by

their governors to administer the program. States

distribute these funds according to DOE-approved

plans. Several examples of EES efforts convey a

sense of the program (box 4-G).

A review of a State energy official survey suggested that on-site workshops, auditor training, and

well-targeted information programs are the most

effective part of the EES program. The study viewed

tive program function.133 Reliable calculations of

SECP and EES energy savings are extremely

difficult to make on a national level given the

diversity, small-scale, and decentralized nature of

projects in both these programs.

Despite the lack of reliable data on energy

savings, however, both programs are important

networks for conveying Federal monies and expertise to the State and local level, and both programs

are connected to small-scale energy users that could

help DOE demonstrate technologies emerging from

its energy conservation research and development

projects. In addition, the auditor and other training

offered by these programs help establish and sustain

local expertise and markets for weatherization and

other conservation services. Finally, SECP and EES

efforts could complement other Federal programs

(such as the Weatherization Assistance Program and

the Institutional Conservation Program, both discussed above) that are designed to operate on the

local level.

132 ~~ ~a~ one of ~ ~e-iu of ~women~tiom ~ a 1982 Gene~ ~o~tingoffice (GAO) report, and it is still pertinent today. IrI their repo~ GAO

made a variety of recommendations for improving the SECP after States missed the 1980 national goal of reducing their energy use at least 5 percent.

See U.S. Congress, General Accounting OffIce, ~fate Energy Conservation Program Needs Reassessing, EMD-82-39 (Gaithersburg, MD: April

1982).

133 J. ClintoU H. Geller, and E. Hirst, “Review of Government and Utility Energy Conservation Programs, ‘‘ Annual Review of Energy 1986 (Palo

Alto, CA: Amual Reviews, Inc., 1986), vol. 11, p, 104.
. .

Chapter 4--A Review of Federal Efforts To Increase Energy EfficiencY in Buildings . 123

Box 4-G-Examples of Energy Extension

Service Projects1

. School Lighting (Washington): The Washington Energy Extension Service in cooperation

with its State Energy Office has provided

training to school districts on how to reduce

energy use through lighting changes in classrooms, gymnasiums, and other school areas.

● Cogeneration Demonstration (Taos, New Mexico): With the assistance of Federal funds

partially matched by the State’s Energy, Minerals, and Natural Resources Department, the

Taos Coronado Center, a local community

meeting and business place, has installed a

cogeneration system expected to save over

$10,000 in energy costs annually.

● State Government Lighting (Rhode Island): A

combined State, utility, and nonprofit group

effort has leveraged Federal EES funds to

upgrade lighting systems in State buildings,

which are expected to reduce total State

government electricity costs by 20 percent.

● Seniors’ Weatherization and Training (Kentucky): The SWAT program is a combined

effort, joining the State EES with seven local

nonprofit groups. The nonprofits recruit and

train volunteers to weatherize residences of the

elderly. With materials donated by a major

corporation, the SWAT team in 1989 offered

information and weatherization services to

over 850 homes in the State.

1 U.S. Dep_nt of Energy, Tenth Annual Reporz to

Congress and the Secretary of Energy on the Nationwide Energy

Extension Service Program, DOE/CE-0266 (Washington, DC:

March 1989), p. 10; U.S. Department of Energy, Eleventh

Annual Report to Congress and the Secreta~ of Energy on the

Nationwide Energy Extension Service Program, DOE/CEO291P (Washington, DC: July 1990), pp. 8-10.

NONFEDERAL PROGRAMS TO

PROMOTE ENERGY EFFICIENCY

IN BUILDINGS

Efforts to promote energy efficiency in U.S.

buildings have by no means been restricted to

Federal initiatives; State, local, private sector, and

utility programs have in many instances been

seminal in promoting energy efficiency in U.S.

buildings. This section reviews briefly some of these

programs. The intent is not to provide a comprehensive list of all such programs but rather to provide

some indication of the level of nonfederal activity.

This will allow for a better determination of how

Federal programs can best complement the existing

network of other programs.

States and utilities have been leaders in implementing energy efficiency. State efforts include

those by State energy offices, State-level R&D

organizations and, perhaps most importantly, State

regulatory agencies. In some States, utility regulators have aggressively promoted efficiency by requiring the development of utility conservation

programs or by providing financial incentives for

utilities to develop such programs.

State Programs

State efforts to promote energy efficiency in

buildings vary greatly. Some States—notably California, New York, Wisconsin, and Massachusetts—

have been very aggressive in pursuing building

energy efficiency. State-level organizations implementing these programs vary as well, but in many

States the lead organization is the State utility

regulatory body, commonly the public utility commission. In some States the public utility commissions, via the utilities they regulate, have been strong

proponents of energy efficiency. Utility programs

are reviewed below.l34

State-level efforts to promote efficiency are not

limited to utility regulatory programs. Many States

have State energy offices, which often administer

Federal funds such as those from the DOE weatherization assistance program and from oil-overcharge

funds.

135 State energy offices use a variety of

programs to promote efficiency, including audits,

loans, grants, and general information efforts. For

example, the Washington State Energy Office operates an information clearinghouse with a staff of

technical experts that responds to public inquiries

134 A detall~ discussion of the role of utilities in implementing energy efficiency will bc provided in OTA, “Utilities and Energy Efficiency, ”

forthcoming,

135 From 1973 t. 1981011 ~ompafies in the Unitd states were subject 10 price con~ols on their ~de oil ~d refined petroleum products. Investigations

by the DOE’s Economic Regulatory Administration uncovered a number of violations of these controls by oil companies. Many of these violations

resulted in court decisions requiring oil company payments to DOE for use in State energy conservation programs. As of September 1987, oil companies

had paid about $6 billion into a petroleum overcha.rgc escrow account held by DOE. See U.S. Congress, General Accounting Office, State’s Expenditures

of Warner Amendment Oil O\’ercharge Fund.r, GAO/RCED-88-l 19BR (Gaithersburg, MD: May 1988).
124 . Building Energy Efficiency

about energy efficient construction for new commercial buildings.136

Some States have R&D agencies that are also

active in energy efficiency (table 4-7). These agencies are typically funded by utilities, State revenues,

or both and work closely with utilities, regulators,

and State government officials to target R&D efforts

in areas most relevant to their State needs.

At least 33 States have adopted mandatory

building energy codes. Many of the remaining States

provide model codes for their counties and local

governments. Generally, State codes are based on

the prominent codes issued by national organizations, primarily the American Society of Heating,

Refrigerating and Air-Conditioning Engineers

(ASHRAE) and the Council of American Building

Officials (CABO), However, some States such as

California and New York have expanded their role

from code adopters to code designers.

Local Programs

Historically, local governments have not been

active in promoting energy efficiency in the private

sector. There are, however, several notable exceptions. A few cities have responded to fiscal pressures

by attempting to reduce energy consumption in

city-owned buildings and equipment. The city of

Phoenix, for example, has an active energy conservation program that has included lighting and

heating, ventilating, and air conditioning (HVAC)

retrofits to city-owned buildings, automated controls

for lighting at city parks, and improved maintenance

of HVAC units in city-owned buildings.137 Electricity and/or gas service in some communities is

provided by small municipal utilities, or ‘munis,’

which may have strong efficiency programs. The

city of Palo Alto, California, for example, is served

by a city-managed utility that offers a wide range of

efficiency programs.

Many communities have building codes that may

have energy requirements. Local building codes

Table 4-7-Selected State-Level Energy Efficiency

R&D Organizations

Year

Organization established

California Energy Commission . . . . . . . . . . . . . . . . . . 1975

California Institute for Energy Efficiency . . . . . . . . . . 1988

Florida Solar Energy Center . . . . . . . . . . . . . . . . . . . . 1974

lowa Energy Center . . . . . . . . . . . . . . . . . . . . . . . . . . 1990

Kansas Electric Utilities Research Program . . . . . . . 1981

New York State Energy Research

and Development Authority. . . . . . . . . . . . . . . . . . 1975

North Carolina Alternative Energy Center . . . . . . . . . 1980

Wisconsin Center for Demand-Side Research . . . . . 1990

SOURCE: Office of Technology Assessment, 1992.

sometimes extend to the existing building stock as

well. In San Francisco, for example, both residential

and commercial buildings must meet energy efficiency levels as a condition of resale.138

Utility Programs

Utilities are in a unique position to implement

efficiency programs for buildings: they have direct

access to consumers and fuel use information, they

have the resources and expertise to understand and

respond to local conditions and markets for their

service areas, and they can provide incentives and

information to their consumers directly through their

regular billing procedures. Readers interested in the

role of utilities in efficiency are referred to a separate

OTA report.139 This section briefly outlines the

types of building efficiency program utilities currently offer.

Utility involvement in energy efficiency is a

relatively new development. Traditionally, utilities

viewed their role as providing dependable electric

and gas supplies at a reasonable cost; they were not

involved in how the energy was used. In recent

years, however, uncertainty over future demand,

plant siting constraints, environmental regulations,

and other concerns have put increasing pressure on

136 GO cu ~ $~e wa~~~onstate ~au Offlce Tec~~Ufit: ~ Approach to De}ivefig Tecfic~ Semices i.I’I tie Pllblic S=tor, ” Proceedings

of the ACEEE 1990 Summer Study on Energy Eficiency in Buildings (Washington DC: American Council for an Energy-Efficient Economy, 1990),

p. 7.17.

137 City of Phoenix, ‘‘City of Phoenix Energy Conservation Program, ’ Public Works Departmen~ Phoenix, AZ, January 1991.

138 K. Egel, J. Cook ad B. ~ox, “Mandating Energy Efficient Commercial Buildings: San Francisco’s Commercial Energy Conservation

Ordinance,’ Proceedings of the ACEEE 1990 Summer Study on Energy E@”ciency in Buildings (Washingto~ DC: American Council for an

Energy-Efficient Economy, 1990), p. 7.43.

IN Om, ‘ ‘Energy Efficiency and utilities, ” fOfiCO~g.
Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings ● 125

utilities to plan better their future capacity needs.140

One result of these forces is the emergence of a new

concept of utility planning termed ‘least-cost planning’ (LCP), or, more recently, ‘integrated resource

planning’ (IRP).

A basic idea behind these concepts is that

consumers do not require energy per se but energy

services (lighting, heating, cooling) and are therefore best served if these services are provided at the

lowest overall cost. For example, it may be less

expensive for a utility to install energy-efficient

lights in offices than to build a new powerplant to

meet the demand of less efficient lights. The service

provided is the same, but the overall cost to provide

it may be lower.141

Thus, LCP (or IRP) entails a process in which

demand and supply options are evaluated together to

determine how to meet consumer energy needs at the

lowest cost; such planning is now practiced in at

least 23 States.142 Interest in such planning has also

led to the aggressive promotion of demand-side

measures in many States. These measures, often

referred to as ‘demand-side management’ (DSM)

efforts, include efficiency and other actions that

reduce the total cost of energy services (e.g., ice

storage, which may actually increase net consumption but which reduces peak electricity demand and

therefore reduces net costs).

At present there are over 1,000 utility-run efficiency programs for the residential sector 143 and

over 340 for the commercial sector. l44 Many utilities

work closely with State regulators and with the

private sector in designing, executing, and evaluating their programs. These programs include changes

in rate structures, financial incentives such as rebates

and loans, information programs providing audits

and technical assistance, R&D, and demand-side

bidding,

First Cost Reduction: Probably the most popular

type of program for encouraging energy efficiency is

a reduction in first cost. Tax credits, low-interest

loans, grants, and rebates are often used by utilities

to provide a financial incentive for efficiency by

reducing the up-front costs. For example, over 20

utilities offer rebates to their commercial customers

if they purchase energy efficient HVAC equipment. 145 Several utilities provide rebates to their

residential customers for buying efficient refrigerators. Low-interest loans are often offered in conjunction with residential audit programs. A utility in

Washington State provides its commercial customers with two free compact fluorescent lamps.146

Rates: Working with State public utility commissions, utilities have used changes in rate levels and

rate structures to influence energy use. Traditionally

rates are set at the State level, although the Public

Utility Regulatory Policies Act of 1978 (Public Law

95-617) promotes the use of innovative rate structures, such as time-of-day, seasonal, and interruptible rates.

Most utilities currently offer a wide range of rate

schedules. For example, the electric utility serving

the District of Columbia offers 16 different rate

schedules, including time-of-use rates for residences

and demand/consumption147 time-of-day rates for

larger commercial customers.148 The effects of

these innovative rate schedules on consumption are

140 The elec~c Utillty indus~ is descri~d in detiil in U.S. Congress, Office of Technology Assessment, Elecm”c Power Wheeling and Dealing,

OTA-E-409 (Washington, DC: U.S. Government Printing Office, May 1989), ch. 2.

141 ~ fact, m this exmple &e semice (lighting) probably improves, as new energy-efficient lighting often provides higher qtity light as well.

142 A Suey conduct~ in 1990 fo~d tit 23 Smtes Ne practicing IRP, 8 States are in the process of implementing it. ~d 11 me comid~g it. See

Edison Electric Imtitute, Rate Regulation Department, Stare Regulatory Developments in Integrated Resource Planning (Washington, DC: September

1990), p. 2.

143 Battelle, 1988 Suney of Re~zdential.Secfor Dema~.Side Management program, EpRI CU-6546 (p~o Alto, CA: EIN~c power Research

Institute, October 1989), p.iii.

144 Battelle-ColUbus Division, 1987 SunVey of commercia~-seclor Den~~-,$ide &fanagementprograms, Epw CU-6294 (Pdo Alto, CA: E1ectric

Power Research Institute, March 1989), p.iii.

145 Ibid., p. 2-14.

lL16 ~encm Council for ~ Ener=_Efficient Economy (ACEEE), ‘ ‘Lessons Learned: A Review Of Utillty Experience wih conservation @ bad

Management Programs for Commercial and Industrial Customers, published by the New York State Energy Research and Development Authority

(?NYSERDA), Report 90-8, April 1990, Appendix.

147 Meting tit ~ustomcrs ~e ~~ged for ~~ how much elec~city hey use at my one tfic (dem~d, meas~ed in kW), as well ~ how much

electricity they use over the entire billing period (comumptiou measured in kWh).

148 Potomac Electric Power Co., ‘ ‘Rate Schedules for Electric Service in the District of Columbia,’ Rates and Regulatory Practices Group, Apr. 3,

1990.
126 ● Building Energy Efficiency

Photo credit: Paul Komor

Some utilities work with local service organizations to

advertise, distribute, and sell efficient technologies at or

below cost to interested consumers.

not well documented. There is some evidence that

equipment design and operation is influenced by rate

schedules in large commercial buildings. For example, a large office building in Arizona recently

installed an ice-storage machine that makes ice at

night when electricity is less expensive and then uses

that ice during the day to cool the building.149 The

existence of time-of-use rates provided the necessary incentive.

Direct load control: This entails a utility paying

its customers for the right to control directly their

appliances, and the idea is used by over 350

Utilitles.l50 A utility serving Maryland, for example,

gives residential customers a $9 credit on their

monthly electric bill in exchange for the right to turn

off their central air conditioner for short periods on

peak demand days.

Information programs: Many utilities offer

audits to their customers, in which an energy analyst

visits the building, takes various measurements, and

makes recommendations for specific energy-saving

retrofits. In many cases the audits are tied to a

low-interest loan for financing the recommended

measures. Here again evaluations are scarce, but

there is some evidence that coupling an audit with a

loan program increases both participation rates and

energy savings.151

There are other types of information programs as

well. Wisconsin utilities, for example, have developed a labeling system for rental housing. The label,

similar in appearance to those found on residential

appliances, provides a measure of heating energy

requirements. Another effort, the Energy Edge

Project, is a $16-million program administered by

several groups--one utility, two State energy offices, and a private company-and aims to demonstrate and evaluate efficient technologies for new

commercial buildings.152 And the Bonneville Power

Administration’s ‘Blue Clue’ program labels highly

efficient appliances with blue ribbons.153

State regulators now typically require utilities to

evaluate their efficiency programs to compare them

with supply-side options. Unfortunately program

evaluation is quite complex; several groups are

working to improve the evaluation methods, but

more work is needed. For example, the ‘free rider’

problem—where program participants would have

performed the same actions without the additional

incentive-complicates evaluation of these programs.

R&D: Utilities also conduct R&D, both at the

individual utility level and via R&D consortia. The

Electric Power Research Institute, for example, is

funded by voluntary contributions from member

utilities. Its 1991 R&D budget was $267 million, and

149$ Cfiz. FiMI Keeps Energy Costs to a Quarter of Local Average, ” Energy User News, June 1991, p. 1. In this case, total energy use may actually

be higher than that fmm a traditional systeq but electricity demand and energy costs are lower.

150 Battclle, ]988 Sumey of Re~idential.SeCtOr De~~.Side Management program, EPM CU-Gs~ (P~o Alto, CA: El&t.lic Power R~~Ch

Institute, October 1989), p. 6.2.

151 s. Nadel, * ~Elec~c Utiity co~emation progr~: A Review of tie ~SSC)IIS Taught by a Dtide of program Experience, ’ Proceedings o~the

ACEEE 1990 Summer Study on Energy Efj$ciency in BuiZdings (Washingto% DC: American Council for an Energy-Efficient Economy, 1990), p. 8.181.

152 w, Miller, s, vo~, G. v~cent, J. pew, K ~derson, ~d G, G- ‘‘~SSO13S ~med for tie Energy Edge Project for New COmmerCiid

Buildings, ” Proceedings of the ACEEE 1990 Summer Smdy on Energy Efi’ciency in Buildings (Washington DC: American Council for an

Energy-Efficient Economy, 1990), p.7.l 17.

153 Bafielle, 1988 Sur\,ey Of ReSldentia/-,’j~~r~~ D~~nd-S/de Manu~e~ent program, EPN (XJ-GS4.6 (Palo Alto, CA: october 1989), p. 4-17.
—

Chapter 4--A Review of Federal Efforts To Increase Energy Efficiency in Buildings . 127

$36.2 million (14 percent) of this was budgeted for

end-use research.154 The Gas Research Institute

(GRI) is funded primarily through contributions

from interstate natural gas pipeline companies. The

1991 GRI budget was approximately $202 million,

of which $95 million (47 percent) was allocated to

end-use research.l55

Demand-side bidding: A few utilities have used

a bidding process to secure new electricity capacity.

For example, a utility might request private companies to submit bids for providing the utility with 100

megawatts (MW) of new capacity. The bidder could

use either new supply (e.g., cogeneration) or efficiency (e.g., a lighting retrofit) to ‘supply’ the

needed capacity. Although the concept is conceptually appealing, initial experience with bidding has

been mixed, and more research is needed, particularly in bid evaluation and the incorporation of

performance uncertainties. In particular, high transaction costs and difficulty in measuring the effects of

some efficiency programs (e.g., information and

design assistance) have limited its use.156

As these examples

programs have been

suggest, a variety of utility

used to implement energy

efficiency in buildings, but there is little agreement

on what works best, and program evaluation is a

continuing concern. By one estimate, utility-run

demand-side management programs led to national

reductions in electricity consumption of 1.3 to 1.8

percent in 1990. Electricity demand reduction was

estimated at 3.7 to 4.2 percent—about 20 gigawatts

of summer on-peak demand. 157 The cost-effectiveness of these investments is somewhat uncertain.

However, by one estimate, total utility expenditures

for DSM are about $1.2 billion annually (1990).158

This works out to about $180 per kilowatt, or less

than one-half the capital cost of a gas turbine.]59

Although the uncertainty of this number must be

recognized, it does suggest that in many cases DSM

may be less expensive than traditional supply-side

options.

154 E1ec~ic power Research Institute, Research and Development Program 1991-1993 (pdo AIIo, CA: JaIIUW 1991), P. 7

155 Gm Reseach Institute, 1992.1996 Re~earch and D~}e/~Pment plan and 1$292 Research andDe\,e[opment program (Chicago, ~: April 1991),

p.28.

156 For ~ detallcd dl~cu~slon of bldd~g, sm C, Goldman ad D. Wolco[l ‘ ‘De~d-Side Bidding: Assessing Current Experience, Proceedings of

the ACEEE J990 Summer Smdy on Energy E@ciency in Buildings (Washington, DC: American Council for an Energy-Efficient Economy, 1990), p.

8.53. Also, Strategic Decisions Group, Bidding for Electric Resources: An Industry Re~tiew of Competitive Bid Design and E\’aluation, EPRI CU-6089

(Palo Alto, CA: Electric Power Research Institute, May 1989).

157 BM~t & c~~rljn, Inc. ~d Ep~, Impact ofDew~-Side~anagement on Fumre Customer E1ectrici~De~nd: An Update, EPRI CU-6953

(Palo Alto, CA: September 1990), pp. 3-6, 3-7. Savings are reIative to a 1988 base year.

158 s. Nadel, ~ ‘Electric Utl]lty ComeNatIon ~oflm: A Review of tie ~ssom Taught by a Decade of program Experience, Proceedings of the

ACEEE 1990 Summer Study on Energy Eficiency in Buildings (Washington, DC: American Council for an Energy-Efticicnt Economy, 1990), p. 8.179.

] w me ~ltl~ Capital rwulremcnt for a gas turbine is about $400 per kilowatt. Electric Power Research Institute, TAG Technicol As.fessment

Guide–%)ectricity Supply 1989, EPRI P-6587-L (Palo Alto, CA: November 1989), vol. 1, Rev. 6, p. 7-55. Estimate in text assumes that DSM

cxpcnditurcs for 1988, 1989, and 1990 contributed to the DSM savings seen in 1990 and also assumes that DSM costs in 1988 and 1989 were the same

as in 1990. This probably overestimates costs, because DSM expenditures have generally incrcascd each year.
Chapter 5

Policy Options for the U.S. Congress
Contents

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Increasing the Incentives for Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Federal Leadership: Procurement, Recognition, and Demonstration . . . . . . . . . . . . . . . . 137

Federal RD&D in the Buildings Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Utilities and Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Mandating Efficiency: Codes and Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Improving Information and Awareness of Efficiency Opportunities . . . . . . . . . . . . . . . . 152

ASSEMBLING THE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Boxes

Box Page

5-A. The Residential Mortgage Industry and the Federal Government . . . . . . . . . . . . . . . . 135

5-B. How a More Efficient House Can Cost Less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

5-C. The DOE Multi-Year Program Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

5-D. The Basic Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

5-E. The Moderate Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

5-F. The Aggressive Package . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

5-G. The National Energy Strategy: Summary of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Chapter 5

Policy Options for the U.S. Congress

INTRODUCTION

Energy use in buildings accounts for an increasing

share of total U.S. energy consumption—horn 27

percent in 1950 to 33 percent in 1970 to 36 percent

in 1990.1 At present, buildings account for over 60

percent of all electricity and nearly 40 percent of all

natural gas used in the United States.

2 Fortunately

new, highly efficient technologies are available that

can provide needed energy services in buildings

(e.g., heating, lighting, and cooling) while using

significantly less energy. In many cases these

technologies cost more initially, but these initial

costs are paid back through reduced energy costs.

OTA has estimated that energy use in U.S.

buildings could be reduced about one-third by 2015,

relative to projected consumption without policy

change, through the use of cost-effective, commercially available technologies.3 Many other estimates

of this savings potential exist and, although the

results vary, there is general agreement that the

untapped potential for improved energy efficiency in

buildings is significant. Exploiting these opportunities would yield important benefits for the United

States, including: 1) reduced energy expenditures,

freeing up capital for other investments; 2) decreased environmental damage by offsetting energy

production and use; and 3) reduced dependence on

imported energy, enhancing national security.

There are several arguments for an enhanced

Federal Government role in promoting energy efficiency.

—Numerous market imperfections lead to the

selection of energy-using equipment that may not be

societally optimal. These imperfections are discussed in detail in chapter 3 and include:

● When evaluating energy savings, consumers

discount future savings very heavily—up to 50

percent or more;

●

●

●

●

●

A separation between those paying for energyusing equipment and those paying to operate

the equipment is common, leading to reduced

incentives for efficiency;

Decisions on the purchase and use of energyusing equipment require comparisons of many

product attributes. When consumers make tradeoffs during these decisions, which are often

complex, these other product attributes often

overshadow energy efficiency;

Individuals pursue several goals when making

energy-related decisions, but very few pursue

the goal of minimizing life-cycle costs;

Energy costs are relatively low (e.g., about 1

percent of salary costs in a typical office), so

those concerned with cost reduction often focus

their attention elsewhere; and

Energy efficiency is often (mis)perceived as

requiring discomfort or sacrifice, limiting its

appeal.

Government programs and policies can be used to

correct or minimize the effects of these imperfections.

—The numerous, untapped opportunities for energy savings that now exist suggest that current

market conditions alone will not ensure the full

implementation of these opportunities, although

society as a whole may be better off if they were

implemented.

—Energy production and use has significant

environmental and other externalities (effects not

captured in price), requiring government action to

correct them.

Yet enthusiasm for a larger Federal role in energy

efficiency must be tempered with a recognition of

several important points:

. Attempts to increase energy efficiency through

regulation or other governmental action may

have unanticipated administrative or other costs;

1 Industry (37 percent) and transportation (27 percent) account for the remainder. Data include energy losses in the conversion and transmission of

electricity. U.S. Department of Energy, Energy Information Administration, Annual Energy Re}’iew 1990, DOE/EIA-0384(90) (Washington, DC: May

1991), p. 13.

z Ibid., pp. 173, 215.

s Cost-effcctlve is dcfln~ here as Positlvc net Prcscn[ v~uc to the comumer. see ch, 1 for a detailed discussion of encr~ savings cstimateS.

–131-
132 ● Building Energy Efficiency

. Past Federal efforts to implement energy efficiency have had mixed success (see chapter 4);

. Current levels of energy efficiency reflect

consumer preferences given existing economic

incentives and levels of information; and

. Consensus on the best methods to promote

efficiency is often lacking.

Innovative research and development by both the

public and private sectors has yielded a number of

highly energy efficient technologies. However at

present many of these technologies are not being

adopted at cost-effective levels. 4 This chapter

discusses policy options to encourage greater use

of cost-effective, energy efficient technologies.

POLICY OPTIONS

A variety of Federal policy actions could encourage greater energy efficiency in buildings. Although

the options outlined in this chapter are quite diverse,

several issues are worth recognizing when considering any options. Perhaps most importantly, there is

no single policy that will address all impediments

to efficiency. There are multiple technologies,

decisionmakers, and energy users in buildings; the

barriers to efficiency discussed in chapter 3 are

diverse, and so must be the policies to overcome

them. Greater attention in the future to program

evaluation would yield better information on what

works and what needs improvement, but at present

levels of knowledge it is clear that several different

policy approaches would be needed to improve

energy efficiency in buildings.

The diversity of current State and utility programs

provide a context to consider Federal policies for

improving building energy efficiency. In almost all

areas of energy efficiency policy-incentives; information; research, development, and demonstration

(RD&D); regulation—numerous States and utilities

are more active than the Federal Government.

Increased Federal efforts would be most effective if

they complemented these existing efforts. In most

cases, States and utilities would welcome Federal

support and assistance to promote energy efficiency in buildings; however, in a few areas—

notably building codes and utility regulation—an

enhanced Federal role would be controversial.

Policies for implementing energy efficiency in

buildings can be divided into six types:

1.

2,

3.

4.

5.

6,

Increasing the incentives for efficiency-As

noted in ch. 3, individuals often have few or

mixed financial incentives for energy efficiency. Federal policies can address this issue

by increasing or improving these incentives,

e.g., through tax or pricing changes.

Federal leadership through procurement, public recognition, and demonstration-The Federal Government has considerable purchasing

power due to its size, and this power can be

used to increase the sales and distribution of

energy efficient technologies.

Research, development, and demonstration for

efficiency-The Federal Government conducts

RD&D on buildings technologies, and changes

in RD&D planning and execution could help

improve the value and application of the

results.

Encouraging utilities to invest in efficiency—

Utilities are well-equipped to implement efficiency, and Federal actions can support utility

efforts.

Mandating efficiency through codes and standards--In some cases regulation may be needed to set minimum efficiency levels, and such

regulation may be most appropriate at the

Federal level.

Improving information and awareness of efficiency opportunities-Information can enhance

and support other efficiency programs such as

rebates. As the benefits of information are

diffuse, a government role in providing information may be appropriate.

Each type of policy is discussed separately, and a

number of specific options within that type are

presented. These specific options are grouped into

three distinct levels, in order of increasing Federal

involvement and energy savings. Many other levels

are imaginable, but the three levels presented here

are intended to illustrate the range of possible

policies Congress could consider.

The basic level includes relatively low cost,

simple policy options that require little or no new

legislation or change from present practice. If

Congress determines that changes are needed to

effect improvements in energy efficiency, then the

basic level could be considered as a first step. The

moderate level includes several options that are

more ambitious and in many cases require modify4 As discussed in ch. 1, there is general but not unanimous agreement that a considerable potential exists for cost-effective energy savings.
——

Chapter 5--Policy Options for the U.S. Congress ● 133

ing existing legislation and increasing Federal spending. The aggressive level includes options that are

quite ambitious, require new legislation, or require

an increased Federal role in energy regulation; the

options on this level require additional funding.

Most of the policy options offered by OTA are

intended to capture economically justifiable efficiency opportunities that are available but not

realized under current market conditions. There is

one exception: the incorporation of externalities

(effects not captured in price) would in all likelihood

raise prices and thereby shift this range of opportunities.

As discussed in chapter 4, the national effects of

past Federal programs enacted to increase energy

efficiency are often not known or have not been

measured reliably. The likely effects of future

Federal efforts are even more uncertain; technologies change over time, market response to Federal

programs is poorly understood, many governmental

programs work in tandem with others (making a

program-by-program estimate of effects misleading), and the diversity of buildings and individuals

affecting their energy use complicates predictions of

the effects of any major policy change. Therefore,

OTA does not provide estimates of the financial or

energy savings associated with these levels or

options. Moreover, OTA suggests that readers understand these limitations when considering any

projections of energy savings associated with any

proposed policy option.

Increasing the Incentives for Efficiency

As discussed in chapter 3, individual choices

largely determine the level of energy efficiency in

buildings—architects designing an office building,

engineers specifying lighting systems for a business,

or consumers selecting a new refrigerator, These

choices are influenced by individual values, information, and perceptions of the costs and benefits of

energy efficiency. A basic policy strategy to motivate greater energy efficiency, therefore, is to

decrease the expense and/or increase the benefits of

saving energy, which is the purpose of incentives.

A variety of incentives are available to encourage

energy efficiency in buildings. This discussion

focuses on incentives that the Federal Government

could consider, including:

●

●

●

●

energy pricing, particularly energy taxes, which

could incorporate externalities into prices;

evaluating and improving Federal grant programs that fund measures for building energy

efficiency;

making appliance efficiency rebates nontaxable; and

incorporating energy efficiency into federally

financed home mortgages.

Perhaps the simplest policy to encourage greater

efficiency is to raise the price of energy through,

for example, taxes. From an economic perspective,

a guiding principle in setting prices is to reflect the

true costs to society of producing and using goods

and services, Energy may be ‘‘underpriced’ ‘—that

is, its true cost to society may be higher than what

consumers actually pay, because environmental

externalities, government RD&D subsidies, and

other costs are generally not reflected in energy

prices. Several States have attempted to determine

exactly what cost to attach to these factors and have

integrated these calculations into their energy planning.s

Federal options to increase energy prices raise a

number of issues, many beyond the scope of this

report. For example, some argue that major increases

in energy prices could place some U.S. businesses at

a competitive disadvantage both domestically and

internationally. 6 In addition, increasing energy prices

through taxes or other means may raise equity

concerns; low-income households, for example,

s About 19 States currently have some provision for incorporating environmental externalities into energy pl arming. New York State, for example,

attaches a penalty of 1.4 cents per kwh for electricity horn a coal plant when considering bids for new generation. Vermont adds a 5 pereent penalty

(“adder”) to supply resources, and a 10 percent credit to demand-side resources, to reflect environmental externalities and the reduced risk of DSM.

Massachusetts gives a 5 percent rate-of-return bonus to utilities for demand-side resources to reflect their environmental benefits. However, few States

currently have provisions for explicitly incorporating externalities into actual energy prices. See Pace University Center for Environmental Legal Studies,

Environmental Costs of Electricity (New York: NY, Oceana Publications, Inc., 1990); also Temple, Barker, and Sloane, Inc., Electric Power Research

Institute, Environrnenfu] Ex(ernalifies: An 0}’erview of Theory und Practice, EPRI CU/EN-7294 (Palo Alto, CA: Electric Power Researeh Institute, May

1991).

b See, e.g., J. Anderson, *‘Presentation to the American Public Power Association’s National Conference,’ Electricity Consumers Resource Council

(ELCON), Washington DC, June 18, 1991.
134 ● Building Energy Efficiency

spend a larger share of their income on residential

energy than do higher-income households.7

Federally funded grants are the principal tool

used by the Federal Government, as measured by

budget, to encourage energy efficiency in buildings.

To illustrate, 84 percent of the Department of Energy

(DOE) budget devoted exclusively to buildings

energy conservation (including RD&D) is in the

form of grants for retrofits to existing buildings;

these grants totaled $230 million in 1991, while

buildings conservation RD&D totaled $43 million

that same year.8 (Chapter 4 discusses Federal grant

programs in detail, including specific suggestions

for improving them.) However relatively little is

known about the cost-effectiveness of the retrofits

performed with these grant dollars, suggesting that

greater attention to monitoring and evaluation is

warranted.

Federal tax incentives could improve participation in a variety of efficiency programs, particularly

those offered by utilities. The current tax treatment

of utility rebates, for example, could be considered

for change.9

In 1989 the Internal Revenue Service (IRS) ruled

that utility rebates should be treated as taxable

income. Some argue that taxing rebates limits

consumer interest in them, thereby reducing the

effectiveness of such programs.

10 Although a subsequent IRS ruling maintained that utility bill credits

promoting the purchase of efficient appliances are

nontaxable, evidence suggests that a cash rebate can

be a much more powerful method of promoting

efficiency than a bill credit. A rebate provides an

immediate cash reward, while a bill credit can be

confusing and obscure,

11 Furthermore, as noted in

chapter 3, many individuals making equipment

selection decisions (e.g., builders and landlords) do

not pay the energy bills, making such credits

irrelevant to their decisions.

If rebates remain taxable, utilities will either shift

to bill credits (thereby missing many energy-related

decisions), increase rebate amounts to account for

the taxes (requiring greater utility expenditures to

achieve the same response), or simply accept a lower

response due to the reduced value of the rebate to

consumers. The cost to the U.S. Treasury of making

rebates nontaxable is uncertain; by one estimate,

utilities spend about $200 million annually on

residential rebates.12 Assuming this figure is accurate and that commercial sector rebate spending is

the same, and assuming a combined marginal tax

rate of 20 percent, the lost revenue by not taxing

rebates could be as high as $80 million per year. On

the other hand, indirect revenue gains could offset

these potential losses if consumer savings were

expended on other, taxable activities. Clearly, understanding the effects on the Treasury of making

rebates nontaxable would require considerable analysis. The response to utility rebate programs, however, will invariably be lower if rebates continue to

be taxed than if they were made tax-free.

Tax credits are another form of tax incentive that

could be used to improve energy efficiency in U.S.

buildings. As discussed in chapter 4, U.S. experience with residential conservation tax credits reveals

uncertain results, but the potential costs and benefits

of offering such credits in the future are worth

assessing. One drawback with tax credits is that,

unlike utility rebates, tax credits are not received at

the time of purchase but only after a tax claim is

filed.

~ us Dep~ent of Encr~, Ene~ ~omtion Adrninistratio~ Household Energy Consumption and Expenditures 1987, part 1: National Data*

DOE/EL4-032 1(87) (Washington, DC: October 1989), p. 46. One way to correct the potential equity problems of increasing energy prices is to link price

increases with a simultaneous and similar decrease in low-income tax rates. Providing low-income rebates is another option. Either approach could be

revenue-neutral.

8 U,S. Dep~ent of Energy, Unj(ed S[ates Department Of Energy FiscaI Year 1992 Congressional Budget Request, DOE/CR-0~1 wasl~rlgto~

DC: February 1991), vol. 4, pp. 272-273.

9 ~~cr~sing num~r of Utillties offer rebates t. ~efi Customem who purchase energy efficient equipment. In one recent smey, at least 106 U.S.

utilities were identified as offering customer rebates. Rebate Report, D & R International (Silver Spring, MD), vol. 2, October 1991, pp. 1-7. Rebate

programs are seen by many utilities as a powerful tool for implementing efficiency, because rebates for appliances-much like rebates for cars-provide

~ imtaut cash reward for the desired behavior.

1° Deterrnining consumer response to rebate taxation is difficult, but the perceived value of the rebate is certainly rcxiuced by taxation. Research in

the rcsidentia.1 sector has found that the “hassle factor” is an important constraint on efficiency, and taxing rebates clearly adds to the complexity and

papenvork of the program.

11 CJm testfiony of Thomas D, Morro~ VICC Resident, Edison Elec~ic I~titute, before ~C Semte Cotittee on Fmce, subcommittee on Energy

and Agricultural Taxatioq June 14, 1991, p. 8.

12 C.M. Antinori, “Will Taxes Still Bite Into Rebates?” Home Energy, vol. 8, No. 3, May/June 1991, p. 11.
Chapter 5-Policy Options for the U.S. Congress . 135

Box 5-A—The Residential Mortgage Industry and the Federal Government

The Federal Government has long played a

role in encouraging the availability of housing at a

reasonable cost, and much of that Federal support

has been through insuring, purchasing, or otherwise

supporting mortgages. Today, the Federal Government participates in the mortgage industry in both

the primary and the secondary markets. In the

primary market, about 18 percent of new singlefamily home sales are financed with direct Federal

Government backing through the Federal Housing

Administration (FHA), the Veterans Administration (VA), and the Farmers Home Administration

(FmHA) (table 5-A-l).

Table 5-A-l—Financing of New, Privately Owned

Single-Family Houses, 1988

Financing source Percent of houses

Conventional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Federally financed:

FHA-insured. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

VA-guaranteed. . . . . . . . . . . . . . . . . . . . . . . . . . . 4

FMHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Cash/equivalent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

NOTE: Percents do not sum to 100 due to rounding.

SOURCE: U.S. Department of Commerce, Bureau of the Census, Statistica/Abstract of the United States: 7990 (Washington, DC: U.S.

Government Printing Office, January 1990), p. 715.

In the secondary market, several institutions created by the Federal Government-notably the Federal Home

Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the

Government National Mortgage Association (Ginnie Mae)-purchase conventional mortgages from original

lenders such as banks and credit unions. The requirements of these federally sponsored institutions, therefore, can

influence conventional mortgages in areas such as building efficiency.

Energy efficient mortgages (EEMs) are another Energy efficient mortgages can work in several

response to first cost barriers that commonly limit

building energy efficiency. A mortgage is typically

a long-term, relatively low-interest source of funds

and offers a practical means of capitalizing efficiency investments in buildings. The Federal Government plays a significant role in both the primary

and secondary mortgage market (box 5-A), suggesting that mortgages could be a viable Federal policy

lever to pursue energy efficiency in buildings.

ways. Once a new home is deemed “energy

efficient,” the portion of income a buyer can spend

on monthly mortgage payments can be increased—

e.g., from 28 to 30 percent. The underlying rationale

is that an efficient house will have lower monthly

energy costs, and the resulting savings could be

applied to the mortgage payment. Homeowners

benefit because overall housing costs (which include

mortgage and energy) can remain constant or even

decrease (box 5-B), and they acquire a more valuable

Box 5-B—How a More Efficient House Can Cost Less

The conventional wisdom holds that efficiency costs more than standard practice. If one uses mortgages to

finance efficiency, however, even measures with relatively long paybacks can result in lower, not higher, housing

costs.

As discussed in chapter 2, the use of superinsulating technologies can reduce space heating energy

requirements by 80 to 90 percent at an additional first cost of about $4,000 to $7,500 per house. The average new

gas-heated house in the Midwest costs $477 per year to heat and $81 per year to cool1 Assuming superinsulation

could reduce space-conditioning energy use 85 percent, the dollar savings would total $474 per year ($477 + $81,

times 0.85), or about $40 per month. Assuming an additional first cost of $5,750 for the superinsulation, the simple

payback (assuming no energy price increases) would be an unimpressive 12.1 years. However, if the additional

$5,750 was financed through a 30-year, 8-percent mortgage, the increase in the monthly mortgage bill would be

$42. The net additional monthly cost for superinsulation, therefore, would be $42 (addition to mortgage) minus $40

(energy savings), or $2. If energy prices rose at 3 percent per year, energy savings would exceed the addition to the

mortgage after 2 years. Thus, after 2 years the superinsulated house would result in a lower monthly housing

(mortgage plus energy) cost.

1 J. Koomey, J. McM~o~ C. Wodley, Improving the Thermal Integrity Of New Single-Fam”ly Detached Residential Buildings,

LBL29416 (Berkeley, CA: Lawrence Berkeley Laboratory, July 1991), p. 34.
136 . Building Energy Efficiency

house. Lenders can benefit because borrowing

increases (assuming risk does not increase as well).

A second type of energy efficient mortgage

applies to existing homes. Allowing efficiency

improvements to be financed as part of the mortgage

provides a relatively low-cost source of capital for

efficiency improvements and can also reduce overall

housing costs, which include energy payments, if the

additional mortgage payment is more than outweighed by the energy cost reduction.

A third type of energy efficient mortgage includes

projected energy costs in the mortgage calculations.

A typical mortgage is based on a calculation of the

costs of principal, interest, taxes, and insurance

(PITI). Adding energy costs (PITI+E) to this calculation could improve the financial attraction of a home

that costs more but uses less energy. The difficulty

with this approach is making a reliable prediction of

energy costs, which are influenced by occupant

behavior, energy price changes, weather, and other

variables.

Provisions for energy efficient mortgages already

exist but are almost never used. A random sample of

5,000 Federal Housing Administration (FHA) loan

files, for example, found only one loan that used an

EEM.13 Possible explanations for low EEM participation include lack of awareness, paperwork requirements, and the threat of delays or even loan

cancellations stemming from the additional requirements.

Incentives: Basic Options

DOE spends about $230 million per year, and the

Department of Health and Human Services (HHS)

about $130 million per year, on grants for energy

conservation retrofits in buildings, yet few data on

the cost-effectiveness of these grants are available.

Congress could direct DOE and HHS to set aside

an adequate amount of program spending for

program evaluation. Such evaluations could measure the costs and benefits of each program and

identify areas requiring improvement. Utilities typically spend 3 to 10 percent of their demand-side

program budget on evaluation. Although OTA was

unable to determine exactly what fraction of Federal

grant spending is applied to evaluation, it may be

considerably lower than this.

Energy costs may not currently reflect their true

costs to society due in part to their failure to

incorporate environmental and other externalities.

Methods to measure and evaluate these externalities

need improvement if efficient pricing is to occur.

Congress could direct and fund DOE to expand

research on the measurement and pricing of

externalities associated with energy production,

distribution, and consumption. Such externalities

need not be limited to environmental or negative

effects, and they may not always favor the most

energy efficient technologies, but measuring them

could reveal their magnitude and importance to the

U.S. economy. Of course, regulatory programs can

have the effect—whether directly or indirectly-f

pricing externalities; for example, Federal and State

environmental regulations often require the mitigation of externalities associated with energy production and use, which commonly introduces costs.

More directly, several States incorporate environmental externalities to some degree into energy

planning. At a minimum, such State efforts could

benefit from a better understanding of the true costs

of currently uncaptured energy externalities.

Incentives: Moderate Options

Congress could pass legislation making utility

rebates nontaxable. Taxing appliance rebates reduces the potential impact of utility incentive

programs by limiting the financial gains from

purchasing efficient units. By making utility rebates

nontaxable, Congress could enhance utility rebate

programs.

Congress could enact or increase taxes on the

production and use of fuels consumed in the

buildings sector. In addition to providing deficitreducing revenues, such taxes would spur efficiency

improvements as well as the market for demand-side

services. Even though U.S. energy prices are among

the lowest in the industrial world, the benefits of

energy taxes would have to be weighed against the

potential economic and trade effects of enacting or

increasing such taxes.

Congress could direct and fund DOE to provide technical and financial assistance to States

interested in measuring and pricing energy externalities. As noted above, at least 19 States have

some provisions for incorporating externalities into

13 w. ~dle, c ‘Enern Efficient Mo~gages: fiopos~ for a Unifom ~ogIq’ proceedings of the ACEEE 1990 Surnrner Study on Energy Efi”ciency

in Buifdings (Washington DC: American Council for an Energy-Efficient Economy, 1990), p. 7.155.
Chapter .5--Policy Options for the U.S. Congress ● 137

their energy planning. DOE could assist these and

other States interested in improving this aspect of

their energy planning, particularly as the nature and

impact of externalities can vary greatly by State.

Congress could direct the Federal housing and

national mortgage agencies to simplify and expand their energy efficient mortgage programs.

Energy efficient mortgages are available but rarely

used. As discussed above, this option could improve

the affordability of many homes, which is especially

important for first-time buyers, and it could increase

the amount of business conducted by lending

institutions. Simplifying the paperwork requirements in obtaining energy efficient mortgages, more

visible promotion of the programs by the Federal

and State Governments and lenders, and possibly

improving program design and marketing would

encourage greater use of these neglected financial

options.

Incentives: Aggressive Options

Congress could mandate the measurement and

pricing of energy externalities. This could occur

gradually, over a period of years or even decades. At

present, the most frequently discussed externality

associated with energy production and use is environmental pollution, but the extent and nature of

many environmental externalities are often poorly

understood, and attempting to assign dollar values to

them would be controversial. One currently discussed option is to levy a carbon tax based on the

carbon dioxide emissions associated with fossil

energy consumption. Other major pollutants associated with building energy use include sulfur oxides

(SOX

), nitrogen oxides (NOX), and chlorofluorocarbons (CFCs). These other externalities could be

addressed through end-use taxes (which already

exist for major CFCs), reductions of Federal energy

supply subsidies, or increases in royalty fees for

energy exploration and development on public

lands.

A national effort to price energy externalities

could begin with the Federal sector. Establishing

select procurement criteria that cost major externalities (e.g., the use of CFCs in building heating,

ventilating, and air conditioning (HVAC) systems)

could provide useful lessons about how to conduct

such an effort on a national scale. Federal energy

programs could also stress the evaluation and

incorporation of externalities in their regulatory

efforts, including appliance labeling, building and

appliance standards, RD&D planning, and utility

demand-side management support.

Federal Leadership: Procurement,

Recognition, and Demonstration

The purchasing power of the Federal Government, and the resulting ability to demonstrate

innovative technologies and to develop their markets, is immense. Major efficiency gains could be

attained through procurement and demonstration

efforts that do not rely on conventional policy tools

such as national efficiency standards, tax incentives,

and information dissemination. In addition, the

Federal Government could encourage efficiency

through voluntary public recognition programs stressing environmental stewardship, economic competitiveness, or other valued attributes of energy efficiency, These approaches are voluntary and rely

primarily on the market.

Policy options to improve the energy efficiency of

the Federal sector are discussed in a separate OTA

report. 14 That report stressed the value of Federal

procurement to support markets for efficient products and services, as well as to demonstrate efficiency measures for private sector applications.15

Some of these options are discussed below.

Energy efficiency has both environmental and

economic benefits, and an innovative, voluntary

Federal program has been designed to provide

public recognition to organizations for their contributions to environmental protection through energy

efficiency. In the Green Lights program, operated by

the Global Change Division in the Office of Air and

Radiation at the Environmental Protection Agency

(EPA), participating companies agree to survey and

upgrade lighting equipment, where appropriate, as

long as such upgrades are profitable to the company

and do not compromise lighting quality. EPA agrees

to provide technical support and information and,

perhaps more importantly, to provide public recognition to participating companies for their contribu14 U,S, ConDcsS, Office of T~~hn~l~~ Asscssmcn[, Energy Eficienc> in the Federal Go\,ernment: Go\ernmenc by Good Example?, OTA-E-492

(Washington, DC: U.S. Government Printing Office, May 1991).

Is Ibid., pp. 105-113.

297-936 0 - 92 -10 : QL 3
138 ● Building Energy Efficiency

tion to environmental protection.

16 Thus far, corporate response to the program has been impressive,

due in part to the high value participants place on

public recognition and positive publicity. Furthermore, participating companies welcome a voluntary,

mutually beneficial alliance with a regulatory agency.

Another program, called the Golden Carrot,

involves the EPA, utilities, environmental organizations, and a State energy office in a voluntary effort

to build and demonstrate highly efficient refrigerators. The utilities will offer rebates to consumers that

purchase the advanced refrigerators, which are

intended to be at least 25 percent more efficient than

1993 Federal standards will require, consumers are

given a financial incentive to purchase what promise

to be highly efficient units, and manufacturers are

guaranteed a market for their product by the utility.

With guarantees of Federal procurement, similar

programs might enjoy even larger markets.

Federal Leadership: Basic Options

Encourage energy efficiency in Federal buildings by changing procurement guidelines for

energy-using equipment so as to incorporate

energy efficiency. As mentioned, the Federal market for energy-using technologies is substantial.

Procurement policies that advance efficiency could

be implemented and enforced, Such policies could

include revising Federal procurement guidelines to

implement life-cycle costing techniques (which

would tend to favor cost-effective efficiency technologies); providing financial and other awards

(such as bonuses or shared savings) to individuals

and agencies responsible for achieving energy cost

savings; and establishing guidelines that set minimum efficiency levels for purchased equipment.

Extend the EPA Green Lights concept to other

contexts. The EPA program is an innovative voluntary effort that could serve as a model for other

programs. For example, the Federal Government

could recognize commercial firms that improve

significantly (by some pre-determined measure) the

efficiency of their space conditioning equipment

without compromising comfort. Another possibility

is to recognize publicly developers that construct a

certain number or fraction of buildings in any year

that surpass a given energy efficiency guideline.

Such efforts could be recognized for their energy,

environmental, or other merits.

Federal Leadership: Moderate Options

Allocate (or increase access to) funds for

efficiency improvements in Federal buildings.

Resources could be channeled through a revolving

Federal fund,17 as earmarked monies designated

exclusively for building efficiency improvements

(usable only if energy audits indicate that proposed

measures are warranted and cost-effective), or

through policies encouraging Federal participation

in utility demand-side management, cost sharing,

rebate, or other private financing options.

Encourage manufacturers, utilities, and other

interested parties to extend the Golden Carrot

program concept to other technologies for demonstration and marketing. Collaborative, voluntary programs providing incentives for increased

efficiency, such as the Golden Carrot program, could

be extended to other technologies-freezers, water

heaters, heat pumps, clothes washers—using Federal efficiency standards as benchmarks to surpass,

Federal Leadership: Aggressive Options

Actively promote the demonstration of efficient technologies in Federal buildings to strengthen

markets for energy efficient goods and services.

One way to promote this is to allow participating

agencies to retain some portion of their financial

savings in exchange for taking the risk of using an

innovative technology.

Federal RD&D in the Buildings Sector

Research, development, and demonstration (RD&D)

is the process that generates new technology for

adoption in the marketplace. This process drives the

improvement of technologies that increase energy

efficiency and reduce energy use in buildings. In

general, only industry and the State and Federal

Governments have the resources and interest to

sustain this process.

16 According to EPA, ‘‘EPA will publicly recognize successful Green Lights corporations. It intends to credit those companies for their contributions

to pollution prevention, and seeks to ensure that customers, shareholders, employees, and the public arc aware of their achievements in protecting the

environment with energy efficiency. From J. Lawson and B. Kwarti~ ‘‘Green Lights on Energy Savings, ’ LD+A, February 1991, p. 7.

17 For ~ st~tc.level exmple of such a Prowm, sec M. Verdict, J. Habcrl, D. Claridgc, D. O’Neal, W. Heffington, W. tier, ‘Monitoring $98 ~llion

in Energy Efficiency Retrofits: The Texas I_cxmstar Program, ’ Proceedings of the ACEEE 1990 Summer .$mdy on Energy Efficiency in Buildings

(Washington. DC: American Council for an Energy-Efficient Economy, 1990), p. 7.261.
Chapter 5--Policy Options for the U.S. Congress . 239

The building sector is highly fragmented by

region, size, and function-from builders to equipment manufacturers, architects to real estate professionals. For example, single-family residential construction firms in the United States alone number

over 90,000.18 In addition, there are thousands of

building equipment manufacturers and hundreds of

architectural and engineering fins. 19 This fragmentation makes it difficult for the building sector to

pool its resources to conduct RD&D. In addition,

this industry, as with any other in the United States,

is driven by the need to sustain profits in the

short-term, which tends to discourage RD&D because of its high costs and uncertain returns. Yet

RD&D generates technologies that improve performance, increase reliability, save energy, and

reduce costs for this sector. As a result, the Federal

Government has a critical role to play in identifying,

planning, and funding RD&D in the buildings

sector.

For all sectors—but buildings in particular-there

are several critical issues worth considering in the

development of an RD&D agenda for the Nation:

Selecting a mix of research projects givcn

limited resources: The Federal energy RD&D

program is a mix of basic and applied research that

addresses both demand and supply technologies.

(Most of the comments in this section relate to

applied research. ) The relative attention and funding

given to these various project types reveals the

relative weighting of priorities (whether or not they

are stated) in an RD&D program. Thus, policymakers and program planners have to consider the

overall mix of their total RD&D effort in setting

programwide research goals-and identify the most

promising individual projects worthy of research—

in order to determine the optimal allocation of often

limited RD&D resources.

Identifying non-hardware research needs: The

conventional notion of research involves technological hardware development, but building design

tools, improved operations and maintenance (O&M)

practices, computer software, and behavior-oriented

research offer numerous opportunities to help implement emerging technologies, improve existing programs, and reduce energy use. These non-hardware

. —

technologies are worth identifying and improving;

they include, for example, computer systems to

monitor and regulate whole building systems for

optimal energy efficiency, econometric methods to

evaluate energy conservation programs, tools for

conducting least cost planning, and social science

and marketing analyses to improve technology

transfer.

Improving program planning by defining and

integrating technology-specific and programspecific goals: Technology-specific goals and better

RD&D program planning are essential for Congress

and DOE to assess the merits of technologies chosen

for development, as well as the benefits the Nation

can expect to realize with DOE RD&D investments.

Without well-defined program goals, there is no

guarantee that the selection of technology-specific

research projects will adhere to consistent principles

or have a consistent direction. And without technologyspecific research goals, broad program goals function as little more than wish lists. Both sets of goals

(program-wide and technology-specific) should be

recognized as interdependent and should be made as

specific as possible, with the links between them

made clear (box 5-C).

Involving industry in project planning, funding, and execution: This would increase the probability of interest in (and a market for) technologies

that are successfully developed and demonstrated.

Involving industry (to the extent practical) at the

outset of project planning would also improve the

chances that new technologies not only save energy

but also consider the concerns of manufacturers and

others--concerns that are typically broader than just

energy efficiency and might include required changes

to manufacturing processes, cost, reliability, and

consumer interest. The fragmentation of the buildings sector could complicate industry involvement;

unlike the transportation sector, where a few major

manufacturers dominate the industry, the buildings

industry consists of a diversity of firms with greatly

differing financial and technical resources. However, the potential benefits of increased industry

involvement suggest that its pursuit in RD&D would

be worthwhile.

— — -. — —
140 . Building Energy Efficiency

Box 5-C—The DOE Multi-Year Program Plan

Since 1983, the Department of Energy Office of Conservation and Renewable Energy has used a multiyear

planning process to establish national conservation goals and to organize technology-specific projects. Currently

termed the “Multi-Year Program Plan” (MYPP), this annual process culminates in the publication of an internal

DOE document that covers the 5 fiscal years subsequent to the upcoming year; thus, the MYPP developed in 1991

covers fiscal years 1993 to 1997.1 While the MYPP establishes ambitious national program goals and outlines the

technologies that are being targeted for development to help meet those goals, the document does not generally

indicate long-term goals for the actual technologies beyond their development nor does it indicate the expected

economic returns from DOE funding allocated for these projects.

For example, the portion of the current MYPP relating to buildings research defines one goal: to hold constant

to 2030 the use of nonrenewable energy in U.S. buildings.2 However, the document neglects to indicate the

relationship between this goal and the technology-specific research proposals outlined in the report; there is no

ledger that sums up or projects the contribution of the technologies that will contribute to the DOE goal. In short,

at least for building-related RD&D, there is no identifiable connection between DOE program objectives and DOE

projects. This is important, because the technical merits of any particular project need to be weighed against other

proposals; many research ideas have merit, but not all can be pursued. A better planning process will better

determine an optimal portfolio of promising conservation projects.

Of course, developing and analyzing methods to integrate long-term program goals with multiyear research

plans would shift some resources away from RD&D to internal administration, but this shift could be small relative

to the entire Office of Conservation and Renewable Energy budget, and it could improve considerably what is

achieved with that budget. At present, the Department could better seine public RD&D objectives through the

MYPP process in at least two ways. First, where practicable, DOE could attempt to delineate more clearly the

expected end-use results (including costs and benefits) of each technology-related RD&D project, Second, DOE

could open the process to include more public and industry review of these planning documents. Such changes to

the MYPP planning process could help the Department link better its program objectives with its technologyspecific projects.

1 U.S. D~~ent of E~r~, ~lce of CoErvation and Renewable Energy, Multi-Year Program Plan Fiscal Years 1993-~997,

DOE/CE-0329 (Washington DC: U.S. Department of Energy, April 1991). Note: This document is used for internal DOE pl arming and is listed

as “administratively confidential.” As a result, OTA does not discuss specific projects or budget figures contained in the report.

2 Ibid., vol. I, p. 6-8.

On the other hand, lack of industry interest in any One promising option for increasing industry

project is not by itself sufficient reason to abandon involvement in project planning is the use of an

a good idea. Federal RD&D policymakers must outside review panel, such as the Critical Review

weigh broader, more long-term issues than can be process, which was developed by the DOE conservaexpected from the building industry. Federal initia- tion office in 1985. This process convened indetive and funding has helped speed the development pendent panels to assess the merits and direction of

of key building energy efficiency technologies, such DOE conservation RD&D projects under consideraas solid-state ballasts and low-emissivity (low-e) tion but, as reported by the General Accounting

windows, at times when there was little initial Office (GAO), the Critical Review program was

industry interest in developing them.20 Industry seldom used even though it was recognized as useful

interest, therefore, should not solely determine in project planning.21 A program like Critical

whether the Federal Government funds an RD&D Review is helpful in promoting industry participaproject, tion in DOE project planning and implementation,

~“ H. Geller, J.P. Harris, M.D. Levine, and A.H. Rosenfeld, “The Role of Federal Research and Development in Advancing Energy Efficiency: A

$50 Bitlion Contribution to the US Economy,” Annual Review of Energy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987), vol. 12, pp. 357-395.

~ 1 U.S. Congress, General Accounting Office, ConservationP/arming andAfanagementShou/dBe Strengthened, GAO/RCED-90-195 (Gaithersburg,

MD: U.S. General Accounting Office, July 1990), pp. 27-35.
-.—. .

Chapter 5-Policy Options for the U.S. Congress ● 141

especially in assessing issues such as the technical

and economic potential of existing technologies, the

clarity and soundness of project goals, and potential

obstacles to technology transfer once a new technology has been demonstrated successfully. Nonetheless, the Critical Review program was terminated in

1990.22

Engaging in demonstration and technology

transfer: This is the process by which lessons from

the laboratory are applied in practice. Technology

transfer is the ultimate goal of RD&D programs. No

applied research project is truly successful unless its

results are implemented. After the development of

new efficiency technologies, successful demonstration and marketing are critical to ensure that they

reach the market. After an initial emphasis on

technology transfer, the DOE RD&D program in the

1980s changed focus. In the last decade, DOE

RD&D has concentrated on long-term, high-risk

research efforts that the agency believed would not

be undertaken by private industry .23 DOE relied on

the private sector to press the transfer of new energy

technologies once they were developed, but the

results of that reliance were often mixed.

In the buildings sector, for example, DOE-funded

research led to the development of residential

heat-pump water heaters, a technology that consumes far less energy than conventional electric

resistance water heaters. However, these units have

shown minimal market penetration due to their high

first cost; currently, less than one percent of water

heaters sold make use of the new heat pump

technology.

24 AS these heaters have the potential to

achieve large residential energy savings, there is a

key role for improved technology transfer because

participation of more manufacturers and vendors

could lead to reduced costs.

According to a 1989 review by the Oak Ridge

National Laboratory, “DOE’s technology transfer

funds are typically very limited. "25 The most recent

DOE report on technology transfer in the DOE

buildings program confirms the general emphasis on

technology development over technology transfer.26

Recognizing the need for research with practical

applications, DOE has taken an encouraging step

with its RD&D agenda. The Department maintained

that the energy RD&D program in 1991 would begin

to balance better high-risk basic research projects

with applied research having more immediate practical applications.27

Expanding demonstration and technology transfer activities would increase the probability that the

fruits of DOE-funded research gain industry and

consumer acceptance and thereby enjoy wider use in

the marketplace. To make this change would not

necessarily require changes in total funding but

could entail a basic requirement that all technology

RD&D projects (or the overall RD&D program)

incorporate a distinct and adequately budgeted

demonstration and technology transfer component

prior to their initiation. These resources could then

be available whenever successful research projects

needed further DOE attention to ensure product

development and marketing.

A different kind of arrangement, the cooperative

research and development agreement (CRADA), has

received increasing attention since the passage of the

Federal Technology Transfer Act of 1986 (Public

Law 99-502). This statute created incentives for

Federal agencies and national laboratories to execute CRADAs to improve the transfer of Federal

research results to the private sector. In brief, these

agreements ease the restrictions on Federal-private

cooperation by, for example, allowing Federal

laboratories to grant exclusive licensing arrangements with parties collaborating on RD&D projects

(e.g., private industry, State and local governments,

and nonprofit groups) and allowing Federal laboratories to use funds provided by nonfederal parties

z? ~cmcti Frlc~m, DOE Office of Comewation and Renewable Ener~, persom communication% Jan. 16) 1991”

23 ~1~ is reflected in tic ~o~olio of rese~chproj~(s selected in tie 1980s, w well as key pohcy documents published by the agency. For example,

see U.S. Department of Energy, The National Energy F’olicy Plan, DOE/S-0040 (Washington, DC: 1985), pp. 3435.

‘~ Carl C. Hiller, Senior Project Manager, Residential Systems, Electric Power Research Institute, personal communication, Mar. 4, 1992. See also

M.A. Brown, LG. Berry, and R.K. Goel, Commercializing Government-Sponsored Innovations: Tu,elve Successful Buildings Case Studies,

ORNL/CON-275 (Oak Ridge, TN: Oak Ridge National Laboratory, January 1989), pp. 75, 86, 123.

25 Ibid., p. 121.

26 U.S. Department of Energy, Office of Building and Community Systcms, Analysis and Technology Tramifer Annual Report 1988,

DOE/CH/OOO16-H2 (Washington+ DC: May 1989), pp. ES-1, 2-9.

27 U.S. Congress, General Accounting Office, DOE’sAllocation ofFundsforBasic andApplicdResearch andDe\lelopment, GAO/RCED-90- 148BR

(Gmthersburg, MD: May 1990), p. 11.
142 . Building Energy Efficiency

participating in Federal RD&D projects.28 At present, the DOE Office of Building Technologies

(OBT) is participating in at least three CRADAS.

29

Performing program evaluation: As discussed

in chapter 4, formal evaluations of DOE building

energy programs, including conservation RD&D,

are rare. Such evaluations identify program achievements as well as implementation problems. Although long-range planning and budgeting are

conducted annually for 5-year periods in the DOE

conservation program, program-wide RD&D evaluations are not conducted on any regular or visible

basis.

The general scope of OBT RD&D projects—as

well as a select number of their successes—are

well-documented, but there is no consistent method

employed by the Department that compares the costs

and benefits of projects during or after their execution, that evaluates how program planning and

funding contribute to actual project results, or that

indicates measurable energy and economic gains

expected from the improvement of technologies

under development. Program evaluations that incorporated these issues would enhance long-term RD&D

planning and define better the purposes and expected results of specific RD&D projects. Such

evaluations would be most valuable if they allowed

cross-program comparisons and considered both

demand and supply RD&D.

Funding: A predictable policy option is to

increase funding for a particular activity. Although

this would expand the scope of the Federal building

conservation RD&D effort, it would not, by itself,

ensure a better one. Improving planning, setting

realistic goals, cooperating more closely with industry, identifying technology transfer opportunities,

and performing program evaluations are equally

vital to the success of the DOE-applied RD&D

program for buildings. Of course, performing most

of these tasks would require additional resources,

unless Congress and DOE are willing to reduce the

number of building conservation RD&D projects

and shift more resources to fewer projects. But if

Congress determines that the current OBT goal—

holding nonrenewable energy use in U.S. buildings

constant until 2030-is a realistic and desirable one,

then current buildings conservation RD&D funding

(in the range of $50 million per year) is probably too

low.

RD&D: Basic Options

Congress could require all DOE Office of

Building Technologies (OBT) applied research

projects reaching the demonstration stage to

conduct some minimum level of technology transfer and market assessment. One simple but relatively inflexible method for ensuring such work

would be to establish a minimum percentage of

funding for these functions as part of all applied

OBT projects or, alternatively, as part of the entire

program budget. A better method would address the

process that incorporates technology transfer into

project planning and execution. This would guarantee that technology transfer is conducted for all

applied research projects that have demonstrated

technological advances. Such a requirement should

not apply to basic or high-risk RD&D work, where

transferable achievements are not expected in the

short-term.

Specific provisions for technology transfer in

each applied RD&D projector for the entire applied

research program increase the probability that research success is actually applied beyond the laboratory. The Stevenson-Wydler Technology Innovation

Act of 1980 (Public Law 96-480) inter alia required

each Federal laboratory to establish an Office of

Research and Technology Applications (ORTA) to

conduct technology transfer from the labs to State

and local governments and the private sector and

directed each lab with a total annual budget exceeding $20 million to place at least one full-time

professional in its ORTA. Federal agencies that

operated or directed one or more national laboratories were required to earmark a minimum of 0.5

percent of their RD&D budgets to fund technology

transfer efforts at their respective agencies and at

their labs, including support for each ORTA.30 This

funding earmark was later repealed (Public Law

101-189), because Congress determined that agencies were using their discretionary authority under

~8 U.S. Congress, General Accounting Office, Difising Innovations: Implementing the Technology Transfer Ad of 1986, GAO/PEMD-91-23

(Gaithersbwg, MD: May 1991), pp. 7,76.

29 U.S. Department of Energy, Office of Conservation and Renewable Energy, Conservation and Renewable Energy Technologies for Buildings,

DOE/CH10093-85 (Washington, DC: May 1991), p. 20.

JO ~bllc Law 96-480, 94 s~[. 2318, sec. 11.
Chapter 5--Policy Options for the U.S. Congress ● 143

the Stevenson-Wydler Act to waive the requirement.31

Flexibility in Federal RD&D program planning is

essential, but technology transfer is too vital to the

success of research programs, in OTA’s view, to

eliminate completely some minimum level of effort

for this function. Congress could consider restoring

(and even increasing) the minimum technology

transfer funding requirement established by the

Stevenson-Wydler Act and deny waivers, although

such requirements risk inflexibility. One clear problem is determining an adequate level of technology

transfer funding that does not significantly reduce

the resources for research itself. Other, more flexible

approaches for improving technology transfer efforts could address the process by which technology

transfer is conducted but could also require careful

attention to, and incentives for, such transfer. Such

options include greater use of cooperative R&D

agreements (CRADAs, discussed above), an industry liaison (separate from designated project managers) to manage technology transfer activities for

appropriate RD&D projects, senior management

and corporate recognition efforts for successful

technology transfer efforts, and a clear and aggressive commitment to Federal procurement for emerging technologies.

Encourage or require DOE to define specific

technological goals that relate to program objectives in the DOE Conservation multiyear planning process. As discussed earlier, the DOE Conservation program annually develops a planning document (the Multi-Year Program Plan, or MYPP) that

lists proposed RD&D projects for upcoming years.

However, the utility of that planning process could

be improved by clarifying the actual measurable

benefits to consumers that each project aims to

achieve. Despite the articulation of overall RD&D

program goals in the MYPP, the document fails to

clarify how those goals will be achieved by the

technology-specific projects proposed. Improving

the multiyear planning process in this way would

require a shift of some resources to this activity or an

increase in the program budget.

Conduct regular RD&D program evaluations

for Congress in order to identify the successes,

failures, and future direction of projects in the

DOE Office of Building Technologies (OBT).

Internal methods at the DOE Conservation office

notwithstanding, Congress does not have the benefit

of reviewing program-wide evaluations of OBT

RD&D projects on a regular basis. As a result, the

actual benefits of RD&D funding cannot be assessed

by Congress in a regular or consistent way. Although

they would require additional resources, regular

evaluations would measure the progress of DOE

building conservation RD&D projects more reliably

and would inform Congress better about DOE

RD&D progress.

RD&D: Moderate Options

Make greater use of market surveys to assess

manufacturer and consumer response to new

technologies prior to initiating OBT RD&D

projects. Even when program planners correctly

identify the most promising technological opportunities for reducing energy use in buildings-related

RD&D, there is no guarantee that manufacturers will

be able to adopt anew technology or that consumers

will respond favorably to that technology. As a

result, market surveys performed prior to project

initiation can uncover potential problems or opportunities which, if accounted for in the RD&D

process, can help ensure that the final product is

marketable. 32 In addition, market surveys may

uncover institutional issues (e.g., building code

requirements) that could impede market success of

new technologies. Performing market surveys would

require shifting some resources to this activity,

perhaps even a minor increase in the OBT budget.

Increase industry involvement in RD&D project planning, funding, and execution. Regardless

31 me N~ti~~ competitivene~~ Te~~olO~ Transfer Act of 1989 (~bfic Law 101.189) repealed the ().5 percent funding earmark, requiring instead

that “sufficient funding, either as a separate line item or from the agency’s research and development budget” be desiwted for tee~ology Bansfer

activities. Public Law 101-189, 103 Stat. 1679, sec. 3133(e)(2). As explained in the House Conference report:

“The conference agreement wot.dd repeal the one-half percent funding requirement for technology transfer programs under

Stevenson-Wydler and the related waiver provisions. These changes are not intended to reduce that commitment to technology ransfer

but rather acknowledge that this requirement has been universally waived during the Act’s 9-year history and that there is a lack of

certainty that one-hatf percent provides the appropriate amount of funding. ’

House Conference Report No. 101-331 (Nov. 7, 1989), p. 761. From U.S. Code Congressional and Administrative New’s, IOlst Congress-Ffit

Session (St. Paul, MN: West Publishing, 1989), vol. 3, p. 1151.

32 However, ~ket sumeys me not always appropriate. For example, if a fundamentally new tectiology is under consideratio~ SUIVeyS IIMy haVC

little value or relevance in predicting the eventual market response.
144 . Building Energy Efficiency

of the technological advances achieved in RD&D

programs, industry must eventually adopt and market new technologies before their practical applications can be realized on a large scale. To gain

industry’s input in RD&D program planning (and to

improve the prospects of its adopting RD&D products), industry could be engaged to contribute to this

process as early as possible through workshops,

requests for proposals, and screening committees

consisting of senior DOE managers and industry

representatives (e.g., similar to the Critical Review

program mentioned above).

Stressing cost sharing and outside funding where

possible would help ensure that industry truly

invests itself in the Federal RD&D process. Although it does not involve cost sharing, the Small

Business Innovation Research (SBIR) program provides grants to small companies attempting to

develop and commercialize new technologies, and is

a useful model to encourage the involvement of

small, competitive firms in project execution.33

(Often, small firms will pursue RD&D projects that

the larger appliance and equipment manufacturers

show little initial interest in.34) Given the fragmented nature of the buildings sector, early and

sustained industry involvement in DOE RD&D

project planning, funding, and execution are good

options to ensure that projects are well-defined and

target clear opportunities for efficiency improvements.

There are potential problems that arise with

increased industry involvement, such as the potential for conflicts of interest or controversy over

granting exclusive rights to technologies developed

with public funding, but the potential gains of

correcting the currently low level of industry involvement in DOE RD&D projects could far outweigh the burden of avoiding such problems. One

Table 5-l—Allocation of Research Funds

in the U.S. Department of Energy Conservation

Program (by percent, fiscal year 1988)

Buildings Transportation Industry

National laboratories. . . . 74 18 30

Industry. . . . . . . . . . . . . . . 13 65 55

Universities. . . . . . . . . . . . 3 5 14

Other. . . . . . . . . . . . . . . . . 10 12 2

SOURCE: M.A. Brown, Ttinology Transfer Strategies of the U.S. Department of Energy’s Conservation Program, ORNUCON-277 (Oak

Ridge, TN: Oak Ridge National Laboratory, December 1988), p.

44.

simple measure of industry participation in Federal

buildings energy RD&D is the fraction of governmentfunded research spending awarded to industry. In

fiscal year 1988, for example, only 13 percent of

OBT RD&D funds were awarded directly to industry. That same year, the DOE industrial and transportation conservation RD&D programs awarded far

more of their RD&D funds to industrial firms, 55

and 65 percent respectively (table 5-1).35

Examine the feasibility of both least-cost and

net benefit planning for the DOE applied conservation RD&D programs. The results of such

studies should be reported to Congress. One way for

DOE to determine the optimal mix of RD&D

projects could be to conduct least-cost RD& D

planning; that is, to establish a research agenda that

attempts to pay the least cost for a given set of

anticipated benefits. Defining the parameters of and

actually conducting least-cost RD&D planning credibly would be extremely difficult, but not impossible. This option suggests that DOE evaluate the

feasibility of adopting a planning method for applied

conservation research that pursues a least cost mix of

energy efficiency technologies.

As an alternative, DOE could examine the feasibility of performing net benefit RD&D planning,

such as that performed by the Gas Research Institute

33 me SB~ pro=- is Operated by tie us. srn~l Business Administration in conjunction with 11 Federal agencies, includtig DOE, ~d~ autiority

of the Small Business Innovation Development Act of 1982 (Public Law 97-219). The program funds small businesses to conduct research projects

through the development stage; although a mjor goal of the program is to encourage commercialization, product marketing is not funded by the Federal

Government. See U.S. Small Business Administratio~ Office of Innovation, Research and Technology, SmaZl Business Znnovarion DeveZopmenf Act:

Eighth Year Results (Washington, DC: July 1991), 8th Annual Report.

34 sm H. Geller, Jp. H~s, MD. ~vlne, ad AH. Rosenfeld, “me Rolc of Federal Rese~ch ad Development in Advancing Energy Efficiency:

A $50 Billion Conrnbution to the US Economy, “ Annual Review of Energy 1987 (Palo Alto, CA: Annual Reviews, Inc., 1987), vol. 12, pp. 357-395.

In additio~ the Energy-Related Inventions Program (rnanaged by DOE in conjunction with the National Institute of Standards and Twhnology) is

authorized under the Federal Nomuclear Energy Research and Development Act of 1974 (Public Law 93-577) and funds energy-related research

conducted by small firms. The program has awarded more than $24 million in research monies to 329 projects. U.S. Department of Commerce, National

Institute of Standards and Technology, Energy Related Inventions Program: A Joint Program of the Department of Energy and the National Institute

of Standards and Technology: Status Report for Recommendations 251 Through 523 (Washingto% DC: March 1991), p. 1-3.

35 MA Bmm Technology Transfer strategies of the us, Department of Energj,’s conse~ation program, ORNL/CON-277 (Oak Ridge, TN: Oak

Ridge National Laboratory, December 1988), p. 44.
Chapter S-Policy Options for the U.S. Congress ● 145

(GRI), the research arm of the natural gas utility

industry. The annual GRI RD&D budget requires

Federal Energy Regulatory Commission (FERC)

approval. To gain that approval, GRI is required to

budget only RD&D projects that are expected to

result in net benefits to existing classes of end-use

consumers. That is, the projected benefits of RD&D

projects must be greater than the projected costs of

performing them.36

RD&D planning of either kind (least-cost or net

benefit) would focus better the DOE conservation

RD&D planning effort to ensure that the best

opportunities for energy technology RD&D are

selected. Such planning would help DOE maximize

the benefits of the public investment in conservation

RD&D. However, the small size and scope of the

OBT program would not warrant the considerable

investment in performing such an evaluation by

itself; applying such a rigorous standard for research

planning would be more appropriate for the entire

Office of Conservation and Renewable Energy

program, rather than just one part of it.

Establish an ambitious level of technology

transfer and marketing efforts for OBT RD&D

projects beyond that currently pursued. This

level would represent an effort to conduct technology transfer more ambitious than in the basic level,

such as assigning a full-time professional staff to

assist exclusively with technology transfer within

major programs such as OBT. Another option is to

set aside a given percentage of the OBT budget to

technology transfer. In recent years, OBT has spent

10 percent or less of its RD&D budget on technology

transfer. 37 In the future, OBT could designate as

much as 15 to 20 percent of its budget for transfer

and marketing (at least in cases where technical

improvements have been made). Other options—

such as increasing the use of CRADAs (discussed

above), encouraging personnel exchanges between

the national laboratories and industry, and training

program management and staff in marketing techniques--could also improve technology transfer

efforts.

Increase OBT funding for RD&D work. To

some participants in the debate on national RD&D

priorities, a substantial funding increase is considered an attractive policy option to enhance any

RD&D program, As this report stresses, however, a

shift in program emphasis or modest (but targeted)

increases in funding for the DOE conservation

RD&D program could yield significant returns. The

breadth and quality of DOE conservation RD&D

efforts would likely increase with increased funding,

but Congress should ensure that basic programmatic

improvements are made or planned prior to any

major funding increases. As discussed in chapter 4,

one of the most prolific periods in DOE buildings

conservation research (based on demonstrated technological advances resulting in measured energy

savings) was during the late 1970s and early 1980s

when RD&D funding was high. The 1991 OBT

conservation budget, however, was only 44 percent

(in current dollars) of the 1980 budget. If Congress

increased funding for the Office of Conservation and

Renewable Energy program substantially, net benefit or least-cost planning for the program could

become a vital yardstick to determine how best to

allocate resources between numerous projects in

different offices.

RD&D: Aggressive Options

Require DOE to market buildings conservation RD&D results to utilities, State agencies, and

its own regulatory programs, including the Office

of Codes and Standards (within the Office of

Building Technologies). This would help ensure

that conservation RD&D results are imparted to

interested groups in a timely fashion. These groups

are at the center of numerous regulatory, incentive,

and other efficiency efforts, suggesting that wellmarketed RD&D results would strengthen their

ability to keep pace with and even push technical

advances. Appointing utility and State liaisons to

market RD&D results is one way to achieve this.

Require DOE to perform least-cost or net-benefitapplied conservation RD&D planning. This would

be a major departure from current applied conservation RD&D budget and program planning, and it

would require a major effort (at least initially). The

suggestion does not apply to basic RD&D, where

high-risk, long-term work is the norm, and where

lb A, he Wallace, Dlrec(or of ReWlatoV and ~gl~lative Affairs, Gas Rcsc~ch Institute, Wtten communication to OTA, Aug. 16, 1991.

37 U.S. Dep~men[ of Energy, Office of Buildings and COMMUnlty SyStCmS, Analysis and Technology?’ Transfer Annual Report 1988,

DOE/CH/00016-H2 (Washington, DC: May !989), p. 2-9. Note: The proportion of technolo~ tramfcr funding in an office such as OBT (10 percent)

should not be confused with the seemingly modest reqwremcnts under the Stevenson-Wydlcr Act (discussed above), because that legislation channeled

resources from entire agency RD&D budgets, not just particular RD&D offices.
146 . Building Energy Efficiency

ultimate returns are often difficult to predict. However, it is an appropriate concept to consider for

Federal agencies conducting applied RD&D, where

public monies are being spent for ostensibly identifiable public benefits. If one or both of these planning

methods is determined to be feasible, DOE could

initiate such an effort to ensure that expected RD&D

benefits exceed expected RD&D costs. Of course,

either planning method would require several years

to implement, but both have the potential to maximize public returns on Federal RD&D investments.

Utilities and Energy Efficiency38

Utilities are ideally positioned to promote energy

efficiency in buildings. They have monthly contacts

with consumers through their billing systems, they

have historical and current data on consumer energy

consumption, and they provide service throughout

the United States. Until recently, however, utility

regulation provided utilities with no direct financial

incentives to encourage efficiency among their

consumers. In fact, under traditional principles of

utility regulation, utility profits were tied to sales—

the more energy sold by the utility, the greater its

revenues and profits.

In recent years, some States have changed utility

regulation to provide utilities with financial incentives for efficiency investments. These changes have

included both limiting disincentives for efficiency,

for example by decoupling revenues from sales, and

providing positive incentives for efficiency .39 Even

without financial incentives, many utilities have

found that efficiency measures can be a quick and

inexpensive way to meet demand growth. In addition, many States and utilities are adopting least-cost

planning techniques to ensure appropriate use of

efficiency .40

At present, utilities are probably the single most

important institutional vehicle for implementing

efficiency in buildings. For example, there are over

1,000 electric utility-run efficiency programs in the

residential sector4l and over 340 in the commercial

sector. 42 These Programs include changes in rate

structures, financial incentives for consumers such

as rebates and loans, information programs such as

audits and technical assistance, RD&D, and demandside bidding.43 Another promising option not applied as widely is a reduced hook-up fee for energy

efficient buildings, which utilities can use to encourage energy efficient construction.

The results in some States have been quite

impressive. In California, for example, utility programs undertaken through 1987 promoting energy

efficiency in the residential and commercial sectors

were estimated to have cut new capacity needs by

over 1,800 megawatts in 1987—the equivalent of

about two new large coal or nuclear powerplants.44

State regulatory agencies have primary jurisdiction over utility resource planning, demand-side

38 me role of utilities in implementing efficiency is discussed in detail in a forthcoming OTA report.

39 me c~ifomia fiblic Utilities Commission uses a rate-setting mechanism known as the Electric Rate Adjustment Mechanism ~,wtich

decouples utility profitability from the amount of electricity sales. For a full discussion of ERAM and other imovative efficiency incentive mechanisms,

see J. Cole and M. Cummings, “Making Conservation Profitable: An Assessment of Alternative Demand Side Management Incentives,’ Proceedings

of the ACEEE 1990 Summer Sfudy on Energy Eficiency in Buildings (Washington DC: American Council for an Energy-Efficient Economy, 1990),

pp. 5.35 -5<50.

~ I@ast-cost plarming (LCP) can be defined as “a process of ex amining all electricity-saving and electricity-producing options to select a mixture

of options that minimizes total customer cost.” (D. MoskovitL Profits and Progress Through Least-Cost Planning (Wash.ingtoU DC: National

Association of Regulatory Utility Commissioners, November 1989), p. vi.) The term integrated resource phmning ~) is also used. There are few

arguments against the concept of LCP. Almost all agree that meeting energy service needs at the lowest feasible cost is appropriate. However, there is

considerable controversy over the implementation of LCP. Calculating costs, structuring regulatory incentives, and allowing for nonutility participants

have all proven controversial. Furthermore, concerns about administrative costs, the difficulty in predicting and measuring saved energy, and

disagreements over relative subsidies have complicated implementation. The interpretation of just what constitutes LCP varies buc according to one 1990

survey, 23 States had least-cost planning of some kind in operation, and another 8 States were initiating it. Edison Electric Institute, Rate Regulation

Department, ~tate Regulatory Development in Integrated Resource Planning (Washingto@ DC: Edison Electric Institute, September 1990),

p. 2.

41 Batte~e, ~9~8 CJune}, of Res.&nri~/-se~tor De~ndJide ~anagenlent progra~, Ep~ CU-6546 (p~o Alto, CA: Electric power Res~ch

Institute, October 1989), p. iii.

42 Batt~lle-cOl~bus DivisiO~ ~9&’ ~uney of Cornmercia/-Sector Demand-Side Management Programs, Ep~ CU-6294 (p~o Alto, CA: Electric

Power Research Institute, March 1989), p. iii.

43 some u~ltles rwuest bids from outside f~s for new energy supplies. Exten~g tie bidding process to ~]OW bids for energy savings iS cded

demand-side bidding.

44 C~ifofia Energy Cotisslon, EnergyEflcienqRepo~, p400-9@W3 (Sacrmento, CA: Octobr 1990), p. 30. For comparison, a lmge COd-flied

or nuclear powerpkmt has a capacity of about 900 MW.
Chapter 5--Policy Options for the U.S. Congress . 147

management programs, and retail rates. Barring a

revolutionary shift in the balance of Federal and

State utility jurisdiction, State regulatory agencies

will continue to play the major role in efforts to

encourage utilities to promote building energy

efficiency.

Federal influence over State regulatory authorities and utility-run energy efficiency programs is

limited and indirect and is based in part on: 1)

management and oversight of ‘‘Federal utilities"—

the power marketing administrations and the Tennessee Valley Authority; 2) Federal Energy Regulatory Commission jurisdiction over interstate transactions, wholesale rates, and multistate holding

companies regulated under Federal law; and 3)

Department of Energy information, technology development, and technical support programs.

There are several examples of Federal Government support for greater consideration of efficiency

by utilities. The Pacific Northwest Electric Power

Planning and Conservation Act (Public Law 96-501)

instituted a regional council for electricity planning

in the Pacific Northwest and required that the

council consider efficiency as a resource when

assessing future electricity supplies. DOE currently

funds a least-cost planning research program within

the Office of Utility Technologies, with an annual

budget of about $3 million in fiscal year 1991.45 The

Clean Air Act Amendments of 1990 (Public Law

101-549) authorize emission allowances for energy

conservation (sec. 404(f)), and the Environmental

Protection Agency is developing rules to implement

these provisions.

Congress could promote utility conservation programs in several ways, including an expansion of

DOE technical support, changes in regulatory policies, and changes in Federal utility plannirig and

management. In considering these options, understanding the interaction of State versus Federal

regulatory oversight of utilities is important. Historically, utility regulation has long been managed

primarily at the State level, and any expanded

Federal role could be controversial.

Utilities: Basic Options

National experience with least-cost planning is

increasing but uneven, and many utilities have a

clear need to understand better the design, operation,

and performance of efficiency programs. Congress

could instruct DOE to expand its research and

development related to the design, operation, and

evaluation of utility efficiency programs. Similarly, the Federal Government could help States

learn from each other about how to implement

least-cost planning and how to design, operate, and

evaluate energy efficiency programs. Congress

could instruct DOE to increase its activities as an

information clearinghouse for efficiency program design, operation, and evaluation.

The Northwest Power Planning Council, established in response to Federal legislation, is charged

with addressing future power requirements in the

Pacific Northwest by considering both demand and

supply options. Congress could instruct DOE to

evaluate whether the Northwest Power Planning

Council represents a useful model for energy

planning that could be applied to other regions of

the country.

Utilities: Moderate Options

The Federal utilities% account for about 19

percent of U.S. electricity sales.

47 Congress could

direct the Tennessee Valley Authority (TVA) and

the power marketing administrations to better

integrate least-cost planning techniques and principles into their operations and management.

Establishing such requirements would be a first step

to ensuring that public monies spent on power

generation are applied in the most cost-effective

manner possible.

The Federal Energy Regulatory Commission

(FERC) has jurisdiction over all wholesale electricity and natural gas transactions in the United States.

Congress could instruct FERC to examine its

ratesetting and other regulatory actions to determine their consistency with State-approved utility least-cost plans.

45 u,S Dep~ent of Energ, U,,’j Department of E~~~g~ Fi~Ca[ year 1992 c~ng~~~~i~nal Budget Request, DOE/m-ml (Washington, D C :

February 1991), vol. 4, p. 438.

46 ~ese include the Fcd~ral po,~,~r M~k~ting Adminis~a~iOns (pMAs), which are pafl of DOE, ~d the Tennessee Wley Authotity (TVA).

47 U,S. Dcp~cnt of Encr~, Encr~ Information AdmiNstiation, “Sales of Electricity Available for Resale, ” Financial Statistics of Selected

Investor-0u3nedE[ectric Utilities 1989, DOE/EIA-0437(89)/l Washington. DC: J~UW 1991)! P 3
148 ● Building Energy Efficiency

As mentioned above, about 23 States are currently

using some form of least-cost planning, and another

8 States are in the process of implementing it.

Congress could instruct DOE to support through

grants, technical support, or other means, State

and utility efforts related to the design and

implementation of least-cost planning. Such support could be directed at both States that currently

use least-cost planning and those considering it. In

addition, Congress could encourage or require

States not already doing so to consider adopting

least-cost plans.

Utilities: Aggressive Options

Most of the electricity sales by the federally

owned utilities are to other utilities and not to

ultimate customers. Congress could direct the

federally owned utilities to provide incentives for

or require its customer utilities to adopt least-cost

plans. Such a requirement could be accompanied by

technical support from the federally owned utilities

to its customer utilities for least-cost plan preparation and implementation.

Mandating Efficiency: Codes and Standards

The government can mandate energy efficiency.

Such regulation can be controversial and costly but

has been used in the past to achieve social goals,

such as ensuring public health and safety in buildings. As noted in chapter 4, codes and standards for

energy efficiency already exist in many jurisdictions. This section discusses Federal options to

amend current building codes and standards as well

as appliance standards. There are advantages and

disadvantages to adopting such mandates. For example, the impact of an appliance standards program is

easier to determine than that of other policy measures such as information and incentives, because

there is less uncertainty in market response. On the

other hand, standards may raise the price of appliances and limit consumers flexibility to make their

own decisions reflecting their own individual preferences and requirements.48

Building codes and standards—The historical

function of building codes has been to ensure the

health and safety of inhabitants, but recently they

have been directed at energy efficiency as well.

Building codes are typically implemented and enforced at the local, county, or State level. Local or

county codes are often based on a State model code,

which is then modified to fit local requirements.

Currently all 50 States have some energy efficiency

requirements in State building codes, but the scope,

stringency, and enforcement of these requirements

vary widely. Federal building standards for energy

efficiency are mandatory for federally owned or

financed buildings and voluntary for other buildings.

Although Congress could direct the improvement

of building energy codes in numerous ways, several

issues should be recognized to guide choices. First,

an increased Federal role in what is traditionally a

State and local matter would be controversial.

Informal interviews with code professionals and

builders revealed strong resistance to a national

building code or standard for several reasons,

including the potential for reduced flexibility in

building design, a possible increase in construction

costs that could threaten the marketability of a new

home, and uncertainties about often complex provisions, which could lead builders to ‘‘over build’ in

order to erase doubts about compliance.

These potential drawbacks could be major barriers to new construction, which understandably

concern builders, but their input in the development

of flexible and clear building codes could prevent or

alleviate many of these problems. In addition, other

policies promoted in tandem-such as an aggressive

Federal energy efficiency mortgage program or

State and utility involvement in pushing incentives

such as reduced hook-up fees for efficient buildings—

could also improve the marketability of highly

efficient buildings.

A second and related point is the importance of

enforcement. Codes are often enforced by local and

county-level officials and, without their support,

implementing code changes would be difficult.

(This also raises the issue of Federal assistance in

training and assisting code enforcement officials,

discussed below.) Inadequate code enforcement

could create incentives for noncompliance, because

builders adhering to guidelines could experience a

competitive disadvantage if those failing to comply

are not punished. An additional prerequisite to

success, therefore, would include the development

46 For cxmple, ~ efficiency s@ndard for a space heating furnace may be cost-effective under average conditions and use, but ift.he fIKMCC is tiwd

to back up a solar heating system it may no longer be cost-effective.
Chapter 5-Policy Options for the U.S. Congress . 149

of adequate State and local expertise for building

professionals to consult for assistance.

Third, the increasing complexity of buildings and

codes could complicate the implementation of

aggressive codes. The shift toward performance

codes rather than prescriptive codes,49 for example,

has been a mixed blessing; performance codes can

increase flexibility in building design but can

significantly complicate enforcement by requiring

complex calculations to demonstrate compliance.

Improved methods of building energy analysis,

however, could alleviate this problem.

Building Codes and Standards: Basic Options

Assess compliance with and enforcement of

existing State building codes as they pertain to

energy efficiency. OTA interviews with builders

suggest that enforcement of State building codes

varies greatly; such enforcement generally occurs on

the local level, where expertise and resources vary

considerably. To determine the status of State

efforts, and to guide Federal ones, DOE, the

Department of Housing and Urban Development

(HUD), and other relevant agencies could assess the

level of both compliance with and enforcement of

existing State building codes as they pertain to

energy efficiency.

One code often used as a benchmark is the

Council of American Building Officials Model

Energy Code (CABO MEC) for low-rise residential

construction; this model code was updated in 1989

(CABO MEC ‘89). About 11 States have codes that

equal or surpass the CABO MEC ’89, while about 34

States have codes less stringent.50 Several studies

have found that the CABO MEC ’89 is costeffective. An analysis by the Alliance to Save

Energy, for example, suggests that if the 34 States

with codes less stringent than the CABO MEC ’89

adopted that model code, the resulting changes in

new homes would achieve paybacks of less than 2

years-based on the estimated incremental rise in

construction costs and the resulting energy savings. 51 Furthermore, the Alliance found that in some

regions codes stricter than CABO MEC ’89 would

provide a 4-year payback.52 A study by Battelle

compared the CABO MEC ’89 to both the CABO

MEC ’86 and the HUD Minimum Property Standards (MPS) and found CABO MEC ‘89 the most

cost-effective for homeowners—both from a lifecycle cost and a first-year cash flow perspective.53

Extension of CABO MEC ’89 requirements to

federally financed homes would speed widespread

adoption of this code. (This was required of HUD by

the Cranston-Gonzalez Affordable Housing Act of

1990 (Public Law 101-165) but is yet to be

implemented. ) Approximately 18 percent of new

single-family homes are financed through the Federal Housing Administration (FHA), the Veterans

Administration (VA), and the Farmers Home Administration (FmHA). If these three agencies were to

require CABO MEC ’89, then builders would have

to build to these requirements in order to sell to home

buyers that finance their homes through these

agencies. Since many builders design and construct

homes before the specific buyer is known, builders

would tend to build to CABO MEC ’89 requirements in case a prospective buyer intended using

federally assisted financing. The net effect would be

that most new homes in the FHA/VA/FmHA price

range would be built to CABO MEC ’89 levels.

The Cranston-Gonzalez Affordable Housing Act

of 1990 (Public Law 101-625) required the HUD

Secretary to promulgate standards that meet or

exceed the CABO MEC ‘89.54 In November 1990

HUD published a proposed rule that: “all [federally

financed] detached one and two family dwellings

~’J performcvlce CodeS SCI a ~lmum al]owat)]e energy consumption level, and thereby allow for any combimtion of technologies as long as the

consumption level IS not exceeded. prescriptive codes, in contrast, have specific technical requirements such as minimum insulation levels. Most recent

codes, including Council of American Building Offlclals Model Energy Code, 1989 edition, have both performance and prescriptive elements.

so B&$cd on data presented in B.D. Howard and W.R. ~ndle, ‘‘Better Building Codes for Energy Efficiency, ’ Final Report (revised) (Washingto~L

DC: The Alliance to Save Ener~, September 1991), pp. 5-7.

5 I Ibid, p, 44, one .St:~tc-India~-~d a 3-ycaI payback; the rest all had paybacks of ICSS w‘2 yeas.

52 Ib[d., p. 40.

~~ A D he R,G, Lucas, cc. comer, Compurjs(jn of the Economic E@-ts of Three Residential Energy Codes on Home BuYers @icMmdI ‘A:

., ,

Battcllc, November 1990), p. ii], These cost-effectiveness studies typically assume that builders usc the pcrforman ce approach (see footnote 49); however

OTA mtcrvmvs with builders suggest that many find the performance approach too complex and thcrcforc use the prescriptive approach. Therefore these

studies may overestimate actual cost-effectiveness. This point also suggests a need to provide builders better tools and training to increase use of the

performance approach.

5J public L:iw 1(11.62s, 104 Slat. ~~~, YX. 1~.
150 . Building Energy Efficiency

and one family townhouses not more than three

stories in height shall comply with CABO Model

Energy Code, 1989 Edition, including 1990 supplements. ’55 As of February 1992, the final rule was

still under consideration by the Office of Management and Budget (OMB). Congress could ensure

that section 109 of the Cranston-Gonzalez Affordable Housing Act of 1990 (Public Law 101-

625) requiring the use of CABO MEC ’89 in

federally assisted housing is implemented. This

would ensure that most new, moderately priced

homes meet the CABO MEC ’89.

There are other model codes and model standards

offered by industry groups. Among the best known

are the standards designed by the American Society

of Heating, Refrigerating, and Air-Conditioning

Engineers (ASHRAE). This group has developed

both residential and commercial standards, and their

experience has been instrumental in the development of the DOE building efficiency standards and

guidelines. As a result, in conjunction with organizations such as CABO and ASHRAE, DOE could

continue to improve Federal building standards

and guidelines and provide implementation materials and support services to promote their use

on the State level. Such support services could

include the provision of software technologies to

assess compliance and resources to hire and train

local and State code enforcement staff.

Building Codes and Standards: Moderate

options

Congress could direct and fund DOE to provide technical and financial support to those 34

States with residential building codes less stringent than CABO MEC ’89 to evaluate the

cost-effectiveness of upgrading their codes to the

CABO benchmark. Financial incentives could be

used to promote code adoption. This would reach the

higher-priced homes not eligible for FHA, VA, or

FmHA financing.

Codes for commercial buildings already exist as

well. The DOE Energy Performance Standards for

New Commercial Buildings (1990), designed in

conjunct ion with ASHRAE, could be used as a

model code. Congress could direct and fund DOE

to provide technical and financial support to

States considering the adoption of more stringent

commercial building codes, again to evaluate the

cost-effectiveness of upgrading the existing State

codes. This would allow States to maintain their

jurisdiction over building codes but would demonstrate the energy and economic savings potential of

improving the State codes.

Another option is to encourage the extension of

codes to existing buildings. Retrofit-on-resale ordinances (also known as residential energy conservation ordinances) are used in some areas to require

minimal efficiency features when ownership

Changes.56 Congress could direct and fund DOE

to provide technical and financial assistance to

communities and States instituting retrofit-onresale rules. Such rules reach all buildings, including low-income and rental residences, which are

often difficult to reach with other programs.

Congress could direct and fund DOE to enlarge its efforts at code official training and

education. Code enforcement is a continuing concern, and as codes become more complex training

becomes increasingly important.

Building Codes and Standards: Aggressive

Options

Congress could require States to meet or

exceed federaIly set minimum building efficiency

standards, such as the Building Energy Performance Standards (BEPS). This would certainly meet

strong resistance from States but would ensure that

all codes meet a common, standard level of efficiency, Implementation would require technical and

financial assistance to States, as well as oversight to

ensure compliance. One way to implement such

requirements would be through the State Energy

Conservation Program (SECP), which requires

States to implement conservation plans that meet

certain conditions prior to receiving Federal funding

for their programs,

Congress could encourage or require secondary mortgage market institutions (e.g., the Federal Home Loan Mortgage Corporation) to require new residences to meet the CABO MEC ’89

(or some other major code).

Appliance standards—The principal goal of appliance standards is to eliminate the least efficient

new appliances by setting minimum energy effi-
— —

Chapter 5-Policy Options for the U.S. Congress ● 151

ciency levels for new units. Typically, standards

establish requirements on the design of an appliance,

the minimum efficiency of an appliance, or the

maximum energy use of an appliance. Standards

improve the efficiency of the appliance stock only at

the rate that old appliances are replaced by new,

more efficient ones (the turnover rate), plus the rate

at which new applications occur.57

Other policy options, e.g., energy taxes and

financial incentive programs, may also encourage

the elimination of the least efficient appliances, but

in some situations standards may represent the

least-cost option for improving appliance efficiencies. For example, the cumulative national energy

consumption for an appliance may be significant,

but the cost of operating any single appliance is

small. This suggests that extremely aggressive

information programs and/or sizable incentives would

be necessary to motivate consumers to purchase

appliances as efficient as standards would require,

especially if the first costs of more efficient appliances were greater. As a result, the cost of applying

these other policy options to attain the same level of

energy savings as standards may be quite large for

some appliances. Conversely, standards could increase the first costs of new appliances, which could

affect manufacturers by reducing sales. Appliance

price increases might also have regressive effects if

lower income groups are less able to purchase them.

As a next step in the DOE appliance standards

program, Congress could consider extending the

coverage of the National Appliance Energy Conservation Act of 1987 (Public Law 100-12; NAECA).

Several appliances, notably lamps and commercial

HVAC (heating, ventilating, and air conditioning)

equipment, are not presently covered in the NAECA

program but use a significant amount of energy. As

discussed in chapter 3, those selecting and installing

commercial HVAC equipment are typically not

those paying the costs of operation, providing an

incentive for the selection of low first cost, inefficient equipment. Standards, if set correctly, could

eliminate the most inefficient models.

However, there are several potential drawbacks to

expanding NAECA coverage to commercial HVAC

equipment. First, some commercial building products (e. g., large HVAC systems) are often custombuilt, which could require equipment-specific design and testing analyses to determine compliance

with efficiency standards. This is in contrast to the

residential appliances currently covered by NAECA,

which are generally “off the shelf’ that is, they are

manufactured and sold in relatively uniform sizes

and designs, which has eased the development and

adoption of their efficiency standards. Furthermore,

if standards reduce the availability of equipment

(e.g., due to manufacturers exiting the market due to

high retooling costs), this could constrain commercial building designers and architects.

DOE already has discretionary authority to add

residential equipment to the list of NAECA-covered

products. 58 The Department could probably add

lamps to the NAECA product list under this

authority; however, extension of coverage to commercial HVAC equipment would require new legislation.

Appliance Standards: Basic Options

DOE could examine the feasibility and likely

impacts of extending NAECA coverage to appliances and equipment not covered by the program.

Appliance Standards: Moderate Options

Extend NAECA coverage to include residential

and commercial equipment not currently covered by the program. A variety of both residential

and commercial equipment is not covered by NAECA,

including commercial HVAC systems and lamps.

Their inclusion in the program would ensure that the

least efficient units among them are eliminated from

-—

57 Whllc ~ffjclcncj, starld:Lr{j$ ;lrc not dcsibm~<i to ~fc.~[ :~PP]i:m~e tumo~r~r rat~s+n]y tic ~n~rgy ~~nsumpt]~n of a neW app]llnce WhCn Ml Old OnC

IS replaced-they can have an mdircct cffec[ on such rates. For example, strin,gcn[ cff]c]cncy standards muy incrcasc the first cost of new appliances and

thereby discour:igc some consumers from purchasing new unils.

~~ ‘The Swretq” rnuy clmsify :i tjpc of consumer product as :1 covcrcd product If hc dctcmlinc$ thfit—(A) cl:~ssifying Products of $uch tYPe :~~

covered products is necessary or appropriate to c:irry out the purposes of [his ctuptcr, and {B) m cragc annual pcr-tmusehold energ~’ usc by prod uct.s of

such ~~rpc 1~ Ilkcly to excccd 100 kllo~!all-hcmrs for Its Btu equivalent} pcr year.

,, ,$~ [J s c, t1292(h)(l KA)-(B )
152 . Building Energy Efficiency

the market. This is the basic goal of NAECA, but its

coverage remains incomplete.59

As noted earlier, there are potential problems with

extending equipment efficiency standards to commercial equipment, particularly HVAC systems. As

an alternative, Congress could consider a more

modest expansion of the appliance standards program, such as adding lamps to the list of NAECAcovered products; currently, NAECA lighting standards apply to fluorescent ballasts only.

Appliance Standards: Aggressive Options

Adopting more stringent cost-effective NAECA

standards by identifying equipment efficiency

levels that represent longer paybacks than most

current standards allow. Despite the large energy

savings and economic benefits expected from the

NAECA program, additional cost-effective savings

may be possible if standards representing longer

paybacks are considered. In particular, the payback

periods for updated electric appliance standards

under NAECA are generally short, ranging from

zero years (clothes washers) to roughly 2.5 years

(refrigerators and clothes dryers).

To allow an initial determination of the economic

feasibility of any proposed appliance standard,

NAECA established a rebuttable presumption: any

appliance standard is economically justified if the

resulting energy savings in the frost year paid back

one-third of the additional production costs, which

implies that a 3-year payback meets the criterion.

The statute requires other considerations prior to

final determinations of the technical and economic

feasibility of any proposed standard but, as a point

of departure, the NAECA rebuttable presumption

encouraging standards with no less than 3-year

paybacks could be extended to a longer period (e.g.,

5 years). More stringent appliance standard levels

that represent longer paybacks than those generally

chosen by DOE—but that still meet the vital criteria

of technological and economic feasibility-are possible. This option suggests that DOE identify and

adopt them.

Improving Information and Awareness of

Efficiency Opportunities

Programs providing information about energy

efficient technologies and practices have been historically quite popular. Information is relatively

inexpensive, politically noncontroversial (as few

would argue against consumer education), and

usually supported by all interested parties. From an

economic perspective, poor information receives

much of the blame for the neglect of many costeffective efficiency technologies. Energy information can be imparted in many forms, including labels

and rating systems, demonstration programs, energy

audits, and workshops.

Unfortunately it is difficult to show conclusively

that information programs have significant direct

effects on behavior or energy use. Several studies

have attempted to measure the effects of information—

e.g., labels, audits, feedback on consumption, and

advertising-on behavior, but the results are generally inconclusive. This is not to suggest that

information has no effect, only that the effect is very

difficult to measure. The evidence does suggest that

information alone may not have much direct influence on behavior in many cases.60 Information

programs are built on the premise that people will

generally do what is cost-effective if they know what

specific opportunities exist. As discussed in chapter

3, however, consumers and other decisionmakers

often define cost-effective differently than do analysts, and consumers often lack the incentive or

motivation to use energy efficient technologies. In

such cases information alone will have little effect.

There are, however, several reasons to promote

information programs. A demonstration program,

for example, may not have much effect by itself, but

may have considerable success when combined with

a financial incentive. Several State and utility

programs, such as those offering rebates, depend on

a credible energy rating. Determining compliance

with building energy codes could be easier if

energy-using equipment was clearly labeled for

energy consumption. And increased consumer awareness of, and interest in, energy efficiency could

59 ~pS, for ~xmple, we not cove~d by he prOgEUII but, according to the American Council for an Energy-Efficient fiOnOmY, lamP efficiency

standards could save more than 7 quads of primary energy by 2010 worth an estimated $30 billion (1990 dollars). Howard Geller, Executive Director,

American Council for An Energy Efficient Economy, personal communication% July 3, 1991.

M As one review of information programs concluded, “informational programs are not sufficient to induce individuals to engage in resource

conserving behaviors.” R. Katzev and T. Johnson, Promoting Energy Conservation (Boulder, CO: Westview Press, 1987), p, 25.
Chapter 5-Policy Options for the U.S. Congress . 153

influence builders, architects, vendors, and others.

The synergistic effects of information when combined with incentive programs and the need for

credible ratings to support rebates, codes, and other

programs suggest that information programs deserve

attention.

There are several arguments for increasing the

Federal role in improving the availability and quality

of energy-related information. The benefits of improved information are diffuse and difficult to

measure, making it difficult for utilities to justify

large expenditures on such programs. However the

benefits, although admittedly difficult to document,

are certainly not zero, suggesting a government role

in providing information is appropriate. Furthermore information must be credible in order to be

effective, and the Federal Government may be

perceived as more credible than other sources with

a direct economic interest in the outcome of a

consumer investment.

As discussed in chapter 4, the Federal Government currently administers several energy information programs. The Energy Policy and Conservation

Act (Public Law 94-163), as amended, requires that

certain energy-using consumer products be labeled

for their energy use and/or annual energy costs. The

Residential Conservation Service was a federally

funded program that provided building occupants

with information on the benefits of building retrofits.

Several DOE programs provide energy efficiency

information through demonstrations, educational

programs, workshops, and other methods.

Analyses of past Federal efforts to provide

energy-related information indicate that information

programs are more effective if they are:

. targeted at specific people and specific behaviors;

● combined with other programs, such as incentives; and

● evaluated regularly, and the results of these

evaluations are then used to improve the

program.

Several options to improve the goals and coverage

of these programs are detailed below.

Information: Basic Options

At present, several energy-using consumer products are exempted from labeling requirements.Gl

Congress could instruct the Federal Trade Commission (FTC) to revisit its 1979 exemption

rulings for appliance energy labeling. Recent

technical advances62 and secondary effects on manufacturers 63 should be included in the analysis.

At present, energy labeling is restricted to residential equipment. Congress could instruct the FTC

and/or DOE to assess the feasibility of extending

labeling requirements to commercial sector equipment. HVAC equipment, office equipment such as

computers and copiers, lighting equipment64 and

commercial refrigeration equipment could be considered. 65

Windows and lamps are significant energy users

in the residential sector but are not presently covered

by the labeling requirements. Congress could extend labeling requirements to windows and lamps.

Congress could instruct the FTC and/or DOE

to investigate alternative label designs that might

inform consumers better. There are several ways the

present label format could be altered, including:

●

●

●

showing life-cycle operating costs;

providing dollars (a readily understood unit of

measure) wherever possible; and

including data on all technologies that provide

the service, rather than just the single technology, as a comparison.66

61 %oducts Cunently exempt~ include clothes dryers, some home heating equipmen~ television sets, and kitchen ranges and ovens.

62 For Cxmple, tie original mlemaking exempted clothes dryers because of the very small variation in operating costs among then-exisdng models.

However, as noted in ch. 2, new dryer technologies such as heat pumps could cut dryer energy use (and operating costs) significantly.

63 me exls[ence of a la~l may spw a ~~ac~er to produce a highly efficient p@UCt ii Would not otherwise produce, as the labei would provide

a marketing advantage over other models.

~ h~ls for light ballasts were required by the NAECA amendments of 1988 (?%bhc Law 1~357).

65 Such la~llng effo~s would ~qu~e close coop~ation ~th industry to ens~e tit testing and labeling procedures are credible and accurate.

66 For ~xmple, la&15 on el=tfic water h~tcrs show estfiat~ ~ual operating cos[s for tittit, m well as the range for all electric water heaters

of a comparable size. Instead, the labels could show a range for all comparable water heating technologies, such as heat pump water heaters and gas water

heaters.

297-936 0 - 92 -11 : QL 3
154 . Building Energy Efficiency

Information: Moderate Options

The existence of a credible, accurate home energy

rating system would allow consumers to compare

the energy efficiency of different homes, would

make it easier for mortgages to incorporate energy

efficiency, and would provide a credible measure of

success for builders using energy efficient technologies and practices. Congress could direct DOE to

explore methods for producing an accurate,

verifiable whole-building rating, and to provide

technical support for State and utility programs

that rate whole buildings.67 To produce a credible

rating, a number of technical questions require

resolution. 68

Efficiency is sometimes viewed as requiring

sacrifice, and some consumers distrust innovative,

energy efficient technologies. In many cases, however, energy efficiency offers other benefits as well;

for example, more efficient lights in commercial

buildings may provide more attractive illumination

in addition to saving energy. Demonstration projects

showing that efficiency works can dispel outdated

beliefs equating conservation with discomfort and

inconvenience. Congress could encourage DOE to

work with manufacturers, designers, and builders to demonstrate energy efficient equipment

that works. For example, DOE could sponsor an

architectural design competition for energy efficient

buildings that use efficient, commercially available

technologies, and grants to finance the actual

construction of these designs could be provided. In

return for the grant, a builder could agree to hold

open houses, during which other builders and

consumers could see the buildings in operation.

Identifying and implementing efficiency opportunities in existing buildings sometimes requires

specialized knowledge. Involving architecture and

engineering schools in building energy audits would

provide that knowledge and would also encourage

interest in building science in the next generation of

technically skilled people. Congress could encourage DOE to set up a building audit program

involving architecture and engineering schools.

Information: Aggressive Options

Congress could require point-of-sale disclosure of whole-building energy ratings. Such ratings could be applied to both new and existing

buildings. Methods to produce such ratings are still

under development, but when they are improved

their use could be mandated. As an intermediate

step, their use could be limited to federally financed

sales.

ASSEMBLING THE OPTIONS

No single policy or program will be sufficient to

generate substantial improvements in energy efficiency; the barriers limiting such efficiency are

diverse and so must be the policies to overcome

them. To assist with the selection of options, the

three levels of options discussed above are assembled into three packages below. Many such packages

could be constructed; the three described here are

intended only to illustrate the range of options

Congress could consider. Basic options are low cost

options that could be implemented relatively easily

(box 5-D). Moderate options are somewhat more

ambitious and may require new legislation and

moderate increases in spending but would result in

considerable efficiency gains (box 5-E). Aggressive

options include changes in the Federal role in energy

regulation and could be quite controversial. Nevertheless, OTA believes they could result in significant improvements in national energy efficiency

(box 5-F).

Decisions by Congress as to what level to

consider and what specific options to pursue will of

necessity be guided by political, financial, and other

considerations. However it should be noted that,

with the exception of the pricing options, at all three

levels only those technologies that would be economically justified using life-cycle costing techniques are promoted.69

CT several States ~d utilities already have home energy rating systems h place. S= R. VOfieS, ‘‘ What Makes Rating Systems Tic~’ Home Energy,

vol. 6, No. 2, hhrch/April 1989, p. 22.

68 For Cxmp]e, us~g Pmt Consumption data as a &Sis for a ratfig is ~ou@t to ~fic~te due to tie eff&ts of occupant behavior. HOW ltige iS

this effect, and what data are needed to control for this effect? For new buildings, can short-term measurements of consumption under test conditions

provide a reasonable estimate of long-term consumption? Can commercial buildings be rated as weU as residences?

@ ~onomic~yjus~led is used here relative to current and forecasted energy prices. A fourth level, maximum technical potential regardless of costeffectiveness, could be considered by the Congress under extreme conditions. Such a level is not discussed here.
Chapter .5---Policy Options for the U.S. Congress ● 155

Box 5-D—The Basic Package

Incentives

. Direct the Departments of Energy (DOE) and Health and Human Services to set aside an adequate amount

of program spending for program evaluation; particularly to determine the cost-effectiveness of low-income

weatherization.

. Direct and fund DOE to expand research on the measurement and pricing of externalities associated with

energy production, distribution, and consumption.

Federal leadership

. Encourage energy efficiency in Federal buildings by upgrading procurement guidelines for energy-using

equipment so as to incorporate energy efficiency.

● Extend the Environmental Protection Agency (EPA) Green Lights concept to other end users.

Research, development, and demonstration

. Require all DOE Office of Building Technologies applied research projects reaching the demonstration stage

to conduct some minimum level of technology transfer and market assessment.

. Encourage or require DOE to define specific technological goals that relate to program objectives in the DOE

Conservation multiyear planning process.

. Conduct regular RD&D program evaluations for Congress to identify the successes, failures, and future

direction of projects in the DOE Office of Building Technologies.

Utilities

. Instruct DOE to expand its research and development related to the design, operation, and evaluation of

utility efficiency programs.

. Instruct DOE to increase its activities as an information clearinghouse for efficiency program design,

operation, and evaluation.

. Instruct DOE to evaluate whether the Northwest Power Planning Council represents a useful model for

energy planning that could be applied to other regions of the country.

Mandates

. Assess compliance with and enforcement of existing State building codes as they pertain to energy

efficiency.

. Ensure that section 109 of the Cranston-Gonzalez Affordable Housing Act of 1990 (Public Law 101-625)

requiring the use of the Council of American Building Officials Model Energy Code, 1989 Edition (CABO

MEC ’89) in Department of Housing and Urban Development assisted housing is implemented.

. In conjunction with organizations such as the Council of American Building Officials and the American

Society of Heating, Refrigerating, and Air-Conditioning Engineers, instruct DOE to continue to improve

Federal building standards and guidelines and provide implementation materials and support services to

promote their use on the State level.

. Instruct DOE to examine the feasibility and likely impacts of extending the coverage of the National

Appliance Energy Conservation Act of 1987 to include appliances and equipment not covered by the

program.

Information

. Instruct the Federal Trade Commission (FTC) to revisit its 1979 exemption rulings for appliance energy

labeling.

. Instruct the FTC and/or DOE to assess the feasibility of extending labeling requirements to commercial

sector equipment.

● Extend labeling requirements to windows and lamps.

. Instruct the FTC and/or DOE to investigate alternative label designs that might inform consumers better.
156 ● Building Energy Efficiency

Box S-E—The Moderate Package

Incentives

● PaSS legislation making utility rebates nontaxable.

● Enact or increase taxes on the production and use of fuels consumed in the buildings sector.

● Direct and fund DOE to provide technical and financial assistance to States interested in measuring and

pricing energy externalities.

● Direct the Federal housing and national mortgage agencies to simplify and expand their energy efficient

mortgage programs.

Federal leadership

● Allocate (or increase access to) funds for efficiency improvements in Federal buildings.

. Encourage manufacturers, utilities, and other interested parties to extend the Golden Carrot concept to other

technologies for demonstration and marketing.

Research, development, and demonstration

●

●

●

●

●

Make greater use of market surveys to assess manufacturer and consumer response to potential new

technologies prior to initiating Office of Building Technologies (OBT) RD&D projects.

Increase industry involvement in RD&D project planning, funding, and execution.

Examine the feasibility of both least-cost and net-benefit planning for DOE applied conservation RD&D

programs.

Establish an ambitious level of technology transfer and marketing efforts for RD&D projects of OBT beyond

that currently pursued.

Increase OBT funding for RD&D work

Utilities

● Direct the Tennessee Valley Authority and the power marketing administrations to integrate better least-cost

planning techniques and principles into their operations and management.

● Instruct the Federal Energy Regulatory Commission to examine its rate setting and other regulatory actions

to determine their consistency with State-approved utility least-cost plans.

. Instruct DOE to support through grants, technical support, or other means State and utility efforts related

to the design and implementation of least-cost planning.

● Encourage or require States not already doing so to consider adopting least-cost plans.

Mandates

Direct and fund DOE to provide technical and financial support to those 34 States with residential building

codes less stringent than CABO MEC ’89 to evaluate the cost-effectiveness of upgrading their codes to the

CABO benchmark.

Direct and fired DOE to provide technical and financial support to States considering the adoption of more

stringent commercial building codes.

Direct and fired DOE to provide technical and financial assistance to communities and States instituting

retrofit-on-resale rules.

Direct and fund DOE to enlarge their efforts at code official training and education.

Extend National Appliance Energy Conservation Act of 1987 coverage to include residential and

commercial equipment not currently covered by the program.

Information

● Direct DOE to explore methods for producing an accurate, verifiable whole- building rating, and to provide

technical support for State and utility programs that rate whole buildings.

. Encourage DOE to work with manufacturers, designers, and builders to demonstrate energy efficient

equipment that works.

● Encourage DOE to set Up a building energy audit program involving architecture and engineering schools.
Chapter 5--Policy Options for the U.S. Congress . 157

Box 5-F—The Aggressive Package

Incentives

. Mandate the measurement and pricing of energy externalities.

Federal leadership

. Instruct DOE to promote actively the demonstration of efficient technologies in Federal buildings to

strengthen markets for energy efficient goods and services.

Research, development, and demonstration

. Require DOE to market buildings conservation RD&D results to utilities, State agencies, and its own

regulatory programs, including the Office of Codes and Standards (within the Office of Building

Technologies).

. Require DOE to perform least-cost or net-benefit conservation RD&D planning.

Utilities

● Direct federally owned utilities to provide incentives to, or require, its customer utilities to adopt least-cost

plans.

Mandates

. Require States to meet or exceed federally set minimum building efficiency standards, such as the Building

Energy Performance Standards (BEPS).

. Adopt more stringent cost-effective National Appliance Energy Conservation Act standards by identifying

equipment efficiency levels that represent longer paybacks than most current standards allow.

● Encourage or require secondary mortgage market institutions (e.g., the Federal Home Loan Mortgage

Corporation) to require residences to meet the Council of American Officials Model Energy Code 1989

Edition (or some other major code).

Information

. Require point-of-sale disclosure of whole-building energy ratings.

SUMMARY AND CONCLUSIONS offered by OTA. Box 5-G summarizes the NES

options related to building energy efficiency. To

OTA has shown that there are numerous oPPortu- illustrate the similarities and differences, options . .

nities to increase the efficiency of energy use in the from the NES70 and from OTA are compared~

residential and commercial sectors. Energy efficient

technologies that would Provide net economic NES: Increase support for research and developbenefits “are commercially available yet often ne- ment to:

glected by consumers. OTA has offered policy ●

options to promote greater use of these technologies.

These options are grouped into three levels: basic,

●

moderate, and aggressive.

It is useful to compare the options discussed here

to those contained in the National Energy Strategy

(NES), a comprehensive strategy proposed by the .

Administration in 1991. The intent is to provide a

sense of how the NES options related to residential

and commercial energy efficiency compare to those

reduce costs and improve performance of

residential energy technologies;

reduce costs and improve performance of

commercial-building energy technologies, including lighting systems, windows, heating and

cooling equipment, and design techniques; and

develop methods [in both the residential and

commercial sectors] of measuring and improving indoor comfort and environmental qual-

-

7 1

ity.

70 ~ese Options me from the Nan’onal Energy Strategy, ISI cd., 1991/1992 (Washington, DC: U.S. Government Printing OffIce, February 1991),

pp. 4(L53.

71 Ibid., pp. 41, 49.
158 ● Building Energy Efficiency

Box 5-G-The National Energy Strategy:

Summary of Options1

1. Increase support for research and development to:

. reduce costs and improve performanceof residential and commercial-building energy technologies.

. develop methods of measuring and improving indoor comfort and environmental quality.

2. Increase energy efficiency of new housing by:

● providing technical infOrmatiOn and assistance to industry, utilities, and State and local governments.

. assisting State and local governments in adopting and enforcing Federal energy-efficiency standards through

local building codes*

● requiring new federally subsidized homes and new manufactured housing to conform to more stringent

energy-efficiency standards.

3. Retrofit existing residences by:

. supporting home energy ratings and the use of energy-efficiency criteria in mortgage loans.

. helping States to implement effective programs to retrofit housing occupied by low-income households.

. demonstrating exemplary energy management in federally supported public housing.

. retrofitting existing federally owned housing.

4. Improve the energy efficiency of residential appliances by using existing authority to update residential

appliance efficiency standards to keep pace with new technology.

5. Provide information and technical assistance to:

. support industry, utilities, and State and local governments in developing and implementing effective

programs, including adoption of Federal efficiency guidelines in local building codes.

. extend Federal performance testing and labeling to lighting products and other equipment.

● accelerate commercial application of new technologies.

6. Implement efficiency guidelines and standards where needed for

● lighting ballasts.

● new buildings,

7. Exercise Federal leadership by:

● increasing energy efficiency in Federal building design, operation, and procurement through improved

management.

● using Federal facilities to test promising new technologies.

1 &~NatioM/En@U s~~egy: POw@!ldeWforA~rica, 1st ~. (wuh@o~DC: U.S. GOV txmnent Printing Office, Februmy

1991), pp. 41,49.

The NES identifies cost reduction and improved implementing either RD&D planning method would

technical performance as key goals for buildings- better ensure that public RD&D funds are targeted at

related RD&D. In contrast, OTA’s discussion stresses

that implementation, rather than just improved

technical performance, is of key concern. As the

options in this report suggest, improving RD&D

project planning and implementation through regular use of market surveys, increased industry involvement in project planning, and more emphasis

on technology transfer would provide better assurances that applied RD&D projects will ultimately

have practical applications. Examining least-cost or

net benefit RD&D plannin g could be used to further

assist DOE in ensuring that RD&D projects result in

net societal benefits. And if feasible, actually

the most promising efficiency opportunities.

NES: Increase energy efficiency of new housing

by:

. providing technical information and assistance

to industry, utilities, and State and local governments.

NES: Retrofit existing residences by:

● helping States to implement effective programs

to retrofit housing occupied by low-income

households.
——...——

Chapter 5--Policy Options for the U.S. Congress ● 159

NES: Provide information and technical assistance [in the commercial sector] to:

● support industry, utilities, and State and local

governments in developing and implementing

effective programs, including adoption of Federal efficiency guidelines in local building

codes .72

Both OTA and the NES stress the importance of

supporting State and utility efforts to improve

energy efficiency. OTA’s analysis, however, points

to the importance of frequent, rigorous program

evaluation to determine how best to spend limited

resources for maximum benefit. To this end, OTA

offers policy options to encourage more frequent and

more rigorous evaluation of Federal spending. In

addition, OTA’s options include those directed at

assisting State and utility efforts designed to address

all environmental and other externalities (not just

indoor air quality) of energy production and use,

Such efforts would allow decisionmakers to determine the level and desirability of incorporating the

social costs of providing and using energy in their

jurisdictions or service areas. Even more aggressive

would be a Federal requirement to incorporate

environmental and other externalities in energy

planning and pricing. Both the NES and OTA

suggest that DOE and FERC work to expand the

adoption of least-cost planning by utilities.

NES: Increase energy efficiency of new housing

by:

. assisting State and local governments in adopting and enforcing Federal energy-efficiency

standards through local building codes, and

● requiring new federally subsidized homes and

new manufactured housing to conform to more

stringent energy-efficiency standards.

NES: Improve the energy efficiency of residential

appliances by using existing authority to update

residential appliance efficiency standards to keep

pace with new technology. Implement efficiency

guidelines and standards where needed for ‘lighting

ballasts and new buildings. ’ ’73

The NES options relating to mandatory appliance

standards suggest that no changes are needed to

current coverage or authority. In contrast, OTA has

offered several options, including ex amining the

feasibility and effects of extending the appliance

standards program to additional products. The NES

options relating to building codes and standards are

relatively similar to the OTA options, but Federal

priorities are not well-defined in the NES. In fact,

OTA in this report provides options that include

Federal Goverment analysis of existing compliance

with State and local energy codes, technical support

for the 34 States with codes less stringent than the

CABO MEC ’89 to encourage their improvement,

and coordination with trade groups (e.g., the Council

of American Building Officials and the American

Society of Heating, Refrigerating, and AirConditioning Engineers) to promote the wider

adoption of existing energy codes and building

energy standards (whether Federal or otherwise) that

are the most suitable for interested States.

In these and other areas, the options offered by the

NES generally fall at or below those offered by OTA

at the ‘‘basic’ level. This suggests that the NES

options do not represent the full range of options

Congress could consider to implement energy

efficiency in the residential and commercial sectors.

Distinctions between NES and OTA policy options,

however, do not suggest the desirability of any

single option nor any single level of action. To be

sure, no one policy option can be expected to secure

the triple interest in forging a national energy policy:

to improve economic competitiveness and growth

by encouraging net reductions in national energy

spending; to foster national security by reducing

energy imports; and to safeguard the national and

global environment by reducing the emissions

associated with energy production and use. A

reliable, comprehensive, and secure national energy

policy will invariably include a range of options

working on a variety of levels.

This report does not advance any one policy

option nor any package as a national energy solution; it does, however, expand the menu of options

for energy efficiency in U.S. buildings presented in

the National Energy Strategy.

72 Ibid.

73 Ibid.
Index
Index

Air conditioners, 17, 23,41-42

Alliance to Save Energy, 149

American Society of Heating, Refrigerating, and AirConditioning Engineers (ASHRAE), 108, 124, 150

Appliance labels, 90, 92, 113-116

Appliance rebates, 116

Appliance standards, 90, 91, 107, 109-113, 150-152. See also

National Appliance Energy Conservation Act

ASHRAE. See American Society of Heating, Refrigerating, and

Air-Conditioning Engineers

BEPS. See Building Energy Performance Standards

Bonneville Power Administration (BPA), 126

Blue Clue program, 126

BPA. See Bonneville Power Administration

Building codes and standards, 90, 91, 107-109, 148-151. See

also Council of American Building Officials

Building energy audits, 90,91, 100, 102,103, 116-120,152-154

Building Energy Performance Standards (BEPS), 90, 91,

107-108, 150

Burner heads, 40

CABO. See Council of American Building Officials

CACS. See Commercial and Apartment Conservation Service

California Energy Commission (CEC), 105

CAPS. See Community Action Programs

CCE. See Cost of conserved energy

CEC. See California Energy Commission

CETA. See Comprehensive Employment and Training Act

CFCs. See Chlorofluorocarbons

Chlorofluorocarbons (CFCs), 61

Clean Air Act Amendments, 13

Clothes dryers, 17, 64-65

Clothes washers, 65-66,79

Cogeneration, 49

Commercial and Apartment Conservation Service (CACS), 90,

117, 120

Commercial building construction industry, 82-83

Community Action Programs (CAPS), 97

Community Services Administration (CSA), 97,99

Compact vacuum insulation, 62

Comprehensive Employment and Training Act (CETA), 97,98

Condensing furnaces, 38-39

Conservation Optimization Standard for Savings in Federal

Residences (COSTSAFR), 108

Conservation Service Reform Act (PL 99-412), 120

Consumer Price Index (CPI), 21

Cooperative research and development agreement (CRADA),

141

Cost of conserved energy (CCE), 69

COSTSAFR. See Conservation Optimization Standard for

Savings in Federal Residences

Council of American Building Officials (CABO), 107,108, 124

Model Energy Code (CABO MEC), 108, 149-150

Cranston-Gonzalez Affordable Housing Act (PL 101-625),

149-150

Critical Review program, 140-141

Crude Oil Windfall Profit Tax Act (PL 96-223), 89-90

CSA. See Community Services Administration

Demand-side management (DSM), 125, 127, 146-149

Department of Energy (DOE), 136, See also Appliance standards; Building Energy Performance Standards; Commercial and Apartment Conservation Service; Energy Extension Service; Institutional Conservation Program; MultiYear Program Plan; Office of Building Technologies;

Office of Utility Technologies; Research, Development,

and Demonstration; Residential Conservation Service;

State Energy Conservation Program; Weatherization

Assistance Program

Department of Health and Human Services (HHS), 90, 92, 99,

136

Department of Housing and Urban Development (HUD), 76,90,

91, 92, 101, 102, 103, 107, 108, 109, 149-150. See also

Manufactured Home Construction and Safety Standards

(MHCSS), Minimum Property Standards (NIPS), Solar

Energy and Energy Conservation Bank (SEECB)

Department of the Treasury, 94

Direct digital controls, 50

Discount rates, 69,79, 80

District heating, 49

DOE. See Department of Energy

DSM. See Demand-side management

Duct leakage, 40

ECM grants. See Energy conservation measure grants

Edison Electric Institute (EEI), 119

EEI. See Edison Electric Institute

EES. See Energy Extension Service

Efficiency (definitions), 68

EIA. See Energy Information Administration

Electric Power Research Institute (EPRI), 28,56, 126-127

Electric resistance space heating, 39

Electrification, 19, 24,25

Energy Conservation and Production Act (PL 94-385),

90,96,97, 107

Energy conservation measure (ECM) grants, 100-101

Energy Edge Project, 126

Energy Efficient Mortgages. See Mortgages

Energy Extension Service (EES), 90,92, 121, 122-123

Energy Information Administration (EIA), 26-28,29,94

Energy intensity, 18, 24,31-32

Energy management systems, 49, 83

Energy Policy and Conservation Act (PL 94-163), 90, 91, 92,

109, 110, 113, 121

Energy Security Act (PL 95-294), 90, 101, 102

Energy Tax Act (PL 95-618), 89-90,93,95-96, 102

Environmental Protection Agency (EPA), 93, 103

EPA, See Environmental Protection Agency

EPRI. See Electric Power Research Institute

Ethnographic interviewing, 73

Externalities, 133, 136-137

Farmers Home Administration (FmHA), 107, 135, 149

PEA. See Federal Energy Administration

Federal Energy Administration (FEA), 90, 110

Federal Energy Regulatory Commission (FERC), 147

Federal Housing Administration (FHA), 92, 107, 135, 136.149

–163–
164 ● Building Energy Efficiency

Federal leadership, 103-104

Federal Technology Transfer Act (PL 99-502), 141

Federal Trade Commission (ITC), 90,92, 113, 114, 115, 116,

153

FHA. See Federal Housing Administration

FmHA. See Farmers Home Administration

Freezers. See Refrigerators and Freezers

Freezing in the dark, 84

FTC. See Federal Trade Commission

Gas Research Institute (GRI), 127, 144-145

General Accounting Office (GAO), 140

Golden Carrot, 138

Green Lights, 93, 103, 137-138

GRI. See Gas Research Institute

Heat pump water heaters, 104, 141

Heat pumps, 39-40

Heat recovery, 49,50,59,60,63

Heating-degree-days, 42-43

HHS. See Department of Health and Human Services

Home appliance industry, 77

Hood River, 46

HUD. See Department of Housing and Urban Development

ICP. See Institutional Conservation Program

Indoor Air Quality, 47

Infiltration rates, 42, 47

Information programs, 113-123, 152-154

Institutional Conservation Program (ICP), 90,91,97, 100-101,

122

Integrated resource planning (IRP), 125

Internal Revenue Code, 90

Internal Revenue Service (IRS), 94,95, 134

International comparisons of energy use, 16

IRP. See Integrated resource planning

IRS. See Internal Revenue Service

Labeling, 153-154

Lawrence Berkeley Laboratory (LBL), 45, 106, 111, 113

LBL. See Lawrence Berkeley Laboratory

LCP. See Least-cost planning

Least-cost plannin g (LCP), 125, 146-148

Lighting, 50-57

Ballasts, 55-56, 104, 106

Compact fluorescent, 52-53

Controls, 56

Daylighting, 57

Fixtures, 56

Fluorescent lamps, 53,54-55

High Intensity Discharge (HID) lamps, 53

Incandescent lamps, 51-52,53

LIHEAP. See Low-Income Home Energy Assistance Program

Loan subsidies, 101-103

I.meal programs, 124

Low-Income Home Energy Assistance Act (PL 97-35),

90,96,99

Low-Income Home Energy Assistance Program (LIHEAP), 90,

92, 96,99-100

Manufactured (mobile) homes, 76-77

Manufactured Home Construction and Safety Standards (MHCSS),

92, 109

Market Surveys, 143

MEC. See Council of American Building Officials

Migration, 19

Minimum Property Standards, 92, 108-109

Model Energy Code. See Council of American Building

Officials

Mortgages, 135-136, 137

MI%. See Minimum Property Standards

Multi-Year Program Plan, 140, 143

NAECA. See National Appliance Energy Conservation Act

National Academies, 28-29

National Appliance Energy Conservation Act (NAECA, PL

10012), 77,90, 105, 109-113, 116, 151-152

National Energy Conservation Policy Act (PL 95-619), 90, 91,

105, 110, 117, 118

National Energy Extension Service Act (PL 95-39),90

National Energy Strategy (NES), 157-159

National Manufactured Housing Construction and Safety Standards Act (PL 93-383), 109

Natural gas furnaces, 38

Natural Resources Defense Council (NRDC), 111

Net present value, 69

Northwest Power Planning Council (NPPC), 147

NRDC. See Natural Resources Defense Council

Oak Ridge National Laboratory (ORNL), 105, 141

OBT. See Office of Building Technologies

Office equipment, 23,66

Office of Building Technologies (OBT), 142-145

Office of Management and Budget (OMB), 109, 150

Office of Utility Technologies, 147

oil imports, 13

Oil space heating, 40

OMB. See Office of Management and Budget

ORNL. See Oak Ridge National Laboratory

Pacific Northwest Electric Power Planning and Conservation

Act (PL 96-501)

Passive solar, 75

Payback, 69

Persian Gulf War, 13

Petroleum Violation Escrow funds, 121

Population (U.S.), 16, 21

Primary conversion, 70

Public Utility Regulatory Policies Act (PURPA, PL 95-617),

125

R&D (research and development). See Research, Development,

and Demonstration

RCS. See Residential Conservation Service

RD&D. See Research, Development, and Demonstration

Rebates, 134, 136, 152

RECS. See Residential Energy Consumption Survey

Refrigerators and Freezers, 60-64, 105

Rental housing, 80

Research and development (R&D). See Research, Development,

and Demonstration

Research, Development, and Demonstration (RD&D), 96,

104-107, 138-146

Residential Conservation Service, 90, 91, 102, 103, 117-120
Index ● 165

Residential construction industry, 74

Residential Energy Consumption Survey, 94,95,96

Retrofit-on-Resale, 150

SECP. See State Energy Conservation Program

SEECB. See Solar Energy and Energy Conservation Bank

Showerheads, 58

Small Business Innovation Research (SBIR) program, 144

Solar Energy and Energy Conservation Bank (SEECB), 90,92,

101-103

State Energy Conservation Program, 90, 92, 121-122

State programs, 123-124, 132

Stevenson-Wydler Technology Innovation Act (PL 96-480),

142-143

Submetering, 81

Superinsulation, 42, 135

TA grants. See Technical analysis grants

Tax credits, 89-90, 93-96, 134

Technical analysis (TA) grants, 100

Tennessee Valley Authority (TVA), 147

Thermostats, 19,40,78-79, 80

Twin Rivers, 45-46

U.S. Treasury. See Department of the Treasury

Utility programs, 124-127, 132, 146-148

Demand-side bidding, 127

Direct load control, 126

First cost reduction, 125

Information programs, 126

Research and Development (R&D), 126-127

Rates, 125-126

VA. See Veterans Administration

Variable speed drives, 49, 63

Variable-air-volume systems, 84

Veterans Administration (VA), 92, 106, 107, 135, 149

VOLRES. See Voluntary Nonfederal Residential Guidelines

Voluntary Nonfederal Residential Guidelines (VOLRES), 108

WAP, See Weatherization Assistance Program

Washington State Energy Office, 123

Water Heaters, 57-60

Flue dampers, 60

Insulation blankets, 58

Plastic Tanks, 59

Weatherization Assistance Program, 90,92,96, 97-99, 122

Weatherization grants, 92, 96-101

Windows, 44-45,50, 106, 153

Wood use, 21