Energy Efficiency: Important Challenges Must Be Overcome to Realize Significant Opportunities for Energy Efficiency Improvements in Gulf Coast Reconstruction
Published: 2007-06-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Following several hurricanes in 2005, the need to rebuild and repair destroyed and damaged homes and buildings in the Gulf Coast region may create opportunities for making energy efficiency improvements and realizing energy cost savings. While numerous federal agencies are involved in the recovery process, the Department of Housing and Urban Development (HUD) and the Department of Energy (DOE) interact with the states on a regular basis regarding matters of energy efficiency. This report, initiated under the authority of the Comptroller General of the United States, examines (1) the extent of opportunities for incorporating energy efficiency improvements in the Gulf Coast reconstruction, (2) potential challenges to realizing the energy cost savings during the reconstruction, and (3) the role of HUD and DOE in promoting energy efficiency in the rebuilding of the Gulf Coast. GAO limited the scope of its work to Louisiana and Mississippi since these states experienced the majority of the hurricane damage. GAO assessed opportunities for incorporating energy efficiency measures by conducting site visits and interviewing federal, state government officials; home builders; and energy efficiency experts. GAO also worked with a DOE national laboratory to develop energy cost savings estimates. GAO is making no recommendations.
section_title: What GAO Found
paragraphs: Reconstruction in the Gulf Coast creates a significant opportunity for incorporating energy efficiency improvements that could produce long-term energy costs savings in residential and commercial buildings. The sheer magnitude of the reconstruction effort and Louisiana's and Mississippi's recent adoption of more energy-efficient building codes makes this an opportune time for incorporating energy efficiency improvements in the rebuilding efforts. In partnership with a DOE national laboratory, GAO analyzed energy cost savings opportunities and estimated that adopting these newer building codes could reduce residential energy costs in these two states by at least $20 to $28 million per year, depending on the extent of the rebuilding efforts in these states. Furthermore, the analysis also showed that annual energy expenditures for commercial buildings--hospitals, schools, offices, and retail buildings--built to newer energy standards could be about 7 to 34 percent lower than buildings built to older standards. There also are opportunities for consumers to make additional energy efficiency improvements to both building types by replacing old, damaged equipment. There are three substantial challenges to realizing the energy cost savings opportunities presented by the Gulf Coast reconstruction: (1) the shortage of a skilled construction workforce, and specifically, the shortage of workers trained to meet the newer building codes; (2) the lack of trained building code inspectors to ensure compliance with newer building codes in Louisiana and Mississippi; and (3) the difficult financial issues facing consumers, such as the sufficiency of insurance and other compensation payments, that may make decisions about energy efficiency a low priority. States have efforts under way to address many of these challenges and it will take time and sustained commitment for them to be successful. The rebuilding of the Gulf Coast is largely a state and local matter, but HUD and DOE have played a supportive role in promoting energy efficient rebuilding. HUD and DOE have provided financial and educational resources that can encourage energy efficient rebuilding, and both agencies have broader national programs that may support energy efficiency improvements in the rebuilding of the Gulf Coast. HUD has made $16.7 billion in funding available for general rebuilding purposes, such as restoring damaged housing, and allows states to determine how to spend these funds, including using them for energy efficient improvements. HUD also has several national initiatives that may directly improve the energy efficiency of the public housing stock in Gulf Coast states. DOE has sponsored education and training on energy efficiency issues to state and local officials, private industry, and consumers in Louisiana and Mississippi. As part of its nationwide effort to assist all states with energy efficiency initiatives, DOE provides grants to states to design and carry out their own energy efficiency programs. DOE's energy expertise as well as HUD and DOE resources may prove valuable to the states and consumers as they make decisions about energy efficient rebuilding in the Gulf Coast.

section_title: Letter
paragraphs: Each year in the United States, consumers spend more than $160 billion to  light, cool, heat and operate homes, and about $110 billion is spent  annually in energy costs for commercial buildings, making improving the  energy efficiency of homes and buildings an important aspect of any effort  to reduce energy consumption and lower energy costs. Improving building  efficiency to reduce energy consumption is normally a very incremental  process. However, after the destruction caused by the 2005 Gulf Coast  hurricanes the need to rebuild and repair hundreds of thousands of  destroyed and damaged buildings in the Gulf Coast region creates unique  opportunities to address energy efficiency issues on a large scale.
The Gulf Coast hurricanes battered the Gulf Coast region causing over  $150 billion in estimated damage. Louisiana and Mississippi were the  states hit the hardest by the hurricanes, sustaining extensive destruction  and damage to residential and commercial buildings. For example, the  hurricanes are estimated to have destroyed or caused severe or major  damage to nearly 270,000 single-family homes in Louisiana and Mississippi.  In all, the Gulf Coast hurricanes caused more than 1,500 deaths; left  hundreds of thousands of people displaced without shelter or employment  and had a disproportionate impact on certain populations, especially the  poor, elderly, and minorities. In response to the Gulf Coast devastation the  federal government has committed a historically high level of resources— over $110 billion—through an array of grants, loan subsidies, and tax relief  and incentives. A substantial portion of this assistance was directed  toward providing emergency assistance and meeting short-term needs  arising from the hurricanes. A relatively small portion of federal assistance  is available for longer-term rebuilding activities, such as the restoration of  the regions housing and infrastructure.
In Louisiana and Mississippi, housing and infrastructure restoration is  taking place in the context of broader regional planning and coordination  activities. The Louisiana Recovery Authority is the planning and  coordinating body created by the governor to assist in implementing the  state’s vision for the recovery of Louisiana. Working in collaboration with  local, state, and federal agencies, the authority serves to address short- term recovery needs and guide the long-term planning process. In  Mississippi, the Governor’s Commission on Recovery, Rebuilding, and  Renewal was formed to develop a strategy for rebuilding the affected  areas of Mississippi. In early January 2006, the commission released a  report with numerous recommendations intended to guide Mississippi’s  post-hurricane rebuilding. Current Gulf Coast rebuilding activities,  including the bulk of the federal rebuilding assistance, are directed  primarily toward restoring the region’s stock of livable housing and  essential infrastructure.
States and their subdivisions, such as counties and cities, adopt codes and  standards that establish minimum requirements for energy-efficient design  and the construction of residential and commercial buildings. Building  codes and standards regulate components that affect the amount of energy  that a building will use, such as the building envelope, electrical power,  and lighting. These codes and standards vary from one state to another  and sometimes within a state. States and local jurisdictions may choose to  adopt model codes developed and published by nonprofit organizations,  such as the International Code Council (ICC) and the American Society of  Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE).
Louisiana and Mississippi adopted statewide residential building codes  created by the ICC to guide the reconstruction of housing after the  hurricanes. Louisiana adopted the 2006 version of the ICC’s code as its  mandatory statewide residential building code, while Mississippi adopted  the 2003 version of this code as its voluntary statewide residential building  code—except for five coastal counties where it is mandatory. In addition,  both of these states were already using ASHRAE’s commercial energy  standards prior to the Gulf Coast hurricanes. Louisiana used ASHRAE’s  2001 standard and Mississippi employed ASHRAE’s 1975 standard.
While numerous federal agencies, including the Department of Housing  and Urban Development (HUD) and Department of Energy (DOE), are  involved in providing emergency assistance as part of the recovery  process, HUD and DOE have also been working with states regarding  matters of energy efficiency. HUD works to increase homeownership,  support community development, and increase access to affordable  housing. DOE is the nation’s lead agency on energy use and energy  efficiency issues. DOE provides education and training through a diverse  set of national, state, and local programs that promote energy efficiency,  such as its Building America, Building Energy Codes, and High  Performance Building Programs. DOE sponsors research in partnership  with industry and academia to advance building science and improve  technologies and practices that make both residential and commercial  buildings more energy efficient.
In light of the widespread congressional and public interest in rebuilding  the Gulf Coast, we have prepared this report under the authority of the  Comptroller General of the United States as part of an effort to assist the  Congress in reviewing opportunities and challenges related to  incorporating improved energy efficiency practices into the reconstruction  of residential and commercial buildings in the affected Gulf Coast states.  This report (1) analyzes the extent of opportunities for incorporating  energy efficiency improvements and realizing energy cost savings in the  Gulf Coast reconstruction, (2) discusses potential challenges to realizing  energy cost savings during the reconstruction, and (3) describes the roles  of HUD and DOE in promoting energy efficiency in the rebuilding of the  Gulf Coast. We limited the scope of our work to Louisiana and Mississippi  because these states experienced the majority of the damage from the Gulf  Coast hurricanes and their building stock is generally similar to the  residential and commercial buildings found in the other Gulf Coast states,  according to the data we that analyzed.
We assessed the opportunities for incorporating improved energy  efficiency measures in the reconstruction efforts in Louisiana and  Mississippi by soliciting the views of federal and state government  officials, home builders, and energy efficiency practitioners and by  conducting site visits to these states. In addition, we worked with DOE’s  Pacific Northwest National Laboratory (PNNL) to develop energy cost  savings estimates for residential and commercial buildings in the Gulf  Coast. PNNL used energy simulation programs to develop these estimates  under several scenarios. PNNL calculated energy consumption and energy  expenditures for these building types assuming they were constructed to  meet newer building codes and standards and compared these data with a  baseline that approximately reflected the energy consumption and  expenditures of buildings prior to the hurricanes. To aggregate potential  residential energy cost savings to the Gulf Coast region, we made  estimates of annual savings that could occur as the result of  reconstruction efforts. A more in-depth description of the methodology  that DOE’s PNNL used to develop energy cost savings for residential and  commercial buildings can be obtained from their January 2007 and  December 2006 reports. These reports can be found at  http://www.energycodes.gov/impacts.stm.
To understand the potential challenges that may limit energy cost savings  from being realized, we relied on site visits to Louisiana and Mississippi,  interviews with state and local government officials, and attendance at  local building conferences and housing summits. Furthermore, we  interviewed energy efficiency practitioners, building industry  representatives, and non-profit organizations as well as HUD and DOE  officials to solicit their views on the challenges of incorporating energy  efficiency measures in the rebuilding and repairing of destroyed and  damaged buildings.
To describe the roles of HUD and DOE in promoting energy efficiency in  the rebuilding of the Gulf Coast, we interviewed agency officials and  obtained and reviewed documentation describing the actions that these  agencies have taken to assist Louisiana and Mississippi. We also  conducted site visits to these states to obtain firsthand knowledge from  state government officials, non-profit organizations, home builders, and  energy efficiency practitioners about their views on HUD’s and DOE’s  efforts to promote or work with various stakeholders to consider energy  efficiency in the rebuilding process. A more detailed discussion of our  methodology is provided in appendix I. We conducted our work from  March 2006 through May 2007 in accordance with generally accepted  government auditing standards, which included an assessment of data  reliability.
subsections: section_title: Significant Opportunities Exist for Incorporating Energy Efficiency Measures into Gulf Coast Reconstruction Efforts, Which Could Reduce Energy Expenditures
paragraphs: The anticipated rebuilding and repairing of residential and commercial  structures in the Gulf Coast creates an important opportunity for  incorporating energy efficiency improvements that could produce long- term energy cost savings. We estimated that newer building codes and  standards could significantly reduce energy expenditures for residential  and commercial buildings in Louisiana and Mississippi, depending on the  rebuilding efforts in these states.
subsections: section_title: The Scope and Status of the Reconstruction Efforts Create Significant Opportunities to Reduce Energy Expenditures through New Building Codes and Standards
paragraphs: The sheer magnitude of the reconstruction effort creates a tremendous  opportunity for incorporating energy efficiency improvements into rebuilt  homes and buildings. Many Gulf Coast neighborhoods and communities  need to be rebuilt—some from the ground up—especially since an  estimated 122,261 homes in Louisiana and Mississippi were destroyed or  severely damaged. This rebuilding creates an opportunity for these states  to make wide-scale improvements to their building stock, especially the  older vintage housing in the areas. In addition, state and local  governments in Louisiana and Mississippi are still engaged in short-and  long-term planning efforts to recover from the hurricanes. Since these  planning efforts are evolving, now is an opportune time to consider fully  incorporating energy efficiency improvements in the reconstruction  efforts. Furthermore, Louisiana’s and Mississippi’s recent adoption of  newer and more energy efficient building codes creates a unique  opportunity for rebuilding all of the destroyed and severely damaged  homes in a manner that could result in significant energy cost savings for  these two states.
In partnership with DOE’s PNNL, we analyzed a range of energy efficiency  levels to determine the potential energy cost savings that could be  achieved if single-family homes and commercial buildings in Louisiana and  Mississippi were constructed in accordance with various residential  building codes and commercial energy standards. For residential  buildings, we examined four energy efficiency levels associated with  building in accordance with various codes—a “baseline” level, a “code”  level, and two “above- code” levels. The baseline level we used represents  the estimated energy efficiency associated with construction practices in  areas of the Gulf Coast that do not have building codes or where the codes  may not be enforced. The code level represents the energy efficiency  associated with building in accordance with the energy provisions of the  ICC’s 2006 residential code. The third level represents the energy  efficiency associated with building to meet the Energy Star New Homes  Guidelines, which requires a 15 percent improvement over the ICC’s code  for all energy used in a house. The fourth level represents the energy  efficiency necessary to qualify for the $2000 home builders’ federal tax  credit for energy efficient new homes, which requires a 50 percent  reduction in space heating and air conditioning energy use compared with  the ICC’s code.
We estimated that homes built to meet the ICC’s 2006 residential code  could reduce energy costs between 24 to 28 percent, resulting in an  aggregate annual savings ranging from $20 to $28 million, depending on  the type of foundation used, the energy efficiency measures to which the  homes are built, and the number of homes being rebuilt. More  specifically, our analysis showed that, depending on the parameters of  individual homes, an estimated annual per house energy cost savings  ranging from $167 to $233 could be achieved if new homes were built in  accordance with the ICC’s 2006 residential code, rather than current  construction practices in the Gulf Coast region where there are no  building codes or where codes are not enforced. Furthermore, greater  home energy cost savings could be obtained if consumers rebuild their  homes to meet Energy Star New Home Guidelines or if home builders take  advantage of the energy efficient home tax credit provisions of the Energy  Policy Act of 2005 (EPACT) by building homes that use 50 percent less  energy for heating and cooling than those built to meet the ICC’s code. For  example, annual per house energy cost savings of $310 to $364 over  baseline levels could be achieved by meeting Energy Star Home  specifications, while $371 to $447 in savings can be realized by building to  meet the tax credit criteria in EPACT. The potential for Louisiana and  Mississippi to achieve significant energy cost savings if the estimated  122,261 homes that were destroyed or severely damaged are rebuilt in  accordance with various energy efficiency measures is shown in more  detail in appendix II, table 1.
In general, the improved energy efficiency features that are part of the  ICC’s 2006 residential code, Energy Star New Home Guidelines, and the  EPACT tax credit include more efficient windows and heating and cooling  equipment, improved building envelope and duct sealing, and increased  insulation. While building homes in accordance with the newer building  codes and above code measures will improve a home’s energy efficiency, it  will also increase home construction costs because more expensive and  efficient energy features are required. However, these additional costs can  generally be recovered within several years. Details on the cost recovery  period for several key energy efficiency features can be found in appendix  II, table 2.
For commercial buildings—offices, hospitals, schools, and retail—we used  the current commercial energy standards for Louisiana and Mississippi as  baselines: the ASHRAE 2001 standard for Louisiana and the ASHRAE 1975  standard for Mississippi. We then estimated the potential energy cost  savings associated with rebuilding commercial structures in Louisiana in  accordance with the ASHRAE 2004 standard and in Mississippi in  accordance with ASHRAE’s 2001 standard. We also estimated the potential  savings that could be achieved by constructing buildings to meet “above  code” levels, such as the requirements of the Leadership in Energy and  Environmental Design (LEED) green building program and the EPACT  commercial tax credit level, requiring 50 percent less energy use than the  ASHRAE 2001 standard.
The results of our commercial building analysis showed that an estimated  annual energy cost savings for commercial buildings between 7 and 34  percent could be achieved in Mississippi if commercial structures were  rebuilt in accordance with the ASHRAE 2001 standard and a savings of  between 7 and 13 percent could be achieved in Louisiana if commercial  structures were rebuilt in accordance with the ASHRAE 2004 standard.  More detailed information on these potential savings is presented in  appendix III, table 5. The primary reason for this significant savings is that  the newer energy standards call for the use of less lighting power, which  directly saves energy and indirectly reduces cooling needs because less  heat is given off from lighting fixtures. Overall, adopting newer and more  efficient commercial energy standards in the Gulf Coast would reduce  energy operating costs as well as construction costs because the newer  standards can be met with fewer, more efficient lighting fixtures resulting  in immediate cost recovery.
Our analysis also shows that greater energy cost savings could be obtained  for commercial buildings if they were constructed in accordance with  even higher energy efficiency measures. These efficiency measures  include the LEED rating system, which awards points for buildings that  use less energy than required by the ASHRAE 2004 standard and the  federal tax credit level for commercial buildings. The energy cost savings  associated with these two “above code” energy efficiency approaches  could range from $17,263 to $286,285 per building, depending on the  building type and size. Additional information about these potential  savings are presented in appendix III, table 6.
section_title: Making Energy Efficient Improvements to Residential and Commercial Buildings by Replacing Damaged Equipment and Appliances Could Further Decrease Future Energy Expenditures
paragraphs: Some residential and commercial buildings damaged by the Gulf Coast  hurricanes will not need to be replaced completely, but they will require  repairs. Consumers who decide to repair homes or commercial structures  can reduce their energy expenditures by replacing older and less efficient  energy consuming equipment that may have been destroyed or damaged  with more energy efficient products. We identified several common energy  efficiency improvements that can be made to both residential and  commercial buildings. For some items, such as cooling systems, minimum  federal standards set by DOE require the manufacture of more efficient  units than would have been used prior to the Gulf Coast hurricanes.  Therefore, energy cost savings from these kinds of equipment could be  achieved by simply replacing older equipment with a standard newer  model. Some of the more common energy efficiency improvements  include more efficient air conditioning systems, better insulating  windows, and improved duct sealing. Although these systems are  generally more costly than older, less efficient units, with the exception of  window replacements, the additional costs can usually be recovered in a  few years. Additional information on the estimated energy cost savings  that these improvements could bring to both Louisiana and Mississippi is  presented in appendix II, table 3.
Residential consumers can also reduce their energy costs by replacing  damaged incandescent lighting and appliances with compact fluorescent  lighting (CFL) and Energy Star appliances. On a per house basis, switching  to CFLs can save consumers an estimated $48 a year in electricity costs for  lighting. Installing Energy Star appliances can produce modest annual  dollar savings compared with appliances that simply meet the current  minimum federal manufacturing standards. However, according to PNNL,  if these appliances are used to replace older appliances that may be much  less efficient, the costs savings can be considerable. According to Energy  Star data, an Energy Star refrigerator is at least 15 percent more efficient  than federal minimum manufacturing standards, meaning that it would  save an estimated $9 a year over a new conventional refrigerator. Savings  from replacing an older refrigerator could be much higher, for example  $65 a year over a pre-1993 refrigerator. The additional costs and the energy  cost savings that may be achieved if these lighting and appliance upgrades  are made in the estimated 143,862 homes that received major damage is  outlined in appendix II, table 4.
Our analysis demonstrated that lighting upgrades are the primary area  where energy cost savings can be achieved from renovating damaged  commercial buildings in the Gulf Coast region. For example, if commercial  buildings—offices, schools, hospitals, and retail—in Mississippi were  renovated to meet the ASHRAE 2004 standard, rather than the state’s  current standard ( the ASHRAE 1975 standard), the cumulative savings per  building would be $18,689 to $150,538 per year depending on the building  type. In contrast, renovating these same building types in Louisiana so that  they go beyond the state’s current ASHRAE 2001 standard to meet the  ASHRAE 2004 standard would result in $5,704 to $30,537 in annual savings  per building. According to PNNL officials, all other building renovations  pale in comparison to the impact that lighting changes would have in  terms of producing energy cost savings for commercial buildings.  Additional information about the potential energy cost savings associated  with lighting in commercial buildings is presented in appendix III, table 7.
section_title: Home Builder, State, and Consumer Challenges Are Substantial and May Limit Energy Cost Savings Opportunities from Being Realized
paragraphs: Three substantial challenges may limit the energy cost savings  opportunities presented by the Gulf Coast reconstruction from being  realized. First, a general shortage of a skilled construction workforce and,  specifically, the shortage of construction workers trained to meet newer  building codes may limit energy cost savings. Second, states will face  serious challenges ensuring compliance with newer building codes,  thereby potentially limiting energy cost savings opportunities from being  realized. Third, consumers who consider rebuilding and repairing their  homes are faced with making other decisions that may make energy  efficiency a low priority.
subsections: section_title: Availability of a Skilled Construction Workforce Trained to Meet Newer Building Codes and Standards May Limit Energy Cost Savings
paragraphs: The shortage of a skilled construction workforce capable of sustaining the  rebuilding and repairing of destroyed and damaged homes in Louisiana  and Mississippi may limit the energy cost savings that can be achieved by  rebuilding to the newly adopted building codes. The construction  workforce shortage is twofold—that is, there is a general shortage of  construction workers and, more specifically, a shortage of skilled  construction workers trained in the application of the newer building  codes.
A 2004 Department of Labor report cited an industry study that said in the  year prior to the Gulf Coast hurricanes, nearly 75 percent of contractors  nationwide reported experiencing skilled construction labor shortages.  Louisiana and Mississippi builders told us that the labor shortage  worsened when the hurricanes displaced some of their construction  workforce to other states and caused an overwhelming demand for  rebuilding and repairing destroyed and damaged residential and  commercial buildings. Consequently, the demand for construction in the  Gulf Coast region far exceeds the capacity of the local construction  workforce. For example, a study conducted by the RAND Corporation  reported that to sustain the rebuilding efforts in New Orleans, the city  would have to expand its number of construction firms, labor force, and  building supply networks.
In addition, there is currently a lack of skilled construction workers  trained to meet the states’ new building codes and standards. According to  many different stakeholders with whom we spoke, building code training  is an important part of ensuring that buildings are properly constructed to  meet the newer building codes, including the energy provisions. Training  the construction workforce will require time and involve a learning curve,  which may delay or even limit the energy cost savings achieved during the  Gulf Coast reconstruction. According to state officials and home builders  that we spoke to, prior to the Gulf Coast hurricanes the general  construction workforce in Louisiana and Mississippi did not have to  comply with any particular statewide building codes, and some parishes  and counties had no residential building codes to guide home  construction. As a result, there was not an overwhelming need for the  general construction workforce to be familiar with the building codes  developed by the ICC. However, the construction workforce in Louisiana  and the five coastal counties in Mississippi will now need training on the  application of the newer building codes that include wind, flood, and  energy provisions. This is especially true for Louisiana, since it adopted  mandatory statewide building codes. Home builders, energy efficiency  practitioners, state officials, and non-profit organizations with whom we  spoke acknowledged that fully implementing newer building codes will  take time and will involve a learning curve before construction workers  understand and are able to comply with the requirements. State officials  and home builders told us that it will be difficult for local home builders— consisting of small volume builders—-to make the transition from not  building according to a building code to now constructing buildings to  meet the requirements of the most recent residential codes. In addition,  according to the National Association of Home Builders, the ICC’s energy  code has caused problems for home builders because they have trouble  finding the lowest cost solution that also complies with the code. All of  these challenges may delay or even limit the energy cost savings.
In an effort to address the skilled construction workforce shortage, the  Business Roundtable—an association of chief executive officers of leading  U.S. companies with $4.5 trillion in annual revenues and more than 10  million employees—in partnership with federal, state, and local  government agencies, construction trade groups, businesses, and non- profit organizations, created the Gulf Coast Workforce Development  Initiative as an effort to recruit and train up to 20,000 skilled construction  laborers for the Gulf Coast region by the end of 2009. Recruitment efforts  for this initiative are under way through the Gulf Rebuild, Education,  Advancement, and Training (GREAT) Campaign. Under this campaign,  participants enroll in a 4-week course to gain entry-level skills in  preparation for jobs in the construction industry. In addition to the  GREAT Campaign, there are other efforts under way to build a skilled  construction workforce in the Gulf Coast states, including courses and  related workshops at local colleges and universities and construction and  building summits/expos being offered throughout the Gulf Coast states.
section_title: States Will Be Challenged to Ensure That New Construction Meets the Recently Adopted Building Codes and Standards
paragraphs: Having an adequate number of trained code officials to inspect buildings is  vital to ensuring that rebuilding the hundreds of thousands of destroyed  and damaged structures is done in accordance with the newly adopted  building codes so that energy cost saving opportunities are actualized.  However, building industry representatives and state officials told us that  Louisiana and Mississippi lack code offices, lack an adequate number of  code officials, and may find it difficult to secure the resources to hire a  sufficient number of adequately trained staff. Despite these challenges,  however, efforts to enforce the new codes and standards in Louisiana and  Mississippi are currently under way.
Louisiana and Mississippi may not have adequate resources to open  additional code offices and may not currently have adequate numbers of  trained staff. For example, only a few Louisiana parishes and Mississippi  counties have code compliance and enforcement programs, and  implementing the new building codes will require more building code  offices to be established. According to one Louisiana code official,  because 57 of the state’s 64 parishes did not have to comply with any  mandatory statewide building codes before the Gulf Coast hurricanes,  there was no need for building code offices in those particular parishes. In  Mississippi, only those five coastal counties affected by the hurricanes are  required to meet the new statewide building codes. According to  Mississippi officials, despite the fact that three of the five counties had  building codes and offices in place prior to the hurricanes, these counties  will still need to hire and train additional code officials because of the  overwhelming amount of rebuilding that remains and the new building  codes. In addition, there was a consensus among the groups we  interviewed that building code offices are currently overburdened,  because there are too few officials and too many inspections.
Furthermore, Louisiana and Mississippi will face serious challenges in  securing the adequate staff and resources to support code enforcement.  Both states reported that the local governments in the most severely  affected parishes and counties have limited financial resources to provide  staff to implement the newer building codes. State officials, home builders,  and non-profit organizations pointed out that code officials are taking  other jobs in the private sector, which means code offices will have to fill  those vacated positions as well as hire and train additional code officials.  According to 1 state official in Louisiana, there were only 35 code  inspectors statewide, only 7 of whom were certified to enforce the ICC  building code recently adopted by the state that includes energy  provisions.
Furthermore, local governments will face challenges in training code  officials and code users in the application of the new building codes.  Building codes are inherently complex and technical, thereby potentially  affecting compliance and enforcement, especially for larger commercial  buildings. One study on compliance and enforcement methods reported  that enforcing energy codes may require a higher level of expertise, and  found that some local governments hire multiple code officials with  specialized areas of expertise. Another study suggests that the  complexities of energy codes make them impossible to enforce without a  labor-intensive review of energy plans and documentation supported by  extensive investments in hardware, software, training, and other  resources. Energy efficiency practitioners suggest that education and  training are critical during implementation, and that adopting jurisdictions  must prepare code officials to enforce the energy code and prepare the  building industry to comply with the code. According to one study, the  inability to ensure compliance with energy codes will risk failing to  capture the energy efficiency and cost savings they are designed to  achieve.
Despite the challenges, efforts to implement the new codes and standards  in Louisiana and Mississippi are currently under way. For example,  according to Louisiana Code Council officials, to some extent parishes  have been enforcing the new building code since February 2006. The 11  most affected parishes have collaborated with surrounding governmental  bodies to expand their existing offices or hired third-party service  providers. One official estimated that the number of code officials in the  state has increased from about 35 to 100, mainly because the Louisiana  Code Council is giving existing code officials, who are not certified to  enforce the new code, up to 3 years to acquire their certification as they  continue to conduct building inspections. Moreover, as of December 2006,  the state had allocated $8 million for those parishes that did not previously  have building code offices. Furthermore, Louisiana has a $14 million  program, funded by Federal Emergency Management Agency (FEMA)  funds, to provide assistance to local governments as they implement the  new statewide building codes. The Mississippi Development Authority is  using HUD funding to administer a $5 million grant program to coastal  county governments to hire additional building code officials and  inspectors to ensure compliance with the new building codes. The  program also intends to help to fund salaries, fringe benefits, travel, and  training for building code enforcement officials for 1 year.
Finally, Louisiana and Mississippi state energy office officials are  providing education and training to code users to encourage the  incorporation of energy efficiency and sustainable practices into the  rebuilding of the state. According to Louisiana officials, they will continue  to provide training on energy codes and compliance methods, sponsor  energy efficiency projects, and work with experts and universities to host  forums to provide hands-on, project-specific, one-on-one assistance to  those rebuilding and repairing destroyed and damaged structures. Officials  from the Mississippi state energy office said that they are conducting  similar efforts in their state.
section_title: Energy Efficiency May Be a Low Priority When Consumers Consider Rebuilding or Repairing Destroyed and Damaged Homes
paragraphs: According to state officials, home builders, and non-profit organizations in  Louisiana and Mississippi, consumers who desire to return to their homes  face difficult financial questions regarding compensation payments, the  higher costs of construction and insurance, and the availability of  employment, which may make decisions about energy efficiency a low  priority. Some state officials and non-profit organizations believe that  compensation payments awarded to homeowners may not be enough to  cover their mortgage balances or rebuilding costs. Qualified Louisiana and  Mississippi homeowners may receive up to $150,000 in financial assistance  from their state’s homeowner’s assistance program, which is funded by the  federal government. However, the most recent available data show that  the average amount received by residents in Louisiana and Mississippi is  about $75,177 and $70,045, respectively. Representatives from non-profit  organizations with whom we spoke told us that in some cases, homeowner  mortgage balances and rebuilding costs exceed the payment amounts,  leaving a funding gap that homeowners will have to fill. In addition, state  officials whom we spoke with told us that the housing program does not  provide additional funds to use for energy efficiency, thus homeowners  will have to pay any additional costs associated with making their homes  more energy efficient.
According to home builders, non-profit organizations, and energy  efficiency practitioners, homeowners may also have to consider the  additional construction costs associated with new elevation requirements.  That is, some consumers will have to consider the additional costs to  elevate their homes. Although FEMA provides $30,000 to cover the costs  for building to higher elevations, it may cost more than that to build in  some neighborhoods, based on FEMA’s advisory base flood elevations and  local parish and county community decisions to implement higher  elevation requirements, according to some home builders. Representatives  of a state home builders association told us that it can cost as much as  $40,000 to more than $100,000 depending upon the house.
According to state officials, home builders, and non-profit organizations,  homeowners continue to deal with insurance claims and face difficult  decisions about future coverage in light of higher insurance costs, if any  coverage is available at all. By some news reports, insurance premiums  have doubled or tripled in some areas. Increasing insurance costs may  affect consumers purchasing decisions regarding energy efficiency, thus  limiting energy cost savings opportunities presented by the Gulf Coast  reconstruction from being realized.
State officials and non-profit organizations told us that homeowners also  will have to decide whether existing employment opportunities make  returning to their homes feasible. Many residents lost their jobs when  infrastructure was destroyed and employees and customers were  displaced. The employment level statewide in Mississippi returned to their  pre-hurricane levels, while levels in the hardest hit area remained down, as  did the rate in Louisiana. In the absence of employment opportunities,  many residents will likely not return to their homes. Without adequate  employment opportunities, even those residents who do return are likely  to face financial hardships that will make decisions about repairing or  rebuilding their homes in an energy efficient manner a low priority.
Even after addressing these issues, homeowners will have to decide  whether it is in their best financial interest to pay the additional costs to  make their homes more energy efficient through purchases, such as  energy efficient appliances, or to use their money for other purposes. For  consumers, especially poor and low-income consumers, this decision may  be compounded by their loss of income, assets, and other financial needs  that will have to be met. One study we reviewed suggest that among the  most important barriers generally affecting consumers and their  purchasing decisions are limited information, limited awareness and  interest in energy costs and reducing energy expenses; and limited capital  and rapid payback requirements. Consumers are less likely to voluntarily  adopt energy efficiency measures without financial incentives and  education on the costs and benefits.
section_title: HUD and DOE Are Providing Funding and Educational Resources to Encourage Gulf Coast States to Incorporate Energy Efficiency in Rebuilding
paragraphs: Because the rebuilding of the Gulf Coast is largely a state and local matter,  HUD and DOE have played a supportive role in promoting energy efficient  rebuilding. More specifically, HUD and DOE have provided financial and  educational resources that can encourage the incorporation of energy  efficiency in the reconstruction of the Gulf Coast. In addition both  agencies have broader national programs that may assist Louisiana and  Mississippi in incorporating energy efficiency improvements during their  rebuilding.
subsections: section_title: HUD Is Making Funding Available to Gulf Coast States for Rebuilding and Repairing Residential Buildings
paragraphs: HUD officials told us that they provided the affected Gulf Coast states with  funding that can be used for, among other things, rebuilding in an energy  efficient manner. Congress has appropriated a total of $16.7 billion in  Community Development Block Grants (CDBG) supplemental funding that  has been allocated for use in the five affected Gulf Coast states for general  rebuilding. These grants afford states a great deal of discretion in  designing, rebuilding, and repairing housing; in neighborhood  revitalization; and in economic development activities. The federal  coordinator for Gulf Coast rebuilding has said that the CDBG program  allows state leaders “who are closest to the issues” to make decisions  regarding how the money should be spent. In Louisiana and Mississippi,  these funds are mostly being used for restoring housing infrastructure. To  receive CDBG funding, Louisiana and Mississippi as well as the other  affected Gulf Coast states were required to submit a Disaster Action  Plan—an overall plan for short-and long-term disaster recovery—to HUD  for review and approval. States were required to describe, among other  things, how their Disaster Action Plan would encourage construction  methods that emphasize energy efficiency and promote the enactment and  enforcement of modern building codes as part of their rebuilding process.  HUD officials said they also have been working with Louisiana and  Mississippi homeowner assistance programs to target CDBG funds to  better assist states and consumers in rebuilding homes that are more  energy efficient, safer, and storm resistant. In addition, HUD officials told  us that they encourage public housing authorities to use energy efficient  construction practices, appliances, and equipment. According to HUD, this  was the case when the department approved and funded a $22 million  grant to the Housing Authority of New Orleans and $7 million in grants to  the Biloxi Mississippi Housing Authority from its Capital Fund Reserve for  Emergencies and Natural Disasters to rebuild, repair, modernize, and  improve the energy efficiency of damaged public housing units.
HUD officials told us that they also have disseminated information on  energy efficiency to public housing authorities and participated in  educational and training activities to assist state and local offices,  consumers, and builders with considering energy efficient rebuilding. For  example, the department distributed a special disaster recovery edition of  its Public Housing Energy Conservation Clearinghouse e-newsletter,  outlining energy efficiency measures that public housing authorities and  residents can take to save energy and reduce utility costs. In addition,  HUD was involved in several reconstruction activities that while focused  on hurricane preparedness and reconstruction, also provided information  on energy efficiency. These activities included the Mississippi Governors  Reconstruction “Expo” where HUD disseminated extensive materials on  its Partnership for Advanced Technologies in Housing (PATH) program,  and the release of HUD “Tech Sets” on storm-resistant roofing and wind  resistant openings for use by homeowners, builders, and community  officials in the affected Gulf Coast states.
HUD also has actions that were planned or under way prior to the Gulf  Coast hurricanes that are designed to improve the energy efficiency of the  nation’s public housing stock and that could potentially benefit the Gulf  Coast states. These actions included the following:    HUD’s Energy Task Force developing standard training program modules  to promote energy efficiency in both new and existing HUD-assisted and  financed housing. HUD also will develop materials on ways to improve  household energy efficiency for housing authorities to disseminate to  public housing residents.
HUD, through its new Partnership for Home Energy Efficiency with DOE  and the Environmental Protection Agency, working to ensure that  information on Energy Star products and appliances, Energy Star  Qualified New Homes, and Home Performance with Energy Star for  existing homes is available for distribution to public housing authorities,  grant recipients, property managers, and new Federal Housing  Administration (FHA) homebuyers.
HUD improving its tracking and monitoring of energy efficiency in pubic  housing with an automated system to provide public housing authorities  with data that serves as an indicator of the relative efficiency of individual  properties and their potential for energy savings.
section_title: DOE Is Providing Energy Efficiency Training and Education to Consumers and State and Local Officials
paragraphs: In its capacity as the nation’s lead agency on energy efficiency issues,  DOE’s primary role in the Gulf Coast reconstruction has been to support  states by provide training and education to state and local officials, private  industry, and consumers. In direct response to the Gulf Coast hurricanes,  DOE partnered with several entities, including state energy offices, to  conduct training workshops on rebuilding with energy efficiency and  storm-resistance practices for home builders, contractors, and consumers.  For example, DOE, in partnership with HUD’s PATH program, Home  Depot, and Entergy Corporation, sponsored free home repair workshops  in Louisiana and Mississippi that highlighted energy efficiency. Attendees  had the opportunity to receive hands-on instructions on repairing storm  damaged roofs, ceilings, walls, and floors; installing windows, doors, and  hurricane shutters; and improving a home’s energy efficiency and  durability. DOE also responded to a request from the Louisiana State  Energy Office to provide Web-based code training sessions to architects,  engineers, and code officials to train them on how to comply with the 2005  Louisiana ASHRAE Commercial Energy Building Code as they renovate  and replace commercial buildings.
DOE also made educational resources available to all parties involved in  the rebuilding efforts by developing a Disaster Recovery and Building  Reconstruction Web site (www.eere.energy.gov/buildings) to (1) provide  various educational resources to state and local officials, builders and  contractors, and consumers and (2) promote cost-effective and energy- efficient reconstruction. This Web site includes information on energy  efficiency and rebuilding training opportunities and a wide range of  guidelines, fact sheets, and case studies developed by DOE, HUD, FEMA,  the National Association of Home Builders, and other organizations.
DOE has taken other actions to encourage parties involved in the  rebuilding process to consider energy efficiency. For example, it awarded  a $100,000 grant to Louisiana, Mississippi, and other affected Gulf Coast  states to incorporate energy efficiency and sustainable design practices  into their rebuilding strategy. DOE also partnered with state energy offices  to encourage the regional exchange of information and best practices. As  part of its partnership with states, DOE hosted the Katrina Green Informal  Working Group, a biweekly conference call with various federal and state  officials, industry associations, builders, nonprofit organizations, and  energy efficiency and housing experts, aimed at networking and sharing  information about the rebuilding efforts in Gulf Coast states. DOE officials  said that the agency plans to continue its efforts to encourage Louisiana  and Mississippi and other affected states to rebuild more energy  efficiently.
Finally, DOE also has ongoing nationwide energy efficiency initiatives to  assist all states with their own energy efficiency initiatives through several  national programs and projects including the following:    Federal-State Partnership Projects: DOE recently awarded $6 million to  fund 22 federal-state partnerships that will help implement training  programs and provide technical assistance and education that is intended  to ultimately result in the construction of more energy efficient buildings.  Louisiana and Mississippi were among the states that were awarded  partnership grants. Louisiana’s project proposal, entitled Gulf Region  High Performance Homes Program, is intended to spur market  transformation in Louisiana and the Gulf Coast region through educational  outreach, demonstration, technical assistance, and training on locally  appropriate, hazard-resistant, energy-efficient, and healthy-building  science and technologies. The goal of Mississippi’s proposal, entitled  Promoting Energy Codes and “Beyond Code” Programs through EPACT  Tax Incentives, is to integrate building energy codes and “better than  code” programs using the tax incentives of EPACT as a coordinating  framework, and to promote building energy codes, DOE Building America  approaches, and Energy Star Home procedures as avenues for qualifying  for the buildings-related tax incentives in EPACT.
State Energy Program (SEP): DOE’s SEP provides grants to the states to  design and carry out their own renewable energy and energy efficiency  programs. Funding from SEP goes to state energy offices in all states and  U.S. territories. States use these grants to address their energy priorities  and to adopt emerging renewable energy and energy efficiency  technologies. SEP projects are managed by state energy offices, not by  DOE directly. In 2006, DOE provided over $650,000 in SEP grants to  Louisiana and about $400,000 to Mississippi.
Weatherization Assistance Program: This program enables low-income  families to permanently reduce their energy bills by making their homes  more energy efficient. According to DOE, it is this country’s longest  running and perhaps most successful energy efficiency program. During  the last 30 years, DOE’s Weatherization Assistance Program has provided  weatherization services to more than 5.5 million low-income families. DOE  reported that, on average, weatherization reduces overall energy bills by  $358 per year at current prices. In 2006, about $2 million in weatherization  funds were provided to Louisiana and about $1.9 million went to  Mississippi.
section_title: Concluding Observations
paragraphs: While the current level of reconstruction and the difficulties surrounding  the return of residents is unsettling for both individuals and communities,  the nature and status of rebuilding actually creates significant  opportunities for incorporating energy efficiency measures into  reconstruction and rebuilding efforts. Nonetheless, as great as the  potential opportunities are, the challenges that must be overcome to  capitalize on these opportunities and actually achieve energy cost savings  are equally significant. Since most of the reconstruction in Louisiana and  Mississippi is still in the planning phase, there is still time to address the  challenges of incorporating energy efficiency in the rebuilding of the Gulf  Coast. Meeting these challenges will undoubtedly benefit consumers, the  Gulf Coast region, and the nation.
While the rebuilding of the Gulf Coast is largely a state and local matter,  HUD and DOE have provided states and consumers with funding and  educational resources to assist in the largest reconstruction effort in the  nation’s history. Going forward, there will be a growing opportunity to  incorporate energy efficiency measures during the rebuilding process—as  states and local governments decide on how and to what extent to  implement and enforce new building codes, and consumers begin to make  decisions about whether making energy efficient choices is in their best  financial interest. Given that improved energy efficiency measures, such as  updated building codes and energy efficient building materials are new to  the Gulf Coast region, states and consumers can greatly benefit from DOE  expertise in these areas. DOE expertise as well as HUD and DOE  resources may prove invaluable to states and consumers as they make  decisions about building code training and enforcement, energy efficiency  construction practices, and purchasing energy efficient appliances and  equipment.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOE and HUD for their review and  comment. DOE provided technical and clarifying comments, which we  incorporated as appropriate. HUD had no comments on the report.
We are sending copies of this report to interested congressional  committees, the Secretary of Energy, the Secretary of Housing and Urban  Development, and other interested parties. We will also make copies  available to others on request. In addition, the report will be available at  no charge on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions regarding this report, please  contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: During our review, our objectives were to (1) analyze the extent of  opportunities for incorporating energy efficiency improvements and  realizing energy cost savings in the Gulf Coast reconstruction, (2) discuss  potential challenges to realizing energy cost savings during the  reconstruction, and (3) describe the role of Department of Housing and  Urban Development (HUD) and the Department of Energy (DOE) in  promoting energy efficiency in the rebuilding of the Gulf Coast.
To estimate potential energy cost savings from rebuilding and repairing  residential and commercial structures on the Gulf Coast, we worked with  DOE’s Pacific Northwest National Laboratory (PNNL). PNNL modeled the  levels of energy efficiency that could be achieved if the buildings were  rebuilt or repaired to meet newer building codes and standards or “above  code” levels, and compared these measures with a baseline that  approximately reflected the energy efficiency of these buildings prior to  the Gulf Coast hurricanes. Separate analyses were conducted for  representative residential and commercial building types. We worked with  PNNL in developing the model assumptions, including the size and  characteristics of representative residential and commercial buildings, the  building codes and standards that were used, the future costs of fuels, the  heating and cooling climate of the area, the discount rate used for  consumers’ valuation of future fuel cost savings from more energy  efficient equipment and materials. We found PNNL’s models and  assumptions reasonable and sufficiently reliable for the purposes of this  report.
For a representative residential Gulf Coast home, PNNL modeled several  energy efficiency scenarios—two baseline measures, an energy code  level, and two “above code” levels. PNNL used an energy simulation tool  developed at the Florida Solar Energy Center and DOE’s Energy  Information Administration forecasts of natural gas and electricity prices.  PNNL also modeled the efficiency gains that could be achieved by bringing  Gulf Coast commercial buildings into compliance with current, more  efficient, energy standards for four prototypical buildings—offices,  schools, hospitals and retail. PNNL estimated the annual energy cost  savings associated with three levels of energy standards—baseline  efficiency, the current code’s higher-efficiency, and “above code” building  standards.
To aggregate potential residential energy cost savings from rebuilding or  repairing destroyed and damaged homes in the Gulf Coast region, we used  PNNL’s estimates of annual energy cost savings for a representative home  built to different levels of energy efficiency and federal estimates of the  aggregate number of these homes to estimate the scope for savings. We  reviewed the methodology used to estimate the damaged and destroyed  homes, including the steps that were taken to ensure the reliability of  these data and were satisfied that the estimates were satisfactory for our  purposes.
To understand the potential challenges that may limit energy cost savings  from being realized, we relied on site visits to Louisiana and Mississippi,  interviews with state government officials, and attendance at local  building conferences and housing summits. Furthermore, we interviewed  energy efficiency practitioners, building industry representatives, and non- profit organizations as well as HUD and DOE officials to solicit their views  on the challenges of incorporating energy efficiency measures in the  rebuilding and repairing of destroyed and damaged buildings.
To describe the role of HUD and DOE in promoting energy efficiency in  the rebuilding of the Gulf Coast, we interviewed agency officials and  obtained and reviewed documentation describing the actions that these  agencies have taken to assist Louisiana and Mississippi. We also  conducted site visits to these states to obtain firsthand knowledge from  state government officials, non-profit organizations, home builders, and  energy efficiency practitioners about their views on HUD’s and DOE’s  efforts to promote or work with various stakeholders to consider energy  efficiency in the rebuilding process. We conducted our work from March  2006 through May 2007 in accordance with generally accepted government  auditing standards, which included an assessment of data reliability.
section_title: Appendix II: Energy Cost Savings Estimates for Residential Buildings
paragraphs: Tables 1 through 4 contain energy cost savings estimates for homes built  in accordance with various energy efficiency standards and for homes  repaired with selected energy efficiency-related improvements.
section_title: Appendix III: Energy Cost Savings Estimates for Commercial Buildings
paragraphs: Tables 5 through 7 contain energy cost savings estimates for commercial  buildings— office, school, hospital, and retail buildings—constructed in  accordance with various commercial building energy standards, to “above  code” levels, and with more efficient lighting requirements.
On a per building basis, we estimated the energy cost savings that could be  achieved i Mississippi and Louisiana by moving from their current energy  standards to the LEED 1- point and 10-point levels as well as the federal tax  credit level, as shown in tables 6 and 7.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact person named above, Dan Haas, Assistant  Director; Mark Braza; Jacqueline Cook; John Delicath; Yvette Gutierrez- Thomas; Raun Lazier; Paul Pansini; Anne Stevens; and Barbara  Timmerman made key contributions to this report.