Thoughts turn naturally to home and family this time of year. Home is where we return to recharge our batteries and restore our souls; it sustains us in times of economic hardship. And a home is the single largest investment that most American families will ever make; it is our nest egg, our inheritance, and the bedrock of the American dream.
This economic downturn has perhaps been cruelest because it attacked this security for working families, hitting us quite literally where we live. But now a smart proposal for a HOME STAR program to help homeowners invest in energy efficiency is moving in the White House and on Capitol Hill. Rebuilding American homes to use less energy will not only cut monthly bills and improve the value of our investments; it will put people back to work immediately.
When President Barack Obama gathered the nation’s top economic thinkers and business leaders together in a time of economic crisis to form the President’s Economic Recovery Advisory Board, he wasn’t trying to save the world from climate change or improve our national security through energy independence. He was trying to find a way to create jobs in an economy that had been battered by a global economic downturn. But it turns out that one of the fastest ways to create jobs is to invest in the things we need most, like real solutions to pressing energy problems, starting with our own homes.
HOME STAR would launch a national “Cash for Caulkers” effort to jump start demand for retrofitting homes through improved air sealing and insulation, advanced building materials, and state-of-the-art appliances. This HOME STAR program can put America back to work, even as it brings us together around common goals.
The Center for American Progress is proud to be part of developing and supporting this important initiative. The effort was led in the President’s Recovery Board by high-tech investor and entrepreneur John Doerr, who was quickly joined by far-sighted leaders from organized labor, Fortune 500 companies, and the financial industry. CAP has worked closely in recent months with partners from business, labor, and the environmental community to support these efforts and help put meat on the bones of this legislative outline for creating jobs.
The resulting proposal for a HOME STAR program represents a strategy that can drive recovery on Wall Street and Silicon Valley, and quickly put cash back in the pockets of unemployed construction workers laid off by the housing bust. Millwrights, mechanics, and assembly line workers at industrial plants across our nation will also benefit as they fabricate advanced lighting, energy efficient windows, hot water heaters, and the insulation that this work will demand.
How HOME STAR works
The program works like this: It offers a rebate on the sale of energy efficient products and home retrofit services so that the federal government can jump start investment in construction jobs at a time when banks aren’t lending and real estate markets are sluggish. Like Cash for Clunkers, which created a government incentive but tapped an existing industry’s marketing and distribution channels, HOME STAR will provide a public incentive, and the industry itself will take the lead on marketing and educating the public on who would qualify. Improved energy efficiency is a fringe benefit of improved sales, new profits, and better prices.
HOME STAR would cut 50 percent off the cost of investing in state-of-the-art energy efficiency products and services. This will provide the incentive for consumers to jump into the market for home retrofits, but it will be the economy as a whole—not government—that does the work. Increasing consumer demand for advanced energy saving appliances will drive up orders for the products of companies such as Lowes, Whirlpool, and General Electric. And local construction jobs will be created as small contractors and major construction firms enter the market to install these new building systems.
Insulation and air sealing can drive huge demand for skilled labor and building materials. Fiber glass insulation for example, which is cheap and bulky, is almost entirely made in America, with companies such as Owens Corning employing workers in good jobs at manufacturing plants spread out from upstate New York to South Carolina, Texas, Missouri, Oregon, and Arizona.
A key feature of the HOME STAR Program is the recognition that high standards actually create more jobs and boost consumer demand. Promoting high-performing mechanical systems and appliances that save energy, and investing in better quality craftsmanship by trained and certified workers will all boost short-term spending while building a sustainable, long-term industry that yields a real economic return.
Investing in energy efficiency will also save consumers money on their bills, increasing disposable income and offsetting the cost of the upfront investment. This allows consumers to finance these investments through long-term savings, further reducing the out-of-pocket investment required of homeowners.
A HOME STAR initiative would establish a $9 billion rebate program to encourage immediate investment in energy efficient appliances, building mechanical systems, and insulation, as well as whole-home energy efficiency retrofits. The proposal could be passed as part of a new jobs bill next year and is designed to be administratively simple, tapping existing institutions and markets, and requiring minimal new bureaucracy from government. The program would be facilitated and coordinated through existing state programs, using federal standards and incentives.
The SILVER STAR and GOLD STAR programs
HOME STAR would provide two separate types of consumer incentives: one prescriptive path that focuses on incentives for specific energy efficiency investments, and one performance-based path that promotes deep retrofits of whole homes.
The SILVER STAR or “prescriptive path” would reward the purchase and proper installation of specific energy saving equipment such as furnaces and water heaters, super-high-performance major appliances such as refrigerators and washing machines, or changes to a building’s envelope such as insulation and duct sealing. The prescriptive path would offer a fast-acting, near-term incentive that is simple to administer and easily introduced into the existing marketplace.
The SILVER STAR incentives would be based on the number of measures installed in each home. Homeowners would receive up to $1,000 for each measure installed, or $250 per appliance, and the program would cover 50 percent of project costs up to $4,000.
The GOLD STAR or “performance path” helps build the home performance industry that America will need moving forward, and at least one-third of HOME STAR funds would be set aside for these whole-home retrofits. The incentive for the performance path is based on the predicted energy savings resulting from the completed job. This technology-neutral approach is based on measured savings, not specific products, and directs investment toward those solutions that deliver the best results. It allows contractors and homeowners to create flexible work plans and to achieve deep energy savings.
The incentive would be designed to provide greater rewards the deeper the cuts in energy use—and bills—with no cap on potential savings. An accredited quality assurance professional conducts an energy audit before work begins, and a test-out when the performance retrofit is completed verifies the savings. Consumers receive $4,000 for modeled savings of 20 percent, plus an additional $1,500 incentive for each additional 5 percent of modeled energy savings. The performance path represents the future of home efficiency: state-of-the-art building science is used to deliver verifiable energy savings, creating short-term jobs while generating long-term confidence among homeowners and investors.
A third element is also critical to this program: quality assurance. The program would establish a system of quality assurance to guarantee that jobs are done right and that advertised energy savings are realized. It would also protect against waste, fraud, and abuse.
This system would put in place industry performance standards to guarantee quality work, ensure that a portion of all jobs are inspected by credentialed professionals to safeguard against fraud, and offer an additional incentive to contractors that invest in a trained and certified workforce. The quality assurance providers would offer a point of entry for contractors to engage the program and demonstrate that they are licensed and insured, improving consumer confidence that a HOME STAR seal is backed by quality work.
The HOME STAR program draws on a number of well-accepted policy ideas. It is based in part on the Retrofit for Energy and Environmental Performance, or REEP, legislation that is currently in the House-passed American Clean Energy and Security Act, and the Building Efficiency title of the American Clean Energy Leadership Act, which has been reported out by the Senate Energy Committee. Additional measures in HOME STAR have been drawn from leading state and local programs with proven results.
HOME STAR offers a solution to promote residential energy efficiency retrofits, but it would only be strengthened if it was broadened to include incentives for commercial buildings, institutional buildings, or industrial facilities. What’s more, current plans for HOME STAR rely on out-of-pocket homeowner contributions of 50 percent, but new tools for financing these retrofits could eliminate upfront costs or increase the levels of private investment leveraged by public dollars, further extending the reach of the program. These further measures should be considered as Congress and the administration act to pass a jobs bill in January. America’s first priority must be investing in jobs doing the work that most needs to be done at a time when Americans are out of work and the economy is strained. Rebuilding America for energy efficiency is job number one.
So, as you nestle in at home this winter holiday season, throw another log on the fire for now. But when January rolls around and those credit card bills start coming due, it just might be time to pick up that Sunday circular and find a local contractor to weatherize your home. You’ll save yourself money by investing smart, and you’ll be doing the right thing for the U.S. economy by putting people back to work. So it is that with a smart new HOME STAR jobs initiative, recovery begins at home.
Happy Holidays, from all of us at the Center for American Progress.
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The Center for American Progress is strongly committed to creating jobs and driving economic recovery through near-term investments in energy efficiency and clean energy. Our work on residential retrofits and the HOME STAR program builds on longstanding partnerships with business, labor, and environmental stakeholders to support residential and commercial retrofits and financing through the Rebuilding America Coalition, undertaken with the U.N. Foundation’s Energy Future Coalition. For more information see Rebuilding America.