The Green Initiative … Energy Efficiency How Does It Benefit Us …

The U.S. government launches new energy efficiency efforts for homeowners. As the House of Representatives passes historic legislation paving the way for a clean energy economy, President Obama and the U.S. Energy Secretary promote aggressive energy efficiency plans that will save consumers billions of dollars per year. What does that mean? How will this energy savings actually be realized by homeowners?

The key provisions contained in the American Clean Energy and Security Act, in part, for homeowners includes:

· HUD and the FHA are encouraged to create a new generation of mortgages that offer 5% larger mortgages to people planning on making energy-efficiency improvements.

· The FHA is directed to insure a minimum of 50,000 new energy-efficient mortgages during the next three years.

· Fannie Mae and Freddie Mac are directed to develop mortgage products and more flexible underwriting guidelines to reward energy-conscious borrowers and builders.

· Real Estate appraisers are required to take into consideration energy improvements and money saved in the valuation of a home.

· Federal financial regulators are directed to support the establishment of privately run “green banking centers” inside banks and credit unions.

· State governments are required that homeowners who through energy conservation measures take themselves “off the grid” are not denied property hazard coverage by insurance companies.

Is this enough to encourage homeowners to invest in energy conservation technologies that are oftentimes cost prohibitive when compared to traditional technologies? Ultimately people will weigh their cost of retrofit (or replacement material), return on investment (“ROI”), along with their growing “moral” and philosophical desire to live in a way that reduces the environmental burden. Given the limited operating hours in a residential application, the cost (depending upon the retrofit options considered) will outweigh the return on investment (payback for your investment will be longer term); however, that is why the philosophical desire will ultimately be what motivates consumers to consider retrofits that are beyond “the low hanging fruit” such as lighting.

Point in case, according to the U.S. Energy Department lighting in your house makes up between 7-38% of your total electrical bill; and you can reduce your bill upwards of 25% using current energy efficient technologies. For example, if your home electric bill averages $175.00 per month ($2,100 per year) and you reduce it by 25% then lighting savings will total approximately $200.00 per year (as per the broad U.S. Energy Department initiatives). So what is the premium you will pay to install compact fluorescent lamps (verses incandescent lamps) and electronic ballasts and T8 or T5 lamps (verses energy saving fluorescent lamps) in your home? There will be an initial “retrofit” cost, and then as lamps fail the ongoing material maintenance cost or premium. Based upon limited operating hours for lighting in our homes, the actual savings will not be as significant as in many types of commercial buildings. The actual savings will vary on usage (total hours you use your lighting system), when you typically use your lights, and your specific utility rate. The other benefit as it relates to most energy efficient lighting products is that the material has substantially longer life span than inefficient technologies (i.e., incandescent lamps last between 800-1200 hours of operation; however compact fluorescent lamps last 10,000 – 12,000 hours). So over the long term you will spend less in material replacement.

So does pursuing energy efficient technology make sense? For the Federal and local governments – absolutely. For individual consumers – the front end retrofit cost can be substantial in some cases therefore tax incentives and financing options reduce the initial burden. Energy cost savings and replacement material savings makes these strategies even more palatable. But ultimately our social conscious will direct our decision to invest the upfront capital.