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Is Energy Efficiency Recession Proof?

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By Lane Burt

Is energy efficiency recession proof? I seriously doubt it, but it should be. A low risk investment with great returns should be at the top of everyone's list regardless of the economic climate. This is true for consumers and the federal government alike. I bring this up to highlight recently released data on energy efficient new homes that suggest that some consumers are making the right decision in the recession.

According to the Residential Energy Services Network (RESNET), almost 22,000 homes were verified as eligible for the federal tax credit for new efficient homes or 4.5% of all new homes sold in 2008 (according to the U.S. Census Bureau). This means that these homes cut heating and cooling energy by 50% compared to a 2004 code baseline. By achieving these targets, the builder of the home can claim a $2,000 credit on their taxes.

The 2008 total of qualified homes is significant because of what happened to home sales that year, dropping 38% from 776,000 to 485,000. So while the number of homes sold fell off a cliff, the number of efficient homes weathered the storm (dropping only 8%) and grew market share from 3.1% to 4.5%. I can only conclude that there are smart consumers out there who understood that a more efficient home represents tens of thousands of dollars in savings and invested wisely.

This is a significant achievement and shows how a well crafted policy can drive the market to greater efficiency in buildings. When the legislation was first enacted, many in the building industry felt that the requirements were too hard and the credit would have no impact, but this has not been the case.

Clearly there are good builders out there who (when properly motivated) can build very efficient homes, cost effectively. These builders are going to lead the rest of the industry towards even greater achievements, as their innovations will eventually become part of better energy codes and new incentives will pull the performance of homes towards net zero energy. We should keep success stories like this in mind when certain parts of the building industry oppose energy efficiency in order to continue to profit from the status quo. How will they convince consumers that it is not possible to save money and energy with more efficient homes when the best in the industry are doing it?

The tax credit expires at the end of this year and needs to be extended. Perhaps it is also time for an additional credit that would provide a larger reward for even greater levels of performance so that new innovations can gain a foothold in the market. We will continue to work to extend and improve the credit to build on this success and eventually make homes like these the rule, not the exception.


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