Addicted to Energy
Rather than going into a lengthy review of the book - it's good - I'll instead talk briefly about the two ideas that Sherwin identifies as being the most critical. Luckily, they also relate closely to what Green Iowa does. How swell!
The first solution is to attach an energy grade to every home and building in the state. This project would have to be undertaken by energy companies who have access to large amounts of energy usage data. By comparing energy usage across similar sized houses in the same climate zone, the energy companies could roughly rank how energy efficient each home is. This ranking system could then be easily translated into an A to F scale, with the highest-performing 20% of buildings receiving an "A", the next 20% receiving a "B" and so on. While this system does not differentiate between usage habits and building performance, it still provides a useful comparison tool.
There are two main reasons for implementing this system: information and incentives, both of which appeal to me as someone who has studied economics. In order for people (or businesses, for that matter, but they are really just groups of people) to make sound economic decisions, all parties must have equal and complete information. Put simply, some people may not realize they are spending more money than they need to.
Once the information is made available, then home and building owners now have incentives to improve the efficiency of their structures. If a homeowner receives an "F" grade and is told that on average a similar home that receives an "A" grade spends, for example, $100 less on their energy bills every month, they now have a monetary and more tangible incentive to improve their home. Looking past the monetary incentives, people also do not like to lose. It's easy to see how someone who receives an "F" grade could feel like they are being beat and would want to improve simply so they are not left at the back of the pack.
Additionally, if more information is released, the incentives will also increase. Let's say, for example, that homeowners are not only given a grade, but also told where they rank on their street or neighborhood ("your home ranks 9th out of 11 houses on your street). Now that the rankings are more personal, some amount of neighborhood competition may enter into the equation. Maybe instead of a neighborhood competing for the best Christmas light display, they could compete for the most energy efficient home.
The last measure that could be taken for this solution is the most drastic and controversial, but would likely have the largest impact: making building grades public. In this system, homeowners would not only be able to see where their house ranks, but also where all other homes rank. The problem is obvious: privacy. Most people will not like having anything that relates to their financial situation released publicly. However, there are two major advantages to publicly releasing the records. First, the vain one: the incentive to improve your "F" home is drastically increased if all of your neighbors now know you have received an "F". People will not want to publicly fail anything, so it is likely that they will try to improve as fast as possible. From a green perspective, the beauty of this system is that the grades are a moving target. The grades are based on performance relative to other homes, not some set level, so if every "A" home improves, then every "B" home will have to improve even more to move up a grade. The system establishes a never-ending battle to improve. The other major advantage is that if the records are public, then the grades can enter into purchasing decisions. If two houses on the market are exactly the same except that one received an "F" and the other an "A", it is likely that the "A" home will sell for a better price. Now it pays to have an energy efficient home.
If you've made it this far and still have a functioning brain, you may be thinking exactly what I was at this point while reading this book: the plan sounds great, but where will the money come from? Most people do not have the money necessary to make drastic home improvements, and the people who cannot afford the improvements are often the owners of the homes that need the improvements the most. Incentives are pointless if people do not have the means to make improvements. This problem is addressed with Sherwin's second major solution: Energy Savings Accounts (ESAs).
The idea, at the core, is simple. Each month, charge homeowners some percentage of their energy bill and put that money into a savings account. This money, which would be attached to the home rather than the homeowner, would only be made accessible for investments in energy-saving improvements for the home. The percentage required of each ?homeowner could be related to the building's grade: a building with an "F" grade might be charged an amount equal to 15% of the energy bill each month, where a building with an "A" grade would only be charged 5%. This system would force homeowners (or, said more nicely, provide incentive to homeowners) to steadily grow investment potential.
Still with me? If so, you may be thinking about major problem number two: well great, now we're just creating higher bills for the people who couldn't afford the improvements in the first place. How is this helping? Well, if you're reading this blog, you probably know enough about energy efficiency in homes to know that many investments will pay for themselves in savings very quickly. With that in mind, one necessary feature of the ESAs would be the ability to take out interest free loans for investments with short or mid length payback periods. This would allow homeowners to make improvements on their homes without having to wait to save up the money. Since they will be putting the money into the ESA with or without the energy-saving improvement, the interest free loans allow for immediate results without risk to either party. If these improvements are done wisely and correctly, the savings experienced by the homeowner could partially or even entirely offset the payments being put towards the ESA. Additionally, since the investment should lower energy use and possibly improve the home's energy grade, the investment should lead to lower bills and thus lower the amount deposited in the ESA each month.
There is one issue at this point that is still not resolved in my mind: if ESAs were put into law today, and all homeowners were to take advantage of the no interest loans, where would the capital come from to pay for all of these improvement projects? The government would likely have to set aside a large amount of cash that could be tapped into for ESA loans and then repaid through ESA payments. While there is still little risk in this system, the money would have to remain available at all times to support the potential amount of investment projects. I don't see that as a popular solution. One thing that Sherwin mentions only in passing is that the money could come from the fines gathered through other "green taxes" (carbon taxes, cap and trade systems, pollution permits, etc.). Creating a store of "green capital" through these taxes is a realistic option, but it requires these other systems to be in place, many of which are not up and running today.
I really do believe that the systems of building grades, bill disclosure and ESAs have the potential to be real solutions to some of the energy issues we face today, but I am unsure if the correct green infrastructure is in place to support these programs. Hopefully once the environmental moment gains a little more steam, these systems can be successfully put into action.
Source: http://greeniowaamericorps.blogspot.com/2012/07/addicted-to-energy.html
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