Energy efficiency programs for new home construction have been in place for over three decades in the Pacific Northwest. Increasingly stringent building codes and updated programmatic standards such as ENERGY STAR are moving baseline energy efficiency performance higher. Because of this, achieving high participation rates in utility incentive programs will only become more challenging in the future. It is clear that program designs that expand utility incentive program participation and create new savings opportunities are needed. One approach that Earth Advantage supports to achieve these twin goals in the new construction market is to design new utility financial incentives that would influence outcomes at the community development level.
Traditionally, utility incentive programs have tailored their incentives to individual builders who build a portion of the homes within a standard community development. These utility incentives encourage each of those individual builders to build higher performing homes. A different approach would be to provide some or all of those incentives directly to community developers. Community developers set a wide range of performance standards in a development’s Covenant, Conditions, and Restrictions (CC&Rs) document, to which each builder building in that community must adhere. Designing utility incentive structures that would support the inclusion of energy or green building performance standards within development CC&Rs could capture greater energy savings at a lower cost to energy efficiency programs.
Incentives designed for the community developer could be paired with existing builder incentives. In Oregon, Energy Trust has several performance paths that include increased financial incentives based on increasing tiers of energy performance. If new incentives were designed that focused on motivating the community developer to institute energy efficiency practices throughout an entire development, community developers in Energy Trust territory could receive a share of the per-home incentive. Builders themselves could also become eligible for additional incentives if they exceed the community development baseline performance standards as contained in the CC&Rs.
As an example, the lowest level of performance recognized by Energy Trust is 10% better than code, with a per-home incentive of $600. If a community developer set baseline development standards at 10% and a builder then chose to build homes that met a 35% improvement to code, that builder could still be rewarded with an incentive based on the incremental difference between the 35% improvement and the 10% improvement. This level of achievement is a very feasible scenario for a builder given that in 2013 builders working with Earth Advantage achieved an average energy savings of 28% compared to code.
There are a number of benefits to directing incentives to the community developer:
Reduces risk for community developer to set energy performance standards
Allows developer to pass on incentives to the builders if they so chose
Provides consistent branding and marketing opportunity to the community development
Reduces transactional and program management costs for energy efficiency programs
Earth Advantage sees tremendous benefit in structuring new home construction incentives in a way that leverages the scale of a community development, while simultaneously continuing to encourage builders to construct high performance homes. In a real estate market like the Portland metropolitan area where raw, developable land is limited, community developers have a greater ability to dictate the performance of construction that builders are providing to homebuyers.