Designing Effective Incentives to Drive Residential Retrofit Program Participation (Text Version)

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Jim: - and the subject of designing effective incentives to drive residential retrofit participation. I'll be talking to you about the subject today along with Richard Faesy from the Energy Futures Group. The agenda for the afternoon, for the hour will first do a brief introduction and then we'll give an overview of the TAP program. We'll talk about retrofit program incentive contests. Really, what are the decision points that you need to consider when you're designing your incentive program. And we'll also give some examples of incentives structures. Richard is gonna go through the more theoretical part and I'm gonna run through some examples for everyone.

And then we'll show you some resources that you can follow up on to get more information. And since we have quite a bit of material for this discussion today we're going to hold questions to the end. But we do hope that we'll have time to answer some. You can type them in on your screen. Richard and I will seen them and if you have questions that we're not able to answer in the course of the webinar, we'll have contact information as well on the webinar. It will be posted and you can follow up with either one of us. We'll be happy to try to help you out.

So just a quick introduction. Richard, who's gonna speak first is a principal at the Energy Futures Group. Energy Futures Group is a new company but the people who are principals who founded it have many, many years of experience in energy program design and implementation. Richard's been doing this work for over two decades. Most of that at VEIC, the Vermont Energy Investment Corporation where he was the energy efficiency division manager within the consulting group.

And I'm still at Vermont Energy Investment Corporation, VEIC. I'm a managing consultant. Until quite recently I was the director of residential energy services. So really focusing on an operation perspective on running energy efficiency programs primarily for Efficiency Vermont. About a staff of 30 in this division and we ran home performance with Energy Star. We had an Energy Star homes with new construction program. We administer renewables programs for the State of Vermont. All the efficient products programs that go through Efficiency Vermont as well.

And for about a dozen years prior to that I was with the local natural gas utility Vermont Gas Systems managing the efficiency programs there. So I'm gonna hand over to Richard to go through the TAP program introduction and some of the theoretical basis of incentive setting.

Richard Faesy: Okay. Thanks, Jim. So a few introductory slides here. Some of you who have attended previous webinars probably have seen these as well but just a reminder that this presentation along with quite a few other regular webinars, which we'll run through at the end are part of DOE's technical assistance program. This effort is supporting the Energy Efficiency and Conservation Block Grant Program, the SEP state energy program initiatives, and also the Better Building grantees. So keep an eye out for many webinars that may help move these programs forward.

So how can a technical assistance program help? We offer really - primarily both the webinar-type assistance for a number of grantees but also one-on-one assistance as well. So if you've got an issue or a question, sign up to - or approach the solution center website or the technical assistance network will provide some access to the website and the contact information at the end to pursue that. But along with webinars on events, the topics like today's, we will have the solution center provides a lot of information on calendars. There's a blog that happens there and a lot of materials, best practices, success stories, et cetera there as well.

So there are, as part of the technical assistance network, there are some specialty teams. The one that we are associated with is called Team Four but specifically providing energy program design and implementation as outlined here. In addition to our team providing the technical assistance, there's also other teams that are providing expertise on financial products and approaches along with performance contracting. So a lot of resources available to assist you in your programs.

Just to let you know about Team Four. We are providing the technical assistance on program design and implementation nationwide. Our team is made up of eight - nine different organizations led by the Vermont Energy Investment Corporation. Many of our partners are already in the marketplace - have been for awhile. The regional organizations are available and are local to many of you to provide assistance for any issues or program design that you have going forward. So you may be familiar with the organization but this helps lay out who your local resource would be coming through the Vermont Energy Investment Corporation. Organizing the technical assistance the - would then flow back out to everybody through this network.

So in terms of where we're gonna go today, we have a number of questions about incentives for retrofit programs. And specifically that is our focus today. Residential markets and retrofits initiatives and what are the incentives that might drive participation. So some of the questions we hope to address today are why do we need incentives to drive demand in these programs? What types of incentives do programs use? Which of those are most effective? Which incentives should you use to base your programs' goals and objectives? Where do you get the funding? Where might you look for funding for these incentives? What are some of the examples of programs that use effective incentive structures and some case studies and lessons learned? And which incentives seem to be working the best for those programs? So hopefully we'll be able to touch on answers to all of these questions throughout the webinar today.

So part one - as Jim mentioned early on there will be two parts. I'll be walking through sort of the theoretical aspects of incentive design and then Jim will look at about a half dozen programs and what some of their experiences are with actually applying the theory behind incentives in the marketplace. So, first of all, why do we need incentives? Really without them attracting significant customer participation will be difficult. I think programs can be effective out there but really they're not gonna get the uptake and build the momentum that we need to without incentives to spur them along.

Markets really don't move quickly without some sort of financial incentives. They will get the message eventually but it will take a long time and we're trying to move these energy programs in a steep growth curve and really need something to spur them on. And really a lot of the incentive design depends on the depths of the savings you're trying to reach. So there's some considerations - and we'll touch on these throughout this hour.

The market characteristics in the audience you're trying to speak to really need to be considered as part of your incentive design, especially when introducing a program you're gonna need to get attention and redirect homeowner's investments in their homes towards energy. As we all know, energy is not at the top of most people's list so we need something out there to get their attention. And if we're trying for deeper savings, which is where we'll need to go with all these programs, we really need to figure out how to incentivize homeowners in order motivate them to go deeper than what they would normally do otherwise.

So I'm gonna - the theoretical section here is really broken into two parts. I'm going to be talking about incentive types and then about how we use those incentives to meet your programs' goals and objectives. So I'm going to be talking about the types of incentives - the typical types of incentives that the programs use out there. These would be - and I'm gonna go into a little more detail on each one of these. The percent of job costs. So incentives based on the cost of the measures. Prescriptive incentives, which may include equipment and, or whole house approaches. Measured energy savings. And then address some issue around homeowner versus customer incentives. Which is the right audience to focus on?

Talk a little bit about cash incentives versus loan buy-downs, which is a typical question that many programs have. And then about the bonus as well. So the first one, percentage of job costs. This really seems to be the most common approach for incentives. A good example would be the federal tax credits. The federal policy is providing incentives for homeowners to make improvements in their home by offering a 30 percent cost of equipment reimbursement, essentially or a tax credit, but as a percentage of the cost of materials with a cap of $1,500, which happens to expire at the end of this year unless it's extended. But this is a good example of a percent of job cost incentive.

Many utilities and state programs design their incentive this way. Typically there's - well, there's a range of percentage of the total job cost that is provided incentive ranging from as little as 10 percent. Less than 10 percent is really somewhat meaningless. But as low as 10 percent and all the way up to 75 percent. Jim will talk about some of the experiences and programs that offered 50 to 75 percent and what that's - what the impacts have been. Clearly people like that and act on it. But this type of incentive is really easy to administer. Basically the homeowner or the contractor just needs to present receipts. However, it's prone to price gouging and we've seen this all the way back into the 1980s with solar incentives that were based on the percentage of system costs.

With this type of incentive contractors are motivated to jack up prices. Not that they always will be there is a - the design here is encourages contractors to make that - to jack their prices up. And Jim will talk about some of that as well as some of the experiences out there. The one downside is - another downside I guess beside price gouging of percentage of jobs costs is that it does not necessarily result in energy savings. Just because you spend money on energy measures in your house doesn't necessarily directly reflect any energy savings, so keep that in mind.

The next incentive we're gonna talk about is prescriptive incentives. And typically think about these in a couple of different areas. One being equipment and so many of you are probably familiar with incentives for specific equipment. A certain amount for a furnace that's got certain specifications for instance. An AFUE of a certain amount with a high efficiency motor or a water heater of a particular energy factor or an Energy Star washing machine. Fifty dollars for an Energy Star washing machine. So these aren't based on costs necessarily, they are really a fixed dollar amount based on the specific equipment type typically regardless of the size or the capacity or the make of that particular equipment. So you could have a $50 incentive for a washing machine. On a $300 or a $1,000 washing machine this type of incentive would have one fixed amount, regardless of the cost of that piece of equipment.

You can also apply this incentive approach towards the whole house as well. Many programs do this in that they're looking at the thermal boundary improvements. For instance, providing a dollar per square foot for insulation or a dollar per CFM50 or whatever the measurement might be for reducing air leakage. This can - both these approaches can also include a bonus option for driving a bundling of measures.

I'll talk about the bonus at the end here. The benefits of the prescriptive incentives is that it's - these are easy to sell by contractors and homeowners. It's transparent. People understand what it is up front. There's no - there's no behind the scenes calculations or mystery about this and it allows for faster transactions for contractors presenting the information. The homeowners, they can tell 'em right at the kitchen table what the incentives are gonna be and figure - and potentially sell the job before they leave the house even, knowing these up front.

The next type of incentive is the measured - what we call the measured energy savings. And this is really an approach that provides incentives based on performance. So incentives tied directly to how much energy's going to be saved. If you're looking for a way to ensure that there's gonna be some energy savings, this might be a good approach. However, it's a little more complicated. It requires an approved audit tool. Some way to calculate how the - how you're gonna project the savings for that particular property or home.

One of the downsides is there are few recognized standards for retrofit program audit tools out there right now. Some of them, however, do use a recognized home energy rating or HERS based on - typically based on their RESNET, which is the residential energy services network that national standard setter for home energy ratings. They have a list of approved HERS rating tools that are out there that could be referenced. And there are programs out there that will provide an incentive based per point on the zero to 100 scale of HERS ratings as a way to provide incentives.

One of the issues around ratings is they can tend to be expensive. $300 to $800 range is what we've seen out in the marketplace. Beyond HERS ratings there are lots of audit tools available and we've got a reference at the back end of the presentation around DOE's building energy software tools directory. Or you can Google - you can Google that and find the list pretty readily on DOE websites. But there are lots of audit tools. The problem is there are not good standards around them so you're gonna have to do some investigation in terms of which are the best ones.

There are as part of measured energy savings incentives as well, there can be tiered thresholds. So you can provide increased incentives for achieving more savings. And you can - there are many programs that help you save 20 percent. You get so much. Or 30 percent or 50 percent. And so you can set up and use an audit tool to determine when you meet those thresholds. Again the bonus can come in here readily to encourage comprehensiveness and deeper savings. The bonus can easily be applied to when you have an audit tool that is measuring your energy savings.

This type of approach ensures results if the tools are used properly. However, it's not as transparent as some of the previous methods that we talked about. Paying for savings and - I'm sorry. Some of the previous approaches where there's a known dollar amount for a measure or a performance. So it's not quite as transparent and may tend to delay information between the contract and the homeowner and therefore delay some decisions.

Some other incentives - those are the primary incentive types. But in putting the incentives together and thinking about the right program design you may want to consider some other factors as well. Is it best to have the incentives go to the homeowner or the contractor? There are pros and cons to both approaches. By incentivizing homeowners you're really driving the market demand for contractors. You're showing contractors - home performance contractors or others in the marketplace that homeowners are looking to - for their services and can be a strong message to build up that supply of contractors for this type of retrofit work. It values the true cost of making the improvements in the marketplace.

However, my - on the other hand by incentivizing contractors you ensure that the contractors have paid for their services. There are some instances where contractors have concerns and by the time the incentives get to the homeowner and then the contractor it could be a couple months out. This incentivizing contractors as well holds them accountable to programs for program standards and quality assurance. So if they're directly beholden to the program the program has some leverage over them and can ensure they meet whatever the program and standards of quality assurance are put in place.

It also allows - this is an important one that's typically overlooked. But it also allows for better program data collection. So as we know all of our programs are going to want to be collecting good information on what's going on out there in the field. What the energy savings we're seeing. If the relationship is directly with the program contractor there's gonna be a higher likelihood that you've got some leverage over them and are able to collect the information you need for your reporting purposes.

The other issue to consider as well is cash incentives versus loan buydown. And whether you offer the incentives in terms of a check for - in terms of cash or check or buying down a loan to make it easier to finance the improvements is gonna depend on the market demographics the program is trying to serve. We've seen typically that higher income homeowners prefer cash. But if you're trying to service lower income homeowners they need loans to make this happen. They don't have that disposable income. Offering both provides, if your program's able to do so, provide some options to enable contractors to sell jobs.

So I've mentioned the bonus a couple of times previously. This is something that we feel is pretty important to have out there. It can typically be used to - as a move to action for somebody to get off their duff and actually hire a contractor and get some work done on the house. Set it up as an act now, limited time offer sort of thing and get the bonus to move forward. Or it can also be set up as a way to achieve comprehensiveness of improvement and that is to ensure that the contractor focuses on the whole house and the measures that get installed are comprehensive and really address all the energy end uses in that house. So by offering a bonus incentive for comprehensiveness we see this as critical for also driving to deeper savings. So not only are we wanting to look at all the end use of the house but by offering a bonus you can get motivation to action for actually going. Taking steps to go implement measures that they may not have otherwise thought about.

So whole house. So there can be one approach for the bonus can be something like a whole house prescriptive incentive. And Jim will mention this as well in some of the programs that we'll be featuring at the end. One example might be if you install insulation in areas equivalent to at least 75 percent of the homes finished floor area and air sealed to a certain standard, you receive an additional bonus of $500. One of the programs we'll talk about has this as a way to motivate people to go deeper.

Another example of applying this towards the measured energy savings incentives would be you can have steps or thresholds. Certain amount for 20 percent savings, for instance. Certain amount for 30 percent savings and then three times the original amount for 40 percent savings. So if you tier it appropriately and drive people to take action towards going deeper than they would have otherwise by using the bonus.

So with those incentives and the different incentives in mind how are you going to take those and apply them to your program? What are the program's goals and objectives and based on those goals and objectives what is going to be the best approach with the incentives you have available to you?

So I'm gonna be walking through here some of the different goals and objectives that your program might be trying to accomplish. It might include grabbing people's attention. Encouraging comprehensiveness. Going deeper. Overcoming the cost barrier for lower, moderate income homeowners. Putting in place incentives for a period trying to creating some buzz in the marketplace. Again, the incentives and loan buydown issues also - already mentioned transparency somewhat but is an issue in how you want to - what goals and objectives your program's trying to accomplish. Building the marketplace value for efficiency. And finally, touch on a little bit approaches in terms of resource acquisition and market transformation. And I'll mention those quickly when we get there.

So if your goal and objectives for your program are to grab attention, we know that energy's not a high priority for most. There's a lot of competition for homeowners' time. Most don't even know that they could be made more comfortable and spend less money by investing in efficiency programs. So you need something that can grab their attention so that they - so that then the education and sales aspects of your program can start to be put in place. People need continual reminders through marketing that they should consider retrofit options. And then once you've got their attention and your program's up and running you need to be able to adjust those incentives based on what's going on in the marketplace.

As fuel prices go up and attention to energy issues go up maybe you don't need to grab their attention quite as readily because the media's doing that. So I think the message here is the program to remain nimble, be able to be responsive to the marketplace but still remain a stable and reliable presence there so that there's a constant reminder. But you can turn that - you can turn the dials up and down to get their attention depending what help is going on.

So the next point was depending on your goals and objectives, it's encouraging comprehensiveness. And I've already talked about this somewhat. But designing incentives for individual measures really doesn't get us a deep savings or broad savings as well. So if you want to look at trying to touch all aspects of the house and not just HVAC or just the inflation, you need to think about this holistically for treating the whole building. So a way to put incentives together to encourage multiple sort of traditional contractors as the marketplace has come into place.

So something that will encourage dealing with the mechanical systems, with improving the envelope, potentially with renewables, but at the same time making sure that there's a single, general contractor, GC, or facilitator who's in charge and able to handle the whole job. So it's - thinking about how to be comprehensive as part of your incentive design is going to be important. Again, offering that bonus for multiple measures that exceed at certain thresholds is gonna ensure that we get deeper than we would have by just going after single contractors and single approaches.

Going deeper as I've also mentioned, think about sequencing the measures. Can you design - design your incentives to ensure that you reduced the load first and then size the equipment based on that reduced load? Doing it the other way around doesn't make much sense. So how can you - how can you put in place the incentives that will encourage that? The - California has thought about this as a loading order. Think about air sealing. Deal with the high and the low in the building first and then deal with the walls. Then insulate and then think about the equipment that follows that. At any point in time probably the product - the lights and appliances can come into play. But there really is a sequence and if you design your incentives appropriately you can encourage the right sequencing measures.

Depending on whether your goals and objectives of your program are focused on middle income or low moderate income homeowners. If you're focused trying to help out the low moderate income segment in the marketplace, certainly the best - the first resource is the weatherization assistance program or WAP. As most of you may know that is free for those who qualify and certainly directing people there would make the most sense initially.

You may want to think about increasing incentives based on income. So the lower the income the larger the incentives. Assuming that most low moderate income homeowners really don't have any disposable income or enough disposable income to put into measure. So make it easy for them to participate. As well, if you're focusing on rental properties, which is a challenge and they're not a lot of programs that are at this point in time but it is a segment in the market that we're gonna have to deal with. The landlords have no incentive to upgrade buildings if the tenants are paying the energy bills. So consider what motivates landlords if rental buildings are targets and focus overcoming those barriers.

So another goal of your program may be to create a buzz in the marketplace. And so you want to think about how long your incentives should last in order to meet those needs to get your program up and rolling and get people excited about it. If you set a deadline it creates some urgency. Limited time offer. Act now. First-come, first-served. The problem with creating a short sort of high-profile and higher incentive for participation is that you don't want to create too much interest that might result in unfulfilled expectations for excessive demand within inadequate contractor supply.

So you want to think about and plan for a short-lived but high interest campaign. Strive for some consistent buzz to avoid waves of interest. You don't want to build up all this interest, create all this demand and then realize you don't have enough contractors to fulfill the demand that you've created. So think and plan ahead to avoid the cliff effect when the buzz ends. Be sure this is part of the planning process. Be sure to line up the next incentive to follow the limited time offer initially. And potentially planning for a series of special offers to keep that buzz going. Different approaches. Different markets segments you may want to focus on. But it's - it's gonna cause a lot of problems if you have a large interest and buzz initially and then don't have something to backstop and fill in afterwards.

Incentives versus loan buydowns. I talked about this a little bit. Incentives are necessary to drive program demand. Marketing alone won't move markets. So it's a combination of incentives and markets. And we've seen in many programs where loans are optional but they certainly are nice to have. For low moderate income people they are necessary. The best loan approaches would be those that are unsecured so that you can have fast approvals for homeowners. They won't - generally they're not gonna get used if rates are set at market rate. They have to be something that is appealing and something that's better than what people could get otherwise from home equity loans or home improvement loans or otherwise. Something less than 10 percent.

One way of doing - of staging this is to have finance terms that reflect the energy savings. So the lower the interest rate - if you offer lower interest rates for more energy savings. A nice way to drive to that deeper level as well. In many programs most homeowners go for the cash incentives but contractors do like having the loans to offer. And as I mentioned before as programs are focusing beyond those with disposable income loans are necessary for those without the means.

Transparency - I've mentioned this also. The process and the incentives need to be clear, open, up front, and simple. This way people - people are more willing to understand what's going on and can make decisions more easily. So if you publicize and make - put up on the website all the program details including the incentives and avoid the black box or back office incentive calculations. They just delay transactions and lower the sales opportunities for contractors.

Building marketplace value for energy efficiency. We - this is not about offering free services. We tried that and we found that once things change people don't value the energy efficiency services anymore. So have them pay for something. You want to ensure that when the incentives go away or are reduced consumers understand the value of efficiency and just don't - and don't just think about needing it for free. One way to do this is to make audits low cost or partially subsidized but not free. Some are looking at $100 to $200 sort of target level and potentially refundable if the work is actually carried out. Again, consider low income needs and you may adjust - need to adjust the subsidies accordingly for lower income people.

So, finally, resource acquisition versus market transformation. So it sounds like a lot of jargon but the thinking here is that there really are sort of two approaches and the message is that they don't have to be distinct and unique. They can work together. Resource acquisition just to define some terms is really looking at short-term energy savings. What can we get for energy savings immediately as part of our program versus market transformation, which is changing markets to support energy efficiency with a longer term perspective? So how can we build a capacity and a contractor base, which would be more towards market transformation while also ensuring that we get immediate short-term savings for - to show that a program's successful?

You may want to think about bundling both approaches. Some - some achieving some savings with a first visit to the house while demonstrating the value of participating in the program can be an effective way to get a foot in the door, get some immediate savings, but then also work to build that marketplace for contractors. We're seeing this typically as something that utilities or program administrators have been promoting in the marketplace directing - putting CFLs, compact fluorescent lighting in - as a direct install as part of the audit process. Moderating the refrigerator and enrolling the homeowner in a refrigerator replacement program. Replacing filters, shower head replacement. I caution that the showerhead we've seen some problems with breaking off the showerhead neck, not necessarily the best approach. But some of these other ones are able to get some immediate savings up front as part of the program.

So at the same time you want to strive for marketability and predictability for your contractors. But at the same - but thinking about this as balancing the free gifts with the longer term goals of the free market. What - how can you balance both of those together? I'm gonna be wrapping up here with just a lot of these are pretty apparent but just want to make sure that people are thinking about where these potential sources of incentives can come from.

So, first of all, look for what's out there already and then build on those. The utilities. Electric, gas, water utilities may already have incentives. You may be able to leverage incentive dollars from them. Many states have system benefit charges or might have - you might be able to have some influence in putting those in place as a way to fund incentives. Clearly everybody who's probably part of this webinar does have some DOE funding for EECBG, competitive block grants, SEP, better building, weatherization assistance program, all have some funding that may be put towards incentives as part of your allocation.

Other - there are some other state or federal grants are out there and we're seeing some states also looking into other fuel charges, surcharges as well. This is a new area that many are interested in. There hasn't been a lot of track record. But thinking about how oil and propane customers can contribute towards programs and incentives. And then there's also the federal government tax credits that are available.

So some final thoughts before I turn things over to Jim. Know your market. Understand how rich an incentive needs to be in order to motivate to action and overcome the inaction barriers. Don't make an incentive too much if you don't need too much. But you need to make it enough to motivate people. Be familiar with your demographics. Know who you target market is and combine with the other offerings and programs and organizations that are out there to leverage other resources as well.

And finally, be responsive. As I've talked about before being nimble. Adjust to changing market conditions. Be responsive if fuel costs go up or down as energy's in the news. You need to be responsive to your income levels with your customers and also the availability of your accredited contractors. It's a balancing act to make sure there's enough defined supply of contractors in the marketplace and demand for their services. So think about lowering incentives or ramping up standards over time and striving for an optimal mix of incentives and marketing to drive demand. So with that I'm gonna turn things over to Jim and let him take over from here to talk about some examples of incentives in the marketplace.

Jim: Okay. Thanks, Richard. I'm glad to do that. And, you know, as I'm sitting here listening to your presentation I hope what everybody's gotten out of this is a point that I'd like to make over and over again, which is what you do with incentives really has everything to do with what you're trying to accomplish. It sounds pretty obvious but you'll see through some of these examples different approaches that people are taking because of different goals that they set out. And had I thought of it sooner - I wish I had - I wouldn't have said what I think their goals were but would have gone through the examples of how they structured incentives. And then we could have done a quiz and everybody could have said what they thought the goals were that the programs were trying to accomplish. And that would have been interesting to see where we came out.

But - so going through these - I'm gonna try to do it fairly quickly. New Jersey has a home performance with Energy Star program. And when they started out this program earlier this year they had some very aggressive goals that were in front of them that were established by the governor. So they said, you know, this isn't right now about building market. This is about getting some results pretty fast. So they put out a very aggressive incentive offer, up to $10,000. Half of the job cost and zero percent financing on top of that. And no surprise, they got a lot of response. And, in fact, they blew through the annual budget in the first quarter. So - hmm. Okay. And they had to restructure it. And they reduced the rebate to a $5,000 maximum, put that back out on the street and blew through that in two weeks so they had to suspend the program. And they reopened it in August of 2010.

Just waiting to see if I can make the slide advance, which I can't. Richard, could you see if you can advance the slide? Technical problems, folks. Sorry about that. There we go.

Richard Faesy: I can I can guess. Okay.

Jim: Late summer they rolled out tiered incentives and if you complete a job that gets between 5 and 25 percent savings you can get a rebate of ten percent of the job cost up to $1,300 or a loan, reduced interest. If you get greater than 25 percent it's still 50 percent of the job cost but the maximum is $3,000 and you still get the zero percent loan up to $10,000. So it's still a very aggressive incentive. And in New Jersey they're considering for 2011 decoupling the incentive from the job cost. As we talked about that can drive up costs. There's at least some thinking that it does. So what they're looking at here is prescriptive dollar amounts based on calculated energy savings. Next slide, please.

So what we think they've learned in New Jersey from talking to some of the program managers down there - well, clearly if you've got high incentives out on the street you're gonna get participants. But there is that concern that high demand with high incentives will drive up job costs. It's anecdotal. There's some observations people have made. Nobody that we know's done a study on this but it kind of makes sense. They also experienced this early budget depletion and that caused some disruption. And in having to change the incentives three times in one year, you know, gets some market confusion. It's hard to keep the contractors on top of what the current incentive structure is. It's pretty clear that participation is decreasing somewhat. The incentives are not as attractive as they were. And there's also some concern in New Jersey that customers might wait until they get better again, whether there's the funding for them to get better again is the big question. Slide.

Also looking in Vermont, which is also a home performance of Energy Star program, which had goals both for short-term savings but also really some long-term infrastructure building. It wasn't about go out and get as many jobs as you can as fast as you can. It was looking at state energy goals of retrofitting 80,000 houses by 2020 with an average of 25 percent savings. What do you need to do to put the infrastructure so that possibly could happen? So with limited incentives in 2005 there was just an interest rate buydown. And as new funding sources became available in 2008 and 2009, the incentives increased but for certain categories of customers.

If you were moderate income below 120 percent of median you can get up to $2,500, a third of the job cost. If you were a Green Mountain power customer for a Vermont Gas Systems customer and they only cover parts of the state you could get a third of the job cost up to $2,500. And the experience of implementing this program with the multiple funders was it was really complex. And basically it led to a black box where customers and contractors had to submit their job information, wait for program staff to sort through it and figure out which incentive they were eligible for and they'd get back to them.

And based on that experience, incentives were redesigned. January 2010 Efficiency Vermont rolled out a consistent statewide incentive. The same no matter what your income is, no matter who your electric or gas provider is, no matter where in the state you live - same incentive statewide. And they're prescriptive based on installed measures not job costs. And there's a bonus the more comprehensive the job is there are extra dollars that are available to you. And Vermont also found that nobody was taking Efficiency Vermont up on the loan option - nobody to speak of so they just dropped it. Next slide.

So this is just a quick shot at the incentive brochure, which the contractor can take with the customer and put it on the table and show them what's available. Next slide. What's been learned in Vermont is, well, even with limited incentives you can get participants if you do some of the other things to build the market. So contractor training and support, building the brand and awareness so that customers know where to go when they want to save energy. And it takes time.

Vermont also found that increasing incentives didn't necessarily help because it was so complex to get to them. There was an enormous amount of frustration during that period where the program had to black box incentive calculator. And really the fact that the money available was bigger did not help the program at all in that case. And something that goes a long with that is contractors need to understand. They need to be able to predict what the incentives are gonna look like. They need it so they can sell the jobs. They also need it so they can look at their own business risks and opportunities and so they can decide how many people to hire. Next slide please.

Quick look at Efficiency Maine, which operates for the last year or so the home energy savings program. And I believe there are some of our friends from Maine are on the line. Glad you can join us today. Home energy savings program is not home performance with Energy Star but it is similar in that it's a comprehensive home retrofit program, which has some goals of 4,000 retrofits with 25 percent savings. And this also links to a bigger statewide goal of retrofitting all of the houses in the state of Vermont. Excuse me, the State of Maine - to improve the energy efficiency of every single house.

So comprehensive savings are very important to the main program. And so if you do a job with calculated energy savings with less than 25 percent, currently there's not an incentive available for that. But if you get between 25 and 49 percent you can get an incentive for 30 percent of the job cost up to $1,500. And if you go over 50 percent it's 50 percent of the job cost up to $3,000. And Maine also had a limited time offer, bonus offer. If you enrolled your project, signed up and the audit before the end of August and if that project's done by the end of December there's an extra $1,000. Next slide.

So what we've learned from the folks in Maine is - boy, put that time-limited bonus out on the street and you get some uptake that really increased short-term enrollment in the program. And they're anticipating that there's gonna be some drop-off in inquiries with the end of that bonus and working to develop a strategy to keep the customers coming in. They found that this incentives - as they've put them out on the street, tied to percent of energy savings by dollar amount or job cost tied to energy savings rather has been pretty easy for people to understand. There's been no barrier from complexity there. And there also finding that they're getting really good energy savings with that incentive linked to the deeper percentage of usage savings. My Service, again a home performance with Energy Star program - really the first in the country and continues to be a model for almost anyone who's trying to put together a home performance with Energy Star program or comprehensive retrofit program of residents.

My Service focus has been primarily on building the market. Long-term infrastructure building and market growth is not been about going out and getting a bunch of jobs real fast. So rather than cash incentives they focused on review straight financing but to a fairly significant dollar mount - up to $20,000 in a 10-year term, which is pretty attractive terms compared to many other loans you can get for energy efficiency projects. And alternatively, customers can get a 10 percent rebate up to $3,000 but that's 10 percent of a $30,000 job to get the $3,000. So, you know, it's a modest focus on cash rebate.

New York has also had a program for quite a few years that provides additional rebates for income eligible. So below 80 percent of median income you can get up to half of the job costs or rather you can get half of the job cost up to $5,000. An interesting - I was on a panel a few weeks ago with Karen _____ from My Service who said that in the past year or so they've seen participation in that program drop by about a third compared to what it had been. And the assumption is because the effect of the economy when you're dealing with a moderate to low income population even with attractive incentives, even with financing available for the balance of the job cost, it's not enough to get people over the line to be able to do it. But certainly like New York has shown that with aggressive marketing and awareness you can get - you can build a program and you can get participation without putting a substantial incentives on the street. Next slide, please. Thank you.

And quick look at Austin Energy, which is a municipal electric company in Austin, Texas. It's been doing energy efficiency for quite a long time. They have the Power Saver program down there. And they have both some prescriptive incentives for individual measures and they also have home performance with Energy Star. And their program goal has been a little different than some of the other programs that are about getting some percentage of energy savings and some percent of the housing ____. They've really focused on bringing the old buildings up to current energy codes. So they offer prescriptive incentives, 20 percent of the measured cost and there's a cap of $1,575 and there's a bonus for if you put in an air conditioner or heat pump it's installed at the same time as part of a weatherization project.

And their experience has been generally that these prescriptive incentives have been pretty effective in bringing the older houses up to code. We'll just take a quick look at the next slide. This is their incentive structure, which I'm not gonna go through but you can obviously reference that because the presentation when it's posted. Sort of a calculator for incentives. And then this bonus structure, if you put in a new central air conditioning or heat pump or a packaged air conditioner unit, heat pump in this two lower tables and you do a weatherization job, with the rebate totals in this little chart in the middle of this slide there's bonus money of $250 to $500. So we've seen this as Richard mentioned. Use the bonus to get people to go deeper or get 'em more comprehensive project that's kind of a common approach.

And just the last example I want to show is TVA that has the in-home energy valuation program where it's still tied to measured cost and they'll reimburse up to 50 percent but the total project is capped at a $500 incentive. So it's fairly low dollar value compared to some of these others that we've looked at. Has to be installed by somebody in the quality contractor network. They do have some do-it-yourself measures that you can get incentives for. And if you get an audit through one of the participating utilities and you pay a fee for it if you do the measured installation within 90 days you can get that fee, typically $150 rebated. And certainly the experience - I mean it's obvious we didn't do any kind of deep exploration of this but there's a $500 cap on the incentive that is gonna have a pretty big impact on limiting the comprehensiveness that you'll see.

And the next slide is just a chart that's right off of their website. The incentives that they give for different measures. So that's a quick wrap on a few examples. There are a number of slides here with related resources from LBNL and the tax incentive assistance project, DOE. Home performance resource center. There are a couple of slides here with resources that you can go to on the web to get more information about incentive structures. And then there are also references to the programs that I mentioned. There are links to the websites where you can get information there.

So there are a couple more slides we can jump through. We certainly invite you to explore the solution center and submit requests for the technical assistance center. If folks dropped e-mail requests to Richard or myself it's very likely that we do our best to give you an answer and then suggest that you apply for more one-on-one technical assistance through this project. And I also want to point out to you the upcoming webinars. And then see we have about 10 minutes for a few questions.

Richard Faesy: Well, I'll leave this up here. There are - or I'll move through it in a couple minutes. So you can just take a look at some of the upcoming webinars we have. And then our contact information again. These are actually all posted on the solution center website, which you can see at the bottom of the screen. So I think that what we want to ask people to do is if you have questions to post those on your GoTo Meeting question area and Jim and I will do our best to take a look at those and see if we can answer them. So if anybody has -

Jim: Seems like there a number of them up there, Richard, now already.

Richard Faesy: Okay.

Jim: So why don't I start and see where I can get to - how far we can get. So first question I'm seeing here is in New York State many middle class homeowners don't qualify for the assisted home performance program, which is the 50 percent incentive that I talked about because when your below 80 percent is median that doesn't give you a whole lot of money. So the standard 10 percent incentive isn't enough. They don't qualify. I'm sorry. I said that wrong because I'm trying to go fast. Sorry, folks. If you're below 80 percent of median, you do qualify for it. If you're above 80 percent of median, you don't. You don't get the 50 percent but there are many people certainly - and this was the experience in Vermont as well who were above 80 percent who are not going to be able to complete jobs with just financing or with just a 10 percent incentive.

So the question is there any good empirical research on what level of incentive would trigger action by such homeowners? Is it 20 percent, 30 percent or what? And I think - the answer is I don't know. I haven't seen any. The call I was on a few weeks ago with Dan York from AC, triple E got a similar question and Dan also was not aware of any research. And I think the other thing that's very challenging about trying to figure that out is as conditions change in the economy and the energy prices change, you know, the answer's gonna be different. We did have one caller when I was on that panel two weeks ago who said he felt that 40 percent was the right amount. I don't know if that's based on empirical research but I acknowledge that it's an enormous problem when we're talking about getting large number of retrofits in the country. There are a lot of people who are not gonna qualify for the additional assistance of either weatherization or some - you know, enhanced incentive programs will provide. They're not gonna qualify for those and they don't have the available capital to do the job with the incentives that are available.

Richard Faesy: So the next question I see is do you have an idea if the tax credit will be extended in 2011? I guess my question back is do you know who's going to be - which party's gonna lead the house after next Tuesday. I think that - I've heard I'm on the RESNET's board of directors. We just had a board meeting earlier this week and the political liaison to RESNET came and gave a presentation about the chances of energy legislation moving forward. And what I heard coming out of that is that there - the energy issue is one that potentially could have some play with either party in power.

Nobody's making any promises but there is some legislation that is co-sponsored by Republican Olympia Snowe from Maine and others that actually has some approaches to some tax credit approaches to focusing on energy efficiencies. So there's some ceilings. There's a chance that this may go forward. I wouldn't necessarily bet on it but there is - they did indicate that there is a likelihood that this could be one of those issues that gets picked up regardless of which party is in power moving forward.

Jim: Okay. Next question I see is do we have any suggestions for income verification when you're using incentives that are based on income but somebody's not weatherization eligible. And I think the question is do we have any suggestions for how to do that verification. And there are a couple of different ways you can do it. I think one of the things - questions to ask yourself is how rigorous do you need to be. Weatherization program with the federal dollars, the restrictions are pretty clear and typically in my experience the approaches they need to be pretty rigorous. So customers have to sign a release allowing program to contact their employers and verify income.

But does a program - a different type of program need to be so rigorous? And I can tell you that the experience in Vermont was when there was this - for about a year a moderate income incentive for folks below 120 percent of median. The decision was it doesn't need to be that rigorous. So basically the program since those customers who said they were eligible sent them a form where they said, "This is my income and I verify that this correct and I don't have any other income." And the decision was, you know, if somebody wants to stretch that, you know, - probably 98 percent of the time they're close enough that they need the enhanced incentive anyway and it wasn't really gonna be a detriment to the program to do that. So we felt that that was sufficient.

Richard Faesy: So there's a question about whether this - how to get copies of these slides. These - this presentation will be posted on the solution center website - DOE solution center website within a week or so. So look for it there. All of the past presentations for past webinars, both the audio and the presentation are posted up there shortly after the presentations are conducted. So you can look for that there or send Jim or me an e-mail and we can probably also send a copy to you too.

Jim: Here's a question about, "Do you foresee much opportunity for the local retrofit programs to use the DOEs national residential retrofit guidelines that are currently being created for WIP?" And certainly I think that there will be opportunities to use those in a couple of respects. I mean there's going to be guidelines about installer qualifications and training and so forth, which I think is applicable regardless of whether you're doing a low income job or a high-income job.

And we're also gonna be very interested to see and I think they will be out for public comment around mid-November. The standard work specifications - it's a first effort I think to really nail down what does it mean to say, air seal the attic? How do you know you've done it right? What is expected to be included in that project, for example, and other measures in well? And I think that getting that standardization in the industry is gonna be very helpful and it gives contractors sort of a uniform language and a place to aim their staff development to and give them uniform specs to do the work to. And in areas - and that will be helpful in areas where I think there are existing programs, but especially in areas where there are no existing programs and there's not an infrastructure yet people are trying to develop something. To have those resources I think would be very helpful.

Richard Faesy: So it looks like we might have time for one last question and there's one question here is "What is the updated news on Home Star?" So for those of you who have been following the Home Star legislation, which has been promoted over the past year or so I think all indications are that it is probably dead and probably going to be replaced by - I mentioned before Senator Snowe's legislation which she's co-sponsoring with Senate Energy and Natural Resources Chair, Jeff Bingaman from New Mexico. It's S.3935, Advanced Energy Tax Incentives Act of 2010.

So what they have done is really stripped out many of the provisions of Home Star and turned them into tax credit. And so that the way the Congress scores legislation they don't have to count tax credits for deficits. I'm not quite sure how they do their math there. So it makes it - it would make it much more palatable for those who are opposed to increasing the deficit any further to vote for a tax credit bill, which would not impact the deficit but may provide incentives for doing retrofit work. So look for S.3935, the Advanced Energy Tax Incentives Act as a vehicle that may take some of the better provisions of Home Star moving forward.

So with that I see that it's after 3:00 PM and on behalf of the DOE's technical assistance network want to just thank everybody for participating today. Look for follow-up information on the solution center website and best of luck.