Male: Hello, and welcome to our webinar. The focus of this webinar is how to
adequately energy model a weatherization project when you're utilizing various leveraged
funds – sometimes, also referred to as braided resources. So, let's get started.
First, we're just gonna touch briefly on why we leverage. Then, we're gonna look at
different funding categories to make sure that we understand how to appropriately
categorize different funding streams. Then, we'll look at a couple of resources that'll help
facilitate your braiding of funds, and then, we'll demonstrate how to appropriately do this
– especially of concern are how we might co-fund measures with an individual SIR of
less than one.
Really, since its very beginning, the Weatherization Assistance Program has relied
heavily on leveraged resources, and really helped to facilitate deeper retrofits. And,
ultimately, they benefit the program's low-income clients. In June of 2022, the
Department of Energy released Weatherization Program Notice 22-9. The main focus of
that WPN was managing multiple funding streams within the Weatherization Assistance
Program. And it helped to clarify how grantees need to distinguish between leveraged
funds that are braided versus blended, and then, how they can effectively be used with
other funding sources.
We'll be focusing more on those definitions here in a moment, but first, why do we
leverage?
Leveraging is really the key to running an effective weatherization program. It can assist
in a variety of ways. The first is to really help us address causes of deferrals. The funding
that's available from leveraged resources can help us to address deferrals and get homes
into the pipeline for weatherization. Once we access the home, then it also assists us to
install more measures – including those that have an SIR – or savings to investment ratio
– of less than one.
It also provides the resources necessary to effectively perform deeper retrofits on every
home. This is going to decrease the greenhouse gas emission from that particular site, and
it's going to provide, overall, a better outcome for all of our low-income clients.
Remember that leveraged funds are generally more flexible than our standard WAP
funding, and we're able to address more repairs and health and safety issues in many
different ways. In essence, leveraged funds really help us to stretch the Weatherization
Assistance Program to cover more homes, more retrofits, and more clients effectively.
This chart really drives home the point of just how important leveraging is to the
weatherization program. As you can see here, over the last 10 years, weatherization
program formula funds – as represented by the green bar – make up, really, just a small
portion of the total funding expended on weatherization projects. You can see how
LIHEAP is also a very large portion of this. So, those LIHEAP transfers are critical.
Then, also, if you'll notice the blue portion of the bar continues to grow over time.
These represent additional or other funding beyond LIHEAP or Department of Energy
funding. These are heavily focused in utility funds or state weatherization funds, as well
as other private funds that come into the programs via leveraging. When you combine all
these funds together, you can see that the Weatherization Assistance Program provides
roughly a billion dollars a year in support for energy efficiency improvements in low-
income housing.
This slide really helps to demonstrate, in a more visual manner, what happens when you
apply leveraging to a home. You'll notice that only a small portion of the measures
installed in this home utilize WAP formula funds. Instead, you can see how each funding
source has been appropriately leveraged and applied to this home in order to ensure that a
complete retrofit was accomplished while work was in process. This graphic also
demonstrates how both federal funds – as well as non-federal funds – can be used to
successfully weatherize and improve low-income housing.
And now that we've seen how important leveraging is in the weatherization program, let's
now look at the funding categories that leveraged funds can fall into. Two common
categories are braided funds and blended funds. Let's clarify those first. When something
is braided, it means that you can keep the funding streams separate. You can individually
categorize and analyze each funding stream for what measures it paid for, where it was
expended, and long-term tracking of that is possible.
Now, when you blend funds, this means that all of the funding goes into a single pot or a
single source, blended with DOE weatherization, and the grantee/sub-grantee is not able
to track it individually. DOE does not recommend blending funds. This is because when
you blend funds, then, the most restrictive rules of all the funding sources have to apply
to all of the funding. So, in these cases, generally, all the funding is required to adhere to
WAP program guidance and regulation, which can reduce the amount of money for any
given project due to the average cost per unit requirements of the WAP regulations. This
now brings us to co-funding, and co-funding was a new term introduced when WPN 22-9
was released.
And essentially, what it allows you to do is to take leverage funds and utilize those to
install measures that don't necessarily meet the cost-effective requirements of DOE
weatherization. We'll demonstrate, a little bit further on, how exactly that occurs and how
the energy modeling of that is done appropriately, but keep in mind that co-funding of
leveraged funds is different than owner contributions or owner buy-downs, which are
really just a sub category of braiding, and they're really only applicable in multi-family
projects. We'll look more at how co-funding works and how you can apply it to your
energy modeling in a way that is acceptable.
So, as we highlighted, braided resources are funding streams that are not necessarily
required to adhere to DOE lab rules. Now, that's not a blanket statement. To be able to
determine what rules each funding sources requires you to follow, you need to look at its
specific agreement, its terms and conditions, the contract that you may have with that
funding source. But, generally speaking, they are not required to adhere to DOE WAP
rules. And what that allows is for you to use that specific funding source to fund
measures that perhaps don't necessarily fit within the Weatherization Assistance Program
or that may have an SIR less than one, and focus, too, on individual maybe health and
safety or repair measures that generally just are not permitted within WAP.
Some primary examples of these braided funds that we typically see are LIHEAP
weatherization funds, certainly, a lot of utility funding, and then, we can also use landlord
contributions and/or buy-downs – and we'll discuss how those function a bit more in the
modeling. But just remember that each one of these resources has its own agreement, as
well as their own contracts, terms, and conditions, et cetera. So, before you begin to braid
funds, you need to understand what each resource's limitation is and what their
requirements are. For instance, there may be a specific per unit spending cap on some
sources. Some funding sources may or may not require cost-effectiveness, and then, that
cost-effectiveness may be based on individual measures or a package SIR, or perhaps a
combination of both.
Another thing to note, too, is that different measure lifetimes may be used by different
funding sources. This is one area where when conducting the energy modeling, it
becomes very important that you stick with the most restrictive of those lifetimes in the
energy model. And, typically, in the weatherization program, that's going to be DOE's
required measure lifetimes that are outlined in WPN 19-4, and that will be in attachment
9. Some things to keep in mind as you're looking at your braided resources – first, let's
figure out how we can use those sources.
So, as we discussed, it's really critical to understand what each braided resource requires
you to do in order to implement its funding on your project. One item that really helps to
facilitate that is creating a source document that can be referenced for each funding
source and what their allowable expenditures are. This document might be referred to as
a funding matrix, to coin a term. And what it does is it outlines all your available
resources, and it helps to define the limitations of each. And generally, the source
documents for all of these will be your contracts or agreements with those separate
funding sources.
This is a very useful resource only if it's kept up to date. So, as funding changes or rules
and regulations change, then, the grantee or the sub-grantee needs to maintain this
resource and keep it up to date.
As we've highlighted, each and every funding source has its own rules, and so, you'll
need to thoroughly document what those rules are and implement their funding in an
appropriate way within the boundaries of that funding agreement. With that being said,
we can focus here a little bit on what are DOE's WAP rules in regards to how you're
going to use the DOE funding. Anytime you're braiding DOE funding with other funding
sources, there are certain overarching WAP rules that are going to apply to the project –
client eligibility, the dwelling eligibility, the energy audit tool use, your health and safety
plan requirements, your initial audit and final inspection requirements, client file
retention, documentation, monitoring. All of those still apply when you're using WAP
funding.
Now, when you start looking at other funding sources and how they braid in, you may
find particular portions of those rules that don't necessarily apply to just that funding, but
it doesn't change whether it affects the WAP funding or not.
One of the more complex portions of the DOE WAP regulations involve the cost-
effectiveness requirements. DOE weatherization requires that all energy conservation
measures must be cost-effective. And this is demonstrated in one of two ways for DOE
funds – either through the approved energy audit tool, which generally calculates a
savings to investment ratio, and this determines whether or not an item is cost-effective
over its life – or, selected using a DOE approved priority list. For information on priority
lists, we'll look to WPN 19-4 and WPN 22-8. Now, just because a braided resource
comes from a different leveraged source does not necessarily mean that there is no cost-
effectiveness requirement.
You'll want to look closely at those funding agreements to determine if there are
additional cost-effective requirements for any of your leveraged funds. The good news is
the DOE-approved energy audit tool or priority list can still be used to determine cost-
effectiveness in most all instances. So, once you have clearly in mind how all your
braided resources may be used in terms of eligibility, measure selection, cost-
effectiveness, et cetera, then, you can begin the energy modeling of the building and
then, we start really getting into determining what measures we're going to install in this
building, and it will then lead to how we're going to budget our braided funds
appropriately.
Now, we're gonna get into the nuts and bolts, so to speak, of the energy modeling –
where do we begin, where do we end, how do we get there? Really, we want to try to
simplify this as much as possible to include all of our funding sources, and the easiest
way to do that is to begin by energy modeling the existing building as accurately as
possible just based on the data collected during initial audit. This would include location,
fuel types, cost, your exterior surface dimensions, R-values, heating/cooling equipment
efficiencies, et cetera. You really just want to input the entire building, as it exists, as a
whole, and then, use that energy model to figure out what measures are most practical in
this building. And, just as a reminder, if you're doing a multi-family energy audit, then
DOE WAP requires that you use the utility bills for that property to true up or to compare
to the model to see that we're at least close to actual usage.
Now, once you've input all of the information into the energy model, then, we start
performing a measure analysis. This is going to help us determine what measures are
cost-effective in this building from the highest-ranking item and the most cost-effective
to the lowest ranking item – the least cost-effective. You will want to, when you're doing
this, consider measures that may have an SIR less than one. This will require some
certain settings within your particular software. Make sure that it's analyzing all potential
ECMs.
Now, keep in mind that DOE requires that all potential measures be analyzed for cost-
effectiveness. This includes all building shell upgrades. So, if you can insulate it, then
you need to consider window/door replacements, air sealing, duct sealing, all mechanical
equipment upgrades, baseload improvements – such as lighting, refrigerators, plug loads,
water savings devices – all distribution system improvements such as duct or pipe
insulation – we mentioned duct sealing already – and then, any other potential ECMs that
are applicable to the specific project. There's a lot of examples of items that your program
may or may not include, but if it's a potential ECM, try to analyze it in this model if at all
possible.
Once you have performed the energy modeling, you verify that it's an accurate model.
Then, based on those results and your funding limitations, then, we need to select all
applicable measures to be installed. And what does that mean? Well, take a look at your
funding sources and compare their cost-effectiveness requirements. Maybe you measure
specific funders – perhaps like a utility that only funds a shell measure or a
heating/cooling system improvement measure.
Consider what health and safety measures are necessary as a result of the ECMs that are
being installed. Are there incidental repair measures that need to be performed to protect
a newly installed weatherization measure? Are there some ancillary measures or ancillary
items that are really part of an ECM that need to be included in the cost of the ECM that
may affect how that SIR comes out? And so, this becomes a bit complex at times, and
this is where the funding matrix really helps us. We can look, clearly, at the item, the
funding limitations, and the funding sources that are available, and then, assign that
particular item to that specific budget item.
That brings us to the project budgeting. Once we've selected the optimal package of
measures – meaning the measures that are most cost-effective and are likely to fit within
our total budget – then, we can determine which specific measures would be applied to
which specific braided resource. Now, as a starting point, obviously, all measures that
have an SIR of one or higher qualify for DOE WAP funding. Generally, most people
prefer to keep a single funding course for the entire cost of a measure. However, there is
no prohibition against splitting costs between funding sources.
The important point to remember, though, is you have to be able to track how that money
was spent. So, if you split a specific measure between funding sources, you need to be
able to demonstrate, in the client file, how that was split, and what source paid for each
portion. And you would need to be able to track that long-term to the extent of your
contract requirements and be able to demonstrate to DOE exactly how much of each
funding source was used on a measure if DOE WAP funding was expended on the
measure. Then, any measures below an SIR of one may still qualify for leveraged
funding, or it may even be co-funded with DOE WAP, as long as the package SIR is one
or greater. And that brings us to the last category of project budgeting, and those would
be landlord buy-downs.
Now, buy-downs are similar to co-funding, however, in the case of a buy-down using
landlord or owner funding – which is only applicable to multifamily – the owner or the
landlord is selecting the measure that they want to have installed, and they specify that
their funding can only be used for that measure. And that case is different than co-
funding, 'cause in the case of co-funding, a DOE WAP or the agency – the WAP agency
– maintains the decision-making authority on how those funds will be expended.
Let's take a look at an actual example. This will help us, I think, to wrap our brain around
the nuances of landlord funding, buy-downs, co-funding, et cetera. So, here's a sample
budget – and this is just for example so, these numbers are – they mean nothing in terms
of program requirements. They're simply chosen here for this specific example. So, in
this case, per unit, we have available to us $8,000.00 of DOE WAP funds per eligible
unit.
The LIHEAP funds – similar. $8,000.00 per eligible unit. We're gonna follow LIHEAP
rules for those funds. Then, for utility funds, we're receiving $2,500.00 funds per
dwelling unit. There is no income limit, but they do have to be utility clients. So, in the
case of our building, there's 10 units.
All of them are eligible, because they're all clients of the utility. Additionally, the utility
says, "You can only use our money to fund shell measures" – so, improvements of the
building's shell. Then, we get into landlord matching contributions. Now, this is different
than a buy down. In this particular case, the landlord agreement stipulates that the
landlord must contribute 25 percent of the total DOE WAP budget to the project.
This is treated as program income in our contract, but it follows the LIHEAP rules. So,
this is not an owner buy-down. This is a landlord contribution. It comes into the program
to be used at the authority of the agency. Then, we have landlord buy-down funds.
A landlord says, "I've got $25,000.00 that I'm willing to pay towards window
replacements. We want low-e window replacements, and that's the only thing you can use
this $25,000.00 for." So, separately, from the matching contribution, these buy-down
funds come from the landlord, but the landlord maintains the decision-making authority
on what they will be spent on. Now, as a reminder, of course, landlord contributions and
buy-downs only apply to multifamily projects. They do not apply to single-family
residences, whether they're rentals or not.
Let's take a look at what this means for our specific project. In this example, we have a
10-unit low-rise multifamily building. 8 out of 10 of the units are income eligible per
DOE WAP and LIHEAP. So, let's analyze the total budget available for this project. So,
since we have eight eligible units for DOE WAP and LIHEAP, then $8,000.00 times 8 is
$64,000.00 from each of those funders. Then, the utility says that they're not concerned
about income eligibility; they just have to be our clients – the utility's clients.
And, in that case, they provide $2,500.00 times 10 units – total of $25,000.00. Then, we
have our landlord contribution, which was based on a 25 percent contribution of the DOE
WAP total budget. So, our DOE WAP budget was $64,000.00 so, our landlord
contribution is $16,000.00. Then, that brings us to our last item – the landlord project
specific funds. In this case, $25,000.00 to spent only in the case of window replacements.
So, that brings our total project budget to $194,000.00, and our per unit budget is
$16,167.00. That includes all 10 units.
Now, we come back to our energy modeling results. In our example, once the building is
accurately modeled – all measures, as it exists – here's the resulting measures list. Now,
this particular measures list was using the Weatherization Assistant Tool, however, all
DOE approved tools can be used to generate a list of measures ranked by SIR and
inclusive of a cumulative SIR calculation. So, this is our sample. You can see there are
some incidental repairs for heat pump upgrades, as well as a roof repaired – protect the
attic and insulation – and then, typical measures – duct sealing infiltration, attic
insulation, wall insulation, floor insulation, et cetera.
Then, you start to notice – around item number 11 – we have our first item that falls
under a 1.0 SIR for the measure – that being duct insulation in this case. However, you'll
note the cumulative SIR still remains to be a 1.6. In this case, this measure – as well as
the rest of the measures from 11 through 14 – could be co-funded with DOE funds or
could be bought down by the owner. Now, in this particular case, we know that the owner
has funds set aside for the low-e windows so, we're going to make sure that that money's
applied there, and then, we'll look at what amount is allowable to be co-funded or shared
with another leveraged resource. So, let's take these results and let's see how that actually
relates to our final budget.
Here we have taken the measures list provided by our auditing tool. We have ranked
them according to their measure SIRs and we've also inserted the measure cost in its full
amount into this list. And you can see how the package SIR is reflected as well.
Now, we can start formulating our budget plan. First, let's address these incidental
repairs. Each of these incidental repairs is included in the cumulative or package SIR.
You can see, at the very bottom, package SIR remains a 1.1. So, that means that with the
package, as it exists, these incidental repairs are allowable under DOE funding, but they
may also be allowable under LIHEAP, utility, or other funds.
You'll have to look at your funding agreements to determine that. Generally speaking, we
like to assign the incidental repair measure to the same funding source that pays for the
ECM to which it's related, though this is not a requirement. The only real requirement is
that if you're going to apply an incidental repair measure to DOE funds, DOE funds must
be paying for some ECMs in the project. Next, we look at the measures that have an SIR
of one or better. These qualify for WAP funding under any circumstance.
They may apply, also, to leveraged funds or other braided resources. These will be, again,
dependent upon your specific funders' requirements. Then, we get to those items in the
measure SIR of less than one, but with a package SIR of one or greater. These are gonna
qualify for DOE WAP co-funding or other leveraged funds – again, depending on your
funding agreement. And then, our last item is an owner buy-down.
The measure SIR is less than one, but the package SIR is one or better. We're not
skipping any measures to get down to this measure, 'cause if we did that, we would have
to drop this measure. So, it does qualify for owner buy-down, but it can also qualify for
DOE WAP co-funding and/or leveraged funds because the package SIR remains 1.1.
Now, let's actually look at our project budget and see how we can utilize all of our
resources to install all of the applicable measures in this particular project without leaving
anything on the table, so to speak. From this slide forward, there are a lot of details so,
you may want to pause the presentation at various points to be able to observe how these
funding streams are being utilized and how they're being split or co-funded. In our first
example here, we've got a blank project budget where we have dropped in our measured
costs, and then, we've also included, you'll notice, a max cost at one SIR. That is a fairly
simple calculation. It's the existing measure cost – so, the full measure cost – times the
measure SIR equals the max cost.
So, in the case of duct installation – $6,872.00 times 0.9 equals $6,184.80. So, that's the
maximum amount that can be spent on that measure and have an SIR of one. Why this is
important is it tells you how much of DOE WAP funding could be expended on that
measure and still maintain a one SIR for the measure. So, in this case, we could spend up
to $6,184.00 and change on duct installation and still maintain a 1.0 measure SIR. You'll
notice, then, that we applied $6,000.00 of WAP funding in this particular instance, and
then, LIHEAP weatherization picked up the additional $872.00 – our first example of co-
funding.
So, let's dive into this and break down the pieces of the budget a bit more. First come are
incidental repairs. As we mentioned, they're included in the cumulative SIR of the project
per DOE rules, and they must meet the requirements of WPN 19-5, which is the
incidental repair guides for DOE WAP. In this particular instance, we're sharing some
costs with LIHEAP and some with DOE weatherization. Each of these costs remain cost-
effective within the package of measures.
We could have also, just as easily, expended some owner contribution money for this, or
perhaps utility funds or some other funding source that may have come into the picture.
But, in this particular case, we chose to use DOE WAP and LIHEAP weatherization to
cover these expenses.
Next come our really high priority items. These are items that have a measure SIR of one
or greater and typically are offering the most cost savings. As is very common, attic
insulation leads the way here then, we have air sealing, wall insulation, floor insulation,
low-flow shower heads, domestic hot water tank insulation, refrigerator replacements,
and duct sealing in this particular example. Now, all of these measures qualify for DOE
WAP funding without any other leveraging, however, if you can do math, you'd see it –
we would quickly expend our $64,000.00 WAP budget, and then, we would have to
assign these measures to other funding sources, leaving a little money left for leveraging
or co-funding those heat pumps and duct installation further down the list. So, here, we
have our next restrictive funding source is our utility source, and the utility says, "We'll
pay for shell measures and shell measures only."
So, in this particular instance, rather than assigning all of the costs of the attic insulation,
air sealing, wall insulation, floor insulation to DOE WAP, we instead share some of those
costs. We give the utility $15,000.00 of the attic insulation and $10,000.00 with the air
sealing. We target that amount because it maximizes the utility investment in this project.
We're able to use the entirety of the $25,000.00 – what the utility's willing to give us – for
shell measures, which, in their contract, states insulation and air sealing. So, in this
particular instance, we've done some cost sharing. We're gonna be able to track that –
individually and separately – in the project file and long-term.
You'll also note how we have shared costs with LIHEAP weatherization. So, again,
trying to preserve the DOE funds so that they can be used for co-funding later down the
list, we have some higher priority items that we can provide to LIHEAP. And so,
LIHEAP's gonna split cost on wall insulation and floor insulation. Then, we're going to
assign the full amount of the cost for shower heads, tank insulation, refrigerator
replacements to LIHEAP. It's allowed in our contract.
It preserves money for later use from the DOE WAP category and is good for the client
in this case. Then, we're down to duct sealing. This is our last measure with an SIR of one
or greater, and we chose to split that cost evenly between DOE WAP and LIHEAP
weatherization.
Next, we'll take a look at these first couple of items that have a measure SIR that is less
than 1.0. Now, because these measures have a package SIR – a cumulative SIR – of one
or greater, they do qualify for co-funding with DOE funds. Now, you might ask, "What's
the difference between splitting a cost and co-funding?" Well, you can split a cost in any
way you want if the measure SIR is one or greater, however, once the measure SIR drops
below 1.0, then we have to start looking to the package SIR to dictate whether or not we
can co-fund the measure with DOE funds. Now, you could use any other split of funds
that do not involve DOE WAP, and you don't have to report that to DOE.
However, in this particular instance, we need those remaining DOE WAP funds to be
able to partially pay for the measure so that we can get it installed. If you look at our
example, we don't have enough LIHEAP weatherization funds left to get to duct
insulation and the heat pumps installed. Our utility, in this case, doesn't permit us to use it
on duct insulation or heat pumps. And we have some limited owner contribution we can
use, but it still doesn't get us to the full amount that we need to expend to put in the heat
pumps. So, you can see the benefit here of preserving DOE WAP funds earlier on in our
budgeting so that we have them available to co-fund this measure.
You can also see, here, that we have preserved some owner contribution money available
to offset costs that fall under the measure SIR of one. This is, just in this particular
instance, how we've chosen to do it. Again, those owner contributions could be expended
anywhere we'd like following LIHEAP rules in our particular instance here because that's
how our contract was written. Obviously, that could change from place to place, contract
to contract so, you need to make sure you understand how you're able to use those owner
contributions in your particular agreements. But, in this case, with the heat pumps, we
needed more funding than what DOE WAP or LIHEAP were able to input so, we peeled
off some of that owner contribution and applied it to our heat pumps in this case.
Then, we move on to our domestic hot water pipe insulation. In this case, the SIR is a .4.
So, performing our basic calculation that we talked about earlier, I could spend $206.00
of DOE WAP funds on this measure, however, I pretty much used up that budget and so,
we're just gonna assign that to the owner contribution – let them pay for that and make
sure that that measure gets installed. What that means is all of our measures – from pipe
insulation up – have been installed so, the low-e windows still qualify for owner buy-
down in cost sharing with some other funding source.
Now, with regard to these low-e windows, the owner said, "I have $25,000.00 set aside
just for windows." So, first, we can drop that amount into the owner buy-down column.
That leaves us with a balance of $8,833.00. In this particular case, we have owner
contribution money still left that we, as the DOE WAP agency, had the ability to expend
on any measure that we chose, but in this particular case, because of other funders'
restrictions, we chose to use their funding first, and the owner contribution – which was
very flexible – we chose to expend near the bottom of the list to ensure that we got all of
the measures we could for this particular residence. So, we were able to fully fund the
low-e windows with the owner's buy-down.
We didn't have to worry about an SIR calculation because, in this case, none of our
funding sources required an SIR for that particular measure. Just the package SIR
remains 1.1. As we have touched on previously, there are a lot of different ways in which
you could choose to establish the budget for this particular project. The example that
we've provided is just that – it's an example. Really, your particular funding sources, their
restrictions or requirements, are gonna dictate how you can create this budget.
But, as you can see, by planning the budget based on accurate energy model – including
all of our potential measures – we have then been able to choose how to expend our
funding in a way that ensures all measures get installed. But again, there are many
different ways in which you could choose to budget this project such as this method.
Or perhaps this one.
Or this one.
In conclusion, we can clearly see that braiding leverage funds is really crucial to
accomplishing a comprehensive weatherization project and maximizing the program's
impacts, but effective braiding requires a methodical approach. You need to first identify
and secure your funds, identify how those funds are to be administered, which then
informs the energy modeling of the whole project or the scope of work, then turn that
energy modeling into a compliant budget plan.
We hope that this webinar has been informative and helpful to you in visualizing how
leveraged resources can be braided successfully while using an energy model. For
additional information, including program guidance and memorandum for the
Weatherization Assistance Program, we invite you to investigate the Weatherization
Assistance Program guidance pages at Energy.gov.
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