By Elton SherwinVenture Capitalist and Author of

Addicted to Energy

Response to theNational Energy Rating Program for Homes

Request for Information

Analyzed Nine Different Energy Labels and Their Associated Rating

Methodologies

Option #3Option #1

(RFI sample)

Option #5

Option #9(Recommended Option)

Recommendations

Two Different Window Stickers for the National Home Energy

Registry

One Methodology:Presents both Site and

Source Data

Option #9

Recommended Format

Local comparison

National standard• Source energy (per sq ft.)

– Scores above 80 are good, below 70 are poor

Recommended LabelDisplays Both Site and Source Data

C-

B+Electricity**

Gas**

*120 is highest score1 is lowest

Compared to all homes in America(See Inverted Scale with Progressive

Weighting)

** Your energy grade is determined comparing your house to other homes in

your zipcode.

74*

Option #9

Image from iStockphoto

Local Rating

• Local comparison• Top 15% to 20% get As• Include + and –

A+ or A+++ reserved for net zero homes

• Data from local utilities• Display best grade of

three:– Total home, per person

and per sq. foot

Local Rating

Only the best grade is used

Why Best of Three?

Why let homeowners have three shots at a good grade?

• Gives all families a shot at a good grade:– Large and small

families – Big and small homes

• Will motivate more change

National Rating

• National standard• Source energy (per sq ft.)

– Intuitive: scores above 80 are good, below 70 are poor

• 120 minus weighted EUI

• National standard– Compare buildings

nationwide• Consistent metric

– CBEC-like

National Rating

Source energy (per sq ft.)• 120 - weighted EUI

Why Zero to 120?Why not zero to 100?• Multiple reasons, subtle,

but important• Americans know scores

above 80 are good, below 70 are weak.

• Need a scoring system that lets superior homes get above 80, yet also rewards net zero homes– Scale of 0 to100 fails to do

this; it will demotivateexisting homeowners--won’t be able to get there.

Advantage for This Methodology: Partial Labels

• Useful labels possible even when data is missing– No heating oil bill– No gas bill– No size data

• Partial labels work:– Apartments– Wood-burning homes

Partial ratings encourage homeowner to enter/release the missing data

Rating generated when only the electric bill is

available

All-in-one Format

Advantages• Visually appealing• All the data well presented• Gives both source (74)

and site data (B+ and C-)• National, universal score

across all American buildings (74)

Nuances• Electric utilities can

generate partial label without gas bill

• Enroll every home in America prior to an audit

Recommended Format

• Complete• Simple• Visually Appealing• Update Monthly• Motivates

Conservation• Motivates Efficiency

Upgrades

#9

National Home Energy

Registry

The whole industry is starved for data.

This is a great idea.

National Home Energy Registry

Recommendations• Aim for universal participation

– Any homeowner can enroll online– Window sticker on every home

• Two tier program– Tier one: Participation

• Include a home’s data anonymously in program

– Tier two: Excellence• Exceed average on any of 6 metrics• Publically making some data available

National Home Energy Registry Green Window Sticker

• This home has made its utility bills and some basic information available

• Address is omitted, only zip code is public

This Home Participates in the

Department of EnergyEnergy

ExcellenceProgram

National Home Energy Registry Leadership Window Sticker

Homes can earn one to six stars

To participate homeowners must – Earn at least one

star and– Make energy data

public, including the home’s address

Department of Energy

Energy Excellence

Leader

National Home Energy Leadership Program

Earn 1 to 6 starsTop 40% - Maximum of two stars per row

Per person

Source Energy (national)

Gas /Heating oil in zipcode

Electricity in zipcode

Per sq. ft.Whole house

Plus public disclosure of monthly utility data

One Coveted Window Sticker Could Make a Big Difference

• Some homeowners will work hard to earn this sticker

• It could have a larger impact than a Cap and Trade system – Must be based actual

energy consumption– Should require public

disclosure of data

Data Requirements

This Label Has Only Five Data Inputs

5 Input Data Items1) Electric bill2) Gas or heating oil bill3) Zip code4) Size of house5) Number of occupants

Data Flow5 Input Data Items1) Electric bill2) Gas or heating oil bill3) Zip code4) Size of house5) Number of occupants

7 scores calculated for home occupant

Nation source energy score 74

Summarized on the Label (Public for Leadership Homes)

Optionally, Leadership Homes can display their window stickers

This Label Only Needs an Electric Bill

• Electric utility can generate this partial label and put it in the bill

• Then encourage the homeowner to enter the program

Data Collected to Get a Green Window Sticker

• Number of full-time residents– Optionally, as much data about part-time

residents as owner wants to enter• Type of water heating (gas, oil, elec.)• Type of space heating and A/C• Number of pool pumps & refrigerators• Number of bedrooms• Single/double pane windows• Size and year built (if known)

– Release to get this data from the assessor.

• Release: get monthly utility bills

Additional Data Collected to be Eligible For a Leadership Sticker

All items required for green sticker, plus• Number of TVs and Set-top boxes• Make and model or digital image of:

– Furnaces – A/C units– Heater heaters– Thermostats

• Optional:– Freeform text on why the house is energy efficient– Name of architect, builder and HVAC contractor– Additional pictures and data

• Release to make the label public

Why Does a Label Need Both Site and Source Data

Site: Local

Source: National standard• Source energy (per sq ft.)

– Scores above 80 are good, below 70 are poor

Because Fairbanks is Different Than San Francisco

Considered Eight Other Options

Sample Labels from RFI

Challenges• High score is

worst• Bottom is best• Requires an

audit to enter program

• Need both gas and electricity bill to calculate

• Upgrade predictions inaccurate

Options #1 and 2

Simplified Label

Your Neighborhood

If your home were one of the most efficient in your area, you would save approximately $4,500 a year. Over ten years this could save you over $60,000 as the price of energy increases.

Lower Number is Better

Recommended Changes• Eliminate “after upgrade”• Replace “recommend

improvements” with a calculation based on the most efficient homes in area.

• Compare to neighbors

Advantages• No auditor required to enter

program• Every home in America can

participate• Create big opportunity numbers

(see example)

Option #3

Inverted ScaleProgressive weighting

If your home were one of the most efficient in your area, you would save approximately $4,500 a year. Over ten years this could save you over $60,000 if the price of energy goes up.

Higher Number is Better

125

100

75

50

25

15

Your Home

Recommended Changes• Rating is based on source energy

subtracted from 125 with progressive weighting.– 125 is net zero– 100 is 25 BTU/sf (see next page)

Advantages• High numbers are good.• Top performer is on top.• No auditor required to enter

program• No negative scores• Same scale works nationwide• Same scale works for commercial

Typical Home

Best Homes

YourNeighborhood

Option #4

Recommended Inverted ScaleProgressive weighting in options 3, 8 and 9

Formula:

• 0-25 BTU: 125-BTU

• 25 to 75 BTU: 100- ½ BTU over 25

• 75 to 125 BTU: 75-1/4 BTU over 75

• And so on.

• Objective is to have a single national metric (per sq. ft.) with efficient homes over 80 and no negative scores.

• Objective: most homes to achieve an 80 for less than $10-15/ sq.ft.

• All numbers are total source energy including all plug loads, HVAC and hot water.

25375303354025550175601357095806588509045

10025

1250 (net zero)Score

Source BTU/sf/mo

Where Do the $4,500 and $60,000 Come From?

• Take the average electric bill per square foot for the top 25% of homes

• Apply to this home• Same for gas• Calculate difference and multiply by 12.• Some nuances, but it is a better

methodology than trying to predict BTUs after upgrades (inherently problematic and frustrating task)

Modified European Union Format

Electricity Gas

Advantages• Does not require gas bill to

enter program• Electric utilities can

automatically generate from bill (omit gas column)

• No debate of site vs. source energy

• Heating oil companies can include in their bills

• Very simple to understand• Turn on for all American

homes quickly• Give monthly feedback to

homeowners.

Option #5

Option #6

Utility Bill Insert from Addicted to Energy

Utility Bill Insert from Addicted to Energy

Advantages• Similar to modified EU

format, plus• Gives homeowner more

detail• Tells homeowner how

much they would save if they were one of the most efficient homes in their climate

Disadvantages• Not very colorful • Difficult to read

Best of Three Grading

Total HousePer PersonPer Sq. Ft.

Electricity

B+GasC-C-D-

Gas

C-Electricity

B+B+C-

Your energy grade is determined comparing your house to other homes in your zipcode. Your grade is always the best of the three.

Option #7

Best of Three GradingAdvantages• Calculates building, per

person, and per sq. ft.• Highest grade is awarded

to homeowner• No debate of site vs.

source energy

Nuances• Utilities can generate first

row with no additional homeowner input

• Homeowners can input additional data if they want the additional “grades.”

All-in-oneSource, Site, Local & National

Total HousePer PersonPer Sq. Ft.

Electricity

B+

GasC-C-D-

Gas

C-

ElectricityB+B+C-

Your energy grade is determined comparing your house to other homes in your zipcode. Your grade is always the

“best of three”

Compared to your neighbors

Combined

74

Compared to all homes in America

120 is highest score*1 is lowest

This score combines all sources of energy (electricity, gas, heating oil, etc.)It is an absolute score and can be used to compare the energy used per square

foot of any building in America.

* Source energy

Option #8

All-in-oneSource, Site, Local & National

Advantages• Both local comparisons

and• National, universal number

based on source EUI.• Give every homeowner six

opportunities for a good grade

• Still motive people to strive for excellence.

• Silence experts who insist on EUI or source energy or… because it has it all.

• Easier to calculate than proposed labels (no projecting the future)

Recommendation

• Elegant• Easy to

Understand• Fair• Automatic

monthly updates• Drive reductions

in energy consumption

Option #9

Summary

• Data-driven approach• Measures real

improvements– Minimizes “greenwashing”

• Universal participation– Does not require audits

• Fair: works for big and small homes

• Drive dramatic reductions in energy consumption

This implements a system that rates each type of energy separately (electricity, natural gas, heating oil, etc.) and also provides a CBEC-like national score.

For more information on this label and the methodology behind it, see the associated PowerPoint.

Five Critical Success Factors From a "cleantech" investor's point of view, here are five items that I would recommend:

1. Implement a system that is Internet-based with universal access. Enable and encourage all utility customers in private residences to participate.

2. Measure actual energy consumption. Do not use a checklist-driven system. Checklist-driven and audit-driven systems reward certain behaviors and not others. They are inaccurate and the current systems have failed to deliver substantial energy reductions in existing buildings.

3. Do not require an audit to get a rating. If you want to drive results, measure results, not audits. As my 20-year old daughter said, "they cannot audit every home in America!"

4. Implement a system that can give automatic monthly updates. This motivates change and measures actual performance. It prevents "greenwashing."

5. A "zero" score should not be the top score. Americans like high scores; they are not motivated to be a "zero."

National Home Energy Registry The National Home Registry is a great idea. Everyone is starved for data. I suggest two window stickers that should help motivate participation and encourage energy conservation.

Recommendation: Two tier program

• Tier one: Participation – Green

Window Sticker – Include a home’s data

anonymously in program

– Every home in America can participate

• Tier two: Excellence – Black or

Platinum Window Sticker

– Exceed average on any of 6 metrics

– Make home's data available publically

– Awarded 1 to six stars

– Will motivate homeowners, builders and architects wishing to make "green" claims about homes to disclose the home's actual performance

For more information on these window stickers and the methodology behind them, see the associated PowerPoint.

Problems in the RFI: A Venture Capitalist Viewpoint. Several items in the RFI are very problematic from an investor's point of view: Eliminate these two sections of any label: Several dozen software companies in America will struggle to raise financing if the DOE gets into the business of forecasting savings and predicting performance. You will not get it right but if you enter the business of forecasting the future, investors will shy away from funding software companies that do.

• Avoid analyzing the problem from Washington. Let the locals analyze the problem.

• Do not make specific recommendations from across the country. It will not work.

Asset-based Ratings Kill Innovation: Asset-based ratings have an inherent bias towards certain technologies. Breakthrough technologies, by their very nature are never on the list of audited assets.

Asset-based ratings make it very difficult to fund innovations that are not on the inventory of assets that improve rankings. If you rate performance, you turbocharge innovation; if you rate assets, you stifle innovation. I invest in innovation for a living; feel free to call me if this connection is not clear. I fear I have not explained it well. However, if you are going to anoint certain building features as "winners," I have included my list at the end of the document.

Additional Feedback

• Don't limit homeowners' aspirations. I live in an area surrounded by million dollar homes. Some of my neighbors will strive for excellence. Don't tell them how much to spend. They may spend more.

• Audit-based ratings create weak auditors. Ask yourself this question: If you were selling your house and rankings were based on data entered by an auditor, would you hire a lenient or skillful auditor? Obviously a lenient auditor. However, if you were selling a house and rankings were based on actual building performance would you look for a lenient or skillful auditor? You would look for a skillful auditor. Asset-based rankings create a country of lenient auditors; performance-based rankings create a country of skillful auditors.

• Compare people to their neighbors. People care how they compare to their neighbors.

See the attached PowerPoint for more information

Asset-based Audits – Ten Items that Matter If you do decide to go with an asset or audit-based system, these are the items that make the most difference.

I recommend that they are the primary focus of your audit or checklist process.

The following is adapted from Addicted to Energy. These 10 items dramatically reduce the carbon footprint of homes, new and old:

1) Thermostat. A separate thermostat with an occupancy sensor in every room, controlling the room’s heating and cooling.

2) Furnace. Variable-output, variable-speed, modulating furnaces with variable-speed fans and oversized ductwork, blow-tested at installation. Variable output is more important than efficiency. Rightsizing is also more important than efficiency.

3) Air Conditioner. Variable-speed, multistage, right-sized air conditioners. Efficient oversized A/C units are endemic in America. A/C units should be variable output.

4) Water Heater. Solar heat or waste heat from a furnace used to preheat domestic hot water.

5) Windows. R-10 spectrally selective windows where needed.

6) Smart Lighting. No incandescent or halogen ceiling fixtures.

7) Insulation. Two R-values of insulation above California Title 24, with the building shell blow-tested and thermally imaged for leaks.

8) Power Monitoring. Real-time reporting to the homeowner of all power, gas, and water usage by room.

9) Utility Bill Disclosure. All buildings claiming to be "green" must disclose their energy consumption.

10) High-efficiency, Zero Particulate, Closed Combustion Fireplaces. These fireplaces emit no soot, most often burning natural gas or propane instead of wood.

If you use an asset-based system—which I do not recommend—audit these items. If you use an asset-based or audit-based system you must develop a methodology that prevents homes with oversized HVAC systems from getting good audits. I strongly urge you to go with a performance-based system that uses actual energy consumption data.