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«NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy, operated by the Alliance for ...»

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Boulder CSLP administrators, including Ann Livingston, Boulder County Sustainability Coordinator, and Susie Strife, the ClimateSmart program manager, recognized many qualitative influences on the overall program outcome. Contractors and program participants who were interviewed for this report, as well as participants in two online surveys about CSLP, confirmed that there were influences and outcomes that a standard economic analysis would miss. It is beyond the scope of this study to draw detailed conclusions about such influences, but this section provides a qualitative assessment.

The research approach for the qualitative assessment of CSLP included: 12

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When Boulder County and City leaders started planning a PACE financing program, Ron Flax, an architect at Rodwin Architecture in Boulder, started to think about how affordable financing for energy improvements might trigger a transformation for middle-class neighborhoods. He called Boulder’s 1960s subdivisions “an energy disaster.” Besides, the homes are small, so their prime locations on tree-lined streets close to parks, schools, shopping, and other Boulder attractions makes them ripe for investors who might just as soon tear them down and build mini-mansions instead. Flax said he knew that risk well, because he has lived in one of those old 1,100 squarefoot houses himself, with his wife and two school-aged kids. When the ClimateSmart Loan Program came along, he sharpened his pencil and prepared to make his place on Elm Avenue a model of small-home sustainability.

Flax’s plan quickly grew to include a deluxe menu of energy-saving possibilities. Recognizing his passion for saving energy, Flax said, “At least I hoped this demonstration would inspire others to go beyond a typical window or furnace upgrade.” He invested in a total of $69,000 in energy improvements—and nearly as much again in nonqualifying remodeling. He used a home equity loan to finance nonenergy measures. To finance the energy measures, he took Boulder’s incomequalified low-interest financing to the maximum $15,000 allowed. He also obtained a zero-interest loan from a nonprofit, Partnership for Sustainability, to finance the PV system. Tax credits, including a $1,500 tax credit for combined energy efficiency measures and a 30% tax credit for a PV system and ground source heat pump helped lower the total investment cost. In addition, Flax gave himself permission to use $10,000 out of savings. “A personal energy education research grant,” he explained.

From a design perspective, Flax intended the home to look like the kind of place a family might aspire to live, rather than a place that is “good enough.” He opened up the living room, added a new study, and dressed up the front of the house with a welcoming porch. The addition added only a little floor space, but it changed the dynamic of the home, so Flax’s wife could have a home office and so that the living space felt more relaxed.

The Flax home is a demonstration project, using the ClimateSmart program as a starting point for developing livable, sustainable smaller homes. Photo from MRG & Associates

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The home includes many energy improvements, from state-of-the-art crawlspace insulation and a ground-source heat pump to super-E windows. Initially, the home scored an energy efficiency (HERS) rating of 190; afterwards, it scored a 5. The estimated annual energy cost before improvements was $2,100, and the estimated annual energy cost afterward is $160.

Flax represents an example of a CSLP participant spending much more than the program loan application suggests. In his case, ClimateSmart financed $15,000 of a $114,000 project. Flax hired numerous contractors and completed some parts of the project himself.

Flax said, “After people make one investment in their homes, all kinds of good things can start to happen.” That includes adding more improvements, keeping up the property, and simply looking at one’s home in a different light. Flax hopes that a revived loan program might support widespread promotion of the idea that living simply in Boulder can mean living very well.

3.2 Categorical Discussion of Trends Taken alone, none of the research approaches above would have been adequate to draw specific conclusions about program influences and outcomes. However, taken together, they indicate four

consistent and significant trends:

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A. Spending on Energy Improvements Inspired by CSLP, but Financed Differently Data from contractor receipts (discussed in the Economic Analysis section above) indicated some spending on improvements that were concurrent with CSLP-financed improvements but were financed separately. The impact analysis model accounted for that spending and its direct and indirect impacts.

However, some CSLP participants used multiple contractors to complete different parts of their projects. It is difficult to quantify economic impacts from additional improvements that were not financed by the CSLP and were not completed by the same contractors. Some improvements might have been do-it-yourself jobs using materials from the local home store and pocket money.

Others might have been major improvements financed through home equity loans and other means. The Boulder County PACE program gathered only clues about the magnitude and kinds of energy-related improvements the program inspired through its marketing but did not finance.

In July 2009, program administrators surveyed registrants for Phase 1 CSLP workshops and captured 325 responses from those who eventually obtained PACE financing and those who did not. This was an online survey through the Survey Monkey service. Due to its informal nature, the survey has limited usefulness today. Still, it shed some light on customer response to PACE compared to financing alternatives. Respondents included about 106 individuals who reported that in the end, they did not use CSLP financing. Of these, about one-third (36) said they decided not to complete energy efficiency or renewable energy projects at that time. Another two-thirds (70) said they did proceed, but used alternative financing. Roughly two-thirds of those paid cash, and one third of them used different kinds of loans.

Figure 3. Responses to a survey question addressed to those who registered for a CSLP workshop, but ultimately did not use program financing.

The use of cash was significant, though it is fair to guess that cash spending was not nearly as great per job as spending that was supported by some type of loan. (The survey did not ask those who declined to use CSLP for spending figures.) A follow-up question, aimed at those who used alternative loans, asked what type of loans these respondents used. The overwhelming response was the home equity line of credit (HELOC).

The evidence of extra spending through cash or home equity loans on energy upgrades matches observations by PACE program sponsors nationwide. Besides cash used for small jobs, the HELOC is the most common financing mechanism for energy home improvements. 13 This form For a discussion of pros and cons of many kinds of residential energy project financing, see M. Fuller, C. Kunkel, and D. Kammen, “Guide to Energy Efficiency and Renewable Energy Financing Districts for Local Governments,” Renewable and Appropriate Energy Laboratory, September 2009.

of credit is extremely convenient—often as easy as writing a check. For customers who already had HELOC accounts, there were no additional fees, and that was appealing, as well. However, a HELOC by definition requires strong equity in the home, and it requires full repayment before the home could be sold. It is not a perfect substitute for PACE financing.

Some CSLP participants who were interviewed for this report used HELOC financing to expand their overall project list, hiring different contractors than those selected for CSLP-financed work.

For two such participants, the CSLP income-qualified rates were too attractive to pass up, but the loan ceiling at $15,000 left them with projects to finance. Two participants reported that HELOC covered window replacements and repairs that were likely to save energy, though these projects did not meet CSLP standards. In addition, solar contractors who were interviewed said some of their customers chose HELOC over the CSLP because CSLP-financed contracts had to be arranged to meet a short bond-issue deadline. The migration to HELOC financing was not necessarily a problem. If ClimateSmart outreach drove people to seek whatever financing that suited them for energy improvements, then, in effect, it expanded the market and increased spending for energy efficiency and renewable energy improvements.

Another electronic survey completed in August 2010 was aimed at CSLP contractors. This survey also was informal and had a small response (13%). Despite its limitations, it confirmed several important trends, including the trend to use HELOC or other alternative financing for CSLPinspired work. One question asked contractors what percentage of their revenues in 2009 was financed through CSLP lending and what percentage they thought was inspired by CSLP, though ultimately using alternative financing. Contractors indicated that about 16% of their 2009 revenues came from jobs financed by CSLP and 15% came from jobs inspired by CSLP, but using alternative financing. Given the small number of respondents, it would be wrong to assume that total spending related to CSLP was nearly double the value of program loans. However, this survey response, in addition to the other information discussed previously, underscores the likelihood that CSLP triggered spending on energy-related home improvements to a much greater degree than the value of CSLP loans suggests.

B. Spending on Nonqualifying Improvements Inspired Under CSLP The discussion above suggests the likelihood that CSLP triggered significant spending on energy-related improvements beyond those financed by the program. In addition, some spending undoubtedly went to nonqualifying, nonenergy home improvements. This spending also had economic impacts, and should be considered a benefit of green jobs development programs.

Examples of spending that escape documentation on CSLP invoices include, among others, project-related fix-up and spruce-up measures, such as roofing repairs needed before a solar PV installation, repainting a house after a window replacement job, new curtains or drapes, new flooring, or a utility room remodel after installation of a new furnace. All interviewed participants said they felt proud of their homes after CSLP work was done, and this showed in small ways, from adding a plant on the porch to partially finishing a garage. This type of spending is difficult to document, but it is real.

The case of Ron Flax (see preceding sidebar), who spent $15,000 that was financed by ClimateSmart, plus more money on energy and nonenergy improvements to a total of more than $114,000, is a rare one. Still, it illustrates how CSLP and similar PACE financing programs can trigger additional nonqualifying spending.

C. Impacts of the Economic Climate on Participants and Outcomes This first phase of the Boulder County ClimateSmart Loan Program took place during the depths of a national and regional recession. This affected homeowner attitudes about spending, and it affected contractor response to CSLP financing opportunities.

How did the economy affect participant willingness to spend money on their homes? Did the prospect of financing home improvements through PACE (whereby the debt remains with the house) increase or decrease interest in the CSLP program in 2009? It is beyond the scope of this research to answer these questions, but they are relevant questions. During 2009, average home prices in Boulder County fell for the first time since the late 1980s, but mid-range home value did not plummet. Any housing market slowdown triggers some investment in home improvements, as homeowners feel destined to stay in their homes longer. Conversely, recessionary times add to homeowner anxiety about taking on debt and increasing property tax bills.

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