If you carefully read the position of the FHA Statement on Certain Energy Retrofit Loan Programs, it should be clear that the right solution could only be positive, but that does not guarantee we will get there.
Simply put, everyone who has done any work in the renewable energy area understands that as of yet there is very little understanding in the market place that energy is becoming a technology business and therefore a capital asset of buildings. It will completely alter the mortgage business, but it cannot do so unless and until it has a rational foundation. If this issue is solved constructively it could be the single biggest progress in improving real estate values in the nation, because in effect permanent renewable energy plant in any building is a hedge against rising energy prices, and there are very few people who would believe that energy prices will go down, or that America could ever hope to be competitive if it continues to spend more on energy per inhabitant than the rest of the industrialized world.
Buildings are the biggest single frontier in that battle with energy intensity, and handling this transition correctly could do more for real estate values than anything else. Meanwhile the current confusion is entirely due to the parlous state of energy programs and incentives, which generally confuses energy efficiency and energy independence, making in effect the unstated assumption that energy efficiency will add up to energy independence, which is simply not so. In fact, making energy efficiency a priority and treating it as a subsidized capital expenditure guarantees that we will prolong dependence on fossil fuels indefinitely, and completely back ourselves into a corner economically.
Only energy independence should be stimulated, subsidized, promoted, and energy efficiency should only be subsidized under the auspices of proper renewable energy projects, where it does become a capital decision, because it is a direct trade off against installed capacity. Energy efficiency in the context of fossil fuel use is an operational savings, and should not be treated as a capital investment, unless it is the only option, and preferably in the context of a strong renewable component. Giving buildings a measure of energy independence, by focusing on energy production at the building level, will always enhance building value, assuming it is done correctly. This is true for a residence as well as for commercial properties, and lenders will have to learn to make energy independence the true focus of building valuations, not mere energy efficiency.
Having said that, there are of course efficiency measures which are rightly part of the building structure, such as insulation, windows, etc. and they will therefore take on a permanent nature, but by making the distinction suggested here, we would solve the total quagmire we are in with respect to these types of investments. Namely, if we prioritize energy efficiency based on fossil fuel based systems, we are in effect postponing the decision to produce energy at the building level, and financially making it harder to ever make that decision in the first place. This type of a shift should properly be the domain of public policy, to see to it that the shift happens. The corollary to this is that once the focus is on building level energy production, investments in energy efficiency have a much quicker payoff, because they are then a proper capital decision, namely they directly reduce the need for installed capacity. In other words it is the order in which we do these things which is important.
Given that the confusion between energy efficiency and renewable energy is so pervasive, and programs therefore routinely subsidize investments which destroy capital by prolonging fossil fuel dependence, it will take some time before these mechanisms are adjusted to the new realities. Meanwhile it is up to owners to analyze their investment decisions correctly, and the ones who do will definitely win by seeing their returns not only operationally, but in terms of building valuation. Many old buildings can be made 80% energy independent with todays technology, by pursuing renewable energy production first, and efficiency second.
Monday, July 12, 2010
Wednesday, July 7, 2010
Of PACE Bonds, Freddie Mac, Fannie Mae and Property Values
There are some fascinating developments around PACE bonds, and apparent obstructionism on the part of Freddie Mac and Fannie Mae, as reported in the New York Times on June 30th, 2010, "Loan Giants Threaten Energy-Efficiency Programs."
Based on some of the issues discussed in recent posts on this site, Freddie Mac and Fannie Mae arguably are actually right to threaten these energy efficiency programs, for to the extent that PACE bonds can be used to extend the fossil fuel franchise, they are suboptimal, and therefore destructive of real estate values.
The smart thing to do would be to have maybe the energy department provide simple criteria to ensure that the energy enhancements are viable renewable energy investments which would in fact enhance property values and therefore provide increased security for any mortgages, so that the technicality of the priority lien becomes irrelevant. After all an investment with a thirty year useful life, and a five year payback, in fact offers twenty-five years of free cash flows from energy "savings," which means a tremendous increase in value of the underlying asset.
This issue goes to the heart of the matter and is very suggestive of a constructive solution. The nation certainly needs some support for real estate values, and the unfortunate fact is that the current confusion of energy efficiency and energy independence based on renewable energy in the rules and incentives, by Energy Star as much as by the ARRA incentives, which in turn depend on the Energy Star programs, is to blame for this confusion. Energy Efficiency only makes sense within the context of a viable renewable energy program, when it comes in the context of a direct trade off against installed capacity, and an improvement of the economics of the project.
Energy Efficiency as applied to extending the franchise of fossil-fuel based energy solutions does not deserve tax credits, or other incentives, it is an operational savings. To emphasize again an issue that I've raised in other posts on this site: Energy Star rated High Efficiency Tankless Hot Water Heaters are perhaps the poster child of federal subsidies for increasing our dependence on fossil fuels, and preventing a switch to renewable energy at a time when numerous viable renewable DHW solutions exist in the market place. They should be outlawed, not subsidized. There are many other examples along these lines, but this one has perhaps more visibility than anything.
If you think of these issues over the typical thirty year life of a mortgage then you'll quickly see that a 30-40% gain in efficiency in water heating with fossil fuels will be eventually offset by energy prices, and perhaps forms of carbon taxation, while solar or geothermal hot water are available and reduce dependence on subscription energy by 80-99%. Energy Efficiency of fossil fuel based systems only possibly makes sense if there is no economically viable renewable alternative. Thus the issue here is "free energy" versus a temporary reduction in energy bills, and the permanently free energy will win the day in most cases if the value of that free energy over the next 30 years is taken into account, and that is a direct enhancement to property values.
The whole issue goes back to focus on payback periods of the investments as if they were independent of the buildings. They should instead be viewed as intra-marginal investments in the building, to ensure that they enhance property values. For society as a whole this will lead to the optimal result.
Freddie Mac did the right thing for the wrong reasons, and the solution lies in a test along the lines suggested here to ensure that such energy investments are constructive and supportive of property values, not a mere green washing that undermines long term real estate values for the appearance of being green.
Based on some of the issues discussed in recent posts on this site, Freddie Mac and Fannie Mae arguably are actually right to threaten these energy efficiency programs, for to the extent that PACE bonds can be used to extend the fossil fuel franchise, they are suboptimal, and therefore destructive of real estate values.
The smart thing to do would be to have maybe the energy department provide simple criteria to ensure that the energy enhancements are viable renewable energy investments which would in fact enhance property values and therefore provide increased security for any mortgages, so that the technicality of the priority lien becomes irrelevant. After all an investment with a thirty year useful life, and a five year payback, in fact offers twenty-five years of free cash flows from energy "savings," which means a tremendous increase in value of the underlying asset.
This issue goes to the heart of the matter and is very suggestive of a constructive solution. The nation certainly needs some support for real estate values, and the unfortunate fact is that the current confusion of energy efficiency and energy independence based on renewable energy in the rules and incentives, by Energy Star as much as by the ARRA incentives, which in turn depend on the Energy Star programs, is to blame for this confusion. Energy Efficiency only makes sense within the context of a viable renewable energy program, when it comes in the context of a direct trade off against installed capacity, and an improvement of the economics of the project.
Energy Efficiency as applied to extending the franchise of fossil-fuel based energy solutions does not deserve tax credits, or other incentives, it is an operational savings. To emphasize again an issue that I've raised in other posts on this site: Energy Star rated High Efficiency Tankless Hot Water Heaters are perhaps the poster child of federal subsidies for increasing our dependence on fossil fuels, and preventing a switch to renewable energy at a time when numerous viable renewable DHW solutions exist in the market place. They should be outlawed, not subsidized. There are many other examples along these lines, but this one has perhaps more visibility than anything.
If you think of these issues over the typical thirty year life of a mortgage then you'll quickly see that a 30-40% gain in efficiency in water heating with fossil fuels will be eventually offset by energy prices, and perhaps forms of carbon taxation, while solar or geothermal hot water are available and reduce dependence on subscription energy by 80-99%. Energy Efficiency of fossil fuel based systems only possibly makes sense if there is no economically viable renewable alternative. Thus the issue here is "free energy" versus a temporary reduction in energy bills, and the permanently free energy will win the day in most cases if the value of that free energy over the next 30 years is taken into account, and that is a direct enhancement to property values.
The whole issue goes back to focus on payback periods of the investments as if they were independent of the buildings. They should instead be viewed as intra-marginal investments in the building, to ensure that they enhance property values. For society as a whole this will lead to the optimal result.
Freddie Mac did the right thing for the wrong reasons, and the solution lies in a test along the lines suggested here to ensure that such energy investments are constructive and supportive of property values, not a mere green washing that undermines long term real estate values for the appearance of being green.
Monday, July 5, 2010
The Lessons of Lamborghini Applied To Energy in Buildings
Lamborghini underwent an interesting paradigm shift with their latest new model, the limited edition Gallardo LP 570-4 Superleggera and the lessons of their design considerations are relevant to what is going on around energy usage in buildings. The "Eureka" came when they finally understood that investment in more horse power was running smack into the wall of diminishing returns as it was becoming exponentially more expensive as it became less and less effective, while reducing weight was so much more effective that at that level of performance carbon fiber became a totally affordable option by comparison in seeking to raise performance.
In buildings the reverse paradigm shift needs to happen. We have been overemphasizing energy efficiency, without looking into energy production sufficiently. Often because energy efficiency investments tend to be smaller, and more easily justified, and no one seems to realize that in the process we cheat ourselves out of the investment decision to produce energy in the first place and become at least somewhat energy independent. Simply put, since money tends to have some resource constraints (costs and availability), by nickel and diming ourselves into a stupor with more and more energy efficiency, we will ensure that we will never invest in energy production and energy independence because the more efficient we become at burning fossil fuel, the lower are the returns on investing in renewable production. So energy efficiency is the lullaby which will make us once again the perfect little victims for the next energy price spike. Still the energy efficient buildings which do not invest in renewable production will eventually be worth less than the equivalent buildings which do because of the rising value of eliminating recurrent subscription costs of energy.
Seen in this light, energy efficiency is not a worthwhile goal unless it is truly the only option, and the basic make or buy decision of renewable energy production versus the alternatives should be considered first, lest we cheat ourselves out of ever making it. The way current policy and incentives reward energy savings on a par with renewable energy causes a metastatic cancer in our energy posture as a country, in which we continue to tinker with becoming simply more efficient addicts to fossil fuel consumption without ever making the switch to energy independence through renewable energy production. The way out of this delusion is to ask which building is worth more, this energy efficient building, which shaved 25% off their energy bills or the equivalent building next door which is e.g. 50, 60 or 70%% energy independent. Now it all comes down to a real estate decision, not an energy saving decision, and if you think you are in the real estate business, that is likely to be your better investment posture. And again, decision made, you can improve on it with energy efficiency.
Or, to put it differently, energy independence produces a higher property values than energy efficiency, and the order in which we consider these options matters a lot. As soon as some of the market adopts an energy production posture building values of those that don't will be depressed. Every investment in energy production is a direct price hedge, while energy efficiency for fossil fuels only attenuates the price risks. Politically the upshot is that the national interest in energy security coincides with a maximal use of renewable energy at the building level, and current incentives produce wildly suboptimal results. For real estate owners it is hard work to make the right energy decisions in spite of incentive systems which are very seductive, and make the wrong investment decisions seem plausible.
In buildings the reverse paradigm shift needs to happen. We have been overemphasizing energy efficiency, without looking into energy production sufficiently. Often because energy efficiency investments tend to be smaller, and more easily justified, and no one seems to realize that in the process we cheat ourselves out of the investment decision to produce energy in the first place and become at least somewhat energy independent. Simply put, since money tends to have some resource constraints (costs and availability), by nickel and diming ourselves into a stupor with more and more energy efficiency, we will ensure that we will never invest in energy production and energy independence because the more efficient we become at burning fossil fuel, the lower are the returns on investing in renewable production. So energy efficiency is the lullaby which will make us once again the perfect little victims for the next energy price spike. Still the energy efficient buildings which do not invest in renewable production will eventually be worth less than the equivalent buildings which do because of the rising value of eliminating recurrent subscription costs of energy.
Seen in this light, energy efficiency is not a worthwhile goal unless it is truly the only option, and the basic make or buy decision of renewable energy production versus the alternatives should be considered first, lest we cheat ourselves out of ever making it. The way current policy and incentives reward energy savings on a par with renewable energy causes a metastatic cancer in our energy posture as a country, in which we continue to tinker with becoming simply more efficient addicts to fossil fuel consumption without ever making the switch to energy independence through renewable energy production. The way out of this delusion is to ask which building is worth more, this energy efficient building, which shaved 25% off their energy bills or the equivalent building next door which is e.g. 50, 60 or 70%% energy independent. Now it all comes down to a real estate decision, not an energy saving decision, and if you think you are in the real estate business, that is likely to be your better investment posture. And again, decision made, you can improve on it with energy efficiency.
Or, to put it differently, energy independence produces a higher property values than energy efficiency, and the order in which we consider these options matters a lot. As soon as some of the market adopts an energy production posture building values of those that don't will be depressed. Every investment in energy production is a direct price hedge, while energy efficiency for fossil fuels only attenuates the price risks. Politically the upshot is that the national interest in energy security coincides with a maximal use of renewable energy at the building level, and current incentives produce wildly suboptimal results. For real estate owners it is hard work to make the right energy decisions in spite of incentive systems which are very seductive, and make the wrong investment decisions seem plausible.
Energy Efficiency is Not What It's Cracked Up To Be
A building is a system, and just like you can't save yourself rich, you can't achieve energy independence by endless investments in energy efficiency, for they are not additive, but instead, they run into the brick wall of diminishing returns on investment. Energy efficiency extends the franchise of the fuels involved, and needs to be seen in that context. They belong in the utility model.
To set up a methodology of justifying capital investment at the building level based on energy savings is counter productive to the extent that it locks us into the subscription models of fossil fuel use. The implicit and unexamined assumption of fossil fuel burning creates buyer lock in, and prolongs dependence on those fuels. This is not to say energy efficiency is not important. It is. However, energy efficiency is a secondary issue not a primary one.
We need to go back to square one, and that is the question what energy do we need? How much do we need as heat, and how much do we need as energy (electricity). After that we should look into however much energy can be generated at the building from renewable sources, solar, wind, and geothermal. Those decisions are make or buy decisions. Then comes the trade off decision of energy efficiency, namely how much can we lower installed capacity through energy efficiency. This will cause a much more constructive view of energy efficiency. It will also produce more of a systems look at the whole building.
Naturally, part of the consideration is also how can we successfully harvest peak load energy such as solar and wind energy, and in residential construction Domestic Hot Water (DHW) storage is our friend, and not the enemy, as long as we use well insulated storage tanks, to harvest our intra day needs of heat energy. Thus tankless hot water heaters are a no-no in almost all cases and should be stripped of their Energy Star ratings, because they lock us in to excessive use of peak cost energy, since they work on demand by definition, and the whole notion of the smart grid is learning to store energy and diminish on-demand usage. These devices represent a false economy which in the long run will lower the value of your building by more than any savings they could ever produce.
To set up a methodology of justifying capital investment at the building level based on energy savings is counter productive to the extent that it locks us into the subscription models of fossil fuel use. The implicit and unexamined assumption of fossil fuel burning creates buyer lock in, and prolongs dependence on those fuels. This is not to say energy efficiency is not important. It is. However, energy efficiency is a secondary issue not a primary one.
We need to go back to square one, and that is the question what energy do we need? How much do we need as heat, and how much do we need as energy (electricity). After that we should look into however much energy can be generated at the building from renewable sources, solar, wind, and geothermal. Those decisions are make or buy decisions. Then comes the trade off decision of energy efficiency, namely how much can we lower installed capacity through energy efficiency. This will cause a much more constructive view of energy efficiency. It will also produce more of a systems look at the whole building.
Naturally, part of the consideration is also how can we successfully harvest peak load energy such as solar and wind energy, and in residential construction Domestic Hot Water (DHW) storage is our friend, and not the enemy, as long as we use well insulated storage tanks, to harvest our intra day needs of heat energy. Thus tankless hot water heaters are a no-no in almost all cases and should be stripped of their Energy Star ratings, because they lock us in to excessive use of peak cost energy, since they work on demand by definition, and the whole notion of the smart grid is learning to store energy and diminish on-demand usage. These devices represent a false economy which in the long run will lower the value of your building by more than any savings they could ever produce.
Sunday, July 4, 2010
Federal Incentives to Prevent Renewable Energy in Residential Construction
OK, that was just a bit tongue in cheek, but it is actually serious, and it raises issues of unintended consequences, which are not always easy to address. However, it is urgent that home owners, and building owners come to grips with it, for it will materially impact the value of their real estate holdings in the future.
It all revolves around a theme that is pervasive on this blog, and that is sub-optimization. You could spend a lot of money on energy efficient appliances and still not create an energy efficient solution. The whole gist of the Energy Star label (when it works as intended) is to focus on the individual function, and make that as effective as possible, but buying everything Energy Star-rated will not solve your problem, and may in fact cause you to spend a lot more money than necessary, thus sub-optimization leads directly to capital destruction (aka stupid investments). A big example is the issue of tankless hot water heaters that I've raised on this blog, which is a hopelessly suboptimal solution because renewable hot water solutions are so easy and plentiful. Eventually there are others, and they all boil down to one and the same thing, which is the systems approach, the holistic approach in which the building is central, and not the equipment. The focus is on operating cash flows, and long term building values. Thus, if you can implement solar DHW, it may pay to look your washing machines and dishwashers to make sure they can take in hot water, in lieu of heating cold water. For never mind how efficient is their heating element, if they can take in water from your solar thermal installation.
Once you put the building central, you can look at integration of various technologies, and implement them even in sequence, if necessary, something now, and something else five years from now, when you're done paying for what you installed today. This kind of preplanning is entirely possible when you figure out the engineering and economic interdependencies, and do not fall for the temptation to implement something now which will prevent you from doing the next logical step five years from now. If you are only looking at the available incentives and the Energy Star ratings, and let them prevail over proper engineering and planning, you are very likely to make these mistakes, which will cause you to spend the same dollar two or three times over over the life of your house or building. The incentives, as much as the ever so well intended Energy Efficiency ratings look only at the level of the individual function of subsystems.
Besides planning ahead your engineering integration of a whole house/building system, the general principle is not to overspend in places where it really does not pay off, for the highly efficient variants of products are often not only more expensive, but sometimes less reliable. Simpler is better in that case. Another examply of where you should break the mold is the reverse, namely you should probably overspend on LED lighting where it conerns far out of the way lighting. If you only look at the difference in energy savings, LEDs are still hard to justify for most applications, but not in out of the way spots, where their longer lifetime pays off in reduced hassle and maintenance cost. LEDs last two or three times (or more) longer than the alternatives, and by looking at both energy savings and maintenance savings the picture changes the more they are in hard to access locations.
By the same token, many forms of subsidy and incentives are geared to the use and installation of Energy Star rated equipment, and again there is no guarantee that this results in an optimal design from the standpoint of energy economics of the building, be it a home or an apartment house. The simplest example is that of the back-up water heater for a solar thermal, or geothermal hot water installation. For this function it may not at all be worthwhile to buy an Energy Star rated piece of equipment. The other example is the installation of solar pv systems financed by your local utility against a Power Purchase Agreement (PPA), which is a low yield investment, which extends their franchise, but is suboptimal from the standpoint of operating cost of your building, since even the worst solar thermal system offers a higher yield of energy than Solar PV.
The fundamental error is that energy efficiency and renewable energy are treated as interchangeable, when they are not. Energy efficiency is not additive to energy independence, but renewable energy is. Energy Efficiency should rationally be funded either directly from savings or by PPA from your utility or oil company, not from public money. Renewable Energy, if it is engineered sensibly, is the only thing that deserves public stimulus because it achieves energy independence, raises real estate values, and is a permanent improvement. There may be exceptions when energy efficiency is the only option, depending on the nature of the buildings, in which case policies should be flexible enough to support it.
It all revolves around a theme that is pervasive on this blog, and that is sub-optimization. You could spend a lot of money on energy efficient appliances and still not create an energy efficient solution. The whole gist of the Energy Star label (when it works as intended) is to focus on the individual function, and make that as effective as possible, but buying everything Energy Star-rated will not solve your problem, and may in fact cause you to spend a lot more money than necessary, thus sub-optimization leads directly to capital destruction (aka stupid investments). A big example is the issue of tankless hot water heaters that I've raised on this blog, which is a hopelessly suboptimal solution because renewable hot water solutions are so easy and plentiful. Eventually there are others, and they all boil down to one and the same thing, which is the systems approach, the holistic approach in which the building is central, and not the equipment. The focus is on operating cash flows, and long term building values. Thus, if you can implement solar DHW, it may pay to look your washing machines and dishwashers to make sure they can take in hot water, in lieu of heating cold water. For never mind how efficient is their heating element, if they can take in water from your solar thermal installation.
Once you put the building central, you can look at integration of various technologies, and implement them even in sequence, if necessary, something now, and something else five years from now, when you're done paying for what you installed today. This kind of preplanning is entirely possible when you figure out the engineering and economic interdependencies, and do not fall for the temptation to implement something now which will prevent you from doing the next logical step five years from now. If you are only looking at the available incentives and the Energy Star ratings, and let them prevail over proper engineering and planning, you are very likely to make these mistakes, which will cause you to spend the same dollar two or three times over over the life of your house or building. The incentives, as much as the ever so well intended Energy Efficiency ratings look only at the level of the individual function of subsystems.
Besides planning ahead your engineering integration of a whole house/building system, the general principle is not to overspend in places where it really does not pay off, for the highly efficient variants of products are often not only more expensive, but sometimes less reliable. Simpler is better in that case. Another examply of where you should break the mold is the reverse, namely you should probably overspend on LED lighting where it conerns far out of the way lighting. If you only look at the difference in energy savings, LEDs are still hard to justify for most applications, but not in out of the way spots, where their longer lifetime pays off in reduced hassle and maintenance cost. LEDs last two or three times (or more) longer than the alternatives, and by looking at both energy savings and maintenance savings the picture changes the more they are in hard to access locations.
By the same token, many forms of subsidy and incentives are geared to the use and installation of Energy Star rated equipment, and again there is no guarantee that this results in an optimal design from the standpoint of energy economics of the building, be it a home or an apartment house. The simplest example is that of the back-up water heater for a solar thermal, or geothermal hot water installation. For this function it may not at all be worthwhile to buy an Energy Star rated piece of equipment. The other example is the installation of solar pv systems financed by your local utility against a Power Purchase Agreement (PPA), which is a low yield investment, which extends their franchise, but is suboptimal from the standpoint of operating cost of your building, since even the worst solar thermal system offers a higher yield of energy than Solar PV.
The fundamental error is that energy efficiency and renewable energy are treated as interchangeable, when they are not. Energy efficiency is not additive to energy independence, but renewable energy is. Energy Efficiency should rationally be funded either directly from savings or by PPA from your utility or oil company, not from public money. Renewable Energy, if it is engineered sensibly, is the only thing that deserves public stimulus because it achieves energy independence, raises real estate values, and is a permanent improvement. There may be exceptions when energy efficiency is the only option, depending on the nature of the buildings, in which case policies should be flexible enough to support it.
Renewable Energy is the Real Energy Independence
Energy independence is the goal of renewable energy, it is a make or buy decision, but in the transition we will simply have gradually decreasing dependence on fossil fuels, before we achieve complete self-sufficiency from renewable sources.
Energy efficiency however, is a subgoal, and it is counter-productive if it is elevated to the primary goal, for it tends to include the unstated assumption that all our buildings can do is to consume energy, based on the recent subscription model of fossil fuel based consumption, and thus it overlooks the productive capacity which is now a reality, with increasing numbers of renewable technologies becoming available at building scale. In short investments in, or subsidies for "energy efficiency," such as is now common practice, do not optimally augment values of building stock, but are instead supportive of extending the franchise of oil companies, utilities, and constitute a subsidy of technology manufacturers, and therefore come at the expense of real estate values on the margin. Or, to put it differently from the standpoint of extending the fossil fuel franchises, energy efficiency is additive, so that in a fair world the providers of those fuels should pay for it, not the building owner.
If we focus purely on Energy Efficiency, i.e. reducing consumptions through various forms of economizing, be it through technology or sacrifice of convenience, we are locking ourselves into the consumption model, the subscription model of fossil fuels, which is the unstated assumption behind "Energy Efficiency." If instead we see energy efficiency from a production standpoint, there is a direct capital trade-off against installed capacity. Your boiler doesn't live forever, but your investment in energy efficiency by means of improvements to the building envelope directly reduces the size of your next boiler, and depending on where you are in the life-cycle of your boiler, this may be more or less relevant. Depending on what other things you undertake in your building, the economic life of your boiler may become shorter than its mechanical life expectancy.
Energy Independence with Renewable Energy will never arrive if we focus on energy efficiency only, we will merely extend the fossil fuel economy a bit longer. In this area failing to plan is definitely planning to fail. There has to be deliberate planning to shift from the consumption model, which is the model of the utilities and oil companies, to the production model, which is the model of renewable energy and of increasingly energy independent buildings. The most important aspect of renewable energy technology is that it is coming down to building scale in a variety of ways, and thus the opportunity arises to produce the energy right where it is used, and avoid high transportation costs (including some transmission losses), as well as avoiding the subscription model of energy. This is a make or buy decision, and with current technology we are shifting to a situation where the economics favor local production. This is particularly evident in metropolitan markets where the transport costs of energy are some of the highest.
Energy efficiency however, is a subgoal, and it is counter-productive if it is elevated to the primary goal, for it tends to include the unstated assumption that all our buildings can do is to consume energy, based on the recent subscription model of fossil fuel based consumption, and thus it overlooks the productive capacity which is now a reality, with increasing numbers of renewable technologies becoming available at building scale. In short investments in, or subsidies for "energy efficiency," such as is now common practice, do not optimally augment values of building stock, but are instead supportive of extending the franchise of oil companies, utilities, and constitute a subsidy of technology manufacturers, and therefore come at the expense of real estate values on the margin. Or, to put it differently from the standpoint of extending the fossil fuel franchises, energy efficiency is additive, so that in a fair world the providers of those fuels should pay for it, not the building owner.
If we focus purely on Energy Efficiency, i.e. reducing consumptions through various forms of economizing, be it through technology or sacrifice of convenience, we are locking ourselves into the consumption model, the subscription model of fossil fuels, which is the unstated assumption behind "Energy Efficiency." If instead we see energy efficiency from a production standpoint, there is a direct capital trade-off against installed capacity. Your boiler doesn't live forever, but your investment in energy efficiency by means of improvements to the building envelope directly reduces the size of your next boiler, and depending on where you are in the life-cycle of your boiler, this may be more or less relevant. Depending on what other things you undertake in your building, the economic life of your boiler may become shorter than its mechanical life expectancy.
Energy Independence with Renewable Energy will never arrive if we focus on energy efficiency only, we will merely extend the fossil fuel economy a bit longer. In this area failing to plan is definitely planning to fail. There has to be deliberate planning to shift from the consumption model, which is the model of the utilities and oil companies, to the production model, which is the model of renewable energy and of increasingly energy independent buildings. The most important aspect of renewable energy technology is that it is coming down to building scale in a variety of ways, and thus the opportunity arises to produce the energy right where it is used, and avoid high transportation costs (including some transmission losses), as well as avoiding the subscription model of energy. This is a make or buy decision, and with current technology we are shifting to a situation where the economics favor local production. This is particularly evident in metropolitan markets where the transport costs of energy are some of the highest.
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