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Wednesday, June 9, 2010

The Home Star Retrofit Energy Act of 2010: Operational and Market Considerations

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

The Home Star Energy Retrofit program as proposed is intended to promote both greater residential energy-efficiency and increased employment in the home remodeling, energy services, and related manufacturing industries. Two very similar Home Star programs are detailed in legislation proposed in the House and Senate. The House of Representatives version, the Home Star Energy Retrofit Act of 2010 (H.R. 5019), was introduced on April 14, 2010, by Representative Peter Welch and 44 cosponsors. H.R. 5019 passed with amendments on May 7, 2010, and was referred to the Senate Finance Committee. The latest Senate proposal was introduced under the Home Star Energy Retrofit Act of 2010 (S. 3434) by Senator Jeff Bingaman and 15 cosponsors on May 27, 2010, and also referred to the Finance Committee.

Home Star would employ a two-tiered structure for energy-efficiency rebates. Its Silver Star program tier would provide up to $3,000 per home in prescriptive rebates for straightforward home upgrades, including insulation; efficient heating, ventilation, and air conditioning units; new windows; and other measures. The Gold Star program tier would offer $3,000 rebates for more comprehensive energy retrofits achieving at least 20% energy savings, with rebates increasing up to $8,000 per home for retrofits achieving 45% energy savings. Quality assurance inspectors would visit 10% to 15% of both Silver and Gold Star participating homes to ensure measures are properly installed. H.R. 5019 authorizes $6 billion in funding for the program. S. 3434 authorizes $5 billion, with provisions for a tax credit beyond this amount.

In both the House and Senate versions, the proposed Home Star program may present an opportunity for both energy-efficiency and employment in the United States. The program targets the residential sector, which numerous studies have shown to be among the largest sources of cost-effective energy-efficiency opportunity in the United States. It also targets a wide base of currently unemployed or under-employed residential contractors. Structurally, the Home Star program seeks speedy implementation by building upon prior experience with both federal and state energy-efficiency programs to provide operating models that might be replicated nationwide. Nonetheless, several operational aspects new to such a federal program, or not previously tried for a program of Home Star's scale, may warrant further attention from Congress. These include the use of rebate aggregators, a two-tiered rebate structure, technical standards, and the general availability of rebates to all who may want them. Key market issues include the inclusion of a "Do-it-Yourself" rebate option, high expectations for program participation, and promoting the growth of a self-sustaining home weatherization industry. Given that it would be a new federal program, the level of homeowner participation implied by the rebate funding provisions in the Home Star proposal would far exceed that achieved by comparable programs in their initial years.

Taken together, Home Star's key operational requirements may present greater challenges than some proponents suggest, and may present unanticipated obstacles to speedy and consistent program implementation across the country. As Congress examines details of the Home Star proposal, focusing on tradeoffs between rapid implementation, operational complexity, and energy-efficiency impacts may be important. Balancing the twin goals of short-term job creation and long-term investment in cost-effective energy savings could also be an ongoing challenge.

Date of Report: June 4, 2010
Number of Pages: 12
Order Number: R41273
Price: $29.95

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