The Consumer Subconscious
Schönbrunn Horses by Stewf
You’ll have to forgive yesterday’s satiric look at the government’s new “Homestar” program. I just couldn’t resist the name association.
The press release was fake, but the frustration was real: Why do we need further incentive to do the things that already have a financial benefit?
My suspicion is that the average American homeowner lacks two things: a fundamental understanding of how their house works and an understanding of the time value of money.
First, for many homeowners, the electricity or gas bill may be viewed as a black box, as unintelligible and unalterable as particle physics. They may come to view the “light bill” with the same sense of helplessness as the cable or phone bills.
But the fact is, there are myriad ways you can decrease the amount of that light bill.
Which brings us to the second, and perhaps more important, point. People don’t seem to understand basic concepts of investing. Call it financial illiteracy or chalk it up to our “buy now, pay later” credit consciousness, but any way you slice it, we don’t value future savings with the same salivating excitement as we do the dollar in our pocket.
Chris Hunt, an energy auditor, did a guest post on the Energy Circle blog describing ten ways we could improve homeowner understanding and efficiency improvements.
Communicating Financial Impact Is Critical
People respond to price bargains (even false ones, like 20% off of an elevated price) rather than considering the big picture. At the same time, people can be contradictory. If saving 20% on the audit was the compelling call to action that got them moving, why wasn’t the basic opportunity to save hundreds per year enough to spur action? Homeowners will pay high bills month after month – in part because they do not know what they can do about them. This contradiction extends to the investment in things like windows and renewables. Solar installers are very good at representing a favorable return on investment. But even a 7 year pay back on a $15-30,000 investment feels out of reach for all but the wealthiest home owners. We need to do a better job of communicating the return on investment on some of the less expensive but valuable services we offer.
Chris recommends improved education, a focus on aesthetics, and turnkey installations so that the emotional and intellectual barriers to efficiency are minimized, allowing the financial savings to shine.
Or perhaps all this talk of payback has actually hurt the cause of home improvements. I recently heard building scientist John Straube rail against the current state of the industry. He said that talk about “return on the investment” is often a death knell for energy efficiency, because it opens insulation, HVAC, or window upgrades to a different set of constraints that other home improvements.
He described owners who installed granite heating elements, to keep their countertops from “feeling cold.”
“What is the payback on a warm countertop?” he asked.
And his point is well taken. Perhaps the conversation needs to center around comfort, air quality, and occupant safety, not focus entirely on costs. Efficiency could be sold as a trendy, must-have, keep-up-with-the-Joneses upgrade rather than a geeky, bank-account-draining, albatross.
If the homeowner discovers that she saves a few bucks in the process, so much the better!
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I can tell you why people need further incentive to do what should be obvious. For many of the efficiency educated, the low hanging fruit has already been picked. It’s that fruit that hangs high in the tree that carries a higher price tag along with it. If I had an incentive to replace high dollar items such as windows and HVAC, I’d likely consider it more often than if an incentive wasn’t offered. It’s like buying something on sale. I enjoyed the $1500 credit I took this year for the new HVAC I had installed last year. It’s too bad I can’t take another $1500 for improvements made this year. I could certainly benefit from new windows and I’m sure the local Pella store would like to keep their installers employed.
Good points, though from a policy perspective, wouldn’t you want to invest in the low-hanging fruit that hasn’t been harvested on 90% of the trees, rather than spending more to get the high-hanging fruit on 10% of the trees?
In other words, why not fund air-sealing and insulation only, rather than windows, HVAC, and appliances. I don’t know very many people who have done even the basics, and putting a nice HVAC system an uninsulated house is like re-arranging the deck chairs on the Titanic. The water is still coming in, and the heat is still going out!
This is true, but for many in older homes, much of the air is leaking out through inadequate windows and exterior doors. Many of which, including mine, can’t be resealed. The cost for picking the low hanging fruit is peanuts in comparison. All that is needed is education on how to pick it properly for maximum benefit. Maybe a policy for subsidizing high cost upgrades should also come with a home energy audit requirement. I would first in line to participate.