Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector

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1 National Energy Retrofit Institute Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector University of Central Missouri

2 Background History has shown that the residential/light commercial construction industry has been a driving force behind economic recoveries in the United States dating back to The Great Depression. This is perhaps best evidenced through the establishment of the National Housing Act during the Roosevelt administration. The act was drafted to provide Americans with affordable home ownership opportunities. To this end, the Federal Housing Administration created a 30 year fixed mortgage which stipulated that once the interest rate was determined (fixed), the rate remained unchanged throughout the life of the loan (term). As a result of this innovative product, as well as VA loans awarded to veterans returning from World War II, access to home ownership increased for many Americans. This increased demand for new homes resulted in job creation in the residential housing sector, which stimulated the economy and ultimately resulted in long term financial stability in America. In recent years, the Federal Housing Administration (FHA) created another mortgage product the Energy Efficient Mortgage (EEM). EEM s were piloted in 1992 and implemented nationwide three years later to help homeowners save on the cost of utilities the single largest housing expense after a mortgage payment by providing funds to install energy efficiency measures. This program allowed homeowners to finance the cost of these improvements into an EEM without the need to qualify for additional financing. In the same way as 30 year fixed mortgages increased demand for new home construction, EEM s have the potential to increase demand for the home energy retrofit sector, which would provide unprecedented opportunities to create jobs, stimulate the economy, and help bring an end to the current recession. Although funds for retrofit projects have been made available to the homeowner through EEM s, the homeowner is left with the overwhelming responsibility of overseeing the project management, procurement, and installation of products and services. Consequently, few EEM s have been written and the retrofit sector has not yet reached its economic potential. In fact, the economic potential from the retrofit sector represents $1.3 trillion nationally in retrofit construction activity serving 130 million homes. If each home that could benefit from retrofit work invested $10,000 in energy saving projects, we could realize 650,000 direct, 650,000 indirect, and 1,300,000 induced jobs sustainable for 10 years across the country (estimates based on the Department of Commerce s RIM model). In October 2009, the Office of the Vice President published Recovery Through Retrofit, which confirms the opportunities within the retrofit sector to create jobs and stimulate the economy. The report also identified three barriers to scalability and sustainability: Access to information Access to financing Access to a skilled workforce Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 1

3 The Center for American Progress and the Energy Future Coalition identified two additional barriers in their August 2009 Rebuilding America study: Access to consistent performance standards Access to standard process for quality and monitoring Recognizing an opportunity to help dislocated workers of the residential/light commercial industry return to the workforce, the University of Central Missouri (UCM) created a taskforce to identify solutions to these barriers. In January 2010, UCM published a Whitepaper, Creating a Viable Energy Retrofit Sector, proposing a solution that called for the creation of a platform for a collaborative retrofit community (consortium), coupled with industry specific training and supportive services to be launched, leveraging partnerships between education, business, labor, workforce, the community, and key government agencies to serve as a nationwide model. In order to validate the proposed solution, UCM facilitated a pilot project in which an informal consortium was created in Kansas City, Missouri. During this pilot, high level processes and procedures as well as duties and associated tasks were identified for several retrofit specific job roles. Training programs for two of these roles (Residential Energy Client Service Coordinator and Residential Energy Auditor) were conducted during the pilotphase as well. These programs resulted in the graduation of 24 students and the creation of approximately 20 new jobs in the sector. Assisting in this effort were founding consortium members including: the Greater Kansas City Building and Construction Trades Council, AFL CIO, Liberty Homes, Rebuilding Management LLC, Hathmore Technologies, and the Full Employment Council (FEC). The success of this pilot project significantly increased demand for a more formalized solution in Kansas City. After the pilot project, the UCM taskforce recommended the following directives for nationwide scalability and sustainability: Proliferate the standardized process model (i.e. Energy Improvement Design Build Process) that provides a systematic approach to designing and implementing energy improvement measures Train workforce on the eight defined workforce roles that map to the standardized process model using UCM s Workforce Guidelines Identify and procure an Enterprise Resource Planning (ERP) system to automate the process, providing project management, accountability, and transparency Create, support and encourage others to join a formalized consortium UCM created and implemented solutions for the five barriers preventing the scalability and sustainability of the residential retrofit sector. The solutions UCM determined can be categorized into the following areas: The Process Workforce Roles Enterprise Resource Planning (ERP) System Consortium Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 2

4 The Process Solves for: Access to consistent performance standards Access to standard process for quality and monitoring According to the Rebuilding America report, a barrier limiting the growth of the retrofit sector was the lack of a standard process for quality and monitoring. Several established models were identified within the sector to design and implement energy improvement measures. Upon close review, the taskforce discovered that these models focused primarily on the energy audit function of the process. As a result, these models lacked a holistic approach without an emphasis on project management, which is necessary for this sector s growth. To address this issue, the taskforce adapted an existing model familiar to the construction industry, which proved successful during the new residential construction boom of the past decade the design build process. Modified to address the specific needs of the retrofit sector, UCM developed the Energy Improvement Design Build Process. Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 3

5 This process ensures the successful completion of the entire retrofit project through its four integrated phases: Client Pre Qualification Phase Inform homeowner about the retrofit process and assist in securing funds for project. Design Phase Create a comprehensive plan of energy improvement measures from data collected from the homeowner and the energy audit. Build Phase Implement energy improvement measures identified in design phase. Project Closeout Phase Ensure quality and safety of work completed. A key differentiator between the contractor and consultant driven models and the Energy Improvement Design Build Process is that the energy audit function does not drive projects. Instead, the energy audit is a key step toward designing a comprehensive plan of energy improvement measures. Also, project management concepts are integrated throughout the process to ensure that a critical path is established and maintained while providing transparency and oversight. More importantly, specific duties and associated tasks that must be completed during each phase have been identified and assigned to clearly defined job roles. There are several key benefits realized by utilizing this process model: Provides sales, administration and management functions that currently are missing Highlights planning and organization as key components for the success of the overall project Eliminates idle workers by increasing effectiveness and efficiencies Homeowner needs are addressed in a safe and holistic manner Workforce Roles Solves for: Access to information Access to financing Access to skilled workforce Access to consistent performance standards With existing models, the process typically begins and ends with an energy audit. An Auditor or audit company is responsible for establishing and maintaining client relationships, coordinating funding services, completing the energy audit, identifying measures to install, ordering products, contracting with someone to complete the work (or completing the work themselves), performing quality assurance activities, and troubleshooting problems. In many cases this jack of all trades approach to home retrofits can result in one or all of the following: Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 4

6 Not enough attention is devoted to identifying the appropriate energy improvement measures Recommendations may be biased towards a specific product (e.g., HVAC, windows, etc.) Small percentage of energy audits completed result in the implementation of energy improvement measures Clients often left with technical data and no clear plan on how to proceed Poor project management and completion eliminate or reduce referrals Auditors often placed in a position to perform roles outside of their area of expertise and comfort zone For the Energy Improvement Design Build Model to be successful, it was necessary to not only adapt existing retrofit sector roles, but also create new ones to fill gaps in the areas of: sales, administration, and management. Qualifications, training, and certification requirements were also identified to ensure the proper skill set necessary for successful employment. The process of defining roles began with potential owners of retrofit businesses. It was determined that these individuals can operate as a retailer (selling directly to clients), as a wholesaler (selling directly to retailers), or as both. An Energy Improvement Project Manager (EIPM) oversees operations of residential energy retrofit retail organizations. The EIPM develops and maintains the business plan to manage the process and provides administrative and operational oversight for the installation of products and services for energy improvement retrofits. Providing wholesale products and services to the EIPM is the Residential Energy Practitioner (REP). The REP develops and maintains the business plan to direct the marketing and implementation of specialty products and services used by retail organizations. The EIPM incorporates the REP s products and services as part of whole house retrofit projects to improve the comfort, safety, and energy efficiency of a client s home. REP s operate businesses that offer established retrofit products and services including HVAC, solar, plumbing, electrical, weatherization, windows, cladding, energy audits, and HERS ratings. REP s also offer third party services needed to successfully operate within the Energy Improvement Design Build Process Model including sales functions, design services, and field project management. The individuals who own and operate these retail and wholesale retrofit businesses are collectively referred to as Retrepreneurs. Training modules have been developed to help Retrepreneurs establish and grow retrofit businesses within the consortium. Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 5

7 The next role is new to the retrofit sector and addresses the barriers of the limited access to information and funding. The Residential Energy Client Service Coordinator (RECSC) advises clients about the benefits of completing residential whole house retrofits using the Energy Improvement Design Build Process. The RECSC also coordinates activities with the client and lending providers within the consortium to secure financing for the energy audit and the recommended energy improvement measures. Once funding is secured and the client approves the design plan, the RECSC serves as the communication hub between the client and the various product and service providers during the build phase. Finally, the RECSC closes the project with the client. Another new role developed helps address the barrier regarding access to consistent performance standards. The Residential Energy Performance Administrator (REPA) facilitates the accurate, timely, and professional completion of all design tasks resulting in contracts to retrofit a client s home to be more energy efficient and comfortable. These tasks include aggregating, reviewing, dispersing, and cataloging data to recommend a set of energy improvement measures designed to provide increased comfort and maximize the financial return oninvestment for clients. In the Energy Improvement Design Build Model, the REPA assumes the design functions traditionally associated with an Auditor. By transferring these tasks to a REPA, Auditors can focus on collecting data and performing diagnostic tests. This will provide an Auditor more time to complete assessments resulting in more retrofit projects for the organization and its consortium partners. Subsequently, the taskforce has identified Auditors who enjoy the design aspects of the job (as defined in existing models) as the individuals best suited to fill the new REPA role. Whereas the REPA ensures that consistent performance standards are met during the design phase, a Field Project Manager (FPM) takes on these responsibilities during the build phase. The FPM coordinates all build phase activities, maintains the organization s project schedule, and facilitates all quality assurance activities to ensure stakeholders execute their assignments on time, within budget, and meet established quality standards with maximum efficiency. In existing models, these FPM duties are often not assigned to a specific individual and might be assumed by the Auditor or someone from the wholesale product and service provider; consequently, work is often not completed on time or in the proper sequence. By the FPM assuming these administrative and project management duties, the communication gap is bridged and Auditors and service providers will have more time to fulfill their job specific responsibilities resulting in more retrofit projects for the organization and consortium partners. With the introduction of the new support roles detailed above, the role of Residential Energy Auditor has been adapted to focus these professionals efforts on collecting data and performing tests and inspections to determine the energy efficiency and health and safety aspects of a building. This adapted approach increases the number of audits accomplished and allows them to focus on their core skill set. The role of the Residential Energy Rater does not change within the new process. Residential Energy Raters will continue to use software to create an energy model, which certifies the energy performance of the design plan Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 6

8 (which was submitted by the REPA based on data collected by the Auditor). This professional will also generate multiple Home Energy Rating System (HERS) ratings of the home to certify its energy equity. Also, the role of Residential Weatherization Technician will not change. This professional will continue to install energy improvement measures to improve safety, comfort, durability, indoor air quality, and energy efficiency using a variety of residential construction techniques and building science best practices including air sealing, insulating, duct sealing, and base load energy improvements. In addition to adapting the existing roles and creating new ones, the job duties of crew chief and crew manager have been updated for the Energy Improvement Design Build Process. These additional job duties take into account the specific tasks associated with managing crews and supervising crew members during retrofit projects. To ensure the systematic approach of the Energy Improvement Design Build Process is followed and individuals are able to properly fulfill their clearly defined roles, specialized workforce training has been developed for all roles. This training allows workforce members to understand how to complete the tasks associated with their role, as well as recognize how their role impacts the entire project. In addition, personnel management training has been created for individuals and businesses. Enterprise Resource Planning System Solves for: Access to consistent performance standards Access to standard process for quality and monitoring The Energy Improvement Design Build Process and its supporting roles specifically the roles of REPA and FPM have addressed the need for a standard process of quality and monitoring; however, simply identifying how things should be done is not sufficient. A system is needed to identify and schedule project tasks, catalog information, and communicate status to all stakeholders including the client. An Enterprise Resource Planning (ERP) System provides the technological infrastructure needed to address these needs. The ERP system will help facilitate: Energy audits Cost estimating Material and contractor bidding Purchase and work orders Scheduling and labor management Construction management Marketing programs Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 7

9 Not only does an ERP help automate these activities for an organization, it also: Provides transparency to all stakeholders Holds stakeholders accountable to complete tasks Automates project management functions to keep projects moving forward Provides client access to the status of their project from their personal computer or data phone There are many ERP systems available in the market, but few tailored for the retrofit industry and even fewer that would be able to support the Energy Improvement Design Build Process. The taskforce identified the Retrofit Exchange as the best overall solution for an ERP system. Benefits of the Retrofit Exchange include: Efficiency The system eliminates repetitive tasks, ensure each step is completed, keeps projects on schedule, and increases the number of projects a contractor can manage. Communication The automated system ensures that all stakeholders homeowners, artisan contractors, suppliers, realtors, lenders, and title companies receive timely communication. The internet based Retrofit Exchange keeps homeowners in the loop, even displaced homeowners living outside the community, by giving them access to all status reports and budget details pertaining to their retrofit project. Connectivity Retrofit Exchange brings together homeowners who need their homes retrofitted and Retrepreneurs who have the supplies and manpower to oversee and complete the project. Moreover, since Residential Energy Auditors and Residential Energy Raters accepted into Retrofit Exchange network must be qualified, mortgage lenders and homeowners can be assured that the energy improvement measures will provide the appropriate return on their investment. Financial Safeguards Unique to Retrofit Exchange system, financial safeguards protect both homeowners and consortium members through third party verification. With Retrofit Exchange, contractors can easily manage multiple retrofit projects simultaneously. Organizations that use the Retrofit Exchange system are better able to support their commitment to building a sustainable retrofit industry. Consortium Solves for: Access to information Access to skilled workforce Access to financing Access to consistent performance standards Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 8

10 The consortium model will educate the community and other relevant stakeholders by: Supporting a cooperative marketing effort Provide curriculum and training to develop local workforces Disseminate information to lenders, realtors and consumers on various financing options Establish, communicate and maintain sector business standards and best practices Call to Action The National Energy Retrofit Institute (NERI), a national consortium formally established by UCM in April 2011, believes in public private partnerships that drive market demand and industry sector growth. NERI s mission is to support and foster nationwide job creation and related economic development activities for the residential energy efficiency sector. This collaborative retrofit community, coupled with industry specific training and supportive services will help achieve scalability and sustainability. A main goal is to establish and grow partnerships between education, business, labor, workforce, the community, and key government agencies to serve as a conduit for the scalability and sustainability the residential energy efficiency industry sector. NERI s first act as an established association will be to formalize the Kansas City consortium created as part of the UCM pilot into NERI s first local chapter. NERI was formed to promote an energy retrofit model for the residential energy efficiency sector that can be duplicated in communities nationwide, ultimately leading to more green jobs for Americans and stronger local economies. Operating under UCM s not for profit foundation, NERI will provide the support and structure needed to actualize nationwide scalability and sustainability, including: Provide nationwide training and certificate programs for professionals and workforce development in the residential retrofit industry sector focused on sales, administration, and management Provide workshops to educate key stakeholders (e.g. realtors, lenders, homeowners) Establish local market consortium chapters in all markets interested in incubating a retrofit industry sector within their local economy Provide a cooperative marketing platform for members and partners Recognize and embrace current industry technical standards and best practices (i.e. BPI, RESNET) Provide retrofit sector with business best practices UCM has demonstrated that the five major barriers identified in the Recovery Through Retrofit and Rebuilding America reports limiting the residential retrofit sector from reaching its economic potential can be overcome and effectively demonstrated this through the Kansas City Pilot Project. NERI, in partnership with the Retrofit Exchange, will now launch this initiative nationally to help scale the residential retrofit industry sector to sustainable levels. Visit NERI at to join our community and together we can create millions of jobs that cannot be exported to other countries and will help spur the economic recovery that America needs today to help bring an end to the current recession. Promoting Nationwide Scalability and Sustainability in the Residential Energy Efficiency Sector Page 9

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