St. Louis Residential Energy Efficiency Loan Program Market Assessment

St. Louis Residential Energy Efficiency Loan Program Market Assessment MAY 2011 Prepared by the Environmental Finance Center for Abundant Power and St. Louis County AUTHOR: CHRISTINE E. BOYLE

ABOUT THE ENVIRONMENTAL FINANCE CENTER AT THE UNIVERSITY OF NORTH CAROLINA, CHAPEL HILL The Environmental Finance Center is part of a network of university-based centers that work on environmental issues, including water resources, solid waste management, energy, and land conservation. The EFC at UNC partners with organizations across the United States to assist communities, provide training and policy analysis services, and disseminate tools and research on a variety of environmental finance and policy topics. The EFC at UNC is dedicated to enhancing the ability of governments to provide environmental programs and services in fair, effective, and financially sustainable ways. ACKNOWLEDGEMENTS This report was a collaborative effort within EFC and with several supporting organizations. We extend special appreciation to Jon Breece and Jeff Hughes for map making and draft editing. This analysis would not be possible without the data and energy resources of St. Louis County Information Technologies and Revenue Departments and the Abundant Power Team. This report is a product of the Environmental Finance Center at the University of North Carolina, Chapel Hill. Findings, interpretations, and conclusions included in this report are those of the authors and do not necessarily reflect the views of EFC funders, University of North Carolina, the School of Government, or those who provided review. We are grateful to the Environmental Protection Agency for supporting and guiding the work of our Region IV Offices. 2011 ENVIRONMENTAL FINANCE CENTER AT THE UNIVERSITY OF NORTH CAROLINA, CHAPEL HILL Environmental Finance Center, School of Government Knapp-Sanders Building, CB# 3330 University of North Carolina at Chapel Hill Chapel Hill, NC 27599-3330 Web: www.efc.unc.edu All rights reserved 2 P a g e

EXECUTIVE SUMMARY The purpose of this market assessment is to help focus the St. Louis County Energy Efficiency Loan Program rollout, which will be administered by Abundant Power, in areas of the county that have high demand for home energy efficiency upgrade loans. To gauge the potential demand for energy efficiency upgrades and loans within St. Louis County, the UNC Environmental Finance Center classified homes based on their potential upgrade values, using four key determinants of demand: Year of home construction Total square feet of home Type of heating system Homes with attics From this analysis, we identify several findings that could help inform the St. Louis Program rollout, including: Zip Code 63017 Represents the Top Target area Using our rating system, the analysis finds that zip code 63017 has over 7,785 high demand residential units for energy efficiency upgrades in a concentrated geographic area. This area presents a big opportunity for program rollout. Ten Core St. Louis County Zip Codes Provide Opportunity for Focused Program Rollout 10 additional zip codes have a combined 32,200 high demand residential units, and are located primarily in and around the city center (63123, 63005, 63128, 63119, 63129, 63141, 63021, 63131, 63122, 63011). Accordingly, the St. Louis Energy efficiency Loan Program could focus its marketing and program rollout in these adjoining areas of the county to increase positive spillover of program efforts to gain homeowner participation. Heat Pumps are a Great Opportunity within the Residential Retrofit Market Homes in St. Loius County almost exclusively utilize furnaces and a central air conditioner to heat and cool homes. Heat pumps are not common in St. Louis County homes, yet present large energy efficiency potential over existing dual furnace / AC systems. The St. Louis County program could focus on heat pump upgrades as part of marketing and promotional efforts, specifically in high demand zip codes with high percentages of homes with older furnaces / AC systems, including 63119, 63122 and 63128. Air Duct Sealing Presents an Opportune Basic Efficiency Upgrade; Attic Insulation and Sealing are Attractive Options in a Limited Market High costs of heating and cooling homes in St. Luois makes basic air duct sealing a cost effective upgrade option for the majority of homes in St. Louis County. Although a small proportion of homes within St. Louis County have attics, within the high demand zones, 32% (20,987 homes) have unfinished attics that will use excessive amounts of energy if left un-insulated and lead to high utility bills. Targeted attic insulation packages to these homes present large potential cost savings to home owners. 3 P a g e

INTRODUCTION The St. Louis County Energy Efficiency Loan Program (the Program) is a county energy efficiency program designed to stimulate green collar jobs while democratically allowing St. Louis County to promote sustainable and verifiable energy savings to individuals, and commercial and institutional entities. Given the wide geographical space and diverse population of St. Louis County, Phase 1 of the Program will target residential properties with energy efficiency project loans. This Market Assessment uses secondary data on St. Louis County s residential properties to identify geographic areas and property types that are likely to finance an energy efficiency upgrade via the St. Louis Energy Efficiency Loan Program. By identifying target locations and property-types within the residential sector, the Market Assessment will assist in the development of a strategic and costefficient marketing campaign. Analysis of demand for residential energy efficiency project loans would typically measure potential loan uptake either by using historical data on comparable programs or by conducting a survey to estimate customer uptake rates at various price points. Energy efficiency loan programs however, remain in early stages of development. Therefore this analysis relies on alternate measures categorized as determinants of demand for energy efficiency loan adoption, using data and information from county parcel-level data and nationally available energy efficiency data repositories. These data sets are used to estimate future demand for the Program, based on housing and property-level characteristics. This analysis forecasts demand for energy efficiency loans for residential homeowners based on a unique set of demand indicators described in this report. DATA This analysis draws from the following data sources: St. Louis County (2010) Parcel-level property data for St. Louis County; Energy Information Administration (2005) Office of Energy Markets and End Use, Forms EIA-457 A-G of the 2005 Residential Energy Consumption Survey ; LEED for Homes Rating System, Version 2008; US Census Bureau (2000) Decennial Census. Accessed at: www.census.gov. US Department of Energy (2010) Home Energy Saver calculator, Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory; 4 P a g e

Overview St. Louis County has a diverse housing stock with many characteristics that influence how energy efficiency improvement programs should be targeted across the county. A typical residential property in St. Louis County is 1.22 stories and built in 1964. This home is 1,711 square feet with an appraised value of $195,984. The typical residence has central air conditioning and uses a furnace air duct system for heating. This household spends $2,321 per year on energy bills ($193 per month) which ranges from 4% to 26% of median household income for different neighborhoods within St. Louis County. Based on such characteristics, this section presents a demand ranking system through which we assess the potential market for energy efficiency financing program participation. Residential Housing and Energy Profile St. Louis County Fiscal Year 2009-10 "ZIP CODE" DEMOGRAPHICS (CENSUS 2000 ZCTAs) Zip Code Median HHLD Income % Families Below Poverty Line % of Zip Code's Housing that is Rented Average appraised housing value Number of residential parcels Average housing area (heated square feet) Average build year 63011 72,721 1.6% 7.0% 234,598 12,269 2,074 1975 63017 83,132 1.7% 5.0% 344,737 12,329 2,617 1980 63021 66,638 2.0% 6.6% 229,248 17,421 1,945 1980 63026 55,378 4.0% 5.7% 216,925 7,933 1,825 1982 63031 49,467 2.8% 13% 103,161 17,129 1,266 1965 63033 47,852 2.7% 12% 103,624 13,455 1,486 1966 63034 71,234 1.1% 7.6% 161,612 6,600 2,014 1986 63043 52,024 4.0% 8.9% 147,339 6,907 1,367 1969 63114 35,946 8.1% 24% 79,768 13,405 1,096 1943 63119 52,703 2.6% 10.4% 226,753 11,356 1,623 1941 63121 32,422 14% 31% 66,827 9,525 1,215 1942 63122 60,672 2.2% 11% 274,919 13,865 1,882 1953 63123 42,254 2.5% 8.7% 138,591 17,107 1,294 1956 63125 37,988 5.9% 13% 104,693 10,514 1,188 1950 63128 59,347 1.3% 6.1% 226,739 9,789 1,997 1974 63129 60,626 2.1% 5.7% 200,457 16,533 1,882 1980 63130 41,580 10% 16% 207,950 9,141 1,670 1939 63135 38,338 9.0% 28% 77,335 7,958 1,209 1949 63136 31,032 17% 32% 58,760 15,418 1,076 1952 63137 36,319 10% 28% 66,911 7,240 1,064 1953 63146 53,377 3.3% 6.9% 201,971 7,394 1,788 1970 Zip Code % WITH AN ATTIC 20 zip codes with greatest amount of residential parcels included RESIDENTIAL a HOUSING CHARACTERISTICS RESIDENTIAL HOUSING ENERGY CHARACTERISTICS HOMES WITH ATTICS HEATING-COOLING SYSTEM % electric % hot water % radiant % forced air 63011 2% 0.44% 2.05% 0.28% 97.2% 63017 4% 0.23% 0.08% 0.03% 99.6% 63021 4% 0.37% 0.17% 0.12% 99.3% 63026 2% 0.38% 0.14% 0.05% 99.4% 63031 3% 0.95% 1.86% 0.37% 96.8% 63033 3% 0.19% 5.00% 0.51% 94.3% 63034 2% 1.27% 0.34% 0.05% 98.3% 63043 2% 0.61% 0.33% 0.48% 98.6% 63114 18% 0.34% 3.86% 0.36% 95.4% 63119 25% 0.15% 8.19% 0.19% 91.5% 63121 18% 0.28% 4.95% 0.32% 94.4% 63122 17% 0.33% 3.71% 0.15% 95.8% 63123 9% 0.14% 1.19% 0.06% 98.6% 63125 11% 0.25% 2.44% 0.27% 97.0% 63128 5% 0.65% 1.78% 0.38% 97.1% 63129 3% 0.27% 0.39% 0.07% 99.2% 63130 22% 0.15% 21.49% 0.69% 77.6% 63135 13% 0.24% 2.28% 0.42% 97.0% 63136 6% 0.29% 1.33% 0.10% 98.3% 63137 3% 0.22% 0.75% 0.12% 98.9% 63146 1% 0.25% 6.99% 0.11% 92.6% External Sources: Census Bureau, 2006 American Community Survey & 2000 Decennial Census; FY 2010 Property data for St. Louis County a Residential property defined as parcels with land use code equal to SINGLE FAMILY (n=319,166) 5 P a g e

THE TRAFFIC LIGHT DEMAND RATING SYSTEM METHODOLOGY To identify concentrations of high demand potential loan recipients, we create a set of demand indicators based on existing research from the Home Energy Saver program to categorize various housing characteristics (see measures of demand below). Next, we assign each residential parcel points (1 3) for each determinant of demand, based on the demand level, then sum each parcel s points to fit into the Traffic Light Demand Rating System. Using our Traffic Light Energy Retrofit Demand Index, the final step is locating spatial concentrations of high demand customers within St. Louis County (see map on Page 9). Measures of Demand The Traffic Light Demand Rating System uses (4) housing characteristics, detailed below in the Determinants of Demand section, identified as influencing a household s demand for energy efficiency retrofits. For each of these (4) housing characteristics, we estimate potential demand for energy efficiency retrofits according to two measures of demand. The first measure of demand is the energy efficiency/energy expenditure for each housing characteristic. For example, although a home with larger square footage is more efficient per square foot than a smaller home, it has larger overall energy expenditures, and a higher demand for energy upgrades. Annual energy expenditures provides a basis for a costbenefit calculation for the breakeven point where potential energy utility savings become greater than the total loan amount The second measure of demand is the home s energy retrofit upgrade project potential. This measure takes into account project potential specific to the housing characteristics. For example, homes using electricity powered heat pumps are already more energy efficient than homes using gas powered furnaces, but since the heat pump home is already quite efficient, the home using a furnace may possess more energy efficiency upgrade potential. Either energy efficiency or retrofit project upgrade potential is used to assign points to each residential parcel, as appropriate for each housing characteristic. Point System Each of the (4) housing characteristics have specific thresholds identified as contributing to a home s energy efficiency, or retrofit upgrade potential. For the analysis, specific points are allotted to each characteristic in the following structure: 6 P a g e

number of parcels For the St. Louis County Market Assessment, points are assigned to each residential parcel, for each of the (4) housing characteristics, creating a 12 point scale (3 max points * 4 characteristics = 4 12 point scale). In the summary Potential Market for Residential Energy Retrofit Upgrades in St. Louis County, per parcel points are aggregated to the zip code level. DETERMINANTS OF DEMAND When viewing the charts below, look for zip codes with more green area to identify the concentrations of high demand across the County s zip code areas. Year of Construction 1 : The year a property is built is one key determinant of potential energy and cost savings. Newer homes, especially those built within the last decade, are more likely to have energy efficient appliances, while very old buildings, such as those built before 1940, and may be difficult to retrofit. 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 RED: Low Demand: Worth 1 Point There is very little potential for dollar and energy savings. YELLOW: Medium Demand: Worth 2 Points There is potential for dollar and energy savings, but specific retrofits would not increase energy efficiency as significantly as in High Demand homes, meaning energy bill savings for retrofits would be relatively low. GREEN: High Demand: Worth 3 Points A home with this characteristic possesses high potential savings from energy efficiency improvements. Build year for residential housing in St. Louis County, per zip code before 1940 1940 to 1949 1950 to 1979 1980 to 1989 1990 to 2000 after 2000 1 Energy efficiency reference for Year of Construction is Energy Information Administration (2005) Office of Energy Markets and End Use, Forms EIA-457 A-G of the 2005 Residential Energy Consumption Survey 7 P a g e

number of parcels Housing Floor Space (Area) 2 : The size of a home also influences the potential for energy and cost savings. Larger homes are generally more attractive for many types of retrofits (e.g., air and duct sealing), due to the increased energy savings across the entire footprint of the home. However, houses that are very large, such as 4000+ square feet, begin to lose some of the benefits from retrofit improvements. For example, such a large home may have one heat pump for the basement and first floor, and another heat pump for the second and third floor. Therefore, paying to replace these two heat pumps with more energy efficient ones would not provide the same savings opportunity as replacing one inefficient heat pump that serves an entire 2000-2500 square foot home. 20,000 Residential floor space in the St. Louis County, per zip code 15,000 10,000 5,000 0 more than 4000 sq ft 3000 to 3999 sq ft 2000 to 2999 sq ft 1000 to 1999 sq ft less than 1000 sq ft 2 Energy efficiency reference for Housing Area is Energy Information Administration (2005) Office of Energy Markets and End Use, Forms EIA-457 A-G of the 2005 Residential Energy Consumption Survey 8 P a g e

number of parcels number of parcels Heating System Type: The type of heating system also influences the potential for energy and cost savings from retrofits. At the extreme, a home without any type of heating system has very little potential for energy and costs savings. On the other hand, United States Green Building Council research demonstrates that new heat pumps are significantly more energy efficient than older heat pumps. Another basic retrofit is air duct sealing. EPA reports that up to 20% of the air that moves through the duct system is lost due to leaks, holes, and poorly connected ducts. Replacing gas furnaces with heat pumps will also increase a home s energy efficiency. 20,000 15,000 10,000 5,000 0 Residential heat types in the St. Louis County, per zip code Electric hot water forced air - furnace Note: other heating system types include solar, baseboard heat, and electric-radiant Homes with attics: Homes with attics that lack proper attic insulation, or that have leaking air ducts in the attic space, will use excessive amounts of energy and lead to high utility bills. Attics are often one of the easiest places in a house to insulate and present a cost effective energy upgrade opportunity. 20,000 Homes with attics St. Louis County, per zip code 15,000 10,000 5,000 0 no attic has attic BRINGING IT ALL TOGETHER IN THE MAP: The next step in the residential market assessment is adding up points per parcel and assigning each parcel a traffic light ranking. The map on the next page illustrates the number of high demand green parcels per zip code and estimates potential demand for all zip codes in St. Louis County. 9 P a g e

POTENTIAL RETROFITS FOR A TYPICAL HIGH DEMAND HOME To provide a snapshot into the types of retrofit improvements potential loan recipient households would undertake, we used the Department of Energy s Home Energy Saver calculator to create a profile of common improvements for representative high demand households in St. Louis County, MO. Any project recommendations would be based on an audit assessment of cash flow positive or cash flow neutral payback. For residential energy retrofit loans, the monthly loan payment will be equal to or less than the household s monthly utility-bill savings. Please note, the estimated loan amounts assume that the homeowner decides to make all the recommended improvements within the upgrade package category. If a homeowner decided to only take on some of the recommended retrofit projects, the cost and loan amount would be lower. Representative High Green Demand Household in St. Louis County (10-12/12 points): Built in 1964, this home is 2,378 sq. ft., uses an furnace-forced air duct system for heating and has a central air conditioner for cooling. The home s average annual energy bill is approximately $2,343 ($195 per month). Upgrade Packages Upgrade Cost (Range) Annual Energy Bill Savings* Basic Efficiency Package Attic Insulation $1,250 - $1,875 $260 Wall and Crawl Space Insulation $2,250 - $2,750 $250 Air Sealing: 25% air leakage reduction $2,500 - $3,750 $120 Duct Sealing: Reduce leakage to 6% $2,500 $106 Total: $8,500 - $10,875 $736/yr Medium Retrofit Package Attic Insulation Wall and Crawl Space Insulation Air Sealing: 25% air leakage reduction Duct Sealing: Reduce leakage to 6% SEER 14 Heat Pump (4 ton unit) $1,250 $1,875 $2,250 - $2,750 $2,500 - $3,750 $2,500 $5,000-$6,000 $260 $250 $120 $106 $513 Gas Water Heater (62% efficiency) $900 - $1,050 $60 Total: $14,400 - $17,925 $1,455/yr Deep Retrofit Package Attic Insulation Wall and Crawl Space Insulation Air Sealing: 25% air leakage reduction Duct Sealing: Reduce leakage to 6% SEER 14 Heat Pump (4 ton unit) Gas Water Heater (62% efficiency) Clothes Washer (Energy Star) 2 pane Energy Star Windows $1,250 - $1,875 $2,250 - $2,750 $2,500 - $3,750 $2,500 $5,000 - $6,000 $900 - $1,050 $600 - $1,000 $11,000 - $15,000 $260 $250 $120 $106 $513 $60 $146 $184 Cool roof: Solar reflectance $3,000 - $5,000 $29 Total: $29,000 - $38,925 $1,668/yr * Annual energy bill savings are the estimated reduction in energy bill amounts, per retrofit, for the representative home. These annual savings are estimated as cost savings over and above the minimal building code mandated for new units. Accordingly, savings may be underestimated if residential units do not meet minimal new construction standards prior to retrofit.

KEY FINDINGS Zip Code 63017 Represents the Top Target area Using our rating system, the analysis finds that zip code 63017 has over 7,785 high demand residential units for energy efficiency upgrades in a concentrated geographic area. This area presents a big opportunity for program rollout. Ten Core St. Louis County Zip Codes Provide Opportunity for Focused Program Rollout 10 additional zip codes have a combined 32,200 high demand residential units, and are located primarily in and around the city center (63123, 63005, 63128, 63119, 63129, 63141, 63021, 63131, 63122, 63011). Accordingly, the St. Louis Energy efficiency Loan Program could focus its marketing and program rollout in these adjoining areas of the county to increase positive spillover of program efforts to gain homeowner participation. Heat Pumps are a Great Opportunity within the Residential Retrofit Market Homes in St. Loius County almost exclusively utilize furnaces and a central air conditioner to heat and cool homes. Heat pumps are not common in St. Louis County homes, yet present large energy efficiency potential over existing dual furnace / AC systems. The St. Louis County program could focus on heat pump upgrades as part of marketing and promotional efforts, specifically in high demand zip codes with high percentages of homes with older furnaces / AC systems, including 63119, 63122 and 63128. Air Duct Sealing Presents an Opportune Basic Efficiency Upgrade; Attic Insulation and Sealing are Attractive Options in a Limited Market High costs of heating and cooling homes in St. Luois makes basic air duct sealing a cost effective upgrade option for the majority of homes in St. Louis County. Although a small proportion of homes within St. Louis County have attics, within the high demand zones, 32% (20,987 homes) have unfinished attics that will use excessive amounts of energy if left un-insulated and lead to high utility bills. Targeted attic insulation packages to these homes present large potential cost savings to home owners. 12 P a g e