December's Last Word focused on "Four Challenges and Opportunities for 2012" (bit.ly/fourchallenges). Here are two more key challenges and opportunities to think about:
Challenge #1: Many energy programs are not working and will likely change. Hundreds of utilities across the country have been tasked by their state's Public Utility Commissions (PUCs) to reduce energy and peak load consumption to help reduce greenhouse gases. For years ratepayer money has funded these programs. The problem is they are typically modeled with a method called "deemed savings," which gives utilities credit for energy that their programs "should" save. Unfortunately it's really just a hope, not actual verification of savings. Sounds more like "dreamed savings!"
Reality check: energy consumption has not been dropping over the past two decades. In fact, just recently some states have experienced higher brownouts due to demand overload.
Opportunity: Measured performance should replace deemed savings. Many utilities and PUCs are becoming disenchanted with the deemed approach and are looking to actually prove reduction in energy, home by home. This could be a big opportunity for HVAC contractors as the utilities and PUCs will need your help to measure and document energy savings through your work. Unfortunately there are already some starting to distort the term "performance-based" to reflect modeled or prescriptive measures rather than basing it on real performance testing and actual saved BTUs.
Prescriptive measures say, "do these things and you should save energy," whereas true performance is measured after the work is done to see if real savings were achieved. The currently stalled proposed 25E federal tax credit is a prime example of this mislabeling, as it describes a prescriptive approach, even though it’s called a "performance-based tax credit." If we can help government understand the difference between modeling and real performance, they might get it right this time.
Challenge #2: Regional efficiency standards could do away with many incentives by increasing minimum efficiency standards. You've probably heard that U.S. Department of Energy is planning to regionalize energy efficiency standards. This will be onerous for manufacturers, distributors, and contractors, and likely raise costs to homeowners.
One proposed regional standard is the 90% minimum AFUE on furnaces sold in northern climates. If this passes, there will be no reason for utilities to give incentives or rebates on gas furnaces — you can't go up from there! This was certainly part of the buzz at the Midwest Energy Efficiency Alliance (MEEA) conference I attended this January. A lot of folks there were deeply concerned about the future of their programs.
Opportunity lies in taking the focus off the equipment rating, and putting it onto delivered performance — this is the product that you, the contractor can uniquely provide. Delivered performance comes from the BTUs that are actually making it into the conditioned space. Delivering HVAC performance requires a combination of properly sized and installed equipment along with properly designed, sized, sealed, and insulated air distribution systems.
There is a lot of confusion and uncertainty out there. You might be thinking, "Great, I invest in training, certification, and tools to comply with these programs, and then they pull the rug out from under me — maybe I shouldn't get involved."
Here's why that’s wrong thinking: These programs were never meant to be permanent. They were designed to encourage different behavior from consumers and contractors who buy and sell energy-related goods and services — that's you — in both cases. This is what folks in energy circles call "market transformation," and "sustainability."
So here's the million dollar question: If these programs were meant to eventually go away after a predetermined time, then why would you put all your eggs in one basket — especially when you know the basket will dissolve eventually?
Do you say, "Well, since the program isn't permanent, I'm just not going to participate?" Or do you treat these incentive and rebate programs as an opportunity to get into a customer's home that you might not have had access to? Once you're in the home you can use your knowledge and training to do the right thing for your customers. Notice I said "your" customer. Once you are in the home, it's your job to take that homeowner from an "energy program lead" to "your" customer, and keep him your customer.
The good news is regardless of what happens, people still need your products and services. Keep improving your knowledge and skills. Stop focusing on just selling boxes! No matter what the "programs" are about, you can still profitably deliver higher quality comfort, safety, home health, and energy efficiency, because it's the right thing for your customers.
Dominick Guarino is chairman & CEO of National Comfort Institute (NCI), (www.nationalcomfortinstitute.com), a national training and membership organization focused on helping contractors grow and become more profitable. Email him at firstname.lastname@example.org or call NCI at 800/633-7058.