How Sealed fixes home efficiency (2/3)

In the last two blog posts, we focused on how Sealed makes home efficiency a more certain prospect, and why this certainty is so necessary.  

Today, we’ll talk about simplicity.

Put simply (no pun intended this time), the experience of home efficiency is extremely confusing. Homeowners are often given extremely technical and jargon-filled documents with which to base their decisions. 

To pick just one example, many contractors in New York are required to give homeowners a Comprehensive Home Assessment (CHA) report produced by a company called Conservation Services Group that contracts with the state. Based on some combination of company DNA, institutional history and state requirements, the CHA report is anything but simple and straightforward. No fair-minded person can say these were designed to maximize homeowner understanding. 

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Among the many things you would need to understand (or have explained to you), are the following terms:

  • cfm50
  • SSE
  • COP
  • Estimated payback
  • SIR

And that of course assumes that you actually read the dense print. 

In fairness, many contractors do not rely on these state-mandated reports and produce their own, manually generated reports, but that can sometimes create even more confusion, with two reports instead of one. Plus it is yet another administrative step that takes away from profitability. 

And while CSG or similar companies may not be in the best position to produce these types of reports, in fairness to them, they are trying to meet different requirements across the many states in which they operate. Each state has its own particular requirements of what to include, which leads to including every piece of possible information rather than prioritizing what is important and focusing on good design.

But no matter who is to blame, there is obviously a problem here. How are homeowners supposed to make decisions on thousands of dollars of home investments based on jargon-filled text?

So how can Sealed help?

First and foremost, Sealed believes in bringing clarity and transparency to the choices homeowners must make. This is done by providing software to the contractors that are performing the home energy assessments and proposing work to make the home more efficient. This software will make the assessment results and choices much more clear. 

Unfortunately, we can’t show you what this software looks like yet because we are still building it, but we will share them in future blog posts. 

Secondly, Sealed believes that the experience after efficiency improvements should be just as good, if not better. Right now, homeowners receive very little follow-up information except for a bill every month. Good contractors will keep in touch to make sure the homeowners is still happy, but by and large folks are left to try and figure out whether they came out ahead. 

Sealed focuses on improving the post-improvement experience, explaining to homeowners in clear terms why their bill changed and how much they saved. We also provide helpful recommendations on how to stay comfortable, and explanations of why energy prices have changed recently.

Below is an example of the monthly energy report that homeowners receive every month:

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Compare that to your existing energy bills, which are notoriously complicated and confusing (see here). This again comes from a state regulatory process that does not put homeowners first, but rather makes the homeowners try to think like regulators and utilities (more on that in later posts).

In summary, Sealed focuses on putting the homeowner first in every single aspect of the efficiency process. We not only guarantee the economics, but also make them simple.  

Next we’ll talk about how complicated it can be to actually receive efficiency improvements, and what Sealed is trying to do to help (hint: it’s the hardest part).

How Sealed fixes home efficiency (1.5/3)

I was planning on writing about the confusing nature of the energy process, and how Sealed helps simplify things, but got derailed poring through a fascinating analysis of actual energy efficiency projects in NY.

An enterprising contractor in Rochester, Ted Kidd, published the results of a massive FOIA request, which shows a wide range of results from contractors in terms or promised and actual home air leakage reduction.

The data comes from over 12,000 actual projects, and includes data on the air leakage tests both before and after work is completed. While this is not a true proxy for actual energy savings, it is about as good as it gets without getting real billing data (I’ll bit my tongue on that issue for now).

This data reinforces the point made in the last post about the current uncertainty in projecting actual energy savings. While some contractors deliver more actual air leakage reduction than promised, the majority realize less than promised. 

I had the opportunity to speak with Ted this afternoon, and he impressed upon me how important it is to bring transparency and aligned incentives to the energy efficiency industry. 

Many contractors are over-promising based on arbitrary state standards (more on that in a later blog post), and some just do bad work. But whatever the reason, homeowners end up getting screwed. 

At Sealed, our goal is to do that contractor and software vetting for you, so that you can be 100% confident in the savings we are able to guarantee. You shouldn’t have to FOIA state data to determine whether the savings promised will actually be there. 

We’ll be back later this week or weekend with the promised post on simplicity, but for now I encourage everyone to read through Ted’s post. You can also download the raw data. 

How Sealed fixes home efficiency (1/3)

In the last post (http://tmblr.co/ZLbA7tdXu7I2) we talked about what is wrong with the current home efficiency process. In short, home efficiency is an uncertain, confusing and complicated process.

So in order to increase the number of efficient homes, Sealed aims to make home efficiency certain, simple and easy. It’s not rocket science, but can be pretty hard in practice.

Sealed is focusing first and foremost on making home efficiency a more certain prospect, which what the rest of this post will focus on (we’ll talk about the rest in future posts).

“Cost” is by far the top reason people choose not to upgrade the efficiency of their home. This is usually code for not believing that the promised energy savings will actually pay for the costs over time.

We’ve heard from countless homeowners who say they can’t afford efficiency upgrades. And those that do improve the efficiency of their home do not feel certain of the savings benefits, with quotes like this:

“We try to wash when we can do a full load, it’s supposed to be more energy efficient, I hope it is. We generally just do the normal wash cycle, delicate for delicate items. That’s about it. Dryer’s also the same model. Front loading’s more efficient so, I guess they are [energy efficient].“

"We used to have a metal door which was from 1978. It is an oversized door (96 inches wide) and I’m not completely sure if this is the reason but my electric bill went down by around $35 last month compared to last year at this time.”

“At least it has the little Energy Star that makes me feel better about it. The little logos on the appliance means I’m trying to be good.” 

The main reason people don’t feel certain about the benefits is because efficiency is not a “thing”, easily measured. By definition, efficiency is the lack of something, which is much harder to determine. In contrast, it’s relatively easy to measure solar energy, which is producing actual kilowatts of electricity. Efficiency, on the other hand, produces invisible, though just as valuable, “negawatts”. 

The traditional approach to calculating these negawatts is through a process called “Measurement and Verification”, or just M&V for short. M&V usually relies on engineering assumptions based on lab tests and/or standards. At best, M&V can tell you how much a home with particular characteristics will save on average. But for anyone who has seen their actual miles per gallon compared to what was advertised, you know that “actual” results are probably not what is claimed.

 “When people started looking into what they’re actually getting for their gas mileage, they’ve said that their car doesn’t even come close to [the sticker]. Now they’ve redone it and you’ve seen the labels on new cars drop dramatically. If you take out a new car, you can even get a rental car, that new car in the show room, we’re still about 15-20% off that revised sticker, so we don’t really know who’s conducting the test and what their variables are on the test.” 

Very rarely does M&V incorporate actual data, and sometimes the claims can be literally criminal. At Sealed, we have a radical belief the efficiency claims should be based on what actually happens. And we’ve built our business around putting our money where our mouth is. 

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Instead of homeowners taking the savings risk for home efficiency, Sealed takes the risk and splits the savings. We do this by actually paying the post-efficiency energy bills as well as the ongoing financing costs of the upgrades. And then we send a single Consolidated Energy Bill each month based on your past (actual) energy usage plus your guaranteed savings. Here’s a simple graphic of how it works for a home with a $3,000 annual energy bill:

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To keep the compact fluorescent lights on here at Sealed and keep investors happy, we take a portion of the savings and give you the rest. 

And while the process for calculating what your bill “would have been” can be complicated, Sealed is literally able to show how our approach would have calculated your past year’s bill, so you can judge for yourself if we’re accurate or not

With Sealed, you can therefore be confident that savings promised will be savings delivered. We can’t promise the energy use will actually drop as projected, but if we’re wrong, we lose money, not you.

We don’t think we have all the answers yet, of course, but we feel strongly that it is time for someone to step up and be accountable for actual energy savings. So if you want honest, transparent and real savings, look us up.

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Sealed’s business model in a phrase…“millions in the ceiling”. Our goal is to unlock those wasted dollars leaking out of your ceiling, and put them into your pocket. What you do after that is up to you…

How home efficiency currently works

Here at Sealed, we aim to completely change how homes pay for energy efficiency improvements. Most people know that these improvements can save money, improve comfort and health, and reduce dangerous pollution, but most people still don’t undertake them. 

Why?

Well, put simply, it’s a long, confusing and complicated process with uncertain benefits. In the real world, people drop off at every stage of this process, which dramatically reduces the potential for win-win home efficiency investments. 

Here’s the typical 10-step process a typical homeowner has to go through to significantly improve the energy efficiency of their home:

  1. Find a qualified contractor. Most people find contractors through referrals from friends, family or neighbors. If you don’t get a referral, however, there is almost no guidance from the government, utilities or other sources about who is good or bad. Oh, and some contractors will only do an energy assessment, while others will also do the actual work. And most will do it for free, but some won’t. 
  2. Schedule an energy assessment. Once you find your contractor, they need to schedule the energy assessment. Many contractors will schedule many weeks or months after you call, by which time you may have forgotten why you wanted the assessment in the first place. 
  3. Undertake the energy assessment. When the contractor gets to your home, they do a lot of cool technical tests of your home’s  efficiency. But unless the contractor happens to bring a sales professional along (very few do), you may not actually know what they are doing and why they are doing it. You just see a guy (not too many women in the industry unfortunately) walking around with a clipboard (tablet if you’re lucky), inputting information, aiming some sort of infrared gun at walls, and putting on a strange inflatable door.   They’ll also probably ask you for your utility bills and/or account numbers. Once the assessment is complete, the contractor will pack up their stuff and say they’ll be in touch in a few weeks.
  4. Pre-qualify for financing. This sometimes happens later in the process, but a good contractor will try and pre-qualify you for financing (typically from government or utilities) during the energy assessment process. This means typical loan paperwork, listing income, tax return info and sometimes mortgage payment records. 
  5. Receive the assessment report & proposed work scope. Assuming you are lucky enough to have a good contractor, you’ll receive the energy assessment report and proposed work scope 1-2 weeks after the assessment. If you’re not lucky, you may be waiting a few months. 
  6. Review the report and scope. Once you receive the report and scope (good contractors will walk you through it in person, but many will just send it to you over email or snail mail), you may (or may not) be surprised to discover that it is filled with technical jargon, language that obviously comes from a government bureaucrat, and a confusing layout. And that’s before you get to the end and see the price tag, typically $7,000 to $15,000. Good contractors will also point out the benefits, particularly the energy savings. But while the costs are guaranteed, the savings are projected (more on that later).
  7. Finance the improvements. While some homeowners choose to pay out of pocket for the “home performance” (that’s the term used in the industry) improvements, most choose to finance through existing government and utility programs. Most of these financing programs are unsecured (e.g. not tied to the mortgage), and have relatively attractive terms (7+ years, <5% interest rate) with few or not pre-payment penalties. That’s the good news. The bad news is that the official approval can take many weeks (4+) and require even more information. 
  8. Schedule and install the improvements. Once your home is approved for financing, the contractor then schedules the actual improvements. A good contractor will schedule within 2 weeks, but some may flake and not schedule anything for months. The construction process typically takes 2-4 days, with minimal disruption because most of the improvements take place on the exterior of the home and in unused parts of the house (attic, crawlspaces, etc.). Good contractors won’t track in mud, swear, or smoke near the home – bad ones will. You may not be able to avoid butt cracks though :). 
  9. Enjoy comfort and health benefits. If done well, your home feels different immediately. You never realized until now how uncomfortable your home was before. Those drafts are gone, the air feels cleaner and there is less noise. There might not be any visible improvement, but you can definitely feel the difference. Yay!
  10. See the energy savings. Whoops! While installing efficiency improvements does in fact save energy, actually seeing those savings can be very difficult. Your bills change each month for all sorts of reasons based on the weather, energy prices and your own behavior (or your lazy uncle’s TV-watching behavior or Thanksgiving). Contractors calculate your savings using fairly convoluted software that does not necessarily have any relevance to the real world. The energy models in the software are based on engineering assumptions, which may or may not apply to your particular home. As a US DOE government report put it, somewhat embarrassingly: 

“Presently, audit tool accuracy is based entirely upon conformance to applicable standards, studies comparing tools to each other, or evaluations of  tools against accepted baseline instruments (such as BESTEST.) As the literature identified in this study does not contain any recent comparison of all the tools, the matrix lists the standards, if any, where the tool complies. All of the tools conform to BESTEST or plan to conform to BESTEST-EX with the exception of Green Energy Compass®, which is not a modeling tool. As of this writing, it is assumed that RealHomeAnalyzer® complies with BESTEST but no confirmation has been obtained from the vendor.  It should be noted that BESTEST-EX is still under development.”

In other words, they have no !@#$^&* idea, but have done a lot of complicated modeling that may or may not have any relation to the real world. 

So where does that leave the homeowner?

Since not even the best existing software actually knows how much energy is saved, the homeowner is left with uncertainty as to whether the savings are real. The home is certainly improved, but it is not clear whether they are paying more or less than before. 

For some homeowners, going through this process is still worth it. They enjoy having a better home, don’t mind paying financing costs, and believe in the energy savings. Unfortunately, this is only about 0.1% of homes. For the rest of us, there has to be a better way!

More on that in the next post…