Michael Chasnow is a Finance Analyst with the Environmental Finance Center.

Although there are dozens of city and state-led residential energy efficiency and renewable energy (EERE) retrofit programs across the country, little research has focused on how individual homeowners perceive these retrofit programs or decide whether to conduct energy efficiency retrofits. Not surprisingly, some programs thrive (such as PA’s Keystone HELP with 6,000+ customers and $40+ mill. in loans), while others flounder. We need to better understand how residential homeowners decide whether to conduct an EERE, from messaging to financing to program process.

Accordingly, with two local partners, AFC First and the Energy Coordinating Agency, the Environmental Finance Center at the University of North Carolina surveyed 440+ residential homeowners in the Philadelphia metro area that are potential participants in the EERE retrofit program EnergyWorks to learn more about key drivers behind homeowners’ decisions to conduct or not conduct EERE retrofits. Below are the three key questions we asked, and some of the key takeaways of the study.

Why do residential homeowners conduct or not conduct energy efficiency retrofits?

  • “Energy and dollar savings” are the key motivator for conducting energy efficiency retrofits. Homeowners that conducted retrofits and those that had not both ranked “Dollar savings through lower energy bill” as the most important factor in deciding whether or not to conduct retrofits.
  • Lack of upfront money and desire to delay retrofit are key stated reasons for not making energy efficiency improvements. 72% of homeowners that had not conducted a retrofit yet plan to within the next year. How can we create the necessary urgency to convince much of this 72% to conduct a retrofit in the near future?

Are good financing options important to whether homeowners conduct these retrofits? What characteristics of a loan product matter most?

  • 40% of EnergyWorks participants used the program’s low-interest loan.
  • 80% of loan users stated they would not have conducted the residential EERE retrofit without the loan. This may indicate that financing is a critical last step for some individuals to implement retrofits.
  • Interest rate was ranked the most important loan characteristic to respondents that did not know about the EnergyWorks program. For the 121 respondents, ensuring “Energy dollar savings are greater than monthly interest payments” and “Ease of application process (e.g., time spent, number of steps)” rounded out the top three important loan characteristics.

How does messaging or program structure affect retrofit adoption?

  • EnergyWorks representatives and home contractors were the top influences compelling respondents to conduct retrofits. Respondents that conducted retrofits ranked EnergyWorks representatives and home contractors as the two most important influences on deciding to undertake an energy efficiency retrofit. This finding highlights the importance of equipping home contractors with EERE program and financing information, because home contractors are often the individuals that meet directly with homeowners considering energy efficiency retrofits.

With all this information, what are the key points that EERE program administers should remember? First, actively engage home contractor networks to improve outreach: these contractors are on the front-line speaking to homeowners every day. Secondly, in communications and marketing materials, stress Dollar & Energy savings, as these two together came out as the top motivating reason for retrofits, both for homeowners that have conducted retrofits and those that have not yet.

And lastly, EERE program administrators need to create urgency. Seventy-two percent of homeowners that had not conducted a retrofit “planned to” within the next year. Marketing literature shows that limited-time promotions and discounts increase customer uptake. In a similar vein, retrofit program administrators should think about how to create time-constrained urgency, whether it be through limited-time free energy audits or tiered financing options dependent on when a homeowner conducts a retrofit (e.g., 2% interest rate through August 2012, and then a 4% interest rate from August to December 2012).

 

You can find the full report here. The author welcomes questions or comments.