Bacon's Rebellion

Democracy Thrives in Sunlight

Virginia As New Jersey’s Extension Cord

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by

James A. Bacon
in ,

The high-voltage transmission line that Dominion wants to build across Virginia’s northern piedmont would supply six times the electricity needed to accommodate growth in Northern Virginia, maintains a new study conducted by Energy and Environmental Economics, Inc., a California consulting firm. The driving force behind the proposal is to wheel cheap electricity from power plants in the Ohio River Valley to high-cost states north of Virginia.

The study was commissioned by Virginia’s Commitment, an advocacy group that has popped up in opposition to the 500-kilovolt transmission line. Describing itself as “a coalition of concerned citizens, homeowners, landowners, consumers and business people” seeking 21st-century energy solutions, the organization posts a Woodstock address on its website (that’s the Woodstock in Shenandoah County, folks, not the Woodstock of 60s-vintage sex-drugs-and-rock ‘n roll fame), and its executive director is Dave Jeffers, president of Indelium LLC, an Arlington communications advisory firm.

The group has not posted a copy of the study online, but it does hit the highlights in a press release. States the press release:

E3 reviewed Dominion Power’s filing with the State Corporation Commission (SCC) and found that the proposed line has the capability to carry 3,250 megawatts. E3 said Dominion Power quantified the size of Northern Virginia’s overloading problem at 514 megawatts, if the line is not constructed by 2011.

“This review shows that Dominion Power’s filing is incomplete,” said David Jeffers, executive director of Virginia’s Commitment. “E3’s review raises serious questions about where Dominion Power really intends to send the electricity transported over this proposed line.” …

“Dominion Power’s solution is to first buy dirty power from coal-fired generators and transmit that power across 12-story high monster towers that would scar Virginia landscapes and communities,” said Jeffers. “Then the power company would sell a small portion of the electricity to Northern Virginia and ship the rest to urban areas north of Virginia.

“They want to use Virginia as an extension cord to connect the Ohio River Valley with New Jersey and New York,” he said.

Virginia’s Commitment advocates what it calls an “integrated resource portfolio” approach that would include:
  • Upgrading Dominion Power’s existing lines to increase capacity.

  • Developing a more diverse mix of Virginia-based power, including natural gas and cleaner coal sources.

  • Investing in energy efficiency and conservation.

  • Burying the lines in locations along the way, especially in places of scenic, historic, environmental and community importance.

  • Incorporating cost-effective levels of demand-side management.

  • Building a “distributed generation” network powered by wind, solar, natural gas and other sources of energy.

Cool. Sounds like what we’ve been advocating here at Bacon’s Rebellion — although, I have to concede, I didn’t realize it was possible to upgrade Dominion’s existing power lines to increase capacity. Wish I’d thought of that. For what it’s worth, the analysis is very similar to the case made by the Piedmont Environmental Council, which has led the attack on the transmission line so far. (Note: PEC is a major funder of Bacon’s Rebellion.) I’ve asked Dominion for a response to the E3 study. I don’t anticipate it will take them long to get back to me.
Update: In an e-mail to me, David Jeffers is careful not to characterize the E3 conclusions as the result of a “study” or “report,” but rather a “review” of Dominion’s 1,000-page application to the State Corporation Commission.

(Image credit: Virginia’s Commitment.)

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30 responses to “Virginia As New Jersey’s Extension Cord”

  1. Anonymous Avatar
    Anonymous

    I think a big irony in this is that one partial reason those are high cost states is because THEIR environmental groups have been so successful in fighting new plants in New England.

    RH

  2. Larry Gross Avatar
    Larry Gross

    nice try RH.

    You make electricity where the coal is.

    It’s cheaper to make the electricity and move it on power lines that it is to move the coal and then make electricity.

    If you’re talking about nukes instead, I agree.

    but why blame environmentalists when it’s ordinary consumers who would rather use electricity that has environmental impacts rather than cleaner but more expensive electricity.

    If the folks in New England and NoVa would use smart meters, congestion pricing and solar/wind technologies – we’d not need the additional power lines and we’d not need to “take” property either.

    As a property owner – and an avowed environmentalist – whose side are you really on?

    🙂

  3. Larry Gross Avatar
    Larry Gross

    re: Note: PEC is a major funder of Bacon’s Rebellion.)

    well.. that says something about PEC because not every opinion on BR is supportive of what PEC advocates so I guess they in favor of robust dialogue (a good thing).

    So let’s hear it from the Virginia Association of Homebuilders. How about a little funding from those folks?

    or… heck.. Dominion Power for that matter..

    I’m sure both could spare a little money from their “education” efforts with regard to our General Assembly guys.

  4. Anonymous Avatar
    Anonymous

    I was thinking primarily of Nukes, Larry, but I seem to recall hearing of protests over hydro systems, and old coal plants where they brought coal in by ship. It was a long time ago so I don’t recall the specifics, just a general kind of recoollection. I prefaced the remarks saying I think that was part of the case.

    I could be wrong, and the part may be larger or smaller than I think.

    But, If I’m right it just shows that some environmentalism has an unfortunate back yard character, even when the back yard is very large indeed.

    If that turns out to be true, then we need to do a better job of not shooting each other in the foot.

    RH

  5. Anonymous Avatar
    Anonymous

    With a little Google I find the the main power source in new England is still coal, with nukes supplying 25%. New England has a strong history of activism fueled by the success and notoriety of campaigns anaginst Seabrook and Yankee. There have also been protests against coal plants, with a long standing campaign to shut down the fourteen oldest plants were are exempt from the clean air act through grandfathering.

    Not that they are too discriminating, New Englanders have also protested against waste and renewable fuels, gassification, LNG, as well as the proposed Nantucket wind farm.

    One New England coal plant closed after protests was dismantled and sold to Guatemala, where it now powers textile firms making clothing for the U.S. market.

    RH

  6. Larry Gross Avatar
    Larry Gross

    so.. the guys who live where the power lines are proposed are: (choose one)

    * – dues paying Environmentalists who have belonged to one or more environmental groups for years and have fought power lines in many different locations…

    * – NIMBYs who suddenly become “environmentalists” when a line is proposed near them, but haven’t given a penny to any environmental group much less belong to one.

    True/False:

    Environmentalists are in favor of more pollution controls, higher prices, green power, conservation

    NIMBYs don’t give a rat’s behind about the above as long as they continue to get cheap power and the lines don’t come through their back yards.

    I have more…. 🙂

  7. Anonymous Avatar
    Anonymous

    You lost me, Larry.

    I don’t see your point.

    The point I was trying to make is that environmental groups in this area are getting all exercised over this power line proposal which appears to be partially necessitated because environmentalists in New England have been working since the Salem incident in 1977 to export their pollution, and apparently it doesn’t matter what kind of pollution it is.

    I don’t think that is very brotherly of those who are purely working for the cause, don’t think
    it is for the common good, and don’t think it gets us to the least cost solution.

    I think your chose one proposition is a false dichotomy. The answer is probably both of those, plus a few environmentalists who never paid dues to have someone else tell them what to think, and some landowners who don’t give a firkin per fortnight as long as they and their neighbors who “aren’t affected” get a square deal in the end. There might even be a few who are happy to see it happen because for them the choice is between some money and no money.

    Right, wrong or indifferent, I don’t care about their motives, don’t care about externalities: what I want is to see externalities priced consisttently, and with the resultant costs and benefits shared equally in such a way that we get the lowest total lifecycle costs for all concerned.

    In other words, ethical and cost effective environmentalism, which I think is in short supply.

    RH

  8. Larry Gross Avatar
    Larry Gross

    RH – environmentalists don’t stop power plants or power lines.

    They are small in number compared to the folks that don’t belong to the environmental organizations – who ultimately decide the fate of plants and power lines.

    Also, – virtually all environmentalists have argued all along about cost-effectiveness by saying that it is not cost-effective to have the environment subsidize pollution because ultimately the costs to society will exceed the alledged benefits.

    In Chatham Virginia, landowners want to mine uranium.

    How exactly would you go about “proving” ROI on something that make take decades to determine the potential harm from releasing it into the environment?

    Who decided .. initially that Kepone was “ok” to be released and then later on decided that it was a big mistake?

    How about PCBs in the Shenandoah River? 30 years ago .. it was determined to be a “good” ROI but 30 years later it’s not a good ROI.

    See.. you’re advocating the way that pollution was done – 30, 40, 50 years ago and since that time we have learned the hard way that you cannot determine ROI BEFORE you pollute.

    So you’re advocating an approach that is opposed by virtually everyone in the environmental community and yet you still claim to be an envrionmentalist.

    How can that be?

    Is the idea that you care about the environment means that you are an environmentalist?

    If that is the concept – there’s not polluter alive that is not an environmentalist… including the guy who dumped Kepone in the river – right?

    I’m quite sure when that guy was called into court he strongly asserted that he “cared for the environment” and did not know the damage that Kepone would ultimately cause and that initially the ROI seemed very good.

    you tell me where I’m getting this wrong..

    Who pays for cleaning up the kepone in the sediment of the river now?

    Who pays for the folks that ate fish contaminated with Kepone?

    And according to you – once the company was allowed to pollute kepone – they cannot later be stopped from polluting because it is a granted “right” that would be “taken”.

    RH.. I gotta tell you something you probably already suspect.

    This is probably not a single environmentalist in the entire state of Virginia that would agree with you on this approach to “environmentalism”.

    Would you not agree?

  9. Larry Gross Avatar
    Larry Gross

    meanwhile…

    ..”Toronto Hydro is extracting and collecting hourly interval residential data from the system daily. They are installing and reading interval data from thousands of additional smart meters each week as part of their smart meter expansion plan.

    The Ontario Smart Metering Initiative was designed to help meet electricity demand challenges in the province.”

    http://uaelp.pennnet.com/display_article/309856/22/ARTCL/none/none/1/Toronto-Hydro-installs-over-345K-smart-meters/

    this would seem to be a perfect win-win. Consumers save money. They don’t have to build more power plants and jobs are created .. making environmental widgets (smart meters).

    One would think.. at the least that any proposal in this country to expand plants and powerlines would have as a separate option – the use of smart meters instead of expansion.

    and perhaps the right direction would be a combination…

    This powerline deal is all about money for investors.. and we are the willing chumps…

    this is the same deal as oil.

    The wealthy is this country make money selling oil and electricity.

    It is blasphemy to talk about conservation… bad for business..

    think of all those 401Ks that would stagnate and fester if their oil and utility stocks flattened.

  10. Anonymous Avatar
    Anonymous

    Larry, I agree that there is probably not a single environmentalist who would agree with me, if my views were actually the way you describe them.

    In my life I have “belonged” to various schools and universities and associated sports teams. Also, the American Chemical Society and the Society of Cost Estimators and Analysts, I contribute to several animal protection societies and humane shelters, plus my church.

    My greatest pleasure in life is to take my sailboat, disturbing as little as possible in the process, traveling using only renewable energy, go out in the open ocean, where the environment is brutal, real, majestic, and in your face, and get as far as possible from all the jackasses in the world.

    Unfortunately, my sailboat is made primarily from glass and hydrocarbons, so its inital environmental cost is high.

    I had a wooden (renewable) one once, but I wore it out, and it wore me out. Joshua Slocumb said that the Spray rebuilt to every plank and nail is still the Spray. I can appreciate the sentiment and philosophy behind that, but if you scrap virtally all of a boat and “recycle” it all from fresh material and labor, what really have you saved?

    I have a degrees in environmental analytical chemistry, including geochemistry, hydraulics, and accounting (of all things), a masters in systems engineering which includes studies in energy management and environmental economics. I spent eight years working on hazardous waste remeditation, during which time I came in close contact (wading up to my hips) with varous poisons, caustics, acids, energetics, and radioactive stuff, working on environmental remediation.

    No doubt it will kill me, eventually. If the sun doesn’t get me from sailing and farming first.

    At this point in my life, I really don’t have to care very much what any one else thinks about what I think. I don’t represent anyone, not trying to sell anything, don’t get paid by anyone.

    I view my role here as unpaid ombudsman. I provide data, which anyone here is free to refute. I actually hope that your view point is correct, but I seriously doubt it.

    All I can do is point out what I think are perfectly obvious omissions of fact and logic. I’ve spent enough time in the computer world, and systems engineering world to understand that everything, EVERYTHING, is a trade off.

    You do not believe that, apparently.

    Strangely enough, what I have learned applies at an organizational behavior level, and at a physical engineering level, and at a cost and ROI level, corresponds exactly to what I was taught in physical chemistry and thermodynamics.

    Entropy equals the negative log of work.

    The guy who figured that out waded int othe Bay of Biscay and drowned himself. It is an open question whether it was because of the profound negative implications of his discovery, or because he was unable to convince his peers of its veracity.

    Roughly speaking it translates as “shit happens”

    One of my professors put it to me this way: the three laws of thermodymaics mean that a) you can’t get something for nothing. b) you can only get something for nothing at absolute zero, and c) you can’t get to absolute zero.

    I think, the first time I created an entry on this blog was in response to a Jim Bacon post wich included the phrase “Free, No cost”

    To which my response was, and still is, more or less, BS.

    To anyone. Forever.

    I stand for what I think is ethical, and cost effective, environmentalism. You seem to stand for absolutist ideals. I think such ideals are doomed to fail, eventually.

    As far as I’m concerned, Knock yourself out. I am personlly convinced, that if what you see as “your side” wins, then it is guranteed to lose.

    I advocate no side, other than a fair and well understood, middle, wher the good of all is most liley to prevail.

    You prefer to see me as the enemy: the antichrist of environmentalism.

    Suit yourself.

    ————————-

    I’m not sure how you figure that consumers save money just because you equip them with smart meters that charge them more at the times they are most likely to use energy.

    What I see is that you want to control their behavior, whether or not it is a savings to them. And you claim is that it must be a savings, because no one knwos waht the down side is, as with Kepone.

    In other words, ignorance is necessarily equivalent to infinite savings.

    I don’t buy it.

    Yes, I agree we can eliminate all mercury pollution from coal powered electric plants.

    No, I don’t agree that it is either free, or tht the cost justifies the savings.

    We do not know. And part of the reason we do not know is that pwople like you insist that certain rights and facts are self evident.

    I’m here to tell you they are not. Whether you listen is up to you.

    I do NOT believe that conservation is bad for business. I beleive that BAD conservation is bad for buisness, and just the right amount of conservation is good for everyone. Too little conservation is bad for everyone.

    All we have to do is figure out the right levels.

    I never claimed this was even remotely easy. All I claimed is that we will never find thme if we a) constantly fight, and b) assume we have the only right answer.

    But. We now routinely monitor millions of conversations and data transmissions across the globe. Some times we have more date than we have trusted translaters to analyze.

    Surely, if we applied the same kind of energy and intellect, we could eventually discover the global least cost solution. The unified field theory of humanity, ecology, and economics.

    We will never get there if we start with “You have no right to cause me external damage.”

    The way I see it, your claim is that consumers save money if you charge them more. Building widgets puts the big bad power companies out of business. And it kills the 401k’s that people have invested in for their whole lives, but thats OK because now they can have jobs buiding widgets until they are ninety.

    All we got to do to accomplish this disaster is to build 400,000 wind generator widgets weging 150 tons apiece and occupying space equivalent to the state of Maine, plus the capital cost and maintenance, minus the cost of puttin out of work the coal miners and power plant operators, and retraining them as windmill technicians, not to mention the widley dispersed locations of allthese windmills which might require some travel.

    No doubt we will do that by Metro.

    And all of this is “Free, No cost”

    My argument is pretty simple. If you and I (and by extension everyone else) spent less time arguing, and more time figuring out what the costs realy are are, and which side of the equation they belong on, we would make a lot more progress with a lot less pain, angst, and anger.

    I don’t see any point in railing about money for investors. The bottom line is that anyone who isn’t totally in debt, anyone with a 401k, a bank account, or a mortgage with equity is an investor. What is the possible benefit of railing against them and profits?

    I just don’t get it. They are us. It is an argument dumb beyond stupid.

    Yes, the wealthy make money selling oil and electricity. They also benfit from using oil and electricity. Them is us and we is them, to varying degrees.

    Get over it.

    What I think is blasphemy, is the idea that conservation can be bad for business, and good for people. Conservation has to be paid for, and that takes business.

    Dues paying conservationists get their dues from profits.

    When you said “think of all those 401Ks that would stagnate and fester if their oil and utility stocks flattened” I suddenly realized your outlook is hopeless.

    Think of all those people (like yourself maybe) who were wise enough to invest every penny they could get their hands on — in solar, or wind.

    They might clean up. I hope they do, and I hope they wind up in the right place and time in my (not mine really) equations.

    How much have you got invested in solar and wind? How about wave energy? None? Maybe you should reconsider how you spend your dues.

    This is our last conversation, Larry,

    Good Bye.

    PS

    I doubt it means anything, but, compare your blog profile to mine.

    A fact is a fact. All we need is enough of them, and a lot less opinion and dogma.

    RH

  11. Steven Lowrie Avatar
    Steven Lowrie

    One of the most unfortunate facts that never really gets out there is that residential energy demand can be so easily and cost-effectively reduced, if only some government level, or energy companies would commit to funding the education of homeowners. My experience in VA and 40 other states between 1993-2000, involves over 50,000 existing homes and individual home energy savings ranging from 25% to 65% (perhaps an overall average of 35% could be assumed), for an investment in energy efficiency improvements of no more than $8k (this was rolled into a first mortgage on the basis that the monthly energy bill savings exceeds the incremental mortgage cost). In all 50,000 cases, savings were way ahead of improvement costs.
    The Energy Efficiency Mortgage (EEM) products that are still out there today could make a huige difference to our need for energy, foreign oil etc, etc – and in every case it’s a no-brainer for the homeowner. Their net costs go down, comfort increases as does indoor air quality and the value of the home. It’s bordering on criminal that we miss 8million chances every year (the number of mortgages written on existing homes in the US annually), to improve our most inefficient housing stock. This is not rocket science – just building science.

  12. Larry Gross Avatar
    Larry Gross

    I completely agree.

    The problem is that in doing this that Dominion will sell less electricity and make less profits.

    and Dominion has Va (apparently) by the short hairs…

    Anything that has a real chance of reducing average consumption is ..

    SO.. NOT on Dominions radar screens.

    Until we can answer the question of why it is in Dominion’s best interests to pursue conservation.. most of the conversation amounts to “nattering”…. right?

    If we want change in Virginia.. we’ve got to do more than beat up Dominion…

  13. Anonymous Avatar
    Anonymous

    “on the basis that the monthly energy bill savings exceeds the incremental mortgage cost”

    BINGO.

    You won’t hear me copmplain about any enviromnmental intitative that can meet that standard, unless there is some other one where the cost difference (ROI) is even greater.

    In this example, the savings goes first to the guy that incurs the cost, and the benefit to the public is less capital costs for production of electricity, meaning more money to spend on something else.

    Over all everybody wins, and no one loses except the electric company stockholders. They were effectively out-competed by the vendors of energy saving widgets. And, even they are still free to go invest in profit producing widgets.

    It is a lot different if you require energy saving widgets, even when they can’t truly compete.

    It is a lot different if one guy incurs the costs and the benefits are widely distributed. Overall its a win, but that doesn’t help the losers.

    RH

  14. Larry Gross Avatar
    Larry Gross

    and how do folks that rent… do this?

    shouldn’t the savings go FIRST to the person that uses less and cuts back on their useage?

    If there is no benefit in cutting back .. why would they?

  15. Anonymous Avatar
    Anonymous

    That’s an interesting question.

    I have an article that shows how ROI, properly applied, would support the argument that power companies are not paying their full costs, and if the proper taxes were applied, it would make renewable sources much more competitive.

    So here is a guy using my methods to make your argument, and he does it pretty well. I think there are a few convenient omissions and some things not quite fleshed out, but, he is on the right track.

    He points out, for example, that one of the pollution costs for a coal plant is that related to making the steel for carts to haul the coal. Notice, this is similar to my claim that you need to consider the pollution associated with manufacturing glass before you can say solar is pollution free.

    He also points out, that once the power plant sells power to another industry, that power (and the pollution associated with it) becomes an input to the other industry. As you would say, industry B is subsidized by getting power from A and not having to pay the pollution costs associated with it.

    In other words, as far as the power plant is concerned their responsibility for their pollution is limited to the pollution caused by their own production process. The subsequent users are responsible for their added value pollution, pluss whatever they “got for free” from the power plant.

    I know this sounds crazy, but it is the accepted method. The value of it is that now, the subsequent industries may have a better or cheaper way of reducing pollution than the power plant had. Overall you wind up with a much more cooperative way of reaching the lowest overall net social cost, as opposed to just sticking it all to the power plant up front.

    So, to some extent, Dominion is (or might be) correct in arguing that this is not their problem alone.

    But, this also aplies to the homeowner, who buys power but isn’t producing anything. Exactly as you say, his costs are subsidized to the extent that he isn’t paying the full costs of electricity.

    The going in argument is that this global problem is so serious that we would benefit by eliminating it. Therefore, if the homeowner is an environmentalist who concurs with that argument, then he ought to believe that it is in his interest to do whatever it takes to eliminate his portion of the damage. And whatever he does do, he automatically gets a proportional benefit from.

    So, if the argument is that the benefit is reducing pollution, why wouldn’t anyone cut back voluntarily, or install widgets voluntarily? What more incentive is needed?

    Maybe the reason is that the going in argument isn’t as persuasive as those who promote it believe it is. And a large portion of the article describes exactly the kind of data collection issues you and I have so politely discussed. The author admits it is a huge problem. And he introduces some factors that even I had not considered. He points out that the cost of pollution is not the same everywhere: it is the locational cost argument in reverse. This complicates the ROI calculation enormously.

    He also points out, as I have, that eventually the cost of solving the problem is higher than the benefits that a slightly more optimum solution would provide. ROI rules aplly to the application of ROI rules, too.

    Total costs equals cost of applying ROI plus costs of NOT applying ROI.

    I though you would enjoy that.

    So, you have to make some simplifying assumptions, and apply some limits to how large the system of payors and beneficiaries is. Not everybody gets to claim damages, in other words.

    And, he has afew interesting things to say about how all of this depends ultimately on property rights.

    That is where the argument gets down to landlords and renters, and what the value of various kinds of cost accounting is. (some people see one side of the ledger and just claim that the other side is getting a subsidy).

    In fact, it is a lot more complicated than that, and we shouldn’t expect simple solutions.

    RH

  16. Larry Gross Avatar
    Larry Gross

    RH – it’s much simplier and much more fair to charge people for what they use.

    to be honest.. I find your reasoning on these types of issues – convoluted in the extreme.

    Your basic theory seems to be that everyone is entitled to a subsidy because.. the idea of charging what it costs to provide something is “very complicated”.

    If you were in charge at WalMart – I strongly suspect that milk would be 25 cents and hammers would be $88 and there would be 3 pages of “explanation” for each product as to why it cost what it did and further than milk at the 7-11 was not priced properly and that hammers at 7-11 for $5 were wrongly subsidized.

    🙂

  17. Anonymous Avatar
    Anonymous

    It is not my theory. It is the accepted practice in determining environmental costs, as well as a lot of other stuff. It really isn’t all that hard compared to a lot of things we routinely compute.

    If you actually do as you suggest, charge people for what they use, heads will keep popping up like moles, each trying to reduce their costs by claming that so-and-so isn’t paying. It turns out that if everyone pays for what they use, we soon discover that a lot of people are using things they don’t pay for.

    We have a lot of offsetting “subsidies” but it is convenient only to see some of them in order that one side or another gains an advantage.

    What ROI does is point out that such an advantage is illusory and counterproductive. However, if you cannot get the players to agree that such a situation is possible to begin with, then the whole exercise is pointless.

    If you can get them to agree, then they implicitly agree that too much advocacy is as bad as too little. The whole idea is to get everybody on one side so they are all working for one best solution.

    Since ROI has no political agenda, it is a useful tool for promoting non-partisan improvements. But, even then, determined partisans can attempt to corrupt the process for their own advantage, which only indicates that they still do not “get” the process.

    Like I said, this author uses ROI to advance your argument, and does a passably good job of it. After I get through digging through it, I’ll post a reference.

    RH

  18. Anonymous Avatar
    Anonymous

    I think Steven Lowrie is exactly on target, and what we need is a lot more of that kind of thinking and that kind of result.

    I have to ask one question though.

    “In all 50,000 cases, savings were way ahead of improvement costs.”

    Does that mean that in every home you will find that potential monthly savings savings will exceed amortized costs? Or does it mean that the other case either wasn’t funded or didn’t make an application?

    I’m not suggesting this is wrong, but when I hear a statement like that it sounds to me like “The new large quart size.” Or like the AFT statement “In every case studied, residential costs were shown to cost more in services that the tax revenue generated.”

    There is also a hidden costs here. If you roll those costs into the mortgage, you assume the money will be there to make the payments out of the savings in the energy bill. That might not be the case, if the money is frittered or other costs rise.

    You can put on more sweaters and cut back on the heating bill, but it is hard to cut back on the mortgage. Now you have the whole house at additional risk and you reduce your options. If you decide to bail out, you may find that the investment in additional caulking, and hot water system insulation isn’t very apparent to some potential buyers and you still have that additional $8k to eat.

    Even I agree this is a nit, and one that shouldn’t be that way in a perfect world, but I bring it up because nothing is without some trade off.

    RH

  19. Larry Gross Avatar
    Larry Gross

    …”hard to cut back on the mortgage”

    really! could have fooled me… cuz apparently a whole bunch of folks went belly up recently…

    see .. that’s what happens when you use someone elses money and then act like it’s a gift instead of a debt.

    you can go to the mortgage folks with your ROI story.. I’d love to be there when you make your case especially when you offer them all those links to the economists who support you.

    🙂

  20. steven lowrie Avatar
    steven lowrie

    …maybe I could clear up the question about the 50,000 homes.
    These were all analyzed under the national Home Energy Rating System (HERS), and a report provided that complied with the terms of the Energy Efficiency Mortgage (EEM) programs of FHA and Fannie Mae. Each of these mortgage programs is slightly different but with the same principle, i.e., that the present net value of the energy savings resulting from the package of recommended energy improvements exceeds the incremental mortgage cost.
    Under these loan programs, it’s possible to get (without increase in downpayment, qualification or appraised value),

    – in FHA’s case an additional $4k or 5% of the value, to a max amount of $8k
    – under Fannie, (I think now) up to 10% of the value

    They each have slightly different formulae for the PNV calc, but they’re based on the same math.

    In the cases I was involved in, the PNV easily exceeded the incremental cost. It was kind of like..”give me $10 each month and I’ll give yo $20 in exchange, no strings.’

    Between the amount of money available and the typical housing stock that was improved, it was really no problem to qualify for the EEM and typically caulking and sealing (of the house and ducts) and some optimization of attic/floor insulation and/or hot water system, gobbled up the money.

    Of course, having completed those improvements, it gets progressively harder to satisfy the payback parameters for other things you might want to do (like new heatpump, windows etc).

    Under these programs, there’s no imperative to take all of the EEM money available, but in almost every case that’s what was done – because the deal was so good versus energy costs.

    There were occasions where under FHA the amount available could be stratched a little by using a little known weatherization program in addition to the EEM.

    Incidentally, there was a study commissioned by EPA and conducted by the National Appraisal Institute concerning valkue versus energy efficiency. It concluded that for every $1 of annual energy savings, you could raise the appraisal by between $15 – $25 depending of region. the AI instructed their members to take this into account when dealing with such EEM cases, but I have no clue as to if any appraisers listened – or if the later value on resale reflected the survey. However, I do know that from another survey, this done by NAHB – when you factor out the usual ever-present and obvious first demands of a home buyer (location, schools, #bedrooms needed etc), the next 3 are comfort, safety, savings.

    I believe that in these days of constant increases in energy costs, there will be little problem for a homeowner realizing his investment in sensible improvements – especially when his first cost was only the tax-deductible interest he paid on the mortgage for that small part of the borrwing while he lived in a better house.

  21. Larry Gross Avatar
    Larry Gross

    I like it – a lot.

    I would support this as not an offer but a requirement for any mortgage in which the Feds are involved either in the initial money or the interest write-off.

    Why can’t solar panels also be required if they pay back more than they cost?

  22. Anonymous Avatar
    Anonymous

    They cut back on their motgage, and the hard part was that they went belly up.

    That was becasue they got sold something they could not actually afford. If you get sold conservation you cannot afford, the result will be the same.

    RH

  23. Anonymous Avatar
    Anonymous

    “Why can’t solar panels also be required if they pay back more than they cost?”

    If, Larry, If.

    And the other question is when. If they pay back in two years, its a no-brainer. If they pay back in 40, I for one, am not interested. I would fight that kind of “requirement” tooth and nail. It would be a huge subsidy for solar manufacturers, who are mostly in Japan.

    All I ask is to show me the real numbers.

    RH

  24. Anonymous Avatar
    Anonymous

    Steven,

    I agree with all you say, I’m just pointing out that everything has another side. In our zeal to promote a good deal we may blind ourselves to other issues.

    If you have a house that has a lot of cracks due to settling, plugging the cracks with caulk temporarily, and borrowing money to do it, might not be the best idea.

    Making the logical leap that Larry does, strikes me as crazy, in comparison.

    RH

  25. steven lowrie Avatar
    steven lowrie

    The general state of existing housing stock in the US – those homes say, 20 years old and older – is shocking in energy efficiency terms and stems mainly from code ‘unenforcement’ during construction, but also of course to some extent, just from age and deteriorating equipment or construction materials.
    HERS and the EEM programs require the best bang for the EEM buck – so, within what is ‘borrowable’ in the EEM, you do the improvements in order of biggest savings first, and so on.
    In our housing stock, the proven biggest energy efficiency problem is that homes leak….and leak big! The story is that in the average older US home, if you put all of the holes, cracks, openeings in that home in one place, it would equal a 3′ x 3′ window being left open 24/7.

    Average whole house leakage in some newer (<15 years old) homes could be as much as 0.9 NACH (natural air changes/hour…and there’s a whole testing and calc protocol for all of this), and oler homes could be way over 1.0. The code standards have required nearer to 0.35 for some years – or even less if there’s mechanical ventilation in say, and ICF home – and many new homes are now built to a very much tighter standard (which may bring a whole host of other problems with it).

    The typical % energy savings gained by just reducing the NACH to a more reasonable (and still safe from an IAQ point of view) level, can be staggering. Sealing ducts is next and so on as I said in a previous post.

    As other rprofessionals are typically conducting other inspections (home inspection, maybe structural, certainly appraisal), there’s little chance of performing energy upgrades that are diminished by an ongoing property condition – or you just would not do them based on the findings of the other professionals if that were the prudent way to go.

    The mortgage borrowing on EEM is in no way onerous ($7 or so per $1000 borrowed?), and is completely funded (and more) by the energy bill savings which begin the day you make the improvement and last for as long as you live there, so cashflow improves along with comfort – and we’re talking about a very modest % of loan increase here within teh EEMs.

    The various Feds did look at making a HERS energy inspection mandatory, but it is still a voluntary program, and FHA at one time had a disclosure (one of several hundered per loan it seems), that borrowers had to sign, saying they’d been made aware of the EEM availability….of course, most lenders just skimmed over that, or said it wasn’t available locally, or that it was a bad idea etc, etc just so they didn’t have to mess with it. Those few loan officers who did tell folks about it had great success in extending their relationship with their borrowers and business referral sources – but there was never any success in getting lenders at a corporate level to commit to EEM and to incentivize their people to write these loans…pathetic really. I wonder what Bank of America will do with their soon to be unveiled ‘green’ mortgage…from what I hear it’s merely a $1000 discount on closing costs for an Energy Star home…..big deal!! If they really wanted to get into doing something that made a difference, the existing home market is the place…and at least 90% of the loans made every year…..duh!

    I did a white paper for DOE back in ’94 that projected the impacts of various levels of upotake of EEMs on existing homes nationally….emissions savings, extra loan business, jobs created etc, etc….and the numbers were, and still are staggering. If we as Americans had any real commitment to doing the smart thing – never mind the ‘right’ thing or anything environmentally positive or global-warming related, we’d have already found a way to make these energy inspections mandatory – not the energy improvements, just the inspections – then people would have a free choice and in my experience would almost 100% make the improvements if they could be funded in the mortgage (even within the existing EEM limits would be fine).
    Now, that would be a walk-the-walk statement that might begin to redress the pitiful state of world perception of all of us.

    There is no catch, no self-serving interest in these programs, no sale of unwanted stuff based on no building science “…. oh yeah, install these windows that I have right on my truck here, and you’ll save 25% off your energy bill…” Horse puckey!

    I’m sick of mediocrity in so many things, and I think we’re trading in competence for incompetence.

    Making the energy efficiency of homes transparent as part of the house buying process is these days just as important as any other inspection that may be done at that time…..and possibly more essential.

  26. Anonymous Avatar
    Anonymous

    Gee Steve,

    Right on, “If we just do what is smart…. ” I agree, EEM’s never lived up to their potential, and I think you are correct about truly smart things beginning to redress a pitiful satate of public perceptions……

    It is the sales pitch I have been making here: stop the horse puckey.

    On the other hand,

    You would have a fit if you saw my hundred year old house. It’s a leakage disaster. I gave up worrying about it, though, because my wife is prone to have the heat or AC on in one room and windows open in another. She’s a fresh air fiend.

    Since I have steam heat (horribly inefficient, but really comfortable), I don’t have to worry about ducts leaking.

    I’d might like to re-insulate the steam and hot water pipes, but since what’s there is probably asbestos, I don’t think I want to know.

    If it is asbestos, the compliance regs would probably make it cost effective to tear down the house and replace everything, plus re-train the wife.

    Some times there are things that need to be done, are cost effective, and yet still not worth it. ;-).

  27. Larry Gross Avatar
    Larry Gross

    Each home, not meeting standards, becomes a 30-year dis-investment in energy efficiency and each one contributes to the need for more power plants and more power lines – both of which impose significant external costs on even those who build energy efficient homes.

    As a result, we have more pollution, more expensive electricity and more property “takings” for the power lines.

    But boy would it be a potent issue if when a house finally went back onthe market – it would require a new OP that would depend on standards being met.

    The government could front the necessary capital.. and the buyer would pay it back over time – essentially paying back the incremental cost of the energy “widgets” rather than for the energy use.

    Of course this has the added benefit of providing jobs for those that build and install the energy widgets…

    looks like a win-win-win to me.

    who loses here RH?

  28. Anonymous Avatar
    Anonymous

    Why is it your idea of a win-win always involves the use of government force to take money out of someone else’s pocket?

    Sure, why not, let’s have new occupancy permits and new proffers every time someone moves. Some how I doubt families that have been in one home for twoo hundred years would have a problem with that.

    You still don’t get it. Any idiot should be able to understand this.

    If, I said if, the government requires people to build and use widgets that do not in fact provide a real cost benefit, then those people will be worse off AND most likely create more pollution than they would without the widgets.

  29. Anonymous Avatar
    Anonymous

    Where is the win-win, if the government forces me to install tenK worth of blown in insulation, and caulking, and the wife still sleeps with the window open?

    At least Steven understands that only the audits should be mandatory.

  30. Larry Gross Avatar
    Larry Gross

    no one would force you to do anything.

    The concept behind the government insuring your mortgage and allow you to write the interest off is that in doing so, it provides benefits.

    Many/most subsidies come with strings attached.

    You are not force to do anything but if you want something – the may ask for a quid-pro-quo arrangement where .. for essentially giving you money – that they want you to help save money for others by using energy efficient products and materials.

    You are free to choose what works for your own particular circumstances.

    Your complaint is a lot like being upset with the auto dealer because he is “forcing” you to buy a spare tire with than new car…

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