Man, I really hate to write stuff like this.
I just got an email about a new financing program in Connecticut, and I can already see how and why it is going to fail. Dang it. That’s really frustrating. Both seeing the hole, and knowing the pain it will cause programatically, to the homeowners, and to the Home Performance industry.
I like AFC First Financial. They are doing amazing things for Home Performance. They got the first set of Energy Efficiency loans sold on the secondary market (like mortgages are sold.)
They rock. So this hurts me.
Here is the announcement.
The first program in it is for a new inexpensive on bill financing program. That means the payment will be part of the utility bill, not from a separate bank.
I love the idea of on-bill. It’s low risk to the homeowner and more importantly transfers with the house, so they know they won’t have to finish paying a big contracting bill when they aren’t living in the house anymore. But I digress…
I see 3 big issues with this program:
1. It relies on energy savings predictions from contractors to determine down payment.
2. It does not deal with the building shell – insulation and air sealing.
3. The terms of the loans are pretty short.
Let’s tackle those one at a time.
First, relying on contractors to predict energy savings, unless they have some sort of accountability and reward for accurate results, is going to cause trouble.
If I were a contractor, I’d selfishly want to estimate the savings as high as possible. The homeowner thinks they will save a lot, and more gets rolled into financing so I may be able to sell a bigger, fancier unit with more profit margin. (By the way, I’m not saying this is what would always happen, but it is a temptation. The incentive is to lie, or at least bend the truth. That tends to be a slippery slope.)
Second, changing HVAC without doing substantial work to the shell is a fool’s errand. It’s like putting a 4 cylinder in a pickup expecting it to get better fuel economy. It may, by a little, but it will also perform like crap. Home Performance needs both sides of the equation – HVAC AND Building Enclosure.
So this path looks like results will be mediocre for the homeowners, who will still have the same unevenly heated and cooled rooms they did before, plus ice dams, wet crawlspaces, and more.
Third, energy savings, if you’re using natural gas, suck. If you could buy a gallon of natural gas like gasoline it would be $.80/gallon at $.70/ccf, which is what it is in my area.
How many would buy a Prius if gas was $.80/gallon?
Not NEARLY as many as do at $4.
Getting anything to “pay back” in under 10 years with current prices is not an easy task.
Yes, the homeowner has to put something down, but with the incentive to bend the truth from step one, the odds are the homeowner will NOT get what they are promised, which is a better house without increased bills.
This is not the way to market transformation. This is the way to further consumer mistrust and Home Performance continuing to be a joke of an industry.
Harsh? Yes. But true.
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