Why Today's Green Era May Fail

Much of the debate about ways to create a landscape of green homes today has focused on the new tax credits for residential energy efficient windows, solar panels and geothermal options. Passive solar and other design methods which make more sense have yet to qualify for tax credits. If history is any guide, this is an error that may take us down the wrong path.

Yesterday And Today

To best understand the direction of today’s green movement, let’s remember the first green era, when the Carter Administration offered a 50% tax credit to solve our energy consumption and pollution problems. The most prolific of the tax financed energy saving devices were unsightly rooftop solar water heaters that marred the suburban landscape. Those solar units cost $5,000 or more installed (1983 dollars). So you, the tax payer, financed $2,500 per home. Unfortunately the heaters had a short life span. Over a decade most wore out and disappeared. The good news was the developed landscape looked better without those things … the bad news was the tax payers likely paid billions for systems that quickly failed.

Back then, I too was a participant in this green era. I built a 1980’s state-of-the-art home: Passive solar, earth bermed, with a 10kW Bergey Wind Generator, of which the tax payers reimbursed me $13,000.

With “passive” solar, the sun heats up a dark brick floor in the home, which in turn heats the home on a sunny winter day. In the picture here, you can see the south-facing windows, which allow the sun through to heat the dark tile floors. The bricks were built upon a thick concrete base which stored heat over-night; this is known as the “battery”. No complex systems are needed as the home itself is the collector. It proved to work well.

The City of Maple Grove, Minnesota, where the home was located, had passed a Wind Generator Ordinance allowing a 100 foot tall wind system to be built on a small city lot with just a permit. Perhaps it was the first city in the country with such a ruling.

So we constructed a 100’ tall tower with a 10kW Bergey Wind System with its 23 foot diameter blades. A quarter century before today’s Green movement, we had a “Net-Zero” home (it produced more energy than it used).

The neighbors however, were not enthused, and waged a war against the city, resulting in Maple Grove being the nations first city to repeal a Wind Generator ordinance. Years after the construction, the City made a large offer and bought the generator from me. There was no recovery from the tax laws, so I got to keep the $13,000 credit.

In 1983 this home cost about $121,000. Twelve years later it was appraised at $186,000. It’s architectural oddity severely limited it’s resale potential. In those years of good home appreciation, had it been a conventionally built, the nearly 4,000 sq.ft. lake front home should have been worth a minimum of $350,000. I had lost nearly $200,000 by going green. In fairness the loss was due to the underground construction and lack of curb appeal, and had nothing to do with its passive solar design, which is why we used passive solar again on our new home.

Late in 2008, I found myself building Green again, this time as a requirement of a land purchase I made from the City of St. Louis Park, Minnesota. I had to agree to build to MNGreenStar certification, a derivative of LEED modified for severe cold climates.

This time, in a similar situation to the ‘80s, the housing market downturn coincides with an increase in energy awareness and we have a government controlled by the Democratic Party. We have not found any new Green solutions that simultaneously reduce both initial housing costs and energy consumption. It seems that higher an EnergyStar rating on an item, the more expensive it becomes. The option today still remains to pay more now, for the promise of reduced costs later.

With most Green ratings there is a list of requirements (with MNGreenstar the “list” is 36 pages long in tiny sized fonts) the builder must contend with to earn “points”. MNGreenstar is modeled after LEED which also contains many “social engineering” requirements.

I also had my builder, Creek Hill Custom Homes, apply for National Association of Home Builders “Green” certification. My Certification comes with a HERS Rating of 59. I have no idea what that means but I’m told it’s pretty good. It’s on an EnergyStar sticker for the entire house.

Why Passive Solar instead of Geothermal?

Since Passive Solar is a very low cost design method and our home has a large unobstructed southern exposure, it simply made sense. This first winter the passive solar was inoperable because we discovered Anderson delivered the wrong glass, reflecting the suns energy out, not letting it in. Regardless, our first gas bill for the January 2009 winter (most days the high was below zero) heating period bill was only $200 at a nice and toasty 72 degrees . We used a conventional 95% Bryant HVAC system with a 3 phase air exchanger, plus a separate gas heater for the garage, a 14,000 BTU Fireplace, and three separate gas cooktops – and 3,600 sq.ft. to heat.

Considering that the average home sells every 6 years, a home buyer is not likely to recover the initial investment on a $20,000 to $60,000 geothermal system, leaving the cost benefit a future home buyer. There is likely to be a significant long term mortgage on the home, so the interest on a $40,000 geothermal system might eventually add up to over $100,000.

According to a December 2008 study and report by Oak Ridge Laboratory for the US Energy Department, Geothermal Systems should reduce energy consumption 30% to 35% compared to typical conventional systems (not specifying what “typical” means). On our home savings in January, the coldest month in a decade, would have been only $66. At best we would save $500 annually with Geothermal. If we spent an extra $40,000 for geothermal payback ( even after factoring in the new 30% tax credit) it would take almost half a century ( without factoring interest). I’d be 108 years old by then.

Had Anderson delivered the correct glass, our heating bill would have been much less than an active complex system (geothermal); there are no moving parts to passive solar.

Sustainable Green

We need efficient housing for the mass market home buyer at attainable pricing to make the largest difference. We desperately need many more newer and better technologies and methods than we have today. This will take the same type of research and development effort that the automotive industry maintains to be competitive. Twenty five years ago our government spent enormous amounts of tax payer dollars on grants for programs that no longer exist. We are entering a new era where government will likely make huge funds available for energy related technologies.

How did the housing industry respond when consumers stopped buying? Why didn’t builders respond by going back to the drawing board to develop innovative and efficient affordable home construction? Where has that good old American innovation gone? We need real solutions that work this time around and we need them to be at prices the average home buyer can afford.

Those applying for grants should show proof of concept of ideas in working prototypes before any money is released to reimburse their efforts. Even then, green still won’t take off unless this next problem is solved.

Appraising the Situation… Or Not.

This may come as a shock, but the home appraisal business does not factor in green at all. Not even those items that actually can clearly demonstrate a quick payback. Certainly a soy derived counter top (with questionable service life) won’t win over the bank, but there are sustainable green solutions. So, what good does winning Silver, Gold or Platinum Green Certification mean if the home is not worth a cent more for financing? To the average consumer what’s most important is valuation for financing. Because the appraisals give no extra value for highly energy efficient homes, lenders see no advantage to green certification. Fix the appraisal and mortgage side of green and there is hope.

Are we Headed In The Wrong Direction?

In some ways these difficult to comply with “go for the Gold” certification programs create roadblocks to success by adding unnecessary complexity and costs. The new tax credits for energy efficient windows, solar panels, geothermal, and wind energy ignore passive solar and other design methods which make more sense, yet earn no tax credits. New home construction is much easier than retrofitting an old home to be efficient, yet there are few tax benefits if building new. The middle class is unlikely to finance home improvements even with a 30% tax credit. Most likely only the wealthy can access funds to retrofit a home today, and take advantage of the tax credits. If we continue on the current path, this green era will fail, and in another quarter century the next generation will try again.

Rick Harrison is President of Rick Harrison Site Design Studio and Author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable. His websites are rhsdplanning.com and prefurbia.com