There is a lot of discussion and debate in the home performance industry about why home energy audits have only penetrated such a small portion of the U.S. housing market.  We know that performance problems in existing homes are the rule rather than the exception.  We know that most reasonable comprehensive home energy upgrades will result in a minimum 10-30% reduction in energy consumption and utility bills.  We know that energy audits identify measures that can improve indoor air quality, reduce maintenance requirements, and make the home more comfortable and more safe.  So why isn't the marketplace absolutely flooded with requests to have this valuable service performed?

There is no single reason, of course, but a clue to a major factor may be found in the phrase "valuable service."  There is much value toHouse and dollar sign be obtained from an energy audit, but if the homeowner does not perceive this value, there will be little demand for the service.  Some say that price is a barrier to demand for energy audits.  This hypothesis is not borne out well by results of some utility companies that offer low-priced or free energy assessments.  The utility companies often have difficulty giving their services away, and when customers do receive the service, they tend to not value it as highly because they didn't pay much for it.    It sounds crazy, but that is the way we humans are wired.  When the results of the energy audit are not valued, the homeowner tends to implement few, if any, of the recommendations.  With no positive results about which to get excited, the homeowner tells his friends and neighbors, "It didn't really help that much." 

This disappointing result says a lot more about the homeowner's perception of and experience with the energy audit, rather than its actual potential value.  So, where do we go from here?  

The best I can offer at this point is better messaging to convey value to the homeowner.  Two examples come to mind.  We are all familiar with scheduled maintenance routines for cars.  Typically, we car owners make monthly payments on our vehicles, which may have purchase prices of $20,000 to $40,000.  When the 60,000 mile scheduled maintenance comes around, most of us are motivated to follow through with the $600 to $900 service because 1)  if we don't, there is a greater chance that something will fail, and be more expensive to repair than the cost of the preventive maintenance, 2) we don't want to void the warranty, 3) we want to protect our investment.

House health check-upAnother example is the full physical examination or health check-up.  Most of us elect to do this once a year or so, and expect to be charged several hundred dollars for 10 or 15 minutes of the physician's time and a few routine lab tests.  Why do we bother?  Pretty much for the same reasons that we service our cars: 1) the physician is a professional, and knows more about how our bodies work than we do, 2) it is better to find and treat a health problem early rather than wait until it gets worse, which may mean more pain, loss and expense, 3) we want our health to be optimal, and to protect and care for the only body we have.  

We willingly pay these fees, because we recognize the value of the service.  We fear that to not do so could result in much greater loss.  Our homes are really not much different than our cars or our bodies.  Homes are by far the biggest investment most people ever make.  They affect our daily lives, and can affect our health and safety.   Giving our homes a diagnostic check-up will benefit us in the same ways as will check-ups on our cars and our bodies.

Except for the low-income demographic, cost of the energy audit is not the barrier to acceptance; it's perception of value.

 

This post originally appeared on Home Energy Consultants' House Whisperer Blog.

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Comment by Peter Troast on April 13, 2011 at 10:17am

Great post, Gary. You are spot on. I do think education and all of us continuing to spread the word on the amazing value of an energy audit is ultimately the answer. Too few people, unfortunately, know what one is.

And that leads to the other challenge we face, which you allude to and comes through in the other comments. With the state of general knowledge about building science and the physics of our homes so low, the multiple flavors and pricing for an "energy audit" is also a big part of the problem. Can't tell you how many homeowners I've heard from who received a utility style clipboard audit and got very little value from it. And then there is the issue of pricing. I think it is a mistake for us as an industry to fall into the discounting trap. A whole house, BPI style audit is worth every bit of $500-750, and we should be upholding this value.

Comment by Gary Kahanak on April 8, 2011 at 5:16pm
Thank you all for your comments, and your confirmation of my views.  The home performance industry is relatively newly hatched in my neck of the woods, and there is speculation by some here that super discounts in audit pricing will stimulate demand.  I think that approach will ruin the market, as it sends exactly the wrong message.  Time will tell which approach is the best.
Comment by Chris Patterson on April 8, 2011 at 4:43pm

So very true. 

Comment by Paul Stevens on April 8, 2011 at 7:19am
If a product or a service does not come at a price it will have no value.  I put the price for my services up front with my coustomers and almost every time the response is "thats not bad" and after some discussion on the process and the benefits (coupled with my excitement and passion for the process)  most feel they have gotten a Bargain.    
Comment by Bob Kretvix on April 7, 2011 at 7:11pm

I couldn't agree more.  There's an old saying in the consulting business that if you give away your services for free, customers think its worth nothing.

My business involves doing residential and commercial inspections for "hazardous substances", such as indoor air quality, mold, asbestos and most recently home performance energy audits.  What I have found very interesting is that people are willing to pay more for a simple mold inspection (for example) that takes an hour or 2 in the house compared to a home performance audit that involves much more work and equipment, then gives them much more information back.

I think a large part of this perception is the apparent giving away of energy audits by contractors looking to do and make money on the renovations.   Of course we know there are hidden costs in the approach that the customers don't see. I wish we could figure out how to change this perception and communicate the true costs and benefits of the audit.

Comment by Gary Kahanak on March 31, 2011 at 6:32pm
Ann, please email me, and we can set up a convenient time. We are actually at the very beginning stages of considering some type of regional label for Northwest Arkansas that will prominently feature energy performance, utility cost, and any national certifications obtained. This is a perfect time for ideas. As always, why re-invent the wheel, when you can make someone else's wheel roll a little better?

I'm especially interested as well in your MLS data for third-party certification impact on sales price and time to market. We need this to make believers out of realtors and appraisers.

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