An Expert's Advice to Home Energy Efficiency
*This episode is part of our Skilled Labor Series hosted by MCJ partner, Yin Lu. This series is focused on amplifying the voices of folks from the skilled labor workforce, including electricians, farmers, ranchers, HVAC installers, and others who are on the front lines of rewiring our infrastructure.
David Holtzclaw is the founder and principle of Transduction Technologies, a small engineering firm based out of Omaha, Nebraska that provides science analysis, testing, and energy consulting services to residential and small commercial clients. In this episode, we are talking about weatherization and home energy efficiency.
David and his team perform a number of services including energy evaluations, duct leak testing, ventilation testing, pressure mapping, combustion testing, infrared imaging and cost benefit analysis of implementing renewable energy systems as a whole. We discuss how the home energy efficiency market has grown over the past few decades, the top things you can do to your home to improve your energy efficiency, and both the tail and headwinds the IRA bill is bringing to consumers and contractors alike in Nebraska.
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Episode recorded on Aug 17, 2023 (Published on Oct 12, 2023)
In this episode, we cover:
[03:11]: Origin of home energy auditing in the 1980s and creation of ResNet
[05:29]: Home Energy Score (HES) for existing homes, Home Energy Rating System (HERS) for new homes
[07:23]: ResNet's relationship with BPI (Building Performance Institute)
[09:04]: Emergence of the first energy code for new construction, the IECC (International Energy Conservation Code)
[11:17]: The impact of high interest rates on the demand for energy audits
[14:47]: David’s transition from aerospace and NASA to founding an energy efficiency company
[20:43]: An overview of his customer base
[24:27]: The main culprits of an energy-inefficient home
[29:45]: David's approach to customizing homes during the design process
[32:11]: Insights into mechanical ventilation
[34:30]: How upfront investments like triple pane windows pay off
[38:50]: Why cheaper heat pumps may be pushed over better models with the IRA
[42:08]: The impact of politics on state energy efficiency funding
[49:22]: Advice and cautions for listeners planning to electrify and weatherize their homes.
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Yin Lu (00:00):
Hello, everyone. My guest today is David Holtzclaw, and we are talking weatherization and home energy efficiency. David is the founder and principle of Transduction Technologies, which is a small engineering firm based out of Omaha, Nebraska, providing building science analysis, testing, and energy consulting services to residential and small commercial clients.
(00:21):
David and his team perform a number of services including energy evaluations, duct leak testing, ventilation testing, pressure mapping, combustion testing, your infrared imaging and cost benefit analysis of implementing renewable energy systems as a whole. We discuss how the home energy efficiency market has grown over the past few decades, the top things you can do to your home to improve your energy efficiency, and both the tail and headwinds the IRA bill is bringing to consumers and contractors alike in Nebraska.
Cody Simms (00:53):
I'm Cody Simms.
Yin Lu (00:54):
I'm Yin Lu.
Jason Jacobs (00:55):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (01:01):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:07):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Yin Lu (01:20):
And with that, David, welcome to the show.
David Holtzclaw (01:23):
Thank you for having me. Appreciate the time.
Yin Lu (01:26):
So the focus that we've had on a bunch of previous episodes on the Skilled Labor Series really has been focused on HVAC professionals, professionals in the electrician space as it relates to just the topic of home electrification. So I wanted to turn the focus today on a precursor step to getting heat pumps installed and new induction ovens installed and new appliances installed, which is going back to the old adage, you can't improve what you don't measure, and how you measure energy efficiency of a home sometimes could be a complex topic. And so we wanted to bring in an expert and break that process down, so super stoked to have you on the show.
(02:00):
And also, I just wanted to call out that we've talked to a lot of folks who have come from California, Massachusetts, New York, and so a lot of the coastal states, but you're based in Omaha, Nebraska, and I think that would be really interesting to get a peek into what your world is like being in a non-cost state and thinking about how differently energy is produced. So super excited to dive in.
(02:21):
So let's start with the foundations. So when you buy a car, which is a non-trivial purchase, efficiency measures like miles per gallon or range is really important. But when you buy a home, I feel like people don't think about efficiency of a boiler or HVAC system or what kind of installation it has, and there's 140 million residential homes in the US. Why is it the case that we haven't had a culture of measuring home energy efficiency? And I guess now we're talking about the topic, so it's become more and more prevalent as something to focus on. So maybe if you can give us a history of home energy auditing as a body of work that has existed and how has it shifted over the years to the point we're at now?
David Holtzclaw (03:11):
So home energy auditing started in 1980s. There was a few rare events that academics were doing in the late 1970s as a result of the energy embargo and the spike in energy prices during the Carter administration that really started out the eighties, and actually it was the banking industry and the mortgage industry that was pushing it. So you think about the typical house today, they're paying about $2,500 a year in utility costs, 2,500 to $3000 a year. Back then it wasn't much cheaper and with inflation it was a bigger percent of the homeowners or the mortgage ease budgets. Right?So mortgage companies got very interested in making sure that new homes or homes that they were underwriting, that the buyer could meet the payments.
(03:58):
And so they started the home energy audit, which later became ResNet in that area, and there were several different versions of that, several different states, and it has evolved over time. So now today the home energy auditing world primarily dominates new construction. It's mostly always in new construction. So right now there's about a million homes a year that gets an energy audit by either ResNet or Title 24 out of California. And so those [inaudible 00:04:33] numbers increasing. It's still a small percent, it's still only 20% of the new construction markets, but it's growing, and so that's where most of the ratings have been done. Some of that has been under building codes, local jurisdiction and port [inaudible 00:04:46] Some of that has been through mortgage companies wanting to make sure that they're getting what they're paying for as well as other lending agencies.
(04:55):
On the existing side, existing home audits, that was the Wild Wild West until really after the ARPA program. President Obama brought in the ARPA program in 2008, and that was started through BPI, the Building Performance Institutes, and the weatherization programs, mostly under the Department of Energy that had been around since late 1990s, early two thousands, mostly through weatherization programs for low-income housing, low-income housing tax credits, those type of programs, and they become more formalized. And they now have what's called the Home Energy Score, HES score, which is similar to HERS rating, but the HES focuses on existing construction and why HERS score focuses on new construction.
Yin Lu (05:43):
I didn't know that differentiation before. Okay, HES, four, existing homes and HERS, four.
David Holtzclaw (05:48):
Primarily for new construction. You can do it on existing homes, but it's made and meant to be for new construction.
Yin Lu (05:56):
There's two organizations that you just mentioned, ResNet and BPI. So how do they work with each other? How do they play with each other?
David Holtzclaw (06:05):
They don't. There's been a lot of bad blood of the year. They're better today than they were when I first started getting into this. As a result of the ARPA program, 2012 timeframe, they saw all this big funding come in through ARPA and they were always trying to get their cut of the pie. Right? So there's a lot of elbows being thrown, a lot of not nice business practices and teamwork, and so that led to a lot of bad blood. So BPI had a niche in the weatherization program, they've been working with Farm Energy for over a decade by that point in time. They were heavily involved with auto prioritization programs that are primarily funded through the DOE. They give money to the states and the states run those weatherization programs, so they kept that niche.
(06:48):
ResNet was trying to get into more and more existing construction, and then after a while they realized that new construction is probably their best fit, and they went back to that new construction. That's how they separated. They still don't work much together at all, unfortunate, and I'm not sure if those wounds have been healed yet, but there's very low cooperation. If there is, they don't talk about it. So for whatever reason, it's been the split. So ResNet is primarily focused on new construction and multifamily BPI, multi globalization programs and energy assessments for existing construction.
Yin Lu (07:23):
Understood. Okay. Got it. That's helpful because I was talking to my partner yesterday, talking to him about how I was going to interview you on the podcast and he's like, oh, you know I'm BPI certified. I'm like, really? I didn't know that. I'm like, how does this one organization work with the other? And so it sounds like over the years they've really figured out their niche of the funding pie, but also just the ... how would you characterize it?
David Holtzclaw (07:45):
The market network and the industries, right? New construction is a very different industry than existing homes, right? Weatherization programs are mostly run through nonprofits and government agencies, whereas new construction is almost always the private sector, right? There may be some government funds pushing it and tax credits and things like that, but it's almost TIFF funds, all that stuff, but it's almost always the private developments. To make it even more complicated is ResNet is for the country besides California. California has a HERS score. They call it HERS, but it's actually run through CalCERTS so the state of California has their own separate HERS rating that's run through CalCERTS and the Title 24. California HERS rating is actually different than a Nevada, Washington, Virginia HERS rating. Not super different, but there is some differences there, so that even makes it more confusing.
Yin Lu (08:47):
Okay. We're going to have to bring on someone from CalCERTS to talk about the country of California and the HERS rating that is unique to California. So it sounds like from the 1980s on new construction had energy efficiency built into building codes and the way that-
David Holtzclaw (09:04):
Not really. So the first energy code for new construction was written in 2004. And so the first energy code, which is called the IECC, the International Energy Conservation Code, was published in late 2004 and got rebranded at 2006 when it was updated and revised in 2006. So our building codes, most of the US is then what's called the ICC, the International Construction Code, and they come out with new codes every three years. So 2003, 2006, 2009, 12, 15, 18. Right now we're on the current 2021 version of the ICC. The next versions coming out in 2024.
(09:51):
So the first energy code that was included in the IC ... ICC is actually 17 different codes. There's a residential code, there's a commercial code, there's a code for plumbing, a code for electrical, a code for natural gas, piping, yada yada, yada, fire, whatever. So the first time it was implemented in the IIC was in the 2006 version of the ICC, and that was the first voting code. Now, just because most of the country hadn't adopted, it wasn't until ARPA came on in 2008 that said ... when that money came down to the states, the federal governments under the Obama administration said, if you take this money, you have to adopt to 2009 ICC. And so the states that were looking at anywhere from 50 to $200 million said, sure, without really realizing the bag of rocks that that was going to open up. So most states first adopted an energy code was in 2009, and they adopted it somewhere between 2009 and 2012 time period.
Yin Lu (11:02):
Okay. I'm trying to square when you mentioned when home energy audits started becoming a thing in the 1980s, and it sounds like maybe between the 1980s and the early two thousands ... Actually, what was happening between the 1980s and early two thousands in the home energy space?
David Holtzclaw (11:17):
So much like today, interest rights were sky-high. For those of you listening that weren't around back then, we had very high interest rates and so mortgages and mortgages default was a big issue. So again, the end of the banking industry where all things run through this country is through taxes and financing said this is a concern for us. We have a high rate of defaults. What can we do to eliminate this? And so back then you had a lot of variable mortgage rates. So you got a mortgage, today, they're all fixed. You can't get a variable mortgage today, but most people don't because it's [inaudible 00:11:53].
(11:54):
Back then they almost all were variable. So you may have bought a home loan at 7% and it could balloon to nine, 10% and now that's a bigger chunk of your monthly income. So the mortgage companies was saying, okay, how can we save this? Well, if we can lower the energy bill costs, that will help us guarantee that the lendee pays their mortgage every month. So then they decided saying, Hey, if our bank or our company's underwriting this mortgage, you need to have an energy audit and it needs to have A, B, C or whatever, or it needs a score of whatever number.
Yin Lu (12:34):
But it's still based on the old ICC code, which has existed for a long time? Understand.
David Holtzclaw (12:39):
That's right. So it wasn't every banking company, it wasn't every mortgage company, but there was enough of them to get an undercurrent to flow of interests across the market. So that's why it started is bankers wanting to protect their money.
Yin Lu (12:52):
Bankers wanting to protect their money, make sure that people can pay and not default on their loans. So therefore making their mortgage as low as possible by doing these energy audits based on the existing code to have them to switch to more efficient appliances. And then as time went on, as more funding and more energy was being put into the federal government and looking at energy efficiency given away for ARPA programs to exist. And then we decided, oh, my gosh, we've got to really think about updating code that's existed for decades in new construction because we got to make sure that whatever new houses come onto the grid are as efficient and built with energy efficiency as a forethought instead of an afterthought.
David Holtzclaw (13:31):
Correct. Yeah, and I should probably mention ARPA was President Obama's workforce development program, and I'm blanking on the actual words, American Recovery something Act.
Yin Lu (13:45):
Yeah, the American Rescue Plan.
David Holtzclaw (13:48):
Okay, all right. After the 2008 crash, that was one of the mini bills the federal government sent out there to try to encourage investments and get our economy running. So the idea was let's start investing into ... that's when the famous tests alone and the solar panel loan of the solar company that six weeks after they got a bunch of money in federal government, they went bankrupt. That was all part of that bill to help get the renewable energy sector off the ground and get the energy efficiency sector up off the ground.
Yin Lu (14:19):
That's great, and not to be confused with the Advanced Research Projects Agency, which is also ARPA.
David Holtzclaw (14:25):
Yeah, I should have defined that earlier for my audience. My apologies.
Yin Lu (14:28):
Great, I'm glad you did. All right, so let's transition to talking about Transduction Technologies, which is the business that you own and run. Maybe this is where we can dive into the more personal side of things. So David, what has your career path been that has led you to now running this engineering firm that focuses on home energy efficiency?
David Holtzclaw (14:47):
It's strange, so I started off in the aerospace industry. I wanted to be an astronaut and I worked for NASA, and so I ended up getting some advanced degrees in the engineering world. Did a lot of years in school, worked for NASA. Along the way, met and married somebody from Nebraska, ended up in Nebraska because she wanted to move home and be by her family. And so when I moved to Nebraska, most of my experience was in the aerospace industry and there are basically no jobs in aerospace in Nebraska. So I was an academic for a while. I was a stay home dad for a while, and had always been very environmental, a tree hugger, so to speak, and was concerned about the environment. And so that's when I put up my own shingles, my own company interested in energy efficiency, saw a definite need for that, saw a need for that locally. Not many engineering firms were fitting that niche and so that's how I started around the 2012 timeframe.
Yin Lu (15:50):
I don't know if I'm showing all my cards here as someone who grew up in California and did not know a lot about Nebraska, Nebraska is interesting in that it's the only state in the country that is served entirely by consumer owned power entities. Meaning that there's 30 public power districts, 120-ish publicly owned utilities, which keep the costs of electricity low in Nebraska compared to some of the other states in the country. How does low energy prices play into people's desire to get energy efficient homes? If I don't have to pay so much for electricity, why, just purely from economics angle, would I care to make my home more energy efficient?
David Holtzclaw (16:35):
Sure. So Nebraska, like a lot of Midwest rural states, a lot of private utilities didn't want to do business there because you're putting a lot of infrastructure in for very few users. It's not cost-effective, it's not good business. So what happened is a lot of Midwest states have what's called rural co-ops, which are basically state entities or local municipalities that got state money to provide electricity to the citizens of the state. Nebraska took it a step forward and said all of our utilities are going to be publicly owned, and so that has been pluses and minuses to that, has been advantages and disadvantages.
(17:15):
The advantages is that when this was done in the 1930s is that it made sure a lot of our rural farms that produce beef that you all eat got power, and so that was an advantage of it. Disadvantage of that is that we don't really have a public utility commissioning, so we really don't have anybody overseeing these public utilities. The thought is these public utilities have publicly voted on board of directors and that those people oversee the utility. Often those boards are overran by the utility and so oversight has been our issue lately as in the last 20 years, so pluses and minus to that.
(17:57):
There's also a lot of state statutes that cap the cost of electricity or cap the increase in cost of electricity. So it has to be affordable, it's got to be reliable. There are certain code words in our state statutes that limits how fast public utility can increase their electricity rates. However, they have found loopholes around that just like every other utility across the country. So for instance, I'm in Omaha, that's the Omaha Public Power District that's the largest district in Nebraska, covers 13 states, about the size of Rhode Island and ... I'm sorry, 13 counties in Nebraska, not states. And what they do is that since they can't raise their consumption charges, they increases their flat fees.
(18:46):
So for residents, your service fee is $35 a month, which is top five in the country, very expensive because the electricity rate's only about 12 cents, which if you're in California you probably had a heart attack because you're paying two or three times that. So I think the national average is around 17 cents. So the consumption costs are low, but the utility has been able to make up with that by increasing your service charge. So from a homeowner's perspective, because you have cheap consumption costs, the cost-effectiveness of energy efficient upgrades, whether it's more installation in your attic, more efficient heat pump, whatever the case may be, your payback is less because you're paying less per kilowatts.
(19:30):
Nebraska still has mostly natural gas heating throughout the state as most states in the country, and those states fluctuate a lot because they're commodities. So we also have a lot of propane in our state, in our rural communities, and propane states also fluctuate greatly and they can fluctuate even higher rates. So that often, when we get calls for energy efficient upgrades, it's often their heating bill because as most of the listeners probably understand, your propane and natural gas costs have increased since the Ukrainian war. None of our natural gas or propane is coming from Europe, but it's a global commodity. So somebody blows up a pipeline in the North Sea, your gas cost goes up. So that has been a factor more than electricity rates.
Yin Lu (20:22):
Yeah, and for someone to be able to switch off of natural gas and onto electricity, and that electricity rate being already pretty low is an added economic benefit.
David Holtzclaw (20:33):
Correct, [inaudible 00:20:34] because benefits for the homeowner going to electric heating.
Yin Lu (20:37):
Yeah, there was a deep dive into a policy question. Okay, let's zoom back out and focus on transaction. Who are the people coming to you and saying, David, I want to do X, Y, Z to make my home more energy efficient? Who are your customer?
David Holtzclaw (20:52):
So we have about a third commercial, about third residential, which I include multifamily, and then about a third, I'll call it other. Some of it's renewable, some of it's design, some of it is how do I take advantage of tax credit, X, IRA benefit Y, whatever the case may be. So of our residential buckets, most of those right now were about 70, 30, 70% new construction, 30% existing construction. That used to be flipped up until few years ago. Now we're getting a lot more new construction work.
(21:26):
The existing home is I want to lower my energy costs or I want to be more sustainable, or I don't trust the man and I want to be independent. So Nebraska, like a lot of Midwest states, have a strong libertarian sense to it. People don't trust authority and if they can get off the grid, there's a population of people that will want to do that and are willing to pay for it. That's a small percentage, but they do [inaudible 00:21:58] and they exist and they call us, so about a third. That's a third people that are interested in sustainability and about a third people are interested in, financial reasons, lowering their utility costs.
Yin Lu (22:09):
Yeah, got it. I would've thought that it would be 90, 10, 90% lower energy costs, 10% sustainability, and then I had no idea about the folks that wanted to really live off dependency on grid. That's interesting. Curious, why the 70-30 flip from new to existing? Why are there so many more new build?
David Holtzclaw (22:27):
Our building isn't increasing. We're still building about the same number of new construction homes, but our [inaudible 00:22:33] business is increasing. So mostly that is people have learned that our residential design, particularly from MEP, mechanical electrical plumbing, is pretty bad. HVAC contractors are trained well on how to install systems. They're not trained at all on how to design them. Same thing with electricians, same thing with plumbers. That's not how their training and their craft and contract profession propagates. They get very little design training.
(23:02):
And locally, our HVAC designers are hideous, so across the country they're bad. There are good ones out there, but most of the time they're poorly designed, they're oversized, the ducks are undersized, the mechanical equipment is oversized. That creates a lot of issues, and here they're really bad. People [inaudible 00:23:22] that to us to properly design the system. We're getting more people that want to be off the grid. They want to be like a net-zero, and most HVAC contractors just can't design and build it well, so people are coming to us for those design services.
Yin Lu (23:38):
Got it. So same volume of new houses being built, not some explosion of new housing build rates, but the people who are building new houses are realizing, hey, if I want to design this house to be net-zero or a passive house or as energy efficient as possible, I really have to bring in someone who understands the design of all these systems, how they work together. And you are that person.
David Holtzclaw (23:58):
Yeah, we were getting lots of the baby boomers who are looking at their forever home like this our the last house, I'm going to build it, I'm going to live in and I'm going to die here. So they are willing to spend more money upfront to get those long-term benefits, lower utility costs, easier to go off grid, more resistant to weather as our weather gets [inaudible 00:24:19] here due to climate change. So we're just getting more of those clients.
Yin Lu (24:24):
Yep, and maybe this is a good grounding question I should have asked earlier, but I'll ask it now. What are the main culprits of an energy inefficient home? Yeah, this would only apply to existing homes since we are just talking about new homes, you build that from the ground up, you make it as energy efficient as possible. But for existing homes, what are the major culprits?
David Holtzclaw (24:42):
It's usually the shell, what's called the building envelope for the building enclosure. That's your walls, your roof, and your foundation, and the biggest culprit is air leakage. So if you're asking me what three things to fix on an existing house that was built pre that first NA code 2004, I would say air seal, then the second thing you do is air seal, and then the third thing you do is air seal, and then you add insulation and in that order. So that has been the primarily energy loss in most existing homes is air leakage and you cannot seal it tight enough.
(25:17):
Again, we had a building assumption or mantra that buildings need to breathe. You still hear some residential builders say that it's false. We've had data since the 1980s showing that that's false. You want that house as tight as you can possibly make it, and then you need to add mechanical ventilation for people in combustion appliances if you have any. So that is the biggest fix is the shell, making it airtight and then adding appropriate levels of insulation.
(25:50):
Then it's going through your appliances, your hot water heater, your furnace and or heat pump, whatever you have, then your refrigerator, going down from largest appliances, working on down to your small appliances. In there, pretty up toward it like lighting. Your lighting is actually more energy consumption than your refrigerator, so making sure you have all LEDs. You'd be surprised how many homes I walk in still with incandescent light bulbs. So there's more of that out there than people appreciate. So if you have an incandescent light bulb in your microwave, in your oven, on your front porch, get rid of it yesterday. LEDs are very cost-effective, cost neutral, and you'd be surprised how many of poor lighting we still find today.
Yin Lu (26:37):
Hey, everyone, I'm Yin, a partner at MCJ Collective here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning, and doing that goes beyond just listening to the podcast.
(26:49):
We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming, like monthly women and climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more.
(27:23):
Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show. Got it. So that is for existing homes and just it sounds like seal that puppy up as much as you can. Good for summer, good for winter.
David Holtzclaw (27:47):
Good for indoor air quality, good for comfort, good for environmental perspective, less allergen, less pollution coming in, less humidity, less mold, less hot and cold spots throughout the building where the upstairs is 15 degrees warmer or hotter than downstairs. So yeah, you can't go wrong with air sealing. The other benefits of working on a shell is that for every dollar you spend on a shell air sealing and insulating, you save about 25 cents in new mechanical equipment.
(28:19):
So what happens is if you have to get a new furnace or hopefully a heat pump, instead of getting ... what's in your house now is probably a five ton furnace, you air seal that envelope and you add more installation. Now you're putting in a three ton furnace or a three ton, hopefully a heat pump. So that just saved you about four to six grand, but every dollar you spend on a shell saves you about 25 cents on your mechanical replacement. So if you're looking to do both, furnaces last about 20 years, heat pumps last 15 to 20 years, air conditioners last 12 to 15 years, again, depending on where you're at in the country and your climate zone. So before you replace mechanical equipment, think about upgrading your shell and you're getting better [inaudible 00:29:06] quality, better comforts, and your mechanical equipment is cheaper because it's smaller and it runs less.
Yin Lu (29:11):
Yep. So seal up that house, make sure you have LED lighting, and then focus on appliances in that order.
David Holtzclaw (29:19):
Yes, [inaudible 00:29:19] Correct.
Yin Lu (29:20):
And the four new bills, going back to the point that you brought up about people wanting to come to you for design help, what type of work do you ... let's say someone wants to build a new house and they said, I want someone like Transduction to come in and help me design "all the systems." Take us through the step of what a typical process would be like and how do you work with the HVAC folks, the plumbing folks, the carpentry folks, and whomever else?
David Holtzclaw (29:45):
Sure. So we have a questionnaire where we sit down and walk through the clients. A lot of it is where do you want to live? How do you live? How many people are in the house? How many pets? Do you like to entertain? How many people come visit you, grandkids, whatever the case may be? What kind of clothing do you wear during the day? Do you sleep butt naked or are you in sweatpants and sweatshirts? All that's helping us design where we want to get the comfort points, which is called a thermal comfort. There's actually a design process, this [inaudible 00:30:15] 55, thermal comfort process to making sure the interior of the building is thermally comfortable as well. And you do the same thing with lighting. Do you like a lot of natural lighting? Do you want to be able to see neighbors? How do you want the house to be oriented?
(30:30):
Everybody has plans of solar and batteries. They don't know it, but everybody has plans for solar and batteries. So you're designing a house to be solar ready and battery ready when they want to pull that trigger. But if you look at the cost curves, in reality within 20 years, almost every new construction house is going to have at least solar and probably some type of storage, whether it's water or batteries. So you're making buildings pre-designed to where that can be added in a plug and play type manner.
(31:00):
So if they walk barefooted, well, then you're looking at a radiant heating system or cooling system so they can feel it. They still wear shoes inside the house, then that radiant benefit may not be as beneficial to you, so maybe that's a savings there. Do they like the air being blown or do they want surface heating and cooling?
(31:20):
Budget is always part of that conversation, timeline is part of that conversation. So you take that information, you come up with some schematic designs, estimated budgets. Do they have a builder already in mind? Do they have an architect already in mind? Whatever. What's their goal? Do they want to be off grid? Do they want to get some type of lead certification or [inaudible 00:31:42] certification or do they ... whatever their wants are. And so we'll come back to them of this is your wants, these are your costs, here are your trade-offs. There are certain tradeoffs we don't allow them to make. Even though locally, mechanical emulation is not code, it's in the code books. It's been in code books since 2012. What happens? A lot of jurisdictions remove it. That's dumb, that's unhealthy. If we're going to do it, we're going to have mechanical ventilation.
Yin Lu (32:11):
And can you just double tap into what is mechanical ventilation?
David Holtzclaw (32:14):
So that's bringing in that outside air.
Yin Lu (32:15):
So if you have a really well sealed house, you have to have some mechanism so that [inaudible 00:32:22] you don't suffocate.
David Holtzclaw (32:22):
So the house doesn't need to breathe. The people inside the house need to breathe. So you want to make sure you have enough what we call fresh air, which is really outside air. It may or may not be fresh depending on your location and time of day. We want to make sure that that's coming in at a controlled amount, a controlled location, ducted and spread throughout the house to certain values and certain flow rates in certain rooms, well controlled, filtered, heat recovery, all those good things to where the running it is very energy efficient and almost adds nothing to your utility bill. So things like that, we don't allow them to pick. The fact that they're solar ready, we don't allow them to pick because they don't realize it, but that's where the future is going.
(33:06):
The service panel is another issue. People don't know it, but they're going to have an EV in their driveway in 20 years. So you want to make sure that service panel has at least one or two open 40 to 60 amp circuit breakers for a future EV charger that they swear they hate and they're never going to buy. But 20 years from now, that house, which will be there 80 years from now, is going to have an EV in the driveway. So things like that you add and you just throw it in without telling them.
(33:36):
Other things, orientation, they can pick. And again, that depends on watts and subdivision and things like that. So you try to make them happy and give them what they want under the best budgets possible, and those first costs recently with construction costs really escalating lately, that's been a challenge, but you just work through the process.
Yin Lu (34:00):
Yeah, I mean it sounds like you're building these designs that will involve the builders, the architects, and all the traits that are necessary to ensure that there's right electrical and right plumbing for the home, and so you come in at the beginning part. I'm curious, are there success stories that you can point to on clients saying like, oh, my gosh, I didn't even know I needed this and thank goodness I have the service? And also on the converse side, what are some points of rub as you are putting together these plans and really bringing people together?
David Holtzclaw (34:30):
Sure, so it's vital for us to get in early. So we need to be in with the architect and the builder or the designer. Here in Nebraska, we don't require architect to stamp residential buildings. So R1 and R2, it could just be pretty much anybody, and those laws vary state to state. So it's very important that you get in early, that you emphasize the importance of a tight shell of a [inaudible 00:34:55] cell and how that makes the rest of the work so much easier and so much more comfortable for life.
(35:00):
So an example is triple pane windows. So we had a client, well-to-do clients, had a nice lot, lot of acreage with this wonderful vista off the back end of the house where he could see it went down into a valley and with the sun setting, it's just this gorgeous view. So basically the backside of his house is going to be all glass, first and second levels so you can take advantage of this wonderful [inaudible 00:35:27] stuff. And we did a lot of computer modeling and we did a lot of comfort modeling, what's called the therm modeling. And we came back and said, you really want to buy triple pane windows. And we explained to them why that is important, and we were adding probably 100K to the project, about 130K to the project. And this was about a low seven figure, one point something million dollar house. So there was a lot of pushback from everybody for it.
(35:58):
But we show them that when you do this, since you have a wall of windows and not broken up with a window ... a cheap window is like an R3, whereas the the oblique wall next to it is going to be an R20. That's a big difference that if you're standing in front of that wall, within five feet of that wall, you're going to fell it. You're going to feel the draft of that window, it's not going to be comfortable. So you have this gorgeous view that you're going to enjoy for about three seconds before you have to move away from the window because of downdrafts, too much light coming in, too hot in the summer and too cold in the winter.
(36:32):
You get these high-end windows that are mostly triple pane European style windows. You can sit in front that window all day and you're not feeling those downdrafts. You're not getting too much solar light in because you have a better what's called solar heat gain coefficient. So not enough solar heat radiating [inaudible 00:36:50] it's coming through the window, it's bouncing back and going outside. And after it was built, the guy was like, these windows are all ... we did a tour of the house, and all they talked about was the damn windows on a seven figure house because you could stand there all day and drink a cup of coffee or whatever, watch it. So that was a success story, but we had to fight like hell to get them to add the additional money, so that's success.
(37:20):
Other problems we've had is ... a thought we've had is that our state offers energy efficient loans. So they will give you a low loan rate if you build an energy efficient house to their standards. And they don't follow resident, they require energy star and some of these other things, but they also have some of their own standards, which I don't agree with everything they're doing. And so we had a client that built with that and their requirement would be have a heat pump with electric resistant backup. This was a few years ago back before the low temperature heat pumps were really on the market very much, but enough of them were on the market where I propose using one of these and get rid of electric resistant because what happens in winter, and we have cold winters here in Nebraska, that winter utility bill skyrockets because the electric resistant heating is the most inefficient way of heating. It's also extremely uncomfortable.
(38:12):
So I told the homeowner, I said, if you go this lane and you go this way, you take this loan and you build electric resistance, it's going to suck. You're going to have your high utility bills and you're going to be extremely uncomfortable. Well, he wanted the right loan, so he took it and sure enough, that's what happened. And he wasn't very happy with me and I had all these emails I sent him. He writes, I told you this. I actually had him sign a disclaimer for it and he ended up switching out a two-year heat pump with one of these low temperature heat pumps that can produce heat at minus 20, but that was a significant cost to him.
(38:50):
And unfortunately a lot of our state run programs don't have ... we have state employees that aren't familiar with the construction business or don't have engineering degrees and don't really understand these things. And you're getting a lot of people that take advantage of these programs that walk away with bad experiences. And one of my fears is with the Inflation Reduction Act, we're going to see a lot more of that in the future.
Yin Lu (39:18):
How do we rectify that or how can we proactively start preventing more people from going down the path?
David Holtzclaw (39:25):
That's going to be tough. So there's a lot of money for heat pumps and there's going to be a lot of people installing heat pumps. It takes a lot of effort to design a heat pump. First of all, you have to design a heat pump. Most contractors are going to look at the size of your air conditioner and they're going to put the same size heat pump right in, guaranteed to be a disaster. Secondly is that again for our neck of the woods where we have what's called cold climates, climate zone, so basically anywhere north of Kansas City and north, you need heat pumps that can hand [inaudible 00:39:58] produce heats at low temperatures.
(40:00):
Those heat pumps cost more, and if you have a cheap two-stage heat pump that cost $4,000 and you're getting $2,000 IRA tax credits, you're going to take that and that's being pushed by the HVAC contractor versus the variable speed, inverted heat pump that costs $8,000. And people are going to grab those $4,000 heat pumps and they're also going to have R410 refrigerants, which you can't get service past January 1st, 2025, because of all the refrigerant phases out. That's going to happen over the next three year. So I think there's going to be a lot of those issues.
(40:37):
A lot of those heat pumps also do a very poor of managing moisture, particularly true for California and for places that have moderate temperature climates where your air conditioner might not be running, but you have high latent loads, which is all high humidity in the house. You have to design heat pump very carefully and select heat pumps very carefully to take manage those situations. And unfortunately, a lot of those heat pumps do not qualify for IRA tax credits, and it gets complicated in the design and it gets really geeky. And you're talking about SHR sensible heat recovery ratio, things like that that average people aren't going to understand. Contractors often don't understand it. People who are running these rebate programs don't understand it, and so that's going to be a problem.
(41:30):
Contractors are going to push the simplest, cheapest unit that they can get their hands on with the best supply chain that they can install quickly and move on to the next project. So that's a hard problem. I don't have a good answer for you. It's going to get ugly. You're going to need programs with a lot of quality insurance. And so I think places like Nicera in New York, which has weatherization programs, been running those weatherization programs for 20, 30 years, they're going to be and have staff up to handle these situations and have already dealt with these situations and have policies and procedures to handle it. You're going to have more success at those locations, New York, Massachusetts, with the UMass State programs, parts of California, depending on New York City. Certain states are good at that. I'm not sure about Washington, I'm not sure about Oregon. Minneapolis, Minnesota has a good program. So I think those, it will be very successful, but a lot of these other states, it's going to be a disaster.
Yin Lu (42:29):
The states that you just mentioned that you think are going to be more successful, they have programs which they focus more on weatherization and it sounds like maybe education as well.
David Holtzclaw (42:37):
Yeah. So they have more education and they have weatherization. So most states just take federal money, the Department of Energy, and that's all the money that they have put into their weatherization programs. Those states that I mentioned actually have state dollars that they put into the reservation programs, both for education as well as providing more services to a broader population. While that weatherization money is just meant from low income housing, the state may supplement that to increase what's called the AMI, the affordable mean income. So instead of just being below 80%, they can go up to 100% of the poverty line, things like that. So certain states have supplemented that if they have staff, they have offices to run those programs, they do education, so they're going to be able to hit the IRA, get those funds and hit the ground running.
(43:27):
Whereas places like Nebraska, we have a state and energy office, but we have one person doing the weatherization, right? If they take the IRA money, they're going to need 12, right? So first of all, they got to hire 12 people, they got to find 12 people, and the money for that 12 people needs to be approved by a state legislature, which doesn't meet again until January, so you're not hiring those people until July 2024. They have to figure out how to do their program, and so it's going to be January 2025 really before those programs are up and running, or as UMass, New York, Minnesota that already have programs in place, a lot of those programs have already hired people.
(44:09):
In January, state of Ohio was advertising six positions where they were looking ... January 2023, they were trying to hire people for the IRA, which wasn't coming out til this summer. So again, they were proactive, they were thinking ahead, they were moving forward, whereas some states have been all reactive. So IRA will be greatly beneficial, but I think it's going to be a have and have nots. Some states will greatly benefit from it, some states won't, and some consumers and homeowners will see great benefits, some will have disasters. And so now we're in a phase of how do we minimize the disasters?
Yin Lu (44:50):
What role does politics play into the shaping of funding at the state level for energy offices to be able to make sure that we have the right types of people and the volumes of people to welcome this new chapter of IRA funding?
David Holtzclaw (45:04):
It does play a role. It can be a significant role. Typically, in conservative states, they typically have smaller state governments because that's the way the politicians like smaller state governments, less regulation, fewer employees. I think there's five states that don't even have a state and energy office. Those are all GOP dominated states, mostly here in the upper Midwest. Those states have small energy offices, small weatherization programs. They don't have state funds supporting those weatherization and energy offices. Those are almost always federal funds, and because of that, there's smaller staff, fewer dollars, less equipment, less ability to ramp up to handle things like the IRA where you could have a huge influx of state dollars to come in. It may take a year or two to add enough staff to handle the money coming in.
(45:59):
So if you look at the IRA Homes Program, which is do energy efficient retrofits in existing homes and an HERA program which is set aside for low income to moderate income households to also do electrification, most of those states are getting somewhere between 50 and $150 million. So state of Nebraska, we only have about two million people. We're still getting $91 million over 10 years from the IRA for those two programs. It takes a dozen people to manage a $91 million program if not more, right? Our state energy office has one person doing the weatherization. The total office on the energy side is probably about six people. So they're looking at tripling their staff if they take this money.
(46:50):
Well, to hire a new staff person for a state office, that has to be approved by the legislature, which only meets January through March, I'm sorry, January through May of each year. So if the state director says, whoa, I just got $91 million from the federal government, it may take them nine months to advertise the job, not to hire someone, but just to advertise the job. So those are type of the hurdles that some of [inaudible 00:47:25] states, because they have a philosophy of small governments, small regulation, fewer state employees. So the challenges that they have over other states that may have large weatherization programs that have been up and running for decades that are more nimble and can respond more quickly and can shift staff around as needed more easily.
Yin Lu (47:48):
Are there states that are red that have done a good job of ensuring that?
David Holtzclaw (47:53):
So it's not strictly red and blue states. There are some mixes. The state of Iowa has primarily been a Republican state as all their federal representatives are Republican, but they have a decent weatherization program and they had offered a lot of rebates historically. And the reason why that continues is because the citizens are happy with the program, they're very pleased. And when one of the Republican governors try to cut it a few years ago, there was a lot of outcry from the citizens and so that idea got nixed.
(48:29):
Kentucky is another states that has ramped up their weatherization services, emphasized energy efficiency, provided more funding and census for this, and has also seen a similar response both from the population as well as more and more programs and more energy efficient buildings being built, particularly with their schools. Kentucky set aside quite a bit of money to make their schools more energy efficient. A lot of those schools have been built and they're way more energy efficient. They're using ground source heat pumps. They have ICF buildings, which is the insulated concrete forms. So they have very energy efficient shells, very, very energy efficient mechanical systems, and everybody's been happy with that. So it varies a lot from state to state, but it's not strictly a red versus blue states. There are some states that have been just more engaged than others.
Yin Lu (49:22):
Thanks for that really interesting perspective, and I know we have limited time left. David, do you have any parting advice for any listeners who are thinking about weatherization and home electrification for their own homes?
David Holtzclaw (49:35):
So in terms of ... for the audience that's listening in this, that's thinking about electrification. So you need a plan and you need a timeline and it needs to be a realistic timeline, and that timeline depends on your cashflow. Right? That's also going to depend on supply change. So I think this fall and for the next 10 years, there's going to be a huge demand for heat pumps. So being able to get the heat pump installed, I wouldn't be surprised if we're looking at six to 12 month backlogs, not in terms of finding a contractor to do it, that's a factor too, but in terms of having these manufacturers keep up, because you also have the consideration, from 2023 to 2025, all the refrigerants and all the US made units are being switched out. So we're getting rid of the hydrofluorocarbons, which is the R 4 10A, which is the most dominant refrigerants in residential heating and cooling system. That's already started being phased out and that cannot be used in any new equipment after January 1st, 2025.
(50:49):
So these manufacturers are already having to change how they ... and you can't just switch out one refrigerant for the other because they operate at different pressures, right? So the whole design changes. Some refrigerants you can use replacements, but many others you can't. And a lot of these newer refrigerants with lower GWP and global warming potential, they operate at higher pressures that also tend to be more flammable. So there's more safety valves and things like that integrated into equipment, so it's a whole new piece of equipment.
(51:22):
So I think people need to be very cautious when they start ... after you fix the shell, after you upgrade your electrical panel, because now you're going to have probably need for four or five 40 to 60 amp breakers, one for induction stove, one for a heat pump, hot water heater, one for electric EV, and another one for your heat pump after you upgrade your panel, which is going to cost you three to five grand. And once you start buying this equipment, you have to ask a lot of questions. You're going to have to be willing to wait six months or more before a piece of equipment's going to become available and a contractor is going to be available to install it.
(52:03):
But again, which is why start now with the easy things. Your lighting, you can fix today. As soon as you hear this podcast, you can fix that now. You can start worrying on your building shell now, you can do that now. You can get contractors, install installation whenever you want. So you can get contractors to air seal whenever you want. And then you can start planning about, okay, now I need somebody to properly size my system, properly design my system, properly install the rest of my mechanical and plumbing systems and somebody to come through and commission it. And there's standards available out there that nobody follows but exists.
(52:45):
So the listener needs to become familiar with ACCA Standard Four, which is how to properly maintain an HVAC system, ACCA Standard Five, which is a quality installation of a new heating or cooling system system, and ACCA standard nine says is quality installation verification. So what you want to do, you want to hire an A1 HVAC contractor to install your new heat pump and you want to hire a second HVAC contractor to verify the first contractor did it correct. And you say, won't that cost more? Yeah, it'll cost more, but it'll work and you'll be more comfortable and it will last longer. It won't crap out in 10 years. It's going to crap out in 12 years. And that third person's going to tell you that that heat pump that just got put in is actually 410 A, which you can't replace in two years. So if you get a leak and your refrigerant leaks, guess what? You're buying a new heat pump.
(53:39):
So it's going to get complicated. Do your due diligence. There are many things you can do now. You can buy an EV now or you can switch out a new panel now. You can air seal now, you can do your lighting now, you can buy an energy star refrigerator now. All that stuff matters and adds up, but your heating and cooling equipment, that's going to take some forethought. Think ahead, get a plan, realizes this is going to take one to five years for all this to get done.
Yin Lu (54:08):
Sage advice, David. Thank you for letting me pepper you with so many questions about weatherization and home energy space. For anyone who is interested, I found your website to be quite educational to get a 101 on the space, transductiontechnologies.com if you wanted to ... David has listed a bunch of articles there, so definitely if you're looking for some resources, that's a really great one. And thanks again, David, for your time.
David Holtzclaw (54:34):
Thank you. Thank you for having me.
Cody Simms (54:35):
Thanks again for joining us on My Climate Journey podcast. At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity. If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter @mcjpod.
Yin Lu (55:02):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (55:11):
Thanks and see you next episode.
