Posted by: Richie Bernardo

Energy is expensive. In fact, it’s one of the biggest household expenses for American consumers. According to the U.S. Department of Energy, the average U.S. family spends at least $2,000 per year on utilities, with heating and cooling of spaces alone accounting for more than half the bill. In 2016, the average consumer spent another $1,900 on motor fuel and oil, though that figure represents a decline in recent years.

The Energy Department estimates that adopting energy-efficient measures in the home could reduce a family’s utility costs by as much as 25 percent, proving that it pays to conserve, especially during a time of increasingly warmer temperatures. As for transportation, the agency found that a more fuel-efficient vehicle could save the average driver about $625 per year.

In order to gauge the impact of doing more with less energy, WalletHub’s analysts measured the efficiency of auto- and home-energy consumption in 48 U.S. states. Due to data limitations, Alaska and Hawaii were excluded from our analysis. Read on for our findings, expert insight from a panel of researchers and a full description of our methodology.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/7354/geochart-energyeff1.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2kYMD7d;

Overall Rank	State	Total Score	‘Home Energy Efficiency’ Rank	‘Car Energy Efficiency’ Rank
47	Louisiana	25.48	48	33
48	South Carolina	22.68	47	40
N/A*	Alaska
N/A*	Hawaii

*Due to data limitations, Alaska and Hawaii were excluded from our analysis.

 

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/7354/geochart-energyeff2.html" width="700" height="450" frameBorder="0" scrolling="no"></iframe> <div style="width:700px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2kYMD7d; Ask the Experts < >

• Nathan Hultman Associate Professor in the School of Public Policy and Director of the Center for Global Sustainability at the University of Maryland
• Mick Dalrymple Senior Sustainability Scientist in the Julie Ann Wrigley Global Institute of Sustainability and Director of University Sustainability Practices at Arizona State University
• Tristan R. Brown Assistant Professor of Energy Resource Economics at State University of New York College of Environmental Science and Forestry
• Jim Krane Wallace S. Wilson Fellow in Energy Studies at Rice University's Baker Institute
• Erin Baker Professor of Mechanical and Industrial Engineering, and Director of Wind Energy IGERT at University of Massachusetts Amherst
• Harrison Fell Associate Professor in the Department of Agricultural and Resource Economics and Researcher in the Center for Environmental and Resource Economic Policy at North Carolina State University
• Kenneth Gillingham Assistant Professor of Environmental & Energy Economics at Yale School of Forestry & Environmental Studies
• Peter Bauer Professor in the College of Engineering and in the Center for Sustainable Energy at University of Notre Dame
• Carolyn Kissane Academic Director and Clinical Associate Professor of Global Affairs at the New York University School of Professional Studies
• Jessica Terman Assistant Professor in the Schar School of Policy and Government at George Mason University

Nathan Hultman Associate Professor in the School of Public Policy and Director of the Center for Global Sustainability at the University of Maryland What is the biggest mistake consumers make when trying to make their homes more energy efficient? I would say that the biggest mistake that consumers make -- or at least the biggest consideration usually missed -- is not thinking about energy efficiency as an investment. When you buy a dishwasher or paint a house, there's a sense that the money spent on those items is essentially "gone". Clearly, we get value from them (paint looks good, dishwasher cleans our dishes), but we don't expect that they will generate cash. But when people confine decisions to "do I do energy efficiency" they often think about one simple factor: payback time. So if a product pays back its entire capital cost in two years, people think, wow, that's great, I'll do it. But if it's like 5 years, people say whoa, that is too long. On the other hand, if you think of investments, you think of your rate of return. With financial markets, people are often pretty happy with a few percent per year of risk-free return. For risky investments, maybe 7% or more sounds good. But a 5 year payback on an energy efficiency investment amounts to something like a 14% risk free rate of return even if the item only lasts 10 years. If it lasts 20, the IRR is about 19%, risk free. Obviously there are other issues like how long the person thinks they will stay in the home, etc. Mick Dalrymple Senior Sustainability Scientist in the Julie Ann Wrigley Global Institute of Sustainability and Director of University Sustainability Practices at Arizona State University What energy efficient products for the home offer the best ROI? The highest ROI “product” is actually a service. Getting a home energy checkup is like getting a full physical for your home. A certified professional brings out various diagnostic equipment, pressurizes your home and tests for various common leaks and pressure imbalances, as well as inspects for gas leaks, construction flaws and missing insulation. They frequently also bring out and install efficient light bulbs and showerheads. The home energy checkup might cost $250 to $400 but, frequently, utility or local government energy efficiency programs subsidize the cost to, say $100 or so. The professional can often identify simple modifications that you might even be able to do yourself that could save hundreds of dollars in utility costs per year, not to mention all the savings from the high efficiency bulbs and showerheads. What is the biggest mistake consumers make when trying to make their homes more energy efficient? The biggest mistake people make is to look for one-off solutions rather than treating their house as a system. Think of your house as a balloon. If you push in on one side, it can make the balloon bulge somewhere else unexpected. You can actually make things worse or even create an unhealthy or unsafe house when you think you are doing something good. Get a home energy checkup first to find out if you need air sealing, wall headers capped, more insulation, insulation re-distributed, air balancing or something else. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Yes. Energy efficiency is often the least expensive form of energy “supply” that society can invest in, and it also generates additional benefits like more comfortable homes and buildings, cleaner air, national security, local jobs, more resilient electrical grids, and improved occupant health. What tips can you provide for building an energy-efficient home on a budget? Invest in passive solar design. The power of the sun is amazing. Passive solar design takes advantage of the sun’s path during the day and during various seasons to warm your house when you need it and keep your house cool when you need it. And, because it is passive, it is something that requires a lot less maintenance than equipment. Good, properly-installed insulation and proper air sealing are also great budget-friendly means to achieve energy efficiency. What are the best strategies for financing solar panels for the home? The best strategy for financing solar PV panels depends upon your individual situation and the incentives offered by your state and/or local government and/or your utility. A lease or a power-purchase agreement can eliminate any need for upfront cash. And, businesses might be able to get a larger tax credit than an individual. Hopefully, some of that savings is passed on to you through lower monthly rates. However, if you have the resources or access to low-interest loans, it may turn out to be more profitable for you to invest up-front and own the equipment. Always get bids from three or more companies, ask them to price systems out under various financing scenarios, and always check their contractor license record and their BBB rating. Also, ask your utility if they have a community solar option. Solar systems accompanied by battery storage are now coming onto the marketplace. Pricing isn’t yet to the point where it is financially advantageous to go off the grid except maybe where electricity costs are really high, but a certain amount of storage with good energy management software can help you store energy at a time of day when the price is low and use it to reduce your electricity purchases when prices are high. Tristan R. Brown Assistant Professor of Energy Resource Economics at State University of New York College of Environmental Science and Forestry What energy efficient products for the home offer the best ROI? Energy efficiency product ROI depends heavily on the geographic location of a building. Solar thermal heating offers a very attractive return in Hawaii, for example, so much so that all new single-family homes in the state must be built with solar water-heating systems. Rooftop solar PV is an attractive option in sunny locations with high electricity prices such as southern California. On the other hand, building insulation represents an attractive return in northern states with especially cold winter temperatures. What is the biggest mistake consumers make when trying to make their homes more energy efficient? The most common mistake that consumers make when investing in energy efficiency is failing to conduct a thorough analysis of their energy needs and losses prior to making improvements. Utilities in many states offer free building energy audits to their residential ratepayers as well as rebates for energy efficiency upgrades. These can generate attractive ROIs for upgrades that consumers would not otherwise consider. Something as simple as installing a high-efficiency heater or adding a few inches of attic insulation can provide homeowners in northern states with a more attractive ROI than an investment in rooftop solar PV even though many consumers would only consider the latter to be an attractive option at first glance. Consumers can maximize their returns by taking advantage of the free and/or low-cost services that are available in their area. In evaluating the most energy efficient states, what are the top five indicators? First, a state’s electricity prices are a major driver of its overall energy efficiency. The ROIs of energy efficiency investments are heavily impacted by electricity prices, which vary widely by state, since these in turn impact the costs that are avoided by an investment. Second, the degree of urbanization in a state is also a major driver. Cities are major energy consumers and local governments are an important source of energy efficiency regulations, so cities in particular tend to host many such pro-efficiency regulations. A state’s weather conditions are also important indicator. States with especially cold or hot temperatures will, other things being equal, have lower building energy efficiencies. Finally, the proximity of electricity generators to the points of consumption in a state affects energy efficiency due to the losses that occur as electricity transmission distance increases. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? One argument in favor of government incentives for energy efficiency investments is that ROI decreases when energy prices decline. Today’s historically-low energy prices have created a situation in which energy efficiency investments are not as attractive from a financial perspective as in the past. At the same time, however, many question the merits of improving energy efficiency just for the sake of doing so. Energy efficiency investments become more attractive during low energy price periods, however, when those investments are also viewed from the perspectives of energy security and environmental security given the additional benefits that improvements to these other two area provide. I believe that it makes the most sense for energy efficiency incentives to be linked to policies that improve energy and environmental security, as a result. What tips can you provide for building an energy-efficient home on a budget? Energy efficiency upgrades can be done on a budget by targeting those investments that offer the largest returns and researching rebates and other incentives before making any final decisions. What are the best strategies for financing solar panels for the home? Companies such as SolarCity offer rooftop solar PV leases instead of outright consumer ownership, which allows homeowners who are on a budget to avoid the large upfront capital costs that solar PV installations incur. Smaller solar PV installers also offer financing options for solar PV ownership that resemble those offered by car dealers. Low interest rates make this latter option especially appealing when the homeowner lives in a state with abundant sunlight and/or high electricity rates, since these offset the financing costs. Homeowners interested in rooftop solar PV should talk with their local installers to identify the financing options that are available in their area. Jim Krane Wallace S. Wilson Fellow in Energy Studies at Rice University's Baker Institute Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Evidence shows that government subsidies on energy efficiency mostly benefit the wealthy -- people who can already afford to buy a Tesla or add solar panels to their rooftops. Sometimes government subsidies flow to environmentally minded people who might have made the investment on their own, without government encouragement. When that happens, the subsidy is essentially wasted. A better policy would try to convince consumers who might otherwise make a bad choice. You basically want car shoppers to buy a Prius, not an F-150. This is easier to do with taxes. Raise the price of gasoline and people start rethinking their need for a giant SUV. Impose a carbon price and fossil fuel-based power generation has trouble competing with nuclear, wind and solar. Subsidies for energy efficiency are still useful, but they are better off targeted to the poor. Home insulation and double-paned windows -- or a high-efficiency heater or air-conditioner -- would help a poor family consume less energy and reduce their bills at the same time. Erin Baker Professor of Mechanical and Industrial Engineering, and Director of Wind Energy IGERT at University of Massachusetts Amherst What energy efficient products for the home offer the best ROI? In some work I have done, it is insulation and weather stripping. What is the biggest mistake consumers make when trying to make their homes more energy efficient? In terms of cost-effectiveness, it is looking at the flashier solutions, such as solar, rather than the cost-effective, but somewhat mundane, solutions such as weather stripping. On the other hand, there is some evidence that visible solutions, such as solar, may have neighborhood effects, causing others in the neighborhood to look into energy solutions. So, in the larger picture, it is not clear if any of these solutions are “mistakes”. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Energy efficiency appears to have great value to the nation, yet it is often overlooked by individuals and firms. Making it easier to think about and implement energy efficiency is a useful role for government and non-profits. Harrison Fell Associate Professor in the Department of Agricultural and Resource Economics and Researcher in the Center for Environmental and Resource Economic Policy at North Carolina State University What energy efficient products for the home offer the best ROI? A lot of home energy consumption comes from space heating and cooling, so generally we think investments aimed at reducing the need to run heaters or AC's are good investments. These investments include things like increasing insulation, sealing drafty doors and windows, and replacing single-pane windows. These upgrades tend to be less expensive than replacing HVAC units and perhaps give a bit more bang for the buck. However, as an economist, I feel I should also give you a contrarian point of view which is that recent empirical estimates have shown that home "weatherization" upgrades (similar to what I describe above) do not save as much energy as the engineering estimates imply. What is the biggest mistake consumers make when trying to make their homes more energy efficient? Again, heating (space heating + water heating) and cooling make up about one third of the total consumption in homes (according to the EIA), so efforts to reduce heating and cooling use will be where one receives large energy savings. Other things like refrigeration or energy efficient washer/dryers, while getting the energy efficient versions of these helps, they just don't account for a large share of the consumption. So expenditures on some of these more energy efficient products, at the expense of not making some of the cheaper investments aimed at reducing home heating and cooling (window/door sealing, loft insulation...), would seem like an unwise choice. In evaluating the most energy efficient states, what are the top five indicators? I don't know that I have 5 indicators here per se. If we are talking about home energy efficiency, there is evidence that newer homes in general (regardless of the state's building codes) are more energy efficient (use less energy per square foot) than older homes. So, looking for the average age of the home stock would be important. A caveat to that is that newer homes tend to be bigger and thus while they're more energy efficient they also tend to use more energy altogether because they're larger. I would also want to consider the subsidies for adoption of energy efficient home appliances. Finally, I would also consider the price of electricity in the state. For example, California often ranks high in terms of home energy efficiency and while they do have a lot of programs to incentivize efficiency, they also have quite high electricity prices which significantly impact the ROI of various appliance upgrades and home retrofits. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Yes. There are many market failures that prevent us from reaching the societally optimal level. Some of these market failures include the poor information available to households about the value of the efficiency investments, inability of households and firms to fully internalize all of the benefits associated with efficiency upgrades, free-riding impacts associated with learning from early adopters of energy efficiency, and the inability of firms that develop energy efficiency products to fully appropriate all of the gains associated with the innovation (due to, among other things, imperfect intellectual property rights rules). There are also behavioral economic reasons, such as consumers’ limited abilities to calculate returns on investment or certain decision heuristics, that may discourage households and firms from purchasing societally, or even individually, optimal levels of investment. Because of these issues, the market outcomes with no subsidies may not get us to an optimal level and so I think subsidies are still warranted. What tips can you provide for building an energy-efficient home on a budget? Given that heating and cooling are the biggest sources of energy use, I would suggest finding budget friendly ways to reduce heating and cooling needs. What are the best strategies for financing solar panels for the home? One can finance solar panels through standard channels, but should be aware of all local, state, and federal tax incentives offered to installers. Power purchase agreements and leasing solar panels are also popular options now and require little to no upfront payments. In terms of which option is best (ownership, PPA, or lease) I don't think there is a standard answer. It will depend on many factors including the consumers’ belief about future costs of systems, level of comfort in repairing the system, and expected time in the home. Kenneth Gillingham Assistant Professor of Environmental & Energy Economics at Yale School of Forestry & Environmental Studies What energy efficient products for the home offer the best ROI? The answer to this question depends on the exact situation of the home – what the current insulation, lighting, and appliances are. However, for older homes that have not been re-insulated in all but the most moderate climates, insulation is almost always a good investment. The cost and quality of LED lighting has also come down to such an extent that from both a financial and environmental perspective it almost always pays off quickly to replace incandescent lights with LED lights. The only exception to this would be in places where the lights are very rarely used. For example, the light in a remote corner of a basement is so rarely used that it is probably not worth replacing with an LED. What is the biggest mistake consumers make when trying to make their homes more energy efficient? The biggest mistake consumers make is to dive in and invest in more energy efficient products without getting a home energy audit. Since every home is different, home energy audits can identify the most promising energy efficiency investments. In evaluating the most energy efficient states, what are the top five indicators? The top indicator is simply the aggregate energy use per capita. However, this may mask what is actually going on, since different states have different industries. Thus, one would also want to look at residential energy use per households to better understand residential energy efficiency. Similarly, one would want to look at commercial energy use per square footage of commercial building space. Now, of course, these metrics will all miss the fact that different states have different climates. To adjust for this, one could look at heating energy use per heating-degree-days and electricity use per cooling-degree-days. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Yes, there are clear market failures due to environmental externalities (i.e., pollution) that energy-efficiency projects can help address that are not being otherwise addressed through government policy. In addition, there may be informational or other market failures that reduce the uptake of more energy efficient technologies. What tips can you provide for building an energy-efficient home on a budget? The very best time to make sure that a home is energy efficient is at the time of new construction. My number #1 is to consider using double-paned windows and consider raising the R-value of the insulation being put in. Whether the extra investment will pay off does depend on the climate of where the home is being built, but in most places, these investments will pay off in short order. What are the best strategies for financing solar panels for the home? There are many options for financing solar panels. One can buy them outright with cash, buy them and finance them with a home equity or other personal loan from a bank, finance them with a solar loan through the solar installer, lease the panel from the installer through a solar lease, or engage in a power-purchase agreement (PPA) with the installer, whereby the installer owns the panels and sells the electricity to the homeowner at a low negotiated rate. Not all of these options are available from every installer or in every location, but it is worth exploring these options. Solar ownership allows the consumer to reap all of the benefits from the panel, but the payback period may not always be short, depending on the situation. Agreements like PPAs are attractive in that the upfront cost is either very low or zero and the installer is responsible to maintenance. However, the benefits to the homeowner are lower. Thus, the best strategy does depend on the situation of the homeowner, but all of these strategies are worth considering. Peter Bauer Professor in the College of Engineering and in the Center for Sustainable Energy at University of Notre Dame What energy efficient products for the home offer the best ROI? LED lamps in conjunction with motion sensors: For lighting that is regularly switched on and off, LED lamps offer superior efficiency over any other (affordable) technology. In combination with motion sensors, this is a winning combination and saves energy two ways: by switching the light off when it is not needed and by having a high conversion efficiency. Amortization times depend on the cost of energy, and are typically on the order of one year. Electric Water Heaters vs. micro waves and ovens: Electric water heaters have superior efficiency simply because practically, all the energy is converted to heating the water in the jar. Ovens and also microwaves lose efficiency by also heating their surroundings. Heat pumps (Depending on climate can have long amortization rates): Heat pumps can have an extremely high efficiency if the temperature differential between inside and outside temperature is not too high. Unfortunately, installation can be expensive, especially if the thermal exchange occurs in the ground rather than the air. Tesla Vehicle - to - Home discharge (not yet realizable - may never be realizable): Basically this describes the V2G (vehicle to grid) scenario for Tesla vehicles. Charging for free at a fast charging device during the day, then returning home and powering the house for free at night! If the commute to work is not too long, this method can provide you 50-70KWh (depending on the Tesla you own) of free energy, more than anybody would ever need for half a day! What is the biggest mistake consumers make when trying to make their homes more energy efficient? Over-investment with long amortization rates! Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Yes, but with decaying support over time. Support should be mostly on the consumer side. What tips can you provide for building an energy-efficient home on a budget? Use a small solar array around the power level of your home usage during the day, i.e., about 400-800 watts. This avoids expensive storage capability and over-design. For a mid-size home in Florida or Arizona, this can be done for approximately $1000 (no labor). This option is especially attractive if your utility does not pay for energy that flows back into the grid from your solar array or if it gives you a very low rate. Carolyn Kissane Academic Director and Clinical Associate Professor of Global Affairs at the New York University School of Professional Studies What energy efficient products for the home offer the best ROI? The return on investment for energy efficiency upgrades is generated by the amount of savings the customer is able to realize due to the lowering of their energy bills. When considering savings, we need to keep in mind that apart from the direct savings, there are also indirect system benefits, which are not initially apparent. ROI is also directly correlated with the amount of time the particular appliance is being used. Common areas lighting in windowless hallways of large apartment buildings is utilized 24/7 and the payback period will be much shorter than the lighting upgrade in an additional, rarely used, bedroom. Direct savings are straightforward – the energy efficient technology delivers the same service as the older appliance but uses much less electricity, gas or heating oil. Compact fluorescent lights (CFL) require much lower wattage to deliver the same lighting and provide a simple payback usually within 1.5 to 3 years. Often, the ROI calculations however tend to exclude indirect savings – the new CFL or LED lights emit negligible amounts of heat, compared to the older incandescent bulbs and therefore they lower the need for using A/C to mitigate the heating effect of lights. They also last much longer, reducing replacement or maintenance costs. Heat emitted from lighting, appliances and refrigerators usually takes up to 40% of the cooling load in a building. An additional indirect saving will come from replacing the old A/C with a new, much smaller chiller, which delivers both energy and capital savings. However, the indirect low-heat effect can be a negative during winter months, when more energy will be required to raise the temperature in the house. But again, this negative effect can be mitigated by upgraded house insulation. So, a complete energy efficiency upgrade delivers a much better ROI than the individual technologies. Some average payback periods for household technologies are:

• efficient common area lighting: 1.5 - 2 years;
• efficient apartment lighting: 2.5 - 3 years;
• occupancy sensors for lighting: 3.5 years;
• energy star refrigerators: 3.8 years;
• energy star window A/C units: 5 years;
• energy efficient washer: 3 - 6 years (depending on usage).

The costs for replacing new appliances can vary substantially depending on the brand and the features built-in by the manufacturer. The cost for operating a 55-inch TV per year can vary from $8 (LCD) to $55 (plasma). A good start for consumers is the government program Energy Star and their yearly “Most Efficient Products” list. ROI will also depend on the price of electricity – the price per KWh in New York State or Hawaii is considerably higher than Arizona and therefore the payback period in NY or HI will be much shorter, given prices of appliances are equal across states. What is the biggest mistake consumers make when trying to make their homes more energy efficient?

• Improper installation. To get the most of your new energy efficient A/C you have to make sure that there are no leaky air ducts. When it comes to wasting energy, they have been found to be some the biggest source of waste. Simply connecting your new A/C units to the old air ducts will not deliver the planned savings. Improper installation could increase household energy use for space heating and cooling up to 30% over projected levels.
• Oversizing. Improperly sized appliance, even if it is energy efficient, uses much more energy to cool/heat the space to the desired temperature and should be avoided. Consumers need to make sure that they are choosing the right size appliance for their home.
• Air-flow. Getting the proper air-flow is essential for a heating or A/C system to perform at its best. Too high or too low flow can lead to higher energy bills as well as a less comfortable home than optimal. Measuring and adjusting the flow for best possible performance needs to be carried out periodically.
• Forgetting to change A/C filters.
• A/C refrigerant charge. The refrigerant in the appliances needs to be properly charged for them to perform at their best and the consumers need to ensure that the charge is regularly measured by professionals and adjusted accordingly.
• Lack of furnace maintenance. Usually, the furnace that provides your heat is left alone somewhere in some basement corner until it breaks down. It can benefit greatly from regular maintenance: replacing filters, installing a programmable thermostat, performing annual tune-ups, sealing air-ducts, creating a zoned heating/cooling system for your house.
• Failure to adjust behavior to the new technology. Opening windows to get fresh air when your house is outfitted with mechanical ventilation system with heat recovery throws the system off balance and it cannot recover the heat lost through the open windows.

In evaluating the most energy efficient states, what are the top five indicators? The American Council for an Energy-Efficient Economy (ACEEE) publishes a yearly scorecard and ranks the states based on the progress of their energy efficiency policies and programs. The top indicators on which states are scored include: utility and public benefits programs; transportation policies; support for combined heat and power programs; buildings energy codes and compliance; appliance and equipment standards, etc. Massachusetts, California, Vermont, Oregon, Rhode Island and Connecticut were the top performing states. Continued commitment to energy efficiency in these states has spurred investment in programs, by requiring the utilities to save a growing percentage of energy every year. Redefining ways of saving energy also plays a major role. Adoption of new building codes, major efforts to achieve efficiency in schools and other public buildings and implementation of cap-and-trade also plays a large role. It is important that the states constantly update and improve their programs. Continuing enforcement and funding for energy savings targets also matters. In the transportation sector, New York is the only state that has a target of reducing vehicles-miles-travelled. California is leading the nation in appliances and transportation standards; new standards for plumbing products also promise to lead to energy and water savings. When evaluating the effect of such policies, factors like economic and environmental benefits of the policies are also key. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? Government incentive programs are necessary and should be in place for technologies with small or modest market share. There are studies pointing that when the technologies already have established market share, the number of free-riders – consumers which would have replaced their old appliances even without the rebates, but took advantage of those rebates anyway – can reach up to 90% of program participants and the net energy savings of the incentive program are much smaller. What tips can you provide for building an energy-efficient home on a budget? The most cost-effective options for improving efficiency are addressing air leaks, replacing lighting, followed by appliances and building improvements. The biggest sources of energy waste are almost always air leaks. If a home is not properly sealed, the cooling and heating system will not work correctly, adding to unnecessary increases in your bills. There are many state and local incentives for home energy audits. The New York State Energy Research and Development Authority, for example, provides free or reduced cost home energy assessments along with incentives to offset the cost of improvements. Single-family homes of less than 3500 sq.ft. and household incomes of less than 200% of the area median income can qualify for free energy assessment. Taking advantage of similar programs provided by your local utility or state are a good place to start. What are the best strategies for financing solar panels for the home? There are several options for residential solar panel financing in the U.S.: third-party ownership (TPO) or solar lease with power purchase agreements (PPA) and direct ownership, financed through savings or loans. Current market data shows that both options are popular and have about equal market share in the U.S. About 57% of residential solar panels were third-party owned in 2016, but the trend for direct ownership is also picking up. There are a wide range of loan products. To finance your solar system, you can take out a solar loan or an energy efficiency mortgage (EEM). Energy mortgages are provided by both federally insured mortgage programs from the Federal Housing Administration, Veterans Administration, U.S. Dept. of Agriculture, DOE, HUD, EPA as well as the secondary mortgage providers like Fannie Mae and Freddie Mac. With loans or mortgages, you have to pay the entire upfront cost of the solar system. Some states also provide Property Assessed Clean Energy (PACE) financing. Under such program, the state/city provides the homeowner with a PACE loan for the upfront cost of the system and the homeowner pays the money back through higher property taxes over a period of up to 20 years. The assessment is added to the property’s tax bill. The PACE financing stays with the building upon sale and is easily shared with tenants. Jessica Terman Assistant Professor in the Schar School of Policy and Government at George Mason University What is the biggest mistake consumers make when trying to make their homes more energy efficient? Many consumers take an all or nothing approach. Energy efficiency is about reducing consumption in addition to improving on the devices that consume energy in our homes. Consumers often overlook the simple modifications such as replacing lightbulbs and high-energy-consuming appliances in addition to basic behavioral modifications (turn off the lights, automate heating and cooling systems, etc.). Many local governments or utilities actually provide energy audits, where consumers get feedback on how they can make their homes more energy efficient. This is the low hanging fruit to which all energy consumers have access. It sounds simple but behavioral economics tells us that we often do not take advantage of what is right in front of us. In evaluating the most energy efficient states, what are the top five indicators? I believe that the key indicator, which influences everything else, is whether or not the State's Public Utility Commission (the regulatory body that governs utilities in each state) decouples consumer energy sales from utility profits. Without decoupling, utilities companies - regardless of their ownership structure - lose money when energy consumers use less. With decoupling, utilities are more likely to offer variable pricing (rates tied to time of usage) and other incentive programs. More broadly speaking, energy efficient states are more likely (1) to have aggressive building codes and appliance standards (i.e., Energy Star products), (2) to develop aggressive public transportation systems that are user friendly, (3) to offer meaningful incentives to utilities and consumers who generate sustainable sources of energy (i.e., solar panels, heating pumps from geothermal energy, etc.) and (4) to offer the utilities within their jurisdictions incentives to educate and incentivize consumers to reduce their energy consumption. Should the government continue to incentivize consumers and businesses to invest in energy-efficient projects? If we are interested in developing more efficient technologies, then we need government incentives. The initial investment in some of these more energy efficient technologies is often prohibitive. Without government investment, there will be no market.

Methodology

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