The True Value of an Energy Audit

TheTrueValueOfAnEnergyAudit

Residential energy efficiency, or home performance, has historically been based on measured results. A contractor physically goes to the location, performs a variety of tests and takes all kinds of measurements and then determines a plan of attack to improve the home using building science principles. After the work is complete, the contractor performs the same tests again to validate or verify the results. This “test-in/test-out” process provides measurable and repeatable outcomes.

It also takes time and significant effort. Unfortunately, there’s an expectation in the industry and among customers that home performance assessments should be free or heavily discounted. While this might seem like a good way to attract customers, in my experience it ends up devaluing the audit process itself and the value of the information it provides. If I could wave a magic wand and make global changes to the home performance industry, one of the first things I would do is to encourage contractors to charge for energy audits. As you can imagine, the labor involved in testing every house before you work on it adds considerable expense to the home performance process. When you have to spend 3-4 hours on a project just to provide an estimate, your cost of acquisition is extremely high. When you compare the process to most other trades, it’s enormous. Imagine if a plumber needed to spend hours in your home before he or she could provide a proposal to replace a sink or fix your toilet.

EFFECTIVE HOME PERFORMANCE SOLUTIONS EQUALS DATA

In order to build effective home performance solutions, you need data. Some of this can be easy to get; most folks can provide a few months of utility bills without too much effort, and in some cases a contractor can get this information directly from the utility. Other parameters depend on a visual inspection: insulation levels, window types, furnace models, crawlspace conditions, etc. Then there are the things you can’t see and that you need sophisticated tools to measure: duct leakage, air infiltration into the building, gas leaks, carbon monoxide levels, or airflow from the furnace or air-conditioning system.

When all is said and done, the interactions in a house are so complex that it’s difficult to create a one-size-fits-all solution. Some homes need lots of work to reduce the drafts (air sealing), while other houses are pretty tight. Many brand new homes are a mess, while some 100 year old homes are amazing. Some homes have forced air heating and cooling systems that work fairly well; many don’t. Unfortunately there’s no real pattern or standard that we can use to streamline the process. Ultimately, if you spend enough time in the business you will come to the conclusion that in-home testing is a good idea: once you’ve seen the house and measured a multitude of parameters, you have a much better idea on how to improve things.

Typically an audit is followed up with some form of a report that is delivered to the homeowner. These reports can be basic, (a couple of pages with some technical specifics), or they can be very detailed, explaining the building science principles and how proposed upgrades will help improve the home when the work is complete.  No matter how simple or how complex, these reports are valuable. When done well, the audit report is a roadmap on how to improve the house. It will include details and photos of most if not all areas of the home. In some ways and energy audit is like a very comprehensive physical exam from a doctor.

You’d never expect a doctor to give a discount on a physical just to win new clients, this is exactly what contractors do with home performance audits.

Some contractors build the audit cost in somewhere else to cover the expense. Others just absorb it as a loss-leader to get new jobs. The fact that many incentive programs subsidize the cost of audits so that they are free to the homeowner makes things worse.

You might ask, what’s so bad about giving something away as a way to increase your business? In my opinion, from a business perspective free audits do more harm than good by giving the impression that the work is of little or no value and this is far from the truth.

Here’s a personal example I can share. In 2010 there was lots of money floating around due to the America Reinvest and Recovery Act (ARRA). Our local county folks had some “use it or lose it” funds that they decide to use to provide free energy audits to homeowners by compensating HERS raters for performing a whole house energy assessment. The result was a lot of HERS raters were very busy performing audits on houses that seldom converted into home performance jobs. Why? With “no skin in the game,” many homeowners who had no intention of doing any further work would request audits. One homeowner actually said to me. “I wanted to get an audit to see how effective my new LED lights are.”

The problem is, someone who’s just interested in the assessment is probably not a good potential candidate for most contractors.

OFFER AN AUDIT AS A STAND ALONE SERVICE

A much better approach, in my opinion, is to charge for home performance assessments, but sell them on their stand alone value. As I mentioned earlier, when you deliver an audit report you are essentially handing the homeowner all the information they need to improve their home, even if you are not the chosen contractor. Obviously, this has long term value to the homeowner.

Charging for audits is also a great way to determine if your potential customer is serious about moving ahead with his or her project. The best way to sell more complete jobs is to promote the value of the audit as a stand alone entity and to charge the homeowner real money to obtain this information. If they are not willing to pay you for spending several hours testing and poking around in their house, they are likely not very committed to moving ahead with a comprehensive solution involving multiple measures.

One approach to charging for audits that worked well for me when I was a home performance contractor was to sell audits based on their stand alone value (in our case we charged $495), and then offer to rebate the cost of the audit if the customer went head with the full project and the budget reached or went over $10,000. This effectively meant the audit was no cost to the homeowner if they moved ahead with the project. If they didn’t, we didn’t lose money or waste time trying to convince a homeowner that they needed our services. This was a very effective strategy.

GIVE A TWO PERSON AUDIT

Something else we learned was the power of a two person audit. The reason is pretty simple especially if you have ever tested a house alone. The value of a two person audit is one person can focus on the technical set-up and testing and the other has the time to educate the homeowner, explaining the process. It’s easy to forget how foreign a blower door and many of the tools used to perform an audit are to most people. With the two person team one person is focused on building confidence with the homeowner and the other is doing the testing, this proved to be a very effective approach. Regardless of your approach I encourage you to involve the home owner in the audit process whenever possible.

The bottom line is, no matter what your process, as a home performance contractor you need to recognize the value of the information you are providing during and after an audit process. Take advantage of the situation to help build trust with your potential new client. Use the cost of the audit to help you focus on home owners that are ready to move ahead with the project. And most of all, resist the urge to lower your price or allow an entity to subsidize the cost so that it is free to the homeowner. Very few things in life are truly free. Recognize the value of your time and experience and use the audit to identify committed new clients. The industry as a whole needs to step up and recognize the value of what it is providing. Charging full price for audits would be a huge first step.

Charles Cormany
Executive Director
Efficiency First California

Image by Charles Cormany

Comments

Energy Efficient Home Consulting

Hi Charles,

Great article!

What I would like to add is our experience.

ELEM3NTS is a consulting company, in SF Bay Area, comprised of a unique set of highly professional building scientists specialized in Energy/Performance Residential Assessment (also valid for the Energy Upgrade California/PG&E Rebate), basically a comprehensive analysis of the Whole House.

Our clients are interested in their home and ELEM3NTS works to bridge the gap between the homeowners and the construction companies.

ELEM3NTS process provides a comprehensive analysis which considers the clients budget and final goals and develops a plan that best meets their goals. We provide the homeowners with all information to enable them to engage the right contractor(s) for their home energy efficient.
In fact, we have had clients that used our services for their multiple properties as they were able to realize and recognize the major value of our audit.

The cost of our audit changes based on house dimension and it is more expensive than average contractors, and our clients are glad to pay it for the completely independent Analysis-Recommendations-Plan, for the vantage to choose any contractor(s) they want or like (usually contractors in the EUC program) and because they realize that our services are performed one time, every 20 years, to bring their old beautiful home to the standards of a new energy efficient home.
WIN, WIN, WIN!

Sincerely
Alfredo Baccari
ELEM3NTS
408-634-6690
www.e3-elements.com

Independent Energy Consultants

Our company has been providing independent energy audits from the beginning. As Alfredo can probably attest, given the choice between a contractor and an independent energy consultant, the homeowner will choose the independent energy consultant every time. The value is that independent energy consultant can provide an assessment without having the penalty of receiving a financial consideration in the outcome. That's what the homeowner wants. Someone they can trust who will provide an unbiased assessment. While a typical EUC contractor will convert 30% of their energy audits, a good independent energy consultant will convert 98% of their energy audits.

As I have been saying since 2010, the dismal results of the EUC program has always been because they used the contractor as the face of the program. The very contractors the California State Licensing Board did a great job painting as less than savory people, out to rip you off if you're not careful. Then scratched their heads wondering why homeowners were not breaking down the doors doing retrofits. Yes, tell the homeowner to "Pick from this list of contractors they, and no one they know, knows who these contractors are, and by the way their dad, uncle, brother, or best friend who are GC's are not qualified". That's like sending children out for Halloween trick or treating and telling them to be careful many people will poison their candy, then wondering why they all came home with little or no candy.

Post new comment

The content of this field is kept private and will not be shown publicly.