Archive for the ‘Energy Related News’ Category

Title-24 Question of the Week

Tuesday, November 7th, 2017

What is a NFRC window label & why do I need it?

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The 2016 California Title-24 Building Energy Standards require that the efficiency of windows and doors be documented in the Title-24 compliance calculations using one of two allowable methods.  NFRC or the default assumptions.  We’ll address both methods:

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NFRC:

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The NFRC (National Fenestration and Rating Council) is a non-profit organization which oversees and sponsors an energy efficient certification and labeling program to document the thermal performance of windows, doors, and skylights.

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California’s Title-24 Energy Code requires that U-factor, SHGC values used in Title-24 compliance reports be backed up by NFRC documentation as well as a temporary label on the actual window/door available for inspection during construction.  The temporary label shows the U-factor and SHGC for each rated window and door.  This label must also show that the window meets the air infiltration criteria.  This temporary label must not be removed before inspection by the building official at final inspection.  There also is a permanent label is usually inscribed on the spacer, or etched on the glass, or engraved on the frame and includes a number or code to allow tracking back to the original performance information on file with the NFRC.

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Default tables:

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Many times window and door manufactures have not gone thru the NFRC testing procedure or the windows/doors are essentially site built which makes it impossible to test the actual performance of these windows and doors.  In this case your only option is the default assumption method.

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This involves modeling your project for Title-24 compliance using the C.E.C.’s default U-factors and SHGC values from the default tables (Tables 110-6-A and 110-6-B in the Title-24 standards).  These default values are assumptions based on window and framing types.  If the windows and doors are using these default tables for their performance numbers (U-factor & SHGC) they also must have a label that uses the phrase “CEC Default U-factor” and “CEC Default SHGC” in front of or before the U-factor or SHGC.  These phrases cannot be simply used in a small print footnote on the label.

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If default performance values are used then the Title-24 energy calculations also must use the same values in the compliance report.  Most windows and and door that are tested and labled by the NFRC have U-factors and SHGC values that are significantly better than the default values from the tables.  This can often make the difference between passing and failing the Title-24 energy code standards so it is to your advantage to use the NFRC testing data in the Title-24 compliance calculations rather than using the default numbers from the tables.

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Overlooking this crucial item in the Title-24 report can result in huge problems during construction.  It is not uncommon for the installing window contractor to bid on the project without ever consulting the approved Title-24 energy code report.  If the Title-24 report is calling out for NFRC compliant windows and doors and the contractor orders and installs non-NFRC products the project is in real trouble.  During the course of construction the building inspector normally will go thru the project looking for the NFRC stickers on the windows/doors and compare them with the approved Title-24 Certificate of Compliance.  If there are discrepancies noted, or the windows/doors have no NFRC stickers, or are site-built then the builder must either revised the Title-24 compliance report to demonstrate that the project will comply with the default assumptions in table 110-6 (U-factor and SHGC) or replace the windows/doors with NFRC compliant ones.

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The problem is that often times there is no margin within the Title-24 analysis to absorb the significant penalty for using the default tables for U-factor and SHGC values.  This penalty is significant especially with metal framed windows/doors.

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The lesson is clear, Title-24 compliance should be a central topic for discussion with window/door suppliers and installers when they are bidding on the project, not pushed off with vague assurances which later could bring the project to a standstill when this comes to light during construction.

 

 

 

Santa Monica adopts Zero Net Energy Code for all new single family construction

Monday, June 19th, 2017

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On May 1, 2017 Santa Monica became the first city to adopt zero-net energy (ZNE) requirements.  The State of California is planning to implement such a code state-wide but this will not be implemented until the 2020 T-24 code cycle so Santa Monica is out in front with net-zero.

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The basic premise of ZNE requires projects to generate enough of their own energy from renewable energy sources (solar PV for example), to equal what they use from the utility grid over the course of a year.  For now this requirement only applies to new residential projects, not additions or alterations.

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However the ZNE requirement is parallel to the city’s Energy Reach Code which requires all new low-rise residential projects to be designed to use 15% less energy than the allowable energy budget established by the 2016 California Energy Code (Title-24).  This presents some challenges as projects that may comply with the reach code (15% better than T-24) may not comply as a ZNE project.  Conversely projects that can demonstrate ZNE compliance may still fall short of the 15% better than T-24 energy use.  One does not always equal the other.

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This new code update became effective May 1, 2017.  This emphasizes the importance of getting your Title-24 Energy Consultant involved in your project early in the design process as most projects will struggle to comply and will involve a lot of back and forth as different design and energy saving strategies are modeled, tested and revised to get the project over the finish line cost-effectively.

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Link to news release

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Link to detailed ZNE and Reach Code explanation

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Upcoming webinar: Understanding the new 2016 Title-24 Residential Energy Code

Friday, February 17th, 2017

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“That was one of the best webinars I’ve ever attended.  Clear, concise, linear, well moderated, and presented.  You’ve got my recommendation if you ever need it.”

“I just wanted to let you know that I thought the presentation yesterday was excellent!  You presented the material in an engaging fashion, and the information was easy to comprehend.”

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“Your webinar was extremely well done.  Please put me on your mailing list for future events.  I have recommended to my GC and his electrician that they should attend next month.”

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The new 2016 Title-24 Building Efficiency Standards take effect January 1, 2017.  These changes will have a significant impact on building design and construction.

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The new webinar will discuss the major changes to the new energy code and demonstrate compliance strategies that allow you to bring your project into compliance with the new code cost effectively and with more allowable glass area than you would think possible.

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This new webinar class will address the big questions from architects, builders, developers, and homeowners:

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How can we cost-effectively comply with the new Title-24 requirements?

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What forms are we responsible for?

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What HERS third party inspections are required and what forms/paperwork are required for these inspections?

This class will examine new Title-24 compliance strategies and options can provide essential leverage tools to allow even problem projects to comply with the new much tougher Title-24 energy code and avoid common mistakes that can jeopardize compliance and final inspections.

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Feedback from those who have attended our webinars

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Webinar date:

Friday, March 17th,  2017

9 a.m. to 11:30 a.m.

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Who should attend:

Architects, designers, contractors, LEED AP’s

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Cost:  $65.00

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California 2nd Most energy efficient state in 2013

Thursday, November 7th, 2013

Washington, D.C.Energy efficiency measures are thriving in state capitals around the United States, with several states—including Mississippi, Connecticut, Illinois, and West Virginia—taking major steps that moved them up the ranks in the seventh annual edition of the State Energy Efficiency Scorecard released by ACEEE. For the first time in the history of the State Scorecard, the 2013 ranking of the states is being released with the participation of a U.S. Department of Energy secretary, Dr. Ernest Moniz, along with a top elected official of a state, Massachusetts Governor Deval Patrick.

Available online at http://aceee.org/state-policy/scorecard, the State Scorecard shows that the top 10 states for energy efficiency are: Massachusetts, California, New York, Oregon, Connecticut, Rhode Island, Vermont, Washington, Maryland, and Illinois. Massachusetts retains the top spot for the third year in a row based on its continued commitment to energy efficiency under its Green Communities Act. In California, requirements for reductions in greenhouse gas (GHG) emissions have led it to identify several strategies for smart growth, keeping the state in a top position at #2. Connecticut is also closing the gap due to passage of a major energy bill in 2013, and Illinois is making its first appearance in the top 10 this year, reaping the benefits of increased energy savings called for in the state’s energy efficiency resource standard.

According to the 2013 State Scorecard, the five states most in need of improvement (starting with dead last) are: North Dakota; Wyoming; South Dakota; Alaska; and Mississippi. However, Mississippi also appears on ACEEE’s list of the top five most improved states, revealing an upward trend as more and more states embrace energy efficiency. Last year Mississippi passed comprehensive energy legislation that included energy efficiency as a major component. The bill included provisions setting an energy code for commercial and state-owned buildings. Mississippi is now set to become a regional leader in energy efficiency. West Virginia’s score improved due to the state adopting stronger building codes. The other three most improved states in 2013 were: Maine, Kansas, and Ohio.

U.S. Department of Energy Secretary Dr. Ernest Moniz said: “Energy efficiency is a critical tool for cutting harmful carbon emissions and the best way to reduce energy bills for America’s families. We applaud the continued progress in energy efficiency nationwide and stand ready to help states as they make their communities cleaner and more sustainable, while saving taxpayer dollars and fostering greater economic growth.”

Massachusetts Governor Deval Patrick said: “Massachusetts continues to lead the nation in energy efficiency because we have made the choice to shape our future, rather than leave it to chance. We will continue to focus on policies that create jobs, decrease dependence on imported energy sources and protect our environment by reducing emissions.”

ACEEE Executive Director Steve Nadel said: “In every region we are seeing states embrace energy saving measures with growing enthusiasm. From Massachusetts, which continues to be the pacesetter in the race to cut down energy waste, to Mississippi, which is emerging as a regional star, state governments are proving that smart policy can still cross partisan divides.”

California Energy Commissioner Andrew McAllister said: “California continues earning its reputation as an energy leader by instituting the nation’s most advanced energy efficiency standards for buildings and appliances, and for pushing the envelope

on ratepayer-funded efficiency programs. Our standards alone have helped save ratepayers more than $75 billion since 1975, grown California’s economy with local jobs, and protected our climate by reducing carbon emissions. ACEEE is providing a valuable service by recognizing energy efficiency leaders that other states can follow. We are proud to be one of the leaders.”

Mississippi Public Service Commissioner and Southeastern Association of Regulatory Utility Commissioners President Brandon Presley said: “Cutting down on energy waste has become an integral strategy for securing Mississippi’s energy future, and we are proud to become the most improved state in this year’s State Scorecard. Investing in energy efficiency helps utilities meet growing energy demand, provides reliable service for our customers, and produces economic benefits like energy cost savings. We look forward to seeing Mississippi emerge as a regional leader in tapping the vast economic benefits of energy efficiency.”

In the seventh edition of the State Scorecard, ACEEE ranks states on their energy efficiency policy and program efforts, and provides recommendations for ways that states can improve their energy efficiency performance in a variety of policy areas. The State Scorecard report serves as a benchmark for state efforts on energy efficiency policies and programs each year, encouraging states to strengthen their efficiency commitments as a pragmatic and effective strategy for promoting economic growth, securing environmental benefits, and increasing their communities’ resilience in the face of uncertain energy costs and supplies.

Other Key Findings

Facing uncertain economic times, states are continuing to use energy efficiency as a key strategy to generate cost-savings, promote technological innovation, and stimulate growth. The ACEEE Scorecard documents the following trends:

Several states have made concentrated efforts related to energy efficiency. Arkansas, Indiana, and Pennsylvania continue to reap the benefits of their energy efficiency resource standards (EERS), leading to substantially greater electricity efficiency investments and savings compared to what ACEEE reported in the 2012 State Energy Efficiency Scorecard.

A total of 20 states fell in the rankings in the 2013 State Scorecard report, due to both changes in the report’s methodology and substantive changes in their performance. Idaho fell the furthest, by nine spots, largely because it did not keep up with peer states in utility efficiency spending and savings. Wisconsin dropped six spots, due to a significant drop in energy savings realized by the state’s efficiency program.

Connecticut passed a major energy bill in June 2013, calling for the benchmarking of state buildings, expandingcombined heat and power programs, and doubling funding for energy efficiency programs.

The leading states in utility-sector energy efficiency programs and policies are Massachusetts, Vermont, and Rhode Island. All three of these states have long records of success and continue to raise the bar on the delivery of cost-effective energy efficiency programs and policies.

The leading states in building energy codes and compliance are California, Washington, and Rhode Island. During the past year, seven states adopted the latest iteration of building energy codes.

Methodology

The 2013 State Energy Efficiency Scorecard provides a broad assessment of policies and programs that improve energy efficiency in our homes, businesses, industries, and transportation systems. The State Scorecardexamines the six policy areas in which states typically pursue energy efficiency: utility and “public benefits” programs and policies; transportation polices; building energy codes and compliance; combined heat and power policies; appliance and equipment standards; and state government-led initiatives around energy efficiency.

Editor’s Note

A streaming audio replay of the news event will be available at http://aceee.org/state-policy/scorecard, an electronic copy of the ACEEE 2013 State Energy Efficiency Scorecard report and a high-resolution image of the ACEEE “logo” will be made available upon request on November 6, 2013.


The American Council for an Energy-Efficient Economy acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors.

Forget Big-Box Stores. How About A Big-Box House?

Wednesday, May 30th, 2012
The architecture firm HyBrid, which specializes in designing buildings from recycled shipping containers, created this solar-powered house for Sunset Magazine.

Amy EastwoodThe architecture firm HyBrid, which specializes in designing buildings from recycled shipping containers, created this solar-powered house for Sunset Magazine.

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May 30, 2012

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When it comes to architecture, sustainability and affordability can mean many things: Salvaged wood becomes new flooring, old newspapers are shredded into insulation.

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But a few architects are taking green building one step further: creating entire homes and businesses out of discarded shipping containers — an approach some have dubbed “cargotecture.”

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Approximately a quarter-million shipping containers pass through Oregon’s Port of Portland each year. These are big boxes — 40 feet long and weighing thousands of pounds.

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“As you look across the container terminal here, they look like giant, multicolored Legos stacked up out there,” says port spokesman Josh Thomas. Each one is full of cargo moving in or out of the Portland region.

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Shipping containers are ubiquitous on trucks, trains and ships today; about 20 million pass through American ports each year. But as critical as they are to modern life, the containers date back fewer than 60 years.

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“We started to see containerization,” the freight shipping system based on the boxy containers, in the 1950s, Thomas says. “And since then, increasingly, just about anything that can be shipped inside of a container is.”

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But traveling so many miles takes its toll, and eventually the containers are retired. Some are melted down, and some sit around old lots.

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And some become buildings — like taquerias.

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Portable Buildings With A Story

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The southeast Portland restaurant Aprisa Mexican Cuisine is one of them. Kirk Lance bought the old container that houses the restaurant for $2,500. He worked with architects and structural engineers to overhaul the steel frame, spray in insulation and cut out windows.

Before: Kirk Lance worked with architects and engineers to overhaul a steel shipping container to house his Mexican restaurant.

Aprisa Mexican CuisineBefore: Kirk Lance worked with architects and engineers to overhaul a steel shipping container to house his Mexican restaurant.

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“There’s no construction methods that are extremely intricate or technical,” Lance says. “Other than getting the blueprints permitted through the state of Oregon,” he adds. “That was technical. But the construction itself? Fairly simple.”

After: The cargo container is now home to Aprisa Mexican Cuisine in Portland, Ore.

EnlargeAprisa Mexican CuisineAfter: The cargo container is now home to Aprisa Mexican Cuisine in Portland, Ore.

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A cargo-based business is flexible, as well. It can be hauled to a new location or loaded on a cross-country train to set up a new franchise.

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But for Lance, cargotecture was about more than just portability.

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“This thing, it’s had a life,” Lance says. “It was born somewhere, and it’s traveled the world and hauled millions of pounds of who-knows-what. And it ends up as a little restaurant in a street corner in Portland, Ore.”

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The buildings are popping up elsewhere, as well. Cargotecture designs have been used for student housing in Amsterdam and a pop-up art studio at New York’s Whitney Museum.

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A Seattle firm, HyBrid Architecture, has used shipping containers to build cargotecture one-room cabins and multistory office parks.

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HyBrid co-founder Robert Humble says the containers pose some specific challenges: They have industrial paints and coatings to deal with, and they’re just steel boxes with no real frame. But essentially, he says, it’s a building material.

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“The mechanical equipment, the plumbing, the electrical, is really quite traditional,” Humble says. “But it is that wrapping in a container that allows the house to be so portable, so flexible and overtly sustainable on the outside.”

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Like many in the cargotecture movement, HyBrid emphasizes that sustainability in its designs. The company leaves on the original stickers, longshoreman’s marks, and all the other little dents and dings that, as Humble describes it, tell people the story of where the containers have been.

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“They can imagine the container on a ship, they’ve seen it on a truck, and they kind of take an emotional journey with that container,” Humble says. “And finally, it’s at rest, and they can live in it.”

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‘Better Than A Lot Of Apartments’

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As Nick Radecki and Kelly Cook do. They rent a bright turquoise house made from two welded-together shipping containers in southeast Portland.

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“It’s a big bathtub — shower up in the ceiling, pedestal sink, nice window,” Radecki says, showing off the bathroom. “It’s better than a lot of apartments.”

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More On Cargotecture

A front view of the shipping container office building

Building An Office Of Shipping Containers

Architects recycle the familiar steel boxes into relatively cheap, unique homes and living spaces.

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Cook, Radecki’s wife, initially took some convincing. And the couple has had to deal with the pros and cons of an open floor plan, as well as curious people who stop in to ask for a tour.

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But the couple likes that the home is recycled. And ultimately, Radecki says, it’s a good house.

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People often say they want a green house, Radecki says, but “truth be told, the only green home is a well-built home.”

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Although with two young boys, two dogs and a cat, Cook and Radecki both admit it may not be long before they outgrow this particular piece of green cargotecture.

New ASHRAE 62.2 Residential Ventilation Code Guidebook Available

Wednesday, August 10th, 2011

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Starting January 1, 2010 California began enforcing the ASHRAE 62.2 Indoor Ventilation Code as part of the new Title-24 Building Efficiency Standards.  Many architects, contractors, and building departments have been struggling to understand and implement the requirements as they wade thru the fairly complex and dense language of the ASHRAE 62.2-2007 code book and the references contained in the 2008 Title-24 Building Efficiency Standards and the Residential Manual.

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The California Energy Commission has promised and delivered a very helpful users guide that is now available for download.  Entitled: “Guide to the Indoor Ventilation Requirements of the 2008 Building Energy Efficiency Standards (ASHRAE 62.2).

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The guide contains, in a checklist format, the requirements for showing compliance with an exhaust-only ventilation approach including a very helpful appendix that contains the much anticipated sample note blocks that can be placed on the building plans for plancheck without the need to complete the actual CF-6R-MECH-05 Certificate of Installation which is not required to be produced until inspection.  This allows the designer to specify on the plans submitted to plancheck the requirements for ventilation airflow, the rooms where the whole-building and local ventilation exhaust fans will be located, and the duct sizing for the whole-building and local ventilation.

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These sample noteblocks can now be used and place on the plans to meet the requirements for submittal of the ventilation system specifications for plancheck.

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Click here to download

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If you would like to attend one of our monthly ASHRAE 62.2-2007 training webinars click here

Los Angeles DWP to relaunch Solar Incentive Program Sept. 1

Tuesday, August 9th, 2011

Solar panels

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L.A.’s Board of Water and Power Commissioners approved a plan Tuesday to relaunch its Solar Incentive Program, and the Department of Water and Power will resume accepting applications for the program Sept. 1 at 10 a.m. The program was placed on hold April 9 because demand for solar incentives exceeded available funds by a factor of three to one.

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“As we relaunch the Solar Incentive Program in September, it is extremely important that we leverage the incentives to achieve the most solar power and encourage as much participation as possible,” DWP General Manager Ronald O. Nichols said in a statement. “We also want to grow solar at a steady and sustainable pace while being prudent about the cost to all customers who pay for this program through their rates.”

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The DWP has increased the budget for the Solar Incentive Program to $60 million for the current fiscal year. It anticipates adding $60 million to the program annually in 2012 and 2013 as well. The $60 million in rebates over the next three years will be funded with revenue collected from ratepayers’ electric bills.

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For an average four-kilowatt, $32,000 solar power installation, the program previously covered up to 45% of the costs for residential buildings. Through April of this year, the Solar Incentive Program reimbursement rate was $3.25 per watt, or $13,000 for a four-kilowatt system. Starting Sept. 1, the rebate amount will be $2.00 to $2.20 per watt, with the highest rebate amount going to the most efficient systems. A four-kilowatt system with optimum orientation and no shading would be reimbursed $8,800, a less-efficient system, $8,000.

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In a statement, DWP senior assistant general manager Aram Benyamin said, “Now that significant tax incentives are being offered by the federal government, we have an opportunity to reduce our incentive levels to be more in line with market pricing, which should give more customers the opportunity to build solar and increase the amount of solar [photovoltaic projects] that can be built through this program.”

Homeowners who install solar power between now and the end of 2016 can receive a federal tax credit equal to 30% of the system’s cost.

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Many of the area’s top solar providers, including Sungevity, SolarCity, Verengo and SunRun, oppose LADWP’s revamped Solar Incentive Program. They say the reduced incentives would require homeowners who install photovoltaic systems to pay more for electricity than they would without solar panels; the payback period would also increase to as much as 14 years — far longer than other areas in the state. [Updated 8-3-11, 1:10 p.m.: The original version of this post did not include feedback from solar installers.]

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According to Nichols, “In the next few months, we will come back with more leasing options and other proposals for lower-income households.”

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— Susan Carpenter L.A. Times

Photo: Rooftop solar panels. Credit: Irfan Khan / Los Angeles Times

Chilling Facts About Air Conditioners

Monday, August 1st, 2011

The heat is on.  But before you crank up the A/C, some cold hard facts about the impact of air conditioning on the environment.

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.click here to listen

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Delayed Households to Boost Housing Demand, Builders Need Financing to Meet It

Tuesday, February 22nd, 2011
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A new study by NAHB economists (“Pent-Up Housing Demand: The Household Formations That Didn’t Happen — Yet”) warns that housing demand will quicken as household formations catch up from recession-dampened levels.

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The study calculates that 2.1 million household formations were delayed from 2007 to 2009 as a result of the harsh economic conditions of the Great Recession, which would account for two-thirds of the three million excess housing units recently cited by, among others, William Dudley, president of the Federal Reserve Bank of New York.

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Doubling up with roommates or living in their parents’ basements to withstand the weak economy, such potential households represent future occupants of rental or ownership housing as their financial situation improves.

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These delayed households will materialize, coinciding with a re-acceleration of the rate of household formations that will be driven largely by the children of baby boomers who are moving into their young adult years and who constitute a generation even larger than their parents’.

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While not directly addressed in the report, these findings suggest that the nation’s home builders should  be gearing up now to meet the housing demand that will be increasing significantly as the U.S. economy moves forward, a task for which they are ill-prepared because they are unable to obtain financing to begin new projects.

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“There should be a sense of urgency to restore the capacity of a fully functioning housing industry to meet the demand that is looming not that far out into the future,” said NAHB Chairman Bob Nielsen. “Instead, builders must contend with severely curtailed access to the credit required to even begin moving into the planning stages for housing that will be in strong demand by the time it is completed.”

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As a result of scarce financing, new rental apartments, which traditionally provide young households with their first housing, “are not moving nearly fast enough into the pipeline today,” Nielsen added. “It can take a few years for some of these larger projects to be built, and already we are beginning to see apartment vacancies tightening up in many major markets.”

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During the Great Recession, the NAHB study finds, average annual household formations slumped to 421,000, roughly a third of the long-term average. Households were being formed at a fairly consistent average growth rate of 1.0% from 2000 through 2007 before they noticeably declined. The researchers extended the 2007 level by the 1.0% average growth rate, and from this baseline number subtracted the Census Bureau’s estimated households for 2010 to conclude that there were 2.1 million pent-up household formations.

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“A considerable portion of the excess housing supply is due to a steep decline in demand related to economic conditions, rather than due purely to overbuilding,” the study says. “This has important implications for recovery in the housing market.”

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The study concludes that today’s excess supply of housing “reflects or embodies significant pent-up demand, implying that recovery in the housing market will come more quickly as the economic recovery makes progress and pent-up demand turns into realized demand, absorbing vacant units in the existing stock and adding pressure for the construction of new units.

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NAHB/Nation’s Building News

FHFA Effectively Shuts Down PACE Financing Programs for Energy-Efficient Retrofits

Tuesday, August 3rd, 2010

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The Federal Housing Finance Agency (FHFA) on July 6 effectively shut down Property Assessed Clean Energy (PACE) financing programs, which it said “present significant safety and soundness concerns,” and it directedFannie MaeFreddie Mac and the Federal Home Loan Banks to take a number of steps to resolve problems with the first liens that are established by PACE loans.

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PACE programs have been embraced by the Obama Administration and state and local municipalities as a means to finance the upfront costs of energy-efficient retrofits for residential and commercial properties. The programs enable the costs for these upgrades to be repaid through a special assessment added to the home owner’s property tax bill. The assessment stays with the property and is transferred to subsequent owners until the retrofit costs are repaid.

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Under the programs, property owners borrow the money from their local government and repay the loans over 15 to 20 years. Funding comes from municipal PACE bonds that are sold to investors.

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PACE loans have run afoul of Fannie Mae and Freddie Mac guidelines because most establish liens that are senior to existing mortgage debt. In the case of a default, the municipality would be repaid for the PACE loan before Fannie and Freddie received any money on the mortgage.

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Some 22 states and hundreds of local governments have been developing PACE programs, with more than $100 million in federal support.

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First publicly raising concerns about the programs in a letter dated June 18, 2009, the FHFA has been working with states and localities since that time to resolve the issue through improved underwriting of the loans and most importantly to get them to accept a junior lien position, which for the most part they have been unwilling to do.

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On May 5, Fannie and Freddie issued letters to their seller/servicers cautioning them to be aware of PACE programs in their jurisdictions and reminding them that programs with liens superior to the mortgage run counter to their Uniform Security Instruments, which govern securities backed by Fannie and Freddie loan purchases.

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The letters did not provide guidance on how to handle existing PACE loans, putting a chill on existing PACE programs until further guidance was provided.

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In its July 6 statement, the FHFA said that it was directing Fannie and Freddie to waive their Uniform Security Instrument prohibitions against PACE loans with a priority first lien that were obtained by home owners before that date.

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The agency also said that Fannie and Freddie should protect their safe and sound operations by undertaking several actions to address PACE programs with first liens.

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This includes adjusting loan-to-value ratios to reflect the maximum permissible PACE loan amount available to borrowers. This varies by jurisdiction, but is typically 10% to 20% of the property value and can be as much as $50,000.

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Fannie and Freddie were also told to ensure that loan covenants require approval/consent for any PACE loan; to tighten borrower debt-to-income ratios to account for additional obligations associated with possible future PACE loans; and to ensure that mortgages on properties in a jurisdiction offering PACE programs satisfy all applicable federal and state lending regulations and guidance.

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It is not yet clear how Fannie and Freddie will implement this directive, but they are expected to come out with guidance for their seller/servicers. They could require that borrowers seek permission from lenders on each lien. They could also tighten lending standards for all borrowers in jurisdictions that have PACE programs.

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Significantly, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation also released statements on PACE bonds echoing the FHFA’s concerns and advising banks that invest in mortgage-backed securities with PACE liens to consider the impact of the lien on the security valuation.

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NAHB has been monitoring developments on this issue, but has formulated no policy on PACE programs. Several home builders associations have expressed interest in these programs, particularly in California and Colorado.

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For more information, e-mail Chellie Hamecs at NAHB, or call her at 800-368-5242 x8425.