Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
The Energy-Efficient Niche
What is it and will customers pay for it?
Photo: Tod Martens
Energy efficiency is becoming a hot topic for remodelers as customers become savvier about new technologies and the costs and savings associated with them. Ron Trull, CR, owns Trull Building Co., a $1 million residential remodeling company in Newton Square, Pa. His company does mainly kitchens, baths and upscale basements; he employs six. Steve Heiteen owns Steven Heiteen Construction Inc., a full-service contracting firm with a similar volume and five employees. The Portland company participates in Earth Advantage, a local green building and remodeling program.
Jud: Does energy-efficient remodeling mean design as well as material?
Steve: Sure, it absolutely can. There are passive solar components that can be added to a home remodel or room addition that can help minimize your energy usage just by the way the house is designed, where the windows are, what materials are used and orientation on the lot.
Ron: As a builder, we're not just going to blow through the addition to get it done for lowest price; we're going to pay attention to all the avenues of energy conservation. I don't think I could talk my customer into saying this window should be smaller because it's on the north side of the house. If they want a big window there, they're going to put the big window in there. I don't think they're on board to where they'll want to get real sophisticated.
Jud: Would customers pay for energy efficiency?
Ron: They, most times, would indicate that they would not pay for it.
Steve: I do have people who feel it's money well spent. I've heard people tout it to their friends and say, "Hey, look at this thing that we did here, this uses X amount less of this." They're proud to be able to do the little bit that they can. What I'm hearing over the last few years, reading about demographics, there's going to be more demand for that from the clients themselves, and that's going to help drive this segment of the industry.
Photo: © John Anthony Rizzo
Jud: How educated are the clients about energy efficiency?
Ron: For the most part, my customers do not ask for energy-efficient appliances; they're probably more concerned about the noise it makes. I will offer the different options in terms of conservation. If they want the best and want to pay for the best, it's available to them. They'll go to where their budget is. Everybody wants to make sure their windows are insulated. I'll take it a step further with the argon gas option and the low-E option, explaining to them what the benefits are.
Steve: We got some sophisticated clients here in the Pacific Northwest; they're very savvy about green building. The environment is a big thing. They're trying to ascertain, hey, is it worth it for me to spend another $1,000 on this or $500 on this refrigerator, knowing that I may only make it up in the next 10 years? I need to be able to provide what they are looking for. I'd say about 30 percent of the people are very concerned and ask those types of questions. Unless somebody is really cost conscious and budgets really tight, we don't even offer them getting windows without the low-E.
Jud: Do you use energy efficiency to upgrade your sale?
Steve: Some of our marketing items tout that we are experienced and savvy to that end. We do a tour of remodeled homes here with our Remodelor's Council. The last few years it's been sponsored by Portland General Electric, which has put in the Earth Advantage program. We show people some of these upgrades and energy-efficient components. We're linked with their Web sites and the whole certification process. It's helpful because they're marketing for us.
Ron: We don't tout it to a large extent. We do mention that we have an energy consultant that comes in before we drywall, and what they do basically is seal all the cracks and crevices.
Jud: How far do you push the HVAC side when you're remodeling a house, and they need to change the furnace?
Ron: We'll ask, "How long do you plan on being in this house?" If the answer is not too much longer, then they almost answer their own question about going to a higher-efficiency unit. A lot of my customers say, "Look, we're living here for the rest of our lives; we want to do the best thing we can economically." And if we do the simple math, it makes sense to get a more efficient unit because it'll eventually come back to them.
Steve: Even if somebody is only going to be in there two or three more years, it might be a good selling point for the home, that it's been upgraded.
Jud: You're putting on a room addition, and the furnace is 5 years old. How far you going to push that one?
Ron: I'll tell them that the furnace has at least another five years left on it. I'll also stress the fact that construction's going on right now. Do you want to get stressed out again five years from now with having to replace your furnace?
Steve: I would not look to convince a client to swap out a 5-year-old furnace. But sometimes, we have to change the furnace anyway to accommodate the floor space that we're adding. If they don't need it for capacity, I probably wouldn't be trying to talk them into doing that, if it's only 5 years old.
Jud: Let's say they have old double-hung windows; it's an older house, you've added to the back, would you go ahead and try to sell new windows?
Ron: I would mention the fact that the old windows are leaking, but nine times out of 10, they realize that, and it's a budgetary issue.
Steve: I explain to them, you want to try to get the best window that you feel you can afford for the value. If we picked the right component, now we've set a new standard for the home, and later up the road when you want to do the kitchen or you're going to do the master bedroom, that's when we'll start replacing those windows with the new standard.
Jud: How have you seen construction change over the last few years into energy efficiency, in terms of energy efficiency.
Steve: Better windows, better seals. He's bringing in an energy consultant, the guy's coming through and making sure you're not getting drafts through whatever, exterior outlet boxes and things like that.
Ron: I would say that the codes are almost picking up the ball for us.
Photo: © Richard Dunoff
Jud: How do you educate your clients on their eventual cost savings when you do energy efficiency?
Steve: A lot of the manufacturers have charts and literature that can be utilized fairly easily and/or one can also utilize your subcontractors. A lot of it is coming directly from our customers. They're questioning stuff, they're doing their homework, they're more sophisticated these days.
Ron: When they come to us and they're watching all the different shows on cable, and they're up to speed with the energy situation, that only reinforces us. They'll come into our addition, and they'll notice the energy contractor is there, or they'll notice the insulation or different precautions we're taking.
Jud: Do any of the energy companies give you any rebates?
Steve: For people to just transfer over from oil furnaces to gas furnaces, in most instances, if we can get the folks to put in a new furnace and a water heater, that's enough for them to get new gas lines brought to their home directly at no cost. There are also energy credits for using the high-efficiency furnaces. On their gas bill, they can get credits that'll be applied over time for getting the higher-efficiency units.
Ron: If your house is totally electric, you'll get what is called a triple E rating from the local power company, and you'll get a reduced rate. If your whole house is on propane, the more propane you use, the lower your rate will be from your supplier.
Jud: What would make you shift your business model into energy-efficient remodeling?
Ron: Demand. If I could slowly start educating the area where I'm working into getting into more green building aspects, I probably would go in that direction, but the need or demand just isn't there right now. When I start hearing more from my customers about more energy-efficient ways, and they're willing to pay for it, we'll be right there with the information and the products that they need.
Steve: Having that component as part of our overall package helps to differentiate us from the other folks, just like credentials do and experience and awards. Most professional remodeling contractors can start to add those components to their business. I think it behooves them to start so they're a little bit ahead of the curve as the shift happens in the demographics. There are going to be more people interested in this stuff. It doesn't have to be the main focus of your business, it just can be another added value to differentiate you from the pack.