All eyes are focused on the White House as President Donald Trump attempts to make good on his campaign promises. In March, Trump released his preliminary 2018 budget proposal detailing several changes to the way the federal government spends money. The U.S. Environmental Protection Agency (EPA) is one of many government departments being targeted. Early reports indicate the 2018 budget may shrink spending by 31 percent, reducing the EPA’s budget from $8.1 billion to $5.7 billion and eliminating a quarter of its 15,000 jobs.

One of the programs rumored to be on the chopping block is the EPA’s Energy Star program. The voluntary Energy Star program was created by the EPA in 1992 to identify and promote energy-efficient products to reduce greenhouse gas emissions. Initially focusing on computers, the program expanded in 1995 to include residential heating and cooling equipment.

Since its inception in 1992, Energy Star reports it has helped families and businesses save $362 billion on utility bills while reducing greenhouse gas emissions by 2.4 billion metric tons. Additionally, about 1.8 million Energy Star-certified new homes have been built, and owners of half the U.S. commercial building space (450,000 buildings) have benchmarked the energy use of their buildings with Energy Star’s Portfolio Manager®.

THE NECESSITY OF ENERGY STAR

In 2016, 91 percent of U.S. households reported recognizing the Energy Star label, according to a National Awareness of Energy Star study. This is a statistically significant increase from the prior year’s findings of 88 percent.

“To see brand awareness and loyalty indicators continue to rise in 2016 is a testament to the EPA and DOE’s [Department of Energy’s] intentional stewardship of this public-private partnership,” said John Taylor, deputy director, Consortium for Energy Efficiency (CEE), and Energy Star liaison in a news release. “The Energy Star program is a vital asset in helping consumers make informed energy-efficient choices. When it comes to energy efficiency, Energy Star is truly one of our nation’s most valuable assets.”

Rich Biava, vice president, GAC Services, Gaithersburg, Maryland, said about 60-70 percent of the systems his residential and commercial contracting company sells are Energy Star-rated.

“People like the idea of helping the environment, and they want to minimize their carbon footprints, so I think there’s an element to that,” Biava said. “However, I think people are more concerned with comfort and price. I think there is an element in the sales pitch, where you talk about energy efficiency, and that’s important to people, but is it something that is crucial in 90 percent of the decisions customers make? No, it’s not.”

Biava doesn’t believe the elimination of the Energy Star program would affect his business one way or another.

“I am not sure if the Energy Star brand is helping or if the people we sell to are interested in higher efficiency equipment because their bills are higher and they want to minimize costs.”

Steve Lauten, president and CEO of Total Air and Heat Co. in Plano, Texas, agreed with Biava in that he didn’t think his company would be negatively impacted in any way if the program were to go away; however, he does think its disappearance would negatively impact the HVACR industry.

“I do feel Energy Star has a positive impact on the HVAC industry, particularly in residential and new home construction,” Lauten said. “It gives incentives to provide air conditioning systems that deliver installed efficiencies versus rated efficiencies. Energy Star means the duct system is sized and sealed like it should be; it means the equipment is checked out and charged like it should be. Energy Star provides at least some form of energy guideline to use when comparing installed efficiencies and rated efficiencies. I’ve long been a proponent of the DOE getting away from specified, rated efficiencies in a laboratory. Instead, we should be focused on installed efficiencies.”

The majority of the equipment installed by Total Air and Heat is Energy Star-rated, Lauten noted. “Energy Star provides some level of confidence for consumers and ensures they’re making good decisions. It has created a relatively good brand name for itself. If we’re going to promote and support high efficiency, there has to be a guideline that general consumers believe in.”

Lauten said his company’s techs approach the whole house as a system to show customers all the opportunities available to save energy.

“Saving customers’ energy and money is so embedded with us that if Energy Star went away, I’m not certain it would hurt us much,” he said. “If it went away, homebuilders would have to find other guidelines to go by. There are a lot of cities that require homes meet Energy Star standards. If it’s not Energy Star, it’s likely another guideline will take its place.”

As of last year, the city of Portland, Oregon, implemented a new policy requiring commercial buildings larger than 50,000 square feet to track their energy performance using the Energy Star Portfolio Manager.

Reitmeier HVAC Services in Tualatin, Oregon, capitalized on this new requirement and started offering it as a service free of charge for its commercial HVAC maintenance contract customers.

“We saw it coming down through city council,” said Jeff Nusz, president of Reitmeier. “We know that property managers are super busy, and this is just another onerous thing for them. But, I also saw this as an opportunity to get into these buildings, benchmark them against other buildings, and provide owners with recommendations to improve their buildings. Essentially, we’re doing an energy study or benchmark, which tails nicely into the energy management and equipment upgrade portions of our business.

“It allows us to get us ahead,” he continued. “You can make a compelling argument to a building owner for energy savings, and you actually have the real-time data. So, we built a campaign around the new city requirement. We do all the data input, and we’re the first ones to see it. We can even register it with the city, if need be. It’s a value-added service at no cost to my maintenance contract customers, and it gives us yet another opportunity to dive down into those buildings and offer them energy-efficient solutions.”

The new service offering has not attracted a ton of new clients; however, it has helped Reitmeier solidify relationships with existing clients.

“It’s another market differentiator for us,” Nusz said. “It’s a marketing thing, but it also allows us to dive into real data with owners. You can sit down and show them a building in Chicago exactly like theirs, compare its performance to their facility in Portland, and explain they’re using twice as much energy as that building in Chicago per square foot. Then, they start to ask questions of why and what they can do about it. So, it allows us to have these in-depth conversations as well as getting into their budget cycle, because they may not be able to do it this year, but they know they can make improvements in 2018. It generates more business with existing clientele.”

Because of this, the Energy Star program has had a positive impact on Reitmeier overall.

“It’s made building owners aware that they have choices and not every piece of equipment is created equal,” Nusz noted. “The Energy Star certification can give them the information they need to make a more sustainable decision. It would be a shame to see it go. A part of my business plan is centered around it. The company would definitely be impacted if the program was eliminated. Seattle has the same program in place as Portland. All of these energy-reporting programs are based on Energy Star’s Energy Reporting Manager tool. Its disappearance would create a hardship for building owners. What would be the replacement for it? This is a good tool that is constantly improved. It would be a hardship.”

PROS AND CONS OF PRIVATIZATION

Nusz believes eliminating Energy Star altogether would be problematic, though he believes the program could be privatized.

“In private industry, we know we can be lean, mean, and competitive,” Nusz said. “Introducing competition forces people to really look for efficiency, and that is not the nature of the federal government. So, it can probably be done more efficiently in the private sector.”

Biava said privatization is an option for the program.

“Privatization puts a different spin on an organization — it helps you focus on the products you are selling and manage the costs associated with them,” he said. “FedEx and UPS have figured out how to ship and deliver while making a profit while the U.S. Postal Service loses billions. If Energy Star is truly an important organization for manufacturers, contractors, and consumers, the industry will quickly find a way to privatize it.”

There’s an argument against privatization, as well. Steven Nadel, executive director of the American Council for an Energy-Efficient Economy (ACEEE), recently tackled the topic in a blog.

“According to news reports, officials in the new administration have suggested that the private sector or an organization should take over the administration and funding of the Energy Star program,” Nadel wrote. “There are multiple problems with this idea. First, Energy Star is built on public recognition and trust. Whoever runs the program needs to be well recognized by the public and also perceived as non-biased. Most organizations and companies do not have this public recognition, and private companies or trade associations will probably not be perceived as unbiased.

“Second, funds would need to be raised and staff or contractors hired,” he continued. “While $50 million is not much for the federal government, it is a lot for most organizations and for all but the largest companies. Furthermore, this is an annual budget, and sustaining this level of interest in the private sector for many years could be difficult. To raise these funds would likely require charging for the use of the Energy Star brand, and while some money could be raised, it is unclear if enough could be raised or if such fees would cause manufacturers and building owners to reduce their efforts to be certified under Energy Star.”

Nadel also pointed to potential liability issues and reliance on other federal agencies as arguments against privatization.

“Whoever runs the program needs very good insurance and deep pockets, because firms whose products are not certified may sometimes sue,” he said. “Most nonprofits would find the insurance costs prohibitive. And, finally, Energy Star depends on technical work by other federal agencies. The test procedures are generally issued by the U.S. Department of Energy. The benchmarking of commercial buildings is compared to survey results from the Energy Information Administration [EIA]. These programs are also threatened in the budget and could not readily be reproduced in the private sector.”

Additionally, the Associated Press recently reported more than 1,000 U.S. companies, including United Technologies Corp. and Ingersoll Rand, have urged government officials to preserve the program, stating it should be strengthened, not weakened, to encourage energy conservation.

Lauten said the DOE is simply not focused on the things that really matter in HVAC.

“DOE promotes high efficiency, but doesn’t want to enforce high efficiency. It goes back to equipment being rated in a lab under perfect conditions — it’s the installed efficiency that really matters,” Lauten said. “If Energy Star goes away, I fear we could lose traction in HVAC that impacts the environment.

“I wouldn’t have any problem if some independent organization wanted to take it over and include a $5 or $10 fee with every system sold to help fund it,” he continued. “If the DOE eliminates Energy Star, is it still going to regulate efficiencies? And, if so, does it shift the effort over to adopting quality standards of how we go about doing our work? If Energy Star is eliminated, but the DOE does not change the way it creates regulations, then we’ve lost something valuable. Cutting out something like Energy Star simply to save money is not doing the right thing for the country.”  

Publication date: 5/15/2017

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