Kansas, a landlocked state known to residents as the Sunflower State, boasted a population of 2.8 million. Kansas is one of the most productive agricultural states in the nation, but its gently rolling mix of farmland, prairie, and forest is also home to well-known and livable cities, including Wichita, Kansas City, Topeka, and Lawrence.
While the state was immortalized by the famous tornado in the 1939 film The Wizard of Oz, it was another, real-world twister that struck the town of Greensburg, Kansas in 2007 and earned the state national attention. After the devastating tornado destroyed more than 95 percent of the town, Greensburg residents drew headlines when they made the decision to rebuild their small community almost exclusively with high-performance green buildings. The commitment to sustainable, energy efficient new construction in Greensburg paralleled work done at the state level during the same time period, when the State Energy Office worked through both voluntary programs and common-sense regulations to ensure Kansans enjoyed more energy efficient homes and workplaces.
Why We Watched
Track Record of Home Energy Efficiency Efforts
For advocates of home energy efficiency, adoption of the latest energy codes is only part of a larger strategy to achieve actual efficiency gains for homes. In the years leading up to 2010, the state created a number of programs to help homes and businesses meet energy efficiency goals. One noteworthy program, the Energy Efficiency Disclosure Form, required sellers of all new homes to provide homebuyers with a report on energy-efficiency specifications. A more-recent endeavor, Efficiency Kansas, was an innovative revolving loan program created by the State Energy Office which provides low-interest loans to homeowners and business owners to retrofit older homes and commercial buildings with cost-effective energy efficiency improvements.
Energy Efficiency Disclosure Form for New Homes
The Kansas Energy Efficiency Disclosure form is a one-page summary of a new home’s energy efficiency features. The state requires sellers to use the form to disclose information about the home’s envelope and mechanical systems and to prominently display the form within a home to be sold. The form is designed to allow the builder/seller to list envelope and mechanical systems specifications alongside the relevant energy codes and federal standards. Analogous to the EPA mileage sticker on a new car’s window, the user-friendly form allows prospective buyers the chance to see what is “under the hood” of their new home. The form’s required entries include R-values (insulation levels) for walls, attics, and foundations, as well as window U-values (heat loss rating), and specifications for water heaters and HVAC equipment.
The disclosure form also allows progressive builders the opportunity to go even further, by demonstrating a new home’s actual building performance. By checking a box on the form, builders can indicate that the home has been assessed by a HERS rater or that it has qualified as an EPA Energy Star Home. HERS raters are trained and certified by RESNET to conduct inspections on homes to determine their energy efficiency. After inspecting the building plans and conducting on-site testing of the home, HERS raters use a computer program to generate a score between 1 and 100, with a lower score indicating a higher level of energy efficiency. While builders are not required to complete this section, this section signals to potential buyers that the builder has gone the extra mile to assure the home’s energy efficiency. In addition to single family homes, the law also applies multifamily residential units in buildings containing up to four total units.
The form, incorporated in state statute (KSA 66-1228), was developed with input from the Kansas Homebuilders Association, the Association of Realtors, the Kansas Manufactured Housing Association, and the State Energy Office. Although the disclosure forms are required only on newly built homes, the State Energy Office plans to incorporate similar disclosure in its retrofit programs.
Efficiency Kansas Loan Program
The Efficiency Kansas loan program was a low-interest loan fund that allowed Kansas homeowners and small business owners to borrow up to $20,000 or $30,000, respectively, to make cost-effective energy efficiency improvements to their homes or businesses. Created with $34 million allotted to the state by the American Recovery and Reinvestment Act of 2009 (ARRA), the program was officially launched on November 17, 2009 and was managed by the State Energy Office.
Efficiency Kansas was based on a “whole house” approach to energy efficiency, and all projects approved for financing were based on an energy audit of the home or small business. Designed as a public-private partnership, Efficiency Kansas gave customers two ways to access financing: through partner lenders or partner utilities.
To get started, prospective participants got prequalified by a partner lender or utility. Next, they contacted one of the qualified auditors listed on the Efficiency Kansas website to schedule an energy audit. While homeowners had to pay for cost of the audit, the state provided rebates of $350 to the first 1,000 participants who completed a project through Efficiency Kansas. The State Energy Office estimated that the audit will cost anywhere between $500 and $600, including the the cost of the required post-retrofit audit.
After performing a thorough audit, auditors provided owners with a customized Energy Conservation Plan (ECP), which listed estimated energy and financial savings and prioritized improvements based on how quickly they would pay for themselves through the energy savings. Improvements included insulation, air sealing, and new heating and cooling equipment, among others. It all depended on what the energy audit showed to be cost-effective.
To be approved for Efficiency Kansas financing, all project costs had to be covered by the estimated energy savings over the term of the loan. With the ECP and a contractor’s bid in hand, homeowners could apply for a loan from two sources: a partner lender or utility. For homeowners, the maximum loan amount was $20,000. Small businesses could receive a loan of up to $30,000. The maximum loan term was 15 years.
For loans originating from partner lenders, the state provided the funds to the lender at 0% interest, and the lender was allowed to charge up to 4% interest. The lender retained the 4% interest to defray the loan costs, and sent the principal in each loan payment to the state to replenish the revolving fund. To keep fees down for borrowers, the state provided each lender with a $250 per loan origination fee for each loan they originated. If an owner of a home with an outstanding loan chose to sell it, the owner had to pay the balance of the loan in full at closing (with no prepayment penalty).
As of March 2010, 17 lenders, totaling 106 branches across the state, had signed up to be Efficiency Kansas Partner Lenders. For customers who elected to finance through a utility, the program worked the same way, except the loan was repaid through the monthly utility bill.
The program’s first partner utility was Midwest Energy, which operates their How$mart program in partnership with Efficiency Kansas. Two large regulated electric utilities were expected to file applications in the near future to offer the program with the Kansas Corporation Commission (KCC), the state’s utility regulatory agency. Several non-regulated rural electric cooperatives also planned to start offering Efficiency Kansas to their customers.
To be eligible for the utility track, customers had to have 12 months of utility service history, be current on their payments, and not have had their service disconnected in the previous 12 months. These eligibility requirements allowed customers with bad credit to participate in the loan program; the utility track also allowed for improvements to rental units, provided both the tenant and landlord were amenable. If customers sold their home or small business before the loan was repaid, they had to disclose the loan (meter-based obligation) to the buyer, who would continue the loan repayment through their monthly utility bill. To increase transparency, partner utilities were required to file a notice that would appear during a home title search, as well as requiring all customers to sign forms agreeing to disclosure.
After work on each project was completed, Efficiency Kansas required the energy auditor to return to the building and conduct a post-retrofit audit to verify the measures had been installed per specifications and that there were no safety hazards (e.g., the structure was now too tight). The cost for the post-retrofit audit wa included in the initial price quote.
Homeowners who financed a project through Efficiency Kansas remained eligible for the federal energy efficiency tax credits of up to $1,500 through the American Recovery and Reinvestment Act (Recovery Act). The tax credits were for specific improvements, including upgraded doors, roofs, windows, insulation, and HVAC equipment that met specific federal standards. More information on energy efficiency tax credits is available from the Alliance to Save Energy.
The State Energy Office started Efficiency Kansas on a strong footing by hiring a marketing firm to develop a statewide advertising strategy, providing support for qualified energy auditor training institutions, as well as providing scholarships for prospective auditors to attend trainings. As of March 2010, 100 scholarships had been awarded. The state estimated that residents who participated in the program would reduce their heating and cooling bills by 20%. For 10% of homes participating in the program, the state planned to conduct an on-site audit of the ECP to ensure that the initial energy audits were conducted correctly.
As of April 2010, this program had approved 10 loans. The State Energy Office anticipated that the number of Kansans participating in the program would grow steadily over the coming year.
Energy Manager Grants
In recognition of the unique challenges faced by local governments, the State Energy Office also developed an Energy Manager Grant program to help coalitions of local governments tackle energy issues. Funded by the Recovery Act, the $2.7 million program helped these coalitions hire an energy manager by providing an annual stipend of up to $65,000 for two years. Energy managers helped each of the coalition members develop both short-term and long-term plans to reduce energy consumption, improve energy efficiency in public buildings as well as in privately owned structures, and increase awareness of energy conservation and efficiency throughout the community. Cities and counties that received funds through this program were also required to participate in the state’s energy codes initiative.
Energy Efficiency Building Codes Working Group
In addition to other efforts, in May of 2009 Kansas established the Energy Efficiency Building Codes Working Group to ensure that the state met building code compliance requirements stipulated in the Recovery Act. To achieve compliance with the law, Kansas and other states must meet a compliance target of 90% by 2017. Because Kansas is a home rule state, the working group’s strategy was based on voluntary adoption by local jurisdictions and building on existing efforts, which included the Energy Efficiency Disclosure Form and the Efficiency Kansas Loan Program.