New Homebuilding Practices may Mean Future Troubles for Energy Sector

Last week, the National Association of Homebuilders revealed this year’s design for their New American Home showcase, an annual event featuring a model house that encapsulates the current trends and innovations of the homebuilding industry.  This year’s home, per the Wall Street Journal, is a net-zero electricity model built by Blue Heron Design.  A net-zero building is one that, as stated plainly in the term itself, consumes no energy in net, due to energy-saving features such as energy-efficient lighting, high-quality insulation, modern windows and doors, and most importantly, solar panel installations.  Such homes often produce more energy than they consume, allowing homeowners to earn credit from utility companies by feeding their excess electricity into the grid.  The fact that the NAHB is showcasing such a design reflects confidence from the industry that net-zero homes are finally becoming financially viable for widespread production – due to the rapidly falling costs of energy-efficient technology as well as increased demand from homebuyers.  As noted in the article above, “The Solar Energy Industries Association says the average price of an installed solar-power system has declined more than 50% since 2010”, leading Blue Heron to claim that they are capable of mass-producing net-zero homes for as little as $700,000.  In recent years, most homeowners who desired zero-energy houses would have had to retrofit their homes out of their own pocket, requiring costly investments in technologies like solar panels, often on top of fees for energy-efficiency consultants.  Hence, it is no surprise that net-zero homes have remained a rather niche concept – many homeowners, even if they are savvy and patient enough to see the benefit in reduced utility bills in the long-term, cannot afford the up-front costs of installing energy-efficient features.  The notion that homebuilders are beginning to construct new homes fully equipped for energy efficiency is an exciting one, and I believe it will only be a handful of years before building zero-energy homes becomes an industry standard (at least in climates where current technology permits feasibility), especially once keeping up with the Joneses syndrome kicks in.

So what does the momentum behind zero-energy homes mean for the energy industry?  Clearly, the trend represents an emerging threat for any company dependent on demand for electricity, as the US Energy Information Administration estimates that 40% of U.S. energy consumption is accounted for by residential and commercial buildings.  I have little doubt that energy-efficiency standards will be applied to commercial buildings at the same rate as residential homes (if anything, commercial buildings will be faster to adopt new technologies, since they are more likely to eat the installation costs with an eye on the longer horizon), and so it is entirely possible that within the span of the next few decades, electricity suppliers will see almost half of their current market dry up.  While the threat is by no means immediate, it will be difficult for capital-intensive energy companies to adapt to the future hit to demand – at least in the U.S., since global energy demand is still certainly on the rise.  Nevertheless, it will be a very long time before any homes are ready to go completely off the grid.  Until battery technology catches up to solar panels, houses will still need to be plugged in to the electricity grid during times when solar panels cannot produce.

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