Low Income, High Efficiency

This report addresses structural and program challenges for the state to meet its energy efficiency goals in residential buildings.

June 3, 2019
Ethan Elkind, Ted Lamm

Residential buildings, through their consumption of electricity and natural gas, are responsible for over one tenth of California's greenhouse gas emissions. In 2015, California set a goal of doubling energy efficiency in all buildings by 2030. The state has long enforced strict energy efficiency requirements for newly constructed homes as well as minimum efficiency improvements for renovations of existing homes.

But approximately half of California's residential buildings were built prior to the introduction of the efficiency standards, and the vast majority of Californians live in buildings that are not efficient enough for the state to meet its target. Achieving statewide efficiency targets is most challenging in the low-income multifamily residential sector. Unlike single-family, owner-occupied homes, these buildings are subject to "split incentives" between owners who might pay for an efficiency retrofit and tenants who would reap the savings based on reduced energy consumption in their units. Low-income property owners also typically face reduced access to capital to fund a project, increased restrictions on their ability to finance one, and older construction that requires significant renovation in other areas.

To overcome these barriers, California and its electric and gas utilities have devised a suite of incentive and rebate programs that provide low-income multifamily building owners with access to a range of efficiency retrofit measures. To participate, owners first need to be able to prioritize energy efficiency upgrades among the many demands for limited capital. For those owners that pass this barrier, a range of factors such as limited owner/developer staff expertise and resources, inadequate energy data, and general program complexity can limit participation.

This report addresses structural and program challenges for the state to meet its efficiency goals. The following high-priority items can serve as focus points for efforts by lawmakers, regulators, utilities, and program implementers:

  • Lawmakers, regulators, and utilities could collaborate to create a statewide "one-stop shop" efficiency program administrator that serves as a single point of contact for customers and facilitates access to and combination of all available incentives.
  • Lawmakers could launch a stable, long-term public fund to support existing incentive programs and provide building owners and developers with the certainty they need to plan retrofit projects now that sometimes may need to start construction in a few years or more.
  • Lawmakers and regulators could authorize and fund pilot projects for innovative private and public/private financing structures to help create a robust market for deep retrofit projects.
  • Lawmakers and regulators could create a statewide database of energy, financing, and rehabilitation needs and timelines to inform owners, program administrators, and third-party contractors and financing entities.
  • Regulators and incentive program administrators could adopt cost-effectiveness metrics that better account for health and environmental benefits associated with efficiency projects to increase their financial viability and to support tenants' quality of life.
  • Financing entities and contractors could develop innovative efficiency performance guarantee and insurance products to help owners and consumers secure minimum gains.

Download the report.


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