Tom Conlon - President of Geopraxis

Tom Conlon, President of Geopraxis

Of the 110 million homes in the US, most are not as energy efficient as they could be, wasting money, causing needless pollution, and contributing to climate change.  This problem is an important opportunity for businesses that improve home energy efficiency and one opportunity is to catch homes at the time of real estate transactions.  For the seller of a home, addressing energy efficiency helps to build value, more important than ever. 

I spoke with Thomas Conlon, President of GeoPraxis, about their program.

Interviewed by Glenn Croston, August 26 2008 

Glenn Croston (GC):  How did you come to work in the energy efficiency field?

Thomas Conlon (TC):  For 15 years I’ve been involved in a wide variety of “green” market transformation activities.  As an undergrad at UC Santa Cruz I got a chance to work on California’s pioneering organic farming legislation. Many of my ideas about technology adoption were formed in an agricultural economics context, watching how farmers had a tough time selling agricultural commodities and adapting to change.  Eventually farmers realized they could innovate to do organic agriculture, and this turned organic into the most profitable area of agriculture. The key to their success was truth in labeling and the development of brands built around that.

My degree is in social anthropology, but I worked through college as an electrician and over time I realized I wanted to work on energy efficiency, knowing our economy is so dependent on fossil fuels that won’t last forever.  When I first became a consultant I was fortunate to be involved in some EPRI-funded projects with utilities. We would go in and do market research on customer energy use, working on teams with engineers and statisticians, to do program evaluation, and helping utilities influence demand for their energy services.  We looked at which technologies had the potential to save energy or shift demand, how people respond to them, and then how the utilities could adopt programs to encourage them to do this.

GC:  What did you find about energy efficiency in these studies?

TC: It’s hard to get people to change their behavior.  For years we tried, but one recurring problem was that many of the people trying to explain it were too technical.  What was clear to me as a market researcher, was that we could not talk to the public on a technical level.  We needed to talk about the true benefits of energy efficiency in terms that were meaningful to them. 

One success was the Energy Star for new homes in Dallas beginning in the late 1990s.  Energy Star homes are inspected, and certified when they are found to be more efficient, and now we have 10,000 people rating homes for home builders all over the country, ensuring that these homes exceed building codes.  New construction is only a small fraction of the building stock though.  The toughest place in the world to sell efficiency is in existing homes.  It’s easy to walk into a factory, and sell the factory manager on efficiency improvements that will save him $50,000 a year because it makes sense.  He can go out and get financing and make it happen and quickly save enough money to pay back the investment.  Selling efficiency is much more difficult with homeowners because the savings opportunities occur in much smaller units, not to mention all the barriers that keep homeowners from making good economic decisions. 

GC:  How is your business model designed to get over this challenge?

TC: We realized we needed an inexpensive way to get this energy efficiency information in front of people in a way that they can use it to make good decisions.  The home energy rating business started with the idea that home energy consultants, working through utilities, could give you a “miles per gallon sticker” for your house.  Once you valued the improvements, you could get money from a mortgage to do improvements and pay back your investment.  It was a beautiful concept but in practice specialized energy auditors in the field were too expensive, charging $500-$600 for the inspection.  It was a tough sell to spend this much money just on an inspection, rather than actually fixing something. 

We realized that if we were going to be successful, we needed a low cost, high-quality offering.  One way to do this is by piggybacking efficiency inspections on the home inspectors already out looking at homes.  That is what is unique about our model, rather than using one special inspector just for efficiency and another one for the pest inspection, etc..  Home inspectors are already out there, already driving out to the house, and all they need is a bit of cross training to be able to add efficiency to their visit.  Home inspectors receive an additional $50 for the visit to do an EnergyCheckup™ inspection, and with our streamlined approach this is enough of an additional benefit to encourage them to add the service.  Right now, the program is utility funded and we are starting to see in San Diego that this program is really catching on.  We started the model in 1999, and quickly did over 27,000 EnergyCheckup ratings coupled with time of sale inspections.  We realized that although the inspector community loved the program, we weren’t really connecting with the real estate agents, and weren’t able to wean the project from utility subsidies.  Home inspectors provide information and facilitate transactions.  Until real estate agents understand how energy inspections can directly benefit them and their clients, the market would not become self-sustaining.

We ran an experimental program In Northern California from 2002-2004, without any direct subsidy to the inspectors, but it was tough go.  We went back to an incentive-based approach in San Diego in 2006, and after 2 years of effort we’ve trained about 100 inspectors, and now have 400 real estate agents promoting the service. We are beginning to see an ecosystem develop around the realtors and inspectors who are offering these new services. The realtors want to get involved because we help them to promote themselves as EnergyWise™ Partners, and give them free CFL light bulbs for their clients.Experienced real estate agents are masters at ‘twittering’ their social networks and keeping in front of people with reasons to call and best practices sales techniques.  The best seem more like a real friend or neighbor than just another sales person, but they also subtly remind you that they are in business whenever you are ready to buy or sell a house.  Good ones do it in a way that is effortless, and unobtrusive, and they’re the ones who get most of the business.  For these savvy types, our program is an opportunity to make energy efficiency info and free light bulbs just another part of their total package. 

GC:  How do home inspectors get involved - what training is required to become an "EnergyCheckup Certified Inspector"?

TC: The service that we offer right now is only available in CA.  Currently we rely on the local inspector trade associations whose certified members generally have the basic skills that pre-qualify them to become on of our students.  After they pay for our EnergyCheckup™ training, they are able to provide the Energy Checkup inspections as a service.  Right now the Energy Checkup™ Report is a solid engineering report based on life cycle cost analysis. The state of California is in the process of formalizing the methods we and others will be able to use to produce these rating reports. These new standards will probably be ready about a year from now. 

GC:  How does this program compare with other programs?

TC:  There is an explosion of different methods and “standards” for doing energy audits -- buyers need to be wary.  Laws in most states prohibit home inspectors from endorsing any specific products or contractors. This means you can usually trust them to give you an unbiased and independent opinion, especially at a low cost initial screening stage.  The challenge is to provide the information, and then actually get people act on in it. 

Another way of doing this is to hire a home performance contractor, like Sustainable Spaces in San Francisco.  Matt Golden (CEO of Sustainable Spaces) and I engage customers at totally different stages of the home ownership cycle, but ultimately we understand that we both need each other.  I’m upstream working within the time constraints of real estate transactions. We provide relatively quick low cost information that every homebuyer really ought to know before they make what may be the biggest investment of their lives.  Contractors like Matt work most effectively after the people have lived in then house awhile, and have decided that they are really committed to making ‘this old house’ into their home.  A service like his is a good choice for a customer who is truly committed to a green lifestyle and willing to do what it takes to reduce their impact on the planet. This gives the contractor the time needed to use more technical equipment, and he can go and sell the job for more extensive auditing of energy efficiency.  If the two of us work together, that’s the best scenario.  For example, we can work together to help people buy the most efficient appliances and lighting right when they move in, and then hire a home performance contractor to help with a major remodel.  It’s important to give customers information and let them invest in things with best payback for their needs. 

We see ourselves as in the middle. Green Irene is another business model providing competition from even quicker and simpler inspections than ours, but augmented with revenue from other green services and products.  This kind of cross-promotion would probably never meet regulatory requirements at the time of sale, but might make sense if you are an apartment dweller or looking to improve your indoor air quality by switching to more eco-friendly products. People can get into doing this readily and at low cost. But consumers need to consider the source of any recommendations before they make major investments.

GC: How does the checkup benefit homeowners when they sell their home?

TC:  When a house that has had an EnergyCheckup is being sold, we have sign riders that say “Energy Rated” that we can put on it. This helps buyers compare similar homes which may or may not have made such a disclosure.  Realtors can also stage a home as energy efficient, particularly if it scores well in the EnergyCheckup analysis.  Homeowners can also get free light bulbs, with the cost underwritten by the utility, and use these to help stage and eventually sell the home.  Still it’s hard to say how a program like this affects the value of a home to buyers or appraisers.  To the right buyer, having an EnergyCheckup clearly has real value.  For appraisers it could be meaningful, but it will take a change in the appraisal process to really factor in energy efficiency.  But this is happening, and if you give the EnergyCheckup Report to an appraiser he is likely to reference this information.  For the most part appraisers need more information before they will fully consider energy efficiency in comps.  As the standardized Home Energy Rating system comes into place in CA, I would not be surprised if big appraisal companies started looking for this information.  Once there is more volume of rated homes and more awareness, appraisers will have more comps to go on.

In the current market, there is much more interest in home energy efficiency.  In 2002-2004, the real estate market was so busy that there was no time or interest in ratings.  Now there is knowledge of the need to stay current, paying attention and getting certified.  I think what we are going to see like any previous cycle is that the savviest and most skilled folks are the ones that differentiate themselves, offering superior service for realtors, contractors, and inspectors. These are the guys that are going to have work.  Folks that have money to spend right now are sophisticated, looking for the more sophisticated services and contractors. 

GC: Do other states have similar programs, or will they have them in the future?

TC: Compared to California where we’ve been working on efficiency for a while, the rest of the country has much more lower-hanging fruit, making the potential for energy payback more dramatic.  The potential is huge, and what we are seeing right now is that the CA brain trust is being tapped by the rest of the country, and the world.  A lot of people are talking about this being the economic engine of the future.  Providing these products and services as cost effective business models is a generation’s work, with utilities and regulators putting the right systems in place.  People are working on getting the utility regulation rules changed in all the states.  In many states, utilities still make money by selling you more power; they have no incentive to sell you less.  The change in other places is happening fairly quickly though, and I’m impressed by the pace of change in the last 2 years. 

In terms of smaller entrepreneurial development, if you are mechanically inclined, have worked in construction, learn the technologies, get certified and market yourself, you will be a success.  There is no end in sight to the demand for making homes perform better, reducing energy use, drafts, water and moisture problems.  Solar and other renewable energy are great, but first homeowners need to do what’s most cost effective and that’s energy efficiency.  Also, solar hot water is a big opportunity, and we are going to start to see new products for replacing water heaters with solar assisted and even solar water/PV systems.  There’s going to be a sizable incentive program to buy down these products in California, modular units that install easily.  We will continue to have the need for trained, mechanically inclined people in the field for the foreseeable future. 

Anyone interested in training in this area can check www.EnergyCheckup.com for details. Another great site is www.energydesignresources.com, go to the Training / Energy Centers link, and on this page is there is information about upcoming events from all over the state, constantly refreshed.  You can find links to utility-sponsored classes, which are generally free or really low cost.  If I was still a young electrician, I’d be all over this site.  You don’t have to be a scientist or an engineer to take advantage of these courses and certifications.  If you can pay attention in class, you can go to Community College, and take these training courses on the side. I would recommend focusing on the courses that provide certification.  Another skill set that is needed is in sales and marketing, so even if you are not interested in picking up a tool belt there’s work to be done in the emerging energy efficiency economy.  These are the green collar jobs of the future.