The Department of Energy’s Home Energy Score: Can a home energy report influence consumers’ willingness to pay for more energy efficient homes?

Abstract

The residential sector accounts for a substantial percentage of total energy use in the United States. Newer homes built under the ENERGY STAR label have increased awareness for home energy efficiency, but there is no standard metric for evaluating the energy use of older housing stock. To fill this gap the U.S. Department of Energy (DOE) created the Home Energy Score (HEScore) that scores existing homes on a 10-point scale based on energy performance. The score, along with a detailed home report, provides homeowners with a list of recommended improvements that – if implemented – will increase a home’s efficiency and HEScore. Through this program the DOE hopes to improve the overall efficiency of U.S. homes. This master’s project investigates behavioral and economic factors that influence homeowners’ willingness to pay (WTP) for energy-efficient home improvements, specifically as they relate to the DOE’s HEScore. An experiment using a contingent valuation study was designed to measure how situational factors and the decision environment influence a homeowner’s WTP for specific energy-efficient improvements. The experiment was delivered via an online survey to more than 1,600 current homeowners, home buyers and home sellers throughout the U.S. A response rate of 56 percent was achieved. Results of the study indicate that no single agent influences a homeowner’s choice in their WTP for energy-efficient improvements; rather it is a complex mix of socioeconomic, situational and political factors that play a role in the decision process. Choices are fraught with emotion and decisions are often processed through filters of long-held beliefs and biases that may ignore factual information. The HEScore may assist in simplifying the decision environment, but it is not a panacea for improving home energy efficiency. As the DOE moves forward with the program they should consider policy options that include tax incentives and educational initiatives to augment the HEScore.