Starbucks is taking “significant action” to turn around its struggling business, closing a large number of cafés and announcing a second round of layoffs at its headquarters as part of CEO Brian Niccol’s efforts to resuscitate the troubled chain.Niccol announced Thursday that Starbucks will close hundreds of stores this month, or about 1% of its locations. The company had 18,734 North American locations at the end of June, and the company said it will end September with 18,300 stores.The company expects its restructuring efforts will cost $1 billion. Shares of Starbucks were flat in premarket trading.In a letter to employees, Niccol said the company underwent a review of its footprint and the locations that will close were ones “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”Starbucks often closes locations for a variety of reasons, including underperformance. But Niccol said this larger-scale effort is more substantial.”This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult,” he said.Despite the hundreds of closures, which will take place before the end of the company’s fiscal year next week, Starbucks said it will return to growth mode, and it also plans to remodel more than 1,000 locations. The new look for Starbucks features cozier chairs, more power outlets and warmer colors.In addition to the store closures, Starbucks announced an additional 900 corporate layoffs, on top of the roughly 1,000 layoffs in February. Affected employees will be notified on Friday and will receive “generous severance and support packages.” Also, “many” open positions will be closed, he announced.”I know these decisions impact our partners and their families, and we did not make them lightly,” Niccol wrote. “I believe these steps are necessary to build a better, stronger and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers and the communities we serve.”One year onNiccol joined Starbucks about a year ago, hoping to revive the storied coffee chain. However, the financial results haven’t come to fruition, with the stock down about 12% and sales haven’t turned around.He’s pared back the menu by about 30%, while also introducing new items to keep the brand on trend, like protein toppings and coconut water. Food is also getting a revamp, with new croissants and baked goods being rolled out.In addition to remodels, smaller touches have been integrated, like bringing back self-serve milk and sugar stations as well as doodles on coffee cups. The company also tweaked its name to “Starbucks Coffee Company” to reinforce its coffee roots.However, his changes have butted heads with some baristas, including uniform changes that sparked a lawsuit. And some new drinks are causing stress for baristas because they are overcomplicated to make during peak times.
Starbucks is taking “significant action” to turn around its struggling business, closing a large number of cafés and announcing a second round of layoffs at its headquarters as part of CEO Brian Niccol’s efforts to resuscitate the troubled chain.
Niccol announced Thursday that Starbucks will close hundreds of stores this month, or about 1% of its locations. The company had 18,734 North American locations at the end of June, and the company said it will end September with 18,300 stores.
The company expects its restructuring efforts will cost $1 billion. Shares of Starbucks were flat in premarket trading.
In a letter to employees, Niccol said the company underwent a review of its footprint and the locations that will close were ones “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”
Starbucks often closes locations for a variety of reasons, including underperformance. But Niccol said this larger-scale effort is more substantial.
“This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult,” he said.
Despite the hundreds of closures, which will take place before the end of the company’s fiscal year next week, Starbucks said it will return to growth mode, and it also plans to remodel more than 1,000 locations. The new look for Starbucks features cozier chairs, more power outlets and warmer colors.
In addition to the store closures, Starbucks announced an additional 900 corporate layoffs, on top of the roughly 1,000 layoffs in February. Affected employees will be notified on Friday and will receive “generous severance and support packages.” Also, “many” open positions will be closed, he announced.
“I know these decisions impact our partners and their families, and we did not make them lightly,” Niccol wrote. “I believe these steps are necessary to build a better, stronger and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers and the communities we serve.”
One year on
Niccol joined Starbucks about a year ago, hoping to revive the storied coffee chain. However, the financial results haven’t come to fruition, with the stock down about 12% and sales haven’t turned around.
He’s pared back the menu by about 30%, while also introducing new items to keep the brand on trend, like protein toppings and coconut water. Food is also getting a revamp, with new croissants and baked goods being rolled out.
In addition to remodels, smaller touches have been integrated, like bringing back self-serve milk and sugar stations as well as doodles on coffee cups. The company also tweaked its name to “Starbucks Coffee Company” to reinforce its coffee roots.
However, his changes have butted heads with some baristas, including uniform changes that sparked a lawsuit. And some new drinks are causing stress for baristas because they are overcomplicated to make during peak times.
Getting to scale with widespread decarbonization will require the industry to develop practices to … [+] reduce overheads and increase efficiency.
Berkeley Lab
As one of many actions to reach a net zero energy economy by 2050, the U.S. is finding ways to minimize the impact of existing housing, which is difficult because as a subset of the country’s overall decarbonization efforts, residential buildings have one of the most diverse existing landscapes.
Variety is the spice of life, but in the case of retrofit solutions to decarbonize housing, it’s not so charming. It demands individual attention by energy auditors and contractors and means that there can be no streamlined pathway to decarbonization with a good user experience for the pros that are required to do the work.
“There are more than 100,000 individual contracting companies in the U.S.,” said Sage Briscoe, the director of federal policy at Rewiring America, a nonprofit organization advocating for clean energy. “Trying to get them up to speed is a big task.”
Grant Farnsworth is the president at market research firm The Farnsworth Group and he agrees that the sophistication and size of contractors is so fragmented that expecting the industry to work in lock step in a substantial manner is a fantasy.
“Plus, like we have seen in other areas, remodelers are laggards when it comes to sustainability,” he said. “They typically aren’t proactively seeking differentiation in the market. They do it when it’s necessary, like when it is driven by compliance or insurance.”
Customer Engagement
Pros rated lack of consumer demand as the biggest barrier to doing retrofit projects.
LBNL
Typically, consumer demand will pull through and catalyze engagement from the industry, but some housing experts are noticing a trend of softening consumer demand.
For instance, the Lawrence Berkeley National Lab’s (LBNL) deep energy retrofit survey of 1,700 projects identified customer demand as one of the biggest challenges, and suggests that in order to drive demand, solutions will need to be readily available, affordable, easy to finance, reliable, safe, and resilient.
Houzz studies find that the most frequently cited appeal for making sustainable choices is long term cost effectiveness, outpacing non-financial reasons like being environmental stewards. In the company’s studies, only 7% of consumers list environmentally friendly as a consideration for a renovation project, while the top three considerations are ‘price within budget,’ ‘quality,’ and ‘design.’
Contractor marketplace Thumbtack’s survey of 1,000 Americans about home improvement plans showed that 32% consider sustainable, energy efficient home projects too expensive and 31% feel unsure about where to begin.
While The Farnsworth Group study reports that the value and benefits for the customer is one of a contractor’s top priorities – second only to cost. That value and benefit is wrapped up in the costs and the energy savings that would be passed along to the homeowner.
According to the Appraisal Journal, home value increases $20 for every $1 reduction in annual utility bills. So, a solar energy system that saves $200 per year would also add $4,000 to the value of a home.
But that finding hasn’t stayed consistent, says Amanda Pendleton, who directs home trends research for Zillow. The real estate firm found solar panels did not command a premium in 2022, and suggests that is due to the exceptionally tight and expensive housing market.
While demand may be lagging, there are examples of programs that are done right and that gain rapid adoption. For instance, the TECH clean California program offers incentives, pilot activities, technical assistance, and training to get California to its goal of being carbon neutral by 2045. The program has been well received, even getting much more interest than anticipated and rapid participation growth.
Lack of Labor
While the construction industry is short millions of laborers, the electrification and retrofit of … [+] existing homes will create even more jobs to fill.
Rewiring America
The construction industry currently has more than two million open positions according to the National Association of Home Builders. While those positions won’t all contribute to decarbonization efforts, the magnitude of the issue is putting a lot of strain on net zero adoption efforts.
In addition, many of the new decarbonization solutions require a specific skill set and contractors typically develop fairly niche expertise. Fortunately, she sees that manufacturers are stepping up with information to help contractors and consumers understand significant product details, how it will impact energy savings, and how to install it.
According to Farnsworth, some contractors are passing on opportunities to install more sustainable products if they require a specialist or if the product is more expensive. He also reports that if the contractor has to buy more expensive products, they may not change already established practices.
In addition, changing building codes may require a specialist’s involvement, making the contractor avoid the product or stick with current practices because it means too much impact to their business.
Farnsworth sees that a lot is landing on the manufacturers to avoid putting any burden on the pro.
“They have to deliver product at the same price point, with the same brand, the same installation, and be compliant without changing anything,” he said.
The LBNL survey also cites a lack of a reliable, trained home performance workforce. Plus, online recruiting platform Handshake reported that young people applying for jobs like plumbing, building and electrical work, dropped by 49% in 2022 from 2020.
Analyzing The Costs
Cost is always a challenge and a couple recent trends make understanding the dollars critical.
In a recent presentation, Todd Tomalak, a principal at housing market research group Zonda, said there has been an overall reversal in mobility for homeowners—where moves were happening on average every 10 years, it’s now every 20 years or more. He also reported that 20% of people’s net worth is equity in their home.
So, an investment in the home is not only more likely, but it would have a more profound impact on ongoing expenses, savings and investments rather than considering for resale value.
A U.S. Department of Energy’s 2021 study showed that to achieve at least 50% carbon reductions in the average home, the project would cost about $55,000, which is a daunting figure for many households when the average home improvement investment today sits at about $22,000.
LBNL also assessed project cost data from its survey to understand where project money was spent, then to identify ways to achieve greater energy reductions at lower costs.
The lowest cost ways to arrive at a 50% energy savings depend on including photovoltaics to offset energy as well as envelope and appliance upgrades. However, the report says it is possible to have more than 70% energy savings with readily available off the shelf insulation, lighting, appliance, domestic hot water and heating and air conditioning solutions.
Plus, while retrofits cost a lot of money, energy in the U.S. is fairly inexpensive. The government is trying to provide incentives to balance the costs, such as rebates and tax credits, which rank as the most effective way to increase customer demand for energy retrofit projects.
A survey by LBNL looked at the deep energy retrofit market drivers, opportunities and challenges to broaden the adoption of deep energy retrofits. For homeowners, cost is the most important factor for digging into an energy retrofit project, but they are also motivated by improved comfort, energy savings, sustainability, or carbon reduction.
The Pacific Northwest National Laboratory (PNNL) has embarked in some consumer research to understand the homeowners’ motivations and help spur engagement. Chrissi Antonopoulos, senior analyst at the lab says that the best motivator is rebates even if they are small.
“It is about getting a deal, which makes them much more likely to participate, but from an economic perspective, people struggle with rebates because they have to shell out money up front and wait to be reimbursed,” Antonopoulos said.
Preliminary results from the lab’s study shows that the most promising technologies for adoption are heat pumps, smart controls, and real-time monitoring and diagnostics. Homeowners also want to be able to spread out the costs by only replacing equipment as it needs to be replaced.
A fairly large opportunity exists for contractors to shrink margins on these types of projects according to LBNL’s Challenges and Opportunities to Home Decarbonization report from June 2022 authored by the organization’s decarbonization leaders Iain Walker, Brennan Less and Nuria Casquero-Modrego. The report shows that across the construction industry, gross margins were higher than industry averages for home performance contractors, sitting at 47% on average. This is much higher than the 33% gross margin for standard residential remodeling, and the typical 10 to 26% gross margin for new construction.
This gap in profit margins spells out an opportunity. If energy upgrade businesses were to reduce gross margins to the level of standard remodeling, overhead and profit costs could be reduced from 47 to 33%, representing a 14% reduction in total project costs. Although the potential for reduced costs is clear, the way to get there is not.
One possibility would be to reduce soft costs that are unique to a project, such as diagnostic testing or energy program administration. Another path that seems increasingly unrealistic due to the current labor market would be to increase market demand and the availability of skilled trades. This approach would drive efficiencies and reduce overhead for these types of projects.
The survey showed that among soft costs, while not common to all projects, professional services from architects could reach up to $10,000 per project. These costs could be reduced with more standardized approaches and guidance for contractors.
Other large costs fall into the categories of home inspections or energy audits and HVAC load sizing, travel and customer management, and building permit costs.
The report also suggested outsourcing customer acquisitions as a prime opportunity to reduce soft costs. Customer acquisition typically costs up to $2,500 per project, which can be reduced to $700 per project by using a skilled marketing group and use of best practices.
Other cost reductions would include automating diagnostic testing and commissioning or using remote approaches for audits to reduce costs by up to 60% per project.
Getting Educated
Knowledge is power and it will be one major catalyst to powering adoption of home energy improvements, but where and how that knowledge is delivered makes a big difference. For example, The Farnsworth Group survey reported that contractors use online sources and trade media to learn about policy change and, maybe more importantly, that they don’t trust government agencies.
“Who trusts the government for anything?” he said. “The majority of pros are gravitating toward industry media. The more you get nuanced in how fresh and new policy information is needed, the more trade media is used. They use social media differently.”
Most contractors have only a surface knowledge of the Inflation Reduction Act (IRA) and very few focus their company’s brand and messaging on energy retrofits.
“The federal government, while they are authoritative, aren’t the best in giving contractors tools,” Briscoe said. “That’s what Rewiring America has set out to do – eliminate the friction in accessing IRA benefits.”
Farnsworth sees the opportunity for government agencies to leverage private partnerships to act as a conduit of information to the mediums that are more trusted and used.
“We cannot rely on government to be the educator – they have to push the content to other sources,” he said.
Again, Farnsworth believes there is a lot of pressure being put on manufacturers to be the source of information, even while product and material availability are reported as the biggest challenge to projects today.
“Manufacturers and service providers have an opportunity to be a knowledge source,” Farnsworth said. “They have responsibility and opportunity as it relates to specs and products as it relates to the policies.”
Technology Coming Into Play
While technology adoption isn’t typically a strong point for builders and contractors, it promises to play an important role in all aspects of the energy transition – from shopping for products to education, from product installation to energy monitoring, and from rebate processing to project management.
New startups and solutions are popping up on a weekly basis to address these various parts of the process, again putting slower moving bureaucracy behind and forcing contractors to rely on information from manufacturers, service providers, trade media and peers.
McKinsey reports that investments in climate tech tripled from 2020 to 2022 compared to previous years, adding up to more than $130 trillion pledged by stakeholders for the transition to net zero energy, water and carbon. The firm estimates $150 trillion will be needed over the next three decades to meet climate goals, and only about 35% of the necessary technology has been invented.
“Contractors and their customers have evolving preferences, so stakeholders have to invest in technology,” Bill Rossiter, the CEO and principal at brand agency Interrupt. “You have to nurture conversations, so you don’t miss out on the ability to give the customer information that they need at a specific point in time. You have to build knowledge on your customers, and always look at and update it.”
He adds that the space is becoming much more competitive and if industry stakeholders focus on building brands and not building bonds, the decision will come down to price because that’s the only decision point that is black and white. As discussed, for contractors that price equation is immediately a factor when they have to think about changing anything at all.
One of the technologies recently launched by the U.S. Department of Energy’s Advanced Building Construction team helps consumers and contractors evaluate the necessary upgrades for a property based on its age and climate location. The tool gives recommendations based on 12 simple inputs and directs the user to a more precise assembly of products that a contractor can use to improve their home’s performance.
Arriving at the country’s decarbonization goals is going to take dedication, passion, commitment, better understanding, technology, and most of all, more collaboration. This won’t happen all at once, and will be messy, but it will certainly be worth it as probably the largest business opportunity for all company’s involved in remodeling and renovation today.
Many factors are influencing the remodeling decisions, which are different based on the age of the … [+] homeowner.
National Association of Realtors
The costs to purchase a new home right now continue to escalate, putting it out of reach for much of the population, driving more households to stay in place and do what they can to maintain, repurpose and reimagine their homes.
Many of the households currently on 15- and 30-year mortgage payment plans are at rates below 5%. Now, mortgage rates have skyrocketed to their highest levels in about 15 years. So, at the new rates, a home buyer would add more than $40,000 to the life of the loan on an average home purchase. With that said, it’s no wonder that a recent Zillow report noted that homeowners with mortgage rates below 5% are nearly twice as likely to want to stay put in their current home.
While economic factors aren’t the only reasons people stay in place, it is the leading driver today, which is also triggering investments in home improvement projects.
Commitments to home improvement projects also could be easier today because homes are appreciating at the fastest rates ever. The average annual appreciation typically sits around 4%, but recently homeowners experienced an average of 17%, giving them plenty of equity to tap into to finance projects.
“Pent-up demand and macroeconomic conditions, such as aging housing stock and high mortgage rates, which continue to drive home improvement activity, are instilling a sense of optimism among builders, remodelers, architects and interior designers as they look ahead to the second half of the year,” said Marine Sargsyan, Houzz staff economist.
With these drivers motivating more home improvement projects, let’s take a look at some details around who is doing what, when, where and why.
A Different Era of Remodeling
Over the years, remodeling projects have evolved. Today, they take on many new variations.
First, we are coming out of a pandemic. Homeowners are emerging from lock down, and they face new work situations. Companies across the country are shutting down offices, pushing people back into their homes for the daily office grind. So, homeowners are looking at ways to renovate to create quiet, calm, technology-enhanced spaces to work.
Second, the pandemic also drove households to think about their home can impact their health. So, remodeling projects centered around health and wellness, including indoor air quality, are becoming more frequent. Research from Chrissi Antonopoulos, a senior energy analyst at Pacific Northwest National Labs, shows that many of the motivators for home improvement projects are quality of life based.
Third, the housing stock is aging. Today’s Homeowner reports that the median age of a home in the U.S. is 39 years old, with 50% of homes being built before 1980. So, a larger percent of projects are tied into the ongoing maintenance and upkeep of homes.
Houzz data goes into additional detail on the projects that are related to the aging housing stock, with close to 30% of homeowners choosing to upgrade plumbing in 2022, with electrical and home automation improvement projects close behind.
Finally, the government is offering incentives that are motivating owners to consider clean energy retrofits. Harvard’s Improving America’s Housing Report shows that 34% of home improvement spending goes to energy-related projects, which has remained steady during the last decade. There is a strong correlation between the aging of a home and the investment in energy efficiency projects, which increases substantially when the house is more than 20 years old.
Investments in home remodeling projects focused on maintenance increases after a house is 20 years … [+] old.
Harvard Joint Center for Housing Studies
These incentives provided by the Inflation Reduction Act are new and just being communicated to homeowners at a state level, so could inspire much more remodeling activity during the coming months.
Regardless of the incentive, the study also shows that 93% of homeowners felt they had a better quality of life after finishing their renovations, which as Antonopoulos pointed out, is a major incentive.
Homeowners Age In and Out of Remodeling
Why would the homeowner’s age matter in these home improvement activities? In general, older homeowners have more disposable income to finance projects and to hire labor to do the project. On the flip side, they also have the experience and knowledge to tackle projects on their own. Plus, they most likely have been living somewhere longer, so they have built up more equity in their home, which can also be a financing mechanism.
“We know older generations who have been in their homes longer have, on average, more equity to tap into to do more expensive jobs which typically involves a contractor,” said Dave King, the executive director of the Home Improvement Research Institute (HIRI). “Additionally, there is some evidence to suggest that younger generations simply aren’t as interested in the trades and haven’t learned the same DIY skills as their older counterparts. and are therefore less likely to do DIY as a percentage of total projects done.”
However, many younger buyers aren’t going to be priced out. To find affordable housing, many have to take on fixer uppers, and they may just simply have the energy to make it work. Data provided by HIRI show that younger generations are more likely to purchase a home that needs improvement.
Younger home buyers are more likely to purchase a home that needs to work, both for affordability … [+] and also to make it their own.
Home Improvement Research Institute
“There has also been some work in the last few years from HIRI that suggests Millennials are more likely to do a hybrid with contractors,” King said. “Gen Y will do some of the work themselves, then have a pro come in for certain aspects.”
The National Assocation of Realtors reports that 12% of recent buyers who are older Millennials purchased a previously owned home because they wanted a DIY fixer upper.
The group’s deputy chief economist and vice president of research, Dr. Jessica Lautz, adds that a considerable share of younger buyers may have compromised on the condition knowing they would need to later remodel, but did what they could to enter the housing market today.
The Social Media Impact
Younger generations also grew up watching every style, size and shape of renovation show on TV, and now watch social media influencers talk about renovations online. When I did a quick search for influencers focused on remodeling, I got lists of hundreds, and the most popular have more than a million followers.
This content and the influencers behind it are creating streams of content that are easy to access and can make anyone catch the DIY bug. The HIRI data shows that younger populations are much more likely to consider themselves “heavy DIYers.” Maybe that is because there is a Youtube video that can walk them through nearly any project that they want to take on.
Younger home owners consider themselves to be more DIY than oder generations.
Home Improvement Research Institute
It appears that younger generations are doing more projects that fit in the discretionary space such as needing more space in their home compared to older generations who are more likely to simply be doing maintenance, which again could be because of the longevity in the home.
Older generations are more focused on repair and maintenance home improvements versus optional … [+] updates.
Home Improvement Research Institute
From the Harvard Joint Center for Housing Studies Remodeling Futures Group recent Improving America’s Housing report we see similar data. It shows that younger owners continue to be the most likely to do DIY projects and are somewhat less likely to do pro projects. But, maybe that is not always the case.
“That said, we have seen the DIY share of improvement spending trend downward over the last several decades for the youngest owners under age 35, which we’ve also speculated is because younger owners today are not as skilled at DIY projects as prior generations or as interested in spending their time on these activities,” said Abbe Will, senior research associate and associate project director with the Remodeling Futures group. “And with the aging of the housing stock, younger owners today are also buying into homes that are more likely to need upgrades requiring skilled installation like roofing and electrical/plumbing systems and equipment.”
Data from Today’s Homeowner supports this, showing that older homeowners only spend 15% of their home improvement budgets on DIY projects.
Houzz reports show an increase in households of every generation hiring pros to do the work, up 2 percentage points to more than 9 in 10 renovation projects in 2022.The same report points to Gen Xers and Seniors relying the most on pros at 46% each.
Another demographic differentiator was marriage. The Today’s Homeowner reports show that married couples with children spent more on remodeling projects than single people.
Bringing Meaningful Value
With every homeowner chasing their dream home, there are lots of opportunities for renovations. As homeowners spend more time at home, they need a space that can deliver intangible value, be safe, healthy, comfortable and secure. Anotopoulous says that means talking to them about health and wellness, not about money savings.
“In residential there are no shareholders, so they don’t renovate homes because they want to make money,” she said. “They are concerned about indoor air quality, or health. The motivations that the U.S. Department of Energy traditionally use are not the things that drive uptick in the residential market.”
Her research on the spectrum of home improvement motivators shows that even though people often say they are committing to a renovation for financial reasons, they most often are not. Her advice is to stay away from a focus on lowering utility bills and talk about thermal comfort instead, like most HVAC companies that sell comfort. So, there are other motivators that we have to acknowledge even if the pros, and the homeowner themselves, don’t fully understand.
The Future
The market remains healthy. Today’s Homeowner predicts that home improvement sales will reach more than $620 billion in 2025.
With current economic factors, there will continue to be discretionary spending financed by home equity and homeowners wanting to get the most pleasure out of where they are stuck in place.
And, once they are invested, they want to stay put for a while. The 2023 Houzz and Home Study reports that more than 60% of homeowners plan to stay in their home for 11 years or more following a planned renovation in 2022. Plus, only 6% of today’s homeowners doing renovations plan to sell their home, which is half of where it was in 2018 at 12%.
With more homeowners staying in place, not a lot of new housing coming online, it looks like a healthy road ahead for remodeling.
Plus, 69% of homeowners feel a major sense of accomplishment after they’ve completed their project, but who wouldn’t enjoy a healthier, safer, more resilient home?
PJCArchitecture has noticed rising consumer demand for more sustainable solutions, like this … [+] induction cooktop, along with positive impact that codes can play in the process.
BJORG MAGNEA
While builders struggle to bring new housing online, the rest of the country’s housing stock is aging. Of the approximately 124 million housing units, the ABC Collaborative counts more than 21 million single family homes that were built before 1980 that need a retrofit, spurring a huge new industry focused on energy improvements.
Energy retrofits are appealing for several reasons—to meet the nation’s 2050 sustainability goals, to meet a growing social consciousness, to improve home equity, and to reduce home energy costs and energy use.
Meeting Sustainability Goals
Meeting the country’s sustainability goals isn’t just a checklist, it’s an integrated process that will take all housing stakeholders along with the right levers for public participation in addition to the pressure of regulations.
Katrin Klingenberg is the co-founder and executive director at Phius, a non-profit organization committed to creating a framework for climate-specific and adaptable building standards to achieve a zero-carbon built environment. Her Phius program is working its way into state code and is currently part of New York’s and Massachusetts’s zero energy stretch codes.
She said that Washington DC and Illinois are both considering adopting the code as well, plus several cities and states are flirting with a ban on natural gas that would go as far as requirements for equipment replacements.
Phil Consalvo is the principal at architecture firm PJCArchitecture and shared some examples of the gravity of codes.
“The example that I like to use was a 1920s gut renovation on Long Island where we had to comply to energy code,” he said. “It was a challenge on the exterior wall because we had to meet a certain rating on the R-value of the insulation. We had to come up with a creative way to meet the code and not build it out to a two-foot wall. It forced us to put on creative caps.”
His colleague and associate at the firm, Juliana Sorzano, added that the envelope update wasn’t part of the original scope of work, but it was required by code.
“In the long term they are going to thank the code because they are going to save on the energy bills,” she said. “This gesture made a big impact on the energy savings. The challenge was that the contractor was doing it the regular way and we had to stop them and educate them on a new process.”
Phius works on projects to achieve various levels of energy efficiency with a strategic design … [+] process.
Phius
Klingenberg is indefatigable in driving Phius’s efforts to decarbonize the built environment, facing the challenges of applying it to our aged infrastructure head on. The organization is participating in the retrofit exploration program REALIZE to facilitate market adoption of net zero carbon at scale.
“We want to transition the existing grid to become a renewable grid,” she said. “We need to reduce the load in existing buildings otherwise the grid will become completely unreliable.”
There is an intricate strategy to reducing that load.
“The design process is very important—it is important to map out measures so that they are synergistic with each other,” she shared. “First step is the assessment; you have to check if there are deficiencies to be fixed. Then, identify measures to get the building as close to zero as possible. If you do the wrong measure first, you close the door to some things that might be the optimal process and you may end up with stranded assets.”
With a design-first approach, the stakeholders can consider what is most cost effective, what drives the best efficiencies, and what the local jurisdiction might be implementing in the future so that the solution has a long-life span.
Homeowner Demand
Consumers want to make sustainable home improvements and their motivations vary as shown by this … [+] recent Thumbtack survey of more than 1,000 homeowners.
Thumbtack
Online home care platform Thumbtack surveyed 1,000 homeowners to find the top reasons they want to engage in energy retrofits. Most important was the feeling of neighborly pressure at 70%; next, 55% said lowering energy bills was most important; and 41% said it was altruistic, and they just want to help the planet.
Consalvo interacts with residential clients who take the work very personally and found that the pandemic motivated people to get more educated about their environment.
“When we approach a project, recently it comes easier because it is more in people’s awareness,” he said. “It is one of the good things that came out of the pandemic.”
Sorzano added that before the pandemic, studies showed that people spent 90% of their time indoors between the home and office, and when they started working from home, it became 90% at home.
“So, now they are more conscious about it,” she said. “Now they want to make sure their indoor quality is healthy. They are starting to associate gas ranges to allergies and sickness. A client recently was in planning and changed a gas range in the middle of the job to induction.”
Consalvo agrees.
“It’s not prompted by us, but the biggest roadblock is the additional cost if you are working on a job with a tight budget,” he said. “We have read that project costs have escalated by 12%. In the end, it may pay off or pay for itself but when you are in the midst of it and trying to tighten up the numbers, it becomes a tossup.”
Building Home Equity
Olivia Mariani serves as the chief marketing officer at Curbio, a company that focuses on renovations to sell homes, and is now talking to sellers about cashing in on energy updates to sell their home faster and to attract environmentally conscious, millennial homebuyers who will pay more for these upgrades.
“Across all markets, according to Zillow housing trends report, 60% of buyers overall wanted energy efficiency, which was very or extremely important,” she said. “And, they will pay up to $15,000 more for a solar powered home.”
Curbio has completed 2,000 projects across the country and is collecting data on what updates drive a return on investment. The company is educating their realtor customer base by sharing out that information, sharing both the pricing of the as is value of the home from the agent and then help them see the return on investment that they will get.
On project “refreshes” that don’t require a high level of contractor work, they are observing a 214% average ROI. The data is available on their mobile app, where a user can put in any project to see what it would cost in that geographic area and what the expected ROI would be.
Curbio also notices that buyers are calculating energy costs into the overall expense of the home and asking their agent about areas that may have been identified during the inspection and what upgrades should or could be made.
Product and Design Innovation
In preparations for a recent SXSW session on net zero housing I got to hear some of the industry’s top minds talk about ideas that took me a minute to fully absorb. Eric Werling from the U.S. Department of Energy pointed out that we have been able to build net zero for more than 30 years, which means now we have three decades of building science advancements making it a reality, and with federal incentives, we are poised for rapid transformation.
The products and technologies for energy retrofits are advancing at an exponential pace. Sean Armstrong is partner at energy consulting firm Redwood Energy and recently posted his thoughts on the improvements in heat pumps.
Some of the main enhancements he has seen include more efficient compressors, refrigerants that are 35% more efficient than they were 13 years ago, and the introduction of computer controls that enable performance at very cold temperatures.
In terms of building envelope, manufacturers such as LP SmartSide are creating products that can perform in new ways, such as siding that is the only carbon-negative engineered wood siding available. The company has adopted intentional processes to be able to produce products that store 10 times more carbon than fiber cement-based products with a manufacturing process that produces 54% less greenhouse gas emissions.
Sometimes it isn’t the technology, but how the product is applied.
Chris Gray serves as the chief technology officer at real estate retrofit company RENU Communities and has held several other roles in the industry. In his current role, he evaluates energy use at acquired properties and then designs and executes a tailored retrofit to improve its carbon footprint, aiming for net zero and targeting a minimum 30% reduction in energy costs.
He has been able to replace the internals of every toilet in a 400-unit complex to save 30% of the property’s water consumption – a project that paid back in less than a year. In another project, he combined a state incentive program with toilet replacements to save more than 3.5M gallons per year and make a pay back in less than a year.
While these are large scale, the example certainly shows what can happen in a neighborhood or community of single family homes. No matter the size of the property, Gray says the process should start with a model of current and past energy consumption.
“Start with the envelope since it is the separation between indoors and outdoors to minimize communication between indoor and outdoor air,” he said. “Then, look at roof line, how much insulation is in the roof with the solar beating down. Also, look at the exterior walls because windows and doors can leak over time changing the airflow and effectiveness. Evaluating the envelope is the most cost-effective place to start before you replace mechanical systems to minimize the equipment that you have to replace.”
After the energy evaluation, a budget has to be put in place, understanding up-front costs, along with when where and how rebates and tax credits may come into play. Sometimes it may mean creating a multi-year plan.
Two new technologies are helping simplify that process for homeowners and contractors. Online permitting and rebate evaluation site Symbium easily finds the rebates relevant to a project, including heat pumps, stovetops, furnaces, as well as larger home renovation projects including solar panels, and electric vehicle charging stations. The site identifies what is required to apply for a rebate, submits a completed application directly to the rebate provider, helps manage communication until the reimbursement is received, and even consolidates rebate programs from different providers and surfaces rebates that are applicable to a specific project.
DR Richardson is the founder at consulting and project management firm Elephant Energy that helps design the right energy system, procures the equipment, connects the work to available rebates, and then sets up the work with a vetted contractor.
“We make electrification super easy, accessible and affordable by integrating all the refunds and tax credits and by designing systems so they apply for the rebates also with a focus on the total cost of ownership,” Richardson said. “We can drive costs down by working with installer partners and offer the training and system design.”
In this difficult labor environment, Elephant Energy is providing contractors with reliable repeatable revenue, where they don’t have to do some of the work because the system design is provided. Amid a lot of misinformation, the company is highlighting the capabilities of cold weather heat pumps, and making it all work without upgrading electric service, since rewiring a home can be an intensive process. R
Richardson says that upgrading to a 200 amp panel usually costs between $6,000 and $10,000, and is sometimes not feasible for logistical reasons. Fortunately, he says that a panel upgrade is needed less than 5% of the time.
Contractors have to understand the hard costs and the future savings to make the right presentation to a home owner.
Homeowners can validate the spend on an energy upgrade through the long term cost savings.
Thumbtack
Thumbtack breaks down the investment with help from nonprofit data group Rewiring America. Heat pumps require a large up-front investment at an average cost of $16,588 but can be up to five times more efficient than traditional heating and cooling systems. Plus, there are government incentives for up to $8,000 in upfront costs, up to $2,000 in a tax credit, and another $330 in average annual energy bill savings.
If homeowners could budget for all energy efficiency projects at once, it would come in at an average total spend of $23,000 after incentives and rebates. But it could pay off in less than a decade by delivering average energy savings of $2,500 per year, plus the benefit of reducing the home’s carbon footprint.
Messages around these money savings are making a mark, especially when they are married with social impact.
“Consumers are savvier and more environmentally conscious than ever,” Mariani said. “We have been asked by them about materials, so we have an entire sourcing team staying up to date on these trends. I wouldn’t be surprised if we had an entire green portfolio by next year.”
In addition to solar panels, Curbio notices growing demand for options like bamboo flooring. The company is sourcing product from volume discount vendors and adding more sustainable products to its portfolio.
Home sellers are making bank on going energy efficient before putting their home on the market.
“Energy efficiency is an ROI positive decision,” she added. “Sellers are making sure windows are efficient and well designed. In markets where lawns are not as common, the lawn is on its way out. They require a lot of water and so are very unsustainable. So, we are looking for hardscape instead of a traditional green lawn.”
Water is becoming a more critical topic in many large markets. Greywater systems are in early adopter mode, but are a more intensive retrofit that might require re-piping the house, Gray pointed out. In larger retrofits where the walls are opened, it becomes feasible, but Gray warns that it’s still necessary to evaluate local regulations to understand greywater restrictions.
The Labor Challenge
So, technology exists, demand is strong, and incentives are in place. However, there is still a missing element – how all of it will be delivered.
In some cases, tools exist for contractors to educate themselves, which is mildly humorous because even if the tools exist how many contractors can stop what they are doing to educate themselves? They are in high demand and not only need training, but Gray says they also need behavior modification.
For instance, they need to change their knowledge about sizing a heat pump system, and the load capacity degradation that happens with temperature changes, along with new, evolving technologies that address that.
Plus, there is a lot to learn regarding heat pump water heaters.
“Heat pump water heaters use an air conditioning cycle to cool the air around the water heater and pull that air into the tank,” he said. “They can recover air and use it to heat the water. Contractors have to educate on where they can be located and how much air flow they need. They cannot be in a closet, and they are larger than standard water heaters. There also are different voltages, and an electric circuit is needed. Some can now run off a standard 150W, but that means less capacity of hot water, so it needs to be applied appropriately.”
To address the contractor education piece, Phius offers online training, which is incredibly important to jurisdictions as they start to standardize passive house.
I honestly am crazy excited about the opportunities that retrofitting our existing homes offer for changing the country’s entire energy dynamics and look forward to sharing more case studies as these projects are completed.
Immerse Yourself in Your New Kitchen Design Without Stepping Outside of Your Home
Press Release –
updated: Sep 24, 2019
GRASS VALLEY, Calif., September 24, 2019 (Newswire.com)
– Thanks to Walcraft Cabinetry’s new fully immersive virtual renovation experience, homeowners won’t have to leave their home to see or feel how a new kitchen will fit into their home. “We use the Oculus virtual reality headset to transport you into your future kitchen without ever leaving your house,” said Walcraft CEO Sean Walsh.
After sliding on the headset, the user will see exactly how the tile they picked works with the lighting fixtures. Thinking of adding an island? The virtual experience will let the user feel what it’s like walking around the altered space. “This incredible technology will save people so much time, money and energy,” smiled Walsh. “They’ll know for sure that their new kitchen design works for them before they start construction.”
The Most Realistic Experience with 8K Resolution CGI Technology During his many years in the construction business, Walsh noticed customers struggled to visualize their complete designs. Homeowners bogged down in the small details, like tile and wood samples, often struggled to envision the big picture of how everything would come together in their space. “Even with drawings and computer renderings, some people had a hard time,” he noted. “Some companies have attempted to incorporate virtual reality solutions, but you have to travel to their offices to try them and the resolution is so low that it’s not especially useful.”
Walcraft’s virtual kitchen experiences solve that problem by providing the highest caliber Hollywood-level CGI rendered in 8k resolution. Walsh noted, “This interactive approach gives you the highest possible level of realism. You will see exactly how every element you selected works together. There’s nothing else like this.”
No Showroom Visits Necessary | Experience the Entire Process in Your Own Home Walcraft provides this service for homeowners throughout the United States. The process starts with a consultation in which the Walcraft team helps you put together your dream kitchen design. They’ll send you free door samples and work with you to create personalized CGI renderings so you can get a general idea of the look you will end up with. Once you work out the details, Walcraft will load the design into a pair of Oculus goggles and send them to your home so you can experience your kitchen in virtual reality.
“This service helps homeowners save time and money because contractors appreciate working with people who are well prepared. In all reality they charge less when the client has everything ready to go,” said Walsh.
About Walcraft Cabinetry Walcraft Cabinetry is a “people before profits” business based in Grass Valley, California. The company provides jobs and opportunities for people coming out of crime, addiction and abuse. Walcraft offers nearly 200 cabinet options with styles, colors, shapes and sizes to suite every homeowner. Learn more at https://walcraftcabinetry.com.
