Attending the Alliance to Save Energy’s 2010 Global Energy Efficiency Forum, The Daily Energy Report interviewed Frank Murray Jr., President and CEO of the New York State Energy Research and Development Authority (NYSERDA). Frank speaks with us about how NYSERDA promotes numerous energy efficient programs through the support of the federal and state government. NYSERDA recently received a $480 million grant to push energy efficient projects which will further help the state of New York become even more responsible about their energy use. Frank says that if you have the resources at your disposal, then pursuing energy efficiency projects is a no-brainer.
Ben Lack: We’re here with Frank Murray, President and CEO of the New York State Energy and Research Development Authority. Thanks for your time.
Frank Murray: You’re welcome, Ben. Glad to be here.
Ben Lack: Can you tell us a little bit, to start off, with about what NYSERDA does?
Frank Murray: The New York State Energy and Research Development Authority, or NYSERDA, as we call it, is a public benefit corporation. We would set up the legislature probably forty years ago. One of those interesting quirks of history, we were actually called the Atomic Energy and Space Administration when we began, back in the days when people believed that nuclear power was going to be cheap to meter. And we were looking for opportunities, commercial opportunities, in both the nuclear power and the out of space. Neither of those worked out very well. During the seventies, during the first energy crisis, the legislature reconstituted us as the New York State Energy and Research Development Authority. Our mission is focusing upon energy and environmental technologies. They can improve energy efficiency. The quality of the environment, promote economic development. And our program stretches from the research side all the way across the spectrum into deployment, training, education. Over the years, we’ve evolved into a fairly large organization. Today, I think our budget is somewhere in the vicinity of $650 million.
Ben Lack: Wow. Can you tell us a little bit about an award that you recently received from the Energy Star Program for leadership in the design of homes?
Frank Murray: Oh, you’re talking about Energy Star Home Program?
Ben Lack: Yes.
Frank Murray: We started that program about, I would say, a decade or so ago before the federal Energy Star Program began. Our objective back then was to promote the construction of more energy efficient housing in New York State, new construction. So we came with this idea of the Energy Star Program. Energy Star houses in New York State are supposed to be thirty percent more energy efficient than that which is required of the New York State Energy Building Code. It’s turned out to be an extremely popular program. We were hopeful. One of these things where you’re hoping it’s the case where the hope follows the reality. It’s an extremely popular program. It’s been very successful.
Ben Lack: So talk to us about some of the offerings that you had in the program that really made it as successful as you’re saying.
Frank Murray: Well, there are a couple different aspects to the program. We do offer builders actual cash incentives to build Home Star houses, and they range up to $2,000 per unit. The program covers single family housing which we defined as one to four family units, up to three stories. So it’s been very popular among the builders. We’ve also worked hard with the builders to promote the program. So beyond just the financial incentive they receive, it’s actually part of the PR campaign and advertising campaign. They can label their buildings “Energy Home Star Buildings.” Consumers, we found, find these sort of buildings incredibly popular. Consciousness was raised with respect to the cost of energy. People want to be green nowadays. There’s increased concern about the impact of energy use upon our environment. So we’ve seen a growth in this program just, let’s say, in the last five years or so, nine percent of new home construction in New York State being Energy Star to today, about twenty-five percent. From the builders’ point of view, it’s not just the money that they can make in the form of incentives which it actually, probably, fairly modest in the large scheme of things. But it’s the ability that in effect take to market and advertise a product in Energy Star Home which clearly has an audience out there even in these difficult economic times.
Ben Lack: Can you talk to us a little bit about the retrofit side for the folks that are staying in their homes and not buying new homes?
Frank Murray: We run a related though different program called Home Performance with Energy Star. And that’s for people who are looking to retrofit their existing homes. And how that program works is, as a homeowner, you reach out and find a certified contractor. We have a whole list of contractors who are certified and not only is technically qualified but also designed to provide a measured consumer protection to the customer. They know that who they’re dealing with is indeed a reputable firm. That contractor will then go into your home and perform an energy audit. We require people who participate to pay a portion of the cost to that energy audit because we’ve learned over time that free energy audits don’t translate into actual investment in energy efficiency in the homes. And that’s really what we’re trying to accomplish. So the homeowner picks up a portion of the cost of the energy audit as do we. The contractor then goes to the home, does a very sophisticated energy audit which will identify what could be done to improve the overall energy efficiency of the home. Then it’s up to the homeowner to make the decision to whether or not to go forward with that investment. We try to encourage them in that direction by providing financial assistance, either in the form of a right down of the interest rate or an outright grant up to a certain amount. And what we found most recently is that the grant, in fact, is a more popular form of assistance that homeowners look for. Again, a lot of homeowners now can go out and, with the low interest rates in the marketplace, they can obtain fairly low-cost financing so that the actual grant to write down the overall cost of the program seems to be the more popular approach.
Ben Lack: How does somebody find out about these types of programs?
Frank Murray: Oh, it’s very easy to find out. They can go right to our website: www.nyserda.org. There’s a whole section on residential energy. In fact, we actually have on our website, not just Star programs, but the programs of several other public authorities. The New York Power Authority and the Long Island Power Authority, but also the utility programs. It becomes, in fact, one-stop citing for homeowners who are looking to learn about what programs are available. Not surprisingly, we think our programs are the best. I think history has demonstrated, in fact, that our program works very well. And one of the things that we’re particularly proud of, I’m sure your viewers are aware of the legislation going through the Congress right now, the Home Star Program. That is based, at least the Gold Star Program, is based very much upon the home performance with Energy Star Program that New York State developed. It’s a good program, and I think it offers some real opportunities to affect changes in the marketplace as well as energy reductions on improving an overall environmental quality.
Ben Lack: We know that you’ve recently received quite a large grant from the government to push some energy efficiency initiatives. First of all, congratulations. And second of all, can you tell us a little bit about what the grant was for and how you plan to implement it?
Frank Murray: The Department of Energy and the Obama administration announced that they were going to do somewhere in the vicinity of about a $480 million solicitation to encourage residential retrofits, investing energy efficiency in existing housing stock. And I expect a lot of people have heard about this bill of installing energy efficiency in a million homes across the country. We were one of the fortunate applicants to win. In fact, we received the largest single award in the country, $40 million. We’ve partnered with New York City and some communities in Long Island and the Westchester County to win this award. But this is just a drop in the bucket. Now the challenge here is to take this $40 million and to leverage it into a much larger investment like residential energy efficiency. We get lots of stories out there that there’s capital available. Foundations are interested in investing in this. Banks are looking for opportunities though, of course, they’re looking to box their risk as much as possible. No big surprise there. In fact, just this week we have a SWAT team working up in Albany meeting with my staff working out the details of the actual grant application. We’re going to be looking to get this out there as quickly as possible but to leverage the $40 million into a much larger investment. I think that’s one of the things that’s made our program or our proposal particularly attractive. Besides the fact that we were marrying both New York City with the suburban areas of New York State, we identified three different funding approaches that we were looking to finance under this. What we’re looking to do here is identify which of these different approaches or maybe several of them work best for different customer classes.
Ben Lack: Can you tell us a little bit about those approaches?
Frank Murray: Well, there are three funding approaches, and they’re all fairly well known. One is the revolving loan fund which a number of states are attempting to implement using economic stimulus funds. A second is what is called On-Bill Recovery. This is where you’re able, to an effect, finance your energy efficiency investment through your energy bill. That’s not the utility. The utility ratebearer actually becomes liable. You still go out to a bank, a mortgage lender gets you a loan. But you repay through your electric bill.
Ben Lack: Like with savings?
Frank Murray: Yes, that’s exactly the idea. If this works the way it’s envisioned to work, you’ll get this much savings every month in your electric bill. And this portion you’ll be using to pay your electric bill back. In the ideal world, it would come up to literally no cost to the homeowner. We’re looking to test that. We have the utility, National Grid in New York State, has indicated they were interested in piloting with us to see how that program would work. So this is the second approach. And the third approach is the PACE legislation which has become very popular. It’s modeled upon a program which was actually initiated in Babylon in Long Island, New York. And there was federal legislation enacted last year that authorized states and municipalities to put this. It’s called a Property Assessment Conservation Efficiency Law and Program into place. And we’ve passed legislation in New York State in December that the governor signed authorizing local governments to implement the PACE financing program. That’s a whole new way of going about trying to finance energy efficiency investment homes. That works very much like a surcharge on your mortgage, on your property tax actually. It’s worked well in Babylon. We’re hoping to replicate it elsewhere in New York State. So those are the three different methods. Our expectation is we’ll have various degrees of success, but that’s what we’re trying to find out here. What works best with which class of customers we’re talking about.
Ben Lack: You know energy efficiency is so easy to do. The return on investment is so strong, and it’s typically the first thing folks do whether they’e a homeowner or a business to try to lower their electricity bill. How would grade the state of New York and their efforts toward pushing energy efficiency initiatives to its constituents and what types of things can the state do to improve those initiatives?
Frank Murray: Well, I don’t think I have to grade how we’re doing. I encourage people to go to other outside organizations where someone is perhaps more objective. I think we do an awfully good job. And that is indeed what we hear from outside organizations like AZ, EEE, or the Alliance to Save Energy and others who evaluate state energy programs. We consistently rank at or near the top of state energy efforts. We’re particularly challenged, obviously, in New York City which actually is one of the most energy intensive or energy efficient areas in the country in large measure because the investment that was made in mass transit. But there are real challenges in places like New York City. The housing stock itself, the relationship between the landlord and the tenant. We’re working very closely with New York City on that. In fact, as I’ve mentioned earlier, with this federal grant that will be one of the interesting aspects of it. Half of that money is going into New York City to work on some of these very specific challenges. So I think we do a pretty good job. Could we do a better job? One could always do a better job, and we strive to do a better job all the time. The challenges that’s facing us is getting the information out there, particularly in the residential sector. The industrial and the commercial sector, for the most part, are fairly sophisticated, particularly, the larger commercial establishments in the industrial sector. They more quickly translate the energy efficiency into the bottom line of the cost of doing business. In the residential sector, some of the relationships that I just talked about in places like New York City between the landlord and the tenant create unique barriers to investment in energy efficiency, getting information out there. Getting it out there in a way people that can understand. One of the biggest concerns that I have is we run our programs in New York State, NYSERDA. Utilities for the first time in a decade are getting back into the energy efficiency business in New York State. So they all have their programs. Here comes the federal government with Home Star, both the Silver and Gold Programs. Presenting these in a way that the public actually understand what the best program or what the best approach is for them is going to be a challenge. If you overwhelm people with information, it’s not that they’re not intelligent enough to sort their way through this information. It’s that most people don’t have the time to. So what happens if you tell three or four different people are knocking on your front door, all telling you, “I’ve got the product that’s going to reduce your energy bill,” people will basically throw up their hands and say, “I don’t have the time to sort through this.” That’s one of the biggest challenges we have. Not only getting the information out there in the residential sector but getting it out there in a way that people can understand and kind of a simple way. What they can do, making it as easy as possible for folks to invest in energy efficiency.
Ben Lack: So do you rely on folks like the contractors or the retail stores that offer these types of energy improvements to get that message out to the consumers or are there specific directives that you guys are taking place to go directly to the homeowner?
Frank Murray: Well, again, and like many things, it’s a variety of different techniques. We work very closely with our colleagues at the State Public Service Commission. Much of our funding comes through a variety of different surcharges on rate-payer bills. And in a climate like today where most states are under tremendous fiscal pressure, this turns out to be a godsend because these revenues tend to be outside the normal appropriation process, and we’ve been able to sustain our investment. And, in fact, I don’t hesitate to tell people that one of the reason that we’re so successful and able to do what we do is we have leadership and support from up top in New York State and that’s Governor Patterson. People are well aware of the fiscal challenges we have and some of the political difficulties the governor has. But on this issue, an investment on energy efficiency and renewable technology which links to the development of this whole new green high-tech economy in New York State, the governor has been a steadfast supporter. So with our colleagues at the Public Service Commission providing us with the revenues and the governor’s leadership, back to your question, what we do is is we work together to try to market the programs that we have. We have solicitations out in the street. We work through contractors. Sophisticated marketing firms that able to convey this. That communication is then provided to our contractors so they’re giving out the same messages. NYSERDA, we have a network that we call Energy Smarts with coordinators all across the state. We work with them to get that same information out. We work with our partners at the Long Island Power Authority and the New York Power Authority, in particular, the Long Island Power Authority serves a lot of residential customers in Long Island. And we try to send the same message as much as possible, a common message. We market a lot of these programs, none under the banner of NYSERDA or the banner of the Public Service Commission, but under the banner of Energy Smart. It’s a label that has developed a recognition over the last decade or so, and it seems to be hitting a responsive note with consumers.
Ben Lack: Well, Frank, thank you so much for the time. I want to congratulate you on the recent award for the grant and much continued success to you. And we will definitely be in touch soon. Thank you so much.
Frank Murray: Great. You’re more than welcome.
Ben Lack: Have a good one.
Frank Murray: You too.
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