CONSERVATION CONSUMER PROTECTION:

"REGULATORY LAG" IN A DIFFERENT SETTING

K.R. Kubitz*

INTRODUCTION

Energy conservation has always had two aspects: (1) behavioral adap-

tation to high prices or shortages (less ~se of services, heat,

light, and mechanical motion, provided energy) and (2) improved effi­

ciency (the use of devices or systems that reduce hea.t loss or other

forms of wasted energy)@ Because conservation through behavior changes

can mean sacrifices in lifestyle, which are unacceptable to

major segments of the American population, programs that concentrate on

behavior may not savingse , the

of most conservation has been on the

installation and use of cost-effective measures that improve energy

, Pa.cific Gas and Companye Viewsthose of the author j not PG&E@

Here I wish to make three assertions, to

cussion:

later dis-

estimates are not of

the that will result from. energy conserva­

tion devices~ because the processes of mass installation will

effect actual energy (and costs to the

conservation programs should be

with an system of

control@consumer

2~ As a consequence,

undertaken in

conservation devices are

I will these two cases: and

standards for insulation, and the ef and

of solar water systems @ For each case we will consider the

record and installation standards, and

the role of both industries and utilities in to insure that these

investments are effective in energy@

Before so, however, we must first discuss consumer

tion and issues are to conservation efforts@

l~e answer is evident: consumer is essential to accep-

tance of any conserva.tion program@ There are reasons for this@

to and finance conserva-

of conservation could be

of insta.lled measures, utilities are

co'ntrol of

First utilities are

tion mea.sures 1 Because

the poor

concerned wi th

Second~ customer confidence has been identified as a barrier to

of some measures, solar systems 0

If the is uncertain whether a new or unfamiliar will per-

formas , the rate of is to be slower than

In addition~ an uncertain m.a.rket may mean unit

costs~ which in turn could retard sales~

Finally, government agencies and utilities are relying upon antici­

pated savings from conservation to meet future energy demand and

reduce oil imports (0 Consequently, utilities must verify conservation

program results@ The issue of quality control is thus closely linked to

issues of demand forecasting, through monitoring and verifying conserva­

tion s8vings@ If the expected number of installations of a given con­

servation measure have been installed but results are less than

expected, the explanation must lie in either poor technical performance

or behavioral changes that offset savings@

CONSERVATION: POTENTIAL FAILURE MODES

Before the cases of insulation and solar heating

, let us review the ways in which conservation , or cost-

effectiveness, can be lower than Besides affected by

behavior, the net energy can be

o or installation@

o Lower than

is

device ~~~~M~.~, even if the device or

and installed@

o deterioration of over the life of a product

or

o Traumatic failure from internal or external causes

Of course, individual installations can exceed average expectationso

For insulation in a home save more than 25

energy, or a solar water heater 80 per-

cent of water energy~ However, we will focus on the other end

of the since we are more concerned with the

..... _~""" ... Ill>~.._t reasonable minimum () for the performance

of numbers of

actual energy each of the above possible

failure modes affects the economics of a conservation measure@ This can

in two ways@ First, the amount of conserved energy may be less

than thus the payback on investiment@ Second,

the cost of achieving a of energy savings with a particular

device may be increased because of higher maintenance, component

c.osts,. or both@

In addition to associated with the of conserva-

tion devices)) in meeting c.onservation goals

need to be considered, will not be covered in detail in

this paper~ One area of concern is escalation in the retail cost of

energy conservation devices 0 This can be a response to

increased consumer demand for conservation, but can also, more

~ be financial incentives to accelerate

consumer demand<0

Another concern is the of consumer

behavior installation of conservation measures@ For example,

some households may want to heat and use more rooms once added insula-

tion lowers the cost of s comfortable @ Both effects have been

little studied but will bear in the future@

the energy savings of

albeit less

devices@

, in addition to that

conserva tion devices, there are more serious,

risks to or residences from failures of

INSULATION: THE SLOW EVOLUTION OF STANDARDS

Insulation standards are an of the interactive,

process of developing energy conservation measures~ The

gradual recognition of a need for insulation standards resulted from

unanticipated side-effects of some of insulation, and

in from concern over the thermal of different

of materials, such as cellulose, , or foam@

the transfer of

Heat loss or in residences may be

the use of sufficient amounts of

-_ ...... _"'~&&,\Iil~-, walls, and floors, to the National

Manual, p@ 3-2)@

cuts down on energy

heat into or out of a

reduced up to 50

insulation in

Bureau of Standards

Heat transfer is the q == UA where q is the

rate of heat loss (or for the entire home (in ; U is a heat

transfer coefficient (in A the total areas of

the shell floors) and ceil;~ s) ; and is the

:ins difference $ The of insulation to

retard heat flow is measured its thermal resistance, or R-factor@ R

is the of U in the above heat-transfer R-factors

are additive) i@e@, installation of two identical of insulation,

each an nominal R-factor of 11, or R-ll) will a nominal R-22

thickness of insulation.

One source of consumer has been the of R-

values for different amounts and of insulation@ Different insula-

tion materials of the same thickness may have very different R-factors$

Four of materials are used in the of insulation:

1. Fibrous or

rock wool~

mineral material, as ~ or

2. Fibrous or cellular

or wood bark$

material, such as cone , wood,

3$ Cellular organic

foamse

, such as or polyurethene

as alumin.um

In addition, insulation is marketed in four different forms:

!@ Blankets and batts of rock waole

slabs<lP

3~ Loose fill, eeg~t cellulose, fiberfil1e

40 Rolls sheets, e@g~, rolls of aluminum~

In addition to heat transfer floors,

walls, heat is also transferred

windows and doors, and

air infiltration through cracks in

storm windows, the frames of

around windows and doors, heat

the

losses or due to air infiltration can be cut down@

To the extent that some of these measures share installation or perfor­

mance characteristics with insulation, the comments which follow also

to these measures@

of new materials in

insulation material@ Now a

and

The : Before the

the 19508, rock wool was the

of materials are used,

of a cellulose insulation plant are in the

foams @ There are estimated to be abou,t 8 to 10 firms rock

cellulosehundreds of firms

tal cos

wool insulation"wool and

insulatiol1@

tion

of

can 'be

,000 to million, a produc­

for much less@ Lead time for production

is estimated at months@ There are three,

insulation@

four, domestic

production

in the demand

ofincreasedto be met

is

The time needed to build

months@ Therefore, sudden

in continuous

is about 1

for insulation are

cellulose based materials@ It appears that cellulose production capa­

city increased in the mid 19708 (10-12 new firms per month)@ Expansion

of cellulose has sometimes been limited by the shortage of boric

acid, a fire-retardant, as well as concerns over the insulating and

fire resistant qualities of the material@2

Insulation Installation: Installation of batts and blankets is rela­

tively simple, requiring only some care in shaping materials to fit

attic spaces $ Therefore~ there is a significant do-it-yourself market

for fiberglass batts@

Installation of blown-in materials requires more care in order to

achieve (1) adequate depths and fluffiness affect the R-value),

and (2) installation that does not interfere with vents or cause

of light fixtures@

A C-2 license from the Contractors State License Board is required

to ins tall insulation in California, and more than 700

contractors now hold this license ~ About 100 of these are members of

the Insulation Contractors Association (

There is no nationwide survey of the number and of estab-

lishments that install insulation~ The U@S@ Census of the Construction

lists insulation under the broader "Plastering,

2 Acoustical and Insulation Work Trade Contractors, SIC

Code 1 @if The 1972 Census indicated that there were then 13,415 estab­

lishments with in this Total of these

establishments amounted to ~2 billion from construction work@ The

limited conclusions that can be drawn from these data are that even 10

years ago, the insulation was, diverse, and typified by

moderate size firms@

Insulation The earliest national standards for insulation-------------the U@ S @ Government Services

of insulation, 5C~ In early 1977,

( , Which had pro-

with the Electric and Gas Industries

that contractors referred to customers PG&E

were

( for federal

Pacific Gas & Electric

insulation in

Association)

meet federal standards for material quality, as well as special workman­

ship standards for installing insulation in existing homes@

In March 1978 the california Public Utili ties Commission issued a

decision as part of its investigation into insulation financing~3 That

decision established, among other things, interim insulation materials

standards:

"pntil such time as insulation material standards are adopted by the

State Energy Resources Conservation and Development Commission, cellulo­

sic insulation materials must meet standards that equal or exceed the

interim insulation material standards set forth in Appendix C. u4 Appen­

dix C required compliance with the federal standard HH-I-515C, and

allowed no product to claim an R-value greater than 3@7 per inch~

These interim insulation standards were to apply until the califor-

nia Commission (CEC) could issued its own standards for insula-

tion~ [as for in the Public Resource Code Section

, which the CEC to regulate the quality of insula-

tion material sold or installed within the State of Californiae Regula-

tions were the CEC on December 6~ 1978@ However, shortly

before these were to become effective, a court order prohi-

bited their This court order was rescinded in August

1980, and amendments to the earlier Quality Stan-

dards were the of an initial environmental study issued by the

Commission on 19, 1981@

Meanwhile, federal insulation standards were also evolving@ Partly

as a result of a series of by the Denver District Attorney's

office the of cellulose insulation, Congress

the Interim Consumer Product Safety Sta.ndard Act of

1978 (Public Law The Consumer Product Safety Commission, on

6, shed standards that incorporated the flame resis-

tance and corrosiveness standards in the GSA specification HH-I-515C~ to

become effective 1, 1978@5

the two years in which the California Commission was

enjoined from implementing its insulation standards, the California

PUC's interim standards remained in These interim standards

served not'· only as criteria retrofit insulation financed under util­

ity programs but ~ in effect, as the main operative standards for all

retrofit insulation in California homes@ As la~e as December 30, 1980,

the California PUC was still to its interim standards

in order to comply with the Federal Trade Commission's Home Insulation

Rule (16 CFR 460)@7 This rule cellulosic materials to meet or

exceed federal (GSA) specifications HH-I--515C$ The California PUC's

order will in effect until such time as insulation materials stan-

dards adopted the California Commission become effective9

these federal and state standards, the ial for

or excessive claims for insulation continues to

exist @ Controversies over the and

further erode consumer c.onfidence @ Ai; an

of insulation

of this

about insulation effectiveness, a

manufacturer, a staff witness in a PUC hear-

on conservation , elicited the information that

has a to maintain its rated insulation avai-

labili much better than blown-in insulation~ which has a to

settle@8 In order for blown-in insulation to maintain an of 19

at the end of a 20 year ~ the PUC staff witness estimated that a

initial It-value, or R-25, would be

the utili's zero-

that

of

also

service

stimulated

A witness for this same

the use of cellulose

Pacific Power and

interest weatherization loan program~ created for consumers as

a result of insulation and fire It was also

that installation of materials was the source of for

a number of fires in 9

this same , reference was made to a in February

1980 the Consumer Product Safety Commission on its activities enforc-

the Interim Safety Standard for The CPSC expressed con-

cern about the "high rate with the amended standards

found to date$e@@ from these firms have

failed the radiant panel and/or: combustion tests under the

amended standard@nlO

In the first instance, concerns about cellulose insulation were

raised someone a rival ; the CPSC concerns were

voiced by a of their accuracy, both comments

illustrate the sense of uneasiness that is also by those Who have

insulated their homes, and those who do so in the future@ Miti-

any actual hazard loss in thermal is fair

to consumers who have retrofitted, and doubts about insulation

and thermal is essential to future customerS0

THE CASE OF UREA FORMALDEHYDE: A COSTLY LESSON

Urea foam insulation (UFFI) is an of too lit-

tle, too late in an effective consumer program for

an energy conservation measure@ The of UFFI, in which

and installation any detailed into its proper-

ties, the need for evaluation of the

benefits and risks of

compressor, which drives

a nozzle into

less

less than 65 cents11

UFFI ls installed in walls

resin, air, and a

the cavities to be insulated@ A

than 2,000 square feet)

per square foot) was described in 1

described as

wool, well as ] nontoxic and

the article suggested that in

~ UFFI foam of the installed

contain a fire in the house@ According

In the article ~ UFFI was

value than mineral or

fire--resistant@@\3H@ Photos

addition to its

was nonflammable and could

to the measures in installation included

the foam to determine whether met standards $

Despite controls, the author that u@@@when temperature

hit the high 80's, the odor of into the back bed-

rooms, the eyes water and the throat burn until I vented the

space under the flat toof@U

As to the of UFFI, various

cited in the CEC staff have noted of 6-10 after

installation$ Based on these factors, both the of

and the of and Urban have sug-

nominal R-value of UFFI about This

R-value would be in the same range as that of alternatives that

cost about the same~ such as loose~fill wall insulation~

The health effects of in a house in which is

released vary in , but range from eye and skin irritation

and throat vapor concentrations

of homes studied the Consumer Product Commission

from O@Ol to 31~ 7 per million (

and Health Administration ( standard for

is 2 ppm~13 A

has been recommended

to

in a

sure to

tute of and Health

effects of residential exposure are likely to be affected

by the length of exposure and the fact that formaldehyde vapor

sensitivity appears to increase, over time~ with constant exposure@ The

CEC staff report states that nonce sensitized, there is no known safe

level of exposure to formaldehyde

In 1976 the Denver District At's Office petitioned the Consu­

mer Product Safety Commission to regulate UFFI@ After years of study~

which included the findings of a Federal Panel on Formaldehyde and data

from the Chemical Institute of Toxicology, the staff of the CPSC warned

of potential hazards of formaldehyde j possible carcinogenic

risk for humans @ On January 13, 1981, the CPSC voted to propose a

nationwide ban of UFFI~14(

Several states had acted to control the hazards of UFFI@

The Wall Street that Massachusetts to have UFFI

foam removed from walls at the manufacturer's expense if it is found to

be a health hazard@28 The number of UFFI-insulated homes in Mas­

sachusetts ranges from 4,000 to 11,000) to different esti­

mates; the estimated cost of removal is $20 j QOO per house@ California,

to the above CEC staff , now has about 20,000 UFFI

installations@ The Journal 600,000 installations nationwide@

If even ten of these installations had to be removed, the cost

would $2 billion@

this~ as late as ~ 1981, the of Energy,

in amendments to its the Residential Conserva-

tion Service ( program, ha.d not decided whether to permit UFFI

installation certain control ) or to ban it

from the list of conservation measures@15 DOE proposed quality

control standards for UFFI content in resin, test-

the content of foam, Nuclear Magnetic Resonance

tea of resin, and of resins, and control

of and conditions@ In its proposed

~n1~~,,~~,n, DOE stated:

These ) which DOE believes wouldthe standards, are based on DOE's studies and recom-menda.tions made the CPSC after the close of the comment

in the last on U-F foam~ If the record sup-ports DOE's conclusions on these proposals, DOE would

them unless, on the basis of the record, DOE is convincedthat these the standards for U-F foam donot assure at least a minimum level of general and effec­tiveness$15

This brief of UFFI, the level of consumer

fears and hesita.tion, illustrates the of adequate

control and consumer before a is introduced

to the market--not

's)

to fulfill the manufacturer's (and the

to individual consumers, but also to

assure that a conservation measure will realize its full market

tial@

SOLAR ENERGY: WARRANTIES PRODUCE MORE REAT THAN LIGHT

initia-

and utili

of energybenef

of

the pace of solar utilization has never

Solar energy has been a

tives in recent years, and

lived up to the

tors0 One reason may be the cost of active solar energy systems, due to

the of copper and in the collectors as well as

the necessary controls t pumps $l and An alternative

tion, at least as V~~~~~~A~?4~, is that consumers are confused or misinfor-

mated in to choose a solar and installer, and find it dif-

ficult to assurances of workmanlike installation and

reliable

Consumer surveys bear this out@ A San Gas and Electric Com-

pany survey summarized in the CPUC's into solar

states that when with the statement, "[Solar installa-

tion is fast~n almost as many

.............._Al'O>n....... <&o) @ 16 In a California state-

wide survey of consumer toward solar energy, 25

of that solar water heaters were installed by

companies$17.

A major policy landmark for the solar 's development was the

1978 report from the Subcommittee on Oversight and Investigations of the

House Committee on Interstate and Foreign Commerce, titled "Solar Energy

6& Today's Consumer",18 which began:

A significant number of have been by severalsources in the operation of active solar systems installed inresidences@ee@ If sales of these systems are stimulated by thetax credit or other Federal loan or purchase actions, by higherenergy prices or other factors, and system purchasers continueto experience a. significant n:mnber of problems, the imp..etus forrapidly expanded [solar] energy use is likely to be blunted0

This cited in New and Florida, as the basis

for its assertion that solar

cant number of

systems have encountered a

The New with 100 solar water

in Solar £~ in March

well, and the worst 25 percent

Electric

15 of 100

systems from 1

1 19

heater

of 15 or less,

Most of the flaws in1

were due first to installation problems, second

energy

the NEES solar

and sizes, and third to the

after installation0

selection of

and

to

lack of

As a result of this , NEES

mer recommendationS0 These included:

very stringent consu-

compare systems, and

suppliers; seek an

and labor warranty~

solar system

systems

i.nstaller and a

o

o to forecast costs over 10 years0

o Contract negotiating: hold back some' of the payment for 12

months; specify design temperature and gallons per day in per­

formance requirements; get descriptions of freeze protection

and maintenance requirements, a set of drawings, and list of

all major componentse

The House Subcommittee on Oversight and Investigations sent a 77­

question survey to 781 solar homeowners in California, Michigan, and

Wisconsin and received 336 usable responses@ Although over 86 percent

of the respondents were satisfied with their solar systems, this satis­

faction was in many cases misplaced, since many of the systems were

shown to have a number of defects that seriously affected performance~

These defects included controller and pump failures, problems with loss

of collector fluid, and performance degradation@

the Subcommittee suggested that the

reason why most survey respondents were unaware of these problems is

that any deficiencies in the amount of heat supplied by the solar system

are made up, heat from the backup system, a

gas or electric water heater0 This has implications for both

the solar and for utilities, which may be calculating solar

contributions in system loads based only on the expected

number of solar installations@

The subcommittee concluded that there was a need for improved

consumer measures@ It of measures similar to

those recommended the New Electric Consumer

tion has received some energy policy, but

less than the level of subsidy of solar systems war-

rants@ The House subcommittee did note that the systems surveyed

were before the effective date of the State require-

ment that manufacturers their system~ as a condition of eligi-

for California's solar tax credit~

The California. Commission has responsibility for

solar thermal in In a February

1 ,20 the Commission identified four consumer issues:

and , remedying consumer problems,

The

adoption

information\\}

data is central to the

~ and

noted that

solar energy in

this and massive state tax

and imminent incentives to accelerate the use of solar energy,

there is little basis for if solar water hea.ters installed to

date have worked better than, worse or about as Answer-

ing this question would data from a properly

selected statistical of installed units~ Thus far, neither the

Energy Commission, nor any other in California, has under­

taken this task~

Onecan

also listed several concerns about solar

be resolved by

will meet the lifetime and

Some collectors contain materials such

in ultraviolet (p@ The same

concern about the lifetimes of pumps and valves

that

such concern was

as

also

used in solar

consu-

tax

of Con-

solar tax

for testing and

one the

ieh is

for the

overa.ll

, the TIPSE program had been

for the

The Commission has established the TIPSE

solar collectors~ However,

~V.~4~~~%~~~, has limited

State's

credit, a consumer hotline

sumer Affairs, and the lSeal program~

mers solar systems that

credit@

The lack of more detailed data on the effectiveness of solar

of innovation have

seem to govern how rapidlytha.t:

seems ~ since a number of earlier stu-

decisionmakers to focus on the role of credible data in

solar utilization® .As Alan and Ae E@ Davis

in their seminal ~ Solar in22

in actual

tiona

identified four

technical innovations are accepted:

Ie The economic advantage of the innovation over older methods@

2. The extent of the uncertainty associated with using the innova­

tion when it first appears.

3. The extent of commitment required to tryout the innovation~

4. The rate of reduction of the initial uncertainty concerning the

innovation's performance~

The staff of the California Public Utilities Commission has also

recognized the need for successful and credible consumer protection

measures in connection with the sale of solar energy systems@ In a 1977

report,23 the staff urged the adoption of "manda.tory minimum performance

standards" in addition to warranty The staff also stated

its belief that requirement of a minimum five-year warranty should

be included in the standards ~ U On the question of monitoring, the CPUC

staff stated:

, it has been that the utilities monitor samplesolar systems in their service areas to collect data on how well

work under actual conditions~ etc@ If the Stateor an independent agency undertakes standard setting ina manner, the sta.ff sees no need for the utilities tomonitor solar at (p@ 1-10).

The ultimate resolution of many consumer problems depends

on accurate feedback about At legislative hearings on the

future of solar energy in held in 1977 before the Assembly

Commi ttee OIl Resource, Land Use and Energy, 24 a number of speakers com­

mented on the need for evaluation@ Hirshberg, a con­

sultant with Booz-Allen and Hamilton of Bethesda, Maryland, made the

that with acceptance of solar energy

systems go the normal economics of the marketplaceo They have to

do with the fact that solar energy is a distributed energy source~ and

a number of individual buying decisions, in order to make

a energy contribution. This fact will delay solar energy

use unless dealt with@

Even the disincentives of initial costs for solar sys-

tems and the absence of replacement-cost pricing for energy~ Hirshberg

noted that consumers are concerned about the chance of

purchasing a solar system that isinstalled@ He added:

manufactured, designed, or

In getting back to the issue of consumer protection, althoughmany solar energy projects exist in California and in thenation, to my knowledge there has been no comprehensive evalua­tion of these projects&~@Nor has anyone looked at the potentialconsumer problems that could arise~ I would, therefore, proposethat you establish what I refer to as a solar implementationcenter 6 * @ @ These could be established not only to go out andtrac.k the solar energy industry and see what's happening outthere so the cost and performance are monitored. but also to pro­tect consumers from potential oblems $ I think the consumerprotection can be accomplished by providing to theconsumer and information to installers (52-53)@

before grow to majorhis testimonyt41

of consumer Thecontinue to be a issue~

tax credit in the state of Cal-of there (p@ 51)$

I should underscore thefor fraud is

with theifornia~ There

the issue of

incentive

, Davis

.,.,...."..,....."""'"..." ........"" s colla-

that a

in the same

Mr@ A$E~ Davis of the Jet

borato!" on the

be built into the tax credit @

stated tha.t:

$ the Commission or cri-teria for solar energy systems which the performance ofsolar energy to be estimated by the manufacturer,installer ~ and should base the cost eligible forthe credit on this estimated (p@ 65)@

Davis felt that

mance would

the amount of the credit on estimated perfor-

and would an incentive back into

the solar market for the to

seller ~ He felt tllat the

with the

of the 55 percent state

Bolar tax credit diluted this incentive for the consumer to

or her own interests0

his

Whether manufacturer estimates ) of solar-system per-

formance are preferable to state warranty standards is not clear@

Perhaps the warranty approach would be simpler, but only if the systems

that met warranty requirements also tended to supply a solar energy

fraction within a reasonable range of performance. Data now available

do not yet warrant such a conclusion@

In terms of the magnitude of expenditures faced by individu-

als, the solar system can be compared roughly to buying an automobile.

Solar water heating systems now cost in the neighborhood of $2,000 to

$4,000@ This is not much less than the base price of a compact car in

today's market, and yet the information available to the consumer is far

less for any solar than for almost any auto 0 Nor is

there for solar systems like the routine "12,000 mile

manufacturer's guarantee" for a new car, in California a war-

is for any solar to be for the state tax

credit@ Numerous have been encountered even in war-

the customer full details of the

set the

on solar

described in an arti­

1980, p@236) nproblems

ranties$ a failure to

non..-conformance with the

State~ and other means of

manufactu:,rers in California 0 These are

cle in the State Bar

with Solar Warranties@U

the with automobile ) there 1s not the

of the EPA for solar energy system

Consumers for an automobile are to compare the EPA

estimates of miles per for various models@ While the State of

California has established the framework for comparing solar collector

the TIPSE program, collectors only says lit-

tle about of , the overall system in a given household@ Stan-

dard estimates, verified a neutral , of the amount 'of energy

that be solar system are not ava11able@

, the issue of consumer for of solar

systems in California. is obscured a between the

solar and the Public Commission over the length of

warranties @ This controversy, which arose after a Commission staff

in 1977 recommended a five-year , is really a smokescreen

for more serious issues of s , and cost~ The contro-

versy is perh~ps set forth most in the staff's recommended util-

solar program for 1979,25 and in the reply to an earlier draft of

this from Yudelson, Director of the Solareal Office 6

Yudelson's letter 21, 1979) to CPUC Chairman Bryson stated:

n ~ @ @'We to the proposed. five-year warranty especially if

it is to include full labor costs ~ e @ @ A five-year warranty is not

any consumer record and would be bur-

densome to small companies

In stmlmary ~ efforts in the

solar energy

and sectors to promote

a distinct lack of awareness of the

needed to stimulate a developing technology 6

Because of the focus on solar system costs and means of

the first-cost barrier, California state has

tax credits and financial incentives~ Yet. many con-

S1Jmers still have about the and performance of

solar energy systems@ The State may be a pol-

an solar energy if its financial incentives for consumers encourage

into the market of manufacturers or

installers@ The lesson here is that incentives for

of solar must be balanced efforts to consumer confi-

dence and reliable system The absence of a well thought

out program of , contractor and

control, enforcement~ and information dissemination to

consumers remains a to the of solar energy,

both in California and elsewhere in the

This to add a neW' to the economist's view that

consumers are resistant to what appear to be rational

economic on the use energy@ This may be a reflection

of the that, those decisions are at the level of

Consumers, on the other hand, may be

based on a assessment of the of the solar

energy and the of now available on the

market @ As Mr e A@ E@ Davis commented in the Assembly hearings cited

earlier:

nIf the truth would be know, the rational consumer would prob­ably wait a few years for the cost to come down, the quality ofthe hardware to build up~ and the price of natural gas to risebefore he would install a system on an exi~ting home that nowhas a natural gas water heater@e •• "

CONCLUSION:

CONSUMER PROTECTION PLUS EVALUATION EQUALS EFFECTIVENESS

In a letter commenting on proposed regulations governing the federal

Residential Conservation Service program~26 the head of the California

Public Utilities Commission's Conservation Branch says that the

real purpose of a list of contractors who provide and

install conservation measures should be to consumers assuring

them that the listed contractors would: provide reasonable bids, use

materials, and high-quality installation and

know of @ The contractors referred PG&E to its customers generally

very well relative to our concerns for consumer

This accolade was the result of a comprehensive program of consumer

Vb~~~~~AV'U, which includes standards, criteria for contrac-

tor and ~ and a. thorough program of inspection and

to resolve consumer

All residential conservation programs must be approached with the

same for control and consumer information

and The Booz-Allen , Utility-Sponsored Home Insulation

__~ 27 identified control as the essential final phase to

such programs, and noted the comment of the Southern California Gas

~mnpaln'V~ from an evaluation of its own in$u1ation

control is critical@

~ that

conservation that to have consumers

measures with which are not familiar must be

transfer~ Just as the first

circuits had in

manufacture to com:merci..a.l so

new conservation must insure that the

ion alld insullation of conservation devices are not

a decline in to esti-

new

viewed as

turers of

the

the firms

mates or

This can be careful attention to the fac-

tors necessary for successful : an number of trained

installation technicians, use of materials in that

have been certified tea wherever ~ and

tions @ f' there must be itlstitutional mechanisms in that

assure manufacturers ~ distributors and

:tnstallers for an.y In the , we

summarize some of the means control and consumer pro-

tection can be assured for of conservation

to

is better 1nforma-

include

of cCfnserva ticl1

ID.ethods can

a,ccelerate the

'''''>'''''''''''9~_.c.".""",.tanldablJ2 staridards fOI" home iKlsulation and solar energy

on what to look for in energy-

conservation and i.,nfomation on and

which can assist consumers who may have

insulation or conservation or renewable

fA. seciCH.ld a.fmed at marlufacturers and :tnstallers rather than

the consumer~ is standards for and services0 Exam-

are the standards set the Consumer Product Commission for

insulat:ton and co:rroStion ~ as well as the of the

Federal Trade Commission on insulation advert and of thermal

1 4 22

effectiveness@

A third is the contrac. tor and

procedures, with effective performance-oriented criteria and

incentives for compliance@ These be in form of civil or crim-

inal , exclusion from some of the market (in the form of

contractor ), denial of tax credit for systems fa1-

below certain standards, and for warranties@

systems@ This is a more

term the rewards may well be worth the

effective in the area. of home

_6~j~_~~_~~U~'_' the of defective installations

to less than 5 after random

The average cost of an is about

A fourth option is

VV~~A~'~) but in the

cost@ has

In PG&E's

was reduced from about 25

were instituted@

1 per home~26

, the actual of installed energy conservation

devices and renewable resource systems, needs to be monitored@ The

results of such programs need to be disseminated to

consumers in order to consumer confidence and commitments to

and

A number of

consumer and

control measures discussed above* These include: federal agen­

cies, such as the Federal Trade Commission and Consumer

state energy such as the California Energy

Resources Conservation and Commission as well as state util-

local such as license

and (in the case of or criminal violations) the dis-

trict R S utilities (in connection with Residential Con-

serva tiol1 Service ); and itself, as for the

efforts of the Contractors Association or the CalSeal program

of the California SolsI' Industries Association@

1 4 23

A program to coordinate the actions of so many different organiza-

tions would to their overall effectiveness and keep costs

down ($ For have but may

not of consumers without the public

agencies involved in the problems contractor and

system control ~ , the program has suffered

from a lack of active enforcement$ Once a specific solar heating system

is as for the state tax credit, there is essentially

no in the form of of systems9

The Role of Research and Evaluation$ At the of this arti-

cle it was that consumer and evaluation of conser­

vation programs are interrelated ~ Utilities should not be afraid to

sort out devices and programs from poor ones, to the news

about the former and terminate the latter$ State Public com-

missions must do their self-evaluation by

utilities.~ and then reward rather than those t.hat

, and ) conservation programs that are less than

It may be well, before new or innovative programs,

to an initial demonstration in which can be

discovered and corrected to full-scale

In add! tion, because the of conserv8 tiol'! programs and

renewable energy resources are intensive, it is necessary to

validate the field effectiveness of and systems to

ensure that societal resources are allocated After all,

the economic rationale for in conservation and renewable

energy resources is the in future energy from reduced

fuel use~;. Careful of investments in

conservation and renewable resources basis for

societal investment in these and for full public

of their benefits~

furt.her and include:

o Means of reducing the costs of monitoring hardware.

o Federal funding for performance monitoring of conservation and

solar equipment.

o Study of how much post.....installation inspection is necessary to

optimize the benefits versus the cost of quality control.

o The use of multi-constituency advisory panels to help strike a

reasonable balance between quality control~ regulations and

results.

o Evaluation of different methods of enforcement: industry self­

policing ,. utili ty inspections, and greater roles for government

agencies 0

In addition, in order to evaluate the overall effectiveness of

energy conservation systems, we need research into whether the best

method is intensive of a statistical sample of i.ndividual

installations or of less detailed data,

such as bills, and characteristics, and sur-

veys of consumer behavior before and after of conservation dev-

ices$

needs $

Such efforts may well have s in terms of improved

of energy conservation devices, increased consumer confi­

of the energy efficiency improvementsdeuce, and

which this

REFERENCES

I. Public Utilities Code of the State of California, Section 2789

authorizes the PUC to utilities to undertake conservation

programs, including financial incentives on reasonable terms@

2 e "Supply Response to Residential Insulation Retrofit Demand, n reF,Inc0~ June 17, 1977, FEA Contract P-14-77-5438-Q@

3. The investigation was conducted pursuant to Public Utilities Code of

the State of California, Sections 2781-2788 __.....-...ll:._

4 @ California Public

March 7) in Case

Commission Decision No. 88551, dated

e l0032@

S@ Consumer Product Commission)

Amendment to Interim Standard and

1 Federal 39720@

, Prepared

Rule, September 6,

6 Cali.tornla Public Utilities Commission Decision No* 92554, dated

December ,1 in case No w 1

Rule; and

IS, 1980, Federal Register

7* Federal Trade Commission, Trade

of Home

October 17, 1980 9 Federal

8@ TR , PG&E

servation

No@ 59537@

and Conservation Ad

a Con-

9@ Exhibit 59, PG&E No*

o@ Staggers

the third six month Report

Standard for Cellu-

CPSC, to

, 1

of Enforcement Activities on the Interim

lose Insulation~

10. Letter of Susan B@

11~ "Foam-in-place Insulation--the Answer for Older Homes," Popular Sci­

~' September 1975, pp~ 104-105, 134@

12. California Energy Commission, Staff Report on Urea Formaldehyde Foam

Insulation, January 8, 1981@

13@ Ibid @

@ 46 Federal Register 8996@

15@ Department of Energy, Proposed alternative amendments to ReS program

to provide minimum standards for or to ban installation of U-F foam

under the ReS program, January 27, 1981, 46 Federal Register 8996@

160 Background Attitude and Awareness Study," Marketing Research

Department~ San Diego Gas and Electric Company, October 1976@

170 the Solar Transition, A Report to the California legisla-

ture in 011 No~ 42, California Public Utilities Commission, January

2, 1980, p @ 51 @

1978@

and Consumer, the Subcommi t tee on

of the Committee on Interstate and

Oommerce~ House of Congress, December

19~ Hot Water 2 the New

,u Solar

Electric System Project: A

March 1 ,pp~ 16-24@

20@ California Resource Conservation and Development Commission,

in California: Residential Thermal (draft)---~

'21@ California Resource Conservation and Development Commission,

Decade of the Sun, Staff 1980@

for California Energy Pol­

and E@S@ Davis, March 1977, CEC Contract 5040-

23 e itA of the and of Solar Energy

Application for Essential Uses in the Residential Sector in Califor-

nia, IV B'@ Barkovich and G@ , October 7, 1977 ~

24* "The Future of Solar Energy in California, tv Hearings before the

Assembly Commi ttee on Resources) Land Use ~ and Energy, Palo Al to,

California, November 29, 1977$

25@ The IS-Point Recommended Solar Program for 1979~ California

Public Commission, ties Division~ Energy Conservation

Branch, issued in draft form April 10, 1979, and in final form on

August 17, 1979@

26~ Letter of George Amarol!,

William Bethea, ReS

31, 1979@

, Energy Conservation Branch to J ~

Manager, U@ S @ of Energy)

27@ Exhibit

28@

, CPUC Case No@ 011 No@ 42

227@

and Hamilton,

29@ Wall Street November 2, 1