Electricity - Where are we Headed?

It is always fun to look at various technologies and notice where we are, understand where we have come from and grasp where we will be in the future! I was pondering this thought last week as I visited the Honeywell Windtronic plant and reviewed their new wind turbine (which we will start distributing this fall).

Electricity is strictly a price we pay for comfort and convenience. It is a “No-value” expenditure. It does not appreciate, nor depreciate. It is money lost. If you are currently spending an average of $200.00 a month on electricity and your usage remains the same over the next twenty five years (currently each household is utilizing 10% more electricity than they did 5 years ago) and the price increases at an annual rate of 5% (the cost of electricity over the last 10 years has more than doubled and is expected to more than double over the next 5 years) then you will have spent $250,000 over those 25 years.

In the United States we set the country up with a centralized approach for our energy needs. (Our alternating current power grid evolved after 1896, based in part on Nikola Tesla’s design and is 120 year old technology). This means we created power plants (coal, nuclear, hydro, etc.) and ran all of our power lines from these centralized locations. At the time, this seemed like a fairly wise decision. However, as other countries have developed and required the same energy needs we have enjoyed (such as China, India and Brazil), technology has been designed along the decentralized approach. These countries had never developed the infrastructure for telephone lines and electrical lines so they have enjoyed and taken advantage of the latest expertise. These countries skipped over the landline technology and went right to the cell phones at a substantial savings. This is occurring quite rapidly in the energy market with small decentralized electrical “plants”.

I believe we will see major changes in the United States over the next five years as we move from a centralized to more of a decentralized system. The utility companies as we have known them are operating on an old business model. In the future, they will need to switch from a provider of electricity to a distributor of electricity if they are to survive. Ten years from now most homes will have their own power source. We have watched changes in our homes before. There was a time not too long ago when a fan sufficed, however, there are very few homes built in the United States today without an air conditioning unit. This will be the same change we will experience with each homes’ power systems.

Coal plants currently generate 54% of our electricity and they happen to be the single biggest air polluter in the United States. Needless to say, we will not see any new Coal plants opening again. The last power plant to open in the United States was in 1996 in Spring City, Tennessee. It was a nuclear plant that started construction in 1973 and took almost 23 years to build and cost nearly 8 billion dollars. All of the centralized plants are very inefficient where only approximately 30% of the electricity generated actually make it to our homes.

Throughout the United States we are finalizing the “smart grid”. I will not go into depth on the definition of the smart grid but it can be researched in the United States Department of Energy’s Modern Grid Initiative Report. Most people have noticed the replacement of their electrical meter from the old magnetic one to the new digital meter. This is required for the “smart grid” system.

The way electricity is purchased and billed will change drastically over the next few years. The days of paying so much per kilowatt used is numbered. The future billing of electricity will be based on usage during various demand periods. We must set our homes up now to be prepared for the changes and save money. Simple things such as washing and drying clothes during off peak hours will save money without sacrificing too much convenience. However, electricity costs will continue to rise at a much faster pace than wages. Now is the time to invest in your own electrical power plant.

Social Responsibility is fueling the Green and Energy Efficient market

The Green and Energy Efficient market continues to grow at an extremely rapid pace. This will not slow down but will continue for the next several decades. The main reason for this growth is the social accountability our generation is accepting. We acknowledge the realization there is a finite amount of fuel available on planet earth. Where the argument now lies is in regards to the current quantity and the length of time when it might be fully depleted. Our population is currently doubling every eighty years. In America, each household is utilizing 10% more energy in their households than they were five years ago. In the BRIC nations (Brazil, Russia, India and China) the demand is increasing at a greater rate. As technology increases and expands throughout other nations we will continue to utilize more energy than in previous years without major modifications.

Electricity is a product. It is not a source and must be created. The price of electricity will skyrocket over the next decade due to the increase in demand, the increase in population, the lack of supply and the enormous cost of constructing new plants to generate electricity, whether they are nuclear, hydro or wind.

The use and development of green and energy efficient products will continue to be assisted by the mandatory regulations being created by the Federal, State and local governments. The governments and utility companies will continue to entice the utilization through incentives and tax credits.

However, it is this social responsibility to conserve energy and develop green and energy efficient technology that will allow us to continue to enjoy the lives we have become accustomed to. It is this social responsibility that will push the regulations and incentives. It is this social responsibility that will be the driving force for new product creation which will eventually allow each building to create its own energy. It is this social responsibility that is fueling the Green and Energy Efficient market.

Purchasing a Home - New or Used

For most people their home is the most expensive purchase they will make and the statistics show 85% of the time the purchase is for a used house. Which is better? To purchase a new house…..or a used house

First we need to analyze the reason someone purchases used products. In almost all cases it is price induced. A two year old car has depreciated and is less than a newer model. A 10 year old computer or cell phone is outdated and can be purchased for very little. The reason is simple. With the rapid advancements in technology and material development, the new models are more efficient than their older counterparts. This is the same in building construction.

Newer homes utilize PEX instead of copper water lines. They operate with LED and CFL lighting instead of the expensive Incandescent bulbs. The new homes have lined crawlspaces instead of ones with vents. The HVAC units have higher EER and AFUE ratings resulting in greater energy efficiency. The better homes have ICF exterior walls instead of wood framing.

So one would assume the reason so many used homes are purchased is the significant price savings. Hmmm…..did someone just state “What price savings”?

Maybe the question should be “Why are new houses priced around the same as used houses”? One would expect to realize a significant savings when purchasing used with the additional maintenance and operating expenses.

Let’s also look at the issue of equity!

When a used home is financed an appraisal is done to insure the house is worth the purchase price. This appraisal will reflect the purchase price resulting in the seller realizing all equity gains. The only equity the purchaser will have is what they have placed as their down payment.

When a new home is financed an appraisal is done based on the land, the house plans and the specific construction materials being utilized. Overwhelmingly, the majority of the time this is higher than the actual costs to the purchaser for the land and construction of their new residence. This results in the purchaser realizing the additional equity in addition to their down payment.

In conclusion I ponder would I spend the same amount of money to purchase:
- A 486 computer compared to the latest version?
- A rotary telephone or a touch tone?
- An original cell phone with a case verse the latest IPhone?
- DOS operating language or Windows or VISTA?
- A 14.4 modem or broadband?
- An older home or a new energy efficient green home?

Do termites enjoy ICF construction?

As the weather warms towards the end of spring we realize Termite’s are alive and breeding well in Tennessee. I do not know why Termite’s enjoy the taste of wood in homes. I would tend to believe there is enough wood in the ground to satisfy the hungriest of the bunch!

When building a house utilizing ICFs (Insulated Concrete Forms), one would think their home is safe from the intrusion of Termites. This is just a myth and is far from the truth. If you talk with a pest control sales rep they will concur. If you talk with an ICF sales rep they will tell you not to worry about it. Both just want the sales and do not really care to know the truth. An ICF without termite pesticide placed in the form is a condominium paradise. The constant temperature of the concrete and the fantastic tunneling ability of the polystyrene create a perfect habitat and breeding ground for Termites.

Several years ago we built ICF homes without Termite protection. We have found it did not stop the termites. We have pictures where the Polystyrene looks like the old ant farms when the Polystyrene has been peeled back. The termites set up different areas for their living quarters, cafeteria, breeding ground and even a cemetery. The more elite termites tend to tunnel to the highest level. We also have taken pictures where the termites have tunneled up through the polystyrene and started to eat the wood in the window seals.

We will only build ICFs now days with Termite protection in the polystyrene. Perform Guard is the only code-approved method for using foam plastic insulation below grade in the heavily infested areas. It is mixed in when the polystyrene is in the liquid state. It is then steamed, the polystyrene beads pop out and Perform Guard is permanently embedded in the ICF. As of this date we have never had a termite issue in any ICF we have built utilizing Perform Guard!

Green can save Green

Green seemed to be the prevalent theme in the year of 2008! Every seminar, trade show and advertisments for new and old products were claiming to be Green. In reality I am not sure the majority of Consumers care about Green except for the Green they can keep in their wallets. The good news is some Green can save lots of Green!

In one study I reviewed, 49% of the participants said "a company's environmental record impacted their purchasing desicions", however, only 21% claimed they had purchased a specific product over another because of it, and yet, more surprising, only 7% could name the specific product they purchased.

We have always been a nation listening to the WII FM station! (What's In It For Me!). We heartlessly make choices based on today and not tomorrow. This is especially true when it comes to our usage of energy. In the last five years we have increased our energy usage by 10% while silently watching the cost double during the same span. Expanding the energy problem is the world growth, which continues to double every 80 years, and other nations' subsequent desire to enjoy energy also. In 2007, the United States continued to do their part in increasing the world growth by setting a record year for births!

What does this mean and How does it Affect the Consumer?

The economic theory of supply and demand will greatly influence the energy market. There will be more demand for energy with less being available per capita and household. We will see substantial yearly increases in energy costs. Furthermore, we will see the government tapping into hidden taxes on utilites which will increase the costs. Consumers will be obligated to decrease their energy usage, if only for cost reasons.

Over the last few years we have experienced a tremendous increase in "Green" purchases that actually save "Green" when it comes to energy usage. Energy efficient commercial buildings, energy efficient residential homes and energy efficient automobiles have substantially increased. Future resale values will be directly linked to the energy efficiency of the houses, buildings and cars.

"Green" was the theme of 2008. "Energy Efficiency" will be the theme of 2009.

Builders or Homeowners - the Blame Game

As I consult with Builders, Developers and Homeowners, it amazes me how many are uninformed in regards to the latest trends and changes in Building Materials utilized in construction. Everyone seems to be more attentive to the cosmetics of a home than with the actual building structure. The glitz is a one time purchase and can be changed anytime, however, the structure creates an ongoing cost. When a person purchases a home their decision process seems to follow an order like this:

1.) I like the look of this house from the outside.
2.) I like the look and feel of this house on the inside.
3.) I think I will purchase this house.

A house is usually the highest amount a consumer will spend on a purchase, yet they don't question the after purchase costs. Even with a car they will follow a different evaluation method:

1.) I like the look of this car from the outside.
2.) I like the look and feel of this car on the inside.
3.) What is the miles per gallon?
4.) What is the warranty?
5.) What will be the resell value down the road?
6.) What will the new models look like?
7.) I think I will purchase this car.

I talked with a General Contractor this week that stated "I have been building for the last 30 years and don't see a need to change the way I build". Wait a minute....I don't think He was listening to what He said. Is He still installing rotary dial telephones in His homes? Is His computer from the 80's? Do people still enjoy avacado living room carpet? Does He still drive a Pacer or Gremlin? The world is changing extremely fast and the building technology seems to be shifting even quicker. Affordable Zero-Energy Homes are happening now and will only become more prevalent with the fast-paced rise in utility costs. Builders and Developers have an obligation to their clients to stay abreast of the changes. I believe we will be seeing a large amount of lawsuits, filed by Homeowners against their Builders, for building a custom home that is not affordable. 

If a Home is not energy efficient, then it is not affordable. If the Home is not sustainable and has high maintenance problems, then it is not affordable. If the Home creates an evironment where the family has health issues and medical bills, then it is not affordable.

Who is ultimately liable? The Builder or the Homeowner? Unfortunately, until the Homeowner becomes educated with their choices most Builder's will continue to claim ignorance!