Weatherization. Generating economies of scale within manufactured-home communities. By Richard A. Minard Jr.

Transcription

1 Weatherization Generating economies of scale within manufactured-home communities By Richard A. Minard Jr.

2 Published by the New Hampshire Community Loan Fund 7 Wall Street Concord NH (603) September 2013 Available at This report is available to the public at no cost and is simultaneously being submitted to the U.S. Department of Energy s Weatherization Innovation Pilot Program and the New Hampshire Public Utilities Commission s Sustainable Energy Division in keeping with the requirements of the grants that funded this project. Department of Energy: DE-EE

3 Weatherization: Generating Economies of Scale 2 Weatherization: Generating Economies of Scale within Manufactured-Home Communities An analysis of the New Hampshire Community Loan Fund s results with its Weatherization Innovation Pilot Program By Richard A. Minard, Jr. 1 Vice President for Policy Contents 1. Summary Replicating the assembly line... 4 Key findings... 4 Other lessons Building efficiencies into weatherization... 8 LIHEAP and eligibility...10 Energy savings and carbon reduction Estimating the savings from close-proximity production Belknap-Merrimack and Southern New Hampshire Services Efficient management of crews and equipment Auditor costs Quality assurance Conclusions and recommendations Appendix Glossary of acronyms used in this report Additional tables and graphs Acknowledgments Endnotes Table 1: Crews weatherized up to 70 percent of the homes in 38 ROCs Table 2: Demographics of households served Table 3: Auditor expenses compared Table 4: Work flow at Freedom Hill Cooperative Table 5: Quality assurance inspections also made more efficient Table 6: Income guidelines for fuel assistance and weatherization... 27

4 Weatherization: Generating Economies of Scale 3 Figure 1: Inviting participation by the co-op's mailboxes... 5 Figure 2: Carbon monoxide risk from cracked heat exchangers forced the removal of 84 furnaces...7 Figure 3: Production was subject to boom-and-bust cycles...7 Figure 4: The most important step in weatherizing a home is sealing and insulating its 'belly'... 9 Figure 5: A training session illustrates typical densities of manufactured housing communities 10 Figure 6: Beverly Glisson helped spread the word about the crew's professionalism Figure 7: Loading the trailer at the Newell and Crathern warehouse Figure 8: 29 percent of 153 homes weatherized Figure 9: The project weatherized homes in 38 cooperatives in 27 towns Figure 10: Hoses carry insulation from the blower to the underside of this home

5 Weatherization: Generating Economies of Scale 4 1. Summary At almost every step in the standard Weatherization Assistance Program process, closeproximity production of homes in manufactured housing parks reduces labor requirements and transportation costs, saving the programs money and maximizing the number of low-income households that can be well served. 2. Replicating the assembly line It s a simple goal: Make weatherization more like an assembly line and less like an artisan s workshop. Close-proximity production of weatherization in manufactured-home communities is a useful technique to achieve that goal, as demonstrated in the Weatherization Innovation Pilot Program (WIPP) project in New Hampshire. Weatherization crews, organized by the state s community action agencies, weatherized 382 homes in 38 manufactured-housing communities over the course of three building seasons. The communities ranged in size from 12 to 392, and the number of homes weatherized in those communities ranged from 1 to 61. In 12 of those communities, crews weatherized more than 20 percent of the homes. In one community in far northern New Hampshire, crews weatherized 14 of the 20 homes 70 percent providing an opportunity for significant efficiencies. The innovation tested in New Hampshire was the efficacy of weatherizing a whole community at once by engaging the leadership and residents of cooperatively owned manufactured-home communities in an effort to reach all eligible residents, and then deploying weatherization teams to work sequentially through the neighborhoods. As is typical in manufactured-home communities, the homes were densely distributed on small lots in compact areas and they were relatively uniform in size and age. Many homeowners were income-eligible for the federal Weatherization Assistance Project, and few had invested their own limited funds in energy efficiency. Some homes were in excellent condition; some in terrible repair; many needed significant health and safety repairs in conjunction with the weatherization. Key findings The relative uniformity of manufactured homes encourages weatherization crews to learn from each home and take the lessons on to the next; innovation that improves efficiency becomes part of the routine. For example, one contractor s crews learned that they could work most efficiently by deploying crews of four using two insulation blowers. Another contractor, using larger trucks with larger blowers, used two-man crews exclusively. The relative uniformity of manufactured homes means that materials needed for each home are similar and can be purchased and delivered in bulk; warehouses and supply trucks feeding the jobs can be well stocked with the materials most likely to be needed, reducing the need for runs to the warehouse or home-supply store.

6 Weatherization: Generating Economies of Scale 5 The close proximity of homes reduces down-time for work crews, minimizes transportation costs, and facilitates the efficient deployment of crews working on different parts of jobs. For example, a crew that finishes one home 90 minutes before the end of the day can move its hoses and materials a few yards down the street and get started on the next home, reducing the tendency to return to the shop early. If only two workers on a crew are needed on a home, the other two can walk down the street and start on the next rather than waiting for their partners. An auditor can jump to the next job, then double back to check on results. The structure of New Hampshire s weatherization reimbursement contracts gives subcontractors a strong incentive to maximize efficiency this way and to prefer closeproximity production. The contractors are paid by the job, not by the hour, so if they can complete the job in less time, they can make more money on each job. In a manufactured-home community, there are relatively high densities of incomequalified households. In New Hampshire and in most parts of the country, manufactured housing is one of the most affordable routes a family can take to home ownership. Manufactured-home communities are also very attractive places for seniors to age in place, including those with very limited means. In 12 of the 38 co-ops served by this project, crews weatherized more than 20 percent of the homes. Figure 1: Inviting participation by the co-op's mailboxes 2 The density of manufactured-home communities makes WAP crews highly visible and accessible to the whole community; word of mouth is an effective vehicle for sharing information (about eligibility, the type of projects that can be done, the reliability of the crews, the results of the work, and the attitudes of the workers). Where workers are competent and polite and visible word-of-mouth drives demand, reducing the challenge community action agencies expect in recruiting households and facilitating

7 Weatherization: Generating Economies of Scale 6 saturation coverage in a community. Higher rates of enrollment generate increased efficiencies in production, so there is a virtuous cycle within these communities. By design, all of the work in the New Hampshire project was completed in residentowned communities (ROCs), manufactured-home parks where the residents have purchased the land and run their park as a nonprofit cooperative. Resident ownership of a manufactured-home community eliminates the possibility that the park will be sold to a developer and all of the homes evicted or destroyed. Thus, investing public weatherization funds in ROCs is a better value proposition to taxpayers than weatherizing homes in investor-owned manufactured-home communities, where the public investment can be lost at the whim of the land owner. During the course of the WIPP project, homes in a private park in New Hampshire were being vacated, crushed, and removed in dumpsters. Their owners lost their primary asset and had to find other places to live. The Community Loan Fund undertook this WIPP challenge in part to ensure that weatherization crews across the state would be trained to work on manufactured homes. Only two of the state s five Community Action Agencies (CAAs) had regularly worked on manufactured homes; the others found them unpleasant to work on or found other reasons to avoid them. Through the WIPP project, each CAA got the desired experience and several contractors came to prefer to work on manufactured homes, largely because of the efficiencies described above. At least one crew continued to replicate the approach used in this WIPP project even after WIPP funds were gone and their assignment was simply to weatherize homes through a different program. Other lessons 84 of the 382 homes weatherized through the project required new furnaces because their old furnaces were hazards to the health and safety of the 177 people who live in those homes. WAP constraints on spending and tasks are too tight for effective work on many manufactured homes. Twenty-two (22) percent of the homes audited and served through the WIPP project needed new furnaces to eliminate health and safety hazards from carbon monoxide and fire posed by old furnaces with cracked heat exchangers. Many needed significant roof repairs or even roof replacements in order to protect the weatherization measures installed in the home; some required additional repair work not normally covered in WAP but which was key to maintaining structural integrity and personal safety in an air-sealed home. The non-federal funds leveraged in the WIPP project made these types of repairs and improvements possible. Without the state funds available for the project, many of these homes would either have been walk-aways and received no weatherization, or would have become even more hazardous to live in because of unaddressed carbon monoxide threats in a sealed home.

8 Weatherization: Generating Economies of Scale 7 Figure 2: Carbon monoxide risk from cracked heat exchangers forced the removal of 84 furnaces Leveraging WAP funds with other money (in our case, a targeted grant from the New Hampshire Greenhouse Gas Emissions Reduction Fund (GHGERF), and more generic funds generated by the state s systems benefit charge for low-income efficiency projects) creates problems when each funding source has its own rules, its own reporting requirements, and its own deadlines for deployment. The complexities here led to long delays in reimbursements, creating cash-flow problems for several Community Action Agencies and their contractors. Ultimately, these cycles generated months with no production at all, as illustrated in Figure 3. Figure 3: Production was subject to boom-and-bust cycles Number of homes weatherized each month APR '11 JUL '11 OCT '11 JAN '12 APR '12 JUL '12 OCT '12 JAN '13 APR '13 JUL '13

9 Weatherization: Generating Economies of Scale 8 The intensifying distrust of the public sector and the resulting demand for greater transparency and accountability is driving up the transaction costs of this type of work. The reimbursement delays referenced above delayed production and reduced the total number of homes that could be weatherized within the grant period. The boom and bust cycles of funding for weatherization reduce the ability of crews to work at the scale and pace that would maximize efficiency. The teams involved here were occasionally diverted to other jobs so they could use targeted funds (including ARRA funds) while they were still available or because the WIPP funds had been constrained for reimbursement delays. The visibility and success of free weatherization in manufactured-home communities increases interest in efficiency among those who are not income-eligible for WAP but who have difficulty paying for or financing work. There is a gap in services for these households, which if met, would be good for them and enable even broader communitylevel approaches to weatherization. 3. Building efficiencies into weatherization New Hampshire s Weatherization Innovation Pilot Program had many moving pieces and might look complicated from the outside, but it was all tied to two simple principles: 1. Low-income households, including those living in manufactured homes, should be part of the solution to climate change, not its victims. 2. Communities of manufactured homes particularly resident-owned communities are a natural place for weatherization programs to achieve economies of scale because of the communities density, demographics, and relatively uniform housing stock. Federal guidelines, as interpreted by New Hampshire s weatherization program, had prevented New Hampshire s weatherization programs from exploiting these opportunities in the past. The program adhered to the federal priority-setting criteria that assigns points to each qualified home based on the age of the residents, their energy usage, and other characteristics. Agencies then tried to work their way down the list starting with the highest-scoring home in their region. This precluded the whole-community approach that put all qualifying homes within a community on the same priority level. Another barrier to the approach is more elusive but worth noting. Across the agencies working on weatherization, some had less experience with manufactured housing and perhaps less interest in working them. Clearly, working on a manufactured home could be physically demanding and less pleasant than working on a stick-built house, because it often meant working under the home on one s back. One contractor explained that manufactured homes

10 Weatherization: Generating Economies of Scale 9 were what you assigned the rookies to. Today, this attitude is gone and our colleagues in the weatherization field deny that it was ever a barrier. The Community Loan Fund framed its WIPP project to fix these problems. We applied to the U.S. Department of Energy for a Weatherization Innovation Pilot Program grant and simultaneously to the New Hampshire Public Utilities Commission for a grant from the Regional Greenhouse Emissions Reduction Fund which had been capitalized by the sale of carbon allowances through the Northeast s Regional Greenhouse Gas Initiative (RGGI). The Community Loan Fund and its partners, the state s community action agencies, were awarded $600,000 from the Department of Energy and $2 million from the Public Utilities Commission. The Community Action Agencies were able to add to this sum approximately $500,000 in weatherization funds generated through the state s System Benefits Charge and awarded by the PUC for low-income energy efficiency work. Figure 4: The most important step in weatherizing a home is sealing and insulating its belly We started in 2011 with training session for weatherization crews from every CAA to ensure that the crews would deliver consistent results and to break down any resistance to working on manufactured homes. It is impossible to know if the training changed the crews approaches to weatherization. Our independent Quality Assurance audits showed that work around the state was at a consistently high quality. Based on our conversations with CAA weatherization professionals, we had assumed that homeowners in ROCs, like income-eligible homeowners across New Hampshire, would need considerable coaxing to sign up for weatherization. To aid in recruiting, we built into our project design a process to hire energy advocates from within each community. The advocates would be a trusted local source of information about the project and would help recruit homeowners to sign up. We did hire and train a few advocates at the very beginning of the project but quickly discovered that they were not necessary.

11 Weatherization: Generating Economies of Scale 10 Figure 5: A training session illustrates typical densities of manufactured-home communities 3 The weatherization crews were highly visible in the dense communities and reports of the quality of their work quickly spread throughout the neighborhood, encouraging qualified residents to apply. Curious residents often approached the weatherization crews while they were working, inspected their work, asked questions, and determined if the project could help them, too. Robert Bowers, the director of Housing Rehabilitation and Energy Conservation at Community Action Program of Belknap-Merrimack Counties, concluded that one of the key elements to the success of the ROC weatherization work was the result of this visibility and the resulting ease of recruiting eligible households for service. The Community Action teams and their contractors typically made a point of informing each coop s board of directors when they would be working in the community. That notice created a positive environment and helped the crews get permission to put up signage at key locations in the parks advertizing the opportunity. LIHEAP and eligibility The federal Low-Income Home Energy Assistance Program, or LIHEAP, has for years been an essential financial support for many New Hampshire residents. Households sign up for LIHEAP with their region s Community Action Agency and then demonstrate their eligibility. Anyone already receiving LIHEAP support is automatically eligible for weatherization, unless their home has already been weatherized. There are currently 36,605 households in New Hampshire receiving fuel assistance, approximately 5,000 of which have also received weatherization services. Before this project, the Community Action Agencies weatherized manufactured homes as they came up in their priority lists. Some were in manufactured-home communities, some on their

12 Weatherization: Generating Economies of Scale 11 own land. The agencies had never had the chance to try a coordinated community-wide strategy. The agencies had good databases of eligible households, but the homes were identified by street address, not by whether they were in a park or a resident-owned community. The Community Loan Fund helped the CAAs prioritize ROCs for action and then showed which homes were within each ROC. Table 1 lists the communities that received service and the number of homes within each community that received attention. The table also shows the funding source for the work in each community and the average amount spent on weatherizing each community s homes. Table 1: Crews weatherized up to 70 percent of the homes in 38 ROCs Resident-Owned Community Town Number of homes completed Cost Average cost Number of homes in community Percentage of homes weatherized Brookview Northumberland 14 $ 113,379 $ 8, % North Woods Berlin 17 $ 134,477 $ 7, % Old Lake Shore Gilford 17 $ 117,439 $ 6, % Catamount Hills Allenstown 44 $ 346,448 $ 7, % Dean Brook Northumberland 11 $ 96,187 $ 8, % Fisherville 82 Concord 6 $ 60,678 $ 10, % Family Estates Epsom 4 $ 39,728 $ 9, % Lakes Region Belmont 28 $ 212,968 $ 7, % Fisherville 107 Concord 14 $ 109,308 $ 7, % Gaslight Tilton 7 $ 26,142 $ 3, % Cardinal Haven Charlestown 11 $ 93,259 $ 8, % Whip-O-Will Plymouth 14 $ 66,571 $ 4, % Huse Road Manchester 7 $ 50,720 $ 7, % Windy Hill Tilton 9 $ 55,795 $ 6, % Ossipee Mountains Estates Ossipee 20 $ 184,620 $ 9, % Oak Hill Hinsdale 11 $ 98,526 $ 8, % Mt. View Gilford 10 $ 88,098 $ 8, % Ashley Park Pembroke 2 $ 7,714 $ 3, % Exeter River Exeter 61 $ 471,111 $ 7, % Bristol Mobile Home Park Bristol 3 $ 21,666 $ 7, % Barrington Oaks Barrington 6 $ 35,718 $ 5, % Olde Town Allenstown 10 $ 76,901 $ 7, % Friendship Drive Salem 4 $ 21,214 $ 5, % Soughegean Valley Milford 5 $ 49,539 $ 9, % South Parrish Winchester 5 $ 48,297 $ 9, % Freedom Hill Loudon 12 $ 118,000 $ 9, % LRMHV Gilford 7 $ 71,105 $ 10, % White Rock Tilton 2 $ 18,172 $ 9, % Icy Hill Exeter 1 $ 5,009 $ 5, % South Weare Mobile Home Weare 2 $ 16,135 $ 8, % Silver Fox Pembroke 1 $ 14,108 $ 14, % Fieldstone Village Rochester 4 $ 19,629 $ 4, % Frost Residents Derry 1 $ 6,325 $ 6, % Hideway Village Rochester 2 $ 15,320 $ 7, % Windswept Acres Rochester 4 $ 12,553 $ 3, % Pine Grove Swanzey 2 $ 19,170 $ 9, % Medvil Goffstown 3 $ 20,882 $ 6, % Pleasant Valley Claremont 1 $ 2,145 $ 2, % TOTALS: 38 cooperatives 27 towns 382 $ 2,965,056 $ 7, %

13 Weatherization: Generating Economies of Scale 12 We do not have actual counts of the number of households that signed up for LIHEAP or weatherization because they saw the work happening in their communities, but auditors reported the numbers were substantial. The program had received enough local press as well that people were ready for it. Beverly Glisson in Loudon told us that as soon as she saw the CAA s co-op weatherization program sign go up by the Freedom Hill cooperative s mailboxes, she was ready with an application for weatherization (Figure 1.) The CAA auditors reported that the whole-community approach significantly increased the percentage of LIHEAP recipients who returned calls from the CAA regarding weatherization. In the process of qualifying applicants for LIHEAP or weatherization, the Community Action Agencies gather information about each household s income and family characteristics. The federal weatherization program requires the CAAs to use a process that gives priorities to the groups shown in Table 2 below, which also characterizes the 382 households served by the WIPP project. (Table 6 in the Appendix translates the poverty groupings into income levels for households of various sizes.) Table 2: Demographics of households served Number of households % of households Number of people served % of people served Household income (as a percent of federal poverty guidelines) Number of households % of households Elderly % % 75% of poverty 50 13% Disabled % % 100% of poverty 65 17% Native American 0 0% 0 0% 125% of pverty 80 21% Children under % 83 10% 150% of poverty 73 19% Total % % 185% of poverty 80 21% 200% of poverty 39 10% Energy savings and carbon reduction The average home weatherized through this program should reduce its annual energy bills by $891, or somewhere between 25 and 50 percent, a sum of great significance to a household at or near the poverty level. Projected savings vary greatly, however. Among the homes weatherized in the last month of the program, estimated savings ranged from $223 to $2,525. These figures are generated for each home from the computer models that the Department of Energy uses to convert specific weatherization steps (e.g., air sealing, adding insulation, replacing appliances) into projected energy savings. Energy prices in this estimate are those posted by the NH Office of Energy and Planning on Sept 3, The estimated savings across the 382 weatherized homes is $340,528 for the coming year, assuming no change in fuel prices. (This figure significantly exceeds the savings we had projected when we designed this project 2010: $287,000.) 5 The same computer models estimate that the efficiency gains will translate into carbon emissions reductions of about 1,000 tons per year.

14 Weatherization: Generating Economies of Scale 13 The Department of Energy is conducting surveys of weatherized homes fuel bills to determine the actual savings, but those results are not yet available. LIHEAP is both an essential part of the social safety net and something of a confounding factor in this analysis. Qualifying households receive a fixed payment depending on their income and the funds available, and the CAAs use that sum to pay the households energy suppliers. The households don t see the payment or their energy bills until the LIHEAP allowance is exhausted. In most cases, the LIHEAP payment doesn t come close to covering a full year s energy expense, so the balance due to the energy suppliers comes out of the households pocket books. Thus it is difficult to estimate, home by home, how much of the savings from the weatherization work will accrue to the homeowner and how much to the LIHEAP program. Figure 6: Beverly Glisson helped spread the word about the crew's professionalism As a result of this reimbursement structure, the beneficiaries of the weatherization program did not have a clear sense of how much energy they were using either before or after the weatherization. They often found themselves paying out less for energy after the work because their LIHEAP allowance covered a much larger percentage of their bill. For many households, this meant that they could afford to fill their fuel tanks before the heating season begins and thus start the winter with greater peace of mind and financial security. The most profound impact of the work on most of the residents was a dramatic improvement in comfort. Their weatherized homes were more evenly warm in winter and free from chilling drafts that might make much of the home unusable.

15 Weatherization: Generating Economies of Scale Estimating the savings from close-proximity production Our efforts to quantify the efficiency gains achieved through close-proximity production have produced solid evidence of success. The dynamism of the process over time and geography, however, has precluded us from generating crisp results across the range of projects completed across New Hampshire. The project set out to engage all five of the state s community action agencies, and we achieved that goal. As a result we had five different approaches to contracting and managing weatherization teams. Most of the CAAs hired private contractors to weatherize the homes, but some used their own employees and equipment. Each team used different combinations of trucks, trailers, and personnel to get the job done. Some teams did so many jobs that they evolved their processes during the project to improve their efficiency and make more money per job. During the course of the project, the CAAs had to manage through fluctuating funding for weatherization work, so their own staffing and approaches to hiring and managing work crews changed. Belknap-Merrimack and Southern New Hampshire Services Given the variations across the breadth of the project, we decided that the analysis would be most instructive if it focused on lessons generated by the teams that completed the largest number of jobs over the longest period of time: Belknap-Merrimack County Community Action (BM-CAA), under the management of Dana Nute and subsequently Robert Bowers; and Southern New Hampshire Services (SNHS), under the direction of Ryan Clouthier. The former completed 173 homes in ROCs, 45 percent of the total; the latter completed 85 homes in ROCs, or 22 percent of the total. These two operations also worked in the communities with the largest numbers of weatherization homes, and hence most fully encountered the opportunities available from closeproximity production. Sixty-one of SNHS s homes were in a single cooperative, Exeter River. One-hundred-fifty-four of BM-CAA s homes were clustered in 10 cooperatives in just five towns. Efficient management of crews and equipment Bowers and Clouthier relied on experienced auditors to drive their production: Chuck Prausa and Ken Cantara, respectively. Bowers hired a local firm, Newell and Crathern Builders, LLC, of Loudon, NH, to weatherize the homes. Bill Newell was deeply involved in the project. Clouthier hired Quality Insulation of Nashua, a MASCO company and part of a very large group of home retrofit companies. Joe Ricard managed the weatherization work for Quality Insulation. The two contracting firms took very different approaches to deploying personnel and equipment, but both found efficiencies in working at the scale of a whole community. Newell and Crathern Builders is a small home-building and retrofit firm with an office and small warehouse in Loudon, NH. The business weatherized most of the 173 homes completed under the direction of the Community Action Agency of Belknap-Merrimack Counties. The firm finetuned its approach to working in manufactured-home communities as it experimented and learned how to make the process more efficient.

16 Weatherization: Generating Economies of Scale 15 Newell s crews provided work flow data to the Community Loan Fund from its last big job, weatherizing a dozen homes in the Freedom Hill Cooperative in Loudon. Although minor gaps in the reporting negated the statistical value of these reports, they support the narrative account of Newell and Bowers and our own direct observations of the crews at work. (A summary of the reports is included in the Appendix as Table 4.) Newell used teams of three or four men who would work out of a trailer that could be towed to the site by a pickup truck. Each trailer was equipped with a fiber-insulation blower, tools, and all of the materials the team would need for its work. Typically, the crew would load the trailer with a day s worth of supplies from the company warehouse at 6 a.m. and leave for the site by 6:45. A key innovation adopted in 2012 was the addition of a second blower to one of the trailers. A crew member could feed two blowers just as efficiently as one, and with two men under a home directing the flow of insulation, the job could be done in half the time. Figure 7: Loading the trailer at the Newell and Crathern warehouse 6 In many communities, Newell deployed two teams and two trailers simultaneously. Ted Dickinson was a crew leader and, when two crews were working side-by-side, he would manage both crews, making it possible to have two three-man crews working on homes while he supervised. Because the next job would always be just down the street or around the corner, Ted could also work ahead of the crews, preparing the next home s owner for the project and determining what materials would be needed. Newell said that Ted could spec as many as six homes in three hours while also supervising the weatherization work of two crews. Chuck Prausa, the CAA s auditor, was on site throughout the process and able to expedite inspections and consultations with the insulation crews. When his close-out inspections noted a problem that needed to be addressed, Newell s crews could take care of the problem almost immediately. In this way, the company was able to weatherize 12 double-wide homes in the Freedom Hill Cooperative in just 21 days.

17 Weatherization: Generating Economies of Scale 16 Bowers praised the efficiencies Newell s crews adopted, noting that as they got the feel of the process they were able to complete a double-wide home in the time it had originally taken to weatherize a single-wide. Newell said that additional savings were generated by the predictability of the work on manufactured homes. Their trailers were usually stocked with everything the crew would need in a day; they rarely had to make a trip to a home-supply store for materials. In more traditional weatherization of site-built homes, these trips are a regular occurrence and a major drain on efficiency. Early in the process, crews had thought that it might be possible to deliver large shipments of insulation and other supplies directly to the community and have them available there for crews to pick up as needed. Lack of secure, dry storage space in the communities made this a nonstarter, particularly since Newell s own warehouse of supplies was centrally located in the area where his teams did the most work. Newell and Dickinson reported that they found the whole-community approach good for business as well as personally rewarding. The efficiencies improved the firm s bottom line and the crew enjoyed the rapport they could establish with the community residents. A significant indicator of the success of the approach is that when Bowers, Prausa, and Newell were working with weatherization funds not related to the Community Loan Fund s project, they continued to deploy the same techniques in other manufactured-home communities. Using very different equipment and work crews, the contractor responsible for most of the weatherization work in the southern tier of New Hampshire found very similar benefits from close-proximity production. Joe Ricard explained that Quality Insulation deploys large box-trucks with two-person crews and high-capacity fiber-insulation blowers. The company has dozens of these $100,000 trucks in the region of southern New Hampshire and Northern Massachusetts, and had as many as 10 trucks working simultaneously on weatherization projects for Southern New Hampshire Services, though not all were in the Exeter River Cooperative. The crews coordinated smoothly with Cantara, the SNHS auditor, who was almost always in the community. With lots of large, high-cost trucks, Ricard said, it s not efficient to bounce around. The company s financial goal is to keep the trucks and crews on-site and generating revenue, not wasting time driving from location to location. The company liked the close-proximity work in ROCs in Exeter and straight across the southern tier of New Hampshire. That trailer park was the key thing that everybody loved. Those people had the need just so much need. You got an auditor inside there and two, three, four trucks, and your auditor is out there every day and it keeps a good work flow. The value of close-proximity production should be of particular interest in any state that manages its federal weatherization program, as New Hampshire does. The State of New Hampshire has contracted with the community action agencies for many years to deliver the weatherization program. The agencies negotiate a reimbursement schedule with the state that

18 Weatherization: Generating Economies of Scale 17 sets prices for specific weatherization tasks, such as insulating the belly of a manufactured home. The state pays the same price for the task wherever it is in New Hampshire regardless of how long it actually takes the agency or its contractors to complete the task. Thus, agencies and contractors have incentives to build efficiencies into their operation, and to avoid jobs that require lots of travel. The contractor has to pay the crew for its time on the road, but only gets paid for their work on the home. Close proximity-production in manufactured-home communities reduces some of those travel costs, as Ricard attested, and keeps both equipment and personnel as productive as possible. The productivity gains may accrue to the contractor rather than the taxpayer but that should help achieve overall program efficiency over time as negotiators build the lower costs into their prices. Ricard said the operation in Exeter River Cooperative approached the ideals of just-in-time production as crews and auditors moved through the community. Two problems reduced the overall efficiency, however. So many homes in Exeter River needed new heating systems 25 percent that the contractor responsible for replacing furnaces got overwhelmed and slowed down the process. And it was awful when the organizations involved in the project had to go several months between reimbursements for services already rendered. The chronic cash-flow problems prevented the company from achieving maximum efficiency in the community, Ricard said, and took its toll on the trained weatherization crews: You got to keep them going. If you don t, you lose them. You lose the guys. Ricard s chief concern was the efficient deployment of his firms trucks and employees, yet he acknowledged the critical advantages that flowed from having nearly constant access to the Community Action Agency s auditor. Ryan Clouthier, the SNHS weatherization director, acknowledged the advantages and attempted to quantify the efficiencies that he gained by weatherizing a much of a neighborhood in one coordinated sweep. Auditor costs SNHS s auditors typically visit each home they weatherize four times: for the initial visit with the home owner, the audit itself, a visit that coincides with the weatherization work, and the postweatherization inspection. With so many visits, any strategy that could reduce travel time for each visit would have the potential to deliver significant savings. The average salary and fringe for the SNHS auditors totaled $26.71 per hour. On average, each auditor spent two hours on each home visit, exclusive of transportation time, Clouthier said. Assuming that each auditor would work no more than eight hours per day, the value of closeproximity production becomes obvious: in a ROC, the auditors could complete three or perhaps four home visits in a day; under most traditional scenarios in the SNHS region, however, they could complete only two, because so much more of their day would be spent driving between homes. Table 3 captures the simple benefits of close-proximity production. Without even considering the savings in reduced mileage and fuel consumption, simply by increasing the number of homes an auditor can inspect in a day, the project saves money and reduces the time

19 Weatherization: Generating Economies of Scale 18 homeowners have to wait to be served. At Exeter River Cooperative, there were 61 homes to weatherize, which would have taken a single auditor as much as 122 days to work through if they had been scattered across the SNHS region. By eliminating most of the travel time, the work within the coop could be completed in 81 or possibly 61 days, saving 33 to 50 percent of the labor cost. Adding a second auditor to the co-op would, of course, permit the homes to be completed in half as many days, though with no additional savings in labor. Table 3: Auditor expenses compared Hourly rate Daily rate Homes to complete Visits per home Total visits Days to complete Cost Savings % Saved Home visits per day $ $ $ 26, $ 17,379 $ 8,690 33% 4 61 $ 13,034 $ 13,034 50% Quality assurance The Community Loan Fund hired its own auditor to provide Quality Assurance inspections on the work being done by the Community Action Agencies and their contractors. We used the opportunity to test whether we, too, could achieve savings through close-proximity production. Our analysis shows a savings of 33 percent on the first 23 homes inspected. The Community Loan Fund s contract with the U.S. Department of Energy requires us to conduct quality-assurance audits on 10 percent of the homes we weatherized with DOE funds. We extended that practice to include 10 percent of all of the homes we weatherized through the project, even when DOE funds weren t involved. We hired Horizon Residential Energy Services NH to perform the audits. It is the same firm used by the NH Office of Energy and Planning to audit the Community Action Agencies traditional WAP work. Our contract with Horizon included an unusual clause: The overall objective of this Weatherization Innovation Pilot Program is to demonstrate that weatherizing homes in a resident-owned manufactured housing community can achieve greater cost-effectiveness by working on numerous houses in close proximity simultaneously or in sequence. The Contractor will be expected to adopt the same strategy: inspecting all the selected homes in a community in a single trip, for example, and timing that trip to coincide with the CAP agency s last day or days on the site. Minimizing inspection costs, particularly time and mileage charges for driving to and from the sites, is one of the measures we will report to the DOE and one which the Contractor must explicitly support and help document. From April 13, 2012 through May 15, 2013, Horizon inspected 23 homes at a total cost of $5,689. In compliance with the contract, Horizon s inspector, Kevin Hanlon, made every effort to maximize the gains that could be achieved through close proximity inspection. Where the

20 Weatherization: Generating Economies of Scale 19 CAPs had weatherized many homes in a single park or in adjacent parks, he inspected two or three homes there in a single day. The reduced mileage costs were significant, but the biggest savings came from reduced time in transit. Our contract paid Horizon $77 per hour for its services whether on the job, preparing for the job, or driving to the job or home. The broad geographic area covered by the project meant that there were several inspection jobs more than 100 miles from Hanlon s base. Combining three of these long trips into one trip yielded substantial financial savings. For example, TriCounty Community Action weatherized 25 homes in the Dean Brook and Brook View Co-ops in Northumberland, N.H. These are 112 miles from Horizon s office in Bow, and take 2.25 hours to reach. Each roundtrip costs $ for time and mileage. Hanlon inspected three homes in the co-ops on a single day, and then drove to a different job (not billed to the WIPP project). So instead of paying for three round trips, we paid for one one-way trip, a savings of $1,175. The Northumberland savings were the most dramatic, but even when the job sites are closer to home, the savings in time and mileage are significant. Our analysis of Hanlon s invoices show that his focus on meeting our contract requirements and the CAA s focused work within individual ROCs allowed him to eliminate 18 trip segments, saving 26.9 hours of driving and 1,258 miles, for a total savings of $2,761 for these 23 inspections, or 33 percent of what would have been a bill of $8,450 had he inspected these homes in an uncoordinated fashion. A closer look at the Horizon bill shows that additional savings could have been possible. A trip to Allenstown might have been grouped with other trips there; two trips to Exeter could have been one; trips to Hinsdale and Winchester could have been combined. These changes would have reduced the bill by another $372, taking the total savings to about 37 percent of the bill. The records of these trips are summarized in Table 5 in the appendix. Hanlon reported that the most-significant savings occurred when he was on site while the weatherization crews were still working in the ROC. He could inspect a home while they were working nearby, and call in crews on the spot if he had questions or saw problems that needed to be fixed. The crews could make the adjustments quickly without making a separate trip to the site. The fast response was great for the clients, of course, but it also saved money that does not even show up in this analysis of Hanlon s travel. The conditions necessary for these savings having the CAA auditor, the QA auditor, and the weatherization crews in the same neighborhood at the same time are extremely unlikely in a traditional scattered approach to weatherization. By working at the community level, however, there were enough jobs in one area to keep all three teams busy and in a position to interact. Hanlon noted, however, that despite this ongoing effort to connect on-site, there were many missed opportunities because of conflicting schedules and the difficulty of coordinating so many teams. 5. Conclusions and recommendations Close proximity production proved to be a valuable innovation in the delivery of weatherization services in New Hampshire. Community Action Agencies were able to

21 Weatherization: Generating Economies of Scale 20 achieve greater efficiencies in the use of their own staff and hired contractors by deploying them to manufactured-home communities and trying to weatherize all eligible households in one continuous campaign. By exploiting their own visibility in these dense neighborhoods and the power of word-of-mouth communication, weatherization teams found it simpler and more efficient to recruit and schedule homes for weatherization. By virtually eliminating travel time between jobs, weatherization crews finished more homes in less time. The nature of the communities in which this pilot program operated added to its success. Resident-owned manufactured-home communities are cooperatives where residents have a shared interest in the community and a habit of working together. This neighborliness seems to have helped in the recruitment process. The similarities in housing types throughout the cooperatives made it easier for crews to purchase weatherization materials and to keep a ready supply of materials and tools on hand. Perhaps most importantly, resident ownership of these communities ensures that the public investment in the housing stock will have lasting value. Unlike investor-owned communities, these are not subject to sale and change of use that could lead to the rapid destruction of the homes on the site. The largest impediment to the success of this innovation proved to be the challenge of managing and harmonizing three related but distinct public programs: the federal weatherization program (reporting to the U.S. Department of Energy and the NH Office of Energy and Planning), New Hampshire s Regional Greenhouse Gas Initiative (reporting to the NH Public Utilities Commission), and New Hampshire s CORE energy efficiency program (reporting to the NH Public Utilities Commission and the state s utilities). Each program had its own set of permissible expenses and reporting and reimbursement requirements. These differences resulted in several delays in reimbursements for work completed, slowing further production. These drawbacks aside, the project worked, and in many ways worked better than its proponents had expected. The project uncovered the systemic safety threat posed by cracked heat exchangers throughout these homes. And because state funds were available to fix these problems, 84 households are now far safer than they were before they were weatherized. Nearly 400 homes in New Hampshire will be far more energy-efficient and their low-income owners will see some direct financial benefits from lower energy bills. We will not have direct measurements of the energy efficiency gains created by the project until the Department of Energy s contractor finishes its nationwide analysis. We anticipate that on the measure of dollars-per-kilowatt-hour saved, the results from the ROCs will look weak. Because the project was able to invest in safety measures like heating systems and in 29 roof replacements where it was necessary to seal the home, the costs per home ran higher than most basic weatherization jobs. By fixing homes that DOE funding alone would have rendered walk-aways, the WIPP project helps reframe the policy choices that govern any weatherization program.

22 Weatherization: Generating Economies of Scale 21 The Community Loan Fund and others used the results of the WIPP project to persuade the New Hampshire Legislature to pass a bill, HB 630, which sets aside at least 15 percent of ongoing RGGI auction receipts for low-income energy-efficiency programs. Governor Maggie Hassan signed that bill into law in The modest funding stream that will result will help the community action agencies maintain their weatherization programs and, if the Public Utilities Commission continues to permit, allow them to address the kind of healthand-safety concerns that New Hampshire s homes present. The Community Loan Fund and the lead weatherization coordinator for the state s weatherization programs recommends that agencies throughout the nation use their contracting and priority-setting mechanisms to replicate close-proximity production wherever possible. Long after all of the grant funds associated with this project were gone and the Community Action Agencies were back to business as usual, one of the weatherization coordinators ed the Community Loan Fund: I think I heard that you guys are working on a 200-unit park in my county. I desperately need a big park up there so we can make our year-end goals. Can you tell me the name or address of the park? The weatherization business as usual has changed in New Hampshire. Our pilot innovations are now understood as a smart, efficient way to get the job done.

23 Weatherization: Generating Economies of Scale Appendix Glossary of acronyms used in this report BMCAP Belknap-Merrimack County Community Action Program CAA CORE DOE LIHEAP NH OEP NH PUC RGGI GHGERF ROC SNHS WAP WIPP Community Action Agency A fund generated by a systems benefit charge levied on electricity users, which is managed by the NH Public Utilities Commission to finance energy efficiency projects. U.S. Department of Energy Low-Income Home Energy Assistance Program NH Office of Energy and Planning NH Public Utilities Commission Regional Greenhouse Gas Initiative Greenhouse Gas Emissions Reduction Fund Resident-owned community (a manufactured-housing community owned by its residents, the owners of the manufactured homes that comprise the cooperative) Southern New Hampshire Services Weatherization Assistance Program Weatherization Innovation Pilot Program

24 Weatherization: Generating Economies of Scale 23 Additional tables and graphs Table 4: Work flow at Freedom Hill Cooperative Work Days Home and Address 25-Jun Tuesday Home 1 Pine Ridge 26-Jun Wednesday Home 1 Pine Ridge 27-Jun Thursday Home 1 Pine Ridge 28-Jun Friday Home 1 Pine Ridge 1-Jul Monday Home 2 Pine Ridge 2-Jul Tuesday Home 2 Pine Ridge 3-Jul Wednesday Home 2 Pine Ridge 3-Jul Wednesday Home 3 Redwood 5-Jul Friday Home 3 Redwood 8-Jul Monday Home 3 Redwood 8-Jul Monday Home 4 Pine Ridge 8-Jul Monday Home 5 Redwood 9-Jul Tuesday Home 4 Pine Ridge 9-Jul Tuesday Home 5 Redwood 10-Jul Wednesday Home 5 Redwood 11-Jul Thursday Home 6 Redwood 12-Jul Friday Home 7 Redwood 15-Jul Monday Home 8 Willow 15-Jul Monday Home 9 Pine Ridge 16-Jul Tuesday Home 8 Willow 16-Jul Tuesday Home 10 Chestnut 17-Jul Wednesday Home 9 Pine Ridge 17-Jul Wednesday Home 10 Chestnut 18-Jul Thursday Home 10 Chestnut 19-Jul Friday Home 11 Redwood 23-Jul Tuesday Home 11 Redwood 24-Jul Wednesday Home 12 Redwood 25-Jul Thursday Home 12 Redwood 25-Jul Thursday Home 12 Redwood

25 Weatherization: Generating Economies of Scale 24 Table 5: Quality assurance inspections also made more efficient Horizon/Hanlon Billing Data for QA Inspections Travel time, miles, costs Specified route Avoided travel, time, miles, costs Date ROC town time miles cost mileage cost trips time miles time $ miles $ Total $ 4/13/2012 Catamount Hills Allenstown 1 $34.00 $ Bow 51 Monroe 0 Catamount Hills Allenstown 0 3 Reagan Bow $ 77 $ 19 $ 96 8/20/2012 Exeter River Exeter Bow 9 Alder Bow $ - $ - $ - 6-Nov Oak Ridge Hinsdale Bow 7 Park Weare (?) $ - $ - $ - 7-Nov Old Lake Shore Gilford Bow Gilford Bow $ - $ - $ - 8-Nov Ossippee Mtn. Estates Ossipee Bow Ossipee Woodstock (not WIPP) Ossippee Mtn. Estates Ossipee Ossippee Mtn. Estates Ossipee $ 578 $ 183 $ Dec Belmont Bow Belmont Belmont Belmont $ 241 $ 80 $ Dec Dean Brook Northumberland Bow Northumberland Dean Brook Northumberland Dean Brook Northumberland $ 866 $ 309 $ 1,176 1/9/2013 Winchester ManchesteWinchester Bow $ - $ - $ - 4/2/2013 Winchester Weare Winchester Bow $ - $ - $ - 5/3/2013 Huse Road Manchester Bow Manchester Bow $ - $ - $ - 5/7/2013 Exeter River Exeter Bow Exeter 0 Exeter-Hampton Exeter Exeter-Hampton Exeter Bow $ 308 $ 101 $ 409 5/9/2013 Exeter River Exeter Bow Exeter Allenstown Bow 10-May Milford Milford Salem (?) TOTALS $ 2,069 $ 692 $ 2,761 AVG $ 120

26 Weatherization: Generating Economies of Scale 25 Figure 8: 29 percent of 153 homes weatherized 1 1 This map depicts one of the communities weatherized in the project. Each star represents a weatherized home but their locations have been randomly distributed across the map to protect the anonymity of the households weatherized.

27 Weatherization: Generating Economies of Scale 26 Figure 9: The project weatherized homes in 38 cooperatives in 27 towns

28 Weatherization: Generating Economies of Scale 27 Table 6: Income guidelines for fuel assistance and weatherization

29 Weatherization: Generating Economies of Scale 28 Figure 10: Hoses carry insulation from the blower to the underside of this home. 7. Acknowledgments This project would not have been such a success without the dedication and talent of a great many people, just a few of whom are recognized here. We are also grateful to the many homeowners who shared their weatherization stories with us and their neighbors. New Hampshire Community Loan Fund Craig Welch, former Vice President for Housing Scott Denoncourt, Reporting and Compliance Kim Derry, Finance Kevin Hanlon, Horizon Residential Energy Services NH New Hampshire s Community Action Agencies Dana Nute, formerly with Belknap-Merrimack Community Action Robert Bowers, Belknap-Merrimack Community Action Ryan Clouthier, Southern New Hampshire Services Phil Guiser, Tri-County Community Action Agency Michele Crown and Beth Daniels, Southwestern Community Services