We may also wish to consider incentives for manufacturers of solar equipment. These could take the form of accelerated depreciation of their capital equipment, or an investment credit During the initial stages of solar beyond that currently allowed. For example, the photovoltaics industry might be likened to the Incentives--including accelerated amortization and increased investment tax credit could be helpful in encouraging investment in equipment for the automated mass production of photovoltaic energy conversion arrays. Similar incentives will be very important to all solar energies, but particularly to those which will require mass production equipment (photovoltaics, solar heating and A variety of possible Government actions are being reviewed including Federal loans and loan guarantees to provide industry with the capital needed for production equipment. Also, special attention is being given to the capital formation problem of small and innovative solar companies. The availability and accessibility of capital are critical determinants in the development of a solar heating and cooling industry capability. From the time that a particular solar technological concept is introduced to management, decisions must be made as to whether or not funds can be allocated to pursue the idea through eventual production and market introduction. Capital in the area of solar heating and cooling, at this time, is difficult to attain. Many companies now producing solar collectors are small businesses with capital formation problems typical to that sector. Even large companies might not direct their capital resources towards solar since the building industry, to which solar heating and cooling is affiliated, is currently in an economic slump. 22 2.d. Demonstrations--Commercial and Residential The Federal Government's solar heating and cooling demonstration program, along with the research and development programs, are discussed in the Interim Report, National Plan for Solar Heating and Cooling, ERDA-23, March 1975. Although the research, development and demonstration programs are not a direct part of the Government's solar commercialization activities, they are the initial steps in developing a solar energy industry capability. For example, the demonstration program is aimed at evaluating not only the technical aspects of solar systems, but also the economic, and commercial viability of such systems. Also, by manufacturing and installing the quantity of solar systems required under the demonstration program, industry will gain necessary experience for commercialization. The demonstration program and commercialization program will be integrated to allow development of a competitive private sector capability, to design, manufacture, install and maintain solar heating and cooling systems. 3. Removing Constraints: Economic, Institutional, Environmental and Legal ERDA-23, Chapter II, entitled Major Constraints to Achieving Rapid and Widespread Utilization, lists several constraints which have been identified to date. Various Federal agencies will continue to identify constraints to use of solar systems with the assistance of State and local governments, the competitive private sector, and the interested public. In many instances, where appropriate, the Federal Government will work for the removal of such constraints in a manner that avoids duplication between the agencies. These constraints will be addressed under the 50. "THE IMPACT OF INCREASED HOUSING THERMAL REQUIREMENTS ON THE COST OF NEW HOUSING," FEDERAL ENERGY ADMINISTRATION THE IMPACT OF INCREASED HOUSING THERMAL REQUIREMENTS ON THE COST OF NEW HOUSING Summary This paper examines the costs and savings associated with the recent upward revision of FHA insulation standards for new single family houses in five cities in different parts of the United States. Except in mild climates where low-cost gas is the heating fuel, energy cost savings are greater than the increase in mortgage payments associated with increased insulating costs. This comparison is useful in evaluating building standards proposed for nation-wide implementation. Background In order to qualify for a mortgage insured by the Federal Housing Authority, a home must meet the FHA's Minimum Property Standards (MPS). One part of those standards requires that certain levels of insulation, of window protection, and of door protection be installed. These levels vary across the country depending on the severity of winter or summer weather. The Minimum Property Standards have been raised twice in the past five years, in order to reflect the rising costs of home heating and cooling. The most recent revision was made effective on November 22, 1974, and applies to all one and two family buildings. The Veterans Administration and the Farmer's Home Administration also use the Minimum Property Standard as the standard for homes whose mortgages they guarantee. Little data is publicly available about the total number of new homes which meet this standard. Approximately 20% of all new single family homes are insured or guaranteed by the FHA, the VA or the FmHA. An unknown fraction of the. remaining 80% also have at least the MPS level of thermal 2 New Study John C. Moyers of the Oak Ridge National Laboratory has the then current FHA standards. At the request of FEA's Office of Buildings Policy Research, Moyers recently calculated the costs and savings associated with the newly effective MPS as compared with those in effect since June, 1971. Table A shows the results of those calculations for five cities: Atlanta, New York, Minneapolis, Seattle, and Los Angeles. Each table contains information on gas, oil, and electric systems, and lists the costs of each of those fuels in each city when used for heating. Central air conditioning is assumed for all cities. 2 The study is based on a hypothetical model home of 1800 square feet floor area. The home is single story, ranch style (60 feet by 30 feet), with wood sidewalls and an unheated basement. Window area is assumed to be 260 square feet. The Several factors are important in these calculations. additional materials required by the new MPS, as shown in each table, add both labor and material costs to the construction process and raise the price the home buyer must pay. For this case, it is assumed that the home is purchased on a thirty year mortgage at 9% interest. Higher purchase price also means higher property taxes and higher insurance costs. These rates were assumed to be 2.5% and 0.4% of sales value respectively. Most home buyers are able to deduct mortgage interest and property taxes from their incomes for tax purposes. If a homeowner can deduct $1,000 of mortgage interest and property taxes from his income, the amount saved will depend upon his tax bracket. In order to take this into account, a 25% income tax rate (total income I"The Value of Thermal Insulation in Residential Construction: Economics and the Conservation of Energy," John C. Moyers, Oak Ridge National Laboratory, ORNL-NSF-EP-9, December, 1971. 2For smaller homes, the costs and savings shown in the tables would both be smaller. Only the size of the figures are affected however. If the new standard yields a net savings for an 1800 sq. ft. home, it would yield a savings of some amount for all homes. The average size of new homes in 1970 |