The planned conversion from petroleum energy sources to clean renewables promises billions (with a “B”) in savings over the years, but will require significant initial capital expenditures.
For our efforts to succeed, homes must be well insulated, must be equipped with heat pumps, and must increasingly rely on renewables such as solar electricity, in either community arrays or rooftops.
With the potential savings involved, it makes sense for the state to invest the necessary money to get there, but the mechanics of investing in this future are not simple.
Cooperation by energy dealers to switch from simply delivering fuel to becoming the installers of heat pumps and insulation is the idea behind the Affordable Heat Act. A dealer who makes this business transition receives credits that will offset the fossil fuel surcharge. In short, dealers are incentivized towards climate positive work and disincentivized for continuing fossil fuel sales and usage.
For the homeowner, without whose cooperation and participation no clean energy program can possibly succeed, I see two obstacles that must be overcome.
First, investments in heat pumps and solar arrays typically involve taking on equipment mortgages that can make a borrower appear less creditworthy to a bank. Even if homeowners actually are saving money with this more efficient technology, their debt-to-equity profile may look worse.
And second, mortgages don’t care about the economic ups and downs of everyday life. Miss a payment and you’re in default. Your credit rating may suffer and things can get worse very quickly.
Again, even if the equipment purchased with these mortgages is saving you money, the mortgage payments are rigid. Whereas you could previously put a fuel delivery on your credit card, you can’t do that with a mortgage payment. Credit card debt isn’t something you want, either, but a credit card can serve as a shock absorber in times of temporary hardship. Giving up this financial resiliency may not seem prudent to a homeowner who is living paycheck-to-paycheck.
Any effective legislative approach to residential clean energy will have to address these front-end economic disincentives.
State-regulated lenders could be encouraged or required to treat mortgage debt resulting from energy efficiency investments in a different light than other debt in appraising someone’s credit worthiness. If they took on a mortgage in order to lessen their ongoing expenses, that effect should be considered and they shouldn’t be penalized for it.
If electrical utilities were collecting the mortgage payments for heat pumps and solar installations, the way they collect on old fashion electricity bills, that would give consumers the option of using their credit card as a shock absorber.
But better and much more imaginative remedies are going to have to be devised if fully informed homeowners are going to think it prudent to participate – as they must, if we are to achieve our goals.
Although the current clean energy legislation is not going to be coming through my Education Committee, I’m an enthusiastic supporter of the effort to curb climate change and to save billions by migrating to clean energy. But I’m going to press my fellow legislators to make policies that protect the average Vermont homeowner during this time of transition.