Trends in home-performance contracting are shifting, and changed market behaviors are having an effect on comfort demand, energy efficiency, and HVAC contractors’ bottom lines. On the customer side of the home-performance equation, the demand for comfort as well as energy efficiency have combined to produce a market that is seemingly ready to embrace a whole-home approach to not only HVAC, but also to other residential, natural resource processes. On the contractor’s side, there is money to be made and more customers to be had. The changing no-man’s land between customer and contractor is revealing opportunities for improved comfort and increased bottom lines in home-performance contracting.
THE REBATES ARE GONE
Back in the day, saving energy was the cool thing to do. HVAC contractors were able to offer better, more efficient systems to customers at higher price points, often because of the rebates provided by multiple states and local utilities. These rebates helped drive higher efficiency to the forefront of the conversation and highlighted home-performance contracting. So, the question is, how are things going now that most of the rebates are gone?
Marc Tannenbaum is the president of Dr. Energy Saver Home Services in Seymour, Connecticut. The company is a network of home energy contractors that offers insulation, heating, and cooling services. Tannenbaum is concerned that the conversation about home-performance contracting is fading in light of the rebate losses.
“Many states and local utilities have cut back on their rebate programs, reducing the incentive for homeowners to buy these services,” he said. “With limited or no rebates on equipment or insulation, HVAC contractors are less inclined to get involved. Home performance is further fading in HVAC because those of us pushing it upon HVAC contractors have made it too complex and overly difficult.”
Tannenbaum clarified his point, noting that in the beginning of home-performance contracting, many contractors were required to get certified in order to take advantage of rebates. But according to him, that was too difficult to sustain.
“There were too many products to learn, sell, and install,” Tannenbaum said. “It was easier for the HVAC contractor to add plumbing or electrical service offerings instead of home performance to their customers. We have to have a simple process for HVAC contractors to add things like air sealing and insulating services if the industry is going to lead in this market.”
The lack of rebates and inherent complexity, as described by Tannenbaum, has him pushing to better define home-performance contracting or stop calling it that altogether.
“We see it as HVAC contractors adding services designed to address issues with how a home was built that, along with properly sized and installed equipment, will be part of more comprehensive comfort and health solutions for homeowner customers.”
NEW BUSINESS MODELS, BENEFITS
With energy-efficiency programs scaling back and rebates dwindling, pay-for-performance is being pushed out as the new model.
“This model will force companies operating under energy-efficiency programs to actually meet targets and goals, since incentives will now be tied to how well the project performs,” said John Jones, national technical director, Building Performance Institute Inc. (BPI). “This will definitely affect the contracting companies that offer technology-specific solutions to homeowners.”
Despite the change, Jones sees home-performance contracting as an opportunity for HVAC contractors. He explained that there are four key benefits aimed specifically at contractors’ businesses: larger ticket size, more consistency in workflow, fewer call backs, and a larger customer base. According to Jones, the larger ticket size is a result of the install being more project-based as opposed to a specific piece of technology. As for a more consistent workflow, he said home-performance work can mitigate the cyclic sequence typically experienced by HVAC companies during shoulder months, keeping cash flow steady and employees in the field selling more products and servicing more customers.
Jones’ reasoning behind fewer call backs and a larger customer base stems from a home-performance company’s ability to provide overall home comfort as compared to those providing new heating and cooling units. Providing a home-performance approach opens opportunities for a more connected relationship with current comfort customers as well as those customers needing more than a heating and cooling solution.
DEFINING THE DIFFERENCE
Home-performance contracting is good for comfort and good for business, but what does it mean to be a home-performance contractor? After talking further with Jones, Tannenbaum, and Steve Baden, executive director, Residential Energy Services Network (RESNET), the key to defining home-performance contracting seems to be in the approach. It puts the needs of the homeowner and the home itself above all else.
“Home-performance contracting is offering the services needed to ensure a home is at its peak efficiency, saving the homeowner money, reducing utility costs, and conserving environmental resources,” said Baden. “Given the growing and continued interest in home performance from consumers, utilities, builders, code officials, and others, it would be short-sighted for contractors not to look at home performance as the present and future growth opportunity for their businesses.”
Jones agreed that it can be a bad idea for contractors not to address home performance in their business practices.
“HVAC contractors could be putting their business reputation and themselves at risk when they don’t address home performance,” he said. “If a customer has contacted an HVAC contractor for comfort-related issues and the contractor does not perform an assessment and diagnostic testing to determine what the underlying cause of the comfort issue or customer concern is, they may not be able to solve the problem. Not determining and addressing the actual problem is not providing the best service to customers.”
There are a plethora of home-performance training approaches and opportunities available to contractors. One of these approaches is that of the Home Energy Rating System (HERS) Index. Training for this is provided by companies like RESNET, and whether training a current employee to add HERS rating to the company portfolio, or hiring one to add to the mix, contractors have found success in this approach.
“Currently, around one in four of all new homes built receive a HERS Index Score, and we look for that number to continue to grow,” said Baden. “We think opportunities abound in the home-performance industry, and we are seeing an increasing interest in the HERS Index from homeowners, potential home buyers, the real estate industry, code officials, and utilities to ensure that homes are performing at peak efficiency. So now is as good a time as any for a contractor to get involved in this work.”
Another approach to home-performance training is through different technical and business-related trainings at conferences, such as the National Home Performance Conference and Trade Show. This conference offers multiple tracks with technical and business sessions at all levels.
As for other training opportunities, BPI has over 100 approved test centers listed on its website, and many offer courses on home-performance contracting. There are also specific performance-based contractor training opportunities to be found with the National Comfort Institute Inc.
No matter how it is defined, home-performance contracting is an evolving term that will likely trend through HVAC for years to come. What it will look like five years down the road is anybody’s guess. There is growing evidence that HVAC contractors will be at the helm of this performance contracting ship.
“All indicators point toward the HVAC industry as the driver of home performance,” said Jones. “More and more, big companies, distributors, and even equipment manufacturers see the benefit of HVAC companies offering home performance.”
Publication date: 9/17/2018