Volts podcast: Andy Frank on how to sell whole-home retrofits to skeptical consumers

In this episode, Andy Frank, president and co-founder of Sealed, discusses his company’s pay-for-performance model for home electrification.

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David Roberts

One of the greatest riddles of the decarbonization effort is the residential sector, responsible for about 20 percent of US energy-related carbon emissions. There are about 142 million housing units in the US, around 83 million of which are “owner-occupied.” Substantially changing them involves dealing with 83 million separate owners, each with their own circumstances and preferences.

Residential decarbonization seems incredibly difficult to scale up, and attempts to date have not been particularly successful. At the rate we are going, it will take hundreds of years to decarbonize America’s housing stock.

The crew at New York-based climate tech company Sealed is trying something new, imported from the commercial efficiency market. Rather than trying to persuade homeowners to buy and install things with their own scarce resources, Sealed covers all the upfront costs and coordinates the work with trusted contractors. Homeowners pay the retrofit back out of energy savings, which means Sealed only gets paid if there are, in fact, measurable energy savings.

This kind of pay-for-performance arrangement is called an energy services agreement (ESA). Listeners of my pod with Rob Harmon will recognize the concept: customers are paying for metered energy efficiency, in the same way they would pay for energy.

Sealed started small but is growing quickly, so I’m excited to talk to its president and co-founder Andy Frank about the frustrations and failures of residential energy efficiency to date, what he’s learned about homeowner preferences, and what kind of benefits come along with having a fully electrified home.

Without further ado, Andy Frank of Sealed, welcome to Volts. Thanks for coming.

Andy Frank:

Thanks for having me.

David Roberts:

Where do residential emissions and energy use sit in the larger picture? How big of a piece of the climate puzzle are they?

Andy Frank:

They’re a pretty big piece of the puzzle. Home energy use represents about 20 percent of US carbon emissions. It's a big enough piece where we're really not going to be able to meet our climate goals without nailing residential efficiency and electrification. It is a large opportunity, but also one that has historically been very frustrating to make progress on.

David Roberts:

The arguments for home energy efficiency stand regardless of climate change; it makes sense to save money and use less energy to do so. We've talked for decades about weatherization and nation-wide retrofits, etc., but nothing ever seems to get off the ground. Why has this been such a tough nut to crack and why have previous efforts not cracked it?

Andy Frank:

There have been many more ambitious goals than there have been success stories. There's essentially been what I'd call 50 years of failure. The first efforts to really promote energy efficiency – they mostly called it conservation back then – were around 1973, with the first oil embargo, the first big energy crisis. Fast forward to today, we're still not in a great place. At the current pace of retrofits, it's going to take us more than 500 years to retrofit every single home. We don't have 50 years, much less 500, so we definitely need to do something.

David Roberts:

What have we been trying and why hasn't it been working?

Andy Frank:

We've tried a lot of things; not a lot of them have worked. A lot of people associate the early days of energy efficiency with Jimmy Carter asking Americans to wear a sweater. But actually, President Nixon, a Republican, was the first one to push for conservation in the early 70s – to turn down thermostats and take shorter showers and change your behavior.

Obviously, we're American, we don't like conservation, we don't like having to sacrifice. So the next wave, which was through the late 70s and 80s, was led by legends of this field: Amory Lovins, who was a big inspiration to me, and Art Rosenfeld, and folks saying hey, this isn't about sacrificing; this is about producing more with less, a better quality of life. The old line “people don't want kilowatt hours, they want cold beer and hot showers” – that was the next wave, and that, of course, makes sense and has always made sense.

One of the original sins of the energy efficiency industry, at least in my mind, is it was created by government for government, and through the utilities and local contractors. What that meant was you were essentially pushing largely home energy audits, very technocratic solutions, on the populace.

I loved your pod recently talking about the economic style of thinking; that was very en vogue with energy efficiency. The idea was, if only we could educate people and give them exactly the right amount of information about what they're doing with home energy use and how much energy they can save, of course they would spend thousands of dollars to make their home efficient.

David Roberts:

They are rational interest maximizers, so why wouldn't they?

Andy Frank:

Exactly. The value prop of residential efficiency essentially evolved to assume that homeowners are all classical PhD economists and have a Masters in building science.

David Roberts:

And are willing to balance short-term investment with long-term payback and can calculate those things for themselves.

Andy Frank:

Perfectly rational.

The sales pitch has historically been horrible. The way that energy efficiency has been sold for pretty much the last 50 years is, “Would you like to save money on your energy bills? Great, get an energy audit!” You have to schedule it, you have to take a half day off of work or at least be in your home and aware of it, and someone who you don't know trucks around your house for three hours, goes into all of the most private parts of your home – I won't even speak to all the stuff that we saw when we were doing energy audits.

At the end of the day, if you're lucky, they will sit down with you and say, “This is what we found, here's how much energy we think you're wasting, here's what you can do about it, and by the way, that's going to cost you thousands of dollars to do” – to potentially save what you, as a homeowner and consumer, largely see as fake money.

David Roberts:

Homeowners are not carrying the one; they're n