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Can energy efficiency brighten a dark economy?

Though part of the stimulus plan, it isn’t likely to create lots of new jobs anytime soon. Still, efficiency can have other big payoffs.

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Savings for homeowners could be even bigger. The House plan calls for subsidized loans or grants to help retrofit 2 million American homes. If those houses were brought in line with the most widely used efficiency standard in the US – the Leadership in Energy and Environmental Design (LEED) – they would use 30 percent less energy. With the average household spending about $3,500 a year on heating and electricity, the savings would translate into about $2.1 billion a year.

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Because 2 million homes represent only about 2 percent of US households, many activists hope the effort will be expanded, perhaps as an antipoverty program.

“With all the foreclosure stuff that’s going on, anything you can do to help reduce month-to-month operating costs for homeowners is a big plus,” says Dan Karan, director of construction for Neighborhood Housing Services, a nonprofit group that builds and finances low-income housing in New York City. But few lower-income Americans have the up-front cash to make the switch, particularly in these tough times.

“Money is much tighter for us now,” he adds, “so we’ll certainly be looking to Washington” for energy-conservation programs.

The prospect that green building standards will be one of the few growth areas for the next few years has convinced Jay Gajjar, owner of Brooklyn-based Horizon Construction, to bring all of his work in line with LEED standards.

“I’m very optimistic that this is where the future of my business lies,” he says. Some 90 percent of his work is in subsidized and low-cost housing, and regulations increasingly require contractors to build energy-efficient homes.

“Once you know how to do it, you can build homes that use 33 percent less power but only cost about 8 percent more to build,” he adds. “The economics are there, and every indication is our business is going to keep growing.”

He’s currently gutting a building in Harlem using government money channeled through Mr. Karan to provide low-cost housing. How it’s done is pretty simple: An energy-saving boiler will be installed on the roof, extra care will be taken with caulking and sealing, and energy-saving windows will be installed.

Those projects generate construction jobs but not the long-term, high-tech positions envisioned in the stimulus package. Is that kind of job creation possible?

Lighting Science’s Rao thinks so.

“The stimulus package makes so much sense for companies like ours,” says the native of India, who has 70 patents. “It’s going to create a lot of infrastructure demand in general, and I’m also hoping it will help people like me bring innovation and manufacturing back to the US.”

For now, his business is tiny, with about $45 million in sales last year – including, most prominently, a contract to help build the new, high-tech ball that dropped over Times Square on New Year’s Eve. He’s also working on a $1 million pilot program for New York City to replace high-pressure sodium street lamps with his LEDs, which consume about 40 percent less electricity and last about three times longer then the existing lights.

LEDs save about as much energy as carbon fluorescent lights (CFLs), don’t use dangerous chemicals like mercury, and last for about 15 years, twice as long as CFLs, Rao says. But at $40 a bulb, compared with about $4 for a CFL, his product is out of reach for everybody but mall owners and municipalities, who have to factor in labor and maintenance costs.

“This is where the stimulus package can help significantly, because if it boosts my volume that will help me get to a price level where we can reach consumers,” he says. His market research shows that if he can get the price to about $25 a bulb, his product will start making financial sense for homeowners.

Even if Rao manages to get down to that price point, many analysts are skeptical that technologies like LEDs will create a domestic manufacturing boom.

“It’s nice to talk about reindustrialization, taking these old Rust Belt factories and turning them into green industries,” says Roland-Holst of the University of California. “But, I’m sorry, most of these jobs are going to go to China.”