THE $14.7 BILLION ENERGY POLICY Act that became law this summer isn't just about clean coal, nuclear power, alternative auto fuels, or hybrid cars—although there's a lot of all that in it. Tucked in at page 1,344 of the new law is a direct payoff for energy-efficient builders: a $2,000 builder tax credit for each new housing unit that beats minimum International Energy Conservation Code (IECC) standards by 50 percent or more.

TRICKY HURDLES To earn the credit, builders must compare each home design's estimated energy consumption against the energy use of a baseline home that meets the 2004 Supplement to the IECC. Earning the credit won't be simple: To beat the tough new code by half, builders will have to pursue a finely tuned set of upgrades. Says Rick Davenport, who directs building science and marketing for Masco Contractor Services, “They'll be juggling a whole lot of options and trying to work them into their process to see where the payback lies.

“Custom guys can play with window orientation and location,” says Davenport, “but the production guys can't—they're building on lots. And they have to use low-E windows just to comply with the IECC. So windows really don't offer a good payback.” Insulation upgrades won't help much either, he adds: “Once you hit the prescribed R-values, you don't get a lot of pickup from additional R-value. You certainly won't get enough credit to really move the meter on that 50 percent.”

EXTRA CREDIT: A $2,000 builder tax credit comes as icing on the cake for projects like this zero-energy house on the east bank of the Hudson River in New York, built with insulated concrete forms. State energy grants helped pay for the rooftop solar panels (above), which on a yearly basis will balance out the home's electric loads, including power for the heat-exchange ventilation system and geothermal heat pump in the home's conditioned basement (left).
EXTRA CREDIT: A $2,000 builder tax credit comes as icing on the cake for projects like this zero-energy house on the east bank of the Hudson River in New York, built with insulated concrete forms. State energy grants helped pay for the rooftop solar panels (above), which on a yearly basis will balance out the home's electric loads, including power for the heat-exchange ventilation system and geothermal heat pump in the home's conditioned basement (left).

What will move the meter, says Davenport, is “extraordinary airtightness” in the building shell, along with very well-sealed ductwork kept within the conditioned envelope. Mechanical fresh-air ventilation, he notes, then becomes mandatory—“it hurts us on the energy side, but we need it for air quality and moisture control.” Appliance efficiency upgrades—better than SEER-13 air conditioning, and 90 percent-plus AFUE heating equipment—will also be required.

THE CLIMATE ZONE FACTOR “But even then you are still susceptible to your climate,” says Davenport. “In climates that don't give builders the option to play around with efficiencies on both heating and cooling, there is no way they are going to make this compliance level. In South Florida, where they don't need any heating, or Minnesota, where the house may have no air conditioning, they can't squeeze any more out of their calculations. It's just an idiosyncrasy of the way the law is written.”

PROVING PERFORMANCE Beyond the problem of building a qualifying house, builders will have a second challenge: documenting the building's performance. And for the time being, it's not clear how that is to be done, says Steve Baden, executive director of the nonprofit Residential Energy Services Network, or RESNET (www .natresnet.org). RESNET created the Home Energy Rating System (HERS) used to gauge compliance for incentive programs like the EPA's Energy Star. Typically, HERS raters use a software application such as Architectural Energy Corp.'s REM/Rate (www.archenergy.com) to assess each proposed design, compare it with a base-case house, estimate the energy savings, and create a custom report.

“It makes sense for the HERS system to be used for tax-credit verification as well,” says Baden, “and the Senate version actually called for that. But the conference bill's language was more vague.” As passed, the law just calls for the DOE to work together with the Treasury Department to write rules for the tax credit—a process that could take at least a year. In the meantime, officials are moving to craft an interim rule that will let builders claim the credit on this year's tax return. A HERS rating, says Baden, will probably be one acceptable form of proof.

Ted Cushman is a freelance writer based in Great Barrington, Mass.