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A contentious change to North Carolina’s energy conservation code has been rejected by a rules review panel, forcing the builders who proposed it back to the drawing board.

The amendment, approved by the state’s Building Code Council late last year, would have allowed residential developers to bypass minimum efficiency standards such as wall insulation if they adhered to a voluntary suite of green building guidelines.

Critics complained the measure was poorly written and lacked a fiscal analysis, prompting the rules panel in February to pause its adoption and seek input from a third entity: the state budget office.

That office concluded the proposal would be too difficult to implement and possibly too pricey for homeowners and society, with the “potential to create a substantial economic impact of $1 million or more in aggregate costs and benefits in a year,” according to a letter issued this month.

The determination set the stage for the Rules Review Commission to last week strike down the measure on procedural grounds. Acting on the recommendation of its staff, the 10-member commission did so unanimously and without a word of discussion.

The North Carolina Home Builders Association, the trade group that offered the amendment, wields sizable clout in the halls of government. That’s especially true at the 17-member Building Code Council, where its proposals frequently clear a byzantine approval process that amplifies the power of building interests and diminishes that of the public.

Last week’s decision, then, marks a rare defeat for the developer lobby, and a bipartisan one at that: The rules panel is appointed entirely by the GOP-led legislature, and the budget office that advised it is under the administration of Gov. Roy Cooper, a Democrat.

A battle over the building envelope

At the center of the controversy is the seldom contemplated but vitally important building envelope — windows, insulation, air seals, and other features that help maintain a healthy, comfortable indoor environment no matter the conditions outside. 

Experts believe a “good envelope” — combined with increasingly efficient appliances and onsite renewable energy like solar panels — is crucial for cutting building energy consumption, which now leads to about 40% of all U.S. global warming pollution.

Yet, largely due to the Home Builders Association, the state’s residential building energy conservation code contains lax requirements for most of these features, lagging about a decade behind the model standard for North America.

To entice developers to build green anyway, the code includes an “alternative compliance pathway,” allowing builders to skimp on insulation or other prescriptions in the code if they install more efficient appliances and other technologies to reduce the home’s energy consumption.

Builders must achieve a target energy rating index, or ERI, on a zero-to-100 scale that reflects these trade-offs, where zero is a hyper-efficient building that produces its own renewable energy. They do so by following a 2014 green building standard set by nonprofit Residential Energy Services Network, or RESNET.

Even under the ERI method, builders must still meet some minimum requirements, albeit more lenient ones than the prescriptive code. This safeguard is essential, advocates say, since builders or buyers could be tempted to swap hard-to-upgrade but crucial features of the building envelope — like wall insulation — for flashier components like solar panels or ultra-efficient HVACs.

But builders seldom use this pathway. According to the North Carolina Building Performance Association, about 30% of new homes get a RESNET or similar energy score each year, but only 3% use it for compliance. The backstop, many believe, may be too high to lure developers.

At the same time, RESNET has adopted a new green building standard, the “301‐2019 Standard for the Calculation and Labeling of the Energy Performance of Dwelling and Sleeping Units using an Energy Rating Index.”

Updating North Carolina’s code to reference the 2019 edition is reasonable, advocates say. So, too, could be a tweaking of the backstop for the energy rating compliance pathway to make it more attractive to builders.

But the proposal adopted by the code council in late 2020 didn’t do either. Instead, it created a new provision in the energy code, without any of the legal architecture of the existing section that references RESNET. As a result, it lacked minimum requirements, definitions, software guidance, and other details that critics said made it unworkable and harmful.

‘Higher long-term energy costs’

In its May memo, the state budget office largely agreed. “As written, the proposal lacks necessary implementation and enforcement components,” the memo said.

Meeting records of the code council, the office concluded, “indicate the proponent intended the new pathway to be implemented without backstops.” That would allow builders “to make largely unlimited tradeoffs against the thermal envelope.” The result would be less insulation in walls, attics, and on the edges of concrete slab foundations. 

Builders could pass the cost savings along to buyers, the office wrote, but “homeowners and society are likely to incur higher long-term energy costs due to the lack of thermal envelope backstops and mandatory minimum requirements.”

Now, according to the letter, the council “must decide whether to begin the rulemaking process anew or to drop the proposal.”

Time will tell what steps the council takes.

If the Home Builders Association wants to restart rulemaking on its rejected amendment, it will need a proper fiscal note and cost-benefit analysis. Legislation moving through the General Assembly would require the code council to either produce that research or seek it from a third party. It would help the builders if it became law — but isn’t likely to do that before the council’s June meeting.

For energy efficiency advocates, the key is Cooper, who has made fighting climate change a priority and who appoints members to the Building Code Council for six-year terms. He’s already appointed new councilors who’ve voted against weakening the energy conservation code, most notably Bridget Herring and Kim Humiston, but they’ve been far outnumbered on the panel. He’ll get five more appointments this year.

Elizabeth Ouzts

Based in Raleigh, North Carolina, Elizabeth Ouzts has covered the state’s clean energy transition for the Energy News Network since 2016. She has also produced features for Environmental Health News and SEJournal, the news magazine of the Society of Environmental Journalists. A former communications director for the nonprofit Environment America, Elizabeth brings over two decades of environmental and energy policy experience to her reporting.