Comment on Updating and Improving the Methodology for Assessing Affordability and Cost-Effectiveness of Building Energy Codes

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Docket No. EERE-2026-BT-BC-0034

Introduction

The Department of Energy’s (DOE’s) Request for Information (RFI) on the methodology it uses to assess the affordability and cost-effectiveness of residential and commercial building energy codes is a worthwhile undertaking. A transparent, well-structured analytical foundation serves everyone with a stake in these codes: builders, homeowners, and the broader public.

These comments are informed by my decades of experience in regulatory analysis and oversight, as well as my service on the National Academies of Sciences, Engineering, and Medicine (NASEM) committee that produced the 2021 consensus report, Review of Methods Used by the U.S. Department of Energy in Setting Appliance and Equipment Standards.[1] That report examined DOE’s methods for setting appliance and equipment standards rather than building codes, but a number of its recommendations bear directly on the questions DOE raises here, and I encourage the Department to draw on them as it revises its codes methodology. These views are my own and do not represent those of the committee or NASEM.

Organize the analysis within a regulatory-impact-analysis framework

The NASEM consensus report encouraged DOE, in setting appliance efficiency standards, to follow a regulatory-impact-analysis framework, compare the incremental benefits and costs of alternatives, and evaluate how those benefits and costs are actually distributed across affected groups.

DOE’s role here is largely one of analysis and persuasion rather than rulemaking. Under Section 307(b) of the Energy Conservation and Production Act (ECPA) (42 U.S.C. 6836(b)), DOE participates in the consensus processes of the code-development bodies and reviews the technical and economic basis of the model energy codes, but it does not itself write or promulgate the codes. Under Section 304 (42 U.S.C. 6833), DOE’s determination that a revised standard would improve energy efficiency obligates each state only to review its code and certify its response; decisions as to whether to adopt the model code remain the responsibility of states and localities. DOE’s cost-effectiveness analysis is not the basis of that determination, which rests on energy efficiency alone, so it functions principally as advisory input to the consensus bodies, the states, and the public. (The analysis does carry direct legal weight in standards for new federal buildings and affordability determinations governing federally financed housing.)

For precisely that reason, the quality and transparency of DOE’s methodology are important: an analysis that informs rather than compels earns its influence through its rigor, and a more credible methodology will better serve the consensus bodies and jurisdictions that ultimately rely on it.

The recommendations below are also relevant to the non-preempted additional efficiency provisions offered in some building codes. Awareness of the marginal cost-effectiveness of those measures will be important for understanding the full impact of the codes on households and businesses.   

Strengthen the empirical basis for cost estimates (Q01–Q03)

The RFI asks how DOE can improve its cost estimates, whether a centralized cost database would help, and how to account for regional variation. The NASEM report offers a consistent answer across all three questions: the Department should commit to systematic analyses of empirical, market-based, and ex-post data, such as actual builder and installation costs, rather than relying on engineering estimates. Such an approach would facilitate better consideration and incorporation of regional differences when evaluating real market costs to consumers. A centralized database of verified installed costs could advance this goal, provided its sources, vintage, and limitations are fully transparent so that commenters can evaluate and, where warranted, challenge the underlying figures.

DOE should commit to routine retrospective evaluation of whether the costs and savings it projected actually materialized in building construction and operation. Comparing earlier code cost-effectiveness estimates against realized outcomes is among the most reliable ways to improve the accuracy of forward-looking analysis, and it would give DOE’s future determinations a credibility that prospective modeling alone cannot.

Account for the full range of consumer-valued outcomes, and present ranges rather than point estimates (Q04–Q06)

DOE’s RFI appropriately applies a consumer welfare lens to understand the effects of building codes on homeowners and businesses, and as such, costs should reflect those borne by consumers. The NASEM report cautioned against reducing consumer welfare to energy-bill savings alone and recommended considering the range of attributes, such as comfort and durability, that consumers, actually value. As DOE refines its energy-savings metrics and updates its prototype building models, it should work validate those models against measured, in-situ performance data wherever possible. Consistent with the NASEM committee’s emphasis on characterizing uncertainty, DOE would also serve decision-makers and the public better by presenting the distribution of estimated savings, with uncertainty propagated through the calculation, rather than single point estimates that can convey false precision.

Treat affordability as a distributional question, and reconsider the evaluation period (Q07–Q09)

Affordability is inherently a distributional concept. Aggregate cost-effectiveness figures can mask the fact that upfront costs and long-run savings affect households differently. DOE’s discounted cash flow metric should report how costs and benefits are distributed, with particular attention to lower-income and first-time homebuyers, for whom the tradeoff between upfront cost and a distant stream of projected savings is less likely to be accurately estimated with low discount rates.

The Academies report identified several reasons a rational consumer might decline an efficiency investment that appears cost-justified on an engineering basis, including borrowing constraints, the option value of deferring an irreversible expenditure, and the prospect of moving before the investment pays back. Yet low discount rate and 30-year horizon implicitly assume those frictions away. DOE should present results across a range of horizons so that the sensitivity of its cost-effectiveness conclusions to the discount rate and time horizon assumptions are visible.

Conclusion

DOE has a genuine opportunity here to put its cost-effectiveness methodology on a more rigorous, transparent, and consumer-centered footing. Organizing the analysis around the regulatory-impact-analysis framework, grounding cost estimates in verifiable data, presenting uncertainty and distributional effects transparently, and using discount rates and time horizons that reflect how consumers actually experience these decisions would, together, meaningfully improve the quality of the Department’s evaluations—whatever conclusions those improved analyses ultimately support.