Meritage Homes Building Net Zero for 8 Years, Its Future?

With almost 40 million people, California is the most populous state in the nation. It’s big enough to be a country, and not a small country at that: California’s economy is the fifth largest in the world. So when California makes policy, there’s a ripple effect.

Starting in 2020, houses in California will be required to include solar panels on the roof, with the goal that the house, taking on-site power generation into consideration, will produce about as much electricity each year as it uses. The details are a little squishy, and there are some exceptions. Still, the requirement is serious, and it’s going to mean serious changes for the state’s builders.

Some builders are ready. Scottsdale, Ariz.–based Meritage Homes, for example, builds almost 2,000 homes per year in California, in addition to the thousands more it builds nationwide. The firm, which ranks No. 7 on the latest Builder 100 list, reported a total of 8,531 closings for 2018. BUILDER's sister publication, JLC, recently talked with C.R. Herro, vice president of innovation at Meritage.

“We have been building net zero for eight years,” Herro says. “We were the first big production builder to build to Energy Star, and we’ve been voluntarily building well ahead of compulsory code in California and all throughout the country for quite a while. So for us, it was a much shorter putt to get our homes to zero.”

Still, not every house Meritage builds is a zero-energy house—far from it. Even for Meritage, building every house in California to the state’s Zero Net Energy standard will be a stretch. The company buys the goal, says Herro: “Energy efficiency and renewable energy is the right financial thing to do at everybody’s price point, from entry level to luxury.” But Herro has concerns with the way the policy is being implemented. Inevitably, a zero-energy house with solar panels on the roof will cost more to buy than an existing home that was built before the mandate took effect. The houses will cost less to operate than comparable houses without zero-energy details, of course, and Herro believes the net-zero house is a better deal for the buyer in terms of the total cost of ownership. But he’s concerned that buyers won’t realize the advantages—at least, not without help.

“California and everybody else that has been pushing an energy-efficient and renewable-energy agenda isn’t enabling it," Herro explains. "What I mean by that is that they’re not differentiating the value of this energy-efficiency and renewable-energy benefit in the transaction. The evolution from my perspective is, we have to change appraisals and underwriting and possibly go to a labeling system that captures both the selling price of the home and the operating cost of the home. I consider that the true cost of ownership. That way, buyers can make more informed decisions.”

There’s a lot more to a zero-energy house than a solar array on the roof. “We put in high-performance windows, we do advanced framing details to reduce thermal bridging, we do better insulation, we do better air-sealing details, we do more efficient lighting, more efficient heating and cooling systems, more efficient water-heating systems, more efficient appliances," Herro says. "What you look at is how many kilowatts you reduce for every dollar you have to spend. And there’s a lot you do that is more financially responsible before you get to solar.

‘Reduce Before You Produce’

Another California builder who’s ahead of the Zero Net Energy curve is De Young Properties, based in Clovis, in the state’s Central Valley. De Young now has three developments in progress devoted to net-zero housing, all with building-integrated solar on every house. But company vice president Brandon De Young says the company followed the mantra to “reduce before you produce,” beginning with improvements—such as more efficient heating and cooling systems, higher-performing windows, and LED lighting—that could be made without changing the construction process. “My job over the last decade has been optimizing the energy-efficient features of our homes, to become the most cost-effective possible,” says De Young. “You do a lot of bidding to figure out what is the most cost-effective of all these different choices that you make.”

Changes that affect construction workflows came later in the process. “Once you’ve gotten past the low-hanging fruit, and you’re starting to have to make some important design changes in how you actually construct the home, that’s where it starts to become more challenging,” says De Young. For example, it took around two years to convert the company’s wall-framing practices from the conventional California method of 2x4 studs 16 inches on-center to an “advanced framing” system of 2x6 walls 24 inches on-center. “It involved a lot of changes in drafting, and re-engineering, and of course going through the plan submittal process with all the jurisdictions we build in, making sure that they can reapprove all the plans with the new engineering designs,” says De Young.

Trades had to learn some new practices also, such as three-stud wall corners. And at interior wall intersections with exterior walls, instead of lumber-intensive stud backing, “we went to having the interior wall stop short about a half-inch or so, about the thickness of a sheet of drywall, and then you attach that to the exterior wall by hardware up at the top plate,” says De Young. “Now that wall cavity is totally free of lumber and you can fit a whole bunch of insulation in there. You don’t have hot and cold points in the exterior wall at the intersections.”

De Young Properties also made a major change in its attic designs, switching to the “High Performance Conditioned Attic” system from Owens Corning, which involves blowing fiberglass insulation behind netting suspended from truss top chords. “In summertime around here, it can be 100°F for 30 days in a row,” says De Young, “and in the attic it can be above 140°F.” Traditionally, air conditioners and ductwork have been located in that hot attic environment, with an associated penalty for system performance and occupant comfort. The firm looked at a number of strategies for bringing the equipment and ductwork into the conditioned space. “We decided to insulate the underside of the roof and basically encapsulate the whole attic space within the thermal boundary, so that we didn’t have to mess with where our HVAC equipment goes,” explains De Young.

Like Meritage, De Young Properties strives to stay ahead of the code. “Here in California, the Title 24 energy code is what rules,” says De Young. “Every few years they update it, and it gets more and more stringent. We know we’re going to have to continually improve regardless, just to even pull a building permit." His company's attitude has been to turn the energy code into a positive, working it into its day to day and making it part of its identity. "Since 2009 or so, even our non-zero-energy homes have exceeded the code significantly," he notes.

After squeezing as much out of the home’s energy demand as it could cost-effectively manage, De Young Properties turned to the supply side: solar panels on the roof. “Our solar partner is Tesla,” says De Young. “We’ve been working with them for about six years. They help us a lot with analysis of our consumption, and then the targets that we have to try to achieve on an annual basis for solar generation. We have a wide range of home sizes—one story, two story, 1,500 square feet all the way up to 4,000 square feet—so obviously the range of solar system sizes is wide. But we are usually around 4.5 to probably 9 kilowatts, depending upon the size of the home.”

Selling the Dream

All of those improvements carry advantages beyond the simple energy-bill calculation. From durability to health to comfort, advanced homes are typically better than ordinary code-compliant houses. But how to communicate that value to a home buyer? At the Department of Energy, Sam Rashkin has been working on that problem for years. Rashkin is chief architect of the Building Technologies Office in the Office of Energy Efficiency and Renewable Energy, and point man for DOE’s Zero Energy Ready Homes (ZERH) program. Homes certified under the DOE program don’t have to be actual net-zero houses—they just need to have Home Energy Rating System (HERS) ratings low enough that solar panels on the roof would be able to bring the house to net zero. So what Rashkin is selling isn’t so much a lower energy bill (although the houses do have that) as a better home, period.

The DOE program is having a national impact. In Arizona, for example, production builder Mandalay Homes—No. 171 on this year's Builder 100/Next 100 list—certifies every house under the ZERH program. “But those houses aren’t net zero,” says Mandalay chief technology officer Geoff Ferrell. “That program is just some cool details and resources, prescriptively and performance path, that help you build a fundamentally better home that is more energy efficient and has some simple details that allow the builder or a future owner to go and make it net zero by adding PV to it.”

The DOE program requires houses to comply with EPA Energy Star standards, the EPA’s Indoor Air Plus specification, and the EPA’s WaterSense program. Rashkin breaks out the elements of a certified ZERH house into six categories: advanced water-management systems; an optimized comfort system; a complete indoor-air-quality system; an optimized enclosure system; efficient components throughout the house; and a solar-ready system (meaning conduit and electrical panel pre-positioned for solar installation at a later date). Rashkin says, “The ZERH program is a way for the homeowner to get this transformational experience by simply looking for a logo.”

If only it were always that easy. Atlanta-area custom builder Luis Imery certifies most of the homes he builds as Zero Energy Ready, and he has several houses to his credit that operate at net zero or better. But he says, “Certifications, at least in Georgia, don’t sell homes. The reality of our marketplace is that it’s not an efficiency-driven or healthy-driven market at the moment. The masses are not in tune with seeing the value of owning an energy-efficient home.”

So while Imery gently steers his clients in the direction of net zero, he does it through a process that puts the customer first. “We start our projects by asking our clients one single question: ‘What is your budget for this beautiful home that you have in mind?’ And we partner with our clients early. We have a framework that we take our clients through to ultimately arrive at a plan with specs and a budget that hits their target. It’s a collaborative process instead of trying to force things that we think are great, but may be not too important to our clients. But in that initial preconstruction process, we’re weighing all the options to be as close to Zero Energy Ready as we can, if we can hit it with the client; and if we can’t, we have that conversation with the client. So, our goal is for all our homes to be Zero Energy Ready. We are 80% there.”

Imery’s latest net-zero project is a home for Mitsubishi executive Mark Kuntz near Atlanta. The home earned a HERS rating in the low 40s without on-site power; an 8.1kW, 30-panel array on the garage brought the HERS score down to -13. The construction was above code, but not extreme: staggered-stud 2x4 walls on a 2x6 plate with R3 Zip-R sheathing, wall cavities insulated with R21 cellulose, and flat-ceiling truss roofs with R50 cellulose. Triple-glazed windows were chosen at the customer’s request, although Imery says that was overkill. The blower-door test came in at about 2.6 ACH50, a disappointment to Imery (caused, he says, by a subcontractor who completed insulation work before air-sealing a few critical junctures). The home is heated and cooled by Mitsubishi mini-split equipment. The ERV is a Broan Sky Series Fresh Air System, which has controls that limit the air intake when outdoor relative humidity is excessive. For supplemental humidity control, Imery installed an UltraAire MD33 in-wall dehumidifier.

For Imery, it’s not about selling a label. “On our website, you have to drill down to find any mention of labels,” he says. But he says clients become converts as the preconstruction and construction processes continue. “We even go under contract for construction and our clients are clueless that behind the scenes, we’re making every effort to make their home DOE Zero Energy Ready,” he says. “As they commit more to the relationship with us, we slowly unveil that this house is third-party verified. What happens is that through that process, they get excited, and they want to make it DOE Zero Energy Ready. So just changing the timing of that education and conversation has helped tremendously, because they’re not getting hit by a fire hose at the beginning.”

“All our homes are third-party verified,” says Imery. “Even if [the clients] don’t want to pay for it, we pay for it because that’s the assurance to the homeowner that ‘Listen: You trusted your largest investment in your life to us, here’s our product. By the way, don’t believe only us, your home was verified by this person who came through at all these different stages of construction to verify.’”

The Near-Zero Home

Meanwhile, in Arizona, production builder Mandalay Homes is aiming to build hundreds of Zero Energy Ready homes at a price point that competes with lesser-performing houses in its market. “In our climate, our houses would qualify for the DOE program with a HERS rating of about 57,” says Mandalay’s Geoff Ferrell. “The way we choose to build takes us down to a HERS 47 on average, without renewables.”

So what’s different about Mandalay’s envelope? “The first thing is slab edge insulation,” says Ferrell. “We gain six or seven HERS points simply by doing a good slab edge detail.” Wall and roof insulation and air sealing also boost the score, he says. “We are insulating the walls with an inch of continuous exterior EPS foam, and then we use open-cell spray foam in our walls and our cathedralized sealed attic. And then we air seal with AeroBarrier. We are sealing all of our homes down to 0.7 ACH50 or so.”

For Mandalay, Ferrell says, the Zero Energy Ready label is a significant value in the marketplace. “It’s brand recognition,” he says. “One of the other builders in our area builds to Energy Star. To the buying public, we build the same house. These other programs help us further differentiate the things that we’ve done to make our buildings healthier, more durable, and more water resistant, and then tie that to an independent certification that validates that it’s not just talk. The house really does perform better than the other guy’s.”

With a small solar array on the roof and a power storage battery in the garage, Mandalay’s average home rates about a HERS 29, not zero—and that’s by design. Says Ferrell, “Unless a customer specifically comes in and requests it for whatever reason, we will probably never build a HERS zero home again. Because in our climate zone, with our utility not paying for exported energy, HERS zero saves the customer no more money than like a HERS 20 house would. If you don’t have net metering, like we don’t in Arizona, unless you can store and use 100% of the energy that you generate and need throughout an average year, you’re not going to get a HERS zero.”

Ferrell explains, “What a lot of the country does, because of net-metering policies, is they basically put a big solar array on the rooftop, the home uses what it can use when it can, and then when it can’t, any excess gets exported into the grid, and then the consumer gets to buy it back at a later time, non-sunny hours or whatever, on a one-for-one import-export basis. Here in Arizona, we don’t have that scenario.”

The reason Arizona doesn’t have net-metering programs that buy solar power from homeowners at full retail value is that in Arizona, there’s already too much solar on the rooftops. On sunny days, rooftop systems produce more power than the utility can use. And California is looking at a similar problem—which is why the new solar mandate in California includes a proviso about batteries. Starting in 2020 in California, if builders install battery storage systems in houses, they can cut back the amount of photovoltaics by 25%. That may not be enough incentive to push batteries into the mainstream in California, but it’s a sign that the power mix of the future is sure to include storage along with on-site generation.