Other recommendations of the Upper Peninsula Energy Task Force discuss increasing funding for weatherization assistance programs to reduce the long-term need for propane in the Upper Peninsula. The feasibility of these recommendations is evaluated below.
Determining Eligibility for Weatherization Assistance Programs in the Upper Peninsula
As noted in the task force report, “Many homes are ineligible for weatherization assistance due to related structural defects (such as the need for a new roof).” Therefore, it is not possible to properly calculate the full costs of weatherization.
To determine the improvements necessary to allow Upper Peninsula households to qualify for weatherization programs, each home would need to go through a home inspection, which can cost up to $400. Simply completing inspections on the 23,000 UP homes that use propane for heating would require an expenditure of $9.2 million. From there, an undetermined amount would need to be spent to fix these structural defects before disqualified homes could become eligible for weatherization assistance.
The Cost of Weatherization in Upper Michigan
To determine the potential for weatherization and energy efficiency upgrades to reduce propane consumption in the Upper Peninsula, we evaluate the findings of a report prepared by the Department of Housing and Urban Development. This report evaluated the potential for energy efficiency to reduce energy consumption in a new 1,296 square foot townhouse, located in Akron, Ohio. The report found that the “bronze standard,” or base, efficiency standard would have an initial upfront “energy efficiency” cost of $647 for a new home. This level of efficiency would reduce energy consumption by 15% compared to a traditional home. In contrast, the emerald standard, the “greenest” of the standards evaluated, would have an initial upfront “energy efficiency” cost of $20,445 for a new home. This level of energy efficiency would reduce energy consumption by up to 60%.
We expect that installation costs for upgrading energy efficiency in the Upper Peninsula would be higher as a result of attempting to retrofit existing structures rather than building new. Retrofitting existing homes requires additional time and labor for the demolition and disposal of existing building materials and replacing these with newer, more energy efficient materials. Therefore, it is reasonable to assume that both the $647 Bronze efficiency upgrades and the $20,445 Emerald efficiency upgrades would be a floor for the cost of retrofitting U.P. homes.
As a result, the cost of retrofitting each of the 23,000 propane-heated homes in the U.P. to the bronze standard might require $14.9 million in upfront costs. Retrofitting to the emerald standard would cost $470.2 million. In practice, however, the actual costs of these upgrades would be larger, as most would be paid for through borrowing, which would add interest costs. Annual maintenance costs required to maintain the national green building standard rating would also increase overall costs.
The high cost of these upgrades would take up almost all the federal funds available from federal weatherization programs in the case of the bronze standard, and vastly exceed those federal funds in the case of the emerald standard. According to the U.S. Department of Energy, the entire state of Michigan was designated to receive approximately $17.9 million dollars for weatherization assistance in 2019.
The Potential Impact of Weatherization on Propane Demand
Despite the costs, increasing the energy efficiency of homes in the Upper Peninsula would reduce the amount of propane needed to heat homes.
Assuming these energy efficiency upgrades reduce propane consumption by 15% for the bronze standard and 60% for the emerald standard, the average household would see the following impacts on their annual propane use displayed in Table 1.
Table 1: Estimated Energy Cost Savings From Weatherization Upgrades
It is also important to reiterate that these upgrades, to any standard, could only be completed after $9.2 million was spent to complete property assessments. That payment would then need to be followed by unknowable amount to repair structural defects on disqualified homes in order for them to qualify for the weatherization program.
Upgrading residential homes to the bronze standard of energy efficiency would reduce the need for propane in the U.P. by approximately 3.4 million gallons per year. Upgrading homes to the higher emerald standard would reduce the need for propane in the U.P. by 13.7 million gallons per year. However, it is important to remember that the Upper Peninsula consumes 34.2 million gallons of propane annually, with this consumption split among residential, commercial and industrial customers.
After energy efficiency measures have been implemented, the Upper Peninsula would still need between 20.5 and 30.8 million gallons of propane annually to satisfy the need for winter heating. Amounts to between 67% and 101% of the annual propane output of the Rapid River fractionator, which produces approximately 30.6 million gallons per year.
 “Upper Peninsula Energy Task Force Committee Recommendations Part I -Propane Supply” (Department of Environment, Great Lakes, and Energy, April 17, 2020), https://perma.cc/D85S-S4TJ (accessed Sept. 2, 2020). The task force report explains that the Michigan Weatherization Assistance Program is a “federally funded, low-income residential energy efficiency program.” WAP subsidizes energy efficiency upgrades for homeowners and renters.
 “An Evaluation of Affordable Housing Using the National Green Building Standard” (U.S. Department of Housing and Urban Development, Oct. 2012), https://perma.cc/JQK2-BF4Q.
 AnnaMaria Garcia, “Weatherization Program Notice: Program Year 2019 Grantee Allocations” (U.S. Department of Energy, Dec. 18, 2018), https://perma.cc/4UK6-HP4T.