Energy efficiency in California just took a turn for the better.
But to understand why it’s better, you first have to understand why programs in energy efficiency in California and everywhere else need fixing, says Matt Golden, principal, Efficiency.org.
Recently, SB 350 in California doubled the state’s energy efficiency goals, which is impressive, but the problem is this: It will take thousands of years to reach those goals under the current system, he says. Our energy efficiency model isn’t scaling up rapidly–and can’t.
“SB350 ratchets up the California goals, but regardless of the goals in California or anywhere else, energy efficiency is simply not on the rails to achieve scale without a new strategy.”
Efficiency is generally measured using engineering models that calculate baselines. “But in many cases the engineering models are not what’s happening at the meter,” he says. “It’s very subjective and convoluted. We’re not approaching energy efficiency as a resource but as a rebate coupon campaign. If we’re going to have markets for efficiency, it has to start with a common standard for how savings are calculated. We can’t just bet on predictions. SB 350 provides the definitions we need,” he says.
The legislation calls for measuring energy efficiency in terms of reductions in electricity and natural gas usage at the meter.
This provides a clear definition that allows energy efficiency to be treated as a resource that you can put a price on it, he says.
This new model, which is being adopted more and more across the country, is a pay-for-performance model.
“Efficiency will be measured at the meter. We will have different aggregators–contractors, finance people, whoever–getting paid for the savings their portfolio creates.” The winners will be those who can put efficiency into a package that customers want–and deliver it based on the actual value of the capacity they’re providing. “Those business models that customers demand and that make money and deliver real savings will win,” Golden says.
“Energy efficiency is unique in that there’s no competition or accountability. There’s no market; we need a product and price, buyer and seller.”
“Winning models for efficiency won’t come from top-down programs or white papers, but instead will be driven by what works in the marketplace,” he adds.
Why is this all possible now, especially in California, where the new law is about to take effect?
“Now we have access to standardized data flows from smart meters. We finally have the tools to turn efficiency into something that’s reliable…This allows energy efficiency to compete on a level playing field. Whoever can come up with a model that works will win,” he says. “There are major utilities figuring out how to implement this and align with what the California legislation is talking about.”
Will energy efficiency finally become a resource that has a market?
Golden is betting on it–in California and across the country.
Learn more about this model at openeemeter.org
Read more about energy efficiency in California by subscribing to our free Energy Efficiency Markets newsletter.
