Why Energy Efficiency in California — and Everywhere Else — Needs Fixing

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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.

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  2. Paul Chernick says:

    What’s the connection between energy efficiency and smart meters? You can measure how much energy use has changed over the course of a month or a year–you don’t need smart meters. And improved efficiency does not necessarily show up at the meter, anyway. Family size changes, health changes, employment patterns change. Your smart meter may show energy use rising, even though the building is more efficient, or vice versa. If you depend on meter readings, an EE “provider” can clean up by targeting households with teens heading off for college: energy use falls for hot water, computers, lights, computer games…with no investment by the “provider.”

  3. I could not agree more that efficiency improvements should be based on an actual measured baseline but keep in mind that for new construction and expansion projects, one typically must come up with a theoretical baseline. As the senior technical manager for a leading energy efficiency program, I do require real baseline measurements whenever feasible and even for new construction projects I have sent engineers to other states to baseline an existing facility if the company has a similar plant outside of Oregon. I also expect real measurements of energy consumption post implementation of efficiency improvements which yields us with very high program realization rates. So, it is not quite as simple as saying that the baseline needs to be based on measurements since it is not always possible, nor is it as simple as registering the improvement at the meter. Energy efficiency is complex – especially in the realm of industrial businesses – so there is no one best method but rather a combination of methods that best fit the opportunity.

  4. Agree very much with comments from Paul Chernick. While the article correctly points out that basing decisions on imperfect models is not necessarily the way to go, it also wrong to assume you need some massive role out of smart meters to get energy efficiency done. It is not rocket science. Intelligent people can figure out on a cocktail napkin what the benefit of many technologies will be. Not sure about California, but many states, especially Massachusetts (which ranks #1 ahead of California in efficiency according to ACEEE) has had robust efficiency programs for decades, and it is working. Are models perfect? No. Are meters perfect? No. But waiting for some Utopian dream of universal smart will certainly be counter-productive. As Nike says… just do it!

  5. It is exciting to see CA moving this direction. In Seattle, we just engaged the utility and a deeply green building in a 20 year pay for performance PPA using dynamic baseline metering and the MEETS transaction structure. More information can be found here: http://www.meetscoalition.org/pilot-projects/