Customer-Funded Efficiency

Posted on May 12, 2015
Posted By: Rick Barnett
Untitled Document

Continuing from previous posts about possible over-crediting for estimated energy savings, I’ve taken a closer look at the method used by regulatory agencies to approve customer-funded efficiency programs.

Intertwined with a long-standing flow of public dollars to promote energy conservation, many US utilities include efficiency in their customer-funded programs.  The history of utility efficiency programs is included in Lawrence Berkeley National Lab’s (LBNL) January, 2013 “Future of Utility Customer-Funded Energy Efficiency Programs in the US:  Projected Spending and Savings to 2025”.  Utilities began addressing conservation after the 1973 oil embargo, but their programs were not very visible until (page 6) “the western energy crisis of 2000-2001 brought renewed attention to energy efficiency….”.   

Efficiency programs claim credit for saving KWH from efficiency products and services dispensed.  This saved KWH is converted to dollars saved by customers, and then compared with the cost of implementing the program, to establish cost-effectiveness.

LBNL’s March, 2014, report, “The Program Administrator’s Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs" lists 587 customer-funded programs approved by meeting cost-effectiveness standards.  To justify customer financing for an efficiency program, regulatory agencies allow utilities to estimate rather than measure KWH savings.

This task is challenging, since “savings” is something that doesn’t happen, and can’t be measured.  ASHRAE’S “Guideline 14-2002 for Measurement of Energy and Demand Savings” states (page 4) “There is no direct way of measuring energy use or demand savings since instruments cannot measure the absence of energy use or demand”.   This means that it’s impossible to verify the accuracy of the estimates used by regulatory agencies..

Without measurement, regulatory approval of efficiency programs is based on low quality data requiring significant assumptions.  This is important, because over-estimating would distort energy forecasts, and inaccurately assign credit toward energy and emission goals. 

Even with a very high efficiency rating, if an electrical product is “on” for no purpose, energy is being wasted, not saved.  Saving is more complex than just installing a more efficient product.

An example of a regulated program employing cost-effectiveness tests is Mississippi’s new “Quick Start” program.  Mississippi Public Service Commission approval is intended to assure that funded programs return adequate value to ratepayers, based on estimated KWH saved.

The Southeast Energy Efficiency Alliance’s (SEEA) April, 2014 report, “Energy Efficiency Quick Start Programs:  A Guide to Best Practices”, indicates that the Mississippi Public Service Commission uses the cost-effectiveness tests defined in the 2001 California Public Utility Commission’s (CPUC)Standard Practice Manual”.  

The CPUC manual (page 2) defines an energy efficiency improvement as “reduced energy use for a comparable level of service, resulting from the installation of an energy efficiency measure or the adoption of an energy efficiency practice”. 

ASHRAE’S “Guideline 14-2002” also defines saved energy as a comparison (page 4):  “the absence of energy use or demand can be calculated by comparing measurements of energy use and/or demand from before and after implementation of an energy conservation measure”.

From these definitions, credit for efficiency products and services should be expressed in KWH per equivalent unit of service or use: it should have a numerator and denominator, rather than being expressed in KWH.

As noted in “Saving Energy”, only by eliminating the denominator (per equivalent unit of service or use) can “savings” be expressed in KWH.  None of the reviewed documents indicate what happens to the denominator, so I will continue looking for an explanation.

An easily measured option for customer-funded programs is Thermal Optimization, which eliminates waste from the largest piece of residential energy bills, space conditioning.  A continuous thermal wrap can thoroughly separate outside from inside:  it contains wasted energy like a blanket cuts off air to a small fire.  Accurately measured with home performance scoring, Thermal Optimization is unaffected by the reliability of estimated savings. 

Compared to the potential, current efficiency programs have done little to reduce space conditioning energy.  If these programs strive to reduce the most consumption per dollar invested, Thermal Optimization is a cost-effective option. What customer wouldn’t want a new program to increase comfort while using the least amount of energy?

Authored By:
Rick Barnett has a B.A. in psychology (UCSB) and an Interdisciplinary Master’s in Environmental Management (Oregon State University, 1981).  Before becoming a builder, Rick introduced the Oregon waste hauler industry to recycling in 1976, and over the next few years convinced many to offer recycling as a service.  Oregon has been a national leader in recycling ever since.Rick started Green Builder in 1996, and was recognized in 1998 by Sustainable

Other Posts by: Rick Barnett

Efficiency Gap - March 07, 2016
Energy Asset - January 21, 2016
After Weatherization - September 25, 2015
Energy Customers - April 08, 2015
Saving Energy - March 10, 2015


May, 20 2015

Les Lambert, P.E. says

While I share your dismay concerning using savings "estimates", I disagree with your statement, relying on ASHRAE “Guideline 14-2002 for Measurement of Energy and Demand Savings” stating that savings can’t be measured.

Not having read the ASHRAE document, I can only say that either you have quoted it out of context, or that ASHRAE is mistaken. My paper, “Getting your Money’s Worth: Diagnostic Benchmarking for Commissioning” (ACEEE 2012) describes a method for, and shows examples of, savings measurements in buildings. It's practical, and should be routinely used for savings measurement.

I have spent a substantial part of my career in projects that involve experiment design, and I also know a good many people who work in the evaluation field who would contest the assertion that savings can't be measured. This is a situation where "preposterous" is the appropriate word.

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