Getting to 21st Century Energy Efficiency

Part 2: What’s Causing Energy Efficiency to Underperform?

-by Aaron Goldfeder, CEO of EnergySavvy

 The following article ran in Electric Light & Power as part 2 of a series devoted to achieving 21st century energy efficiency.

In my last article, I talked about how energy efficiency isn’t reaching its potential as a true resource. If we want energy efficiency to reach its potential, we’ll need to evolve away from data silos and align the experience of key stakeholders in the demand-side management (DSM) industry. Three key areas of particular focus are the methods of energy efficiency data management, quantification and the user experience between utilities and trade-allies.

Leaving the Carter Era Behind — Data Management and Consumer Experience 

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The Carter-era pioneers of energy efficiency established a relatively simple formula for utility energy efficiency portfolios. Establish energy-saving measures (insulation, system change outs, etc.) and then agree on some deemed savings level for each measure or an accepted modeling approach. Then, based on cost-effectiveness tests, establish rebates. Rebates offer the twin benefit of encouraging adoption of energy efficiency measures and providing a form of proof of influence upon adoption. The entire flywheel of planning, evaluation, regulation and cost-effectiveness can be traced back to this simple model.

Rebates aren’t evil. But rebates beget paper forms. Which beget filing cabinets. Which beget rebate processors, consultants, manual efforts and an industry that’s good at dealing with rebates.

The rebate as the sole currency of the energy efficiency transaction made sense in the 20th century, but it has led to an unfortunate data and experience silo that no longer makes sense in the smart grid, digital era. The implications are broad.

First, all of that energy efficiency data often is locked up in one opaque silo: the project data, cost data, deemed or modeled savings, customer information and installation data. This data often is locked up in filing cabinets or PDFs, or it’s manually typed into some customer relationship management (CRM) system, which is pragmatically not useful to the rest of the organization. That silo often gets even harder to deal with if the utility has outsourced its energy efficiency efforts. While more mature energy efficiency efforts tend to in-source or take hybrid approaches, a surprising number of utilities still outsource the responsibility of implementing their portfolios.

Real cost opacity is often another artifact of this approach. Here, the true costs of energy efficiency that materialize through administration, outreach, measurement and so on aren’t reflected in the rebate amounts, which become a proxy for cost.

But the real losers in the 20th-century approach are consumers, whether they’re residential or business customers. Take e-commerce. We demand modern experiences when we shop online; energy efficiency should be no different. To say nothing of dealing with PDFs, paper forms or clunky tools, think of the end-to-end experience. The silo approach prevents the kind of “now that you’ve air sealed and are achieving savings, insulation might make sense — click here” kind of experience that many of us expect. Adding financing should at least be as simple as what car dealers have figured out, but this type of customer-friendly offering only appears in modern programs that have removed the data and experience silos between implementation and finance.

And how are business or residential consumers supposed to figure out how much energy they are saving anyway? Which brings me to the next point.

20th-Century Quantification isn’t Reliable

The 20th-century approach to energy efficiency quantification is to collect a year’s worth of rebates or more, stack them up and then hand them off to evaluation. Typically, six to 18 months later, a report shows up to indicate savings, realization rates and cost. These reports are often hundreds of pages and contain more Greek letters than my graduate-level math books.

This method of energy efficiency quantification would be like a business that doesn’t manage accounting with regular bookkeeping and financial reports and, instead, sends its auditors stacks of receipts and bills to create their only financial statements. No scalable business could survive this way, and neither should the nearly $10 billion DSM industry.

DSM-challenges

DSM is challenged by antiquated methods of sharing data. Without a common platform, silos inhibit true energy efficiency quantification.

Locking up energy efficiency quantification into esoteric paper reports years after the fact creates another murky silo that leaves regulators, utilities and other stakeholders in an often un-empowered and frustrated position. And when evaluation surprises cause regulatory friction or lag, real financial, investor and consumer interests hang in the balance.

As an example, one utility launched an air-sealing program using deemed savings. During evaluation, those savings were found to be 90 percent too high; but the utility was still using the original savings calculations for two to three years after, which meant that the total write-down, once the numbers were corrected, was material.

In another case, a utility took a 37 percent realization rate haircut because of inaccurate energy modeling. Although the models were suspect, the analytical tools to observe actual savings weren’t in place. When the measurement and verification (M&V) cycle came along, shareholders received lower bonus payments and customers were unhappy because they had invested in projects with unrealistic energy savings.

On the financing side, we’ve been hearing for years that energy efficiency finance is finally on the rise, and although substantial progress is underway (hello, on-bill repayment), lenders and the real estate industry are still clamoring for bankable and robust data to calculate risk and value on energy efficiency upgrades.

On the resource planning side, faced with the unpredictability and opacity of energy efficiency, the impact of energy efficiency is often just rounded to zero.

An EE program manager at a large investor-owned utility (IOU) asked his resource planners if they factor in efficiency.

The answer?  “No, because we don’t know where on the grid efficiency will reduce demand, and we don’t know how reliable it is.”

For consumers, despite all the investments in smart grid, dashboards, reports, thermostats and so on, there’s still almost no visible and easy connection between the energy savings investments they’ve made and their actual savings — another by-product of the twin silos of implementation and evaluation.

Trade Allies

The unsung heroes of energy efficiency — the kind that makes buildings more efficient — are the trade allies, whether they’re residential contractors or commercial energy service companies. Often, trade allies are the face of utility and state energy efficiency programs.

Many of these businesses face tight margins and cash flows. But too often, they contend with the silos and 20th-century approaches described. Faced with expensive overhead, there’s often an incentive to simply cut a discount for customers and work around the utility program. A recent Greentech Media article highlights the broader implications and touches on how California’s energy efficiency program might be improved by focusing on lower transaction costs for contractors, reducing administrative overhead, and a focusing on tangible observed savings.

This issue isn’t limited to California. A contractor in the Southwest, for example, has to spend three to four hours sitting in front of the computer to do multiple data uploads in clunky Excel templates just for test-in data on a project. And another East Coast contractor was saddled with outdated software that took hours to start up before data entry even could begin.

Although streamlining and silo busting can help trade allies interact in a more business-friendly way with programs, it can cut the other way, too, in measuring trade ally performance. A statewide energy efficiency program had a single contractor who was responsible for more than three-quarters of all the air-sealing jobs in the state but was underperforming. Twentieth-century evaluation and planning practices meant this wasn’t addressed until the third year of program execution — far too late to take meaningful action.

Driving to 21st-Century Energy Efficiency

We’ve seen how the evolution of the DSM and energy efficiency industry in the 20th-century approach has led to data silos and user experience hurdles that prevent real scale. The question is, how do we get to energy efficiency as a resource that is reliable, bankable and deployable and is delivered in a modern way that aligns with consumer and trade ally expectations?

I wish I could say the answer could be found in just better software. Unfortunately, adding a better tracker or CRM often just automates existing methods and is akin to faster horses, as opposed to the advent of the automobile. Going digital is a good step, but broader change is needed at the strategic level.

Fortunately, innovative DSM organizations are establishing the way to a 21st-century approach and providing insights into realistic, low-risk pathways that offer a better deal to investors, regulators, consumers and the industry.

In my next article, we’ll survey some of these methods and how these innovative organizations are working horizontally across planning, implementation and evaluation to unlock the future of energy efficiency as a resource.

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New Jersey Natural Gas and EnergyFit Nevada Deploy EnergySavvy Optix, Join Study to Evaluate U.S. Department of Energy’s Home Energy Score

EnergySavvy and the U.S. Department of Energy (DOE) are working together to study the effectiveness of the agency’s Home Energy Score in motivating homeowners and homebuyers to invest in energy-efficiency upgrades. Two new EnergySavvy clients, New Jersey Natural Gas and EnergyFit Nevada, are participating in the Home Energy Score study and implementing their programs on the EnergySavvy Optix platform.

Motivating Homeowners

The study aims to answer a simple and important question: do Home Energy Score reports effectively drive increased follow-through and deeper retrofits?

Using easily understood scores to raise awareness about the energy performance of homes has the potential to transform the residential energy-efficiency market by motivating homeowners and homebuyers to invest in energy-efficiency upgrades.

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The U.S. Department of Energy’s Home Energy Score program is also engaging academic leaders in behavior research to support the evaluation efforts and maximize the impact of the Home Energy Score in driving demand for residential energy efficiency. Thirty program Partners have used Home Energy Score to score more than 8,500 homes nationwide.

The Energy Savvy study involves randomly selected control and test groups of homeowners. Homeowners in the control group receive the home energy report that auditors provide through the utilities’ existing programs; homeowners in the test group receive an additional Home Energy Score report.

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All audit and project data are tracked, quantified and analyzed using EnergySavvy’s Optix platform, cloud-based software for utility demand-side management, to provide firm correlation data.  This will confirm how use of the Home Energy Score relates to program follow-through and deeper retrofit activities. DOE’s Home Performance with ENERGY STAR® programs are also engaging EnergySavvy to support the transformation of the home performance industry by using a standardized language for data transfer.

New Jersey Natural Gas: The SAVEGREEN Project®

NJNGLogoNew Jersey Natural Gas (NJNG) is rapidly expanding the number of projects through The SAVEGREEN Project, the utility’s suite of energy-efficiency programs, and building on the huge success of their on-bill financing program.

“EnergySavvy’s Optix platform allows us to provide an enhanced customer experience,” said Jerry Ryan, Energy Efficiency Operations Manager for New Jersey Natural Gas. “Now we can show customers how their home’s energy consumption compares to similar homes and customize their audit reports to our program’s incentives. The ability to test Home Energy Score’s effect on deeper retrofit measures will give us the insight we need to continually improve customer adoption of energy efficiency.”

EnergyFit Nevada:  Next Phase of Growth

EFN_logoDenee Evans, the Executive Director of EnergyFit Nevada, stressed the importance of intelligent efficiency as EnergyFit transitions from an ARRA-funded organization to an ongoing sustainable, statewide program.

“As we embark on our next phase of growth, EnergySavvy will allow us to do more retrofit work with less administrative overhead, reduce the time and effort required by contractors to work with the program and engage Nevada homeowners more intelligently,” Evans said. “As a DOE Home Energy Score study participant, we’ll be learning and incorporating the latest best practices in customer engagement.”

Study Invites One More Program

The grant supporting the Home Energy Score study has capacity for one additional utility or state program study participant. To gain consideration for the study, program executives are invited to meet both DOE and EnergySavvy this week, January 27-30, 2014, at the Association of Energy Services Professionals (AESP) National Conference in San Diego. Representatives will be available at booth number 10 in the conference exhibit hall.

Or, complete our Contact Us form and we’ll get back to you.

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Efficiency Vermont Selects EnergySavvy to Support Programs

Efficiency_VermontEfficiency Vermont, the nation’s first statewide energy efficiency utility, has chosen EnergySavvy’s Optix platform to help scale and streamline its Home Performance with ENERGY STAR ® and Building Performance programs. The effort will help the state of Vermont achieve its ambitious 2020 goals for residential, multi-family and commercial retrofits, and help more Vermonters save money on their energy bills.

A recognized national leader in energy efficiency program delivery, Efficiency Vermont helps state residents reduce energy costs, strengthen the local economy, and protect the environment by making homes and businesses energy efficient.

EnergySavvy’s cloud-based utility software will enable Efficiency Vermont to provide an integrated approach to its energy efficiency programs by bringing customers, contractors, trade allies and the utility onto one platform. Working alongside other software partners, such as OptiMiser for in-home audits, EnergySavvy provides a platform for Efficiency Vermont to help more Vermonters improve the efficiency of their homes.

From Thousands to Tens of Thousands

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Efficiency Vermont has been honored with numerous awards over the years, most recently recognized by the American Council for an Energy-Efficiency Economy (ACEEE) for Retail Efficient Products Residential Lighting, Residential New Construction (with Vermont Gas Systems), and Low Income Services. The organization even received the Department of Energy’s 2013 ENERGY STAR Award for Sustained Excellence. Last year, more than 1,100 whole-house energy projects were completed through Efficiency Vermont’s Home Performance with ENERGY STAR program.

But in the next six years in order to meet the aggressive goals set forth by the Vermont legislature, tens of thousands of homes and businesses will need to be retrofitted. Recognizing the strategic imperative ahead, Efficiency Vermont searched for a platform on which to scale and streamline their programs. After a competitive RFP process, they selected EnergySavvy Optix to provide a strong and flexible program management software platform for its Home Performance with ENERGY STAR and Building Performance programs.

To Scale Energy Efficiency on Earth, Look to the Cloud

Like many organizations, Efficiency Vermont is constantly looking for ways to increase the energy savings provided to customers for every dollar spent by the program. The ability to quantify and deliver savings through data transparency and control has become a prerequisite for program scalability. Purpose-built for utility demand-side management and energy efficiency, Optix fits this need perfectly. Optix simplifies program workflow and brings transparency to energy efficiency data. Continuous innovation and improvement of the platform through implementations in 22 states makes the cloud-based Optix platform future-proof, unlike premise-based and custom software solutions.

“Our goal at Efficiency Vermont is to provide a range of energy-saving solutions for everyone in the state,” said Jim Merriam, Director of Efficiency Vermont. “In the past, we have had to innovate all of our program management solutions in-house, as third-party software options couldn’t live up to the complex needs and goals of our statewide programs.  We look forward to working with EnergySavvy and using Optix as a core component of our infrastructure, helping us to better meet the needs of our customers and partners.”

Efficiency Vermont also becomes the nation’s fourth major program to adopt the Home Performance XML (HPXML) standard for exchanging building performance data internally and externally among its partners. This emerging standard reduces the time, expense and overhead of managing projects among vendors, contractors and programs and provides more predictability for contractors and modeling tools. Through its leadership, Efficiency Vermont is advancing standards like HPXML to quickly incorporate and develop new and innovative offerings to scale energy efficiency.

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Getting to 21st Century Energy Efficiency

Part I: Why is Energy Efficiency So Hard to Measure and Difficult to Manage?

-by Aaron Goldfeder, CEO of EnergySavvy

 The following article ran in Electric Light & Power as part 1 on a series devoted to achieving 21st century energy efficiency.

There’s been a recent wave of commentary that the utility business model is on a proverbial death row, imprisoned by its 19th-century past and spiraling toward irrelevance, thanks to 21st-century revenue-reducing breakthroughs in distributed generation, customer-owned generation, demand response and energy storage.

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The story becomes even more melodramatic when people liken the utility business to the telecommunications sector, which saw landlines supplanted by mobile technology in a matter of years.

But utilities aren’t going away. They represent the backbone of the nation’s energy services, and they provide the safe, reliable and affordable baseload power that’s required to keep lights on and critical functions running in companies and communities. To play on the metaphor, when your cellphone call drops, you’re frustrated. But when there’s no power, it can mean life or death.

Many of us think the utility industry of the near future must adapt to changes to flourish. One of the biggest changes is an increased and enhanced role for energy efficiency. Granted, utilities generally make more money when they sell more power, but the economic and social promises of doing more with less through energy efficiency are too strong to ignore. Faced with emerging changes on the consumption side of the meter, utilities know they can’t just burn more fuel and hope for the best.

Efficiency First

Energy sector thought leader Daniel Yergin had it right when he called energy efficiency the “first fuel.” On an overall basis, energy efficiency has had the single biggest impact of any source in the energy mix of the 11 IEA countries during the past generation:

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Source: International Energy Agency

Utilities get this. And that’s one of the reasons they will spend $10 billion in the U.S. by 2015 on energy efficiency programs to help customers use less energy.

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Source: Ernest Orlando Lawrence Berkeley National Laboratory

Regulators get it, too, which is why most states have a medley of carrot-and-stick policies to boost energy efficiency.

And finally, consumers get it. They want energy efficiency to succeed, and despite a confusing landscape, energy consumers increasingly understand that energy-efficient homes and businesses run better and are more valuable.

Despite all the support, though, energy efficiency is considerably undervalued in the U.S.

In many ways, this is because it’s complex, hard to measure and difficult to manage. This makes it tough for utilities to improve their energy efficiency portfolio performance to meet changing market needs, achieve mandated energy efficiency savings, deliver on customer satisfaction opportunities, and gain the full trust of investors and regulators.

Big Challenges

There are several key reasons energy efficiency is difficult.

Energy efficiency data is hard to accumulate and analyze to gain transparency and insights. Across the industry, data often is locked up in a hodgepodge of spreadsheets, file cabinets, consultant systems and half-customized legacy information technology systems. On top of that, determining and defining energy efficiency is often counterfactual — how do you measure what you never used? Dealing with certain variables in the measurement process, such as seasonality and free ridership, is also a key challenge.

Latency is another issue when it comes to energy efficiency. Data is collected throughout program implementation but savings aren’t measured and validated until the program has been running for a year or more. When it takes a year or two to figure out costs and benefits within a portfolio, it adds tremendous financial uncertainty for all parties involved and adds friction to industry acceleration. During the past 30 years, we’ve gone from the beginnings of the PC revolution to the iPhone, yet energy efficiency quantification — despite billions spent on smart grid — hasn’t advanced much since the Carter era. There must be a better, faster and cheaper way to durably quantify energy efficiency.

Finally, on the delivery side, energy efficiency still hasn’t reached the kind of modern experience that consumers and businesses expect and deserve. There’s been progress on the behavioral side, but the experience for actual energy upgrades often ranges from barely acceptable to horrendous. It’s still too common that participants and trade allies are buried in paperwork, manual effort, ridiculous forms and half-baked software systems. All of this adds unnecessary cost, risk and waste.

There’s considerable commercial misfortune here. It reminds me of an old saying, “What gets measured gets managed,” and to the extent that we can’t quantify energy efficiency, we stunt the industry. In addition, until we get energy efficiency measurement and management figured out, it cannot compete with power generation as a resource.

Although there’s been a rise in energy efficiency spending and a widespread desire to scale up energy efficiency initiatives in the utility industry, many people say energy efficiency hasn’t lived up to expectations or delivered results.

Great Expectations

To a large degree, these critics are right.

Utilities aren’t always able to optimize energy efficiency and institutionalize its practice as a core business capability. Incentive misalignment and complexity often means they can’t realize it as a profit center or effectively include it as part of long-term resource planning. Regulators sometimes focus more on spending levels and confusing, cost-effectiveness tests over making it easy for customers to participate, driving unnecessary costs out and modernizing quantification of what is being achieved. It’s no wonder that some utilities entirely outsource their energy efficiency efforts to consulting firms. Although this offers some attractive benefits, you don’t have to study things carefully to realize it often means higher costs for ratepayers to pay consultants and an outsourcing of risk management, customer experience, resource planning and overall accountability to those not responsible for the long-term success of those activities.

With ratepayers — everyday people and businesses — footing the whole bill and lots of societal goals’ hanging in balance, it neither has to be this way nor should it be.

Innovation and Ingenuity

As we’ve seen in the travel industry before Expedia, personal finance before E-Trade and real estate before Zillow, modern, cloud-based software approaches can be harnessed to bring businesses into the 21st century. American ingenuity often steps in and modernization eventually comes along. And that will happen with energy efficiency in the utility industry — if we can help consumers and companies save money on their energy bills; if we can help utilities grow and plan more effectively; and if we can provide regulators with data and certainty that show how a dollar spent on efficiency pays for more negawatts than megawatts.

 

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NYSERDA Launches The New York Home Performance Portal, Advances Standards

670px-Albany_PanoramaEnergySavvy and Conservation Services Group Jointly Deliver Project Management Portal for New York State Energy Research and Development Authority

Conservation Services Group (CSG) and EnergySavvy have collaborated on a new program management portal that is designed to enhance communication among homeowners, contractors and the New York State Energy Research and Development Authority’s (NYSERDA’s) Home Performance with ENERGY STAR® program managers.  The New York Home Performance Portal will increase customer satisfaction, improve the contractor experience and accelerate completion of energy efficiency projects.

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The Portal provides access to information that allows homeowners, contractors and NYSERDA to track individual energy efficiency projects and program data through an easy-to-access web interface.

“In the past year, NYSERDA achieved a major milestone for its Home Performance program with the completion of the program’s 50,000th project. CSG has worked with NYSERDA for more than a decade and strives to continually enhance the Home Performance program to make it more cost effective and deliver greater efficiencies,” said Mark Dyen, Executive Vice President of Strategy and Products at CSG. “For NYSERDA’s Home Performance Program, we worked closely with contractors, responding to their calls for easier, faster ways to handle everyday program administrative tasks. The integration of EnergySavvy’s Optix software platform with CSG’s project management database accomplishes this.”

To help NYSERDA grow its Home Performance program and increase energy savings per dollar spent, CSG selected EnergySavvy’s Optix demand-side management software platform for its easy-to-use project tracking and workflow features. With integration between EnergySavvy Optix’s platform and CSG’s EnergyMeasure® HUBProgram Management System, the New York Home Performance Portal provides automated incentive and project eligibility screening, incentive optimization, project details, and homeowner financing status.

The New York Home Performance Portal is capable of seamlessly receiving data from any HPXML-compliant* energy modeling tool approved for use in the Home Performance Program. A pilot program, using Energy Design Systems’ Auditor software, is currently underway, making this one of the first production applications of HPXML data transfer in the country. HPXML provides a national standard to easily communicate building retrofit data between software tools and stakeholders.

“NYSERDA’s Home Performance with ENERGY STAR program provides a model for the industry,” said Aaron Goldfeder, CEO of EnergySavvy. “By focusing on breaking down data silos, leveraging industry standards like HPXML and improving the contractor experience, one of the largest energy efficiency programs in the country will continue to grow to meet the energy efficiency needs of the state. We’re proud to work with CSG and NYSERDA on this important program.”

* HPXML stands for Home Performance XML. Learn more about the industry data standard at http://www.hpxmlonline.com/data_transfer.html.

Photo by UpstateNYer (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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