We’re hitting program savings goals, now what?
Many states across the country jumped on the energy efficiency bandwagon about five or ten years ago, and the results since have been impressive. For example, in 2006, Illinois and Michigan ranked 26th and 33rd respectively in ACEEE’s energy efficiency scorecard. In the latest scorecard, Illinois and Michigan have moved up to 10th and 14th, an impressive accomplishment. While utilities in these states and others have launched and grown successful energy efficiency programs, “hitting the savings goal” just isn’t enough anymore. Here are some of the top trends DNV GL is seeing among utilities as they refine their approach to managing their energy efficiency regulatory obligations.
- Achieve more savings from non-lighting measures / comprehensive solutions – Both regulators and utilities desire a greater portion of savings from non-lighting technologies. Historically, lighting has been the workhorse of savings for energy efficiency programs for the following reasons:
- It’s relatively easy to measure the savings
- The ratio of incentives to project cost is higher than other technologies
- It’s ubiquitous among customers
- It’s generally the first thing customers think about when deciding to reduce energy consumption
Although lighting has clear advantages, much of the “low-hanging fruit” has been plucked, and utilities have been making progress in increasing the percentage of savings coming from non-lighting measures. A sample of DNV GL utility clients shows that lighting savings as a percentage of total savings has declined from approximately 74% in 2009 to about 55% in the most recent program year.
- Increase the accuracy of forecasted savings – Forecasting accuracy is mainly an issue with commercial and industrial programs, where large projects with a single customer can have a big impact on annual savings. In some cases, a single project can represent 25-50% of a program annual savings values. Tactics used to increase forecasting accuracy include:
- More frequent contacts with customers / contractors regarding project status – For this tactic to work successfully, the program needs to strike a balance between proactively “nudging” a project toward completion and being an irritant. As long as the person asking for the status update is courteous and professional, we have found that the project staff welcomes the inquiry and it does move the project more quickly toward completion.
- Assigning project probabilities across individual projects or groups of projects – Developing project probabilities works well when there is past history to rely on or there are large numbers of relatively homogenous projects, i.e., residential or small business. With large projects, assigning a probability is usually an exercise to turn qualitative information into quantitative information, which drives more frequent contacts with the project owner.
- Developing incentive offers / program rules around project completion – Although this tactic does work, it can have a negative consequence of penalizing projects that can’t complete quickly (non-lighting) and signals the marketplace to wait around for the program “sale.”
- Increase the Utility’s JD Power score – Energy efficiency programs offer utilities an opportunity to interact with their customers in a more positive way than they traditionally do (sending bills and outage restorations). Utilities can get a lift in customer satisfaction from energy efficiency programs in one of two ways:
- Transactional satisfaction with programs based on participation
- Program awareness
Generally, the number of customers that participate in a program in any given year is only a small percentage of a utilities customer base. Therefore, mere awareness of programs can provide a much bigger impact. Typically, customers that are simply aware of energy efficiency programs provide utilities a much higher JD Power rating than those that are not aware.
- Synergize programs with other regulatory obligations / initiatives – Utilities are now realizing that energy efficiency regulatory requirements are (for most states) here to stay, and thinking about how to incorporate these obligations into other initiatives can provide multiple dimensions of value to their customers. Some of the most popular initiatives that utilities are tying to efficiency programs include:
- Demand response / curtailment programs – Many customers confuse demand response and energy efficiency anyway, so this is a natural tie-in. Some states include demand response within energy efficiency goals and some keep it separate. Even though these initiatives may be tracked separately, it does provide an opportunity to communicate more comprehensively to customers about how they can manage their utility costs.
- Automatic Meter Reading (AMR) or “Smart Meter” deployment – With the advancement of technology, big data, and utilities’ desire to show customer benefits (as opposed to operating cost savings), many larger utilities are deploying advanced metering infrastructure across their customer base. The meters do not save energy by themselves; it is only what customers do with the information coming out of the meter that provides an opportunity to save energy. Some utilities are working to integrate technologies such as programmable thermostats with the advanced metering infrastructure to highlight the customer benefits of this infrastructure investment.
- Geographical / targeted load reduction efforts – Due to shuttering older power plants or the prohibitively high costs of increasing distribution capacity, some utilities have been directed by their governing regulatory agency to achieve significant load reductions in targeted areas of their service territory. These mandates typically result in higher marketing and outreach efforts to promote energy efficiency programs in the targeted area.
With energy efficiency programs maturing across many states, it’s not surprising to see utilities working to integrate the programs with other initiatives. In many ways, this trend reflects the widespread success energy efficiency programs have had in reducing load and improving customer satisfaction over the past five to ten years. By integrating energy efficiency programs with other utility or regulatory initiatives, utilities are able to achieve more than just their hitting their savings targets.