Rebate Programs Don't Work

4/9/2015

New EUC report identifies how to create Market Transformation

Programs alone don’t work.

Energy Efficiency rebate programs can help stimulate business but they will never lead to true Market Transformation. To date, no energy efficiency program in the USA has achieved significant scale and realized dramatic reductions in total GHG emissions.

The Energy Upgrade California program despite it’s efforts, has not invigorated our industry or made any significant steps toward true Market Transformation.

Here’s some rough numbers to consider. Over 250 million dollars spent for 12,000 retrofits, the actual numbers are slightly different, but let’s use these figures for the sake of argument. 

With some simple math here’s what I come up with. The average cost of a retrofit is $14,000, the average Energy Savings is less than 20%. (18% for Advanced Home Upgrade, 9% for Home Upgrade). $250,000,000 / 12,000 = $20,833 spent per retrofit. The average rebate is about $3,000 this means the programs have spent $17,000 to provide an incentive of $3,000.  It doesn’t take much of an imagination to realize this can’t go on forever.

The California Public Utility Commission is responsible for ratepayers funds. One of their obligations is to insure that the funds are well spent. Our State has very aggressive energy savings goals, in part to eliminate the construction of new power generating facilities. The states long-term energy plan is counting on the emergence of a large-scale energy efficiency industry. The State recognizes that energy efficiency is the lowest cost option to long-term energy reductions.

Recently EUC hired a consulting firm to determine where the bottlenecks are in the current program structure and develop a strategy that will lead to true market transformation. The report is out, and the net result of why the program doesn’t work is  finally evident to all. The report mentions several areas of concern with “lack of statewide standardization and formal idea sharing” as the single largest limitation. The report goes on to discuss certifications and training plus the real estate industry involvement. Streamlined financing programs and developing best practices are also mentioned

That’s it, the program does not work because the submission forms are not consistent across the State! All we have to do is fix the forms and true Market Transformation will occur, it’s that easy. OK that’s a bit cynical, but where is anything in this report that we have not heard about or tried before? What this represents is a long-winded way of saying more of the same, with some minor changes, will lead to Market Transformation.

What we really need is a new way to consider Energy Efficiency and rebates. We believe that a pay for performance model is the right path to true market transformation.

When incentives are based on measured savings, rather than modeled or deemed savings, energy savings will be the goal. This creates a market where performance is rewarded and innovation can drive business models. 

How do we get there? Honestly we are there now. Energy Efficiency Meters exist today, in the form of software solutions. These tools allow us to compare baseline energy use against post-retrofit energy use. With measured energy savings we can now function like other markets, such as the solar industry. With a performance based system that rewards real energy savings we can leverage incentives to create true Market Transformation.

Enough of the bureaucracy and consultants, it’s time we stand up and insist on a different approach, enough is enough. They have had 5 years and millions of dollars to try their way. It’s time for real change and more of the same is just not an option. We need to get the money into the hands of contractors and homeowners. We need to encourage energy savings over program submissions. Then we can talk about true Market Transformation.

Sincerely

Charles Cormany
Executive Director
Efficiency First California

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