Advocacy Update: August 2017

Advocacy Update: August 2017

Residential Pay-For-Performance is gaining traction in California. PG&E is close to launching a Pilot program and hopefully will have it in place by the end of the year. The other three IOUs (Investor Owned Utilities) are watching closely.

Running the current Energy Upgrade California rebate program is expensive and by most accounts is not sustainable. How expensive? Check out this chart I created from the recently released CPUC report on EE portfolio costs.

Fiscal Year 2015 - Energy Upgrade California - CPUC Program Expense Report

I think we all would agree that 43 million dollars a year is a stack of cash. Utilities are looking at new approaches and Pay-For -Performance looks promising. The question is how will Pay-For-Performance save money?

There are several financial advantages to a P4P program compared to the current rebate program structure.

With P4P the IOUs can save 30% by only paying on actual savings. PG&E has reported that 30% of the current EUC projects produce utility bill neutral or negative results. This means after the work is complete the homeowner's utility bills show no reduction or they increase. This is worth $13 million a year to the IOUs. With that much money at stake, you can bet the utilities are watching P4P closely.

P4P programs are cheaper to administer, as the cost to evaluate measure and verify (EM&V) the results are much less. The measurement is built-in and verification is measurable via utility bills and software tools.

It’s likely the P4P programs will be run by third parties, not the utilities. Shifting program design and administration away from utilities is already in motion. Recent regulations require that the majority of new program design and implementation has to be performed by third parties (60% or more). A case-in-point is the PG&E P4P Pilot, which will be administered by a third party.

The point I am trying to illustrate is there are huge savings to the utilities if they switch away from expensive to run, and not incredibly effective rebate programs currently in place. We are not exactly sure where things are going at this moment. I suggest you consider your business model and how the rebate program factors into your business. The only thing I can guarantee you is that things are changing and the current programs are too expensive to survive.

Charley Cormany

Executive Director

Comments

Missing the mark

These dismal percentages you reported are self-inflicted by the utility companies. Handing this off to a third party will not change that. This will just reallocate the expenditures creating a consultant's goldmine. My guess is if you drill down on that 30% zero or increased energy use statistic you'll find they all went through the basic home upgrade program. This program has become nothing more than a glorified discount program. We installed over-sized 96% efficient systems, replacing over-sized 80% efficient systems. All we did was upgrade the inefficiencies and negated the benefits of insulation and air sealing, if these were done at all.

P4P is another example of looking at a problem sideways and blaming others for a programs poor performance. Shifting this burden to third party consultants will shift the same expenditures to the consultants and provide a scapegoat for the utility companies, justifying their rate increase requests. The contractors, the people the regulatory agencies and utilities believe they need, will again be appeased to the detriment of the new P4P program, and in a few short years we will be re-litigating these same issues, having learned nothing.

The average rebate from an EUC advanced home upgrade project is about $9,500. It ranges from $8,000 to $13,000. This pay out is based on whole house energy savings, averaging about 40%, and savings on kWh's and Therm's. But only $3,500 of that $9,500 will be in whole house energy savings. The rest is from estimated energy savings and that is based on decades of empirical data. These are not just guesses. These retrofits, if done right, do not result in zero or increased energy use. Home comfort improves. Air quality improves. Utility bills plummet. Airflow slows on average from ACHn 0.60 to ACHn 0.28. The HVAC system reduces from a 4 ton to a 2 ton. The hot water will go from 62% for storage to 97% with tankless including the recirculating pump. Energy use plummets as the house reacts to the improvements. And we know this because the homes post-upgrade performance operate, on average, within 64° and 79° without the assistance of mechanical ventilation, regardless of outdoor temperatures. The homeowner's lifestyle ceases to be relevant. And a 4-6 kW solar systems transforms the house to ZNE and will stay ZNE. There will be no need to revisit the house in the future as solar degrades to address inefficiencies. This is what pay for performance looks like and it exists in its current form.

We are trying to rebuild a wheel that doesn't need to be rebuilt. Just replacing a spoke here and there is all that's necessary. Look at the MF upgrade program. The 2017 program year was developed by or with the assistance of a third party consultancy. That program is a farce an was no better than the 2016 program year. The payouts are minimal, the timelines too restrictive, and it doesn't seamlessly span multiple years. All factors that I know prevented a handful of potential candidates who wanted to go through the program but chose not to. We had better luck, with similar or higher returns, leveraging the existing tax code.

Makes you wonder who's actually in charge of actually evaluating all this and who they are listening to.

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