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The conversation at the CPUC this month has been focused on Evaluation, Measurement, and Verification or as it is more commonly referred to EM&V.
Consider the process of designing an incentive program, the basic idea is you are giving out money to achieve a desired result. Typically you make some forecasts of how things will work (referred to as ex-ante forecasts) and then review the actual results after a period of time.
Now that your program is up and running how do you tell if you are achieving the desired result? This is where EM&V comes in. You evaluate the situation, measure the results, and verify they are true.
There are basically two ways you can do this. You can run the program for awhile and then review data after the fact (known as ex-post review), or you can measure as you go. Ex-post reviews have obvious risks, as you don’t know the results until you have already provided incentives. This is how most programs have been operating to date, as accurately measuring performance has been challenging. A better solution would be if you could measure the results as the program was running, effectively building EM&V into your program design.
Advances in technology now allow the use of AMI data from smart gas and electric meters to accurately measure energy savings. This is a huge improvement over relying on predictions (models) and ex-post reviews. Using smart meter data, program administrators will be able to accurately measure the effectiveness of an energy efficiency program as it is running. This is what assembly bill AB 802 is intending to achieve.
Assembly bill AB 802 mandates the use of “normalized metered energy consumption as a measure of energy savings” in energy efficiency programs. “normalized” means the data is adjusted to match a specific variable condition, in this case the weather, in order to make it more accurate. Effectively AB 802 requires that measured data is a part of program design moving forward.
Senate bill SB 350 takes it a step further and requires “incentives are directly liked to energy savings, with a portion of the incentive reserved pending post project savings results”. SB 350 requires incentives to be split vs. paid in full up front. The intent is an effort to encourage long-term, sustainable solutions.
Using software tools to measure data for EM&V is being referred to as EM&V 2.0. As you can imagine, using measured data to determine savings simplifies the entire process and significantly reduces EM&V costs for programs. It also paves the way for new and innovative program designs.
There are some specific details about the types of data that need to be defined before measured data becomes the norm, this is what is currently being discussed at the CPUC.
Speaking of new approaches for program design. PG&E just sent out an announcement that they are funding a residential pay-for-performance incentive program.
The current energy efficiency rebate programs in California are expensive and not tremendously effective. It has been obvious for some time that they are not a long-term solution. PG&E has taken the lead in designing and testing a measured savings program. Last year they rolled out a residential Pay-for-Performance Pilot with over $5 million in incentives. This month PG&E announced that they are looking for program aggregators and are providing up to $20 million in funds for a new 2-year effort.
With other incentive programs slashing their budgets and restricting qualifications it is refreshing to see PG&E stepping up to take the industry towards incentives based on measured performance. Residential pay-for-performance (P4P) is gaining traction and has the potential to create long-term, sustainable incentives that could truly bring market transformation to the industry. All eyes will be on PG&Es residential P4P program as it moves forward.
Efficiency First California
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