How to approach the next phase of energy efficiency

By: Val Jensen, ICF

Energy efficiency (EE) has delivered huge benefits to states and electric companies for nearly four decades. The outcomes of various EE initiatives launched across the United States can be measured in avoided power plants, lower carbon emissions, lower electric bills, jobs created, or simply as increased customer control and satisfaction. While relatively inexpensive and easy-to-acquire efficiency is the norm in many jurisdictions, moving to more cost-effective programs wholesale will require a total shift in program design and delivery approaches that drive future energy savings. 

Meeting the challenges associated with delivering more energy efficiency will also require policy changes at the state level. For context, a large minority of states still effectively penalize electric companies for promoting energy efficiency through regulations that do not allow for revenue adjustments in response to reduced sales, let alone provide financial incentives. Even states that have created supportive policy frameworks for energy efficiency will need to ensure that carbon reduction policies (including increased electrification) are not working at cross-purposes with efficiency programs targeting reduced electricity sales. It is critical to reconcile efficiency and electrification in the context of carbon reduction goals.

Specifically, states and electric companies should consider launching and advancing energy initiatives by focusing on five complementary areas:

1. Relying more on data to inform customer engagement and service: Granular customer insights gathered by advanced technology can reveal energy use reduction opportunities. In practice, introducing sensing and control technologies that produce data can be paired with propensity models to more effectively identify savings opportunities and the customers most likely to take them. Electric companies that receive and curate these sets of data can better understand current energy use and make more informed decisions to use tech to improve efficiency, while keeping costs down.

2. Rolling out more personalized offerings: Data can also provide important context about individual consumers—including: current energy consumption, preferred channels of communication, and level of interest in offsetting or eliminating carbon emissions. Electric companies that want to advance beyond traditional EE should focus program implementation and marketing around delivering experiences that bring value to individuals as they improve grid conditions for the broader jurisdiction.

3. Moving toward evaluation, measurement and verification 2.0: Introducing new, more sophisticated analytics to regular energy efficiency operations can significantly improve program evaluation for states and providers, alike. Statistical techniques, including randomized control trials, have already proven effective in validating savings achieved outside the traditional measurement of specific technology replacements. These techniques allow electric companies, in particular, to shift the focus of evaluation, measurement and verification (EM&V) from individual customer behaviors to capturing the aggregate behavior of everyone participating in a program. Further, analytical platforms that support simultaneous evaluation can outfit program managers with a new level of accurate, near-real-time results that inform service improvements. 

4. Introducing new service models that involve customers in service decisions: Launching or advancing new programs should include the incorporation of business models that involve customers in energy distribution decisions when possible. In practice, customers can be rewarded for achieving specific policy objectives such as reducing electricity use, rather than being paid to take an action that is assumed to yield electricity savings. The energy provider value of customer incentive programs resides in their ability to simplify energy delivery and relieve program administrators from having to decide which technologies will be promoted through which channels—effectively leaving those decisions to energy users and the market.

5. Normalizing using customer-sited tech to increase visibility on the utility side: Today, it is possible to entirely manage our energy using cost-efficient digital sensing and control technology. Smart thermostats and building energy management systems give customers and electric companies the ability to automatically, and almost instantaneously, adjust energy in response to system conditions. Customer-sited tech like smart thermostats provide a level of visibility into individual energy consumption that, along with analytics and control technologies, can inform innovative, utility-led actions and outcomes.

Keeping an Eye on Cost While Moving Toward A Smarter Energy Future

Today’s reality is that energy efficiency is becoming more expensive as incremental savings targets expand to meet evolving organizational goals and market demands. In fact, EE is being called upon to deliver even more outcomes as electric companies and states pursue deep carbon reduction and as the amount of distributed, variable renewable resources on the grid increases. Energy consumers, for their part, have become more energy conscious, and thereby, more interested in EE and other methods of eliminating or offsetting their energy use on an individual level.

A rise in the use of data and analytics across the energy industry offers exciting opportunities to improve customer program marketing and implementation. Data can also directly support creating more customized and market-based efficiency programs at a potentially lower cost for everyone involved.

The normalization of customer-sited technologies ranging from in-home smart thermostats to sophisticated campus-wide building energy management systems gives customers and providers the ability to automatically and quickly adjust energy use in response to system conditions. Combined with a range of inexpensive sensing and control technologies, data-informed programs offer states and electric companies, in particular, great promise and potential to deliver better service to more energy-conscious customers. 

About the Author

Val Jensen is a senior fellow at ICF focusing on critical issues facing utilities, including building operational resilience, improving EE and DER programs and rethinking customer engagement.

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