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Why is energy savings contribution instead of attribution important for NMEC programs?

While California has often been at the top of the nation’s leaders in energy efficiency, its recently stalled in its progress to regain the number one status. I believe that, until we solve our current issues with energy savings attribution for energy efficiency programs following normalized metered energy consumption (aka NMEC) procedures, we’re doomed to fall further behind, rather than regain our top status. Why? Because we’re allocating far too many resources on attribution, rather than contribution. We need to work on simplification now – here’s why.

Note – this post focuses on the California energy efficiency market and hopes to engage those interested in this market and other program designers who are interested in learning from our experience.

The CPUC is the ultimate authority over how energy efficiency dollars are spent in the state. Their policies have widespread impacts and the way that custom projects are administered is crucial – these projects make up some of the largest savings opportunities in the state. I truly hope we can work with them to produce reasonable guidance on this front. But if we’re forced to calculate the final destination of every kWh associated with projects, we’ll be hard pressed to find the deep energy saving projects that the CPUC has identified as a primary goal. Those projects, by their very nature must include energy saving opportunities that make up all types of savings – end of life replacements, early retirements, add-on equipment and the like. If we can’t focus more simply on the bottom line, as was the intent of AB 802 to focus on savings at the meter, then we’re trying to catch up with our shoelaces tied together. As an industry, we need to advocate for realistic custom review policies that focus on contribution – achieving savings, rather that the attribution of every kWh.

What is Ex Ante Review and Why do I care?

The approach to determining the impact of energy efficiency measures has slowly gotten more complicated and burdensome over the 20 years since I started kW. In 2011, the CPUC initiated Ex Ante Review process (aka “Custom Review”) under which projects receive review by the CPUC or their consultants prior to incentive approval.

The initiation of the custom review process was for good reason. The IOUs in the state were getting very low marks by evaluators and the CPUC was determined to improve the process. But the additional oversight, and the added time to review projects slowed delivery, introduced uncertainty, and generally slowed the volume of custom projects year over year.

Fast forward to 2015

I was pretty happy when AB 802 was passed back in 2015 because it promised simplification. Along with setting new benchmarking requirements in California, the bill offered relief to energy efficiency incentive treatment through the adoption of metered savings approaches. The bill included a provision to use existing equipment as the baseline for energy savings calculations when NMEC was used.  The relevant part of the bill isn’t long:

the commission, in a separate or existing proceeding, shall, by September 1, 2016, authorize electrical corporations or gas corporations to provide financial incentives, rebates, technical assistance, and support to their customers to increase the energy efficiency of existing buildings based on all estimated energy savings and energy usage reductions, taking into consideration the overall reduction in normalized metered energy consumption as a measure of energy savings. Those programs shall include energy usage reductions resulting from the adoption of a measure or installation of equipment required for modifications to existing buildings to bring them into conformity with, or exceed, the requirements of Title 24 of the California Code of Regulations, as well as operational, behavioral, and retrocommissioning activities reasonably expected to produce multiyear savings. Electrical corporations and gas corporations shall be permitted to recover in rates the reasonable costs of these programs. The commission shall authorize an electrical corporation and gas corporation to count all energy savings achieved through the authorized programs created by this subdivision, unless determined otherwise, toward overall energy efficiency goals or targets established by the commission. The commission may adjust the energy efficiency goals or targets of an electrical corporation and gas corporation to reflect this change in savings estimation consistent with this subdivision and subdivision

The approach identified in the bill was especially important because it seemed to offer a way out of what has become a real drag on California energy efficiency programs. We hoped that we could focus again on finding, and implementing energy savings and counting the reductions that we observed using established M&V guidelines like EVO’s International Performance Measurement and Verification Protocol (IPMVP).

However, the implementation of AB 802’s cited approach may be trickier than we think. Initial guidance from the CPUC, like their Jan 31st “NMEC Ruling” has so far indicated that programs that follow NMEC procedures will also go through the Ex Ante review process to “provide feedback and inform evaluation”. It sounds as if that may be a less stringent review but that’s not entirely clear. That’s still troubling because that process has been fraught with complexity and delays, especially for 3rd party implementers (who haven’t always had the best seat at the table in discussions between the utilities and CPUC’s project reviewers).

The other reason the decision is troubling is that the measure-by-measure treatment of custom projects may undermine the simplicity of metered savings if we try to manage the multiple baselines that come up in the custom process.

Here’s how ugly and complicated the current framework has gotten

If you’re unclear at just how complicated custom projects have gotten – allow me to give a short illustration:

Here’s a simple table of EE measures, and how they are treated when it comes to baseline and lifetime of savings. We’re trying to get deep savings, so we have projects in multiple end uses.

nmec-ee-measures-eul-baseline-lifetime-savings-kw-engineering-energy-efficiency-consultant

First, you’ll need to catch up on the types of retrofits you can have:

nmec-ee-retrofits-kw-engineering-energy-efficiency-consultant

And the types of equipment life we consider:

nmec-ee-equipment-life-kw-engineering-energy-efficiency-consultant

Each of these measures has a different baseline because of their interaction with code and other factors. For instance, we don’t credit VFD savings if we’re adding the VFD to a pump that is beyond its useful life. And for accelerated retrofits we actually have to calculate savings relative to two baselines; 1) the existing equipment energy use for the length of the RUL, and 2) the life beyond that (EUL – RUL) relative to code.

Pretty complicated eh? Did I lose you? In that case here’s a few hundred pages of resources

(at a minimum) that you’ll need to perform attribution successfully under current rules. Don’t mean to pick on PG&E per se, their info was just easiest for me to put my hands on.

   nmec-201-customized-procedures-manual-kw-engineering-energy-efficiency-consultant  nmec-cpuc-ee-policy-manual-kw-engineering-energy-efficiency-consultant
PG&E Customized Energy Efficiency Policy & Programs Rulebook Version 1.5 2019 Statewide Customized Offering Procedures Manual for Business

 

CPUC Energy Efficiency Policy Manual (July 2013)

 

OK, just give me simplicity and NMEC!

Here’s the rub. With the NMEC ruling, it appears that we’ll have to do all the above, just to determine the appropriate EUL to govern our project and the relative combination of each of the measures to the existing baseline. This brings me to the contribution vs. attribution question.

contribution-nmec-energy-use-graph-ee-meausure-projected-actual-savings-kw-engineering-energy-efficiency-consultant

In the graph above, the difference between the projected energy use and the actual is my savings. Since I have a ton of data, I can do an accurate job of determining those savings at the meter. However, the attribution is complicated.

splits-nmec-energy-use-graph-attributions-ee-meausure-projected-actual-savings-kw-engineering-energy-efficiency-consultant

It’s actually more complicated than shown above because each of the measures has a different lifetime, and a different baseline.

The result is that, if I’m asked to do just as rigorous a job on the attribution as we did with custom projects, we’re going to end up doing a lot more work for each project instead of less. More work means more time, which means energy efficiency is more expensive, and therefore the size of the overall resource is diminished because it’s no longer cost effective.

How did we get here?

Most of the complication comes from the fact that we’ve already “claimed” the savings due to the impacts of codes and standards. Baselines are complicated because we don’t want to pay for savings that we’ve “already paid for” through code interventions. Code and standards (C&S) alterations have been some of the most cost-effective energy efficiency program interventions to date. Why? Because a relatively small effort to change codes, has a long-lasting and profound impact on the market.

However, one wonders about some of the assumptions involved. When I add an efficiency measure to an existing building, and then claim savings, it’s assumed that code compliance is perfect. A brief tour through a few buildings will tell you that’s far from the truth. Were those savings claimed for C&S programs? Was 100% compliance and persistence assumed (really, evaluators, let me know)? If so, the evaluators missed something and claimed too much. If not, why can’t we claim them now? We appear to be leaving a real gap in savings between theory and practice.

Conclusion

I propose that with NMEC, we focus first on the contribution. That is fundamentally what we really care about. Then we can make the attribution to other types of measures, but let’s not overcomplicate. Since we know the contribution accurately, let’s allow more leeway in the attribution among measures. Yes, let’s estimate relative savings and baselines, but not with customized engineering calcs for every measure, and its respective baseline. Surely, we can make use of the volumes of data collected on prior projects to assist with attribution. That way we can do it on a bigger, more cost-effective scale. Or otherwise, lets propose an overall “haircut” or realization rate on savings that gets us out of the morass. We need some creative thinking on this front or we’re going to really gum up the works of energy efficiency programs instead of meeting our energy reduction goals.

We’re at a crossroads as the NMEC energy efficiency platform is just taking off. We want to make sure we get this right, especially as we transition to 3rd Party Implementation of programs. If we expect the market to respond positively to pay-for-performance cost structures, we need program rules that incent the right behavior, and credit real savings.

 

Thanks much to Ben Hoffman for his valuable contributions to this article.

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