Getting to 21st Century Energy Efficiency

Part 3: Pathways to unlocking DSM in the modern age

-by Aaron Goldfeder, CEO of EnergySavvy

 The following article ran in Electric Light & Power as part 3 of a series devoted to achieving 21st century energy efficiency. Read part 1 and part 2 here.

Got cynicism? You’re not alone. In today’s big data world, it doesn’t take long to feel assaulted by buzzword technology marketers. Companies promise data-driven, smart grid analytics-enabled, big data cloud solutions for achieving breakthrough energy intelligence and success. If anyone can figure out what all that is supposed to mean, please let me know. Really. I read all of my email, so please send your best guess along.

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On the other hand, smart industry leaders such as ACEEE and Greentech Media recently have released papers on intelligent efficiency. Although these are worth reading, they focus primarily on building facilities managers and generally address the consumption side of the meter.

In the final part of this series, I’d like to share what we at EnergySavvy consider to be promising pathways for unlocking the value of demand-side management (DSM) in the modern age — real, pragmatic changes that utilities and DSM organizations are pursuing. My background is in software and I lead a DSM software company, but these advances are as much about evolving the business approach to DSM as they are about the enabling technology. It’s about applying technology in new, DSM-specific ways to drive performance at lower cost, as opposed to automating old processes.

Taking Control (aka Moving From Silos to Service Delivery)

In Part 2 of this series, I discussed the silos born from managing rebates in one area, planning in another, customer experience in still another, and so on, all of which is amplified by outsourcing. We see DSM departments’ gaining more control of their portfolios by using technology to break down artificial barriers. Utilities are realizing that when they have disconnected data, they’re double or triple paying for information technology (IT) while robbing themselves of the benefits of coordinating across their business.

As an example, an EnergySavvy utility client in the Pacific Northwest is embarking on a new approach that allows it to insource its IT platform to span customer experience and program operations while still using a third-party implementer to perform classic functions such as quality assurance (QA). This is a best of both worlds situation, which allows the utility to gain control of the data and customer experience and benefit from the flexible resources of the consultant. The utility expects to deliver a better experience and higher volume while cutting thousands of administrative hours. Plus, if the utility alters its programs or hires different consultants, it retains transparency and control of the data and customer experience. And it’s no longer double paying for IT systems.

Another program we work with provides comprehensive residential services, combining subsidized audits, financing and on-bill financing. Simple enough, right? But this process combined four systems, consultants, paper, fax machines and all the headaches involved in doing this at high volume. To achieve scale, this organization has moved forward with a comprehensive DSM system that blends the silos of program operations, customer experience and finance into a single experience. This simplifies the contractor and customer sales experience and makes financing just as easy as other industries have made it.

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Eliminating silos is even more compelling when marrying customer engagement and program participation. We’ve seen clients use online engagement to generate energy reports and drive lower-cost enrollments in programs, then add targeted participant outreach at each step of the equipment or building-upgrade process. At one southwestern utility, this strategy cut the cost of customer acquisition by 85 percent compared with traditional methods, boosted conversion rates by 50 percent and drove down the timeline from engagement to savings (by as much as 40 percent in another case).

All of these approaches drive deeper energy savings per DSM dollar spent. It’s smart, practical and straightforward to do. But it involves business process evolution enabled by technology, and it means that DSM departments must take control of how they execute.

Measure as You Go — Real-time M&V

One of the most exciting industrial trends is the advent of measurement and verification (M&V) 2.0, or real-time M&V. Whatever the term, the principle is measure as you go. For utilities and DSM departments, this requires breaking the barriers among implementation, planning, measurement, meter data and regulatory affairs to measure DSM effectiveness as it happens.

Real-time M&VReal-time M&V advances evaluation to take advantage of investments in the smart grid. The enabling technology is the ability to combine accurate DSM project data (demand response, energy efficiency, distributed generation, etc.) with geolocation, weather and usage data to calculate observed savings on a rolling basis per project and per premise. With the advent of cheap computer processing, parallel computing and large-scale storage, it’s now feasible to do rolling bill analysis regardless of project volume and usage-data interval.

The nominal cost of a software-driven approach is more than an order of magnitude less expensive than traditional methods. Despite all this, the real ROI comes with the ability to correct DSM performance issues, such as realization rate issues, and bank on actual resource acquisition. Real-time M&V provides new ways to avoid regulatory risk, boost customer engagement, enrich resource planning and take advantage of market transformation.

Now, this doesn’t replace the need for a third-party auditor any more than QuickBooks or SAP replaces the need for a financial auditor. But given the trend toward $10 billion of ratepayer dollar spend in DSM, with an estimated 5 percent spent on M&V, every forward-thinking regulator or industry leader I’ve spoken with sees this new wave as an eventuality. In the modern age, we can’t rely on 500-page evaluation reports and deemed savings and hope for the best. Real-time M&V is a better deal for ratepayers, investors and all DSM stakeholders. 

Trade Allies — If You Love Somebody, Set Them Free

At EnergySavvy, we have deep respect for energy efficiency trade allies, especially residential contractors. As discussed in Part 2, faced with tight margins and cash flows, many of them are crying out for a streamlined approach. Too many contractors are being forced to use outdated software, spreadsheets and fax machines. But it’s not enough just to go digital. Leading energy efficiency programs — from NYSERDA to Arizona Public Service — are advancing an open standard called Home Performance XML, or HPXML.

The idea behind HPXML is to further market transformation by enabling contractors to use modern tools to sell energy upgrades while interfacing with programs in a more seamless way. In other words, HPXML exists to let contractors do what they’re good at and let utilities gain the energy efficiency resources that they are paying for.

To make this work, utilities require centralized DSM software that can understand the contractor work flow while using the XML standard to transfer data from third-party tools to the DSM department. The quality assurance, qualification and final validation calculations all can happen on the back end of the DSM department’s system.

One final example comes from a large investor-owned utility in the Southwest. By investing in DSM software with advanced work flow capabilities, this utility could streamline contractor interactions along with program QA interactions. The results were significant: Trade ally satisfaction rose from 20 to 60 percent satisfied in just the first couple of months, and this is driving up volume while driving down costs.

Software isn’t the (Only) Answer

Throughout this series, we’ve discussed moving from a traditional, inefficient, siloed energy efficiency approach to unlocking the power of DSM through modern technology and process.

The themes we see tend to revolve around bringing transparency and control to DSM as an operational practice area, quantification on an as-you-go basis and streamlining interactions with trade allies.

We’ve also seen how the necessary software technology isn’t really a simple fix. It’s more than a customized customer relationship management (CRM) or a tracker bolted onto an enterprise resource planning (ERP) system. It’s about the right mixture of large-scale analytics, clean project data and business-oriented work flow that accounts for all stakeholders.

But the opportunities and challenges are larger than the technology. The real heroes of modern energy efficiency are the utility and other DSM departments that are smartly applying enabling technologies in tandem with business process changes that often involve departments’ operating differently. These leaders and their cravings for results at a smarter cost profile are driving advancements in measurability and transparency. And that same desire for transparency drives the need for control, which precipitates the business process evolution.

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Early Warnings Aren’t Just for Tsunamis

M&V 2.0: Getting to Real-time Program Evaluation

Thursday, March 20
2 pm Eastern / 11 am Pacific

M&V 2.0 is beginning to change the DSM Industry. Advances in large-scale data analysis, meter data and program feedback make it possible to “measure as you go.” This approach helps achieve more robust, lower risk and lower cost energy efficiency resources.

Now available on demand. Hosted by:

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Join industry thinkers and doers who are pushing the industry away from traditionally slow and expensive methods that produce uncertain results, towards a modern “measure as you go” approach to DSM quantification.

  • Tom Hines, Arizona Public Service
  • Katherine Johnson, Johnson Consulting
  • Charlie Ellis, EnergySavvy

We hope to see you at the webinar! In the meantime, learn more about the newest member of the EnergySavvy Optix family. Calculating program impact in real-time, Optix Evaluate enables a shift from unproven savings and risk to verifiable savings and opportunity making efficiency more easily valued, financed, and deployed.

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Getting to 21st Century Energy Efficiency

Part 2: What’s Causing Energy Efficiency to Underperform?

-by Aaron Goldfeder, CEO of EnergySavvy

 The following article ran in Electric Light & Power as part 2 of a series devoted to achieving 21st century energy efficiency.

In my last article, I talked about how energy efficiency isn’t reaching its potential as a true resource. If we want energy efficiency to reach its potential, we’ll need to evolve away from data silos and align the experience of key stakeholders in the demand-side management (DSM) industry. Three key areas of particular focus are the methods of energy efficiency data management, quantification and the user experience between utilities and trade-allies.

Leaving the Carter Era Behind — Data Management and Consumer Experience 

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The Carter-era pioneers of energy efficiency established a relatively simple formula for utility energy efficiency portfolios. Establish energy-saving measures (insulation, system change outs, etc.) and then agree on some deemed savings level for each measure or an accepted modeling approach. Then, based on cost-effectiveness tests, establish rebates. Rebates offer the twin benefit of encouraging adoption of energy efficiency measures and providing a form of proof of influence upon adoption. The entire flywheel of planning, evaluation, regulation and cost-effectiveness can be traced back to this simple model.

Rebates aren’t evil. But rebates beget paper forms. Which beget filing cabinets. Which beget rebate processors, consultants, manual efforts and an industry that’s good at dealing with rebates.

The rebate as the sole currency of the energy efficiency transaction made sense in the 20th century, but it has led to an unfortunate data and experience silo that no longer makes sense in the smart grid, digital era. The implications are broad.

First, all of that energy efficiency data often is locked up in one opaque silo: the project data, cost data, deemed or modeled savings, customer information and installation data. This data often is locked up in filing cabinets or PDFs, or it’s manually typed into some customer relationship management (CRM) system, which is pragmatically not useful to the rest of the organization. That silo often gets even harder to deal with if the utility has outsourced its energy efficiency efforts. While more mature energy efficiency efforts tend to in-source or take hybrid approaches, a surprising number of utilities still outsource the responsibility of implementing their portfolios.

Real cost opacity is often another artifact of this approach. Here, the true costs of energy efficiency that materialize through administration, outreach, measurement and so on aren’t reflected in the rebate amounts, which become a proxy for cost.

But the real losers in the 20th-century approach are consumers, whether they’re residential or business customers. Take e-commerce. We demand modern experiences when we shop online; energy efficiency should be no different. To say nothing of dealing with PDFs, paper forms or clunky tools, think of the end-to-end experience. The silo approach prevents the kind of “now that you’ve air sealed and are achieving savings, insulation might make sense — click here” kind of experience that many of us expect. Adding financing should at least be as simple as what car dealers have figured out, but this type of customer-friendly offering only appears in modern programs that have removed the data and experience silos between implementation and finance.

And how are business or residential consumers supposed to figure out how much energy they are saving anyway? Which brings me to the next point.

20th-Century Quantification isn’t Reliable

The 20th-century approach to energy efficiency quantification is to collect a year’s worth of rebates or more, stack them up and then hand them off to evaluation. Typically, six to 18 months later, a report shows up to indicate savings, realization rates and cost. These reports are often hundreds of pages and contain more Greek letters than my graduate-level math books.

This method of energy efficiency quantification would be like a business that doesn’t manage accounting with regular bookkeeping and financial reports and, instead, sends its auditors stacks of receipts and bills to create their only financial statements. No scalable business could survive this way, and neither should the nearly $10 billion DSM industry.

DSM-challenges

DSM is challenged by antiquated methods of sharing data. Without a common platform, silos inhibit true energy efficiency quantification.

Locking up energy efficiency quantification into esoteric paper reports years after the fact creates another murky silo that leaves regulators, utilities and other stakeholders in an often un-empowered and frustrated position. And when evaluation surprises cause regulatory friction or lag, real financial, investor and consumer interests hang in the balance.

As an example, one utility launched an air-sealing program using deemed savings. During evaluation, those savings were found to be 90 percent too high; but the utility was still using the original savings calculations for two to three years after, which meant that the total write-down, once the numbers were corrected, was material.

In another case, a utility took a 37 percent realization rate haircut because of inaccurate energy modeling. Although the models were suspect, the analytical tools to observe actual savings weren’t in place. When the measurement and verification (M&V) cycle came along, shareholders received lower bonus payments and customers were unhappy because they had invested in projects with unrealistic energy savings.

On the financing side, we’ve been hearing for years that energy efficiency finance is finally on the rise, and although substantial progress is underway (hello, on-bill repayment), lenders and the real estate industry are still clamoring for bankable and robust data to calculate risk and value on energy efficiency upgrades.

On the resource planning side, faced with the unpredictability and opacity of energy efficiency, the impact of energy efficiency is often just rounded to zero.

An EE program manager at a large investor-owned utility (IOU) asked his resource planners if they factor in efficiency.

The answer?  “No, because we don’t know where on the grid efficiency will reduce demand, and we don’t know how reliable it is.”

For consumers, despite all the investments in smart grid, dashboards, reports, thermostats and so on, there’s still almost no visible and easy connection between the energy savings investments they’ve made and their actual savings — another by-product of the twin silos of implementation and evaluation.

Trade Allies

The unsung heroes of energy efficiency — the kind that makes buildings more efficient — are the trade allies, whether they’re residential contractors or commercial energy service companies. Often, trade allies are the face of utility and state energy efficiency programs.

Many of these businesses face tight margins and cash flows. But too often, they contend with the silos and 20th-century approaches described. Faced with expensive overhead, there’s often an incentive to simply cut a discount for customers and work around the utility program. A recent Greentech Media article highlights the broader implications and touches on how California’s energy efficiency program might be improved by focusing on lower transaction costs for contractors, reducing administrative overhead, and a focusing on tangible observed savings.

This issue isn’t limited to California. A contractor in the Southwest, for example, has to spend three to four hours sitting in front of the computer to do multiple data uploads in clunky Excel templates just for test-in data on a project. And another East Coast contractor was saddled with outdated software that took hours to start up before data entry even could begin.

Although streamlining and silo busting can help trade allies interact in a more business-friendly way with programs, it can cut the other way, too, in measuring trade ally performance. A statewide energy efficiency program had a single contractor who was responsible for more than three-quarters of all the air-sealing jobs in the state but was underperforming. Twentieth-century evaluation and planning practices meant this wasn’t addressed until the third year of program execution — far too late to take meaningful action.

Driving to 21st-Century Energy Efficiency

We’ve seen how the evolution of the DSM and energy efficiency industry in the 20th-century approach has led to data silos and user experience hurdles that prevent real scale. The question is, how do we get to energy efficiency as a resource that is reliable, bankable and deployable and is delivered in a modern way that aligns with consumer and trade ally expectations?

I wish I could say the answer could be found in just better software. Unfortunately, adding a better tracker or CRM often just automates existing methods and is akin to faster horses, as opposed to the advent of the automobile. Going digital is a good step, but broader change is needed at the strategic level.

Fortunately, innovative DSM organizations are establishing the way to a 21st-century approach and providing insights into realistic, low-risk pathways that offer a better deal to investors, regulators, consumers and the industry.

In my next article, we’ll survey some of these methods and how these innovative organizations are working horizontally across planning, implementation and evaluation to unlock the future of energy efficiency as a resource.

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Not Content with #1, Mass Save Takes Customer Engagement to the Next Level

MA_PA_logosWhile ACEEE has ranked Massachusetts the number one state in energy efficiency for two years in a row, Mass Save® is not resting on its laurels. Selecting EnergySavvy’s Optix Engage, it’s bringing the most usable and effective online home energy assessment to the state’s 2.8 million households with twin goals of educating customers on energy savings opportunities and increasing energy savings per home.

Mass Save is an initiative sponsored by Massachusetts’ gas and electric utilities and energy efficiency service providers, including Columbia Gas of Massachusetts, The Berkshire Gas Company, National Grid, New England Gas Company, NSTAR, Unitil, and Western Massachusetts Electric Company. The Sponsors of Mass Save work closely with the Massachusetts Department of Energy Resources to provide a wide range of services, incentives, trainings, and information promoting energy efficiency that help residents and businesses manage energy use and related costs.

Selecting Optix Engage, Mass Save will guide customers through a four-step interactive and visual online home energy assessment. The tool collects information about a home’s structure, heating and cooling, appliances, and energy usage habits and calculates their energy savings potential. Customers are then provided specific measures they can take to achieve these savings. If qualified, customers can sign-up for a detailed in-home assessment where a contractor will implement some of these energy-saving measures.

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Deploying a customer-engagement platform for its many utility program administrators at this scale requires modern analytics and data-driven engagement strategies. “Mass Save has set the bar for energy efficiency in this country and they continue to build on the state’s leadership position,” said Aaron Goldfeder, CEO of EnergySavvy. “We are proud to work with Mass Save to generate greater energy and financial savings for the citizens of Massachusetts.”

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New Jersey Natural Gas and EnergyFit Nevada Deploy EnergySavvy Optix, Join Study to Evaluate U.S. Department of Energy’s Home Energy Score

EnergySavvy and the U.S. Department of Energy (DOE) are working together to study the effectiveness of the agency’s Home Energy Score in motivating homeowners and homebuyers to invest in energy-efficiency upgrades. Two new EnergySavvy clients, New Jersey Natural Gas and EnergyFit Nevada, are participating in the Home Energy Score study and implementing their programs on the EnergySavvy Optix platform.

Motivating Homeowners

The study aims to answer a simple and important question: do Home Energy Score reports effectively drive increased follow-through and deeper retrofits?

Using easily understood scores to raise awareness about the energy performance of homes has the potential to transform the residential energy-efficiency market by motivating homeowners and homebuyers to invest in energy-efficiency upgrades.

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The U.S. Department of Energy’s Home Energy Score program is also engaging academic leaders in behavior research to support the evaluation efforts and maximize the impact of the Home Energy Score in driving demand for residential energy efficiency. Thirty program Partners have used Home Energy Score to score more than 8,500 homes nationwide.

The Energy Savvy study involves randomly selected control and test groups of homeowners. Homeowners in the control group receive the home energy report that auditors provide through the utilities’ existing programs; homeowners in the test group receive an additional Home Energy Score report.

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All audit and project data are tracked, quantified and analyzed using EnergySavvy’s Optix platform, cloud-based software for utility demand-side management, to provide firm correlation data.  This will confirm how use of the Home Energy Score relates to program follow-through and deeper retrofit activities. DOE’s Home Performance with ENERGY STAR® programs are also engaging EnergySavvy to support the transformation of the home performance industry by using a standardized language for data transfer.

New Jersey Natural Gas: The SAVEGREEN Project®

NJNGLogoNew Jersey Natural Gas (NJNG) is rapidly expanding the number of projects through The SAVEGREEN Project, the utility’s suite of energy-efficiency programs, and building on the huge success of their on-bill financing program.

“EnergySavvy’s Optix platform allows us to provide an enhanced customer experience,” said Jerry Ryan, Energy Efficiency Operations Manager for New Jersey Natural Gas. “Now we can show customers how their home’s energy consumption compares to similar homes and customize their audit reports to our program’s incentives. The ability to test Home Energy Score’s effect on deeper retrofit measures will give us the insight we need to continually improve customer adoption of energy efficiency.”

EnergyFit Nevada:  Next Phase of Growth

EFN_logoDenee Evans, the Executive Director of EnergyFit Nevada, stressed the importance of intelligent efficiency as EnergyFit transitions from an ARRA-funded organization to an ongoing sustainable, statewide program.

“As we embark on our next phase of growth, EnergySavvy will allow us to do more retrofit work with less administrative overhead, reduce the time and effort required by contractors to work with the program and engage Nevada homeowners more intelligently,” Evans said. “As a DOE Home Energy Score study participant, we’ll be learning and incorporating the latest best practices in customer engagement.”

Study Invites One More Program

The grant supporting the Home Energy Score study has capacity for one additional utility or state program study participant. To gain consideration for the study, program executives are invited to meet both DOE and EnergySavvy this week, January 27-30, 2014, at the Association of Energy Services Professionals (AESP) National Conference in San Diego. Representatives will be available at booth number 10 in the conference exhibit hall.

Or, complete our Contact Us form and we’ll get back to you.

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