Part 3: Pathways to unlocking DSM in the modern age
-by Aaron Goldfeder, CEO of EnergySavvyThe 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.
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.
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&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.