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Managing the Future of Energy Efficiency

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Katherine Johnson's picture
President JOHNSON CONSULTING GROUP

Dr. Katherine Johnson is President of Johnson Consulting Group. For nearly 25 years, Dr. Johnson has worked closely with investor-owned, rural electric cooperatives, and municipal energy...

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This item is part of the Energy Efficiency - July 2022 SPECIAL ISSUE, click here for more

Lingering Challenges and Innovative Solutions to Residential Energy Efficiency Programs

Although electric and gas utilities have offered residential energy efficiency programs for nearly 30 years, some program designs struggle to gain traction with customers. Despite the utility’s best efforts to provide enticing rebates or create attractive packages that combine energy audits with follow-on technical services, many residential programs still struggle across many utility service territories.

This article summarizes the findings from recently completed evaluations from seven Investor-Owned Utilities (IOUs) in Arkansas, exploring barriers and solutions to residential program strategies. The Independent Evaluation Report (IEM) for PY2021 with the Arkansas Public Service Commission on July 7, 2022  (IEM PY2021 Annual Report).

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The ongoing barriers identified in this statewide assessment are summarized next, followed by some innovative strategies utilities use to reduce these common obstacles.

Barriers to Residential Program Participation

  • Lack of awareness or understanding of the program offerings and benefits.

Even though energy efficiency programs are available, several recently completed program evaluations determined that lack of program awareness remains one of the biggest challenges to encouraging customers to enroll in these programs.

A recent evaluation of a downstream lighting program in a Southern state revealed that only 16% of the residential survey respondents were even aware of the program. Most could not identify which products were eligible for rebates.  

Other barriers identified in this multi-utility evaluation included customers' reluctance to invest in energy upgrades.  

  • Scarcity of qualified contractors who will participate and support program enrollment

Recruiting and engaging participating contractors is another ongoing challenge for many utilities, especially since contractors are the critical ambassadors of the program to residential customers. A recently completed evaluation determined that some customers experienced long waiting times for contractors to complete the jobs—an issue exacerbated by the COVID-pandemic, reduced labor supply, and increasing costs.

An excerpt from a recent evaluation report identified how these issues decreased customer interest in these energy efficiency programs.

“In 2021, the program is ‘running into the psyche of the public,’ who are worried about jobs, mandates, and kids. They did expect that with the combination of rising inflation and rising coal and natural gas prices, people would be pushed in their direction to save energy and money. The supply chain has also been an issue, from light bulbs to computer chips. This program also suffered from crew shortages for a while and a shortage of potential participant leads for contractors. Some uncommonly cold weather and snowfall helped make the public more receptive to the program and responsive to advertisements. However, the rise of the Delta Variant resulted in some crews getting sick, and people being reluctant to have others enter their homes.” (IEM PY2021 Annual Report).

  • The “Spilt incentive,” especially among renters where the landlords are not willing to invest in upgrades because they do not pay the utility bills.

This disconnect between renters and landlords is especially problematic among low and moderate-income households.  Unfortunately, many of these renters live in energy-inefficient homes, increasing their overall energy costs.

  • Lack of upfront capital required to make investments in energy efficiency improvements.

Customers with even higher household incomes also lack the funds to make energy efficiency investments or are hesitant to take on additional household debt.

Innovative Solutions

This recently completed multi-utility program evaluation also identified some successful strategies utilities and program implementers use to minimize these barriers, which are highlighted next.

  • Promote the program offerings everywhere.

Program outreach should not be limited to just a few markets, such as spot radio or tv ads. The most effective promotional campaigns push messages on multiple channels, including social media, setting up tables at community events, targeted direct mailings, and email blasts.  Email broadcasts proved one of the most effective ways to raise program awareness and motivate customers to enroll in the residential programs.

  • Deputize and empower contractors.

Trade allies are critical to the success of many residential programs, whether they are retailers stocking energy-efficient products or contractors promoting highly efficient HVAC equipment. But these contractors often face competing demands on their time, especially with the labor shortages and supply chain delays.  Utilities can play an essential role in engaging these trade allies by providing them with ongoing training and support, especially in marketing and outreach. Successful programs view trade allies as an extension of the utility brand and provide co-op advertising and branded clothing that provides these contractors with a competitive edge in the market. (IEM PY2021 Annual Report)

  • Offer financing programs to underserved markets, such as on-bill financing programs targeting renters. 

Rural electric cooperatives have been offering Tarrifed On-Bill (TOB) financing programs for over two decades. More recently, this on-bill financing option has been provided through Investor-Owned Utilities (IOUs) in multiple states. Through these programs, the utility offers the up-front capital to make needed upgrades in residence, which are paid through a utility surcharge. The customer then repays the investment through the energy savings from the bill. The following chart illustrates this innovative and highly successful financing solution.

Source: How$martKY Program Design

Figure 1: The Pay As You Save® Program Model

Arkansas: Ouachita Electric Cooperative – HELP PAYS® is just one example of an on-bill tariff; the program can “serve all customers, regardless of income, credit score, and renter status.”. The program targeted the rental market and reached 2% of its service territory in the first eight months (https://www.oecc.com/help)

As this most recent program evaluation illustrates, utilities and energy organizations still face multiple and ongoing challenges to engage residential customers. However, examples of innovative solutions, described in this article, illustrate ways that utilities and energy organizations can successfully engage residential customers in this changing market.

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