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How can we deliver energy and cost savings with a quick payback to help customers with already stressed finances?

As I outlined in my recent post about 2021 predictions & trends, I'm asking my team at Eversource to figure out how we can deliver financial relief and energy savings to our customer base amid the economic challenges of the moment so I figured I'd also turn the question to the Energy Central community. How are you looking to achieve these goals with your customers? 

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christopher landrum's picture
christopher landrum on Jan 21, 2021

Tilak,

We have been addressing this very issue with several of the REP's in the ERCOT (TEXAS) Region. I founded a company called Industream (industream.co) which was initially designed to provide greater price transparency for the Texas small business and residential customer, then COVID happened. The platform has cost hundreds of thousands and four years of planning and design to build. Today, I provide the platform to its customers, free of charge. We are also offering the entire (white-labeled)  platform to either regulated or deregulated power companies, which automates the customer engagement experience. By simply reducing the number of hands that have to touch each customer contract, we are able to reduce the customer cost of adoption, in which the savings is passed on to the customer. The REP's still maintain their margin, the customer has a more predictable kWh pricing and we help support each other in these difficult times. I have provided a few links below for anyone that is interested. Stay safe and healthy and support your neighbor. 

Regards,

Chris Landrum  

Here are a few links:

 

 

https://www.industream.co/energy-plum-demo

https://www.industream.co/admin-video

https://www.industream.co/zone-price-video

www.industream.co

https://www.fundable.com/browse/fundraises?keywords=energy+plum

 

Afshin Matin's picture
Afshin Matin on Jan 24, 2021

Hi, 

I respond this question from a government policy perspective. The payback period, is an example of a simple calculation method for the customer to evaluate whether a particular energy efficiency action is suitable or not. High efficiency ACs and furnace heaters can be promoted for their lower electricity consumption and hence demonstrated for performance by the length of payback time. Such devices can reduce the electricity bill by as much as 30% annually translating into payback periods quite shorter than their service life. 

Rafael Herzberg's picture
Rafael Herzberg on Jan 25, 2021

Usually power contracting is pretty complex when it comes to a list of aspects involved, such as:

1. power factor related penalties,
2. time of use rates selection for the ongoing power profile consumption,
3. contracted demand vis-à-vis recorded demand (idleness or excess penalties),
4. deregulated power contracting options,
5. demand control to increase the load factor 
6. programming time of use to reduce waste and focus on off-peak hours
7. cost arbitrage using other sources such as storage, natural gas, etc.

My experience tells that usually industrial. commercial and institutional energy users are able to take advantage of one or more opportunities (list of 7above). The great news is that these are typically low-cost or no-cost solutions which can be captured in the short term. 

And last but not least, these opportunities can be arranged in a shared savings fashion - I mean with an energy consultant so it could potentially generate a positive cash flow since the very beginning!

Norbert Vasen's picture
Norbert Vasen on Jan 25, 2021

Hi Tilak,
My opinion in these situations is to take the low hanging fruit of Energy Efficiency. You save with that and reinvest in fruit that hangs a little bit higher, but is also heavier, so even more savings.
Low hanging fruit is often found by measuring in real time the total consumption and then the consumption downstream of departments or big machines like the compressor, chiller, etc. These measurement often reveal problems with setpoints, timing, behaviour, which require little investment. Typical recommissioning issues. I have also a Youtube of 10 minutes on these type of measurements. https://youtu.be/0sO5tQxrQ1Q
I hope this helps.
Norbert

Ivon Louis-Letang's picture
Ivon Louis-Letang on Jan 25, 2021

Utility budgets are an absolute necessity for any Business or home while Project Budgets are fluid in nature whether for Energy Savings or Business necessities.  Energy Project funding is much more acceptable to the client if it can be tied in to the utility budget.  One way of funding that would be if a project looks healthy to use the energy savings incentive dollars towards the project cost plus pay the additional project cost  based on the calculated savings of the project to fund the project upfront or on completion. The agreement would be to tie the payment to about a 1-5yrs savings on the Customer utility bill to be with-held by the utility Co. or the Vendor can buy the savings from the Customer and accept the utility payment till the project is paid in full.  This way the Customer can utilize his solid utility budget to fund a large portion at the pre-energy savings annual budget allocation cost to payback the Project without an additional expense payment

Larry Eisenberg's picture
Larry Eisenberg on Jan 25, 2021

Hi Tilak: An alternative concept to answer your question is what I have come to call the utility company of the future.  The vision is that every single home / building where possible should be equipped with renewable energy generation capability (rooftop solar and/or small scale wind) and energy storage capability.  The utility would pay for the installation 100% and sell the home owner / building owner generated by their own building. The utility would retain ownership of the system and provide necessary maintenance over its lifetime. Done at scale across a neighborhood or across the city, the price per kWh would be very low.  This would provide an immediate savings to the customer, avoid the need for complex contracts, and provide ongoing jobs and income for the utility. It goes without saying that they should also support an upgrade of all energy using features on the property to achieve maximum efficiency.

Hope this helps your thought process.

Best, Larry

 

 

Mary Cauwels's picture
Mary Cauwels on Jan 25, 2021

Such a great question and great conversation - I particularly appreciate the concept of low hanging fruit and using the initial savings from something small and easy to "fund" the next thing. Pair that with the idea of an energy plan/budget that includes a roadmap for savings over time. Start with smart lighting, efficient scheduling to match time of use rates while you plan for solar/battery storage, EV charging or electrification projects. For the Commercial accounts whose businesses have been impacted during the pandemic, offering loans or deferred payments for improvements makes so much sense if possible. I heard a spokesperson from SMUD in California say they were doing a significant higher number of solar and efficiency projects on commercial accounts during the pandemic because they wanted to do the work while they were in lockdown anyway.

Ned Ford's picture
Ned Ford on Jan 26, 2021

Many respondents have noted efficiency.  My contribution does not appear elsewhere, I believe.   The critical element in making efficiency work for a utility is regulatory comprehension of the fact that the TRC test ensures lower cost for all customers, including non-recipients, and that the regulatory body understand and support the payment of an incentive, in addition to program costs and lost revenues.

This has been done in Ohio, with a regulatory concurrence of 13% of verified net savings, paid in net present value in the year following the program expenses, and amounts to five to six percent of the actual savings to customers.  Because the programs pass TRC the net effect to all customers is to lower the cost of total provision of supply.

For low income customers, a robust understanding of those two factors allows programs which are nominally marginal or failing TRC to be included in a large system package which passes TRC by a wide margin.

I will skip over the fact that Ohio's current regulatory system is under fire and the PUCO chairman resigned after the FBI searched his home.   It is an exception, perhaps, or worse, but Ohio's performance should be considered prior to 2019.

Our programs cost $1.9 billion and produced gross savings of more than $12 billion.  This is considered healthy among other state programs.  Yet the entire U.S. could double its' annual savings from utility efficiency in a matter of months simply by raising the program level in 44 states to the current level in the best six states. 

Efficiency is an $8 billion annual industry in the U.S.   In 2020 efficiency saved more energy than wind or solar built that year will deliver in 2021.  Wind and solar are accelerating due to their rapid cost decline over the last several years.  They may also provide opportunities to lower the burden of electricity, but I warn people that the savings will be small and slow.

When typical utility efficiency programs are evaluated for low income customers, they typically ignore many important aspects of the programs.   First, they are most often delivered by low income energy assistance organizations, and the availability of the money from the utilities is used to reinforce and multiply the effect of dollars from numerous other sources.

Second, the savings which are produced are examined using the same tools that are used for non-low-income program activity.  This most often results in something like a Standard Practice Manual assumption of savings per unit of efficient product.  While that is a sensible means of delivering and examining the programs, it neglects large benefits to low income customers.  If low income energy assistance is available, it saves those public dollars.   If homelessness is risked, it reduces that risk and that substantial public dollar cost.  It reduces arrearages for utilities.  

In a nation where more than half the population is by one measure or another considered to be low income or at risk, these programs are a powerful tool which is seriously under-used.  I don't advocate developing metrics for these secondary benefits for low income services.  It can be done and it is probably instructive to identify a few of the better studies.  But it is like the avoided capacity created by efficiency.

In Ohio, $1.9 billion in expenditure over 12 years has created an avoided amount of capacity which is measured at something north of 1,550 MW's.  That would be $1.5 billion worth of power plants if you used a quick and dirty equivalent value.   But efficiency also eliminates the need for maintenance and expansion of the distribution and transmission grids.   That would double the $1.5 billion.  We would add another $300 million in benefits if we recognize the value of avoiding 20% reserve margin, which is the PJM value.

What if I'm wrong about the value of those estimated savings?  I don't care.  Make any realistic estimate of avoided capacity, and it is larger than the actual program costs, including the incentives paid to the utilities.  

That former PUCO chair who resigned in the wake of the FBI investigation once told me that he "didn't believe" that the efficiency programs produced capacity savings.  That disbelief didn't disqualify him from becoming PUCO chair.  Many states also politicize the regulatory process, and few states have regulators who are serious about producing the most value for the customers of their states.  Many lawmakers are meddling with processes they don't understand, and many more are oblivious to processes they can and should understand if they took the time.

The cumulative effect of efficiency is huge.  Over 12 years more than 90% of Ohio's customers of the regulated IOU's have directly participated in the programs.  Those who have not probably benefited by shopping at stores, working for employers or purchasing goods made by companies which did.

The efficiency programs were deliberately aimed at schools, hospitals and government buildings.   This sped up the distribution of efficiency benefits.

I often point out that the nuclear industry promised power that was too cheap to meter, and the efficiency industry delivered it.   The cost of being too cheap to meter is high.  The level of respect is too low.  The level of awareness is ridiculously low.

Taken as an individual action or set of actions for an individual customer these programs seem pretty modest.  Taken as a whole and examined over time, utility efficiency programs have almost absolutely lowered the cost of electricity in the United States by about 20% per year over the last twenty years.

As I said before, we could double that in a few months if we got serious about incentives and awareness of what the TRC test shows.

Wind and solar create jobs, create huge tax revenues for rural communities which desperately need them, and when you look at the dollars on a large scale it is not preposterous at all to suggest that global transition to wind and solar generation has a real potential to make the global economy stronger than it has ever been in human history.  Think about nine new jobs for every one displaced, and proceed from there.

Efficiency is not as sexy as wind and solar.   It will remain cheaper than delivered power from a utility.  Ohio utilities routinely secure millions of dollars worth of saved electricity at less than a penny per KWh from industrial energy customers who think they are already as efficient as it is possible to be.   This happens after a decade of efficiency programs.

I don't want to appear to be favoring efficiency over wind and solar development.  All three offer large benefits.  All three create many new jobs.  All three produce economic benefits we can't afford to continue to be casually dismissive of.

This was a very good question.   But it doesn't mean much if we don't translate the good answers into something larger.  I keep trying and I appreciate the opportunity to do so in a setting which brings other people with similar motives together.

Ned Ford's picture
Ned Ford on Jan 26, 2021

I want to add one more emphatic point:  The simple fact is that taken as a whole, a dollar spent on industrial efficiency is more valuable to low income customers than a dollar spent on a low income customer's home.  This is because the avoided capacity created by industrial savings results in lower costs to all customers.

A witness in a legislative hearing in Ohio a few years ago testified that efficiency capacity savings were diminished further because they flowed to all of the customers in the entire PJM region.   His testimony would have been more respectable had he acknowledged that all of the states surrounding Ohio had stronger efficiency programs than Ohio did at the time, except for WV and KY.  He actually was trying to mislead the lawmakers, and emphasized the low level of program activity in those two states instead.

It is easy to confuse and mislead the public, including lawmakers and regulators on these matters.  It doesn't take a rocket scientist to figure out who is deliberately misleading anyone in these matters.  I just want to make the case that this is a fight, not a polite conversation, and that industrial customers are often seeking to raise the rates of other customers because that enables them to negotiate private deals with the utilities which hardly anyone is able to follow.

In Ohio, industrial energy users get about $200 million of other people's money every year.   It used to be almost double that amount.

We need to respect our knowledge and be clear about who is misleading the public when it happens.

Matt Chester's picture
Matt Chester on Jan 27, 2021

The simple fact is that taken as a whole, a dollar spent on industrial efficiency is more valuable to low income customers than a dollar spent on a low income customer's home.  This is because the avoided capacity created by industrial savings results in lower costs to all customers.

This is an eye-popping fact-- can you point to a paper/study that highlights this fact? I can see how it could make sense in theory, despite some perhaps seeing it as counterintuitive at first glance, but would love to see the numbers run in practice. 

Tilak Subrahmanian's picture
Tilak Subrahmanian on Jan 29, 2021

Wow!  Love the dialog here.  Reading some of the commentary here, I must say that we are lucky to operate here in New England where there is a very supportive Regulatory/Legislative environment.  In fact they push us hard to deliver on the promise of Efficiency – and I think that we do.  ISO New England’s charts show it - it’s real.  We have a populace that, over the years, sees the benefits of these investment; Commercial and Industrial customers – large and small – have invested in Energy Efficiency.  Low hanging fruit has gone

Our near-term challenge is how to deal with the fallout from COVID-19.  For instance, K-12 schools are struggling to keep up with all the demands of social distancing and the direct costs of dealing with this pandemic.  Add to that the need for increased air-flow through buildings, the stress on HVAC systems and resulting breakdown – they don’t have the capacity to think about much in the way of capital investment.  So how do we remain relevant to them in the short-term?  What can we do to help reduce their energy bills in 2021 – with little outlay of capital?  How do we help mitigate the risk of system breakdowns?

All of this is equally true for our residential customers who’ve been cooped up at home for the last 10 months.

I posed a question specific to COVID-19 reopening a couple of days ago. Would love to hear your thoughts on that thread as well. 

John Simonelli's picture
John Simonelli on Feb 1, 2021

Coming from the North East region where Eversource is located, one of the biggest problems in this area is the portability of both residents and industry. It seems as if no one stays in the same place longer than five years. Approaching someone with a recommendation that may have a 3 to 7 year payback is really hard for both homeowners and businesses to justify. Essentially  payback needs to be a lightning quick return on their investment. As was pointed out by other authors there are some quick fixes, converting all the lighting to efficient LED, potentially installing rooftop solar, and a few other items can get you a little bit quickly. However, the big dollar expenditures like replacing HVAC systems or putting in some form of battery storage, etc. are the big-ticket items which are not going to fly because the payback is longer. The only way the big-ticket items will proliferate is if Eversource and/or the state kick in a significant amount of the upfront investment.

The longer-term solution may be to get the state to mandate certain building code standards. An example: requiring 6-inch exterior walls with a higher R value insulation, requiring certain energy efficiency rated windows and doors, requiring appliances sold in the state to have a specific EER, requiring new construction have the electrical work done to allow EV charging, require heat pumps, if solar is being installed mandating that some form of storage be included, etc. If the building codes start requiring these types of efficiencies to be put in up front as part of construction, it makes it a little easier to swallow because the cost is spread out over long-term financing on the home/facility.

Matt Chester's picture
Matt Chester on Feb 1, 2021

It seems as if no one stays in the same place longer than five years. Approaching someone with a recommendation that may have a 3 to 7 year payback is really hard for both homeowners and businesses to justify.

This is an interesting point-- I wonder if there's data out there to back up the anecdote re: how transient the NE population is compared with other regions and how that impacts customer behaviors. 

Is there the opportunity for some kind of on-bill financing that, if a homeowner leaves and sells their home, can be transferred to the new owner? 

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