The Need for Dynamically Managed Energy Efficiency Programs
Across the US, Energy Efficiency programs’ benefit-cost ratios are significantly decreasing due to 1) many measures becoming industry standard practice, 2) increased administration costs, and 3) the remaining more complicated projects requiring more engineering resources, additional monitoring and verification and policy changes.
This is leaving the EE program managers with lesser measure options that are more costly in management, engineering, measurement and verification. Additionally, it is more complicated for customers to implement such EE measures further requiring an EE based project management to realize the savings.
Based on current practice, the EE implementers (Energy Utilities and 3rd party program implementers) file their program performance quarterly or on an annual basis. We believe this approach needs to be much more dynamic. This means knowing the EE program performance on demand with exact measure information, type of application, selected and participating contractors and unique marketing methods.
When we apply dynamic program management concepts to existing programs, even under the more stringent benefit cost calculation tools, we are increasing the benefit cost ratio of programs by up to 50%. Although there are a few dynamic program management tools in the market today, most tools are proprietary and are not dynamic (i.e. they do not provide feedback on demand). With dynamic program management, by knowing the actual benefit-cost ratios and other performance metrics of programs, we believe that program implementation costs can be significantly reduced. There are many options for increased success of the programs such as limiting sub-performing measures, setting a threshold for measure costs, requiring performance requirements from installation contractors, and increasing project incentives. All of these options result in higher benefit cost ratios. Clearly, in order to hold program managers responsible for overall program performance, we must use dynamic tools that report the performance metrics back to the program manager. They can then manage the results by making on-going adjustments. It should be noted that energy utilities typically require quarterly or annual KPIs from their program implementers. These are static metrics, however, and they do not resolve the need to make program changes early on, and to ensure that the benefit cost ratio and other metrics are satisfied.
For energy efficiency programs to continue to be implemented, we highly encourage the use of dynamic management. Dynamic management will hold program managers responsible for the final outcome of their programs and will prove to the regulators that the public funds (energy efficiency surcharges) are properly expanded.
Dynamic management’s main objectives are to assist the energy efficiency program managers with the following goals:
- Meeting program target dates and other metrics, and to avoid end-of-year or seasonal changes.
- Tracking program results and implementation contractor performance to avoid unwanted surprises in achievements and budgets.
- Executing programs in accordance with your utility and regulatory standards, policies and procedures.
- Providing a program tracking and reporting system to effectively monitor all aspects of program results, measure categories, program administration and implementation costs and to avoid “surprises” in program goals such as unnecessary activities, expenditures, customer and market participation and challenges or issues.
- Reviewing monthly program budget reports and ensure corrections are made as soon as the challenges are discovered.