1. Ori Skloot, Interim Executive Director, Board Chairman
President, Advanced Home Energy
Tuesday, March 18, 2014
EUC 2.0:
A Market‐Based Solution
For Meeting Our Energy Goals
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2. EUC Performance So Far
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New Job Submissions
Month and Year
Energy Upgrade California New Job Submissions by Month
PG&E*
SDG&E **
SCE/
SoCalGas
SoCalGas
Only
SoCalGas/L
ADWP
SW Home Upgrade JAN2014 2

3. • PG&E Energy Upgrade California™ (EUC) projects
produced 21% actual gas savings
• Average incentives of only 17.2%
• 95% of market activity is Advanced path driving projects
that average nearly $13,000!
• EUC performed better than comparable programs based
on ACTUAL SAVINGS realization rates:
o EUC (21%)
o New York (16%)
o Midwest (18%)
o Massachusetts (13%)
There’s a Baby in the Bathwater!
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4. • Scalable private‐sector market
• $100+ billion economic activity
• Reward results (that is, actual energy savings)
Ideas that work win,
ideas that don’t fall away
Time for a Big Shift
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5. California Solar Initiative (CSI) is a successful
example of moving from a program to a market.
• Business models defined by industry and feedback from the market
• Competing private companies offer diverse solutions
• Savings monetized through net metering and accountability to results
• Each aggregator / implementer has a suite of services similar to EUC
The Solar Story
Vertical Integrated Sub‐Contracted Franchised White Labeled Solar Lease / PPA
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6. • What’s the difference? The METER.
• Efficiency can use actual, historical savings data
to track energy‐unit savings in relative “real‐
time”
We can harness the same market forces that
propelled the Solar industry to scale the
Energy Efficiency industry.
Can We Deliver EE Like Solar?
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7. Eight Steps to an EE Market
1. Allow Diversity of Business Models CalTEST to calibrate predictions
2. Create an Energy Efficiency “Meter” with CalTRACK providing ongoing
calibration of predictions to savings and incentive values, feedback to contractors
3. Reward Energy Savings by moving from incentivizing % savings to actual therm /
kWh energy unit savings
4. Group Projects to Reduce Variance to allow like‐projects to be grouped
according to multiple market performance factors
5. Provide Two‐Tiered Incentive Structure by dividing program into resource and
non resource‐based (or market transformation) incentives
6. Pass Incentives Through Industry so that resource payments become a pass
through for contractors
7. Incentivize Peak Load Reduction to support demand‐side capacity
8. Move to a Utility Procurement model that pays for performance
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8. • Ability to have choice in methods used to reliably
predict savings fosters business diversity
• CalTEST allows multiple energy modeling software into
EUC Home Upgrade
• CalTEST system is based on actual California homes
o CalTEST ensures sufficient accuracy based on historical data
o Vendors get feedback to tune predictions to California homes
• Ensure common communication through HP‐XML
STEP 1:
Allow diversity of business models
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9. • Contractors need simple feedback on performance
• CalTRACK delivers real‐time performance tracking
• Adjust future predictions based on historical post‐project results
• No fault (customers get full rebates upfront)
• Feedback on how contractors perform compared to their peers
o Allow good contractors to benefit from superior performance
• Performance is not simulation, it is a function of measuring results
and applies to ALL ENERGY EFFICIENCY APPROACHES:
STEP 2:
Create an energy efficiency “meter”
 Deemed
 DEER
 Regressions
 Simulation
 Home Energy Upgrade
 New approaches to come…
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10. • Move from incentivizing percentage savings to paying for
BTU / kWh unit of energy savings
o Percentage‐based incentives favor smaller projects and homes,
while rewarding units of savings will encourage projects that save
more energy
• Align payments with what the market values
o We build fewer power plants based on our customer consuming
less energy
o We emit less Carbon when we replace power plants with
efficiency.
STEP 3:
Reward energy savings
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11. • Move beyond software to allow actuarial pooling
of projects based on a range of attributes:
o Past contractor performance, years in business, certifications,
house size, work‐scope, climate zones, etc.
o Avoid selection bias by reducing winners and losers, for example:
 1,500 sf house in Climate Zone 3
VS.
 3,000 sf house in Climate Zone 12
with A/C
STEP 4:
Group projects to reduce variance
Homeowners/
aggregators get
what they are
promised
Unhappy
customers
Very happy
customers
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12. • Long‐term incentive based on energy savings
o Resource Based Incentive
o Calibrated to the underlying costs effective investment level
• Market Transformation Incentive
o Incentivize goals outside least cost savings paradigm:
 Increasing incentive for deeper savings per project
 Social equity issues
 Large enough incentives to drive market adoption
o Decrease Market Transformation incentives based on current
EUC 10 year ramp‐down, until what is left is just the resource
incentive
STEP 5:
Provide two‐tier incentive structure
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13. • Resource payments become a pass through for
contractors — just like CSI
• Customers pay “net cost of project”
(that is, receive instant rebates)
• Makes system simple for consumers to use
• Align incentives with how the energy efficiency
market will eventually function
STEP 6:
Pass incentives through industry
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14. • Demand is critical for utility procurement and emissions
reduction
• Incentivize systems that can accurately predict
demand savings by pricing incentives in terms of
the predicted time of savings (TOS)
• Implement demand incentives as carrot not stick
o If system predicts without demand reductions,
they get a blended rate
o Accurate demand predictions will drive greater value
and provide an
economic advantage
STEP 7:
Incentivize peak load reduction
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15. • Utility procures energy savings units as a resource
o Utilities contract with private investors bidding in to provide
demand side resources
o Establishes a phase‐out tariff for future verified savings,
and penalties for non‐delivery
• Private investors develop the resource and are accountable
to actual delivered savings
• Utilities and regulators ensure:
o Savings are verified and real
o Branding is used appropriately
o Health, safety, and
consumer protection
STEP 8:
Move to utility procurement
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16. STEP 8:
Move to utility procurement
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• IOUs issue an Efficiency Portfolio Standard EE target/terms
• For example, 2MW of energy savings
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• IOUs host reverse auction for energy‐unit savings
• Lowest energy‐unit cost provider wins
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• EE aggregators bid on contract
• Market sets price, which goes down over time
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• Private investors support EE aggregators
• Based on EE provider network capacity and reliability
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• Efficiency contractors sell energy‐unit savings to aggregators
• Contractors compete on ability to deliver reliable energy‐unit savings
(Based on the commercial solar model)
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17. Recipe for Success
Profitable
Business Models
Range of
Products
Energy
Savings
SCALE
Public Benefits of
Actual Energy Savings:
• Reduced need for new
power generation
• Reliable least‐cost
power source
• Reduced dependence
on foreign oil
• Climate change
mitigation
• Clean energy economy
shift
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18. 1. Open EUC to multiple prediction methods/
business models (CalTEST – June 2014)
2. Implement CalTRACK (September 2014)
3. Incentivize contractors directly to cover
program costs and increase contractor margins
4. Incentivize units of predicted savings,
not percentage reductions
EUC 2.0 Action Plan Preview
(More Details to Follow Soon)
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19. 5. Give customers and contractors monetary
reward for achieving their predicted energy goals
6. Allow for assignable incentives (e.g., CSI)
7. Create open third‐party implementer/
aggregator model
8. Aggressively partner with residential PACE 2.0
9. Develop operating capital sources; reduce float
times for incentives and financing
EUC 2.0 Action Plan Highlights
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20. • Be sure to enter your “audio PIN” number to
allow the organizer to unmute you (see Audio
control pane)
• Use “raise hand” feature to be unmuted to
comment or participate in discussion
• Alternately, send in questions through
Questions control pane
Question/Answer Logistics
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21. Recap of our vision for EUC 2.0
• Turn Energy Efficiency into a resource
• Align stakeholder interest with public policy goals
• Reward results not predictions
• Allow markets to innovate and select winning solutions
• Manage risk to homeowners
• Encourage private capital investment
Establish a market that can scale
to achieve our energy efficiency goals.
Questions/Answers
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22. Eight Steps to an EE Market
1. Allow Diversity of Business Models CalTEST to calibrate predictions
2. Create an Energy Efficiency “Meter” with CalTRACK providing ongoing
calibration of predictions to savings and incentive values, feedback to contractors
3. Reward Energy Savings by moving from incentivizing % savings to actual therm /
kWh energy unit savings
4. Group Projects to Reduce Variance to allow like‐projects to be grouped
according to multiple market performance factors
5. Provide Two‐Tiered Incentive Structure by dividing program into resource and
non resource‐based (or market transformation) incentives
6. Pass Incentives Through Industry so that resource payments become a pass
through for contractors
7. Incentivize Peak Load Reduction to support demand‐side capacity
8. Move to a Utility Procurement model that pays for performance
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23. • Energy‐unit savings are tied to actual utility bills using
SmartMeter technology
• Contractors valued by their ability to deliver real results
(that is, energy‐unit savings [kWh, therms])
• Market demand encourages innovation
• Programs get simpler when results replace regulation
as tool for incentive award
Pivot to an
Energy Efficiency Market
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24. To be the same as other successful energy markets,
we need a procurement model in which:
• Utilities procure Energy Efficiency (i.e., kWhs/therms)
like a supply‐side resource
• Industry aggregators bid into reverse auctions to supply
demand‐side capacity
• Performance risk flows to industry
• Verifiable savings are rewarded and industry is allowed to
innovate on delivery models
Procurement Model for
Energy Efficiency Market
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