A Bay Area entrepreneur is proposing to scale up energy efficiency investment by building large efficiency “portfolios” that are robust enough to compete with new sources of supply.
Matt Golden, CEO of OpenEE, notes that U.S. businesses typically invest US$60 to $115 billion per year in focused efficiency enhancements that deliver positive returns to their own bottom lines. By comparison, public incentives designed to encourage wider adoption of efficiency improvements in homes, buildings, and business operations receive paltry support from utilities and governments—about $8 billion a year, roughly matched by participants’ private investment.
To really tap into the understanding that the cheapest watt of electricity is the watt you never have to generate, Golden plans to re-envision energy efficiency as a “capacity resource” class similar to power purchase agreements (PPAs).
Today’s technology makes the idea feasible, Golden writes in a Greentech Media opinion piece. Smart meters that are becoming the industry standard in a growing number of U.S. states provide detailed enough consumption data to reveal energy savings in real time, across scores or hundreds of accounts. That, he writes, makes it feasible to aggregate and quantify those savings with enough precision to create efficiency “portfolios”, valued on a par with new supply.
“As portfolios of efficiency projects and data are aggregated,” he states, “we will have the ability to calculate savings on portfolios of energy efficiency projects in terms of both time and location. This analysis creates resource curves (time and locational savings load shapes) that can be used to design efficiency portfolios that reliably deliver “negawatts” where and when they are most needed, rather than simply average reductions in consumption for a given month. Utilities will be able to procure savings based on when and where they are happening.
“By breaking down ‘energy efficiency’ into classes of projects that deliver more valuable resource curves, we can make savings worth more when they have the biggest impact, giving market players the tools and incentives they need to optimize their offerings to deliver the most valuable results to the grid and the best deal to customers.”
Invoking available standards like his own company’s product or another open-source software called CalTRACK, Golden urges utilities to “establish markets in which a wide range of businesses can enter into mid- or long-term contracts, similar to supply-side PPAs, where they are paid for performance through savings purchase agreements (SPAs) for the value of how they shift load over time, based on normalized metered savings.”
The idea is not as “far-fetched and futuristic” as it may seem, Golden asserts. Already, Pacific Gas & Electric has signed a pilot contract for “pay-for-performance” demand reduction. “Under that program, aggregators will be paid based on metered performance over time, rather than through customer rebates and time and materials to implementers.” Negawatts achieved through the contract will go part of the way toward making up for the anticipated loss of 2.2 gigawatts of generation from the California grid when the Diablo Canyon nuclear plant closes in 2025, he adds. Similar initiatives are under way in Texas, New York, and four other U.S. states.
“By making efficiency work like other capacity resources,” Golden writes, “we solve for two of the outstanding existential problems that have stood between energy efficiency and its potential: how to bring efficiency to bear as a real solution for modern-day grid issues such as intermittent generation, and how to attract the private investment required to get us there.”