This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.

Guest Blog | July 11, 2011 | Energy Efficiency, Utilities

People in the Southeast do want energy efficiency! We had no doubts, but it is great to see strong participation in the first full year of new efficiency programs offered by Progress Energy Carolinas (PEC) and Duke Energy Carolinas (DEC). Our analysis shows that both utilities achieved greater savings and spent less per kWh than they had anticipated. We were particularly pleased to see that both utilities achieved a “cost of saved energy” similar to some national leaders and lower than their Southeastern peers (Table 1).

All Carolinas energy customers are benefiting from low cost energy savings. After the first full year of data, it looks like Duke Energy is outperforming Progress Energy in terms of total savings, and as a percentage of retail sales (Table 2).

What made the difference for Duke Energy? The lower costs and higher savings are driven by large CFL programs, both in terms of number of bulbs installed and savings per bulb. While these programs are very successful and low-cost, the federal lighting standard that goes into effect in 2012 will reduce the amount of savings the utility can claim from a CFL bulb because the utility only gets credit for helping customers go “beyond standards.”

Both utilities are achieving greater savings and lower costs than their peers across the Southeast. This is no surprise to us – just like most business opportunities, energy efficiency programs operate best at an economy of scale.

The results come with some caveats. These are preliminary data: Some of the savings claimed by the utility are still subject to a “true-up”, or measurement and verification analysis. Another caveat is that many Carolinas utility customers are served by other utilities, whose data we haven’t obtained or analyzed yet. So in another year or so, we should have an even better picture of what utilities and their customers have been achieving, and at what cost.

What do these savings mean for customers? An easy way for customers to understand the cost-effectiveness of energy efficiency is to compare it to electricity rates. The “cost of saved energy” is like the cost to build a power plant, a power plant that operates for free for years afterwards. Assume that the “energy efficiency power plant” lasts ten years (a common result): if the cost of saved energy is $0.20, then the average cost of energy efficiency is just 2 cents per kWh. That’s cheaper than even the low, low rates that industrial customers pay (around 5 cents per kWh). It’s cheaper to pay for energy savings than to burn fuel in power plants!

Duke opens up with a strong residential lighting program

Duke Energy’s Residential Smart Saver program, which achieved the majority of its savings from residential CFLs, used low and no cost coupons to create an incentive for their customers to purchase and install energy efficient CFLs. They used targeted marketing and had a customer specific code on each coupon so they were aware of who was redeeming the coupons, and who wasn’t. Based on independent measurement and verification, for every 100 free bulbs that Duke Energy gave away, the program received credit for 107 bulbs due to customers purchasing additional CFLs when cashing in their CFL coupon.

Progress delivering energy savings to its business customers

Progress Energy’s commercial business program was successful as well. The program offered commercial, industrial, government and educational customers standard or prescriptive rebates for installing energy efficiency measures. The standard rebate is a set amount, for example, a $6-8 incentive for replacing a T12 light fixture with a T8 florescent light fixture. The custom rebate is for technologies that Progress Energy hasn’t included in its standard program thus far, and allows customers some flexibility in customizing the energy efficiency solution they need for their business.

Ideas for improvements

While both of these programs were successful, and we hope they will continue to be, there are a few improvements to Duke Energy and Progress Energy’s energy efficiency portfolio that could be made.

First, neither utility offers a small business efficiency program. Several utilities have shown great results by designing specific programs that cater to small business. They may offer turnkey or similar implementation of energy efficiency technology.

Second, neither utility offers a complete design-to-commission new construction energy efficiency program for their commercial customers. It is critical to encourage contractors to install energy efficiency during the construction process because many of the measures, particularly with the building envelope, are no longer available cost-effectively after the construction is finished. Then when the building is complete, it is necessary to complete a proper “commissioning” to make sure the building systems are operating to design specs. Many buildings last for longer than 50 years, so it is very important the utilities try and capture these time sensitive savings.

Finally, we recommend that the utilities look at their implementation models. For example, neither of the utilities are offering upstream incentives. This is a program where the utility offers an incentive to the manufacturer, or retail store (“upstream” in the value chain from the customer) to produce or sell energy efficient measures. Often the goal of this type of program is to give the customer the option of purchasing an energy efficiency widget for the same price as the standard widget. One technology that we think would be well suited for an “upstream incentive” program are residential reflective roof shingles.

 

Program Ideas	Description	Examples
Small business efficiency program	Small businesses often have not implemented energy efficiency measures because of time, cost and other market barriers. While Duke and Progress make program offers available to small businesses, best practice utility programs target small businesses with market niche specific solutions.	• Arizona Public Service – Small Business Program • Xcel Energy Minnesota – One-Stop Efficiency Shop • Xcel Energy Colorado – Small Business Lighting
Commercial new construction	New construction is an important time to install energy efficiency measures because many savings opportunities exist with low incremental costs that are not cost-effective as a retrofit. Progress Energy Carolinas offers incentives for energy efficient new construction, but not a complete design-to-commission program.	• Progress Energy Carolinas – EE for Business • Interstate Power & Light – Commercial New Construction • MidAmerican Energy – Commercial New Construction
Residential reflective roofs “upstream” incentives	High quality, reasonably priced residential “cool roof” products have been available for many years. Studies suggest residential customers have a low response rate to rebate offers for cool roof shingles. Utilities have demonstrated that response rates to so-called “upstream” (distribution channel) incentives can be higher for measures that require a trusted installer.	• California – Upstream HVAC incentive program operated by Energy Solutions • Xcel Energy Colorado – Upstream CFL program

– Natalie Mims co-authored this blog.