NEEC announces 2021 blog series exploring the industry challenges and economic opportunities of the clean energy future.
Recent policies implemented in Washington State to support the state’s climate objectives are demanding more from our residential and commercial buildings in terms of decarbonization and energy performance. The combination of these policies and a changing grid environment from policies such as the Clean Energy Transformation Act (CETA), highlight the ineffectiveness of our current energy efficiency framework in supporting the state’s achievement of its climate goals. As we move to decarbonize electricity, electrify building end-uses, and improve overall energy use intensity in buildings, it is increasingly apparent that our antiquated view of energy efficiency is a hindrance to our efforts. In 2021, NEEC is launching a blog series exploring the future of energy efficiency and buildings and will be inviting members to participate and share their ideas and concerns as we support the efficiency industry in evolving to meet the changing needs before us.
As we move forward to explore this new world, it is time for us to acknowledge the need for changes to the framework in which we view efficiency by developing a shared understanding of what has changed and what no longer works:
- Building technologies have advanced to a point where building systems and equipment can be integrated throughout the building as well as with the grid in a two-way manner. This type of integration has the potential to provide tremendous value to the grid in providing flexibility through isolated, controllable loads that can be adjusted to respond in real time to grid needs. The current efficiency framework has no means of incorporating this value in a holistic manner when assessing the importance and relative merit of a building efficiency investment, as it is designed to incorporate the value of investments that provide long-term sustained savings, which undervalues the benefits of daily or annual savings in favor of longer term reduced consumption.
- The longer-term savings model is further complicated in that it values efficiency through an estimated and projected savings rather than the savings that are occurring at the meter. This model weakens the case for energy efficiency and buildings as tools in supporting a resilient grid as the savings are prone to volatility and can only be verified a year or more after the fact in a backward-looking manner.
- Recent policy changes in WA, such as the passage of CETA, cannot be reasonably achieved without greater flexibility on the part of the consumer. This type of flexibility obscures the long-standing delineation between energy efficiency, renewable onsite generation, battery storage and demand response. As buildings become a critical element of grid resiliency and demand flexibility in a carbon free future, centralizing the way we encourage building investments creates the conditions for smart and efficient building upgrades that are useful to the overall needs of the grid as well as society in achieving carbon reduction goals. However, current modeling does not look at these investments in a holistic manner as complimentary tools deployed inside buildings but instead assesses them each in isolation of the other. This will inevitably lead to over building supply-side generation resources while missing the opportunity to save consumers and utilities money through greater acquisition of distributed energy resources.
To meet the expanding needs of the state of Washington and other jurisdictions and to take advantage of the opportunity before us, the following changes are needed:
- Shift to building level/meter level measurement of savings and move away from deemed or estimated efficiency savings. This encourages a whole building approach to building energy management with less focus on the individual technologies or strategies used to achieve the savings.
- Move to a performance-based model in which building owners, or their designee, are compensated or receive benefits from hitting or exceeding monthly or annual savings targets.
- Abandon the outdated Total Resource Cost Test and begin measuring the value of building interventions and performance by their contribution to the grid in terms of improved building performance, GHG reduction and flexibility.
- Stop separating consumer side resources from one another and enable a market to develop/expand around managing buildings as resources for the grid. Assuring that building loads match grid and societal/policy needs through effective integration and stacking of building systems and equipment with efficiency upgrades, onsite generation, energy storage and demand response.
Historically speaking, state level policies around energy efficiency have largely encumbered utilities (and therein ratepayers) with the financial burden to support energy efficiency investment in existing facilities. In Washington State, the Energy Independence Act requires qualifying utilities to acquire all cost-effective energy efficiency before investing in new supply side resources. In this framework, cost-effective is an assessment of the cost to acquire the energy efficiency against the benefits to the utility in avoided costs to acquire new generation resources. A lot has changed since the Energy Independence Act was first passed in 2006. Technology costs have declined and market adoption of more efficient technologies such as LEDs is now widespread. This has led to the loss of many EE measures as they are rendered no longer cost-effective in the above scheme. Technologies have advanced and in so doing blurred the traditional silos between building-side resources such as demand response, EE, onsite generation, and storage. The acceleration of climate change has led to the enactment of a variety of policies that have combined with technological advances to drive down the cost of renewables to the point where the NW Power Council is now finding that efficiency is competing in its long-term planning model with renewables. Utility advanced metering infrastructure and smarter building technologies have brought new possibilities to what can be achieved through smarter management of building energy performance through incentive and price signals to building owners (or aggregators) to adjust building loads to meet the needs of the grid in real time, or as is underway in California, to aggregate a portfolio of buildings and match the portfolio level performance to the projected and real time needs of the grid.
To better understand how our industry can support the future we all desire, NEEC will be gathering input from members and other subject matter experts on the challenges buildings face in complying with increasing pressures as well as the opportunities our members (and others) see in the creation of new business models and markets to work with buildings in this new world. It is time to acknowledge what we need from buildings, explore the technical and financial challenges of fulfilling those needs, rethink how we talk about and assess the merit of consumer side resources, and develop a new framework for our new reality. NEEC believes the resource is buildings and the tools the buildings use will include a variety of means including energy efficiency, demand response, onsite generation, and energy storage to create flexibility.
If you’re interested in engaging with us on this, please reach out to NEEC Executive Director, Kerry Meade at firstname.lastname@example.org .