A comprehensive comparison of two innovative energy efficiency transaction models : Can metering energy efficiency and paying for performance transform the energy efficiency market?

Abstract

A large percentage of the building stock in the US was built prior to any real efficiency standards hence, '42% of total energy and 75% of all electricity is used in the built environment and most of it is wasted. We can triple or quadruple the efficiency of our building stock by 2050 and the savings are worth 4 times the cost'. In addition, 'there is a global abundance of private capital' looking for good sustainable investments. But today, even in states with high energy efficiency (EE) spending like California, experts estimate that 'the economic efficiency potential is two to three times greater than what is achievable with the current voluntary incentives and policies'. This thesis will compare two new EE transaction models in the US; Metered Energy Efficiency Transaction Structure (MEETSTM ) and P4P Residential Program (Pacific Gas & Electric in CA). These models, although different in many ways, share the following elements; 1. Pay-For-Performance (PFP) on, 2. all metered (to industry standard protocols) energy efficiency on a, 3. whole-building basis. This thesis will compare the differences between these models in terms of markets, technical approaches, depth of energy savings, regulatory and contractual requirements and impacts to the key market players and answer the following question; Can metered energy efficiency models that PFP based on whole-building savings break down the key hurdles to acquiring the energy efficiency potential in the US building stock? The content and conclusions draw upon a combination of technical reports from leading energy organizations, interviews with key experts, financial analysis on depth of energy savings potential based on documented case studies and the most recent news articles and blogs from industry. For the energy efficiency market to really accelerate all the right conditions need to be met. These include a well identified large market potential in combination with high demand from the utilities and regulators. In addition, an abundance of private capital must be available targeting sustainable investments. The technologies required, mainly the energy efficiency meter, must be deployed. Lastly, key regulations that pay for metered performance of energy efficiency and in some cases new utility revenue models need to be enacted. With the right conditions, new EE transaction structures that pay for metered performance should flourish. Transaction structures that fully realize Amory Lovins- principle that efficiency is, in fact, energy and result in stable, reliable cash flows will attract the uncommitted large private capital and unleash the well identified market potential.