Residential Pay-For-Performance is gaining traction in California. PG&E is close to launching a Pilot program and hopefully will have it in place by the end of the year. The other three IOUs (Investor Owned Utilities) are watching closely.
Running the current Energy Upgrade California rebate program is expensive and by most accounts is not sustainable. How expensive? Check out this chart I created from the recently released CPUC report on EE portfolio costs.
Fiscal Year 2015 – Energy Upgrade California – CPUC Program Expense Report
I think we all would agree that 43 million dollars a year is a stack of cash. Utilities are looking at new approaches and Pay-For -Performance looks promising. The question is how will Pay-For-Performance save money?
There are several financial advantages to a P4P program compared to the current rebate program structure.
With P4P the IOUs can save 30% by only paying on actual savings. PG&E has reported that 30% of the current EUC projects produce utility bill neutral or negative results. This means after the work is complete the homeowner’s utility bills show no reduction or they increase. This is worth $13 million a year to the IOUs. With that much money at stake, you can bet the utilities are watching P4P closely.
P4P programs are cheaper to administer, as the cost to evaluate measure and verify (EM&V) the results are much less. The measurement is built-in and verification is measurable via utility bills and software tools.
It’s likely the P4P programs will be run by third parties, not the utilities. Shifting program design and administration away from utilities is already in motion. Recent regulations require that the majority of new program design and implementation has to be performed by third parties (60% or more). A case-in-point is the PG&E P4P Pilot, which will be administered by a third party.
The point I am trying to illustrate is there are huge savings to the utilities if they switch away from expensive to run, and not incredibly effective rebate programs currently in place. We are not exactly sure where things are going at this moment. I suggest you consider your business model and how the rebate program factors into your business. The only thing I can guarantee you is that things are changing and the current programs are too expensive to survive.