Highlights -

· Energy efficiency (EE) programs can still make up for much of their 2020 goals by using propensity scoring tools like SageScore℠ and pursuing electrification programs.

· New and innovative “touchless” utility programs are emerging. The BYOC EV off-peak charging program is one example. They are very good, but they are not enough.

· Program administrators could see hundreds of millions a year in new revenue from electrification programs. It is by far the largest growth opportunity for program administrators.

· Real-time AMI meter data program tracking is key to delivering all of the customer benefits. Spending on the right programs creates enormous customer benefits, and spending on wrong programs produces none.

Growth is again possible, even though Covid-19 has halted much of the traditional energy efficiency activity—programs that rely on physical visits to customer sites for energy audits or installation of products—across the country. This means that due to the Coronavirus many energy efficiency (EE) programs are now very far behind their 2020 energy savings targets and some are also concerned about missing their 2021 targets as well.

The search for new “touchless” utility energy efficiency programs and other innovations, like Sagewell's Bring Your Own Charger® EV load shifting program, has been in overdrive. 2020 has been particularly challenging for program administrators who run pay-for-performance programs. Virtual energy audits have been popular and have driven the delivery of energy efficiency kits to new heights, but it will not be enough. Many programs will still fall short. While pandemics don’t have silver linings, they can offer moments of clarity. One of them is the realization that traditional utility energy efficiency programs have been on autopilot for years and have lacked a catalyst for innovation and change.

So, let’s not waste a crisis. It is time for bold action that can be taken immediately in many parts of the country. For example, Vermont already allows utilities to choose if they wish to spend their resources pursuing energy efficiency or electrification - or both (as enabled through the state Renewable Energy Standard). No additional approvals are needed. All they need is to adjust their existing energy efficiency programs and shift their attention to electrification programs. The same is true with many other programs across the country, though most will have to seek various approvals to implement such electrification programs in scale.

Furthermore, and most importantly, it is not an “either-or” proposition. Existing energy efficiency programs can be re-optimized so that they can attain a much larger portion of their 2020/2021 goals even with Covid-19 constraints AND the same programs can grow further with electrification. It is a “more, better efficiency” AND “more electrification” proposition and not an OR proposition.

Energy Efficiency programs can be re-energized overnight to meet 2020 goals.

The good news is that the existing energy efficiency programs could be re-focused to meet more of their targets this year even with Covid-19 induced restrictions. It requires analysis of the AMI meter data and target marketing analysis. We can tell from our tracking data that many energy efficiency programs spend 80% of their resources on customers that are not the best candidates for the programs. This problem is fixable practically overnight with tools like Sagewell’s propensity scoring model SageScore℠. It can quickly identify which customers are most likely to implement the few program measures that may be available during the Covid-19 restrictions. Using this type of an approach can both find thousands of new customers and increase their conversion rates immediately.

The chart below shows how a propensity scoring technique such as the SageScore℠ can identify which customers are most likely to act. In this case, the analysis of one of the largest weatherization programs in the U.S. demonstrated that just 15% of those who came to the program completed nearly 50% of the measures. Even more dramatically, just 3% of the customers completed 20% of the program measures with a conversion rate far exceeding 50%. Conversely, the program could have lost nearly 50% of its incoming customer flow, yet only lose 20% of the weatherization projects. Or, even more dramatically, the program could have lost two thirds of its customers, yet only lose one third of the conversions. Covid-19 has done just that to many programs - except the programs lost their best customers too and the program results have plummeted. It does not have to be that way if propensity scoring is used.

We have found similar results in all utility energy efficiency programs that we have analyzed. This is why there is a way for every energy efficiency program that is falling short this year to make up for lost time before the year is over - but they would have to act now. Again, the good news is that the programs could see improved results practically overnight by target marketing to those customers who are most likely to implement the measures. This knowledge has been available for years but many programs have not been able to take advance of the optimization for many reasons. This year may be different because of Covid-19.

Energy efficiency programs re-imagined: electrification programs reduce emissions and create a multi-billion dollar growth opportunity for program administrators

While SageScore℠ analysis can make a radical difference for today’s energy efficiency programs, it will not be enough to meet the greenhouse gas emissions reductions goals that states have or business growth targets for program administrators. For that, we need electrification. Our analysis shows that one can get higher emissions reductions through electrification than energy efficiency programs. And, even better, electrification programs are self-funding because of the positive contribution margin they generate and can therefore decrease electric rates for all customers. That makes electrification programs a significant growth area for energy efficiency program managers. In fact, we estimate that it represents a several billion dollar a year revenue growth opportunity for energy efficiency program administrators in the U.S.

But, in parts of the country, program administrators and utilities may have to convince the regulators that electrification is the right area for program investment. There fortunately is a straightforward way to prove the benefits, and all of the proof is in the utility AMI meter data that Sagewell has analyzed. We have already shown through our analysis that an electric utility with two million customers with an electrification program could generate hundreds of millions of dollars a year in additional customer benefits. In one example, we estimated that a 1% market share gain in the specific electrical technologies we identified was worth between $10 and $15 million a year in contribution margin to the utility. We have also demonstrated that 1% to 2% market share point gains in electrification programs are possible annually, which means $20 to $30 million in new annual customer benefits each year. After just five years, it is possible for the programs to be generating $100 to $150 million a year in customer benefits annually. After 10 years, the savings can reach $300 million per year - just for one utility with 2 million customers. The U.S. has nearly 150 million electric meters.

The carbon savings from electrification are also very large - and increase each year as the grid gets cleaner. In other words, AMI data-driven electrification programs can pay for themselves and deliver the carbon savings to customers at no cost to them - and deliver significant growth for program administrators.

We predict that traditional energy efficiency program revenues for program administrators will continue to see significant competitive pricing pressures, whereas electrification programs will continue to grow at an exponential rate.

But, there is one enormous catch. If the programs aren’t designed using AMI meter data to measure the “real life” impacts and they are not monitored “live” from AMI meter data, it will result in highly ineffective programs. For example, Sagewell’s analysis of AMI meter data has shown that many heat pump electrification programs have invested all of the money in technologies that did not get used for winter heating - and therefore produced almost no emissions savings or customer benefits. At the same time, many of the same programs have explicitly prohibited the types of heat pumps that are proven to replace fossil fuels in home heating . Hundreds of millions of dollars have been spent on those programs to date. Finding these answers required the use of Sagewell’s SageSight℠ AMI meter data analytics software that has allowed us to monitor the program impacts “live” every day and suggest program course corrections in real-time as data has become available.

In sum, the future looks bright for energy efficiency programs with significant new growth ahead through electrification programs. But, the benefits will prove elusive without the assistance of AMI meter data analysis, SageScore℠-type propensity scoring, customer targeting and analytical approach to program management. The good news is that those actions will lead to a multi-billion dollar program growth and far greater greenhouse gas emissions reductions than we have seen before.

Bring Your Own Charger® is a registered trademark of Sagewell, Inc. Sagewell℠, SageScore℠ and SageSight℠ are service marks of Sagewell, Inc. Copyright 2020.