In March 2016, Pacific Gas and Electric Company (PG&E) submitted plans for a pay-for-performance residential energy efficiency pilot program. The PG&E plan uses newly available and standardized energy and project data, combined with open-source standard methods to calculate savings. The result is a market that pays for actual performance of energy efficiency instead of upfront savings estimates.

Key Details

• PG&E will compensate energy efficiency aggregators for gross and net energy savings:
  • Gross energy savings are changes in energy consumption that occur as a direct result of all actions taken in an efficiency program
  • Net energy savings accounts for free riders (i.e., those who would have implemented the same or similar efficiency projects without the program now or in the future) and spillover (i.e., savings that results from actions taken as a result of a program’s influence but which are not directly subsidized or required by the program)
• Aggregators will be paid a set rate per therm and kWh for weather normalized gross energy savings. An additional incentive will be offered for net energy savings
• Energy savings will be measured using the CalTRACK system, which is an open-source platform for tracking energy savings. The CalTRACK system will access smart meter data allowing for near-real-time transmittal of usage data
• Payments will be made one and two years post intervention; no up-front payments will be made
• The proposed budget for the two-year pilot is $6 million with the option to expand based on first year results
• The pilot program is supported by AB 802 which was passed in October 2015 and requires the California Public Utility Commission to start using normalized metered energy consumption as the basis for energy efficiency measurement

Implications

This effort will transition away from a model of rewarding programs based on modeled energy savings to a framework based on actual outcomes. This will allow aggregators to determine the mix of energy efficiency investments that are most cost effective and attractive to customers. If successful, the pay-for-performance model could be used to further expand demand-side procurement as an accepted resource option.

More Information

GTM: PG&E’s Newly Proposed Efficiency Program Is Simple. But It’s Based on a Revolutionary Concept

PG&E Commission Filing: Residential Pay-for-Performance Program

SEE Action: Energy Efficiency Program Impact Guide

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