Meeting Energy Savings Targets in an Evolving Utility Market

The EISA backstop and the future of upstream lighting programs

If there’s one thing keeping energy efficiency professionals up at night, it’s the EISA backstop. Those of us who design energy efficiency programs for a living hear this refrain from our clients, at conferences, and at the water cooler: “What’s next…what are we going to do when lighting goes away?”

For those who’ve been living in a cave for the past few years or simply work outside the utility field: the 2007 Energy Independence and Security Act (EISA) increased the efficiency standard for lighting products, effectively eliminating incandescent light bulbs from the market. The EISA backstop provision, a secondary rule under the enabling legislation, takes the standard a step further by requiring any light bulb sold after 2019 to meet a 45 lumens-per-watt standard, a dramatic increase in the efficiency of residential lighting.

But that’s a good thing, right? Well, yes…good for our planet, but more complicated for utilities that must meet regulated energy efficiency targets. Why? Increasing the efficiency of light bulbs changes the baseline against which energy savings are measured.

The EISA backstop effectively eliminates halogen bulbs from the market because they don’t meet the standard. Screw-in CFL bulbs would meet the standard, but that market is shrinking fast—consumers are over the CFL and its many quality issues. That leaves LEDs as the baseline, and, as all competent efficiency professionals know, to achieve energy savings you must install a technology that is more efficient than the baseline. So, while lighting energy use will be significantly reduced by the new standard, utilities will no longer get credit for encouraging customers to install LEDs.

For a couple of decades, lighting savings have been the backbone of utility energy efficiency programs. Lighting efficiency programs are inexpensive to run, are extremely popular with customers, and produce a lot of energy savings, making them one of the most cost-effective ways for utilities to meet their regulated energy savings obligations. In fact, lighting programs have been so successful that some utilities could historically count on lighting for meeting 50 percent, 60 percent, or even 70 percent of their portfolio savings targets.

All that is about to change when the EISA backstop takes effect in a few short months. Utilities can likely count on retailers’ accumulated inventory of halogens and CFLs to keep their upstream lighting programs viable for another year, maybe two, but after that, they will have to find new source of energy savings. The problem? There are no existing or emerging technologies that offer the savings potential, simple installation, widespread application, and low-cost as the humble light bulb. Utilities’ energy efficiency staff across the country are searching for the silver bullet that can replace lighting savings and enable them to meet their aggressive savings targets.

At Cadmus, we’ve been trying to crack the same nut. While there are no other technologies that can produce savings on the same massive scale that lighting has over the past two decades, there are some interesting possibilities on the horizon. New programs that take behavioral change to the next level are showing promise. For example, some utilities are beginning to capitalize on customers’ increasing interest in digital engagement, supplementing traditional behavioral home energy reports with customer-facing digital platforms that include interactivity, gamification, and real time analytics that give customers access to customized information and suggestions for managing their energy usage.

We are seeing a range of behavioral program strategies being piloted and implemented in the commercial sector as well. While the jury is still out on savings persistence, several utilities are offering programs that encourage operational efficiency, energy efficient employee behaviors, and ongoing energy management, and some are piloting strategic energy management approaches that combine traditional continuous improvement and peer encouragement strategies with technologies that give customers more granular information on energy usage than ever before.

While there are no other technologies that can produce savings on the same massive scale that lighting has over the past two decades, there are some interesting possibilities on the horizon.

In many jurisdictions, as utilities begin to integrate more renewable energy and customer-sited distributed energy resources, the need to manage demand for grid reliability and load predictability has become paramount. In many states, demand reduction goals are taking precedence over kWh targets. Combining traditional energy efficiency programmatic approaches with variable rate structure to encourage targeted energy savings during periods of peak demand is one approach to amplify kW reductions from traditional demand response programs. Providing bonus incentives, digital information and management tools, and adjusting program eligibility rules are among the ways some utilities are attempting to capture energy savings at the “right” time to help manage system peaks.

Finally, as energy efficiency markets evolve and mature, some state legislatures are beginning to recognize what utility efficiency professionals have known for some time – the current energy efficiency regulatory paradigm is likely not sustainable. Much of the low hanging fruit has been picked through a combination of decades of successful energy efficiency programs and increasingly stringent equipment standards. New ways of looking at energy efficiency from a regulatory perspective could help utilities achieve compliance, improve customer value delivery and satisfaction, and expand service offerings while doing right by the planet. Regulators need to ask themselves – are kWh savings really the right way to measure progress toward broader environmental goals? If the ultimate objectives are to mitigate the energy sector’s contributions to a changing climate, while fostering economic diversity and growth, perhaps the focus on cost effective energy savings should be broadened. Some states have begun to ask these difficult questions, while public and private sector innovators are exploring interesting alternatives. The good news is that promising ideas are out there and beginning to be tested in a few places.