Measured Savings Approach

Policy Pathways to Meter-based Pay for Performance, (Carmen Best, IEPEC 2019 Proceedings) explores the policy drivers for meter-based performance programs. Three states embarked on meter-based pay for performance in this time period, and the results of each provided lessons learned for initiating, sustaining, and assessing these efforts. 

Guidance for Meter-based programs like HOMES can be found on the California Public Utilities Commission energy efficiency portfolio page. Specifically, "Programs and Projects Using Normalized Metered Energy Consumption (NMEC)” NMEC Rulebook (Revised January 2020). Guidelines for "Population-based NMEC" are appropriate for consideration of HOMES measured pathway program criteria and M&V expectations. This guide provides core program design criteria to enable approval by the regulatory body and includes program implementation considerations like eligibility along with pre-defined measurement and verification expectations. Recurve created this tutorial video to help demystify the rules and provide program implementers a path for operationalizing the guidance.

The Residential FLEXmarket is a currently operating measured home performance program. It was approved in 2022 by the California Public Utilities Commission (filed program plan) and is operated by MCE, a community choice aggregator in northern California. MCE launched the market in response to California’s efforts to increase grid reliability and lower energy costs.  This $6 million program increases decarbonization and grid reliability by incentivizing participants to reduce energy consumption with a focus on summer 4 p.m. to 9 p.m. peak hours. The Residential FLEXmarket is an expansion of MCE’s Marketplace programs, which include the Commercial Efficiency Market and the Peak FLEXmarket.

3C-REN’s Single Family Residential Program is powered by Recurve’s Demand FLEXmarket platform. The Residential Marketplace utilizes independent, transparent, open-source measurement and continual tracking of changes in pre- and post-intervention energy usage observed at the meter.  It makes aggregator payments based on metered impacts, not calculated estimates, and offers targeted incentives to disadvantaged communities with streamlined kicker incentives (3-7X) for both electrification and efficiency improvements.

OhmConnect operates a Virtual Power Plant (VPP) in California’s wholesale electricity market, comprised of more than 200,000 members with 250,000 dispatchable devices. During a nine-day 2022 summer heatwave, OhmConnect’s VPP dispatched member devices 1.3 million times in response to real time grid signals, saving 1.5 GigaWatt hours (GWh) of energy, effectively taking 1 million homes off the grid for an hour. In return, OhmConnect delivered $2.7 million in rewards to its members. Read more.

In response to Governor Newsom’s July 30, 2021 Emergency Proclamation, which directed state agencies to address a statewide shortage of electricity, the Commission authorized the Market Access Program as a strategy to reduce peak demand. This program was created by D.21-12-011, which authorized up to $150 million to fund projects that are incremental to the main energy efficiency portfolio. Market Access incentivizes peak savings (7 to 9pm) during the summers of 2022 and 2023, with payments based on actual savings at the meter with value tied to avoided cost and emission reductions. The program is open to qualified aggregators. 

The “pay for performance” concept allows for the market to build around business models that work for saving energy.  Companies can design, manage, and finance home weatherization and electrification projects, and focus their work on where they get the best energy savings with the measures and marketing that attracts the most customers. Sealed’s business model, for example, with thousands of homes retrofitted across the country to date, covers the upfront costs of a retrofit while being accountable for the energy savings. If the work doesn't cut energy waste, Sealed doesn't get paid. Sealed’s projects have helped homes reduce energy usage by up to 50% or more through whole home weatherization and electrification projects. To ensure this performance, Sealed creates baseline models that determine how much energy an average customer would have used if they did not work with Sealed. While individual homes are difficult to predict, large data sets of homes can serve as reliable portfolios. Read more.

PG&E’s Residential Energy Efficiency Program launched one of the first Residential Pay for Performance (P4P) programs in 2016 to test whether this market solution can cost-effectively scale residential energy efficiency. PG&E selected several aggregators through a competitive solicitation. Each aggregator offered a unique model of working directly with residential customers and contractors to achieve energy savings via behavioral interventions and retrofits.  PG&E provided incentive payments to aggregators based on analyzing the combined impact of their customers' metered energy consumption.  Franklin Energy, one of the program’s aggregators, presented its results at an industry forum (slides 133-146).  The program, which replaced the California Advanced Home Upgrade predicted program, improved realization rates from 27% to 100% and nearly doubled the electrical savings for customers without needing costly, high transaction cost quality assurance. 

NYSERDA’s Home Energy Savings Program was a pay-for-performance residential energy savings pilot program in Central New York.  The program was developed to provide new opportunities for contractors and enable energy-efficiency service providers to serve National Grid’s customers with innovative, energy-efficiency services and solutions, reducing their overall energy consumption and costs. The program met several barriers on its way to a successful launch.  As a single-provider model, the program hinged on the success and engagement of a single firm selected through a long procurement process. More recent residential measured performance programs have an open procurement model.  Another key to the open market model is to provide a price signal (like a per-kWh incentive rate as is provided in IRA) to providers instead of a bidding model that can be challenging when new programs are just getting off the ground. These valuable lessons should be considered when designing future meter-based performance programs. 

Oregon's residential pay-for-performance program launched in April 2019 for a limited two-year term.  It was initiated by an executive order from the Governor to explore meter-based performance models for accelerating the state's response to climate change. Three aggregators provided different programs primarily focused on residential HVAC but could also offer multi-measure projects.  An evaluation of the pilot was published in 2021, noting that aggregators saw the potential to use performance data and incentives to guide their offerings but did significantly engage with the data during the pilot. Project disqualifications limited the size of aggregators’ eligible portfolios, with data availability challenges as a key factor leading to disqualification and savings from electric portfolios falling short of deemed estimates.

Hundreds of utilities and their third-party evaluators have relied on whole-home meter data for the measurement of energy and demand savings for all manner of utility-managed demand response (DR) programs. One example is this M&V section of the Texas Technical Reference Manual which describes how the CenterPoint and Oncor Residential Load Management Programs use meter data to calculate performance and payment for aggregators. Another is the 2022 third-party program evaluation for Entergy New Orleans, which includes an evaluation of the “EasyCool” DR programs using AMI data and the MISO-defined customer baseline methodology.