Designing shared-savings incentive programs for energy efficiency: Balancing carrots and sticks
- California Public Utilities Commission, Sacramento, CA (USA). Div. of Ratepayer Advocates
- Lawrence Berkeley Lab., CA (USA)
One promising approach for stimulating utility participation in the acquisition of cost-effective demand-side resources is called shared savings. In a shared-savings arrangement, the difference between the cost of a demand-side resource and its value measured in avoided supply-side resources is shared by utility shareholders and ratepayers. A shared-savings incentive mechanism consists of the three major components; the cost of the demand-side program, the amount of energy saved by the program, and the value of the supply-side activities avoided by the program. Measuring energy savings is an imperfect science. In principle, it should be performed after a demand-side program has been put in place and observed for some time. A particularly difficult measurement issue lies in properly accounting for effects that are not within the control of the utility but which affect energy savings (such as weather or occupant behavior). The collaborative decided to rely on prespecified engineering estimates of savings for individual measures, but to base aggregate savings on the actual numbers of installations made by the utility. This decision protects the utilities from uncertainties in the performance of individual measures while providing an incentive to increase program participation. The utilities also agreed to initiate comprehensive measurement programs to improve future estimates of the performance of energy efficiency measures. Avoided costs, like conservation program performance, are a subject to a large number of influences, only some which are under the control of the utility. Recovering the benefits of demand-side programs over a time period that closely parallels the realization of savings, means the utility will have to wait a considerable period of time before recovering its full share. The collaborative resolved this issue in a manner analogous to contractual agreements that pay qualifying facilities for non-utility generated power. 2 figs., 1 tab.
- Research Organization:
- Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- USDOE; USDOE, Washington, DC (USA)
- DOE Contract Number:
- AC03-76SF00098
- OSTI ID:
- 5887580
- Report Number(s):
- LBL-29503; ON: DE91010223
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
POLICY AND ECONOMY
ELECTRIC POWER
SUPPLY AND DEMAND
ELECTRIC UTILITIES
LOAD MANAGEMENT
COST BENEFIT ANALYSIS
COST RECOVERY
ENERGY DEMAND
ENERGY EFFICIENCY
ENERGY POLICY
DEMAND
EFFICIENCY
GOVERNMENT POLICIES
MANAGEMENT
POWER
PUBLIC UTILITIES
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