The National Home Performance Council (NHPC) unveiled a new study before the National Association of State Energy Officials that outlines proposals to improve the process for testing the cost-effectiveness of ratepayer-funded energy efficiency programs.
“All over the country, public utility commissions are using outmoded or misapplied cost-effectiveness tests for energy efficiency programs in ways that squeeze customer choice and discourage comprehensive deep energy reductions,” said Steven Cowell, executive director of the Conservation Services Group and an NHPC board member.
“This regulatory approach to how programs are evaluated is holding back the development of a home performance industry, and worse is yet to come if we don’t act,” Cowell said.
The report recommends use of the Program Administrator Cost test, which compares the cost of reducing energy consumption to the cost of supplying an equivalent amount of energy.
“The Program Administrator Cost test makes sense as the primary screening tool for energy efficiency programs,” said Kara Saul-Rinaldi, NHPC executive director, speaking before the NASEO Buildings Committee. “It is relatively simple to administer, and it doesn’t apply hurdles to energy efficiency programs that traditional energy sources do not have to meet.”
If this test cannot be adopted, the report recommends a set of best practices for applying a second test that considers the costs and benefits of a program for society. The recommendations observe that while the test is appropriate in theory, it is difficult and expensive to apply fairly and accurately in practice. If used, it should be done in a way that does not penalize energy efficiency programs as a result of methods that are inconsistent with the test’s underlying rationale.
Finally, the report recommends research efforts to develop strategies to compensate utilities so they benefit as much from energy efficiency as from an increase in demand for energy.
“Our long-term goal should be to ensure that utilities have the appropriate incentives to promote energy conservation, so that in cases in which it’s more cost-effective to conserve energy than to build new power plants, utilities will have a bottom line reason to promote energy conservation,” said Robin LeBaron, NHPC managing director and the primary author of the report.
The report is based on recommendations of a group of national stakeholders. NHPC will follow release of the report with a broader stakeholder convening to build consensus and promote public education about cost-effectiveness test issues. Comments from interested parties are welcome.
The National Home Performance Council encourages the implementation of whole-house retrofits for increased home energy performance and facilitates coordination among federal governmental agencies, utilities, state energy offices, contractors and others to achieve improved whole-house energy performance.