Energy Efficiency Program Types

by Penni McLean-Conner, NSTAR

With the rapid funding growth for energy efficiency programs, many utilities are developing programs or expanding existing ones.

The many programs and varieties might seem overwhelming, but they fall into three categories: direct install, education and audit, and rebate and loan programs. They work for residential and commercial and industrial segments.

Direct Install Programs

Direct install programs are characterized by installations of efficient technologies and target existing retrofit markets and equipment replacement, which includes lighting, appliances, doors, windows and insulation. These programs are popular in residential and commercial markets.

Direct install programs are characterized by turnkey sales and the installation of efficient technologies primarily targeting residential and small business building retrofit markets.

For all customer segments, energy savings associated with direct install programs are easily quantified. For example, if an old, residential refrigerator is replaced with a new, efficient refrigerator, the savings calculation is straightforward and reliable based on usage and technology characteristics.

Audit and Education Programs

Audit and education programs are popular with all customer segments. Home or business audits are intended to lead directly to the installation of energy conservation measures (ECMs). Educational programs raise awareness of energy efficiency benefits and the various programs’ availability.

A common residential energy efficiency program is the home energy audit. Home energy audits are offered on the Web or with in-home consultations. They provide consumers ways to lower energy costs and suggest energy efficiency retrofits that provide cost-effective investment paybacks. Energy audits also are valuable to the commercial segment, particularly small businesses. Commercial audits predominately are completed on-site, although some utilities offer Web-based audit tools for commercial customers.

Education increases awareness of energy efficiency programs and is used with residential and commercial segments. The educational offerings target audiences from end consumers to trade allies to school programs.

Education may be delivered through classes offered by program managers or partnerships with technical schools or regional organizations. Classes may cover a range of topics designed to encourage behavior around ongoing facility benchmarking, building science, facility commissioning, or retro-commissioning, among others.

Rebate and Loan Programs

Rebate programs entice consumers to invest in the efficiency opportunities in residential and commercial and industrial markets. More often rebate programs are complemented by financing programs to support customer contributions.

Establishing the rebate amount is an art and a science. The trick is to design a rebate that is just sufficient to encourage the purchase of the more efficient product. Often rebates are set to equate to the incremental cost associated with a more efficient product and later to assess whether the incentive is adequate, can be lowered or can be eliminated.

In addition to incentives, loans offer another means for customers to finance energy-efficient projects. This financing may be offered directly by program administrators with direct billing or by partnering with a financial institution. The interest rate offered on loans varies from zero to prime. Some loan programs are funded via program administrators, and others are funded via banking institutions. The uptake on the financing program was small compared with rebate programs. Regardless of overall volume, having a loan option might tip projects forward because a borrower requires more attractive financing.

Direct install, audit and educational, and rebate programs come in all varieties. The fundamental constructs, though, are the same. Successful energy efficiency portfolios include a mix of all three program types.


Penni McLean-Conner is the vice president of customer care at NSTAR, the largest investor-owned electric and gas utility in Massachusetts. McLean-Conner, a registered professional engineer, serves on several industry boards of directors, including the Massachusetts Technology Collaborative and CS Week. Her latest book, “Energy Efficiency: Principles and Practices,” is available at http://pennwell

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