Turning Policy into Performance: Metrics for Clean Energy Market Transformation

Welcome to the newest installment of a new blog series called Turning Policy into Performance. In this series, we'll take a look at how states can implement decarbonization and climate goals with energy efficiency programs.

States are establishing ambitious climate goals that rely on a transition of our power grid from fossil fuel-based energy to flexible, renewable clean energy. Embedding new metrics in energy efficiency programs can spur the new clean energy market by encouraging technology innovation, accelerating the transition to electrification, and helping to grow a new workforce. This blog will outline three ways to embed new metrics in energy efficiency programs to spur investment in clean grid infrastructure: (1) Goals; (2) Cost-Benefit Analysis; and (3) Tracking Metrics.

Goals to Spur Clean Energy Transformation

Energy efficiency program goals represent what programs aim to achieve. Aligning energy efficiency program goals with climate emissions goals can propel the industry to be innovative in helping states achieve these goals. Current energy efficiency program goals focus on first-year or near-term energy savings because programs are built for quick three-to-five year cycles that can provide cost-effective results. But this way of identifying success is short-sighted, and can stop program implementers from pursuing programs, like weatherization and electrification, with long-term climate benefits. Here are two goals energy efficiency programs can use to start to drive market transformation:

• State Climate Benchmarks as Goals: These goals can be a portion of a state goal to achieve a certain clean energy policy or technology, such as number of homes weatherized, heat pumps installed, or energy storage. Creating goals or targets tied to state market transformation does not mean that the utilities or other program administrators must meet these goals alone. Other policies, such as workforce training or benchmarking, can be created alongside to ensure that every actor in the market is helping to achieve clean energy goals.

• Total System Benefit (TSB) as a Goal: The Total System Benefit (TSB) is a metric that values flexible energy technology such as energy storage and demand response programs. This goal is a dollar value that calculates savings and load shape of an energy efficiency resource by applying hourly values for energy, capacity, and greenhouse gas (GHG) compliance costs. Using this goal in the energy efficiency space can drive implementers to design energy efficiency programs for times when the grid is the most carbon intensive, lowering energy at the time it is needed most.  

A Cost-Benefit Test to Value Clean Energy Technology

Cost-benefit tests are used to assess the cost-effectiveness of energy efficiency programs to ensure ratepayer investments result in ratepayer benefits. To help with clean energy market transformation, states should look to create a cost-benefit analysis to drive design and investment in clean grid infrastructure. This can be done by adopting new metrics to measure energy usage and account for societal impacts of the energy system.

• Measuring Energy Usage with Loadshapes: Using loadshapes to measure energy creates an hourly value for energy efficiency programs. This allows for proper valuation of programs that reduce or mitigate energy on the grid when it is short on capacity. Generally, cost-benefit analyses use the same energy use profile for every day of the year, but energy use patterns change, causing this measurement to under- or over-value programs. Measuring energy usage on a more granular level allows implementers to see the full costs and benefits of energy efficiency, demand response, and other time-sensitive resources. Studies from the National Resources Defense Council have shown that when program administrators and implementers correctly prioritize energy efficiency measures, states can see three times the amount of benefits through lower electric rates and less carbon emissions.

• Measuring Emissions Aligned with State Climate Goals: State climate goals are created because the costs of continuing to emit carbon and other emissions is too high. Including the costs of emitting or not emitting these sources directly into the program cost-benefit analysis aligns the energy efficiency portfolio with state climate policy. Metrics such as societal costs and benefits of carbon, methane, and other emissions properly value the costs of emitting pollutants by quantifying economic and environmental harms.

• Measuring Participant Benefits Recognized by State Policy: Including participant and societal non-energy benefits (NEBs) to the cost-benefit test can align energy efficiency portfolio design with the environmental, energy, and equity policies of the state. A key part of ensuring cost-effective climate energy policies is acknowledging the environmental and societal impacts of our energy system. Yet many cost-benefit tests do not include them because they can be hard to identify and quantify. By not including them, states are failing to fully capture the benefits these programs provide.  

EM&V Metrics to Track Market Transformation Goals

States can modify the EM&V process to better align with state goals and allow for more transparency by reporting additional metrics and publishing the data. At the highest level, research and evaluation activities help us to see what is actually happening due to a policy, program, or event, and to understand what it means for the future. Providing this information could create a better picture of program impacts for utilities, regulators, and consumers, and show how energy efficiency helps to implement these policies. Metrics to consider incorporating into energy efficiency programs include:

• Tracking State Climate Benchmarks: Energy efficiency programs will be part of state efforts to lower energy use in the upcoming years. By identifying targets that also align with wider state climate goals, program implementers can be encouraged to design programs that better align with this policy. Additionally, regulators can better understand how energy efficiency programs currently are and could possibly help to achieve these goals. Some metrics to consider tracking and publishing include: total heat pump installations, number of active demand devices enrolled, and number of homes weatherized.

• Climate Emissions: Adding a carbon emissions tracking metric allows implementers and regulators to catalog the emissions impacts of these programs. This information can be beneficial in identifying programs that significantly reduce carbon emissions and can be implemented on a wider scale in the future. This information can also be informative in establishing future goals, performance incentives, and system planning. For more information on how to track and measure carbon in energy efficiency programs, see NEEP’s Carbon Metrics Blog.

Energy Efficiency and Market Transformation

Energy efficiency programs can help in achieving state climate and equity goals because they lower emissions from the building sector and lower energy usage, which results in less need for infrastructure buildout. By embedding metrics to help achieve goals in conjunction with clean energy policy, states can start the important process of aligning energy efficiency programs – and eventually larger utility infrastructure investment – with climate goals.