Seeking Energy Efficiency’s Hidden Savings

Some marketers view energy efficiency as invisible to United States consumers. Within the industry itself, benefits that are not measured in kWh are often invisible, said Noel Stevens, senior consultant at DNV GL. During a webinar hosted by Northeast Energy Efficiency Partnerships (NEEP) on Sept. 19, “Quantifying the Value Proposition: Recent Work on Non-Energy Impacts,” he and other speakers showed the selling points of retooling savings estimates.

A variety of cost tests have been used to justify United States energy efficiency programs. However, these tests have generally not valued benefits from financial savings due to disposal, maintenance, materials, safety, comfort, health and productivity. Similarly, property-value increases have not been included. Nor have corporate profits been used to show savings from non-energy benefits.  

Stevens said taking these figures into account can dramatically shift customer views of the value of installing specific technologies. For example, when evaluating an industrial lighting case study, he said that including non-energy benefits decreased the payback time for an installation from 3.5 years to between 1.33 and 2.5 years, depending on the details of the technologies and impacts.

“For facility managers, that is a major case for going ahead with the project,” Stevens said. “When you include simple benefits such as the operations and maintenance cost savings… we can decrease the payback period under which a measure will provide a return on investment to below two years.”

There are two primary motivations driving various organizations throughout the United States to consider counting non-energy benefits for energy efficiency, Stevens said. The first is cost testing for program-portfolio evaluation, which has revealed that only a part of the reduced costs is accounted for by energy benefits. The second is better data that helps optimize marketing and outreach strategies.

Testing Efficiency Programs

A new paradigm for program evaluation for the next generation of energy efficiency programs has gained traction in recent years.

“It’s really exciting to be here today to talk about this transition in our industry where we’re looking at identifying the total non-energy benefits of energy efficiency programs rather than simply focusing on the energy savings,” Stevens said.

Massachusetts views non-energy-benefits accounting as a good fit with its existing use of the Total Resource Cost test, said Beth Delahaj, manager of evaluation, measurement and verification at National Grid.

This is especially true because Massachusetts is looking to cost-justify expanding the energy efficiency solutions it seeks. This is because the state believes it is already financing the ones that are easy to reach.

“As the proverbial low-hanging fruit has been picked and eaten, it becomes harder and harder to bring in fruit at a low cost,” Delahaj said. “Since [the Total Resource Cost test] includes all costs associated with the system, it stands to reason it should include all of the benefits.”

Measuring Residential Properties

“Because the customers are benefiting directly from the measures that are being installed, we should be able to communicate to them which benefits they are receiving,” Stevens said. 

From an economic-value standpoint, Stevens said, real estate buyers don’t buy a home to purchase the building. “What they’re trying to buy is a stream of attributes associated with that house. They lock in a price to that home and that’s what they pay for.”

“When we install an energy-efficient piece of equipment, we’re usually installing a high-end piece of equipment that has impacts other than the energy efficiency itself,” Stevens said. “We’re adding to the attributes of the home. We’re trying to assess the increase in value that comes with these additional benefits.”

 

Monetizing Company Profits

In contrast, in commercial and industrial environments, Stevens measures non-energy impacts by tracking decreases or increases in revenue.

“What we’re really looking at is a change in the profit or producer surplus associated with the firm that produced the equipment,” Stevens said. “If you install energy-efficient lighting, you have a decrease in operations and maintenance costs associated with that plant. There are lots of other types of impacts we’ve learned to monetize.”

When companies measure this change in their revenue, they shift their marginal cost curves and short-term supply curves, Stevens said. “You’re able to produce the same amount at a lower cost.”

There are exciting new developments on the horizon with lighting technologies for industrial environments, Stevens said. “Some of the new technologies that are coming along in energy-efficient lighting and controls are really going to be able to change energy efficiency from being a cost to being a revenue driver.”

How can energy-efficient lighting systems drive manufacturing companies’ revenue? Some of the advantages, Stevens said, include industrial productivity, air quality, theft prevention, and asset tracking.

“Lighting has a long-term effect of producing non-energy impacts [through] worker productivity and worker safety,” said Wes Whited, senior consultant at DNV GL.

Preventing Wrong Estimates

Errors such as double-counting can cause major complications, Stevens said. It’s important to not assume benefits are additive.

For example, one can’t count both the sum of the increases in value due to efficiency measures on a property and count the change in the property’s value.

“You can take individual studies and add together the decrease in noise, the increase in comfort, the health and safety benefits, plus whatever other impacts you have,” Stevens said. “Studies have shown these benefits may to some extent overlap with one another.”

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