How are California policy makers going to double energy efficiency by 2030?

California’s SB 350, passed in 2015, garnered widespread attention for the state’s leadership in advancing renewable energy and energy efficiency. The bill set a goal for “doubling” energy efficiency in the state by 2030. But what does it mean to “double energy efficiency” by 2030, and how are California’s policy makers going to do it?

The California Energy Commission (CEC) is tasked with the high-level planning and scoping for implementation of the energy efficiency targets in SB 350. (The California Pubic Utilities Commission is responsible for evaluating the investor-owned utilities’ energy efficiency rolling portfolios, in light of SB 350 targets.) The Existing Buildings Energy Efficiency Action Plan developed by the CEC is the primary vehicle for setting the state’s path to meeting the SB 350 energy efficiency goals.

According to the most recent update (December 2016) of the Existing Buildings Energy Efficiency Action Plan, the goal of “doubling energy efficiency by 2030” is defined as a “cumulative doubling of statewide energy efficiency savings by 2030,” relative to the “additional achievable energy efficiency savings” identified in the mid-case analysis of the California Demand Forecast, 2015-2025, extended to 2030 using an average growth rate. According to the Existing Buildings Action Plan, this is equivalent to a 20% reduction in building energy usage in 2030 compared to current projections.

In the Existing Buildings Energy Efficiency Action Plan, the CEC outlines five goals for reaching the 2030 target: government leadership in energy efficiency, data-driven decision making, increasing building industry innovation and performance, recognized value of energy efficiency upgrades, and affordable and accessible energy efficiency solutions. Among these goals, the themes of promoting energy efficiency in state buildings, data-driven decision making, improving code compliance, and improving the market for energy efficient buildings, are particularly note-worthy.

Governor Jerry Brown issued an executive order in 2012 asking state agencies to reduce energy consumption from the grid 20% by 2018, compared to a 2003 baseline. The state’s Green Buildings website discloses energy and water consumption data for most state agencies over the last several years. The Division of General Services has also released a directive with end-use based requirements for energy efficiency in state-run buildings, including a requirement that state-owned data centers and server rooms achieve a power use effectiveness (PUE) of no more than 1.5. Promoting energy efficiency in schools and community colleges through the Clean Energy Jobs Act (Prop 39) program, is another key component of the state’s approach to pursuing efficiency in public buildings. The California state legislature is currently considering a bill that would extend funding for the Prop 39 program beyond fiscal year 2017-2018, when it is currently set to expire. The Action Plan cites energy savings estimates from the Prop 39 program, based on the plans submitted by school districts, of $57 million annually, so far. How do we know that these energy savings will be realized by Prop 39 projects, and other initiatives?

The Existing Buildings Action Plan also addresses approaches for measurement and verification (M&V) of energy efficiency projects, under the umbrella of “performance-driven value.” The Action Plan cites the high opportunity programs or projects (HOPPs) authorized by AB 802, which are pursuing M&V approaches using normalized metered energy consumption. The plan also identifies “pay for performance” energy efficiency program approaches by the investor-owned utilities as a mechanism for achieving deeper, and reliable, energy savings.  However, “pay for performance” schemes often incentivize implementers to seize only the “low-hanging fruit” of energy savings, because of the more reliable potential savings. The Plan also identifies the need for tools to facilitate the easy adoption of measurement & verification using meter-based approaches, and cites the Open Energy Efficiency Meter (OEEM) tool as one example.  (OEEM is a web-based tool for automating whole-building measurement and verification analysis.)

How OpenEEmeter Works

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Easy access to building energy use data is necessary for implementation of these meter-based approaches, and disclosure of energy use data can help identify building candidates for energy efficiency projects. This is another strategy discussed in the Existing Buildings Action Plan, and has also been the subject of recent state legislation.  AB802, passed in 2015, would require periodic energy use disclosure and benchmarking of buildings greater than 50,000 square feet in size. The CEC is currently drafting regulations to implement this requirement, which would take the place of the state’s previous point-of-sale disclosure policy.  Legislation introduced in this session by State Senator Nancy Skinner, SB 356, seeks to ease the process by which customers make energy use data available to third-party consultants, by requiring utilities to make meter-specific energy data available to third parties using a “click-through” electronic signature process for customer authorization.

The Existing Buildings Action Plan also identifies future updates to Title 24 and Title 20, and improved code compliance, as strategies for advancing building energy efficiency in the state. The Action Plan states that the CEC will establish a “baseline code compliance rate” for residential HVAC by 2018, and, by 2021, improve the code compliance rate to 80%.  However, the Plan does not address how the compliance rate data will be gathered. This process is likely to be difficult, given the fragmented nature of code enforcement. The plan also sets a target for achieving 90% compliance with Title 24 in retrofit projects by 2020. The CEC is considering adding additional plug-load efficiency standards for servers and network equipment in the future.

The Plan also addresses the question of where the money for achieving big reductions in energy consumption will come from. According to the Plan, it is “unreasonable” to expect ratepayers to shoulder the burden for subsidizing the needed growth in energy efficiency. The Plan notes that existing market mechanisms have so far failed to unlock the full potential of building energy efficiency, and discusses some new and existing state initiatives that seek to expand financing opportunities for energy efficiency projects.

Over the past three years, the state has seen $2 billion in transactions in residential projects through the Property Assessed Clean Energy (PACE) program, and the state has established a fund to protect first-mortgage lenders from losses associated with PACE liens. In light of this, is access to capital truly an obstacle in pursuing energy efficiency projects, or the detailed analysis and accounting that is often involved in implementing them?

The state has developed several mechanisms that are intended to streamline financing for efficiency projects. The California Hub for Energy Efficiency Financing (CHEEF) has initiated a pilot program for private lenders to use alternative credit criteria, such as utility bill payment history, for lending to energy efficiency projects.  The Existing Buildings Action Plan also seeks to increase the market value for energy-efficient homes and commercial buildings. The Plan sets targets for establishing consistent energy performance asset rankings for buildings, and including these rankings in real estate listings, and, ultimately, getting the rankings factored into real estate appraisals.

The Action Plan addresses many of the common barriers to energy efficiency retrofits: insufficient access to data, lack of measurement and verification of energy savings, as well as limited private financing mechanisms, and flexes the state’s policy muscles for buildings under its jurisdiction. The state legislature has also jumped on board, by passing or introducing legislation that facilitates implementing some of the strategies outlined in the report.  But, can the state meet these goals, and, if so, are they enough to get us to big increases in energy savings?

There are weaknesses in the way the goals are outlined, and structural factors that will make it difficult to achieve them. The Action Plan doesn’t quantify the expected energy savings associated with each goal. Some of the strategies, such as energy use benchmarking and disclosure, while useful in facilitating other goals, will not directly result in energy savings.  The Natural Resources Defense Council has voiced concern about this in comments submitted to the CEC.

One obstacle to achieving energy savings under the ratepayer funded efficiency programs is not addressed by the Plan: the climate of uncertainty contributed to by the shifting landscape of regulation at the CPUC. The CPUC has ordered that 60% of the energy savings portfolio be administered by private contractors, making the programs effectively “pay for performance.” The continual strengthening of Title 24, and the CPUC’s practice of only “counting” energy savings beyond code towards program goals, has a chilling effect on third party administrators, by diminishing the amount of savings they can claim, and making it uncertain as to whether they will be paid for their work.  The next update to the Existing Buildings Action Plan is set for 2020. In order to put the state on the path to achieving even deeper energy savings, the CEC must set metrics for incremental steps and adjust course as necessary. The CPUC and CEC must also ensure that the regulatory environment does not let the accounting for energy savings get in the way of saving energy.

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