Why the Timing of Energy Efficiency Matters

The measurement of energy savings and demand reduction through energy efficiency (EE) projects has always been challenging.  For those EE programs that receive ratepayer funding for incentives, rebates, and program administration, the pricing of energy efficiency is even more important-----and sensitive------to policy makers. 

The challenge of wedding technological benefits with rebate and incentive pricing can be very puzzling in developing robust energy efficiency programs. Add to this, the fact that not all saved kWh’s and reduced kW’s are valued equally. 

Electricity saved during the grid’s daily peak is much more valuable than that which is saved off-peak.  Similarly, virtually all utilities have seasonal peaks and off-peaks. Electricity saved during the seasonal peak is more valuable than the same electricity saved in the off-peak season. 

Additionally, for many utilities with multiple generating assets, the relative carbon intensity of generated power can change hourly, as can the consumption of water relating to thermal power sources.  Thus, the timing of the end-use customer’s energy efficiency savings may create varying levels of carbon reduction and water efficiency. 

Of course, the time and season sensitivity of electricity value (and energy efficiency savings) varies by geographic location------sometimes within a state! While there are energy efficiency and demand response programs that seek to take this time-sensitivity into account, most are imperfect at best. 

Just as progressive policy makers understand that real-time pricing of electricity is optimal, so too is it generally understood that real time pricing of energy efficiency savings is also optimal. Achieving this aspirational goal remains challenging.