Measured Efficiency Makes the IRA HOMES Act Easy

July 24, 2023

Residential measured efficiency (NMEC) programs in California show how the IRA HOMES Act measured path is the easiest way to deliver energy efficiency to customers and contractors.

Source: Comfortable Home Rebates

You may wish implementing the IRA was as simple as the program shown to the right.  

While deemed incentives may not be sexy and often underperform, they are easy for customers and contractors.

However, while contractors and customers want a simple energy efficiency program, regulators and utilities must ensure funds are used wisely, and savings are delivered. We have all been burned by low-realized savings from modeled and deemed programs.

We can have our cake and eat it too!

Franklin Energy’s Comfortable Home Rebates (CHR) program is an excellent example of a program that is easy for contractors to adopt and simple for homeowners. Qualified contractors provide targeted homeowners with incentives for measures, with back-end bonuses for combining measure packages. Homeowners get paid a simple rebate, just as they would in any deemed program.

Conventional wisdom says deemed or modeled programs are easy, and measured pay-for-performance is hard. However, in practice, it is the exact opposite.  

What if I told you that Franklin Energy’s simple program design resulted from measured pay-for-performance?

Not only that, but unlike many programs, it overperformed program goals, delivering 100%+ realization rates, 20% peak savings, and projects worth over $4,000 to the grid

While the consumer and contractor-facing CHR program was designed to be simple (and indistinguishable from a deemed program), the incentives were actually based on the measured savings and grid value Franklin Energy delivered. Using historical performance data from the modeled Advanced Home Upgrade Program (nearly identical to the IRA HOMES modeled program), Franklin worked with Recurve to target the right customers with measure packages designed using actuarial performance data. 

Paying for actual savings instead of upfront estimates enabled simple program rules because Franklin got paid for what they delivered. These aligned incentives ensure program dollars are always spent wisely and free aggregators to design programs and business models that deliver real outcomes and are as simple as any deemed program for contractors and customers.

Measured performance has been misunderstood. Suppose you want something as simple as deemed, but you also want it to deliver real outcomes. In that case, the solution is to measure and pay for performance and allow aggregators like Franklin Energy the freedom to innovate on the business model to customers and  contractors. 

The IRA HOMES Measured Path Empowers States to Enable Market Innovation

The Inflation Reduction Act (IRA) has allocated up to $4.3 billion for state energy offices to develop and implement "Home Energy Performance-Based, Whole-House Rebates" (HOMES) residential retrofit programs. This historic investment in energy efficiency has the potential to transform how homes use energy and is a critical step in the decarbonization of the nation's building stock.

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The IRA sets out two potential ways to structure these programs. The "modeled" path relies on predictive simulation models to estimate how much energy a retrofit will save and pays incentives based on that prediction, while "measured savings" determines savings based on actual energy usage data before and after the improvements are implemented, and pays based on the savings delivered at the meter.

The modeled approach is typical of historical programs. It requires a whole-house energy audit and model calibrated to that home's historical energy usage. This creates transaction costs and the need for complex rules and program administration, as paying for estimates encourages optimistic savings estimates, leading to low realization rates.

Measured performance instead pays aggregators for savings that are measured and delivered at the meter, aligning incentives resulting in realization rates at or above 100%, with much simpler administration and low overhead for all parties.

Rebates can be stacked on existing utility programs and federal tax credits with little new overhead or requirement for new and complicated program designs. This deployment strategy can turbocharge programs to launch quickly by leveraging both ratepayer and federal investment to drive greater demand. When AMI is present, time-based incentives can be sent to drive greater peak savings and GHG reductions.

The IRA represents a significant milestone in advancing energy efficiency and enabling a decarbonized future. Its potential to restructure how homes use energy is monumental. Including  a "measured savings' path gives state energy offices an innovative but low-risk opportunity to transform efficiency, making it more effective, scalable, and beneficial for customers, the climate, and the grid.

Contact us to learn how the measured path can supercharge your state's clean energy policy.

Check out Recurve’s Measured Performance in a Box landing page for frequently asked questions and tools you can use to easily implement the IRA HOMES Measured Program.

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