Measured Pay-for-Performance Program Exceeds Goals, Delivers 20% Peak Savings

July 18, 2023

Working with a large California utility and their program implementer, Recurve demonstrates how a measured, performance-based program approach can scale residential electrification retrofits for customers, the climate, and the grid.

Franklin Energy’s Comfortable Home Rebates (CHR) pay-for-performance program is one of the first examples of how incentives based on actual meter-based measured energy savings data can lead to simple, scalable, and far more impactful solutions for contractors and customers. The program emphasized deep whole-home retrofits delivered by more than 70 contractors. The CHR program was scaled to include air source heat pumps, insulation, thermostats, heat pump water heaters, and duct sealing.

While traditional energy efficiency programs typically pay incentives based on energy models or pre-determined deemed average savings, the Franklin Energy CHR program was paid based on metered savings and a price signal that paid three times as much for summer peak savings at the times when it counts the most for the California grid.

Many home retrofit programs in California and elsewhere have suffered from poor savings-realization rates, which means that the actual savings achieved by individual home retrofits and the program overall is far lower than predicted.  The savings realization of Franklin Energy’s CHR program is holding steady at 100% and beyond, proving that the measured savings approach can maximize performance.

Because of the flexibility enabled by pay-for-performance and the alignment of incentives, quick innovation during implementation resulted in a shift from traditional HVAC to comprehensive electrification. Aligned incentives, a simple structure, and seamless customer participation set the stage for an average gas reduction of 43 percent per customer and peak summer electricity savings of 20 percent. The program is exceeding savings goals.

Customer Targeting and Grid Value Are Key

In response to California's forecasted summer grid emergency, Governor Gavin Newsom’s Emergency Proclamation and the California Public Utilities Commission (CPUC) passed a decision creating a new Market Access Program to improve summer grid reliability by saving energy at peak times.

Recurve worked with Franklin Energy to identify and forecast customers with the greatest potential for savings with heat pumps. It was clear that high users of air conditioning, with low heating demand in a hotter Central Valley climate, were more likely to save on their energy bills and benefit the grid by replacing both heating and cooling with an efficient heat pump. By focusing on these customers, Franklin Energy was able to eliminate their winter gas use and deliver summer electricity savings at the times when it was dirtiest, most expensive, and posed the highest risk to grid stability.

Franklin Energy was able to increase electric demand and still create positive electric grid benefits by ensuring electrification also maximized summer peak savings to deliver an average grid benefit of over $4,000 per heat pump retrofit.

Measured Approach Has Timely National Implications

With the passage of the federal Inflation Reduction Act in 2022, the residential measured pay-for-performance approach presents a strong option for state energy offices across the nation, each of which will soon be tasked to stand up $8 billion in Department of Energy funded home rebate programs. The legislation explicitly calls out a measured approach, akin to the design of the CHR program, as a viable option for states deploying these programs.

Learn more about Residential Measured Pay-for-Performance.

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