Pay-for-Performance Efficiency Comes to New York

Pay-for-performance is coming to New York, with the potential to transform the way commercial building efficiency is procured, delivered, and valued as a grid resource.

The New York State Energy Research and Development Authority (NYSERDA), in partnership with New York Utilities, has issued a request for proposals (RFP) inviting energy efficiency aggregators ("Portfolio Managers") to bid on its new Business Energy Pro pay-for-performance (P4P) efficiency initiative. In its first stage, Business Energy Pro will provide energy efficiency services to small- and medium-sized businesses in Staten Island and Westchester County, with a special emphasis on innovative solutions that aggressively target natural gas consumption in Westchester. The program is being conducted in collaboration with Con Edison. 

With approximately $10 million on the table for one or more winning bidders, this RFP represents a critical opportunity for efficiency businesses to get a foothold in the rapidly growing the pay-for-performance market.

Unlike traditional energy efficiency programs that are based on measure-specific incentive rebates (such as light bulbs and efficient appliances), the new pilot compensates providers over three years for measured energy savings that accrue from a large portfolio of energy efficiency upgrades and operational improvements at small-to-medium businesses. The winning proposals will deliver at least 5 percent average whole-building savings for less than $12/MMBtu of levelized cost (gas and electric lifetime savings).

Taking this innovative, market-based approach to energy efficiency promises to unlock private capital and encourage innovation in how efficiency is delivered to customers, allowing service providers to deploy more flexible and comprehensive offerings to reduce energy use and meet customer needs.

Coming on the heels of California's statewide pay-for-performance push, the new NYSERDA initiative demonstrates that the emerging national shift toward performance-based efficiency is real and accelerating. By embracing an “aggregator” model of P4P, Business Energy Pro aligns the interests of implementers by offering them a financial reward for targeting and executing efficiency projects that deliver more savings than average. The implementers can pass that value on to customers in the form of reduced up-front project costs or other inducements to participate.

NYSERDA's Business Energy Pro program will also use the CalTRACK open source methods to calculate and determine payment for savings. These methods are housed as part of the Energy Market Methods Consortium, a project of the Linux Foundation Energy.  

The OpenEEmeter provides an open source implementation of the CalTRACK methods that is verifiable and can be used by any party without restriction under an Apache 2 license.

Energy efficiency businesses looking for a foothold in the rapidly emerging P4P markets in New York and around the country are strongly encouraged to submit bids in response to this RFP.

As always, Recurve is happy to help. If you are a utility or aggregator interested in learning more about integrating metered savings and pay-for-performance, please contact us to discuss your needs.