The future of energy efficiency isn't estimated—it's measured. Measuring Measured Savings

Millions of American households will soon have the opportunity to make energy-saving upgrades, thanks to the new Inflation Reduction Act (IRA). 

The financial incentives becoming available through the IRA’s HOMES program are the kickstart many families need, particularly the Measured Savings Incentives (MSI) pathway that aligns taxpayer dollars with real energy reductions. 

Explore this series in full: 

• Part 1: Aggregators: The hidden key to unlocking Measured Saving Incentives (MSI)
• Part 2: For the HOMES program to succeed, energy data must be accessible
• Part 3: Measuring Measured Savings
• Part 4: Incentive flexibility can unlock market innovation
• Part 5: The HOMES program can deliver simplicity for consumers and contractors

Part 3: Measurement

Measured savings offers the potential to transform energy efficiency from a noble, but limited, compliance activity into a real and measurable clean-energy resource, like wind and solar, where both utilities and the private sector can invest their resources. 

In Part 1 and Part 2 of this 3-part series, I explained some of the most important elements of the coming energy transformation through the HOMES program and two of the crucial components to getting measured savings incentives off the ground, including:

1. The private and nonprofit aggregators responsible for expanding clean energy markets and 
2. The ability for aggregators to access home energy data 

To scale measured savings, though, policymakers at the federal and state levels need to also align on exactly how savings are measured. 

Getting this right is critically important: Without the correct set of rules, the measured savings pathway will fall short of its promise—and instead become another case study of what doesn’t work when it comes to energy efficiency.

In order to be successful, the measurement of Measured Savings Incentives must prioritize being:

1. Accessible
2. Transparent
3. Accurate

Measured savings must be accessible

Effectively implementing measured savings requires access to energy data.

Aggregators that submit projects for incentives need energy usage history at the individual household customer level—before and after efficiency improvements are made. 

Accessing energy data has often been a challenging proposition. 

Most utilities haven’t built the software tools that make it easy for customers to share their energy data with third parties. 

At the same time, utilities by and large haven’t shared their customer data—particularly for the programs they are not directly managing—with governments or third parties that are making use of measured savings approaches.

Even with utility cooperation, challenges to data access abound. 

Many homes still rely on delivered fuels (heating oil and propane, for example) that are not metered. 

Still, other households may be implementing electrification projects that use distributed energy resources, like solar power or electric vehicles, that don’t have traditional utility data or combine utilities with accessible data (e.g. local electrical utility) and utilities with poor data access (e.g. local gas utility).

The good news is that the private sector has the tools and technology to overcome these data challenges. 

The good news is that the private sector has the tools and technology to overcome these data challenges. 

Companies like Sealed have demonstrated the ability to collect energy data from almost every kind of home, leveraging software built by companies like Arcadia and UtilityAPI, among other tools.

Policymakers need to recognize the limitations in energy data access but not be bound by them. This means encouraging utility data partnerships, but not having data provided through utility partnerships be a prerequisite for implementation of measured savings programs.

Measured savings must be transparent

For the measured savings approach to scale, measurement must also be transparent. 

Any market relies on standardized weights and measures, and energy efficiency (and demand flexibility) is no different. 

If market stakeholders do not know how energy savings will be calculated, they cannot ensure accountability from both a private capital or public policy perspective. 

If market stakeholders do not know how energy savings will be calculated, they cannot ensure accountability from both a private capital or public policy perspective. 

The IRA’s HOMES program recognizes the importance of transparency by requiring “open-source advanced measurement and verification software.” Open-source means that the calculation methods are transparent to anyone and everyone that wants to recreate the energy savings calculations. 

But transparency is more than the calculations themselves; key “metrics that matter” should also be transparent. 

In particular, baseline model portfolio errors should be standardized and published by program administrators to demonstrate to all stakeholders that the calculations reliably predict the amount of energy a portfolio of homes uses if no energy saving projects are installed. 

Similarly, program administrators should publish savings prediction portfolio errors (also sometimes called Fractional Savings Uncertainty) at the program and aggregator levels to demonstrate the reliability of the energy efficiency resource.

Measured savings must be accurate

While accessibility and transparency are important, the primary benefit of the measured savings approach is accuracy. 

Traditional deemed and modeled savings models are historically unreliable when it comes to gauging the performance of energy efficiency upgrades. 

Measured savings is the only approach accountable for results. 

In order to be dependable, however, measured savings must have a predictive baseline model. In other words, a model that accurately predicts what happens in a population of households if no energy efficiency improvements are made.

Measured savings is the only approach accountable for results. 

For example, Sealed creates baseline models that determine how much energy an average customer would have used if they did not work with Sealed. While individual homes are difficult to predict, large data sets of homes can serve as reliable portfolios. 

We measure the baseline portfolio error for different home energy types and only qualify homes when we gather enough data to have a baseline energy model that has portfolio error levels of close to zero.

In other words, Sealed knows that the amount of energy saved is real because our models accurately predict the amount of energy a portfolio of homes use before any project is installed. 

Policymakers will not be the ones creating these baseline models in the context of the HOMES program (that will be up to transparent, open-source methods). 

But policymakers can, and should, define the acceptable ranges of “metrics that matter” that make such models acceptable from an accuracy perspective. 

A good, better, best framework for measurement

What does this all mean for government policymakers at the federal and state levels? 

Simple: They need to create guidelines and implementation plans that prioritize accessibility, transparency, and accuracy while building in flexibility to address the inevitable differences between states and jurisdictions. 

At a high level, this means embracing a “good, better, best” framework for measurement that not only has a clearly stated end goal, but also enables implementation of measured savings programs today—no matter the local state of affairs.

It also means rewarding program administrators and aggregators that are able to demonstrate higher levels of savings accuracy and granularity. 

For example, program administrators that can provide hourly interval data will be able to meet key savings thresholds with peak reductions or greenhouse gas (GHG) reductions rather than annual energy reductions, ensuring a higher likelihood of program success and impact. 

And aggregators with better Fractional Savings Uncertainty metrics or energy savings insurance policies could receive more incentive value upfront given the lower-risk profile. 

The IRA and the HOMES program offers a once-in-a-generation opportunity to transform how we measure and manage energy efficiency, unlocking a resource that will support demand flexibility in an age of rapid growth of renewables and other no- and low-carbon energy resources. Sealed, along with other private-sector innovators, is ready to step up to the challenge.

The IRA and the HOMES program offers a once-in-a-generation opportunity to transform how we measure and manage energy efficiency.

But we have to take the right steps—and that means policymakers have to properly balance program accessibility, transparency, and accuracy in a flexible but robust manner that ensures accountability and reliability of results.

Flexibility is also needed for how measured savings incentives are structured and stacked—a topic we’ll focus on in our next article.

Explore the Measured Savings Incentives (MSI) series in full: 

• Part 1: Aggregators: The hidden key to unlocking Measured Saving Incentives (MSI)
• Part 2: For the HOMES program to succeed, energy data must be accessible
• Part 3: Measuring Measured Savings
• Part 4: Incentive flexibility can unlock market innovation
• Part 5: The HOMES program can deliver simplicity for consumers and contractors