How to make the HOMES Measured Savings Incentives (MSI) program rollout successful (Part 5: Simplicity)
In this 5-part series, Sealed president Andy Frank has covered ways to ensure the HOMES programs and its measured saving incentives are successful. We’ve defined aggregators and explained why data access is so important, why we need multiple pathways to access consumer energy data, and the importance of flexible incentives.
In this final article of the series, Andy highlights how simplicity is essential and how it can catalyze market innovation.
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 5: Simplicity
Skepticism of Measured Savings Incentives (MSI) programs typically comes down to a common sentiment: It’s too complicated.
While this is an understandable reaction given how new this approach is relative to traditional program designs, it is also not true.
The truth is that by following a performance playbook, Measured Savings Incentives will be the simplest energy efficiency program ever created for consumers and contractors.
Traditional command-and-control programs are complicated
As we’ve noted previously, energy efficiency has historically been a world rife with top-down efforts to entice consumer adoption of home upgrades like insulation and heat pumps.
These command-and-control solutions typically include the following features:
- Rigid program structure organized around pre-determined tactical choices (one-size fits all rebate amounts, project proposal templates, etc.)
- Narrow trade ally definition that forces small contractors to excel at sales and marketing in addition to scoping, installation, and following program rules
- “Eggs in one administrative basket” that can discourage innovation given the layers of approvals required for program changes
This traditional approach is often both inaccurate, which leads programs to allocate dollars to underperforming projects, and super complicated for everyone involved, especially contractors.
In order to calculate energy savings, program implementers typically require contractors to do some (or all) of the following:
- Build complex energy models that require judgment calls on the R-value of insulation, among other things
- Submit detailed floor plans and other home characteristics and project scope specifications
- Calculate project-level cost-benefit analyses
Oh, and once the project is submitted, contractors often have to suffer the indignity of a third-party inspector visiting the home and pointing out to the customer any mistakes that they made.
Unfortunately, all of the above is deemed necessary in a traditional program model because program implementers have no other way to ensure quality and results.
It’s theater of the absurd—lots of complexity and cost without any real accountability (or results).
One study of 600+ utilities and third-party program managers found that roughly 40% of total energy efficiency program costs were spent on just administrative and marketing costs, leaving only 60% for actual incentives to customers!
No wonder most contractors hate participating in energy efficiency programs.
One study of 600+ utilities and third-party program managers found that roughly 40% of total energy efficiency program costs were spent on just administrative and marketing costs, leaving only 60% for actual incentives to customers!
Measured savings incentives are simple
Unlike traditional programs that try to make up for the lack of energy savings accountability with complicated rules and calculations, the measured savings approach has accountability and innovation built in—eliminating the need for byzantine requirements that don’t improve program outcomes.
Specifically, Measured Savings Incentives embrace a performance playbook that includes the following features:
- Flexible program structure driven by performance-based, mid-stream incentives.
- Broad trade ally definition that allows “Aggregators” of various types (financiers, retailers, solar companies, etc.) to participate.
- Many eggs, many baskets to encourage innovation and experimentation by aggregators to discover the most effective ways to increase adoption.
This approach also enables program implementers to dramatically reduce the amount of information and paperwork required for each project.
For example, unlike the HOMES modeled savings incentives, which requires contractors to create a BPI 2400 model for each program participant, the measured savings pathway only requires an energy savings estimate from an aggregator.
In fact, we believe Measured Savings Incentives projects should only be required to provide program administrators with:
- Project location and customer identifier
- Project scope listing the measures installed
- Pre- and post-project installation photos
- A minimum of 12 months worth of pre-project utility data
- Estimated energy savings
This is information that contractors routinely collect, so it is not onerous. While aggregators and contractors will likely collect additional data points in order to predict energy savings and the scope of the project, minimizing program data requirements will provide important flexibility, enabling innovation that continuously reduces the burdens of data collection by the contractor.
These minimal data requirements are possible because the data points that really matter are the measured savings that are calculated based on actual energy usage—before and after the project is completed.
Policymakers and program administrators need to empower the market
Measured savings incentives can be simple, but only if policymakers and program administrators empower aggregators by unlocking data access, providing incentive flexibility, and keeping project requirements simple.
It’s always easy to ask for more information and create more complex rules to satisfy various stakeholders, but sometimes less is more.
Keeping the requirements minimal creates the flexibility to encourage innovation and multiple aggregator business models.
For example, an “Installer Aggregator” could be a local contractor that does their own sales and marketing, leveraging Measured Savings Incentives to provide special rebates to consumers at off-peak times of the year, while partnering with financing and distribution partners.
Or a “Marketing Aggregator,” like a marketplace website, could focus primarily on lead generation—leveraging Measured Savings Incentives to reach more homes than they otherwise would be able to—and partnering with installers who do in-home sales and have third party financing and distribution partners.
A “Distributor Aggregator” could provide installer partners with lower cost equipment and financing solutions subsidized by measured savings incentives, lowering project prices across the board.
Or a “Sales Aggregator” like a solar company with existing sales, marketing, and financing capabilities could partner with HVAC contractors to improve the economics of projects that combine heat pumps and solar.
The possibilities are endless, and that’s the point.
By removing lots of one-size-fits-all rules and minimizing submission requirements, the market can experiment and find the best combination of business partnerships for every geography and customer type.
Measured savings can align good public policy—and great—market outcomes
By embracing Measured Savings Incentives and a performance playbook, policymakers can align public and market goals.
Program simplicity and flexibility enables market innovation, innovation enables performance, and performance enables sustainable scale.
Ultimately, there are two groups of stakeholders that we need to design the program around:
- Market stakeholders: Consumers (homeowners and renters) and contractors
- Public stakeholders: Taxpayers and ratepayers
Measured savings incentives minimizes the friction between the market and public policy goals.
By leveraging aggregators that have ultimate accountability for results, policymakers can ensure public dollars are spent wisely while enabling the market innovation that we so desperately need.
By leveraging aggregators that have ultimate accountability for results, policymakers can ensure public dollars are spent wisely while enabling the market innovation that we so desperately need.
Like most things, it comes down to simple choices.
Will policymakers and program administrators continue a failed top-down, command-and-control approach to energy efficiency program design?
Or will they embrace a bottom-up performance playbook that leads to innovation, accountability, and simplicity?
We’re biased here at Sealed, but believe the answer is clear.
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