Right now, states are readying their plans to launch the two Inflation Reduction Act-funded rebate programs for home energy upgrades: The Home Efficiency Rebate (HOMES) and the Home Electrification and Appliance Rebate (HEAR) Programs. In fact, New York recently became the first state to launch the HEAR program, and more states are expected to follow suit over the next several months.
HEAR rebates are fairly simple: They’re based on prescriptive rebate levels. For instance, low-income households can be eligible for an $8,000 rebate for a qualified heat pump. By comparison, the HOMES Program is generally seen as more complex, in part because these rebates are based on actual or estimated energy savings via a measured or modeled pathway. In order to launch the HOMES Program, states must decide which pathway(s) to use (we at Sealed have been advocating that states take a “no regrets” approach and launch both!)
In making this decision, the conventional wisdom is that, while measured programs are seen as innovative and a downpayment on Virtual Power Plants (VPPs), modeled programs are simpler than measured. And while this conventional wisdom is understandable at first glance, the reality is that measured programs can actually be much simpler (and even faster to launch) than modeled programs.
To understand why measured programs can be simpler than traditional program models, we first need to take a step back and talk about the inherent tensions and challenges that all rebate programs face.
Traditionally, programs struggle to balance accountability and scale
Rebate programs are funded by public dollars, so programs are appropriately concerned that there is accountability for how the money is spent. As a result, programs often require many “inputs” from contractors about the project to ensure that it is installed correctly and to estimate the amount of energy saved.
But accountability is not the only goal of these programs. Scale is equally important, since more rebate money can lead to market transformation, which is absolutely essential if we are going to meet our climate and grid reliability goals.
Public dollars need to be used wisely, but they also need to be used.
In the traditional program paradigm where contractors need to collect many “inputs,” it’s harder for contractors to scale their participation in rebate programs (or even participate in the first place). As a result, contractors that do participate in rebate programs usually have to raise their prices or take on financial burdens to cover associated soft costs.
The tension, therefore, in most programs is balancing accountability and scale. You can get more accountability or more scale, but you can’t have a lot of both. With measured savings programs, however, this tension is resolved by focusing on a single output: actual energy savings.
With measured savings, accountability and scale are no longer competing goals. That’s because measured savings programs are focused on the amount of energy saved as the key output to ensure project quality, which reduces the need for as many inputs from contractors. Measured savings therefore get the best of both worlds: the highest levels of accountability possible with the greatest simplicity possible (and therefore potential for scale).
Measured savings programs can be easy if you let them be
The good news is that multiple states have experience with measured savings programs, and the lessons learned in those programs can help inform the creation of IRA HOMES measured programs.
For example, California is leading the way with the most advanced measured programs in the country. And while it took California some time to get here, the state has discovered what works for them (and what doesn’t) when it comes to measured savings programs and has adjusted accordingly.
California has invested heavily in energy data infrastructure. As a result, the state’s rebate programs have direct access to granular utility data, both control and participant, which enables advanced program features such as comparison groups and time-based price signals. However, standing up California’s utility data sharing agreements took a long time, and states trying to replicate existing or past versions of measured savings programs with IRA funds are likely to experience implementation delays.
Other states such as Oregon have also piloted measured savings programs. Although the Oregon program had strong utility data sharing agreements, the program struggled to get high-quality data. (Which is why we recommend programs enable other ways to get energy usage data outside of utilities.) Additionally, the program utilized comparison groups, but found that was too complex of an approach for a pilot program. Above all, the program found that starting out simple is key.
Therefore, states should use the lessons learned in past measured savings program development to create their own measured programs.
And those (simpler) measured programs can be launched quicker because there is experience for what works and what doesn’t.
There are easy ways to launch measured savings programs
Sealed has been executing measured savings approaches, in both private and programmatic context, for more than 10 years. We’ve learned — sometimes the hard way — what’s needed to keep things simple.
One major component of simple measured savings programs is asking aggregators, like Sealed, to take on more responsibility and accountability. For example, in simple “pilot” measured savings programs, aggregators can be responsible for energy data collection and savings calculations using open-source M&V software — the two elements that can make measured savings programs initially daunting.
By asking aggregators to do more, implementers can focus their time and budget on using the additional data insights from measured savings programs to provide better targeting, confirming and analyzing savings calculations, quality control, and community engagement strategies.
Over time, of course, programs can add more advanced functionality to do even more, but starting out simple is usually best.
Measured savings programs can be the easy button
Piloting measured savings programs can be the quickest, easiest way to get HOMES Programs launched. In particular, measured programs can be faster to launch because states can:
- Reduce Contractor Training: Programs don’t have to train contractors on BPI 2400 modeling software.
- Minimize Custom Program Tools: Programs can leverage aggregators that develop tools for contractors and households to access rebate programs, which means that states can focus less time on creating customized tools and more time on getting rebates out the door.
- Lower Project Review Needs: Programs don’t have to hire and train as many people to review project inputs because project quality in measured savings programs can primarily be gauged by energy savings.
This also means that state energy offices and their implementation partners can spend more of their administrative budgets on higher value things like low income community outreach.
States can get measured savings programs up fast — faster than other programs, even — by asking aggregators to do more right at the beginning. Taking a smart approach to piloting measured savings programs will ensure that states have the time and resources to also launch the modeled pathway to ensure full program accessibility.