How utilities can become efficiency innovators

With future federal clean energy policies in doubt in the US, proactive clean energy policy will probably be left mainly to states in the next few years. A New York policy could fortunately show the way forward on energy efficiency for utilities.

In its Reforming the Energy Vision, the New York Public Service Commission, opted for an outcome-oriented approach to measuring and incentivising efficiency performance. An outcome-oriented approach would focus on the policy goal of reduced energy use overall, putting lesser emphasis on the administratively intensive business of attributing savings to specific actions. New York’s Clean Energy Advisory Council recently released its Energy Efficiency Metrics and Targets Options Report on implementing the Commission’s orders. The report is a radical departure from program-based efficiency regulation, and highlights both opportunities and implementation challenges.

No state, so far, has attempted this sort of performance-based ratemaking for energy efficiency, and New York’s approach could become a powerful new tool to get the most out of efficiency investments. In the end, transparency and adaptability will be essential conditions to ensure an outcome-oriented approach achieves deep efficiency savings.

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