November 15, 2022

Utility Value of a Pay As You Save Inclusive Utility Investment Program

By: Jamie Dunlap

Inclusive utility investment systems such as Pay As You Save® (PAYS®) make it financially feasible and attractive for utilities to capitalize residential energy upgrades to develop efficiency resources and grid flexibility. This summer, a study co-authored by Clean Energy Works “Utility value of a pay as you save inclusive utility investment program for whole home energy efficiency and electrification upgrades” was included in the European Council for an Energy Efficient Economy’s (eceee) peer-reviewed Summer Study proceedings. This paper makes the business case for all utilities with tariff authority to use inclusive utility investment to fund building energy upgrades.

This study analyzed weather normalized hourly meter data from one of the longest running inclusive utility investment programs. As of October 1, 2021, Ouachita Electric Cooperative Corporation (OECC) in rural Arkansas, has invested $3,237,024, providing energy efficiency and in some cases solar energy upgrades to 396 single family homes and 10 commercial facilities (6% of all customers) through their HELP PAYS inclusive utility investment program. To date, OECC has recovered all of the scheduled cost-recovery for their investments.

The analysis revealed that 369 of the locations in the program’s residential portfolio are generating over 1,100,00 kWh of electricity and 250 kWh of peak demand reduction per year to the utility (an average of 3,200 kWh energy savings and 0.7 kWh of peak load reduction per home). Over the 15 year lifetime of the upgrades, the savings Net Present Value to the utility is $531,900 ($1,350 per home).

Throughout the life of the program, OECC has instituted program design reforms. These reforms increased average energy savings by 42%, peak load reduction by 13%, and offer-acceptance rates from 63% to 80%. Offers with no upfront cost for the customer were accepted 90% of the time. 

Compared to the portfolio average which reflects a large number of upgrades produced before the institution of the program design improvements, the next generation of upgrades are projected to produce savings in wholesale electricity costs that are 42% higher wholesale demand costs that are 13% higher, and accepted offers by 46%, relative to the historical portfolio. OECC can further improve program value by increasing its annual program volumes which will distribute its fixed internal program costs more readily. The cumulative effect of these existing and proposed improvements would be to increase the average net present value of future upgrades by 70% relative to the historical portfolio average. 

OECC’s HELP PAYS program is generating energy savings for its participants as well as economic benefits for the utility and even member owners who are not participating. It is expected to provide even greater benefits in the future as more adjustments are made into the program.

Other coops with high weather driven energy costs and supply contracts which produce savings when wholesale energy and peak demand are cut, could produce similar benefits by creating their own Pay As You Save inclusive utility investment programs in order to deliver savings to all member-owners from lower power purchase costs, and to participating member-owners in comfort, health, and resilience, and protection from extreme heat and cold and the often unaffordable costs that accompany these events.

Read The Full Paper

Related Stories