The Problem with Current Cost-Effectiveness Metrics

Current California energy policy is focused on decarbonization, electricity grid resiliency, energy equity, demand flexibility, and resource security. However, many of the state’s cost-effectiveness definitions and methodologies, which are used to justify new requirements and energy programs, are decades old. The Warren-Alquist Act, which governs the activities and responsibilities of the California Energy Commission, for example, was established in 1974. While the Act has expanded to include emerging energy policy mandates, it still contains some outdated and conflicting cost-effectiveness language pertaining to buildings, appliances, distributed generation, and utility programs. 

The outdated and unclear framework for cost-effectiveness does not reflect California’s current energy environment, whether in terms of fires and resiliency, grid stability, automated buildings or Automated Demand Response, and it fails to address many of the challenges in terms of energy needs and resources in neglecting to properly value a whole list of factors and benefits that result from real-world implementation. Lack of harmony across state agencies and across utility regions presents ongoing adoption barriers for new technologies and sound building approaches. When costs and benefits are ignored, promising energy-saving technologies capable of significantly contributing to California’s energy policy goals are excluded from its programs. One problematic end result of unclear value propositions to end-use consumers, is lower code compliance in installing Demand Responsive (DR) enabled projects as well as lower participation in DR programs.

CEA’s Efforts to Redefine Cost-Effectiveness Metrics

CEA’s Cost-Effectiveness Metrics Initiative is focused on developing an updated definition of cost-effectiveness, as well as an extensive set of technical and policy elements to transform how California state agencies define costs and benefits, including non-energy benefits, and methodologies for determining the cost-effectiveness of energy measures and programs. 

Initiative Priorities:

Multiple Perspectives - Cultivate a broad collation of voices for recommendations that factor in various agencies’ perspectives. While the primary discussion to date has focused on the California Energy Commission, it is important to integrate other agencies’ perspectives such as the California Public Utilities Commission.

Comprehensiveness - Engage an extensive and diverse set of stakeholders beyond government that spans the private sector to include: architects, engineers and builders; component manufacturers, installers and inspectors; building owners, operators, and tenants; and energy providers. 

Value Propositions - Develop compelling explanations of the specific benefits to each of those constituencies that will be affected by changes in CEM energy policies, codes and regulations. Articulate benefits relevant to each stakeholder group/constituency: governments and municipalities; architects, engineers and builders; component manufacturers, installers, and inspectors; building owners, operators, and tenants; and energy providers. 

Systems Focus & Resilience - Demonstrate the link between systems and resilience by addressing how highly interconnected control systems can be developed to ensure resilience such that if central control systems go down each individual component functions independently.

End to-End Benefit Valuation - Quantify end-to-end benefits to include both energy and non-energy considerations for a more holistic measurement framework; develop a viable measurement paradigm to encompass:

Adaptability - Develop measures that apply to both existing energy systems and technologies, as well as to evolving systems and technologies for easier and more effective interpretation, implementation, and compliance.

READ MORE: CEA’S COST-EFFECTIVENESS METRICS WORKING GROUP & TASK TEAMS