One Giant Leap for Energy Efficiency in New York

Posted by Deb Peck Kelleher and Ryan Katofsky on Feb 18, 2020 3:12:32 PM

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On January 16, the New York State Public Service Commission (PSC) issued an order approving Utility Energy Efficiency and Building Electrification Portfolios Through 2025.  This is a robust order with strong heat pump and low-to-moderate-income programs. It is also a huge leap in the savings New Yorkers will get from making their homes and businesses more energy efficient. 

As part of its broader Reforming Energy Vision (REV) initiative, New York created a new concept for energy efficiency, with the New York State Energy Research and Development Authority (NYSERDA) changing its focus from consumer programs to market transformation. The idea was that it would be the market value of energy efficiency savings, rather than utility mandates, that would drive investment in energy-saving products and services. It was a bold vision, but the market-driven system never really took shape, and energy efficiency investment through utility program lagged in New York, just as many other states were ramping up their energy savings goals. While REV continued to break new ground in other areas, in energy efficiency New York fell behind.

In the meantime, REV required New York’s utilities to create transition budgets and metric plans – Energy Efficiency Transition Implementation Plans (ETIPs).  The ETIPs largely kept utility energy efficiency programs at the pre-REV status quo – 1% incremental savings goals per year, with achievement slightly below that.

But then, on December 13, 2018, the PSC went back to a more traditional approach to energy efficiency and put out a set of more ambitious targets across utilities, NYSERDA, and other state actions in its Accelerated Efficiency Order. No longer wed to a market-driven scheme, the Order ramped up utility savings goals, tripling them by 2025. In addition, the Order encouraged a more collaborative approach between the utilities and NYSERDA on programs and market development and a larger emphasis on heat pump deployment to reduce greenhouse gas emissions and the demand for natural gas in the Downstate market.

The January Utility Energy Efficiency Order is based on April and May 2019 utility filings of proposed plans for reaching the goals set in the Accelerated Efficiency Order, which significantly increased their efficiency budgets.   

The new Order sets electric targets to reach 3% reduction of electricity sales by 2025, as established in the Accelerated Efficiency Order. Gas efficiency targets and budgets are based on the need in the Downstate market to reduce peak demand and the possibility of moratoriums on new gas hook-ups.  The Order values pursuing all cost-effective measures within budget limits. Utilities are directed to transition their programs to target building envelope and other longer-term improvements, as opposed to short-term measures, and set incentives to encourage the highest levels of efficiency.  The Order separates the portfolio by Low-to-Moderate Income (LMI), non-LMI, and heat pump programs.  As in other orders, the Long Island Power Authority (LIPA) is encouraged to work with NYSERDA to implement similar programs.

For the LMI portfolio, the Commission called for a statewide effort to improve access to programs and the customer experience, with the creation of a Customer Hub, and cost sharing between utilities and NYSERDA. Utilities are directed to develop offerings that include incentives for comprehensive retrofits, for achieving deeper energy savings, and for predevelopment and technical assistance for building owners and managers. In addition, NYSERDA will remain the default LMI multifamily provider.

The Order has a specific minimum target of 3.6 TBtu for heat pumps and sets a combined budget of $454 million. The Order discusses three variables with heat pump installations – per unit savings estimates for different technologies, expected adoption rates, and effective incentive levels. A statewide evaluation, measurement & verification study is to be conducted by June 1, 2022 to ensure energy savings are appropriately captured. As throughout the Order, the utilities and NYSERDA are encouraged to collaborate in expanding the use of heat pumps, not only in residential settings but also at commercial and multi-family units.  

The main focus of the Heat Pump program is residential non-LMI, but the Order does direct NYSERDA to spend at least $30 million on LMI heat pump programs.  In addition, NYSERDA will continue its Heat Pump Incentive Program with utilities reimbursing NYSERDA for any incentives paid until their programs are operating. 

The Order has repeated references to the recently enacted Climate Leadership and Community Protection Act. The details of the Act have been left to the Climate Action Council, which has yet to meet, but the law has two specific requirements that could affect this Order – that 20% of funds be spent within disadvantaged communities and that an energy efficiency goal of 185 trillion TBtu of end-use energy savings below the 2025 end-use forecast be met. This goal aligns with the expected savings from this Order. The Council is also tasked with defining disadvantaged communities, which may or may not overlap with LMI programs. The Order’s 2022 Interim Review allows the Commission the opportunity to adjust the budgets, as well as LMI spending and programs, as required by the Climate Action Council. 

This is a very strong order and, overall, efficiency advocates are pleased. Although the order encourages heat pump incentives that also upgrade building envelopes, some feel that consumer acceptance of heat pumps is dependent on improvements to the building shells. And there is general frustration that systems weren’t created to drive deeper, longer lasting efficiency measures, and that the systematic problem of cost recovery measures being set in individual utility rate cases wasn’t addressed.

There is still much work to be done in terms of implementation, but New York’s Efficiency Order significantly increases utility efficiency budgets and establishes the coordination with NYSERDA that is needed to advance the programs to meet the 2025 efficiency and climate goals. Efficiency providers and advocates are supportive of this order, but they will be vigilant to make sure that these programs work effectively.

Deb Peck Kelleher is Director, Policy Analysis and Operations, at the Alliance for Clean Energy New York.

AEE’s regulatory issue brief “Energy Efficiency as a Resource: The Power of Getting More from Less,” as well as seven other related issue briefs, are available for download by clicking below.

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