Active Efficiency in Action
The best way to understand the value of Active Efficiency is to see it in action. There are many examples that demonstrate the potential of Active Efficiency. Between the economic, social, and environmental benefits, the hard work that goes into making these examples successful is something to be celebrated.
Energy Efficiency as a Service (EEaS) in Seattle
The growing demand for deep retrofits to help decarbonize the nation’s building stock has faced many economic barriers. Prime among these is the “split incentive,” where the financial benefits of energy efficiency flow to tenants through reduced energy bills, rather than to the party responsible for the financing of the efficiency measures.
To address this barrier, Active Efficiency Collaborative Member Seattle City Light established programs with long-term service agreements that sell energy-efficiency-as-a-service (EEaS) rather than kWhs of energy. By providing long-term financing solutions for deep retrofits, the EEaS model supports Active Efficiency strategies – such as smart controls that enable systems integration and real-time energy models that incorporate load forecasting – that are often too complex and expensive for traditional programs. EEaS is built upon the MEETS model, developed by the MEETS Coalition. Seattle City Light tested the MEETS model in a trial project at the Bullitt Center. There, MEETS demonstrates the feasibility of a model that does not rely on incentive dollars, but is instead largely or wholly self-financing. The success of the trial project at the Bullitt Center, a 52,000 square foot commercial office building in Seattle where the investor recouped $54,000 of its investment in energy efficiency measures just one year into its 20-year contract with Seattle City Light, has led Seattle City Light to expand upon this experience with the Energy Efficiency as a Service Pilot Program.
Energy-efficiency-as-a-service is a financing solution that allows customers to implement efficiency projects with no upfront capital expenditure. The provider pays for project development, construction, and maintenance costs. Once a project is operational, the customer makes payments that are based on actual energy savings, resulting in immediately reduced operating expenses.
The Metered Energy Efficiency Transaction Structure (MEETS) is a model for EEaS developed by the MEETS Accelerator Coalition and implemented by Seattle City Light that could fundamentally change the way utilities conduct business and encourage a sea change toward deep retrofits across commercial and industrial building portfolios. MEETS and EEaS address the split incentive market failure that often hinders efficiency improvements to commercial buildings.
MEETS involves four stakeholders: the utility, the building owner or manager, a third-party developer or investor, and tenants. The utility, building owner, and investor enter a 15-30-year power purchase agreement that defines the following roles:
- The investor provides upfront capital for the building owner or efficiency manager to invest in efficiency improvements. The investor also finances ongoing maintenance of building upgrades to maximize the metered energy efficiency improvements.
- The utility tracks the building’s energy savings against a baseline set by the building’s historical energy usage. The utility issues a monthly bill to the building owner that reflects the building’s energy use had it not been upgraded. In other words, the building owner pays the same energy utility bill as if the building had been built to code but not further improved.
- The investor is repaid through a long-term contract with the utility for “Efficiency Energy,” defined as the calculated avoided energy use harvested at the site by the energy efficiency developer, which is quantified by the measurement and verification consultant. The utility also retains a portion of the revenue to cover administration and efficiency metering costs.
- Tenants pay nothing extra.
This structure benefits all sides involved: Utilities can turn a profit while providing energy efficiency services to their customers and reducing expensive generation and transmission costs during periods of peak demand, tenants enjoy more comfortable office spaces that may lead to improved productivity, the investor is protected by a contract with the utility that provides a return on investment over time, and building owners increase the value of their building and earn additional cash flow from the investor or efficiency manager.
Seattle pilots MEETS
Seattle City Light has successfully leveraged MEETS to help the Bullitt Center reap deep energy savings, even after it was touted as the greenest commercial building in the world in 2013.
Seattle City Light administers the MEETS trial project with the support of DeltaMeter®, a software platform that models three scenarios: a baseline model of the Bullitt Center’s energy use had it not been retrofitted, a model that tracks the Bullitt Center’s energy use after improvements, and a model of current conditions that includes the Bullitt Center’s utility meter readings, occupancy data, and daily average temperature. Each month, these three models are used to determine the energy savings and overall performance of the building.
Following the success of implementing MEETS at the Bullitt Center, the Seattle City Council approved Seattle City Light’s request to build upon the MEETS model and launch the Energy Efficiency as a Service pilot program for an additional 30 buildings. Its experience providing EEaS is a significant case study for utilities considering replication of the model. Lessons learned include:
- Secure buy-in on program design. Conducting extensive stakeholder outreach with both the energy service provider and the property managers is critical for creating a successful program. Seattle City Light spent more than three years working to understand and address stakeholder needs within the program design for EEaS.
- Streamline billing. The EEaS program is built around a smooth billing process that involves only one account per building to reduce administrative burdens and ensure ease of customer participation.
- Prepare for nonroutine adjustments. Performance-based programs rely on a mix of strategies, including advanced metering, manually read meters, modeling, tracking energy efficiency implementations, and tracking savings assessments. Any of these multiple components can experience a disruption; for instance, COVID-19 posed challenges for manual meter readings due to issues with in-person access. Seattle City Light is working toward building greater flexibility into programs for nonroutine adjustments.
Ultimately, the EEaS program highlights how reimagining a utility’s role in the energy system as brokers of Efficiency Energy can allow utilities to meaningfully contribute to emissions reductions without sacrificing their bottom line. This model can therefore accelerate adoption of Active Efficiency approaches at the utility level, and through a long-term contract that enables payment to participants for achieving deep energy savings.