Policy Leadership Initiative Year III Addressing Energy Challenges for Low-income Families in Northern New Englan

Cillo, Paul A.

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Pay As You Save® (PAYS®)Paul A. CilloEnergy Efficiency Institute.Policy Leadership InstituteDurham, NHOctober 28, 20082Energy-efficiency Economics? Fact #1: Cost-effective measures produce more than enough savings to pay for the measures.3Energy-efficiency Economics? Fact #1: Cost-effective measures produce more than enough savings to pay for the measures.? Fact #2: Both society and individual customers save money from installation of cost-effective measures.4Energy-efficiency Economics? Fact #1: Cost-effective measures produce more than enough savings to pay for the measures.? Fact #2: Both society and individual customers save money from installation of cost-effective measures.? Fact #3: Unless measures are 100% publicly funded, customers must pay some or all of the upfront cost.5Energy-efficiency Economics? Fact #1: Cost-effective measures produce more than enough savings to pay for the measures.? Fact #2: Both society and individual customers save money from installation of cost-effective measures.? Fact #3: Unless measures are 100% publicly funded, customers must pay some or all of the upfront cost.? Fact #4: Most customers leave cost-effective energy efficiency measures uninstalled.6Huge Savings Are Left on the Table...? Consumer barriers to choosing efficiency– Lack of information/trust in vendors– Lack of access to capital and/or debt– Uncertainty about future occupancy– Split incentives? Landlord/tenant? Builder/owner7Market Intervention Strategies 30 years? Technical assistance– Information/energy audits/arranging? Subsidize customer purchase: lower total measure cost– Rebates (ratepayer funded)– Tax credits (taxpayer funded)? Finance customer purchase: reduce first cost– Loans (incl. low and no interest)– Energy-efficient mortgages– Leases/On-bill financing– ESCo shared-savings? Combinations: technical assistance, subsidy and financing8A large and untapped resource remains…? ACEEE Meta-study (2004)? Achievable potential = 24% electricity? Inter-laboratory Working Group (2000)? 24% electricity savings achievable across U.S.? NYSERDA (2003 & 2006)? NYS GHG reduction targets can be met by lowering electricity use by 11% (2012) and 14.1% (2022) at a cost of less than 3 cents/kWh; and yield $4.5 - 9.1 billion in net economic benefits? 28% of forecast gas use economically displaceable by 20169Public/Utility Programs Limited? State/utility programs to address the efficiency gap are good as far as they go...? “Iron ceiling” on funding? Legislatures have raided system benefit funds? Large up-front payments or debt? Many can’t participate even with rebate assistance? High administrative/transaction costs? It’s not enough? At current weatherization expenditure levels, 100-150 years to treat all low-income units? Big savings opportunities missed because of persistent market barriers and lack of funding10The PAYS® Opportunity? Concept originated in 1999 by Energy Efficiency Institute? A market-based system where customers, vendors, and capital providers acting in their own interests produce unprecedented resource efficiency investment that is also in society’s interest.11How PAYS® works...? Customer selects (qualifying) measure.? Measure installed at no cost to Customer.? Customer pays tariffed charge on utility bill:? Measures certified to provide savings right away.? Estimated savings greater than payment.? DNP for non-pay just like any other utility tariff.? Portable measures.? When customer leaves, take and pay  balance.? Permanent measures.? When customer leaves, charges “run with the meter.”12How PAYS® works...Draws Funds to Pay ContractorsPays Contractors for completed jobsPAYS® Product InstallatonMonthly PAYS® PaymentSends Payments Repays Capital ProviderCapital ProviderCertification Agent UtilityEscrow AccountCustomerCertified Contractor13More Desirable “Products”? No upfront payment? No credit checks, liens or hassles? No new debt obligation? Pay only while saving (and pay less by saving)? Independent certification? Tenants can make their dwelling more efficient without risking loss of investment14All Customers Can Participate? Renters -- landlord pays nothing; customer pays only while occupying a location. ? Customers with limited resources -- no liens, credit checks, or upfront payments required; the only obligation is to pay a lower bill. ? Businesses -- no debt obligation, no upfront payment, no commitment to location.? MUSH customers -- agreeing to pay a lower monthly bill, so town vote, agency or board approval should not be required15First PAYS® Installation - NH (2002)? Town of Stratford (NH) street lighting change- out? $13,050 to change and relocate 58 fixtures? $6,292 annual savings? Would pay for itself in 2 years, but...? Voters turned down project? Did not want to take on debt? PAYS® did not require voter approval? Not a loan, but a utility bill? “We couldn’t have done it without PAYS®”16Kansas Pilot with PAYS® Elements? Residential pilot program (mostly single family)? Commission approval December 20, 2007? Landlords required to assume risk of measure failure – not PAYS®? 234 audits, 47 buildings completed (6 rental); 98 rejections; 89 plans in pipeline; demand overwhelmed contractors - 6 month or longer wait (8/1/08)17Hawaii PAYS® Pilot? PAYS® legislation -- 2005? Solar hot water (SHW) heating pilot? Commission approved 3 utilities to offer PAYS® tariff on June 29, 2007? $1,000 rebates and very high rates make SHW cost effective18State by State? System set up and operation– One-time: system set up? tariff design and approval? billing system adjustments? set up third-party certification? find capital provider(s)– Ongoing: operating and financing costs are built into PAYS® customers’ charges19State by State? State Commission must approve PAYS® tariff:? Defines measure eligibility and customers? Specifies rules & responsibilities of vendors, utilities and customers? Identifies Certification Agent and role? Permits utility recovery of PAYS® bad debt like other bad debt**  In reality, PAYS® bad debt MUCH lower than typical utility bad debt.20More InformationPAYS Americawww.paysamerica.orgEnergy Efficiency Institutewww.eeivt.com802-879-8895

Pay as you save (PAYS)

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Pay as you save (PAYS)

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