The Why’s, Where’s, and How’s of California’s Energy-Efficiency Rebates

Energy-efficiency rebates are a relatively recent idea, first appearing after the energy crisis of the 1970s sent prices skyrocketing and drove customers to look for ways to reduce their energy bills. Those early programs generally involved simple cash rebates for one-off purchases of energy-efficient household appliances and heating, water heating, and cooling equipment. As these programs evolved over the next few decades, they became more sophisticated, emphasizing a comprehensive approach and basing the incentives on the quantity of energy saved. At the same time, utilities started to see energy efficiency as a resource, replacing the need for additional generation, transmission, and distribution at a fraction of the cost.

Setting energy-efficiency rebates at the right level has always been a challenge for utilities and regulators. In the early days of appliance rebates, the cash-back reward was simply intended to cover the difference in cost between lower-priced, inefficient appliances and higher-priced, more efficient ones. But as rebate programs expanded and became more complex, so did the task of aligning rebates with the amount of energy savings they produce. The mission of regulatory agencies became to find the “Goldilocks” level of incentive – that is, one that was enough to convince customers to install more efficient equipment but wasn’t overly generous. Since many efficiency programs are funded by ratepayers, agencies must ensure that they produce energy savings, environmental benefits, and economic activity that are in line with the money being spent.

In California, the California Public Utilities Commission (CPUC) is the agency that regulates the investor-owned utilities and the energy-efficiency programs that are run by those utilities. The CPUC has built and maintains DEER – the Database of Energy Efficiency Resources – which is an enormous catalog of information on many types of energy-efficiency measures and technologies. The information contained in DEER is used to calculate the energy savings for most types of energy-saving equipment. These DEER-based energy savings are then used to determine the amount of rebate that will be available. As energy-efficiency technology evolves and advances, the CPUC and its consultants update DEER annually to reflect those changes. The most recent is the 2020 update, with a 2021 update currently in development.

Among the vast array of information contained in DEER are so-called “Deemed” energy-savings values that are used for off-the-shelf energy-saving equipment such as new lighting fixtures. Utilities base their rebates on the energy savings established by DEER for that particular piece of equipment, so it is important to understand the values contained in DEER. More complicated energy systems require “Custom” energy-savings calculations (as opposed to prescribed Deemed values) that use site-specific information combined with some DEER values to determine energy savings. Using either savings calculation method – Deemed or Custom – requires knowledge of the values in the DEER database.

Energy-efficiency programs in California are administered by the electric utilities within their respective service areas. California has six investor-owned utilities, or IOUs, with the “Big Three” – Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric – accounting for 75% of the electricity sold in the state. In addition, there are 46 municipally-owned utilities, or MOUs, which range from the Los Angeles Department of Power and Water and its nearly four million customers down to those with only a few hundred customers as well as four rural electric cooperatives. All of the IOUs and many of the MOUs administer rebate programs that can help businesses save money by offering rebates on high-efficiency lighting, HVAC units, commercial refrigeration and cooking equipment, and automated controls. (MOUs calculate energy savings and rebates based on the “TRM,” which is separate from but related to DEER.) You can visit your utility’s website to learn about the details, or you can get a more wide-ranging view with resources like the Database of State Incentives for Renewables and Efficiency.

Your best option, though, is to contact the energy-efficiency experts at Taper. Our experienced team of dedicated professionals has completed more than 20,000 efficiency projects and can walk you through the options, finding the programs that are best suited to your specific business. You’ll learn how saving energy can improve your bottom line…and your carbon footprint.