Commercial Building Owners in California: Energy Efficiency Is Becoming Much Better for the Climate, the Grid, and the Bottom Line

Large commercial building owners in California have an unprecedented opportunity to play a leading role in addressing climate change and reducing summer blackouts—all while saving big on equipment upgrades and energy costs.

Up until now, energy efficiency upgrades in California have focused on saving energy at any time of the day or year. Going forward, the focus will shift to saving energy on summer afternoons and evenings when it is extremely expensive or impossible for utilities to purchase enough power to meet peak demand. Saving energy during these times can help reduce the risk of blackouts and help utilities avoid costly procurements of fossil-fuel-powered electricity.

Peak energy savings also produce up to three times more greenhouse gas reductions.

Regulatory shifts have opened up new ways for large commercial building owners to tap into these high-value savings. In December 2021, the California Public Utilities Commission (CPUC) approved $180 million for a set of energy efficiency initiatives designed to reduce energy use during summer peaks. Launching now, this 18-month effort is expected to provide building owners with much greater incentives and financial support for energy upgrades than past efficiency programs in California have.

The New World of Meter-Based Energy Efficiency

Recent advances in energy metering enable California’s new focus on summer peak reductions. Smart meters can accurately measure the precise hour when energy savings occur. Innovative new methods to analyze the meter data allow energy efficiency providers to value that savings on the basis of the hourly value to the grid. This results in dramatically higher value for projects that focus on peak hours as well as for new equipment with long lives that will save energy for many years. The process is simple for commercial building owners. They don’t need to do these calculations themselves.

Because the meter-based approach rewards buildings on the basis of their real-world performance, the approach is likely to drive significantly greater incentive payments than past energy efficiency projects have. By selecting and designing upgrades that result in the greatest peak reductions, facility owners can maximize incentives as well as grid and climate benefits. The hourly savings data also give building owners deep insight into their energy use patterns, informing additional cost-saving energy improvements.

There’s an added bonus for California facilities on time-of-use pricing. Because they pay the highest electric rates during peak times, they can significantly reduce their utility bills by targeting peak reductions—a financial benefit that lasts for the lifetime of the upgraded equipment.

A Vast Improvement Compared to Historical Approaches

In the energy efficiency world, the meter-based approach is truly revolutionary, representing a substantial improvement in how commercial building owners are rewarded for their upgrades. For decades, as part of the traditional efficiency approach in California, building owners have received financial incentives for upgrades on the basis of upfront estimates of energy savings. Remember that the meter-based approach measures actual savings.

There were two traditional approaches. One was based on highly conservative savings estimates and resulted in low incentives. The other produced relatively accurate estimates and valuable incentives, but the process was expensive, uncertain, and painfully slow. Many owners didn’t pursue incentives because the cost of participating in the programs outweighed the financial benefits. Furthermore, traditional approaches valued energy savings the same regardless of which hour of the day and time of the year they occurred. As a result, such approaches are not suited to targeting high-value peak savings.

Meter-based projects rely on measured data, so there is no need to convince skeptical reviewers about energy savings. Projects are approved and installed quickly. They often produce much higher value for building owners. Therefore, many ambitious upgrades that didn’t make financial sense in the past—such as projects involving high upfront costs or several building energy systems—may now pencil out.

Taper: The Market Leader in Meter-Based Energy Efficiency

The $180 million in energy efficiency funds recently approved by the CPUC are intended for the statewide implementation of the meter-based approach. The regulator’s decision was based on the approach’s successful use in several California counties as part of community choice aggregator MCE’s Demand FLEXmarket program. Over the past year, Taper has implemented more than 80% of the meter-based projects in this program. We are seeing projects yield as much as six times greater value than traditional energy efficiency projects. We’ve done it, it’s better, and we can help your organization get new energy systems.

Besides possessing our unrivaled expertise in the new meter-based approach, Taper has 20 years of experience providing energy efficiency upgrades for building owners. Today, we are a trusted energy advisor and project implementation firm for many commercial companies with large facility portfolios.

Looking forward, we have developed powerful new capabilities to help large commercial building owners get the greatest financial value and climate benefits out of meter-based efficiency upgrades. We invite owners to collaborate with us during this exciting new era in energy efficiency.

This article is the first in a series about the revolutionary meter-based energy efficiency approach. Stay tuned for articles about specific opportunities for large commercial building owners, new Taper capabilities to maximize value for building portfolios, and other topics. If you are interested in learning more and working with our trusted energy advisors, please contact us.