NYS Looks to Change Utilities’ Role in Energy Projects

by | Nov 10, 2016

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New York State

An initiative wending its way through the New York State Public Service Commission could have a big impact on the relationship between energy managers and their buildings on one side and utilities on the other.

The basic idea of the change, which is part of the broader Reforming the Energy Vision (REV) initiative, is to focus transactions between utilities and end users on outcomes rather than savings. The utility would become the conduit through which a vendor and the end user of the energy link up. Currently, utilities play a more passive role under a regulatory approach that discourages investments by tending to limit incentives.

Last week, a mandated report entitled “Energy Efficiency Metrics and Targets Options Report,” which was written by the Clean Energy Advisory Council, was released.

The report draws heavily on work by Energy Innovation, a think tank based in San Francisco. Michael O’Boyle, a Sector Transformation Expert with the firm, told Energy Manager Today that the changes under consideration are significant. “They want utilities to serve as market makers and provide platforms for distributed energy resources to provide enhanced electric service and more choice and cleaner electricity for customers in New York,” he said.

The key is the focus on enabling and encouraging the transition to new and more efficient equipment. From a high level standpoint, the idea is to make it more profitable for utilities to encourage projects than for them to invest in new utility infrastructure, which O’Boyle says is the way the system works now. The utilities will take on the role of market makers and facilitate deals which would directly or indirectly encourage energy efficiency.

The proposed approach is best illustrated through an example. Under the current system, a manufacturing company interested in retrofitting its plant with an energy efficient HVAC system would reach out to a vendor and seek incentives from the utility. The amount of incentives, however, may be depressed due to the age of the current equipment. If its end of life was five years in the future, the amount allotted in incentives would be less. The logic is that the company is close to a replacement anyway, so it is entitled to proportionately less money in incentives.

The proposed approach turns that dynamic on its head. The age of the equipment being replaced and other details become irrelevant. The new role of the utility would be to proactively link the HVAC vendor and the potential customer. In this vision, the emphasis is on achieving energy efficiencies, not debating every nickel and dime. “This approach steps beyond that and empowers the utility to innovate and find partners that can maximize energy savings no matter where coming from,” said O’Boyle. The new equipment would be more efficient and, therefore, the company which would pay less for energy.

The change will be fundamental. “The old approach sort of discouraged cooperation with third parties,” O’Boyle said. “The new approach just cares about achieving more efficiency. It gives the green light to partners to have [the relationship] go as far as possible” to building a relationship and making deals work.

A big outstanding question is the level of support New York State will provide. “The commission has not a decision on how much money will be made available for these incentives,” O’Boyle said. “It’s a key to the success of this approach.”

O’Boyle guesses that final decisions won’t be made until the end of next year. It’s obviously a big change and timelines are fluid. Though it is unclear when, or even if, this element of REV will be adopted, energy managers and their bosses clearly must pay attention since it could influence the timing of projects.

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