CURRENT ENERGY EFFICIENCY MARKET CONDITIONS AND THE POTENTIAL FOR TRANSFORMATION

Transcription

1 CURRENT ENERGY EFFICIENCY MARKET CONDITIONS AND THE POTENTIAL FOR TRANSFORMATION SUMMARY OF PROGRAM LOGIC, CURRENT MARKET CONDITION/TRENDS AND OPPORTUNITIES FOR PROGRAM ENHANCEMENT MAY 25,

2 LADWP S PURSUIT OF MARKET TRANSFORMATION IS UNIQUE At the conclusion of the first year of EM&V, Navigant delivered a report detailing net and gross energy savings - Free ridership was greater than expected LADWP management asked do traditional NTG methods really tell the LA story? Unlike other sponsors of market transformation, the City of Los Angeles can intervene with incentives, out reach and the force of law The Navigant team undertook an effort to explain the logic of this approach and lay the foundation to quantify future energy savings 2

3 TODAY, NAVIGANT WILL PRESENT ITS PRELIMINARY EVALUATION RESULTS REGARDING THE FOLLOWING Is the program logic for market transformation viable in Los Angeles? What are current market conditions and trends (with a focus on awareness)? What barriers prevent market transformation? How will an ordinance drive market change? What programming would support successful market transformation? How will we model energy savings from market transformation effects? 3

4 NAVIGANT PURSUED FIVE DATA COLLECTION ACTIVITIES TO ASSESS THE STATE OF THE MARKET AND THE POTENTIAL FOR TRANSFORMATION In-depth Interviews of Market Actors and Market Observers (28 Completes) - Engaged contractors, property owners and managers - Journalists, trade association officials, government officials On-Line Survey of Property Owners and Managers (107 Completes) - Representative sample of relevant business professionals Focus Group of Commercial Property Owners (5 Participants) - Less engaged property owners Delphi Panel of Market Experts (7 Participants) - Trade association officials, academicians, commercial real estate brokers and more engaged property owners General Population Survey (800 completes) Focused Telephone Interviews with Lighting Distributors (10 completes) 4

5 PROGRAM LOGIC 5

6 Market Share TRADITIONAL MARKET TRANSFORMATION PULLS MARKET ACTORS TOWARDS A FINAL CODE OR STANDARD GOVERMENT UTILITIES MARKET 3 4 Investment Market Transformation Baseline Return Codes and Standards 2 1 Time 1 Pre-Commercialization: Technical Assessment/Market Test 3 Accelerated Market Adoption: Price/Features/Competition 2 Addressing Market Barriers: Awareness/Availability/Information 4 Codes and Standards: Code development/code adoption Source: NEEA s Definition of Market Transformation 6

7 THE CITY OF LOS ANGELES IS PURSUING A PUSH/PULL STRATEGY Increased Efficiency and Lower Consumption Incentives Outreach & Education Market Actors - Building owners - Building Managers - Multifamily Tenants Supply Chain - Distributors - Manufacturers - Trade Allies - Installers - Service Providers Benchmarking Ordinance Efficiency Improvement Mandate 7

8 AWARENESS 8

9 THE NAVIGANT TEAM ASSESSED AWARENESS FROM SEVERAL PERSPECTIVES plan Benchmarking Ordinance Energy Efficiency Programs - Non-Residential Customers (Building Owners) Multifamily C&I - Residential Customers 9

10 AWARENESS AND SUPPORT OF plan IS HIGHER AMONG MARKET OBSERVERS THAN MARKET ACTORS (PROPERTY OWNERS) Heard of plan and Fully Support Heard of plan Have not heard of plan Market Observers (n=11) Property Owners (n=9) Source: In-Depth Interviews 10

11 PROPERTY OWNERS LACK AWARENESS OF ORDINANCE I heard of it before this survey and can tell you when or where that was, 7% I heard of it before this survey but can t recall when or where, 21% n=107 This survey is the first time I have heard of this benchmarking ordinance, 71% Source: On-line Survey of Property Managers 11

12 MULTIFAMILY BUILDING OWNERS HAD A LOW TO MODERATE AWARENESS OF ELECTRIC AND WATER CONSERVATION PROGRAMS *Multiple responses allowed. Source: On-line Survey of Property Managers 12

13 MULTIFAMILY AWARENESS OF NATURAL GAS PROGRAMMING WAS GENERALLY LOWER THAN THAT OF PROGRAMS FOR ELECTRICITY Note: Other category includes air conditioners and residential pool pumps. *Multiple responses allowed. 13

14 SIMILARLY, C&I BUILDING OWNERS AWARENESS OF ELECTRIC EFFICIENCY PROGRAMMING RANGED FROM LOW TO MODERATE... *Multiple responses allowed Source: On-line Survey of Property Managers 14

15 ... AND NATURAL GAS PROGRAMMING HAS LOWER AWARENESS *Multiple responses allowed Source: On-line Survey of Property Managers 15

16 RESIDENTIAL CUSTOMER AWARENESS OF ELECTRICITY, WATER AND GAS HAD SIMILAR RANGES Source: General Population Survey 16

17 WHEN ASKED WHAT KIND OF SAVINGS MEASURE CAME TO MIND, WATER AND RENEWABLES LED AWARENESS RANKINGS Source: General Population Survey 17

18 WHILE LADWP S PROGRAMS MAY HAVE MODERATE AWARENESS Awareness of programs and opportunities for action are moderate at best Water conservation programs are better known than electric counterparts Lack of awareness remains a barrier to market transformation but for those customers who are aware... What keeps LA residents and building owners from participating in programs and pursuing energy efficient actions? 18

19 BARRIERS TO PARTICIPATION 19

20 BUILDING OWNERS CITED WORKING EQUIPMENT AS THE MOST COMMON BARRIER TO PROGRAM PARTICIPATION *Multiple responses. LADWP Programs, n=152 Source: On-line Survey of Property Managers 20

21 COST AND UNCERTAINTY DRIVE MULTIFAMILY RATIONALES FOR NOT TAKING ENERGY CONSERVATION ACTIONS OR CHOOSING AN EFFICIENT OPTION Source: General Population Survey 21

22 BUILDING OWNERS AND MULTIFAMILY CUSTOMERS LACK MOTIVATION TO PURSUE EFFICIENCY Building owners do not want to replace equipment that is working for the sake of efficiency Multifamily tenants view cost and uncertainty of value as reason not to invest in energy efficiency... A benchmarking ordinance would provide this motivation if compliance is feasible. 22

23 FEASIBILITY OF COMPLIANCE 23

24 THE MAJORITY OF PROPERTY OWNERS EITHER ARE UNPREPARED OR DO NOT KNOW THEIR LEVEL OF PREPAREDNESS Don t know 29% Very prepared 7% Prepared 10% Don t know 29% Very prepared 18% Somewhat prepared 22% Prepared 19% Multifamily n = 27 Not at All Prepared 32% Commercial n = 73 Not at All Prepared 22% Somewhat prepared 12% Source: On-line Survey of Property Managers 24

25 PROPERTY OWNERS WERE DIVIDED REGARDING THEIR ABILITY TO PARTICIPATE IN AND COMPLY WITH BENCHMARKING ORDINANCE Source: Focus Group of Property Owners Very Feasible Feasible but Difficult Not Feasible 25

26 FOCUS GROUP PARTICIPANTS DETAILED THE CHALLENGES OF COMPLYING TO A BENCHMARKING ORDINANCE Cost - I think they [property owners] should be incentivized to do them [efficient upgrades]. Finding qualified contactors - The contractors I ve dealt with in electrical, plumbing, HVAC, they don t do this [benchmarking work]. Accessing tenant usage (energy and water) data - [For] utilities paid for by our tenants, no, we don t even have access. Lack of control over tenant usage - I don t control the energy and water consumption of my tenants. 26

27 DELPHI PANELISTS EXPRESSED SKEPTICISM ABOUT COMPLIANCE Panelists articulated a third compliance option: - If you re the manager of a downtown high-rise that s got 250,000 square feet, you have one of these two [compliance] options, or Option C pay a $1,000 fine. It was unclear how tenant choices would affect compliance - One property owner described how he was unable to shut the water off of an evicted resident who turned on his or her water 24 hours-a-day before vacating the unit. Class A tenants may be willing to pay a green premium and retrofits may benefit existing tenants on their bills but this is only a small percentage of the market: - On a triple-net lease the capital expenditure of any retrofits would be expensed out across the measure s expected life. Any given tenant is unlikely to stay for the duration of that expense so will only realize percent of the benefits. On a lease renewal the tenant will not incur those additional costs either. 27

28 ABILITY TO PARTICIPATE IN AND COMPLY WITH BENCHMARKING ORDINANCE In-depth interview respondents viewed individual compliance as easier than market-wide compliance Market observers commented in their interviews that workforce education and training would be key success factors Market actors, both building owners and managers, viewed incentives as a critical resources to comply Nearly all (4 of 5) focus group participants reported that the benchmarking ordinance would affect their business because as one respondent said: - it [compliance] would involve spending money. 28

29 LIGHTING DISTRIBUTORS ARE NOT CONFIDENT OF DEMAND TO CHANGE STOCKING PRACTICES Distributors cannot afford to change stocking practices based on speculation If demand for efficient measures suddenly increased, the current supply pipeline may not support compliance Current outreach to distributors has been limited and they do not consider themselves to be partners in sustainability efforts 29

30 MARKET ACTORS AND OBSERVERS HAVE A HAZY VIEW OF HOW TO COMPLY WITH AN ORDINANCE Building owners do not know what compliance will entail They are also concerned as to what the return on investment will be from compliance The market will demand expertise and solid counsel to compliment incentives and outreach... what are the impacts of compliance if LADWP provides sufficient support? 30

31 IMPACTS OF COMPLIANCE 31

32 DELPHI PARTICIPANTS SAW LIMITED IMPACT FROM THE PROPOSED ORDINANCE Participants estimated that the overall level of efficiency equipment saturation in 2015 was 35% with a replacement rate that would not increase saturation in the near future Yet, participants estimated that the overall level of efficient equipment saturation by 2030 would be 75% Regarding the benchmarking ordinance, the participants forecast the impact would be low due to limited compliance Participants thought it unlikely that that the disclosure of benchmarking information would result in a green premium for Class B or C properties 32

33 DELPHI PANEL COMMENTS REQUIRE THE FOLLOWING CAVEATS None of the participants had experience with benchmarking (either with or without disclosure) Best practice requires that we repeat the panel in approximately one year to determine how new learnings impact forecasts The lack of an anticipated result as a counterfactual creates greater potential for energy savings impact 33

34 PROGRAMMATIC OPPORTUNITIES 34

35 RESPONDENTS IDENTIFIED SEVERAL OPPORTUNITIES FOR FUTURE PROGRAMMING Training and Educational Outreach - Effective delivery of efficient retrofits from the building trades - Energy management per the sophistication of a given building - Partnerships with mid-stream market actors such as local equipment distributors Benchmarking Support - Data access, management and analysis - Identification of qualified vendors to support data collection and provide understanding of results Incentives for upgrades and improved building performance - Establish the business case for Class A - Energy management and Custom Project Incentives for Class B - Direct Install for Class C - Multifamily-specific measures 35

36 MOST PROPERTY OWNERS THOUGHT IT LIKELY THAT DWP WOULD ASSIST COMPANIES IN COMPLYING WITH A BENCHING ORDINANCE Don t know, 19% Very likely, 21% Not at all likely, 8% Somewhat likely, 21% Likely, 32% n=107 Source: On-line Survey of Property Managers 36

37 BASELINE FOR ESTIMATING ENERGY SAVINGS FROM MARKET TRANSFORMATION 37

38 THE THEORY OF MARKET CHANGE IS DEPENDENT ON THE ENACTMENT AND ENFORCEMENT OF CITY ORDINANCES An Energy Potentials Model (ELRAM) is suggested as a Market Transformation Assessment Tool - ELRAM provides a consistent platform as it is used for: EE program goals and target assessments Codes and Standards Assessment - ELRAM based models are used by nearly all electric utilities in California The key ELRAM indicators are: - Technology-level density values of the efficient and baseline technology options - Program-level awareness 38

39 TECHNOLOGY-LEVEL DENSITY VALUES OF THE EFFICIENT AND BASELINE TECHNOLOGY OPTIONS ELRAM incorporates the most current estimates of baseline and efficient technology densities/saturation ELRAM estimates changes to the baseline and efficient technology densities/saturations over the forecast horizon An indicator of Market Transformation would be if the efficient technology density/saturation values are higher in the future than predicted by ELRAM This indicator would be tested as new building and appliance saturation studies are performed 39

40 PROGRAM LEVEL CONSUMER AWARENESS ELRAM incorporates estimates of consumer awareness in energy efficiency programs The degree of program awareness helps define what portion of the population has the ability to participate in an EE program ELRAM estimates changes to program awareness over the forecast horizon An indicator of Market Transformation would be if the program awareness values are higher in the future than predicted by ELRAM The current baseline estimates of program awareness are from the customer surveys recently completed for LADWP by Navigant As these surveys are conducted in the future, new estimates of program awareness will be developed. 40

41 CONCLUSIONS FROM THE INITIAL ASSESSMENT OF MARKET TRANSFORMATION 41

42 LACK OF AWARENESS AND ABILITY ARE BARRIERS TO MARKET TRANSFORMATION Awareness of the proposed benchmarking ordinance - The proposed ordinance creates a need to increase awareness and drive participation Many property owners may view compliance to benchmarking as difficult if not impossible - Cost and lack of expertise will limit the feasibility of compliance The market will be slow to change without benchmarking supported by DWP programs The supply chain for efficient products may not be sufficient to meet stimulated demand 42

43 THE PROGRAM LOGIC IS VIABLE BUT THE ELEMENTS ARE NOT SUFFICIENT ALONE The push of an enforced ordinance is necessary to both raise awareness and motivate action The pull of incentives and outreach will facilitate compliance Success requires both the push and the pull... without either element, the program logic breaks down and the market is unlikely to move. 43

44 CONTACTS FRANK STERN Project Manager Managing Director GARY CULLEN Deputy Project Manager Director ROBERT RUSSELL navigant.com