Follow the Yellow Brick Road to Energy Efficiency and Demand Response Programs - GDS Associates

Follow the Yellow Brick Road to Energy Efficiency and Demand Response Programs

Transactions 115 Pic 5Many electric cooperative, municipal utility and government clients offer a range of energy efficiency (EE) and demand response (DR) programs to their customers (called “members” in the electric cooperative world). These entities cite many reasons for offering such programs to customers but the most touted benefits of EE & DR programs are:

    • Many EE&DR programs are much less expensive than the capital and operating costs of new generation facilities
    • Offer a way to save energy and money
    • Reducing energy use can help address climate change issues
    • Can help postpone the need for new power plants and transmission and distribution facilities
    • Can reduce emissions of CO2, SO2, NOX and particulates from power plants
    • Can help diversify a utility’s resource mix and reduce reliance on fossil fuels
    • Can help comply with applicable government laws and regulations (e.g., energy efficiency portfolio standards, integrated resource planning requirements, US EPA rules, etc.)
    • Can help address high bill complaints of utility customers

Many electric utilities are seeking guidance relating to best practices for the design, implementation and evaluation of EE & DR programs. This article presents a snapshot of the latest information on such EE & DR best practices and provides citations to best practices studies developed by the National Action Plan for Energy Efficiency.

Program Planning and Program Design

Transactions 115 Pic 6You have likely heard that “it doesn’t matter what road you take if you don’t know where you want to go.” The first step for EE & DR planning is to develop a sound business case for implementing such programs. The business case should define the reasons that your organization is pursuing EE & DR. Developing this business case includes reviewing a comprehensive list of EE & DR benefits and costs and making a decision if your utility or organization finds that such programs are cost effective, can help comply with laws and regulations, or meet customer needs and preferences. The second step is to conduct an energy efficiency/demand response potential study to identify the EE & DR options that can save the most energy and are the most cost effective.

The results of such a study can help your organization set priorities for program design and implementation, since most organizations do not have unlimited budgets for EE & RD. An excellent guide for conducting such EE/DR potential studies is the November 2007 National Action Plan for Energy Efficiency “Guide for Conducting Energy Efficiency Potential Studies.”1 The results of the potential study provides the roadmap that an organization needs to design and implement cost effective programs that will achieve meaningful energy savings. A recent example of a completed energy efficiency and demand response potential study is the November 2013 potential study for the State of Michigan.2 This study is available at:

EE/DR Potential Studies can help your organization set priorities for program design and implementation, since most organizations do not have unlimited budgets for EE & DR.


Program Implementation

Utilities and government agencies in the US and Canada have been implementing effective EE & DR programs for decades. The first step with program implementation is to develop a detailed program plan. The program plan should include the following information:

    • The goals and objectives of the program
    • Target market (e.g., residential single-family, residential multi-family, commercial, industrial, agricultural, other, etc.)
    • Eligible energy efficiency measures
    • Eligible participants
    • Marketing methods
    • Education and outreach methods
    • Staffing plan
    • Financial incentives for participants and/or contractors
    • Energy efficiency/demand response potential kWh/kW savings
    • Cost effectiveness analysis
    • Evaluation plan

The program plan should include an assessment of the 1) remaining energy savings potential for the program and 2) program cost effectiveness. Generally, programs should be designed so that they have a benefit/cost ratio greater than 1.0. There are often additional criteria to consider, such as making sure that there are programs for all customer classes (i.e., residential, commercial, industrial, other) and for low-income and hard-to-reach customers, that programs have continuity, and that programs provide for energy efficiency education. There may also be other utility, regional, or policy factors to consider in developing the energy efficiency program.3 It is often helpful to examine existing program plans that are available in filings made by utilities with state regulatory commissions. For example, one can find the most recent program plans developed by all seven investor-owned electric utilities in Pennsylvania on the web site of the Pennsylvania Public Utility Commission.4

Program Evaluation

Evaluation of EE & DR programs has two key objectives:

  1. To document and measure the effects of a program and determine whether it met its goals with respect to being a reliable energy resource.
  2. To help understand why those effects occurred and identify ways to improve current programs and select future programs.

Energy efficiency impact evaluations are conducted to determine actual energy savings (versus predicted estimates) attributable to an energy efficiency or demand response program or measure. Process evaluations assess how efficiently a program was or is being implemented, with respect to its stated objectives and potential for future improvement. All energy efficiency program categories can be assessed using process evaluations. Findings and recommendations from regular impact and process evaluations can be used to continuously improve programs to make them more efficient and cost effective. In addition, evaluations often include cost-effectiveness analyses that document the relationship between the value of program results (i.e., energy, demand, and emission savings) and the costs incurred to achieve those benefits.5

Emerging Technologies

Every day we learn about emerging EE & DR technologies that will help us use energy more efficiently. Here are three examples of emerging technologies that will change our energy consumption patterns in the future:

    • Smart appliances now exist that can either shift their time of operation or curtail their operation temporarily upon request from an electric utility. This reduction in power use can lead to power grid benefits manifested as savings in wholesale power production costs.
    • Lawrence Berkeley National Laboratory is conducting a project to develop a cost-effective, high-performance residential window that maximizes net useful solar gain in heating mode and minimizes solar gain in cooling mode. Fully automated operation that optimizes energy savings is provided by an intelligent, networkable sensor/microprocessor package that is easily installed and calibrated. Control algorithms are being developed for this high technology window that focuses on maximum energy savings while keeping occupants experience in mind.
    • Oak Ridge National Laboratory is developing a carbon dioxide (CO2) heat pump water heater (HPWH) that meets ENERGY STAR® standards for HPWHs at an installed cost that will enable widespread acceptance in the U.S. residential market. CO2 has low global warming potential when compared to other refrigerants, has zero ozone depletion potential, is very inexpensive, and is not flammable.

Funding of EE & DR Programs is Increasing

Due to increasing concerns about climate change, national energy security and volatility in fossil fuel prices, electric and natural gas utilities and government agencies in the US and Canada are increasing commitments to energy efficiency and demand response programs to meet the energy needs of residential, commercial and industrial consumers. The Consortium for Energy Efficiency reports that US and Canadian combined gas and electric Demand-Side Management (DSM) program budgets reached $9.6 billion in 2013, representing a 2% increase over 2012 DSM budgets. US and Canadian combined gas and electric DSM program expenditures reached $8.0 billion in 2012, representing a 9% increase over 2011 expenditures. If you are a decision-maker in a utility or government agency that is interested in expanding the EE & DR offerings of your organization, the best practices and methods outlined in this article provide guidance on where to find the data, analytical techniques and case studies to jump-start your energy efficiency and demand response initiatives.


  1. See
  2. See
  3. See Chapter 6, Energy Efficiency Best Practices, in the NAPEE guide titled “National Action Plan for Energy Efficiency”, July 2006. Available at
  4. See
  5. For a thorough discussion of evaluation concepts and methods, see the national Action Plan for Energy Efficiency guide titled “Model Energy Efficiency Program Impact Evaluation Guide”, November 2007. Available at

For more information or to comment on this article, contact:

Transactions 115 Pic 7Richard Spellman, President | CONTACT
GDS Associates, Inc. – Marietta, GA


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