Where does the energy efficiency industry stand at the start of 2018? Two new reports offer insight into that question. Their findings show a strong, growing industry with uncertainty on the horizon. In 2017, the energy efficiency industry observed a continuation of many ongoing trends. Utilities continued to offer robust efficiency programs for commercial and residential customers. States again led on efficiency policy, expanding or renewing many clean energy programs. Amidst that optimism, however, federal actions stymied progress. Adoption of new technologies and the expansion of more distributed resources presented new challenges for all stakeholders. At the start of 2018, these developments indicate a growing industry with many remaining uncertainties. According to two new reports on the state of industry, new technologies, policy uncertainties, and customer-facing innovations will shape the state of the efficiency industry moving forward.
Each year, Utility Dive surveys electric utility professionals to compile a list of common concerns and perspectives. The forthcoming 2018 State of the Electric Utility, a report based on that data, will reveal some interesting trends. While the final report has not yet been published, earlier this month Utility Dive shared via webinar some initial impressions from the survey. Although survey questions focused on a broad array of utility concerns, the survey uncovered interesting conclusions about energy efficiency.
The Utility Dive survey results showed that energy efficiency has a major effect on utility load growth. Only forty percent of survey respondents expected their utility to see increased load growth in upcoming years. A stagnant or decreased load, anticipated by sixty percent of people surveyed, would represent a reversal of historical trends toward greater and greater load. Efficiency efforts, from both states and utilities, explain this developing shift.
Efficiency has more than offset the growth of overall load despite increases in electrification and population. This is especially true in coastal states with robust efficiency offerings. The load growth regions – Great Plains/Rockies and South/Southwest – are areas with the least energy efficiency saturation. Some of the industries responsible for expected load growth, businesses like marijuana farming and bitcoin mining, are ripe for energy savings through efficiency. Finally, because of uncertainty surrounding energy efficiency policy, experts increased forecasts for load growth by as much as two percent over last year’s forecast.
Outside of security, utilities expressed the most concern about renewable energy integration, an issue integrally tied to energy efficiency. Not only did renewables register near the top of utility concerns, but respondents overwhelmingly predicted growth for renewable resources like utility-scale solar (92%), distributed generation and storage (91%), grid-scale storage (85%), and wind energy (76%). Energy efficiency alleviates the two biggest concerns for these resources: price and dispatch. Efficiency is among the lowest cost resources. Greater efficiency minimizes the most expensive wind, solar, or storage because it offsets the last of the resources, the most expensive. And efficiency is effective at all hours. This is especially useful for resources like wind or solar that can only be dispatched under the right conditions. While utilities don’t express energy efficiency as one of the most important or influential issues of 2018, efficiency affects a wide array of utility concerns.
A second report, tied directly to the energy efficiency industry, paints an even clearer picture. CLEAResult’s 2018 Innovation Outlook Report focuses on advanced technology and how it is transforming the business of energy efficiency. Renewable energy sources, reliable sensors, and a revolution in customer-facing technology have all disrupted the relationship between the utility and its customers. The next wave of technologies like electronic vehicles, artificial intelligence, and blockchain are poised to do the same. Amidst this change, the efficiency industry has an opportunity to reimagine business models and customer relationships.
Utility customers have access to more technology than ever. An overarching theme of the CLEAResult report is that utilities and their program implementers should use this technology to empower customers. Whether that means greater mobile engagement, more data visibility, or simplifying decision-making, customers should be at the center of utility adaption to new technologies.
Focusing on customers and new technologies enables opportunities for new business models, the final focus of the CLEAResult report. Despite rapidly evolving technology and customer interactions, transformative business models have not followed, according to the report’s authors. We know many of the avenues for change in the industry, but we have not yet designed that best means to capitalize on those trends. At CLEAResult, they have committed to strategic energy management (SEM) and energy stewardship as their model for the future. Other energy service companies and their utility partners will find their own approach to optimize the latest developments. Because static load growth and integration of renewable resources, key drivers from the Utility Dive survey, the future growth of the energy efficiency industry depends on such innovation.
Combined with recent developments, these two reports depict an industry at a critical juncture. Technology, they both argue, has created both uncertainty and opportunity. Though largely absent from both reports, policy changes at the state and federal levels have done the same. Uncertainty abounds in Washington. Which clean energy standards will be rolled back next? How far can the Trump administration go before hitting regulatory or electoral boundaries? Meanwhile, many states have picked up the slack. And although states like New Jersey seem poised to expand their energy efficiency portfolio (opportunity!), the Connecticut legislature recently slashed its efficiency budget (uncertainty!). Which trend will continue in 2018? The answer may define state of the industry reports one year from now.
In the meantime, industry stakeholders must continue to adapt and innovate. New technologies won’t guarantee deeper energy savings or greater customer participation. Only by improving relationships between utilities and their customers, through better, cheaper, or more personalized offerings, can we achieve our goals. Lime Energy is committed to doing all of these things in 2018. We will expand to new markets previously underserved by efficiency programs. We will introduce new measures to give customers a wider array of options. And we will devise new offerings to make efficiency more affordable. In short, we see the state of the industry as strong and open for growth. Despite the necessary uncertainty, we plan to seize the available opportunity.
Opportunity and uncertainty created room for the energy efficiency to thrive in 2018. Together we can ensure this potential is realized.