Expand energy efficiency rebates and installation services

Assumptions

• Life cycle of energy efficiency improvements is 10 years
• City provides $6 million for energy efficiency rebates and direct-install programs to add to the amount funded by PG&E

Analysis

Public goods charge-funded energy efficiency programs are not a particularly cost-effective tool for reducing carbon emissions. Although rebates may attract people to buy more energy efficient products than they otherwise might, the private savings they will obtain by using less electricity — and the reduction in demand for local supplies — probably are more valuable benefits.

What we do now
Investments in energy efficiency, such as appliance upgrades, efficient HVAC systems and improved weatherization, are primarily financed through private investment by individual consumers. Although many energy efficiency investments have been proven to be cost-effective, several barriers – especially a lack of funding, incomplete information, and split incentives between principal and agent historically have impeded their widespread application.

Since a major barrier to increased efficiency investment is the initial capital cost to the customer, programs to alleviate some of those costs are common throughout the country. In San Francisco and throughout California, utilities provide customers with incentives such as rebates on the purchase of efficient lighting and appliances, and assistance with energy audits, to help defray the cost of investing in energy efficiency. These incentives are paid for from a pool of resources collected from every customer’s utility bill. All utility customers pay a small public goods charge as part of their monthly bill. Those funds are aggregated by the California Energy Commission, and spent by PG&E and other utilities to provide voluntary energy efficiency services to eligible customers, among other things. PG&E provides residential customers with rebates on energy efficient lighting, appliances and home renovations to offset some of the replacement cost of these items. PG&E provides non-residential customers a range of services to identify opportunities to increase energy efficiency and help defray the cost of those investments. PG&E collects roughly $8 million a year in public goods charge funds from its customers in San Francisco and uses these funds on a variety of programs for residential and commercial customers. In addition to rebates and financial incentives, public goods charge funds are used to educate the public about the economic and environmental benefits of reducing energy consumption, through multimedia campaigns such as the statewide Flex Your Power program.

PG&E works with the San Francisco Department of the Environment through a program known as San Francisco Energy Watch to provide targeted incentives and assistance to small businesses and multifamily residential buildings.. San Francisco Energy Watch uses designated energy service companies to directly install efficient lighting, insulation, HVAC and refrigeration equipment to qualified customers, often free of charge. Since its implementation in 2007, San Francisco Energy Watch has spent more than $6 million on providing rebates and directly installing energy efficiency measures that will reduce greenhouse gas emissions by nearly 5,000 tons annually.¹

The California Public Utility Commission mandates that statewide utility-run efficiency programs must help energy customers attain 90 percent of the electric energy savings possible through existing rebate, audit assistance and direct install program structures. The effect of this mandate is that collectively, investor owned utilities will offset more than half of the incremental electricity demand growth of their customers.²

What we could do
One way to decrease the cost burden of investing in energy efficiency products and services is to provide greater rebates and incentives than those offered through the programs funded by the public goods charge. For residential customers, rebates on appliance purchases such as washers, dryers and water heaters could be increased. These increased incentives could attract more program participants and reduce energy consumption at a greater rate than the existing public goods charge programs.

For multifamily and nonresidential customers, the services provided by San Francisco Energy Watch could be expanded so that more customers could receive energy efficiency services. Direct-install lighting and refrigeration insulation have been the initial focus of San Francisco Energy Watch.

Cost
We estimate the potential carbon savings from the City matching 50 percent of the funds provided by PG&E to be $6 million annually.

Carbon savings potential
If the City were to increase funding for San Francisco Energy Watch by $6 million annually, an additional 4,936 tons of emissions could be abated per year. Assuming a life cycle of 10 years, the cost per ton reduced is $135. Because of cumulative savings, by the 10th year and for each year the program is continued thereafter, a total of 44,654 tons could be abated.

Endnotes
¹ Power Savers, a similar program implemented in San Francisco in 2002 and 2003, provided rebates and direct install services to small businesses and multifamily residential buildings. This program reduced greenhouse gas emissions by 4,700 tons annually at a public cost of $4 million, or about $84 per ton over the life cycle of the measures.
² CPUC. “Energy Savings Goals for Program Year 2006 and Beyond”. Decision 04-09-060. 2004.