Energy-efficiency startups just need access to existing data—on electricity usage, housing characteristics, renovations and financing—to unlock hundreds of billions of dollars in savings, two founders of startups said in Chicago Tuesday.
"One of the big barriers to scaling energy efficiency is the lack of data in the market," said Andy Frank of Sealed, a startup that encourages efficiency improvements by guaranteeing homeowners a lower bill than they're paying now.
In a forum hosted by the Energy Policy Institute at Chicago, Frank and Matt Gee of Effortless Energy advocated an open-energy-data warehouse that would collect anonymized forms of existing data from various sources and make the data available for research, government, and industry.
"There needs to be some sort of entity that organizes all this information and has it in some sort of standard format," said Gee, whose startup pays for home improvements up front and then splits the savings with investors and the homeowner.
According to Gee, the current energy-efficiency market operates without data on actual savings:
A regulatory body, usually a public utility commission, mandates that utilities spend money on efficiency.
The utility charges customers an efficiency surcharge ("$9.5 billion is the projected total spending on utility rate-payer funded energy efficiency by 2025").
The utility hires a program implementer.
The program implementer sends auditors to customer homes.
Potential savings are estimated from improvements like new insulation or new appliances.
Those modeled savings determine what the contractor can do in the home.
The modeled savings determine what financing is available.
In some cases, utilities will hire consultants to estimate savings generated from these improvements. California utilities spend $40 million a year estimating savings, Gee said, but the actual savings are neither verified nor integrated in the process.
"Nowhere in this process do actual savings enter," Gee said. "They don't drive anyone's incentives, which is just absolutely astounding, right? The opportunity here is that energy efficiency actually pays for itself. It should be something that's self-financed."
For that to happen, the market needs reliable information on how much energy is currently being wasted and how much is saved by improvements.
"What does the market actually need to know?" asked Gee. "It needs to know detailed housing characteristics, it needs to know low-level aggregations of energy use or energy intensity—anonymized but at the block level, potentially. It needs to know anonymized project performance: what actually happens during the project."
Right now, those forms of data are held independently—by utilities, by contractors, by cities, by financiers. Were the data opened and combined, businesses could reliably finance efficiency improvements, pay for the improvements with the savings, and in the process, reduce carbon emissions, said Gee and Frank.
"Right now pretty much everyone out there has their hands tied behind their back, either because they have access only to small data sets, or they only have their own data, or they only have one piece of the puzzle," Frank said. "The more data you release and the more it's in an open format and the more people you release it to, the more innovation you're going to have."
Frank's startup struggles to convince homeowners how much efficiency will save them. Sealed surveyed homeowners and found they believed efficiency improvements would save them only about 25 percent of promised savings. So Sealed would use the data to build confidence.
"They want to be confident that what they're told they're going to save will actually come to pass," he said. "You can't sell something that nobody believes in. It's really hard to do."
Effortless would use the data to invest in improvements and then share in the savings, Gee said, outlining a very different efficiency market:
"Some entity takes the risk on, says okay here's what you currently spend. We will actually go in and pay for a whole bunch of things—$3,000 to change your home, that's going to lower your bills, that's going to generate some sort of annuity of energy savings over time, and that annuity can actually go back to paying initial investors while also being shared with the homeowner."
McKinsey and Company has estimated the U.S. could save $1 trillion by 2020 that is currently lost to inefficient energy use. About $230 billion of that represents the cost-effective savings that could be realized by improvements that pay for themselves, Gee said, if the market barriers can be solved.
"You need to know where the potential savings are, what actually generates the savings, and how reliable the payments are based on that. In order to know these things the entities that are currently doing this have to be willing to release their data."
The institutions holding the data are beginning to recognize the opportunity, Gee said—"I want to emphasize that we're actually riding a very very productive wave right now in aspects of opening up all this data"—but the effort needs support from regulators and policy makers. But according to Frank, the current energy efficiency scheme will resist change.
"A lot of this stuff is scary for most of the people in the industry right now," he said. "There's an entire industry apparatus around the way they've been doing this stuff. And nobody has an incentive to care about savings…. It really requires almost a grassroots and distributed effort to go and tell the utilities, the regulators especially, 'Look, this isn't good enough any more. We're not going to countenance spending our money on something that can't actually be verified.'
"There's a lot of excuses given around why we can't do this, and it's just a bunch of BS."
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