How Programs Can Navigate Aggressive Change to Achieve Deep Energy Savings in Multifamily

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Rapid market, regulatory, and policy evolutions are creating opportunities for utilities to coordinate with key stakeholders to identify and harness untapped methods of achieving their program goals. The U.S. is beginning to see a slow transition away from natural gas-based efficiency measures as electrification has emerged as a leading decarbonization strategy and a growing pathway for utility energy efficiency programs. Renewable energy continues to grow, placing greater emphasis on the adoption of energy efficiency measures that reduce demand. Elevated equipment efficiency standards have improved energy performance baselines, which will cut into the efficiency savings utilities can claim on these measures in the future. Further, the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA) have turned the energy efficiency and clean energy landscape on its head. In addition to making funding available to augment the scope and reach of utility programs, these laws have beset government agencies nationwide with a level of funding that exceeds their current wherewithal.

This is where multifamily (MF) housing should come into play, especially its affordable housing subset (MFAH). Historically, there is a widely held belief that these properties are “hard to serve.” However, if programs are well-designed and executed, the cost-effectiveness, scalability, replicability, and savings achieved by serving MF and MFAH can dramatically exceed those from serving single-family (SF) houses. Said differently: Programs focused on MFAH can serve as a silver bullet ” for utilities struggling to construct cost-effective portfolios in a time of significant change.

Multifamily as a Value-Add

Market Need and Opportunity: Almost a third of the nation’s housing is in MF properties, and MF new construction has been increasing in recent years. MF and MFAH have been chronically underserved; thus, they constitute a huge, missed opportunity in energy savings, fossil fuel reductions, energy management opportunities, and benefits for low-to-moderate-income (LMI) communities. Buildings account for more than 30% of the U.S.’s greenhouse gas emissions, and housing (its availability, affordability, and condition) is a recognized social determinant of health.[1] It is also worth noting that the MF housing sector supports 17.5 million jobs and generates over $3.4 trillion in economic activity.

Benefits for Program Administrators and Implementers: There are myriad variables in serving MF and MFAH that help minimize administrative burden while maximizing the positive impacts. Provided below are a few key examples of how serving the MF market compares favorably to serving SF housing:

  • One contract with a MF property owner can cover dozens or hundreds of homes in one location. Achieving the same volume for SF necessitates individual contracts for each house spread across a city.
  • Low-income (LI) SF homeowners need extensive upfront education on programs in various formats—events, meetings, etc.—and in different languages, adding significant costs. In contrast, engaging directly with LI households does not apply to MF because it is a business-to-business program. The management company engages with the tenants, as they do for all other services and complaint resolution processes.
  • MFAH programs can leverage financial resources that LI SF programs cannot, such as monetization of tax credits and depreciation, grant funds, etc. Further, asking LI SF homeowners to fund upgrades or take on debt to pay for those upgrades is not a viable option. However, asking a MF property owner is feasible, given the financial benefit they accrue from a higher-value, better-performing property. Note that leveraging other funding sources can dramatically increase the scope and achieved energy savings of a project, and—assuming the appropriate agreements from project contributors and partners—many utilities may attribute the entirety of the project’s energy savings toward their program goals.

Capturing the Opportunity

Creating Tailored Programs: An essential first step is decoupling from the prevalent belief that program designs that work for other customer types will also work for MF and MFAH—especially given that data has long been available to support the contrary. For example, a 2016 report produced by the nation’s Regional Energy Efficiency Organizations (REEOs) stated—based on strategies that have led to deep energy savings in utility MF energy efficiency programs across the U.S.—the following: “Programs specifically designed for the MF market can drive higher participation rates and deeper energy savings because the incentives, outreach strategies, and other aspects of the program are designed for the intricacies of the MF housing market.” Research from the American Council for an Energy-Efficient Economy (ACEEE) also demonstrates that when utilities offer programs for specific customer segments and targeted energy end uses, energy savings increase by expanding the reach of the programs to more customers.

The One-Stop-Shop: The REEOs, the U.S. Dept. of Energy, and others highly recommend the one-stop-shop (OSS) service model for MF. With the OSS, the program implementer offers turnkey services, including outreach and education to MFAH owners and managers, energy assessments, project design and engineering, identifying and applying for incentives and financing, construction planning, contractor selection and management, inspection/monitoring, and reporting. This implementer can reduce the cost of projects by the value of all available rebates and incentives (i.e., offer point-of-sale rebates) while leveraging financial resources from various sources to offset project costs. The OSS accommodates the fact that the MFAH owners and managers have many competing priorities, making it easy, clean, and streamlined for them to sign up for green upgrades. This approach is not new; various programs have successfully leveraged the OSS for years.  

Pay-for-Performance: With a Pay-for-Performance (P4P) model, program implementers, and MFAH properties are compensated for achieving program goals, such as energy savings. This aligns the goals for all stakeholders and minimizes the risk for the administrator. ACEEE found that the P4P model is one of several strategic incentive tools that can be leveraged to encourage MF building owners to pursue more extensive energy-saving projects, resulting in higher energy savings and providing building owners with more certainty around the project’s success.

Case Study: The Rocky Mountain Power (RMP) Multifamily Demand-Side Management (DSM) Program—Utah
This program launched in 2017 and is one of the most successful programs in the U.S. for electrification in MF properties. ICAST manages it and covers the entire MF market, serving affordable and market-rate properties and new construction and retrofit projects. It focuses on holistic, deep energy savings, paying custom incentives tied directly to energy savings. The incentives are designed to compensate for any cost increases for selecting and installing very high-efficiency equipment. MFAH receives larger incentives for the same energy efficiency measures.

All incentives and the program implementer are on a 100% P4P structure. The program leverages the OSS service model, offering a single point of contact for the customer, design assistance, energy modeling, construction planning, and management, local contractor selection and management, point of sale rebates, and other services—all designed to make the customer engagement hassle-free and easy.

RMP worked with policy advocates and other stakeholders to launch this program because its MF clients were a neglected segment. RMP believed the program if designed right, could grow significantly, as it has almost 500% since its launch and continues to grow (versus standard MFAH programs that decline rapidly once the free “low-hanging fruit” measures are installed). This program is now gearing up for a large scale-up by partnering with the various IRA programs expected to hit Utah and braiding those incentives with the RMP program rebates and owner contributions.

A few noteworthy program metrics:

  • Average per unit kWh savings continues to increase, from 1,158 kWh in 2020, 1,678 kWh in 2021, 1,852 kWh in 2022, and 2,515 kWh in 2023
  • With 145 MF projects in 2023, the program helped increase efficiency, health, safety, comfort, value, and net operating income for 9,987 MF units.
  • ICAST completed heat pump installations in 61 projects in 2023. Through this effort, 4,902 heat pumps have been installed, which include both HVAC and domestic hot water end-uses.  

Start Now

Utilities and their program facilitators need to coordinate with key stakeholders to leverage their relative expertise and additional funding beyond utilities’ standard pools of money (e.g., utility rebates). Without doing so, the risk that these funding programs will be redundant—or worse, in direct competition with each other—could threaten program providers’ ability to meet their goals. The trends we’re seeing and the once-in-a-generation infusion of funds through IRA and BIL should be greeted as an opportunity to document best practices, reduce knowledge gaps, and overcome hassles and barriers in program design and implementation. Building strong referral networks between program designers and providers across all funding sources, understanding program designs, and ensuring effective collaboration are key to success. With proper execution, these synergies could result in deep energy savings in MFAH and provide excellent benefits for utility customers.

[1] U.S. Energy Information Administration (EIA), Annual Energy Outlook 2020 with Projections to 2050 (Washington, D.C.: EIA, January 2020), accessed February 2021, www.eia.gov/aeo; U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2018, EPA 430-R-20-002 (Washington, D.C.: U.S. EPA, 2020), accessed February 2021, https://www.epa.gov/ghgemissions/inventory-us-greenhousegas-emissions-and-sinks-1990-2018.

 

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