Gridium: Hello everyone, and welcome to this conversation with Mark Shahinian, President of the Future Grid Coalition. The FGC is a non-profit organization based here in San Francisco whose mission is to ensure that low carbon distributed resources, including energy efficiency, are properly integrated into America’s rapidly changing energy infrastructure.
My name is Millen and I’m with Gridium. Buildings use our software to fine-tune operations.
Today, we’ll be discussing that work as well as the recent push to measure energy efficiency in new ways. The California Public Utilities Commission―the state’s electricity regulator―is doing a lot of work around this now. This is important for building operators as it will improve transparency into the results from energy efficiency products.
Hey Mark, it’s a pleasure to have you on the podcast, not only because you and I have been talking about this during our weekly bicycle rides over the Golden Gate Bridge, but also because your FGC has recently submitted some thoughtful comments to the CPUC on draft guidance for the California utilities request for approval of their energy efficiency rolling portfolio business plan. And Gridium is a supporter!
Mark: Hey Millen, great to talk to you. Fun to talk to you not in the context of one of our bike rides, and yea… Gridium’s been a fantastic supporter of Future Grid Coalition and I’m excited to talk about what we’re up to.
Gridium: Great. So, before asking you to explain how new technologies are helping us measure energy efficiency in different ways, can you tell us how you came to be interested in our country’s energy infrastructure?
Mark: Interesting question. Okay, so back in the day and several careers ago, I was a newspaper reporter at the Palo Alto Daily News here in the Bay Area, and I was a reporter when the California energy crisis of 2000/2001 hit.
And Palo Alto has its own municipal utility, as I’m sure you know.
I was able to have access to the people running the utility and talk to them every day and wrote a story every day, nearly, in that summer about what was going on with electricity in California and I think the reporters―myself included―largely missed some of the big points of the story.
Gridium: Go figure.
Mark: Yeah, go figure, right?
It was happening really fast with a lot of complex information. There were a lot of market actors who were behaving badly, and it wasn’t totally apparent what was going on, but what I did gain was an appreciation of how little I knew and an appreciation of the incredible complexity and the fun ins and outs of the energy world, and I’ve worked in and out and around energy ever since.
It’s been a fun start.
Gridium: When you think about the changes happening to our energy infrastructure and some of the new elements to that infrastructure, what are some examples of those?
Mark: The obvious big one is solar, right? Solar has swept everything before it.
It’s been an incredible change that many people didn’t predict. I worked on a McKinsey team back in 2008, and we were looking at solar demand worldwide and our high case was about three or four times too low. We predicted out about five years, 2012 I think, and our high case was three times too low.
It just gives you a picture of the fact that even a team that has those kinds of resources at their fingertips and a bunch of smart people, had no idea what solar was going to do. So, that’s the first big one.
The second big one is the general trend toward decarbonization: we’re seeing it with coal shutting down, we’re seeing it with wind and solar coming on.
And the third one, I think we’re going to start to see it and it’s going to be really big, is electric vehicles. It’s going to place incredible demands on our grid as people need and want to charge their cars on an immediate basis.
And I think energy efficiency is always going to be a player in making all those trends work out. We’re always going to need to squeeze efficiency out of the grid and out of the infrastructure to make sure we can take in all the solar and charge all the cars that we need to.
Gridium: I quickly mentioned FGC’s mission. How did the Coalition come about? Is meter-based energy efficiency, as it’s been called, your group’s main focus?
Mark: That’s a good question.
It came about… basically a friend, like often these things start, a friend and I started talking and saying, “Hey, what can we do in energy?” And he’s a regulatory lawyer and I have a background more on the business side of energy. And he really pushed the idea of meter-based energy efficiency―and we’ll talk more about that obviously―being an overlooked area where there’s a place for a group to come in and really help out on the policy side.
And so, that’s what we’ve done and that’s what we’re focusing on now. Long-term, we would love to be involved in the larger debate around distributed resources and how those all come in, but right now this is our focus.
Gridium: So, let’s dig in a little bit on meter-based energy efficiency and California’s term for it, which is NMEC or N-M-E-C.
What is that?
Mark: Okay, so I’ll tell you about meter-based energy efficiency as a concept first, and then we can talk about California.
NMEC just, so your listeners know, stands for Normalized Meter Energy Consumption. And you know, if you’re someone that’s not deep in the regulatory space, all this is kind of… it can sound a little bit academic, so let’s just talk about a concrete―not example, but a concrete analogy for what we’re talking about here.
So, basically, when people talk about meter-based energy efficiency or sometimes referred to as M&V 2.0, what they really mean is how we measure how much energy efficiency you get out of a building retrofit project.
So, if you go retrofit a building and you use less energy next year, you don’t know exactly if it’s because the weather changed or because your building-use changed or just because you’re more efficient because of the retrofit project. And so, the way to know that is to normalize against a bunch of other variables like weather, and that’s where the California acronym NMEC―Normalized Meter Energy Consumption― comes out of.
So, just to make this concrete, so to speak, for our listeners especially the building owners amongst them or those who aren’t as involved in the regulatory process.
You and I go on a bike ride nearly every Friday and this bike ride starts up in San Francisco and goes out and does a loop through Marin up in the headlands there, right, and then comes back across the Golden Gate Bridge and we have coffee.
And so, let’s say I said, “Hey Millen, I just got a new set of carbon wheels and they’re much lighter than my old wheels and I bet you they’re much more efficient at going around our standard loop.” And you say, “Okay, well how much more efficient?” I’d say, “I don’t know, but I bet you they’re more efficient.” and I just paid whatever it is, 2 or 3 thousand dollars for a new set of carbon wheels, so we’d like to prove how much more efficient they are, right?
Gridium: Right.
Mark: And so, there’s a couple ways to do that.
One, we could go hire an engineer friend of ours and say, “Hey, here’s how much lighter the wheels are, and here’s I guess the angle of momentum, whatever it is…” You can calculate how big the dish is and the weight on the deep-dish rim. And then maybe you could throw in some sort of side wind type calculations, because you’ve got to get across the Golden Gate Bridge. And you could factor in my weight and maybe my fitness, because that determines efficiency, too.
And you could do some calculations, you could say, “Basically, here’s how much more efficient the wheels are for your 20-mile loop there.” That would be one way to do it and that’s okay. But what if I gain weight? Or what if it’s a super windy day on our ride? Or what if…
Gridium: The chain is not oiled.
Mark: Yeah, the chain is not oiled, which you’ve heard on my bike before, (laughs) or what if… you know, any number of variables could have happened, right?
Gridium: Yeah.
Mark: And so those things can throw off the actual efficiency that I see out of the wheels on any day, and so what we’d want to do is normalize or factor out all those variables. You’d want to factor out the important variables, right? Wind speed, Mark’s weight, whether he oiled his chain. Let’s say those are the three main variables.
So, then we go build the computer model that takes into account all of those and we have instruments that know if it’s more windy or if Mark weighs more because there’s a scale, right? Or if I didn’t oil my chain, Millen could do a squeak calculation on that― a squeak test. And so, if we can factor those into a computer model then we can say, “Ah! We know the main factors that affect the operation of Mark’s bike ride and we can really dial in how much more efficient he was on the ride.”
And then to take the analogy a little bit further, we could put a power meter on me, and we could say how much power I have to put out over the course of the ride and measure that, and then use that as the standard output for power and efficiency.
So, if you take that analogy and you apply it to buildings, if you put a new HVAC system, let’s just say, on a big commercial building and you want to say, “Okay, how much more efficient is that actually?” you’d want to know the same things. Has the weather changed from pre to post install of this system, right? You’d want to know is the building being used in the same way? You will want to know is there some other change in the environment of the building or in its operations that are affecting it, and you want to be able to factor out those issues, as needed, to see whether your new HVAC unit really made the building more efficient or not, and if so, how much more efficient, right?
Which I imagine, you tell me right, but I imagine it’s a really big thing that your building owners and operators would want to know.
Gridium: Sure, and you’re right that it’s those two things: did it make it more efficient, yes or no? And if yes, to what degree?
Mark: Yeah.
Gridium: Because that drives payback in ROI and investment return.
Mark: Right, exactly and these guys are operating on relatively well-known margins and they want to make sure they’re getting what they expect, right?
Gridium: Right.
Mark: I think that’s the exciting promise of this, is this is a set of software tools and standards and data coming out of a smart meter that feed into that software that allows us to really dial in how much you save from energy efficiency, and―I’m sorry, how much you’re saving from a retrofit and how much energy efficiency you’re getting out.
Gridium: Right.
Mark: And so, if we’re talking about the goals of like why we care about this, right? What are the goals, generally speaking, of meter-based energy efficiency or NMEC?
Gridium: Right.
Mark: Let’s just say there’s four main goals that we’d like to talk about.
One is this really lowers the cost of measurement and verification, sometimes called M&V, and makes it more accurate. So, you don’t have to do engineering estimates, you can actually measure how much energy efficiency you’re getting. And you don’t have to have engineers do the calculations, you can have, to a large extent, software models do it which are a lot cheaper than engineers.
And so, the second goal is: we really want, over the long term, to make energy efficiency a grid resource for the reasons that I described earlier around a lot more solar coming in, a lot more electric vehicle charging―both of which are highly variable.
If you want to be able to know exactly what you’re getting out of energy efficiency, where on the grid, at what times of day, and when you know those things, you can really build programs around that to, if you say you want to juice energy efficiency around 6 pm because that’s when everyone comes home and charges their cars, cool. You can target programs toward that and you can measure the effects. So, it really makes it something that someone like PG&E can go and take and plan around, so that’s another big push.
Third goal is really to bring in financing.
Once you can measure something, you can finance it, right? As all your building owners know. That was the trick that solar pulled off, is you can measure solar and they convinced the financiers, “Hey, this is a financeable resource because there’s net metering and other policies that allow it to play in the electricity markets.” and it brought in billions of dollars of financing for solar. And so, the same thing is possible with energy efficiency if you think once you can measure it and really have people, like your building owners and the people who finance them, be confident in the results.
And then, the last part which I mentioned a little bit, is really allowing us to improve energy efficiency by targeting the programs better.
So, for example, energy efficiency delivery in a low income multifamily home is historically extremely problematic. The really low adoption rates, it’s hard to get it to work. So, financing might help with that, okay. Cool, like you might just get more projects because there’s financing available, but also if we’re measuring what’s working and what’s not in a multifamily program, that’ll allow us to see, “Okay, cool. We can go focus on the things that are working and we can understand why some things are not and either drop them or adjust them.” And so, as energy efficiency becomes harder and harder to get because we’ve mined out a lot of the energy efficiency in our existing building stock, this will be important to go and continue to push forward.
So, does that makes sense, those four goals?
Gridium: It does, yes, and thanks for that recap.
Mark: So, what I’m curious about too―because there are a lot of the people that I hope and think should really care about this―what are the implications of all this for your building owners? Your customers who are building owners and operators and how do they think about this?
Gridium: Good question, and one of the reasons we’re very excited about the Future Grid Coalition’s work is because it can solve and help the CPUC and other participants bring forward solutions to a big problem for building owners and operators, which is the transparency and visibility into the results from their energy efficiency projects. So, these folks…
Mark: What do you mean?
Gridium: … yeah, these folks are working hard to invest in, to select an energy efficiency project, a new system, to changing their operations, what have you and they need some help both on the accuracy, but also on just the availability and the ease of M&V and of proof to know that the project did what it was supposed to do… which actually brings up another issue.
We talk to building operators, building owners, directors of engineering and they say―I’ve just heard this last week―that you know, heartburn isn’t caused from the specter of a project touching the building; heartburn comes from a black box savings promise, from an energy efficiency project that’s pretty tough to judge.
So, to the extent that M&V gets easier and better, it’ll be with greater confidence that building owners and operators can make that next second, third, fourth and fifth energy efficiency investment.
Mark: So, if I’m a building chief or someone in charge of building energy use and I want to do an energy efficiency program, this helps me understand if it worked or not, basically, and then go back to my organization and sell it as something we should do again or something we need to adjust if it’s not working. Is that right?
Gridium: That’s right, yeah. So, the concern is did the system… did the project deliver: yes or no? And then to what degree?
Mark: Yup.
Gridium: Because the financial model or the payback plan is based around a particular percentage savings number: 3, 4, 20%, what have you. And then how do you know a year on whether or not it was 20 or 2?
Mark: Yeah, and I think that’s why this is so exciting, it’s because this makes energy efficiency tangible, right? You don’t just have to assume it, you can say, “Okay, cool, this is what we got out of it.”
Gridium: Right.
Mark: And I think that’s why it’s so exciting.
Gridium: Right. So, how did the three groups of the CPUC, the program administrators and the implementers interact? What are their roles?
Mark: Okay, right. And so, you’re articulating three of what I would say are the four groups involved here.
Gridium: Okay.
Mark: I’d say the fourth group is building owners, right?
Gridium: Yes.
Mark: And so, the CPUC, the program administrators and the implementers all have different interlocked roles in the system.
The CPUC―the public utilities commission―is regulating how ratepayer dollars are spent. Ratepayers are people like you or me or a building owner who pay electricity bills or a tenant. And so, they’re trying to make sure that ratepayer dollars are spent in good ways and that programs are put in place that, in California at least and then a bunch of other states, save on… or reduce carbon and generally reduce the impact of the electric power system. And so, they’re trying to play that public interest role, or they are playing that public interest role.
The program administrators is a broad term that’s usually basically electric power utilities. Investor-owned utilities like PG&E or Southern California Edison or munies [municipalities] like Palo Alto or Sacramento, or in the case of California, we also have other groups like Marin Clean Energy, which is a PA―program administrator―or some groups in Southern California that do the same thing, even though they’re not officially “utilities” because of the regulatory role they’ve taken within the state―a regulatory approved role. And so, the program administrators administer all the energy efficiency programs, that’s what they do.
And the implementers are the groups like Build It Green is one on the residential side, there’s other groups that are doing… often do it on the…
Gridium: Commercial side
Mark: …do implementation on the commercial side―exactly, thanks. And it’s anybody who’s business it is to install energy efficiency projects. And I’m sure that sometimes your building owners are big enough to do that on their own, but often they have contractors they work with and that come to them to help them figure out or sell a project, and those are the implementers.
And the building owners are the final consumers of all this, and part of our goal in talking to you and working with you is to get them more involved. We think this is really about them and we want programs to start to be designed for them and with them in mind, so…
Gridium: Got it. Let’s talk about baselines and baseline models.
Why are these important and why do you have concerns about the CPUC’s approach to baselines and their latest guidance?
Mark: Okay, good question.
So, baselines are at the heart of how all this works and just to talk about terminology: baseline is when you have a building that’s been operating for a year, or two years, or five years or twenty, that pre-retrofit energy use is the baseline. So, you go, and you take reads off the smart meter data, and you say how has it been behaving over the past year?
And you know the weather conditions last year and from that, you develop a baseline which is given certain weather, certain occupancy or use to that building, this is what we expect it to do in terms of energy use. And so, that sets the way… once you set that baseline then if there’s a drop or an increase in energy use, that delta is the measured change in energy efficiency, right? And so, how you set the baseline is super important.
And let me say upfront, we’re extremely enthusiastic about how California is tackling this and how the state has mandated meter-based approaches in its legislation, so at the level of the state legislature and the governor.
And the CPUC is now putting that legislation into regulations, into rules that make this all go and from my conversation with CPUC staff―we’ve talked with them a bunch of times―I’m super pleased to be working with them and to make this a reality. They really want to make this go and make it all happen.
And a couple of things have emerged in our conversations with them and other groups, and these are things we’re all wrestling, with―and you know, I’m happy to chat about that―but I do want to emphasize that California is doing a great job and there are some other states that should be mentioned in here. Oregon is one, New York State is another, Illinois is another and those are states that are also at the forefront of this and we’re just talking about California today.
So, one of the big discussions that we’re having is that you know, mainly the way energy efficiency is calculated now, is both costly and less accurate than what we all want, but it is the way we’ve always done it. And new systems (in any universe) are a bit scary and in this universe there’s a lot of public ratepayer dollars that are riding on energy efficiency and how we calculate or measure it. And so, people are understandably cautious about a change.
And so, what’s new and what we’re seeing here is that these software models used to build the baselines that we talked about are the things that actually make meter-based energy efficiency work. And the CPUC is really trying to ensure that those models really accurately represent savings, and there are a couple other groups in California―the office of ratepayer advocates, which is also a side branch of the CPUC, termed the utility reform network. They’re very good at advocating for ratepayer needs, and they’re trying to make sure that this all works and is a fair representation of saving―fair and accurate representation of savings in the state.
Look, we think it’s pretty straightforward actually, and there’s three ways to make sure that we ensure accuracy.
So, one is we think you should think about this as operating across large portfolios for a couple of reasons. One is large portfolios give you scale on cost savings. Two is, somewhat like insurance risk pools, if you’re using a large portfolio you can be a little bit off in any one building or a few buildings, but on average the math will wash out and you get a great representation of what’s happening across the population. So, that’s the first reason and that’s the first thing that we think should be a focus of these programs: is really getting them to scale so you can operate across large portfolios and think about it that way.
Second thing is we’re pretty cautious about what I’ll call unplanned non-routine adjustments.
So, let’s say you have a commercial building and let’s say something changes in that building, maybe or maybe not but whatever it is, you get pretty bad results in terms of what your model’s spitting out and saying about energy efficiency. So, your model’s saying, “Hey, this building has saved almost no energy from that retrofit project”. And what we want to be cautious about is we don’t want to allow you to willy-nilly adjust your model, because we’re a little bit concerned that you could game the system and make it look better if you can adjust it in the middle of the whole process and do non-routine adjustments that weren’t planned before you started the whole program.
So, does that make sense? Does than make sense as an explanation why we don’t want non-routine adjustments to just happen in an unplanned fashion?
Gridium: It does. I would love to hear a little bit more about what exactly a non-routine adjustment could be, if you’ve had a chance to think about some examples.
Mark: Yeah.
So, a non-routine adjustment is when something happens in the building that generally thought of, is changing its use. To be honest, this is a matter of debate in the industry: how you define it, how you characterize it, those sorts of things, so we’re still working on it in the industry.
But basically, a change in the use of building and it could be a change in occupancy, it could be a change in load like you have a data center in a building and you move it out or vice versa, those sorts of things, right, are the classic non-routine adjustments.
Gridium: Yup.
Mark: And so, what you want to do is make sure that if a floor goes vacant for six months, you want to make sure that that doesn’t get credited towards somebody’s energy efficiency. Or if a building gets to full capacity and wasn’t before, you make sure they don’t get punished for it, right? So, taking out those sorts of changes, at least at a portfolio basis, we think is important, but you have to plan for it in your program. You can’t just after the fact go back and change your numbers is what we’re saying.
Gridium: Got it.
Mark: So, first two things again: operating across large portfolios, don’t allow unplanned non-routine adjustments.
Third thing we think is have a process to create an approved list of software models that are allowed to power NMEC or meter-based energy efficiency programs.
So, look: models can be good, models can be not as good. They can be good for some purposes like residential, but not for others like commercial. You guys have a great commercial model I’m sure it’s not tested or aimed at residential. And so, we think that the best way to do this is to have a regulator or a standard setting body help create a list of models that work and that work under certain defined circumstances that everybody understands. And so that your customers―the building owners―can really know if they’re getting a model that works.
And so, that’s an important third point which is: having a process to create this approved list of models.
Gridium: Got it.
Mark: And so, look, the twin goals as I said before here are: to be much more accurate and to get to scale in order to lower costs. And we’re working with the CPUC staff and other parties to make sure that’s achieved.
Gridium: So, IPMVP options C and D. CV(RMSE), ASHRAE Guidelines. Is this so much just alphabet soup or what is going on here with this layer cake?
Mark: Interesting, okay, so… (laughs) I have to think about this myself. I think… I mean, here’s a good question for you: you’ve been around this a little bit. Can you articulate the difference between IPMVP Options C and D? I mean, maybe you can.
Gridium: Actually, I couldn’t say the difference between option C and option D. These are two methods for measurement and verification, and my instincts tell me that option C is the most common or the one that we see most often.
Mark: Yeah, that’s exactly right. Option C is the one most used when you’re looking at a retrofit building. Option D models are honestly used almost exclusively when you’re looking at new buildings―and there’s some real exceptions to that, but mostly when you’re looking at new buildings. And the reason is option D models take into account calculations around the building envelope itself, and so they’re much more complex models based on the physical reality of the building, whereas option C models―which are based on just the meter data.
And there’s cases which one or the other are better. Option D models tend to be a little more expensive because they have to take into account the building and set it up that way. But the larger point here is like look, you know a ton about this stuff and you and I talked about this a bunch and this is all pretty hard to sort out. I think I can recommend a pretty good couple of reports, one is from RMI. They wrote a report a couple years back about M&V 2.0, as they call it.
Gridium: Is that the Rocky Mountain Institute?
Mark: Yeah, exactly, right. So, your listeners can Google that report and find it. We have a bunch of stuff up on our website from our regulatory proceedings that, some of which is down in the weeds, but people feel free to read about or read, but this stuff gets pretty complex pretty fast.
And it took me about kind of six months to a year to really get my head around it, and honestly the industry is still―not defining the particular terms, you talked about CV (RMSE) and ASHRAE―but defining when they should apply and when… where to put the emphasis on them. So, it’s a good question and I think as you know, it’s a super complex area and we’re sorting a lot of it out.
Gridium: We’ve covered a good bit of ground here. The Future Grid Coalition has some suggestions for the CPUC on non-routine events, model validation, data processing. What are those? Can you summarize those for us?
Mark: You know, like I’ve said a little bit earlier, I think there’s a few main things. It’s largely contained in our comments that we just made to regulators, but a few things. One is a portfolio approach; you should really look at it across a bunch of buildings, not just building by building―that’s important.
Number two, like I said, be careful about how you address non-routine event adjustments. Be careful about how those are allowed or not allowed in the program. We think those non-routine event adjustments are expensive, often unnecessary at a portfolio level and a tend toward gaming, so we tend to shy away from them as a real solution.
And I think we also had some comments about the need to have a set of rules around data validation. As you know from looking at a ton of meter data in Gridium, a lot of meter data is faulty. There’s big gaps, there’s problems with it and sorting out how you clean that data, how you validate it and the rules around that is really important, and so we just think the industry should have standards around that. And the standards will evolve but there should be some attention paid to that as well.
Gridium: What should we expect next from the Future Grid Coalition?
Mark: Well, what we’d really like to do honestly is to start to engage with your customers―the Gridium customers: the building owners, the building operators. In some ways they’ve been the quietest, but they are also the most important constituency in all this, the people that are the final consumers or energy efficiency projects.
They’re the ones that largely pay for them along with the ratepayers, and so we want to make sure they’re part of the conversation. And we think there’s exciting things coming down the pike, and as things get more developed, it’ll be fun to see them come along in the conversation.
Gridium: I know you’ve had some conversations with building owners to date. What do you think has caused a little bit of the reticence to get involved so far?
Mark: I think there’s two reasons. One, this is super complex issue, like we talked about, and it’s very easy for experts to get in the weeds quickly.
Gridium: Yeah.
Mark: And if you’re a building owner, you’ve just never been exposed to that and you view it as, there’s no way to get involved in it, right? And we’d like to offer a way for people to get involved and become part of our Coalition because you know, there’s a lot of people here who can help talk to you about what issues are important and how to think about them and how to focus your attention.
Gridium: Right.
Mark: So, that’s the first point.
And I think the second point is, there’s probably a reluctance to spend a lot of time on something over which you don’t think you have very much control. So, things that building owners care about, is a tenant leaving or are tenants happy? Are there going to be zoning changes? Or am I going to get hit with a new cost next year? If I’m building a building, you know, what are my costs of construction, etcetera? Like really big cost questions.
This seems like something really far afield and honestly, any one actor probably doesn’t have a chance to influence that, so people are correctly not paying a lot of attention to it; but collectively, the building owners will have a lot of say in this. And so, we’re hoping they start to realize that and start to understand how big a deal this is going to be for them.
Gridium: I agree, Mark, and I think that’s one of the things that excites me about the Future Grid Coalition and the work that you guys are doing, so I hope you keep it up.
Are we riding on Friday?
Mark: (Laughs) I got a couple more weeks with my broken leg, but once it gets back then we’ll be riding.
Gridium: Awesome. So, thanks for taking the time to chat with us, Mark.
Mark: Thank you, Millen.
Gridium: And wish you all the best of luck.
Mark: Thank you very much. It’s been fun and we’re looking forward to where this goes.
