Portfolio Enhancements

Definition

This research family is focused on identifying opportunities to increase cost-effectiveness, adoption, and participation in EE programs and ways that EE can mutually reinforce other initiatives and policies such as BPS and building decarbonization programs.

Additionally, this technology family may focus on increasing awareness and understanding of the market and programmatic constraints of cost-effective EE solutions, including assessments of measure energy savings, TRC and TSB benefits and cost implications, adoption rates, and other factors contributing to EE measure adoption. This research may also consider market constraints on program participation such as limited financing solutions for certain market segments. While California has a rich and diverse set of measure delivery approaches, including deemed, custom, and normalized metered energy consumption (NMEC)—in addition to recent policy changes that encourage innovation under the TSB metric and through NMEC solutions—overall measure utilization remains low. Some measures have inherent barriers to adoption and implementation. Shedding light on these barriers, research needs, and tools can enhance awareness and uptake of EE savings, TSB, NMEC, and other methods, thereby supporting and validating a more robust EE portfolio.

Research Initiatives

Research Initiatives	Performance Validation Needs	Market Analysis Needs	Measure Development Needs	Program Development Needs
Identify measure packages that may require updates to load profiles to enhance TSB achievement and/or cost-effectiveness
Conduct a review of existing measure packages in the electronic Technical Reference Manual (eTRM) to assess their benefit to the EE portfolio from a range of attributes such as TRC, TSB, and measure adoption
Assess additional potential value streams for EE measures/measure packages for grid and customer value such as TSB and non-energy benefits (NEBs)
Identify barriers and opportunities to increase NMEC solutions and market participation
Identify ways that EE programs can support or enable other programs including BPS, decarbonization, or low-GWP programs

Opportunities

Rethinking how we measure success by looking at EE through the lens of TSB, TRC, and NEBs creates natural opportunities to promote awareness, use, adoption, and benefits of these metrics:

• Increases awareness and understanding of TSB and TRC and their interactive effects as primary metrics of the EE portfolio
• Initial research presented to the Cal TF suggests the common understanding that current cost-effectiveness metrics promote electrification may often be incorrect. In the examples given, low TRC values may limit program promotion of heat pump water heaters as replacements for gas units, while high TRC values may encourage gas heating in new packaged heating, ventilation, and air conditioning (HVAC) units. Further research may highlight opportunities to align EE metrics with California policies.
• Addresses potential gaps in the EE portfolio, such as co-benefits or NEBs
• Identifies potential NEBs, including health, safety, and comfort benefits from fuel-substitution measures; job creation; improvements in non-energy material consumption or product quality; waste heat recovery; and implications for departing loads.
• Identifies potential gaps, such as opportunities to incentivize market activities for demand management, load flexibility, and other system benefits in TSB.
• Analyzes and classifies existing measures and participation to identify non-technology barriers, such as low TRC or TSB, to aid in the identification and prioritization of opportunities for study to support impactful measure updates.

Barriers

Current discussions with EE stakeholders revealed the following barriers:

• A limited understanding of how to optimize TSB despite increasing awareness of TSB as an operating metric.
  • There is a general need for broader awareness of the drivers of TSB, such as long-lived measures (long effective useful lives) and their potential trade-offs with market uptake because these measures typically require higher capital investment, which may impact market participation. There is also a limited understanding of the interaction between TSB and TRC. TSB replaced kilowatt-hours (kWh) and kilowatts (kW) as primary goals but did not replace TRC for cost-effectiveness. Some stakeholders have mistaken TSB as a replacement cost-effectiveness metric for TRC. There is also increased interest in, but limited understanding of, the flexibility around TRC.
• Some stakeholders have noted that while TRC captures all participant and program costs, it does not capture all participant benefits, such as health and safety benefits associated with fuel-substitution measures.
• Certain infrastructure-heavy electrification measures could be much more successful if incentives exceeded current deemed incremental measure cost values due to inherent system benefits, despite the resulting TRC value.
• EE policies left over from years or decades past may no longer serve California’s decarbonization goals well.
  • A recent State of California Auditor’s Report on EE programs highlighted that the current TRC calculation does not include certain NEBs—as accounted for by other states—despite including participant costs. This omission could discourage utilities from implementing certain EE programs or prevent them from achieving cost-effective program portfolios. In these states, an estimate of NEBs is attributed to EE programs, similar to how spillover effects are estimated and included in California’s EE evaluation framework.
    
    

Existing EE policy restricts some NMEC opportunities, such as limiting NMEC to strategic energy management programs in the industrial sector or to cases where site-specific NMEC resembles that used for large commercial buildings. EE policy also currently restricts fuel switching from unregulated fuels, e.g., wood or propane, to regulated fuels, e.g., electricity or natural gas, and is under consideration as part of the 2024–2035 Business Plan filings. Recently, strategic energy management has expanded in California beyond the industrial sector; however, further study of additional untapped markets could yield new program pathways for the EE portfolio.

CalNEXT Related Projects

• Optimization of Deemed Data Collection Requirements
• Load Shape Planning Tool Development

Definition

This research family is focused on supporting affordability, electrification, fuel substitution from regulated fuels, and fuel switching from unregulated fuels, as well as identifying critical barriers and developing consistent and effective solutions. The CPUC defines “affordability” fairly broadly in D. 20-07-032 as “the degree to which a representative household is able to pay for an essential utility service charge, given its socioeconomic status.” In this vein, CalNEXT focuses on the affordability of energy services related to electricity bills for residential customers (i.e., the reference to “a representative household”). Nonresidential customers (e.g., commercial, industrial, agricultural) are not directly implied based on the reference to “households,” although there may be other interpretations of “affordability” among EE market actors, including policymakers; program implementers and IOUs (e.g., program cost-effectiveness); supply chain actors such as manufacturers, distributors, and contractors (e.g., whether or not it is affordable to participate in the EE market); and other parties not mentioned. CalNEXT will focus on affordability from the point of view of end-use customers in terms of their ability to afford electricity services.

California has some of the highest electric rates in the nation. The California legislature passed a suite of new bills intended to provide policy support, with some directly targeting affordability concerns. However, ratepayers need more support from ET programs to identify additional pathways to help address energy affordability. Potential solutions should continue to encourage consumers to conserve energy as well as support investment in EE improvements, especially among populations experiencing the highest energy burden.

Decarbonization involves the use of the most efficient conversion or fuel-substitution strategies, switching from a carbon-intensive fossil fuel source in building and transportation end uses to electricity generated from a clean, renewable energy source. Electrification is commonly achieved for individual end uses but often requires a broader assessment of impacts on the building, community, or utility infrastructure. Associated impacts can include necessary upgrades to building and utility electrical infrastructure to accommodate the higher electric demand associated with increased electrification of building energy, transportation, and process loads in California homes and businesses, as well as the incorporation of onsite renewable energy and energy storage.

Electrification of California’s buildings, end uses, and transportation will be essential to meet California’s goal of achieving carbon neutrality by 2045, reducing carbon emissions by 85 percent from 1990 levels (AB 1279, statutes of 2022), and requiring 100 percent of electricity by 2045 to be from renewable energy and zero-carbon resources (SB 100, statutes of 2018). In addition, the South Coast and the Bay Area air quality management districts have passed new rules regulating emissions from space and water heating appliances, which will be significant drivers of electrification.  California is making significant investments in building electrification through statewide and regional efficiency programs, large heat pump market transformation efforts such as TECH Clean California, and other rebates that encourage higher-efficiency products and electrical upgrades.

Research Initiatives

The goal of the research initiatives for California’s decarbonization strategies described below is to identify both common and unique affordability, electrification, fuel-substitution, and fuel-switching pain points and to support the development and demonstration of innovative, scalable solutions. The focus areas of this portfolio enhancement will include program solutions and multiple end-use control solutions to support scalable, targeted electrification for both buildings and communities, ultimately helping to avoid expensive electrical infrastructure upgrades.

Research Initiatives	Performance Validation Needs	Market Analysis Needs	Measure Development Needs	Program Development Needs
Technologies supporting increased energy savings, energy affordability, and bill savings, including through behavioral measures and BPS
Scalable and targeted cost-effective electrification, load flexibility, and control strategies
Commercial, industrial, and agricultural market sector electrification research and tools
Decarbonization with fuel substitution/switching and program strategy alignment
Technology gaps for all market sectors and application electrification

Opportunities

A higher-level market assessment is needed to improve policies, program strategies, tools, and technology solutions to maximize the overall impact of funding investments and reduce the financial burden of building electrification on owners and tenants. The team identified the following opportunities:

• Comprehensively assess the costs, barriers, benefits, and effectiveness of technology solutions and load flexibility controls at the individual end-use, building, and utility levels to support increased energy savings, energy affordability, and bill savings, including through behavioral measures.
• High-priority electrification areas, such as HVAC and water heating, have competing solutions. These solutions prioritize benefits to the customer, either through improved performance or reduced installation or operational costs; alternatively, the benefits may go to the utility for mitigating the impact on the grid. These solutions are often achieved with different degrees of complexity, cost, and required market and contractor engagement.
• Historically lagging market sectors, such as small and medium businesses (SMB), require targeted research and tools to support successful electrification strategies. In addition, identifying specific technology gaps and appropriate solutions is necessary to achieve comprehensive electrification in California. Potential opportunities may include studying successful electrification strategies in other states that may be suitable for California but must account for California’s “spark spread”—relatively high electric versus natural gas fuel rates.
• Identify, research, and analyze the most cost-effective ways to scale electrification, e.g., zonal electrification.
• Insights into appliance controls, including distributed energy resources (DER), DR, and home management—will provide programs with different control strategies and inform the level of compatibility among the various load flexibility solutions.
• Partner with and capture insights from utility pilot electrification programs to inform new technology and programmatic research needs and accelerate electrification.

Barriers

The primary barriers to building electrification are the complexity, cost, and time associated with the replacement of existing fossil fuel end uses with electrification solutions.

• Gaps in the availability of simplified electrification solutions and the increased burden of building code, permitting, and program requirements significantly impact scaled electrification.
• Unplanned building electrification can also require expensive electrical panel replacements and utility service upgrades in homes and businesses to accommodate new electrical loads. In addition to cost escalation, increased permitting requirements and the complexity of electrification projects can overly burden small contractors and homeowners.
• Increasing peak electric demand also leads to increased grid infrastructure requirements, such as the replacement of transformers and distribution wires and the need for additional generation, increasing future costs for all ratepayers.
• The cost of electrical upgrades, especially for lower-income households and small businesses, can pose a significant barrier to scaling electrification in California.
• The diversity of water and space heating needs, the complexity of owner and tenant decision-making, and spilt costs and benefits in SMBs can limit the rate of adoption of electrification.
• Technologies are needed to support increased energy savings, energy affordability, bill savings, and energy conservation, including through behavioral measures, to allow customers to optimize their energy use and save money.

CalNEXT Related Projects

• Enabling Meter Socket Adapters for Utility Electrification Programs

Definition

This research family is focused on adaptation in the EE portfolio to maximize decarbonization and TSB benefits by properly considering the time dependence of energy consumption throughout the day and year. Currently, EE savings are attributed based on a limited set of load shapes, load shifting, and demand management. Conversely, demand flexibility has not been included in EE measures in terms of EE benefits, largely because it has been framed as part of the DR policy scope. This research family will assess opportunities to consider the co-benefits of demand flexibility for EE measures as part of an integrated demand side management (IDSM) strategy. It will investigate ways to incorporate demand management, load-shifting, and demand flexibility attributes as part of EE measures, including by identifying necessary research, the potential costs and benefits of incorporating demand flexibility co-benefits into EE programs, and ways to incorporate DR and decarbonization approaches alongside existing EE measures and programs.

Note: The CPUC created a proceeding to address demand flexibility through rates in 2022 in R.22-07-005 (Order Instituting Rulemaking to Advance Demand Flexibility Through Electric Rates). Subsequently, in R.25-09-004 (Order Instituting Rulemaking to Enhance Demand Response in California) and in related staff proposals/Scoping Memo, the CPUC framed demand flexibility as a related concept within the broader demand response framework. While demand flexibility policy is still developing, particularly with ongoing pilots led by CalFUSE (California Flexible Unified Signal for Energy, this research family will monitor policy developments and consider how to support demand flexibility’s benefit to both EE and DR portfolios.

Research Initiatives

Research Initiatives	Performance Validation Needs	Market Analysis Needs	Measure Development Needs	Program Development Needs
Research supporting implementation of standard load shapes for measures
Evaluate TSB and cost-effectiveness of current measures versus policy alternatives that incorporate more demand flexibility
Measure characterization and market study of measures with added demand flexibility costs and benefits
Cost-effective and future-proof program implementations for various degrees of connectivity

Opportunities

On May 20, 2021, the CPUC, through D.21-05-031, officially announced TSB as the new metric to replace kWh as the primary metric for savings accounting in the EE portfolio. The CPUC’s decision created the following opportunities:

• Evaluate and identify new benefits, such as demand management and load flexibility, especially when considering peak demand, time of use, and other temporal factors.
• Match measures to and create more accurate load shapes and load shape variations based on peak-avoidance, load-shifting, and demand management strategies.
• Study potential measures and policies to address system needs, such as time-of-use benefits to customers, demand flexibility measures, incentives, locational benefits, and grid resilience.
• Research new technologies and applications, such as upsizing thermal energy storage, demand flexibility, and connected EE measures.
• 23-06-055 also encouraged IOUs to expand the use of NMEC approaches in the EE portfolio. These and other meter-based measurement activities may create a data source for identifying specific measure opportunities and creating new load shapes.
• IOU smart water heater programs and market transformation activities, such as TECH Clean California, may also provide useful project data for analysis.
• Due to aggressive code baselines, a significant number of EE measures have been sunset due to a lack of cost-effectiveness. With hourly and monthly valuations now the default, some sunset measures—as well as creative new decarbonization measures—may once again benefit the EE portfolio.

Barriers

The team identified the following barriers to using time-of-use and load flexibility:

• The existing eTRM load shapes are out of date and inadequate for calculating TSB value.
• There is limited market understanding of TSB and whether demand flexibility should be addressed under EE, DR (current practice), building decarbonization, or other policies and proceedings. Thus, there are opportunities for market education and awareness about TSB and demand flexibility in general.
• Updates to measures and program policies may be needed to address the overlap between demand management and EE. As the hourly cost of energy embedded in the TSB calculation is constantly shifting, it is unclear how the eTRM impacts and schedule may change relative to the Database for Energy Efficiency Resources updates and what is necessary in EE measure development to capture changing peak values.
• A lack of definition related to the valuation of DERs in EE measures poses barriers to assessing the benefits of new technologies, such as 120-volt induction stoves with batteries, as well as comparing thermal and electric energy storage benefits.
• Cost-efficiency and the valuation of equipment costs and benefits related to load flexibility vary across different market actors (e.g., utilities, vendors, contractors, and customers).
• Developing standardized measurement and verification methods, quantifying potential demand flexibility benefits across hourly load shapes and locations, identifying solutions, assessing their equipment, program delivery, and customer engagement costs, and addressing program complexity and benefits may strengthen the case for broader incorporation of load flexibility approaches into EE measures.

CalNEXT Related Projects

• Multifamily Central Heat Pump Water Heater Storage and Control Strategies for Increasing TSB

Definition

The refrigerants used to heat and cool buildings efficiently with heat pumps often contribute significant greenhouse gas (GHG) emissions over the lifetime of the equipment in which they are used. This concept is referred to as “global warming potential” (GWP), and all refrigerants are assigned a GWP index relative to that of carbon dioxide (CO₂), which describes the cumulative radiative forcing of a given refrigerant on the climate over the lifetime of that refrigerant in the atmosphere. Because a significant amount of refrigerant may be released from equipment due to leaks during installation, decommissioning, or operation, when refrigerant GWP is considered in the context of the GHG resulting from operating a piece of equipment, a high-GWP refrigerant used in that equipment may partially or completely offset any GHG emissions reductions resulting from using that equipment in place of less efficient electric equipment or fossil fuel equipment.

Fortunately, many low-GWP refrigerants, including natural refrigerants such as CO₂, ammonia, and propane, also deliver efficiency benefits compared to synthetic refrigerant alternatives, which may have high GWPs. This research family is focused on determining pathways to integrate low-GWP refrigerant technology into the EE portfolio while simultaneously identifying opportunities to reduce costs, energy use, and lifecycle emissions.

This research family focuses on technology strategy and policy frameworks that could impact multiple end uses. The objectives include:

• Creating an actionable framework for reducing refrigerant emissions across end uses
• Examining barriers to replacing refrigerants with low- and ultra-low GWP alternatives
• Aligning refrigerant emission reduction calculations within the TSB metric with current practices in the field
  
  

Reducing leaks in existing refrigerant systems will complement the approaches within the HVAC, Water Heating, and Process TPMs, which will also drive active recovery, reclamation, and destruction of high-GWP refrigerants. Refrigerant emissions reductions should be pursued primarily as a co-benefit of broader energy efficiency investments, rather than as a standalone objective. Opportunities such as the early retirement and replacement of HVAC, water heating, and refrigeration equipment can provide an effective pathway for refrigerant recovery, reclamation, and low-GWP adoption.

This framework also emphasizes the need to expand consideration of disruptive innovations, such as non-vapor-compression systems that avoid refrigerants entirely, eliminating the risk of leakage and the need for refrigerant management. It will also be important to more clearly define lifecycle refrigerant management (LRM) within the California EE portfolio and incentive structures, which will create more cost-effective, impactful incentives and program interventions.

LRM broadly refers to the full lifecycle of refrigerants—from system selection and installation to refrigerant leak prevention, detection, and repair—during the operational life of equipment, as well as refrigerant recovery and reclamation or destruction at the end of the equipment’s life. Proper refrigerant charges are required for systems to operate at rated efficiencies, so LRM is essential to maximizing the performance of all systems that use refrigerants. The goal of LRM is to eliminate the GHG impact of refrigerant emissions, given these are primarily gases with GWP values thousands of times higher than CO₂.

Note: This technology family is not intended to be a primary objective but rather a secondary (co-benefit) of focus alongside of existing EE opportunities such as conducting refrigerant swap-outs as part of overall EE upgrades (e.g., early retirement of HVAC equipment).

Research Initiatives

Research Initiatives	Performance Validation Needs	Market Analysis Needs	Measure Development Needs	Program Development Needs
Improve refrigerant recovery rates, including targeted incentives for end-of-life refrigerant recovery
Automated leak detection (ALD), and alternative monitoring options
Equipment selection and installation practices including natural refrigerant systems and lower system leak rates
Data collection and analysis on refrigerant charge size, leak and recovery rates to inform TSB assumptions
Evaluate non-vapor compression technologies for HVAC and refrigeration
Identify ways to harmonize low-GWP benefits with existing EE measures and/or building decarbonization programs and policies

Opportunities

The following are some examples of opportunities related to LRM and emissions reductions:

• The TSB metric recognizes GHG benefits from mitigating refrigerant leak emissions.
• Despite some progress, further work is needed regarding how EE portfolios handle refrigerants to meet utility regulatory requirements and state emissions reduction goals.
• Utility EE programs, traditionally valued for energy savings, can also serve as cost-effective platforms for reducing refrigerant emissions when paired with energy savings.
• One near-term opportunity for utilities is to incorporate refrigerant emissions reductions into existing EE programs, capturing additional GHG reduction benefits without creating separate, standalone program components.
• Refrigerant emissions reductions often result in energy savings, allowing:
  • Seamless integration of LRM efforts into existing programs
  • Delivery of both direct energy savings and indirect cost and emissions savings across sectors
  • Promotion of ultra-low-GWP refrigerant-based systems
• Transitioning to an LRM-based approach for calculating refrigerant emissions impacts will:
  • Enable more accurate measurement of lifetime CO₂ equivalent (CO₂e) savings
  • Enhance program effectiveness
• A comprehensive approach to LRM includes equipment selection, installation best practices, leak monitoring and repair, and proper refrigerant disposal at equipment end-of-life.
• For large commercial and industrial refrigeration, the greatest opportunity is replacing existing high-GWP refrigerant systems, while for residential and small commercial HVAC, the greatest opportunity is recovering refrigerant during decommissioning.
• Accelerating the adoption of emerging non-vapor-compression technologies will help California meet key climate policy deadlines while delivering significant cost savings across multiple sectors.

Barriers

Though substantial progress with natural refrigerants has been made in commercial refrigeration, the HVAC sector faces several challenges:

• Lack of harmonization between US national codes and international safety standards for natural refrigerants
• Misuse of Environmental Protection Agency Significant New Alternatives Policy guidance for hydrofluorocarbon alternatives
• Misaligned efficiency and emissions metrics
• Limited project data, leading to perceived technology viability issues
• A shortage of skilled HVAC and refrigeration technicians experienced with low-GWP refrigerants.
• Low rates of refrigerant recovery due to:
  • Added time and cost to achieve compliance
  • Lack of financial incentives and low enforcement rates
• Concern from utilities that recognizing current conditions with LRM may erode existing savings
• Lack of ultra-low-GWP products in many product categories, e.g. mini-splits

CalNEXT Related Projects

There are no CalNEXT projects related to this technology research area at this time.