Top 3 trends: How energy efficiency changed in 2023
As the year comes to an end, we’re reflecting on the ways our industry changed in 2023 and what those changes mean for energy efficiency programs going forward. The excitement and growth in our industry continues to present both new challenges and huge opportunities for utilities, states and other stakeholders looking to shape the future of energy. Here are the top trends from 2023.
Energy policy took center stage
The energy industry is not always known for rapid change, but the last 12–18 months have seen significant shifts and sweeping legislation that has already made an impact and will continue to do so for at least the next decade. Some of this policy and legislation we saw includes:
- Inflation Reduction Act (IRA): We would be remiss if we did not start with the single largest piece of legislation impacting energy and climate goals in US history. While the IRA was passed in 2022, it wasn’t until this year when we began to gain clarity on how these billions of IRA dollars will be spent, including guidance from the Department of Energy for states’ home energy rebate programs. Applications to implement these programs have already begun, and we expect many of those focusing on low-and-moderate income customers to begin in 2024. These home energy rebates programs are a central focus for states and utilities, but IRA also includes billions in direct grants to make businesses more energy efficient, as well as aggressive tax credits for homeowners of all incomes. The reach of the IRA will be extraordinary.
- Energy Independence and Security Act (EISA): In 2007, discussions began among utilities, energy efficiency implementers and lighting manufacturers about the eventual shift in lighting standards, signaling the end of lighting as the most cost-effective measure in most programs. In 2023, this came to pass as EISA enforcement took effect, taking non-compliant bulbs off the shelves and largely removing utilities’ ability to incentivize lighting in their programs. Beyond changing the aisles at Lowe's, this will hugely impact what utilities think about when they design programs. We have been working closely with our electric utility clients to update their approaches to compensate for this change, but it isn’t easy. Heat pump space heating and water heating will cover a large proportion of these lost lighting savings, but the legislation really changes the dynamic of many programs and how customers have typically engaged with utility initiatives.
- Greenhouse gas emissions (GHG): We are seeing increased momentum around the adoption of GHG savings as a measure of performance for states, municipalities and some utilities. GHG goals usually transcend fuel neutrality restrictions, with more states and utilities becoming open to fuel switching as part of energy efficiency. In certain states, we are now able to promote heat pumps to gas heat customers, where that has not been permitted in the past. This will likely accelerate the shrinking of the delivered fuels market (like oil and propane), as moving a customer away from these fuels can lead to significant incentives. The wider adoption of GHG savings is much more than just a new metric, it is really shifting how we approach energy efficiency.
Utilities zoomed in on customer online experience
Over the years, energy efficiency programs have worked to improve the digital experience for utility customers, hoping to emulate companies like Netflix or Zappos to deliver high-quality online customer engagement for services like energy-efficient rebates and home energy assessments. With more than 15% of US retail sales now taking place online, customers expect to easily browse, find and purchase what they need online—as well as getting a bargain and receiving personalized recommendations. Utility customers are no different, so unsurprisingly we’ve seen continued growth in energy efficiency marketplaces where customers can easily research and purchase energy-efficient products and services that include utility discounts, then get them delivered directly to their door, just like they would with Amazon or other ecommerce retailers.
As an industry, making sure we continue to be at the forefront of digital engagement is vital to customer satisfaction and successful delivery of programs like the IRA home energy rebates. If your program's digital experience doesn’t meet customer expectations, you will struggle to convert those projects into savings.
Homeowner interest in energy costs fueled by macroeconomic trends
Understanding and managing energy costs is at the forefront of many homeowners’ minds, as the cost of homeownership keeps rising, more people work from home, and interest in smart devices like thermostats increases. But getting the necessary information to make energy-conscious decisions can be a challenge. Add in demand response programs, solar panels and other energy transition measures with their associated complexities, and it’s easy to see why some customers don’t know where to start.
The good news is customer attitudes toward demand response options remain positive, especially as a method to reduce costs. A recent survey from the Smart Energy Consumer Collaborative showed over 75% of customers are willing to participate in some form of demand response, especially if there is a small bill discount or incentive.
As we continue to engage these customers with energy efficiency and energy transition programs, we must ensure that there are clear benefits for utility customers and that customers are aware of and understand all options—especially low-and-moderate income customers who often are less familiar with their local utilities’ program benefits. We are moving in the right direction but can only move as fast as our customers’ understanding and awareness.
Stay tuned to CLEAResult Insights for more on how 2023 shaped our energy future.