Untapped Incentives for Energy Efficiency Projects

By: Abraham Weiner, 2013 EDF Climate Corps Alumnus

money presentAs an EDF Climate Corps fellow back in 2013, one task that was of particular interest to me was figuring out how to help my host organization fund, in whole or in part, its efficiency upgrades. In my research, the most unique funding source I found was the energy efficiency forward capacity market.

This program allows those who invested in energy efficiency over the last several years to go back and obtain additional incentive dollars on top of traditional utility rebates. This is essentially free money for organizations who have invested in efficiency measures. In fact, when I was a fellow, I identified over $50,000 in incentives that my EDF Climate Corps host organization was eligible for from projects completed before I even arrived.

In order to explain how this program works, I need to explain who PJM is and what they do. PJM Interconnection is a regional transmission organization. They coordinate the activity of suppliers, generators, and utilities to maintain an adequate flow of electricity on the grid. Their territory touches 13 states and the District of Columbia, and they are the largest electricity market in the world. They are also unique because they allow energy efficiency to participate in their forward capacity markets. Fortunately, my EDF Climate Corps host organization was in their territory.

Every year, PJM runs an auction for establishing the amount of capacity (think kilowatts, not kilowatt hours) needed to operate its grid. This is the capacity market. It is a forward market — this upcoming May, PJM will be establishing the capacity needed for the grid in 2019. PJM’s capacity markets operate on a 4-year window.

The exciting aspect of PJM’s forward capacity market is that it allows a kilowatt of energy efficiency (a negawatt) to be treated as if it was a kilowatt derived from a coal plant. Energy efficiency clears on PJM’s exchange alongside generators who are bidding in power from their fossil fuel plants. Building owners/renters who reduce their power demand are viewed by PJM as mini power plants. This equates to an energy efficiency incentive program that is not subsidized or mandated by state governments (like most utility rebate programs), but one that results from market-based economics.

So why is this important? Every single organization with facilities in PJM territory that has invested in efficiency since June of 2011 most likely has money on PJM’s table. Additionally, if those same organizations were to invest in efficiency today, they would be entitled to an annual payment for the next four years. Since PJM has a four year window, organizations can reach back to projects that have already been completed and bid them into PJM’s upcoming capacity auction. For some organizations, this could be hundreds of thousands of dollars just waiting to be uncovered.

There are a few stipulations to participating in PJM’s energy efficiency incentive program. Organizations who wish to participate cannot apply for these incentives directly. They must use a 3rd party for a variety of reasons, the most significant of which is PJM requires the projects be aggregated to a size that PJM finds reasonable. Additionally, some of the utilities in PJM territory are sending projects from their rebate programs to PJM’s capacity market. This means that, in a few utility territories, organizations cannot obtain both rebates and PJM’s incentive.

The Bottom Line: If you’re an EDF Climate Corps host or fellow, make sure to look into PJM’s energy efficiency capacity markets when evaluating a potential energy efficiency project. If you don’t, you might be losing out on a free lunch.

About Abraham and Encentiv Energy: After Abraham graduated from Case Western Reserve University’s Weatherhead School of Management, he became an Account Executive at Encentiv Energy. Encentiv Energy is a company that helps organizations identify and obtain all of the different financial incentives their energy efficiency projects qualify for. In only a few years, they have identified millions of dollars of PJM energy efficiency capacity credits alone.

This post originally appeared on our Climate Corps blog.

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