Best Practices in Energy Efficiency Program Screening - Synapse ...

spillover from program activity in previous years may be identified as free
ridership in the current program year. (NMR 2010, page 34)
Requires large expenditures of resources that are not in keeping with the
importance of the estimates and their reliability and validity, thereby diverting
resources from other planning, evaluation, and implementation activities that
could yield greater benefits. (NMR 2010, page 18)
Some parties argue that “the focus on minimizing free ridership is
counterproductive and greater savings could be achieved if the focus were on
maximizing outreach and not on avoiding outreach to the “wrong people” (i.e.,
free riders)” (NMR 2010, page 44).
However, NMR (2010) also found that many stakeholders still emphasize the importance
of the use of net savings because net savings allow us to assess the effectiveness of
various program designs and whether the designs should be replicated, expanded,
revised, or discontinued. It also allows us to ensure that ratepayer or taxpayer funds are
being spent responsibly and in a manner that ensures that efficiency is the lowest-cost
resource (NMR 2010, 18).
Finally, market transformation programs present a distinct challenge with regard to costeffectiveness
screening. These programs are explicitly designed to achieve savings
beyond the direct program impacts (i.e., spillover effects); savings that might not occur
for several years, might last for many years beyond that, and might be very difficult to
quantify. Screening these programs without accounting for their spillover effects would
clearly understate their true value and would preclude many valuable programs from
proceeding. The options for addressing this issue include: (a) allowing these programs to
be implemented even if they do not have a benefit cost ratio of one or greater;
(b) including the costs and benefits of these programs within the evaluation of other
related programs, and requiring that the combined program be cost-effective; or
(c) developing an adder to the estimated benefits to best represent the likely spillover
effects of the market transformation program.
Recommendations
We recommend that program administrators and other stakeholder place less emphasis
on free-ridership and greater emphasis on spillover and market transformation effects, in
order to achieve more balance between these effects. In addition, all of these effects
should be accounted for in a more timely and effective manner as part of program
process evaluation, in order to inform whether a program should be redesigned or
replaced as a result of these effects. 26
We recommend that free-riders be treated consistently in estimating both the costs and
benefits of energy efficiency programs. If the impacts of free-riders are subtracted from
the efficiency savings, then the impacts of free-riders should be subtracted from the cost
estimates as well.
26 In Massachusetts, the state regulator, utilities, and other stakeholders are currently investigating this
issue, and trying to develop ways to estimate net savings that achieve three core benefits (1) increased
reliability and accuracy in reporting program-delivered savings (which also capture multi-year impacts
from program efforts in the multi-year planning cycle); (2) better planning assumptions for program
strategies; and (3) increased administrative efficiency (MA Joint Comments 2012)
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