Performance Incentives for Efficiency Programs

Guest Blog | May 24, 2010 | Reports and Fact Sheets

Seeking Consistency in Performance Incentives for Utility Energy Efficiency Programs

John D. Wilson, Southern Alliance for Clean Energy Tom Franks, KEMA, Inc. J. Richard Hornby, Synapse Energy Economics

Regulators and legislators in many jurisdictions are requiring or investigating a variety of shareholder incentive mechanisms to overcome the inherent disincentives to utility investment in energy efficiency and demand side management as compared to supply-side investments. Performance incentive mechanisms are one of many tools available. The authors briefly examine the need and justification for performance incentives, the historical utility financial structures with regard to energy efficiency and challenges to this model created by policy initiatives, propose a set of metrics for shareholder incentives and set of criteria for comparability, present a sample of approved shareholder incentive mechanisms in tabular format, and suggest additional research efforts.Financial_Incentives_Utility_Efficiency_ACEEE_2010SSB_Prepub.pdf