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The Division of Ratepayer Advocates Comments on the KEMA Draft Impact Evaluation Research Plan on Upstream and Residential Downstream Lighting The Division of Ratepayer Advocates (DRA) submits the following comments in response to the KEMA Draft Impact Evaluation Research Plan on Upstream and Residential Downstream Lighting (Research Plan), Work Order 28, dated October 29, 2011. The Research Plan provides an outline of Section 1 through 2.1 of the topics in the Table of Contents, which include an evaluation overview, goals and objectives, a list of researchable issues, research plan schedule, contact information and the list of high impact measure groups. The goals and objectives according to the research plan are: (1) to verify and validate the IOU-reported energy savings and peak demand reduction claims (including net savings and free ridership) (2) to provide feedback to the IOUs on how well the energy efficient lighting measures are doing relative to their established program performance metrics (PPMs) and market transformation indicators (MTIs) (3) To provide results that will support future program design improvements and future program ex ante impact estimation. The last two goals indicate that this research plan is not simply a “savings evaluation report,” but also a report on lighting market transformation performance. DRA’s submitted comments filed after the Commission’s November 7, 2011 market transformation workshop recommend the application of the 13 key steps of a market transformation program plan in the development of market transformation indicators, as recommended by workshop participants and leaders in market transformation work – NEEA, NYSERDA and Prahl and Keating.1 This Research Plan should be synchronized with the development of market transformation indicators, since one of the objectives of the Research Plan is to provide “feedback” on how well lighting measures 1 DRA Comments on the November 7, 2011 Market Transformation Indicator Workshop (DRA MTI comments), filed on November 21, 2011 in R.09-11-014. are doing relative to these MTIs. Following the 13-key steps is central and essential to this process. First, the Research Plan should define each of the appropriate market segments as the primary step to evaluating upstream and residential downstream lighting. This should result in several market segments, each defined in a manner that meets each of the following definitional attributes: (1) a set of actual or potential customers, (2) for a given set of products or services, (3) who have a common set of needs and wants, and (4) who reference each other when making buying decisions.2 The third and fourth attributes of defining a market are critical as they work towards ensuring the evaluations are actionable. By actionable, DRA means helpful to program administrators and implementers who strive to improve the effectiveness on residential lighting programs.”3 The design, development, implementation and evaluation of market transformation and resource acquisition programs cannot be divorced from a disciplined, delimited definition of the addressable market segment and it cannot be divorced from the product attributes, quality and performance standards expected by customers in that market. This is especially the case in residential lighting where customers have different expectations for each area of the home. It is simply not enough to divide residential lighting based on light bulb intensity and whether the bulb is dimmable or not and then assume the color quality is essentially equal across all these bulbs, regardless of technology. They are not. For example, the denominator in calculating penetration of basic CFLs should not simply be non-dimmable sockets but rather non-dimmable sockets located in areas of the home where customers can reasonably expect and accept lower color quality relative to the superior color quality provided by incandescent bulbs which is the baseline customers expect. In this narrower market segment, the market share of basic CFLs will be much greater than in previous evaluations. This information becomes actionable because it will focus investment on other promising bulb technologies that have the potential to meet the minimum color quality standards expected for the remaining sockets in the home, dimmable or not. Furthermore, previous lighting program evaluations have been bulbcentric (also very much CFL-centric) and do not take into account other aspects of 2 3 Geoffrey A. Moore, Crossing the Chasm, First Collins Business Edition 2006, p. 28. Ibid, pp. 5. lighting technologies, for example, lighting controls and sensors that can be part of a lighting system retrofit. Thus, one market segment may be defined as residential customers who can reasonably accept the color quality of basic CFLs in specific areas of the home (e.g. the garage, hallways, home office). Another market segment may be those residential customers who would prefer other energy efficient light bulbs that have the color quality, shapes, and sizes that are at least equal to or better than that of the diverse spectrum of incandescent bulbs (e.g., lighting to showcase artwork and home shelf displays, or lighting placed in a “powder room”). Unless markets are defined carefully and in a delimited way, it is difficult to determine the “saturation rates” of particular lighting measures. It is inaccurate to claim, as the 2006-2008 Market Effects report states, that California CFL saturation rates remain at approximately 21% of all sockets.4 The fact is, that CFLs are unlikely to “saturate” market segments that have no desire for them. For example, while warm incandescent bulbs may work to showcase artwork, basic CFLs may not work. Basic CFLs can only therefore, address or penetrate the segment of the lighting market that does not require warm color lighting. CFL saturation rates are measured appropriately when the market is defined within the correct target market segment. A more accurate way to understand CFL penetration is to view it within the appropriately-defined and sized market segment. From a market perspective, CFLs may have already reached its saturation point. For all other market segments, other lighting products are required to meet the specific demands of these other segments. Together, these lighting products may “saturate” a larger part of the residential lighting market once served by incandescent bulbs (the baseline). The measure groups listed on page 3 of the Research Plan should be categorized into the market segments they serve. Multiple technologies may serve a single market segment. Their success on “how well the energy efficient lighting measures are doing relative to their established ….market transformation indicators” should be measured on (step 3) how well these measures remove market and institutional barriers and saturation 4 Compact Fluorescent Lamps Market Effects Final Report, The Cadmus Group, KEMA, Itron Inc, Nexus Market Research, A. Goett Consulting for the California Public Utilities Commission, April 2010. (The Lighting Report). Pp. 105-106. rates within the appropriate market segments. The gap between the saturation rate and the rest of the market will “provide results that will support future program design improvements.” Once MTIs are developed (if they are developed within a timeframe that is early enough to be incorporated into the Lighting Research), success of the measures should be assessed according to other indicators, including the short-term, intermediate, and long-term progress indicators developed through the Commission’s MTI efforts. As DRA’s MTI workshop comments states, it will be difficult to measure progress along MTIs if the market, leverage points, barriers, interventions, and differences from a baseline not precisely defined.5 Further, as stated in DRA’S MTI Workshop comments, DRA believes market transformation progress for lighting should not be measured based on units of lumens per watts used, but rather on the average energy consumption of residential lighting. “This is because the products available to reduce the average consumption of lighting applications include not only bulbs but other items like sensors and controls. Incandescent bulbs linked to sensors and controls can be quite an efficient energy efficient solution.”6 In other words, they can reduce the amount of energy used in the residential lighting sector for providing the same amount of “lighting energy service”. While this is not a primary focus of the current portfolio’s upstream and downstream residential lighting programs, progress in this area may provide useful information for next-cycle portfolio design improvements. By contrast, “[a] “lumens per watt” metric will only reinforce investment decisions and program designs that are bulb-centric and it will be a struggle to transition to a whole lighting systems approach which is more consistent with the desire to achieve persistent, long-lasting energy savings.”7 Finally, in addition to the above recommendations, DRA recommends that if possible, the “researchable issues” in this research plan (p. 4) include an assessment of the spillover effects or benefits of the current upstream and downstream residential lighting program as well measure the persistence (or “decay replacement”) of CFL lighting in sockets that were filled with prior program CFLs that have burned out. This is 5 DRA MTI comments, pp.3. DRA MTI comments, pp. 10. 7 Ibid. 6 an important indicator of market transformation that can provide highly useful feedback for future lighting program design.