11. Energy Efficiency Requirements

Section 2865 requires that the Commission establish conditions on gas-displacing SWH systems that receive incentives, including "appropriate energy efficiency improvements in the new or existing home or commercial structure where the [SWH] system is installed." The Staff Proposal notes this requirement, and states that energy efficiency requirements will be specified in the CSI Thermal Handbook.

SOLID contends undue energy efficiency requirements could hamper the program. SOLID and CALSEIA agree that if any EE is required, it should only be required for items tied to the SWH system.

PG&E recommends the Commission adopt energy efficiency requirements for customers participating in the SWH program that are consistent with requirements for the general market CSI program. At present, only an energy audit is required for CSI. The Commission may want to consider additional efficiency measures that save energy and water, such as low flow showerheads, faucet aerators, and pipe insulation for residential customers. PG&E suggests that savings from installation of these measures for which the customer receives an energy efficiency rebate should be credited to energy efficiency programs.

Similar to PG&E, DRA maintains the if the Commission implements an SWH incentive program, customers should have an EE audit, and then install all feasible cost-effective EE measures that reduce water heating costs before any SWH system is sized and incentives paid. TURN suggests that PG&E and SCE include SWH in their energy efficiency program portfolios. For CCSE, TURN proposes it administer an SWH program in coordination with SDG&E so that any premise applying for SWH rebates first obtain the relevant EE measures.

We have previously stated our commitment to whole-house or whole-building approaches that maximize energy efficiency improvements, integrate our various programs, and facilitate customers' adoption of energy efficiency, demand response, solar, and distributed generation options as a planned package of actions customized to meet the needs, priorities and values of each customer. It makes sense for customers to consider a bundle of water-heating related energy efficiency measures as part of any SWH installation, given that there may be energy efficiency measures that a customer could deploy, at relatively little cost, that would reduce their water heating demand significantly, and thereby reduce the size of SWH system and corresponding incentives. Moreover, we expect that such energy efficiency measures could be easily installed by the SWH system installer at the time of system installation.

At the same time, we recognize that requiring program participants to install specific energy efficiency measures can increase up-front costs and add to the administrative complexity of this program if such requirements are not implemented thoughtfully. We herein specify that "appropriate energy efficiency improvements" shall be ones that are broadly applicable, do not require SWH system installers to develop new competencies, do not significantly increase project cost or delay installation, are easily validated on system inspection, and are likely to be retained once a customer has received their incentives. We recognize that if this program is to succeed, any additional requirements cannot unduly impede the ability of customers to move forward with the installation of SWH systems.

Therefore, we agree with and adopt DRA's recommendation to require an energy audit as a condition of participating in this program, as well as the requirement that customers deploy cost-effective and feasible EE measures that reduce water heating costs and meet our definition of "appropriate energy efficiency improvements" to qualify for incentives. Systems should also be sized taking into consideration the impacts of appropriate energy efficiency improvements. We will not, at this point, require that customers deploy all cost-effective and feasible measures, because we are concerned that such a requirement could impede the willingness and ability of customers to install SWH systems.

We direct our Energy Division to hold a workshop within 30 days of this decision to determine what measures meet our definition of "appropriate energy efficiency improvements" and should be required to be installed as a condition of receiving incentives under this program. Following the workshop, the PAs shall jointly develop a list of measures that shall be required as a condition of receiving incentives under this program, as well as how this requirement shall be implemented and enforced, and submit this information in their Program Handbook Advice Letter for Commission approval.