Rewarding What Matters in Energy Efficiency

This report by RMI examines the shift toward "climate-forward efficiency," which prioritizes energy efficiency, electrification, and demand flexibility specifically to reduce greenhouse gas (GHG) emissions. It analyzes the use of Performance Incentive Mechanisms (PIMs) to align utility business models—which traditionally favor capital investment and sales growth—with state climate goals.

• Traditional utility incentives often hinder GHG reduction because shareholder returns are typically driven by sales growth and capital investments in infrastructure like power plants and substations, rather than demand management.
• While 32 states use Performance Incentive Mechanisms (PIMs) for energy efficiency, most are based on direct energy savings (kWh or therms) and fail to account for the time, location, or fuel-switching value of GHG reductions.
• RMI and ACEEE categorize climate-forward PIMs into two types: "explicit GHG" PIMs, which directly reward GHG reductions, and "policy intent" PIMs, which implicitly reward reductions through fuel-neutral savings, time-based savings, or net benefits calculations.
• New York is the only state with explicit GHG PIMs established long enough to show results; these PIMs reward utilities for lifetime CO2 or CO2e reductions from beneficial electrification, with half of the state's six utilities achieving maximum rewards in the last two years.
• Most climate-forward PIMs are reward-only, as regulators are hesitant to implement penalties due to evolving calculation methodologies. A notable exception is the D.C. Sustainable Energy Utility, which has a symmetrical PIM with a $1 million reward or penalty.

APA

RMI (2022). Rewarding What Matters in Energy Efficiency. https://rmi.org/resources/rewarding-what-matters-in-energy-efficiency/

Chicago

RMI. Rewarding What Matters in Energy Efficiency. 2022. https://rmi.org/resources/rewarding-what-matters-in-energy-efficiency/.

Wikipedia

{{cite report |author=RMI |title=Rewarding What Matters in Energy Efficiency |date=16 September 2022 |url=https://rmi.org/resources/rewarding-what-matters-in-energy-efficiency/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2022rewarding, author = {{RMI}}, title = {{Rewarding What Matters in Energy Efficiency}}, institution = {RMI}, year = {2022}, month = sep, url = {https://rmi.org/resources/rewarding-what-matters-in-energy-efficiency/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }