Utilities are Heading Upstream to Increase Energy Efficiency

February 9, 2016 | Howard Geller

Midstream utility energy efficiency programs provide utility-funded incentives to equipment distributors and contractors to stock and sell energy efficient measures, such as commercial lighting products and heating and cooling equipment.  By contrast, downstream programs pay incentives directly to consumers or businesses that purchase energy-efficient products.

SWEEP has discussed the advantages of upstream and midstream program designs over traditional downstream designs here.  Programs such as the Small Business Program offered by Tucson Electric Power in Arizona and the Business Cooling Program offered by Xcel Energy Colorado show how midstream designs can drive energy savings while achieving market transformation in the commercial sector.

Tucson Electric Power Small Business Program

This program, approved by the Arizona Corporation Commission in 2008, is designed to offer a turn-key option for commercial customers with a monthly demand less than 200 kW. The program provides rebates directly to contractors and installers of commercial lighting, HVAC and refrigeration equipment, and motors.  The program added a custom component in 2012.

This program is a central part of Tucson Electric Power’s commercial portfolio and has saved over 31 million kWh since its beginning.  The majority of these savings are due to lighting retrofits, followed by replacement of HVAC equipment. 

This program has impacts beyond the energy savings.  Motivated by the financial incentives, participating contractors and installers educate and work with their customers to improve the efficiency of their businesses.  This has a market transformation effect, since it encourages installers to keep efficient equipment on hand. It also has a business development effect, by providing direct support for these installers through the rebates issued by the program.

Xcel Energy Colorado’s Business Cooling Program

Xcel Energy Colorado introduced a midstream commercial heating and cooling program in 2015.  Prior designs for this program used a downstream model, i.e., offered rebates directly to customers for purchasing approved equipment.  The midstream component of this program began issuing rebates to HVAC distributors beginning in September, 2015.  The program provides rebates to HVAC distributors to stock and sell a prescribed set of heat pumps and air conditioners, including high efficiency rooftop units, which are widely used in smaller commercial buildings, as well as other high efficiency commercial cooling products.

The midstream component of Xcel’s Cooling program had a soft launch in May, 2015 and began recording savings and participation data in September, 2015. In the fourth quarter of 2015 the midstream program issued incentives for 271 approved heating and cooling units, saving 684,000 kWh in first-year savings. By comparison, in the entire year of 2014, the downstream program issued incentives for 1,545 approved heating and cooling units that saved 1,140,000 kWh in first-year savings. In one quarter, shortly after the new approach was fully launched, the midstream program saved 60% of the electricity achieved over the entire year of 2014.   Over the course of 2015, the entire program, including both downstream incentives and midstream incentives, the Cooling program saved 1,925,000 kWh in first-year savings.

Under the midstream approach, Xcel Energy works with heating and cooling distributors, such as Trane and Carrier, to stock high efficiency equipment.  Distributors receive rebates based on their sales of high efficiency equipment, which encourages them to stock and upsell high efficiency HVAC units.  This process transforms the market for commercial heating and cooling equipment by increasing the range of efficient products available for installation.  Because efficient heating and cooling equipment is readily available, rather than being a special order, the likelihood that efficient equipment is installed greatly increases. The program led Trane to build a distribution center in metropolitan Denver dedicated to providing only high efficiency commercial HVAC equipment. Plans for 2016 include instituting a tiered rebate structure to align with the market’s characterization of HVAC product lines and to encourage installation of higher efficiency units.


Midstream programs that provide rebates and incentives to distributors and contractors offer utilities an opportunity to achieve much greater energy savings compared to traditional downstream incentives. In Arizona, Tucson Electric Power’s Small Business Program targets smaller commercial customers and transforms the market for lighting and HVAC equipment by providing support to local contractors.  In Colorado, the midstream component of Xcel’s Business Cooling Program is showing strong initial savings by providing incentives to HVAC distributors to stock and sell high efficiency equipment.