Cash or Credit: What Works Better? Comparing Utility Incentive Programs with LEED

Prasad Vaidya, Lara Greden, Jason Steinbock, David Eijadi | 2006 


Utility programs have long provided cash incentives to promote energy efficiency in new buildings. More recently, the US Green Building Council (USGBC) has been promoting energy efficiency through its Leadership in Energy and Environmental Design (LEED®) program. This paper compares projects motivated by LEED credits with those motivated by utility cash incentives. The process of achieving energy efficient designs is similar for the two sets of projects studied, consisting of energy modeling for a range of energy conservation strategies, but the models for market transformation are different. The utility projects receive free energy consulting, along with cash incentives to reduce the capital costs of conservation measures. In contrast, non-utility projects seeking LEED certification pay for energy modeling and absorb costs for conservation measures in the construction budget. Beyond energy conservation, the branding of LEED provides these projects national recognition. This study aims to answer the question “Is there a difference in the level of energy savings between Cash (utility) and Credit (LEED) projects?”

The analysis includes 26 utility projects and 14 LEED projects. Results show that the highest level of potential energy savings considered by the two types of projects was similar, but LEED projects chose to implement higher energy savings. Utility projects cover a wider range of energy savings than LEED projects, indicative of the utility programs reaching a wider audience. Participants in utility programs seek relatively risk free investment in energy efficiency (average payback of 0.4 years after factoring in incentives), while those participating in LEED show a greater willingness for more investment (average payback of 3.25 years).