Permanent Demand Reduction and DSM Programs

If you have ever lived an area that experiences rolling black outs, then you can probably identify with the need for Permanent Demand Reduction (PDR); an energy usage concept that promotes reducing power demand over the long term. Permanent Demand Reduction programs reduce peak demand through the implementation of energy efficient equipment, offering financial incentives to customers that implement and operate energy efficient equipment that qualifies under a program’s rules. PDR programs and Utility Demand Side Management (DSM) programs share similarities: both offer financial incentives both target the long-term reduction of energy usage. But DSM programs are sometimes viewed as being more expansive energy efficiency programs that still promote Permanent Demand Reduction. For companies that want to reduce their energy costs through energy efficient retrofitting, deciding what type of program to participate in brings a major consideration: the financial incentives that a program offers.

The business case for energy efficient retrofitting is fairly straightforward: By implementing energy efficient retrofits, companies can reduce their annual utility costs by between 35 and 60 percent. But achieving this reduction can require a significant upfront investment. In the past, smaller companies that lacked the budget to pay for the majority of an energy efficiency project upfront were left in a precarious position: they could either abandon the project or make smaller changes and use the utility savings to budget for larger projects. But today, PDR and DSM programs offer companies financing options that reverse an old trend; instead of having to pay for the majority of a project upfront, companies can finance the majority of a project, which is a safe situation considering the dramatic reduction in energy costs that a comprehensive energy efficiency project brings.

If you believe that participating in a PDR or DSM program is an option for your company, there are two things that you should understand going into the process. For one, the energy efficient solutions will be offered by a partnering energy efficiency provider and not the program sponsor itself. In addition, the energy efficiency provider may be the party that offers the financing. Second, the financial incentives promoted through PDR and DSM programs will differ with each program, although having the opportunity to finance up to 70 percent of your project is considered a generous financing offering. In addition, many programs offer direct financial incentive and non-financial incentives such as technical services. By retrofitting your building for energy efficiency through energy efficiency programs, you accomplish more than slashing your annual utility costs. You also help your region reduce its energy demand in accordance with state mandates to increase the percentage of energy efficient power users by a certain date.

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