Utility Customer-Funded Energy Efficiency Presentation to Ohio Legislative Study Committee May 7 2015 Charles Goldman Division Director and Staff Scientist Electricity Markets and Policy Group Lawrence Berkeley National Laboratory This work was supported by the National Electricity Delivery Division of the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability under Lawrence Berkeley National Laboratory Contract No. DE-AC02-05CH11231.
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Utility Customer-Funded Energy Efficiency Presentation to Ohio Legislative Study Committee May 7 2015 Charles Goldman Division Director and Staff Scientist.
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Utility Customer-Funded Energy EfficiencyPresentation to Ohio Legislative Study Committee
May 7 2015
Charles GoldmanDivision Director and Staff ScientistElectricity Markets and Policy Group
Lawrence Berkeley National Laboratory
This work was supported by the National Electricity Delivery Division of the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability under Lawrence Berkeley National Laboratory Contract No. DE-AC02-05CH11231.
Presentation of Topics
• What is energy efficiency (EE) and what are some of the barriers?
• What is the cost of saved energy for electricity efficiency programs?
• Why should EE be considered a utility resource (and customer service)?
2
Efficiency versus Conservation
Energy Conservation: Doing with less of a service in order to save energy
• Using less energy and probably getting less of a result
• Example: Turning down the thermostat to get less heating
Energy Efficiency: The use of less energy to provide the same or an improved level of service
• Using less energy to perform the same function
• Example: A more efficient furnace
Example: Turning street lights off versus installing efficient
streetlight lamps and controls
3
What are the Barriers to Energy Efficiency?
Barriers to Energy Efficiency
• Front-end investment requirements• Principal agent problem (property owner/tenant)• Lack of information and understanding of benefits (and risks)• Transaction costs• Lack of knowledgeable contractors and/or suppliers• Uncertainty in documenting benefits
5
Barriers to Energy Efficiency
Examples of issues in different markets
Institutional/Public Sector
Buildings- Large backlog of deferred capital
investments- Lack of financial resources- Lack of people resources
Commercial Businesses - Split incentive problem- Lack of interest even in long tenancy
situations since energy costs represent small percentage of business costs
Residential- Poor: not able to make investments- Middle class: lack financing - Well-off: energy costs represent a small
portion of disposable income so not that interested
- Split incentive problem· Tenants pay energy bills· No incentive for owner improvements
Industrial- Short investment horizon (1-3 year
paybacks sought)- Energy costs can represent small
percentage of business costs
6
What is the Cost of Saved Energy for Electric Efficiency Programs?
Energy Efficiency Programs
• Programs are collections of similar projects that are intended for a specific market (a describable group of customers)
• Portfolios are multiple program initiatives in specific market sectors
Savings Hierarchy for Most EE Programs• Fundamental savings unit are measures
—equipment or strategy
• Projects are coordinated activities to install one ore more measures at a facility
8
LBNL Cost of Saved Energy ProjectThe cost of saved energy (CSE) has not been comprehensively documented or analyzed at the program level
Approach Collected & analyzed reported annual EE program data in 34 states
Objectives Enable policymakers and program administrators to compare and
weigh resource options Encourage more consistent reporting of EE program impacts and costs Enable assessment of program approaches and performance across
different markets, delivery mechanisms and designs
Uses for Regulators More informed choices among demand and supply resources Better understanding of the costs of efficiency Keener insight and input into DSM investments
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Data Collection and Standardization
LBNL DSM Program Database• Program Administrator (PA)
CSE: 100+ administrators in 34 states
– 5,900 program years for 2009-2013• Total Resource CSE: 50
administrators in 19 states– 2,100 program years for 2009-2013
Types of Data Collected• Net & gross savings• Annual incremental & lifetime
• Participant costs• Measure lifetimes for programs• Number of program participants
10
Standardization Is Critical to Aggregating Data and Comparing Performance• Standard terms and definitions for program data and metrics• A national typology of programs
10
Energy Efficiency Programs
Program Administrator Portfolio
Residential
Whole Home Programs
Whole Home Retrofit, Home Performance
Audits – standalone,
onsite
Direct Install
Consumer Products Rebate
Electronics
Lighting
Appliances
Commercial
Custom
Whole Buildings
RCx
Small Commercial
Prescriptive
HVAC
Lighting
Perf. Contracts, Bidding
Industrial & Agriculture
Custom
Industrial & Ag Process
Data Centers
Refrigerated Warehouses
Prescriptive
Motors
Ag. Prescriptive (Pumps)
Cross Cutting & Other
Multi-Sector
Codes & Standards
Market Transformation
Multi-Sector Equipment
Rebate
Cross Cutting
EM&V
Marketing & Education
Low Income
Low Income
Examples of common program types (and support activities)
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Cost of Saved Electricity: National Results– The U.S. average levelized CSE is slightly more than two cents per kilowatt-
hour – Residential programs had the lowest savings weighted CSE ($0.018/kWh)
followed by C&I programs ($0.021/kWh)
12
n = 1752 n = 1338 n = 339 n = 699
Cost of Saved Electricity: Commercial and Industrial Programs
– C&I Custom (287) and Prescriptive (259) programs were the most common and had savings-weighted average CSE below $0.02/kWh
13
Cost of Saved Electricity: Residential Programs
– Consumer Product Rebate and Prescriptive (HVAC, insulation) programs had a savings-weighted average CSE of $0.009/kWh and $0.016/kWh respectively
14
Cost of Saved Electricity:State Results
15Values in this figure are based on the 2009-2011 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs and based on gross savings. Savings are levelized at a 6% real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type.
Total vs. Program Administrator Cost of Saved Energy
• Savings-weighted average Total CSE ($0.046/kWh) was nearly twice the PA CSE ($0.023/kWh)
• Residential programs had the lowest savings-weighted total CSE ($0.033/kWh) followed by C&I programs ($0.055/kWh)
Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs are based on gross savings. Savings are levelized at a 6% real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type.
Source: LBNL DSM Program Database
16
Why should Energy Efficiency be considered a utility resource (and customer service)?
Why do Energy Efficiency?
• Has already done a lot to reduce wasting of energy
• Is relatively cheap—reduces investment requirements for supply-side resources
• There are plenty of opportunities
• Is not a limited resource—there are new technologies and strategies
• Can be implemented quickly and can be targeted (e.g. geographic area)
• Diversifies utility resource portfolios
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EE Reduces a Utility’s Cost to Serve
• EE avoids the need for new generation additions which reduces capital expenditures
• EE reduces total sales and peak demand which reduces energy production costs