1. business and industrial
2. energy
3. renewable energy

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.
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)?
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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
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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
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What is the Cost of Saved Energy
for Electric Efficiency Programs?
Energy Efficiency Programs
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
• 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
8
LBNL Cost of Saved Energy Project
The 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
Types of Data Collected
• Program Administrator (PA)
• Net & gross savings
CSE: 100+ administrators in 34 • Annual incremental & lifetime
states
savings
– 5,900 program years for 2009-2013 • Budgets & expenditures
• Total Resource CSE: 50
– Administrative costs
administrators in 19 states
– Incentive costs
– 2,100 program years for 2009-2013
– Education, marketing & outreach
• Participant costs
• Measure lifetimes for programs
• Number of program participants
Standardization Is Critical to Aggregating Data and Comparing Performance
• Standard terms and definitions for program data and metrics
• A national typology of programs
10 10
Energy Efficiency Programs
Examples of common program types (and support activities)
Program Administrator Portfolio
Residential
Whole Home
Programs
Industrial &
Agriculture
Commercial
Consumer
Products Rebate
Custom
Prescriptive
Custom
Cross Cutting &
Other
Prescriptive
Multi-Sector
Low Income
Cross Cutting
Whole Home
Retrofit, Home
Performance
Electronics
Whole Buildings
HVAC
Industrial & Ag
Process
Motors
Codes &
Standards
EM&V
Audits –
standalone,
onsite
Lighting
RCx
Lighting
Data Centers
Ag. Prescriptive
(Pumps)
Market
Transformation
Marketing &
Education
Direct Install
Appliances
Small Commercial
Perf. Contracts,
Bidding
Refrigerated
Warehouses
Low Income
Multi-Sector
Equipment
Rebate
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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)
n = 1752
n = 1338
n = 339
n = 699
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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
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Cost of Saved Electricity:State Results
Values 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 interquartile range and median CSE values are calculated for each program type.
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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 ($0.055/kWh)
Source: LBNL DSM Program Database
Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs are based on gross savings. Savings are levelized at a 6%
real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program
type.
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Why should Energy Efficiency be considered a
utility resource (and customer service)?
Why do Energy Efficiency?
• Has already done a lot to reduce wasting of
energy
• Is relatively cheap—reduces investment
requirements for supply-side resources
• There are plenty of opportunities
• Is not a limited resource—there are new
technologies and strategies
• Can be implemented quickly and can be
targeted (e.g. geographic area)
• Diversifies utility resource portfolios
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EE Reduces a Utility’s Cost to Serve
• EE avoids the need for
new generation
additions which reduces
capital expenditures
Case
• EE reduces total sales
and peak demand which
reduces energy
production costs
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
BAU
P
P
Mod. EE
P
P
M
P
P&M
M
M
M
M
P – Peaker M – Mid-Merit Red – Deferred Plant
P
P
P
P
Purchased Power/Capital Expenditure
Budget Savings ($B, 20-Yr. PV)
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1.23
0.87
Mod. EE
Agg. EE
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Non-Energy Benefits: Participant Benefits
•
Indoor air quality improvements, improved comfort (e.g., quality of light,
less noise, fewer drafts, better building temperature control)
•
Higher productivity and lower rates of absenteeism through betterperforming systems (e.g., ventilation, building shell, lighting)
•
Reduced equipment O&M costs because of more efficient systems
(although more complex systems could require more maintenance)
•
Water and wastewater savings
•
For commercial businesses and public entities, improved public
perceptions and the ability to market products and tenant leases
•
Avoided capital cost for equipment or building component replacements
whose capital costs can be paid from savings
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Non-Energy Benefits: Utility & Societal
Value
Impact
Hedge value
Reduction of consumer exposure to volatility in electricity/gas commodity costs
Reduced commodity prices resulting
from reduced demand
Reduction in aggregate demand puts downward pressure on wholesale market electric and gas
commodity prices
Easing electricity
distribution/transmission capacity
constraints
(localized) Reduced line losses, voltage support (reliability), and power quality improvements
May defer or eliminate the need for local distribution system upgrades
Avoided transmission and
distribution capital and operating
costs
(localized) Particularly valuable in areas with high energy use, high demand growth, and/or
constrained distribution systems
Environmental benefits
Mitigate environmental impacts of electricity generation
Customer bill collection and servicerelated savings
Avoiding shut-off notices, shutoffs/reconnects, and carrying costs on arrearages
Can provide access to energy savings
opportunities for all markets
Virtually all consumers can participate in energy efficiency programs
Economic development
EE programs can support greater net job growth than electricity/ gas supply and delivery
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Non-Energy Benefits: Jobs
• Direct. Jobs in firms that receive
efficiency program dollars and
implement EE projects
• Indirect. Jobs in firms supplying goods
and services to energy efficiency firms
• Induced. Those created by the demand
generated by wage and business
income from energy efficiency
investments and by energy bill savings.
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Key Policy Drivers for Energy Efficiency
Key Policy Drivers for Energy
Efficiency Spending and Savings
Applicable to Electric Efficiency Applicable to Natural Gas
Programs
Efficiency Programs
Energy Efficiency Resource
Standard (EERS)
AZ, CA, CO, HI, IL, IN, MD, MI, MN, MO,
NM, NY, OH, PA, TX
Energy efficiency eligibility under
state RPS
HI, MI, NC, OH, NV
Statutory requirement that utilities
acquire all cost-effective energy
efficiency
CA, CT, MA, RI, VT, WA
CA, CT, MA, RI, VT, WA
Systems benefit charges
CA, CT, DC, MA, ME, MT, NH, NJ, NY, OH,
OR, RI, VT, WI
CA, DC, ME, MT, NJ, NY, RI,WI
Integrated resource planning
34 States (primarily in the West and
Southeast) and TVA
17 States (primarily in the West and
Northeast)
Demand Side Management plan or
energy efficiency budget
28 States
21 States (primarily in the Northeast
and Midwest)
CA, CO, MI, MN, NY, IL
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Thank You
Charles Goldman
Staff Scientist
Electricity Markets and Policy Group
Lawrence Berkeley National Laboratory
1.510.486-4637
cagoldman@lbl.gov
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