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“ Show me the money… ” $ $ $

“ Show me the money… ” $ $ $. Efficiency Vermont ’ s 2006-08 Investment Plan. Q. What IS money, anyway?. A store of value; A means of exchange; Not everything, but a great way of keeping score; and

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“ Show me the money… ” $ $ $

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  1. “Show me the money…”$ $ $ Efficiency Vermont’s 2006-08 Investment Plan

  2. Q. What IS money, anyway? • A store of value; • A means of exchange; • Not everything, but a great way of keeping score; and • Unlike electricity, not necessarily fatal if consumed directly (hence the “derived” demand for energy)….

  3. Time is money… Q. Do you believe a dollar in the future is worth MORE because of future generations? A. If yes, I want to borrow as much money as you’ll lend me right now for as long as possible. Q. Which would you rather have, $1,000 today or $1,000 in ten years? A. Duh!

  4. You and Your Discount Rate… • Money’s worth today depends on when you get it. • You (and every member of species homo economicus) implicitly or otherwise apply an annual DISCOUNT RATE to future money outlays and income (even if you’re certain to spend or receive it). • Until yesterday, Efficiency Vermont calculated our PRESENT WORTHS of future money (benefits and costs) using a 6.8% discount rate. • From now until the DPS changes it again (with PSB approval), we’re using a 5.8% discount rate. • This is the OPPORTUNITY COST of investing the public’s money somewhere else, i.e., in some other “public good”.

  5. Not all money is the same… • How do we count money at Efficiency Vermont (and VEIC)? • Let me count the ways….

  6. Different Ways of Counting Money at Efficiency Vermont • Societal Benefits and Costs • All costs and benefits, including externalities, comparative risk adjutment • Total Resource Benefits and Costs – per contract • Benefits: Societal minus externalities • Costs: Not including CRA • Total Resource Benefits and Costs – per 5270 and PIP • Costs: with Comparative Risk Adjustment • Electric System Benefits and Costs • Benefits: TRB without fossil, water • Costs: TRC minus participant, third-party cost • “GMP Value Test”

  7. The Color of Money….

  8. DSM Cost-Effectiveness Indicators • Net benefits = PW Benefits – PW Costs • The economic “bottom line” (>>0) • Measure of increase in wealth • Benefit/Cost Ratio = PW Benefits / PW Costs (>>1.0) • Simple comparative indicator • Misleading • Cost of saved electric energy ($/kWh) • PW costs / PW lifetime kWh • for comparison with avoided supply • Like “yield”, except inverse, and accounting for lifetime • Net cost of saved peak demand ($/kW-yr) • = (PW costs minus PW electric energy benefits) / PW kW-yr

  9. Supply Curves for Energy Efficiency Savings

  10. The Money Show for Efficiency Vermont2006-2008 • Societal • Total Resource (per Contract) • Total Resource With CRA per PIP • Cost of saved electric energy • Net cost of saved peak demand • Total Resource With CRA per PIP and 5270 • Comparison of benefits and costs • Cost of saved electricity • Electric System • Comparison of benefits and costs • Cost of saved electric energy per kWh • Net cost of peak demand savings • GMP Value from Energy Efficiency Fund • Net Resource Benefits divided by EVT costs (NRB/EVT) >>1.0

  11. Conclusions • Prospective performance • Everything pretty much cost-effective from all perspectives. • A few red flags. • What about the future? • Prospective initiative economic assessment • New avoided costs. • Using analysis to make decisions about budget allocation over time. • Portfolio economic performance. • Where are we on the supply curves for residential efficiency?

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