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Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs

Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs. Kansas Corporation Commission. Mitchell Rosenberg, Vice President Topeka, Kansas March 26, 2008. Overview. Practical Approaches and Results

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Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs

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  1. Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs Kansas Corporation Commission Mitchell Rosenberg, Vice President Topeka, Kansas March 26, 2008

  2. Overview • Practical Approaches and Results • Formulating cost-effectiveness tests to address a jurisdiction’s policy objectives: Expanding the Total Resources Test (TRC) • Estimating benefits not included in the TRC • Selection of appropriate analysis periods and discount rates to reflect policy objectives and specification of benefits • References • KEMA work in Wisconsin

  3. Policy Drives the Test • Total Resource Test • Meet energy needs at lowest social cost, including environmental externalities • Wisconsin Goals for Energy Efficiency Programs • Reduce energy used per unit of production • Improve energy reliability • Enhance economic development & competitiveness of WI businesses • Reduce environmental impacts of energy use • Expand ability of market to deliver energy-efficient goods & services • Deliver return on public investment

  4. Wisconsin Approach: Test Structure

  5. Wisconsin Approach: Other Elements • Analysis Period: 25 years, beginning 2001 • Needed to capture economic benefits • Program Period: 10 years, beginning 2001 • Need to assume levels of program activity from 2007 – 2011 • Two funding scenarios • Low-funding: continues first 5 years • High-funding: spending increase per current legislation. More market effects reflected in benefits • Net Present Value: All benefit and cost streams discounted to $2007, then netted.

  6. Wisconsin: Overview of Benefit-Cost Analysis Results In $2007 millions

  7. Benefits under the Simple Test

  8. Non-Energy Benefits Estimates developed from combination of surveys to assess incidence and secondary sources to assess unit values.

  9. Indirect Economic Impacts Modeling Economic Benefit Drivers Direct Program Effects Benefits Counted

  10. Estimates of Economic Development Impacts Note: Benefits not discounted in Sum columns. Import substitution and increased business competitiveness are the primary drivers of economic benefits generated.

  11. Putting it together: Simple Test Residential Programs: High Funding Scenario

  12. Putting it together: Expanded Test Residential Programs: High Funding Scenario

  13. Key elements of uncertainty

  14. Lessons Learned • Extended cost-effectiveness framework is analytically manageable, with significant areas of uncertainty remaining • Extended cost-effectiveness creates considerable program ‘headroom’. • Incremental cost data a major weakness. • Need to build cost data collection into program operations and evaluation • Must ensure that assumptions used in b-c calculations are incorporated into program planning • Example of California’s E3 calculator

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