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EE Reporting Tool Training

EE Reporting Tool Training. California Municipal Utilities Association & Southern California Public Power Authority August 4, 2010 Eric Cutter Senior Consultant. Cost-Effectiveness Framwork. 2. Origins of Cost-effectiveness: Traditional Supply Side Planning.

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EE Reporting Tool Training

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  1. EE Reporting Tool Training California Municipal Utilities Association & Southern California Public Power Authority August 4, 2010 Eric Cutter Senior Consultant

  2. Cost-EffectivenessFramwork 2

  3. Origins of Cost-effectiveness: Traditional Supply Side Planning Cost-effectiveness analysis is rooted in least cost utility supply planning; where objective is to… develop the least cost supply portfolio that has acceptable level of cost risk, meets established reliability criteria, and complies with environmental regulations. Traditional analysis yields a preferred supply plan Integrated supply and demand planning (“IRP”) can also yield a preferred supply plan No ‘benefits’ calculation is needed in this framework, just a complete characterization of all costs required to meet the object function

  4. Why cost-effectiveness analysis? Shortcomings of “full IRP” approach Complex analysis on broad set of issues from fuel supply, operability, supply technology Significant time required (2+ years typically) Lack of stakeholder transparency Focus on ratepayer cost and risk, subject to minimum standards on reliability, environment Once you have your ‘preferred plan’ How do you test for a lower cost solution?

  5. Cost-effectiveness Framework Testing whether an alternative plan is lower cost is the basic building block of CE analysis Evaluate the costs of EE program Evaluate the change in costs of your preferred supply plan (“avoided costs”) These are the ‘benefits’ of implementing your program Compute the difference (or ratio) Step 1 Step 2 Step 3 More formally, net present value difference of benefits and costs…

  6. Calculating Avoided Costs

  7. Range of avoided cost components that are considered in developing the benefits for EE Each state selects their own elements and methods for quantification Avoided Cost Components

  8. Methodology of Avoided Costs Methodology depends on market structure Lots of variation across states

  9. Components of Avoided Cost

  10. Generation Marginal Cost Forecast Resource Balance Year Trend to All-in Cost of New CCGT Or other suitable proxy powerplant Use Market and/or Market Forecast Market Price (Energy & Capacity) Forecast of Long Run Market Price (Energy and Capacity) Electric Forward data Gas Futures data Long run forecast of market prices 2009 2013 2021 2028 and beyond

  11. Model Structure

  12. Model Structure

  13. Key Issues

  14. Defining Incremental Costs

  15. Incremental Costs

  16. Measure Costs • Utility incentives OFFSET measure costs (that otherwise would be paid by participant). The two incentive types are: • Rebate: cash transfer from utility to participant • Direct Install: Utility pays contractor to perform installation • Both are (since 2008) treated the same in cost tests • Utility costs that are IN ADDITION to measure cost are: • Entered as Variable Overhead.

  17. Net To Gross (NTG) Ratio Net to gross ratio may deratethe program impacts and significantly affects the results of the TRC, SCT, PAC, and RIM tests Difficult to estimate the NTG with confidence Key factors addressed through the net-to-gross ratio are: Free Riders Installation Rate Persistence/Failure Rebound Effect Take Back Effect Spillover

  18. Free Rider Costs • In 2007: how to address free-rider “costs”? • IOU Position • Exclude both rebate and direct install costs that benefit free-riders (treat all incentive costs as transfers, whether to free-rider or not) • Incentive costs, whether to participant or free-rider, are a transfer within the region and should be excluded from TRC • DRA, TURN, NRDC Position • Include both rebate and direct install costs that benefit free-riders as a TRC Cost. • Incentives paid to free-riders are a “cost” bourn by non-participants and reflect actual utility expenditures. • TRC is sum of participant cost (PCT) and non-participant cost (RIM)

  19. Free Rider Costs • CPUC sided with DRA, TURN and NRDC • Both rebate and direct install costs paid to free riders areADDED as a cost in TRC. • In other words, only the rebate and direct install costs that benefit non-free-rider customers are treated as a transfer payment and excluded from the TRC cost.

  20. Application at portfolio level allows for inclusion of individual programs or measures that do not past cost test Low Income, emerging technologies, market transformation Point of Measurement

  21. Discount Rates are a key input

  22. Value of Carbon Adder Simple Calculation of Value At $30/tonne CO2, natural gas combined cycle costs increase about $0.012/kWh and coal $0.027/kWh

  23. Accounting for Non Energy Benefits Customer perspective Increased comfort, quality of life Improved air quality Greater convenience, quality of product Utility perspective Reduced shut-off notices Reduced bill complaints Societal Perspective Increased community health Improved aesthetics. Reduces reliance on imported energy sources NOT Included in CPUC/E3 Avoided Costs

  24. Example Measures

  25. Refrigerator Replacement • Look up measure in KEMA Report • Incremental costs provide the cost of installing a more efficient unit than the code minimum, whereas full costs represent the installed cost of an Energy Star refrigerator. The measure cost assumes an average refrigerator size of 26 cubic foot unit. • Does not include disposal

  26. Refrigerator Replacement

  27. Refrigerator Replacement

  28. NPV and Levelized Costs

  29. NPV

  30. Levelized Payment

  31. Levelized Payment

  32. Cost-effectiveness Tests

  33. TRC Test Implications TRC Test measures overall cost-effectiveness Pop Quiz Does the size of the incentives change the TRC? Do the customer bill savings change the TRC? Do direct install costs change the TRC? Distribution Tests (RIM, PCT, UCT) If the TRC is positive, what can we say about the distribution of costs and benefits? Need ‘distributional tests’ PCT (cost-effectiveness for participants) UCT / PAC (cost-effectiveness from a utility perspective) RIM (economics for non-participants)

  34. Definition of Cost Tests

  35. Summary of Costs and Benefits • High level summary of costs and benefits included in each cost test • Each state adjusts these definitions depending on circumstances • Details can significantly affect the type of energy efficiency implemented

  36. Example Cost Test Results Benefit / Cost ratio results from three programs Energy efficiency is widely cost-effective RIM test results are often less than one

  37. Participant Cost Test • Measures economic attractiveness of measure to customer • Non-economic factors can have significant influence on customer adoption

  38. Participant Cost Test

  39. Program Administrator Cost Test • Measures cost to utility on a comparable basis with supply-side resources • Positive PAC means average bills will eventually be lower as compared to supply-side alternative • Usually the least restrictive cost test • Includes cost of incentive to utility but not the cost of the measure to the customer

  40. Program Administrator Cost Test

  41. Ratepayer Impact Measure • Almost always negative • Participant bills go down, but average rates go up • Most restrictive test

  42. Ratepayer Impact Measure

  43. Total Resource Cost Test • Measures Cost to Region as a whole • Intra-regional transfers not included • Incentives, rates • Most common threshold test • PCT and PAC can be positive even when TRC is negative

  44. Total Resource Cost Test

  45. Societal Cost Test

  46. What is the Goal? • Achieve maximum potential savings • All efficiency with PAC > 1.0 • Or TRC > 1.0 at portfolio level • Achieve maximum savings with given budget or meet savings target at minimum cost to utility and its ratepayers • Individual measures with highest TRC and/or PAC • Protect competitiveness of utility rates or minimize impacts to non-participants • RIM > 1.0 (rare)

  47. Resources

  48. Resources • National Action Plan for Energy Efficiency • http://www.epa.gov/cleanenergy/energy-programs/napee/index.html • PG&E Workpapers • http://www.pge.com/includes/docs/archives/about/rates/rebateprogrameval/aljruling/2008/4q08_workpapers_revised.zip • California Energy Efficiency Website • http://www.californiaenergyefficiency.com/calenergy_old/2006_08_programs.html • CPUC Energy Division Contracts • http://www.energydataweb.com/cpuc/home.aspx

  49. Measure Impacts

  50. Demand Savings • Estimated or Connected Demand Savings • Replace 100 w incandescent bulb with 20 W CFL • 80 w connected demand savings • Average or Non-Coincident Demand Savings • Refrigerator or AC units cycle on and off • Demand reduction averaged over period of time • Coincident Peak Demand Savings • Coincidence diversity factor • Ratio of coincident peak demand/non-coincident peak demand

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