Efficiency Programs 101:Efficiency Programs 101: A Guide to Public Efficiency A Guide to Public Efficiency

Programs in Maine and Programs in Maine and Elsewhere for the new Board Elsewhere for the new Board

Member Member

Doug BastonDoug Baston

Principal, North Atlantic Energy Principal, North Atlantic Energy Advisors Advisors

(and Director of Business Construction (and Director of Business Construction Services, Efficiency Maine)Services, Efficiency Maine)

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• History of Efficiency Programs in New History of Efficiency Programs in New EnglandEngland

• Maine’s Unique HistoryMaine’s Unique History

• Efficiency Programs in 2008Efficiency Programs in 2008

• What We’ve Learned about Good What We’ve Learned about Good Programs Programs

• What’s on the HorizonWhat’s on the Horizon

TodayToday::

History of Efficiency History of Efficiency Programs in New England:Programs in New England:

1985 – 19951985 – 1995

• Pressure from environmental organizations: Efficiency is Pressure from environmental organizations: Efficiency is a lower cost, cleaner alternative to new nuclear or fossil a lower cost, cleaner alternative to new nuclear or fossil plantsplants

• 1987 CLF issues “Power to Spare” report. CLF forms 1987 CLF issues “Power to Spare” report. CLF forms Stakeholder Collaboratives with utilities in Connecticut, Stakeholder Collaboratives with utilities in Connecticut, Massachusetts, and Rhode Island to jointly design new Massachusetts, and Rhode Island to jointly design new programs and increase efficiency spendingprograms and increase efficiency spending

• Utilities in Maine, New Hampshire, and Vermont also Utilities in Maine, New Hampshire, and Vermont also develop efficiency programs; CMP rejects a develop efficiency programs; CMP rejects a collaborativecollaborative

• Large budgets (CMP and New England Electric were in Large budgets (CMP and New England Electric were in the forefront)the forefront)

• A suite of brand new “resource acquisition” programs A suite of brand new “resource acquisition” programs (some modeled after those in the Pacific Northwest)(some modeled after those in the Pacific Northwest)

• Stakeholder/Utility Collaboratives become Stakeholder/Utility Collaboratives become institutionalizedinstitutionalized

• New England utilities, including CMP, are national New England utilities, including CMP, are national leadersleaders

1995 – 20051995 – 2005

• Utility Restructuring “Grand Bargain” keeps efficiency Utility Restructuring “Grand Bargain” keeps efficiency programs in place, but control shifts from regulators programs in place, but control shifts from regulators to legislatorsto legislators

• Utilities in other New England states want to keep Utilities in other New England states want to keep program management and delivery (Maine utilities do program management and delivery (Maine utilities do not)not)

• Some states shift to government administration (New Some states shift to government administration (New York, New Jersey, Wisconsin, California, Maine)York, New Jersey, Wisconsin, California, Maine)

• As New England generation fleet shifts to gas, As New England generation fleet shifts to gas, environmental benefits of efficiency are seen to environmental benefits of efficiency are seen to diminish (pre - CO2 concern)diminish (pre - CO2 concern)

• More emphasis on “Market Transformation” programs More emphasis on “Market Transformation” programs (vs. “Resource Acquisition”)(vs. “Resource Acquisition”)

• More emphasis on “Lost Opportunity” (vs. Retrofit) More emphasis on “Lost Opportunity” (vs. Retrofit) programsprograms

• Programs become more consistent in the region, Programs become more consistent in the region, around mature and proven modelsaround mature and proven models

• More cooperation among distribution utilities, who More cooperation among distribution utilities, who don’t compete for power salesdon’t compete for power sales

Mid 2005 to NowMid 2005 to Now

• Perfect Storm: rising energy costs, capacity constraints, Perfect Storm: rising energy costs, capacity constraints, climate changeclimate change

• Good news: Politicians discover efficiency; Bad news: Good news: Politicians discover efficiency; Bad news: Politicians discover efficiencyPoliticians discover efficiency

• Huge budget increases bring:Huge budget increases bring: - Concerns about insufficient workforce and infrastructure- Concerns about insufficient workforce and infrastructure - Pressure to do “splashy” programs- Pressure to do “splashy” programs - Fear of legislative raids- Fear of legislative raids - Pressure to dilute technical rigor of programs - Pressure to dilute technical rigor of programs

• Many more jurisdictions establish programs – New Many more jurisdictions establish programs – New Brunswick, Nova Scotia, Maryland, Delaware, Illinois, Brunswick, Nova Scotia, Maryland, Delaware, Illinois, Indiana, etc.Indiana, etc.

• Some states return to utility administration (Wisconsin, Some states return to utility administration (Wisconsin, California, probably New Jersey; New York moves towards California, probably New Jersey; New York moves towards mixed system)mixed system)

• Consider capacity savings attributes of efficiency (not a Consider capacity savings attributes of efficiency (not a fully developed science)fully developed science)

• ““Best Practices” program models are generally known Best Practices” program models are generally known and accepted, and are largely copied by new program and accepted, and are largely copied by new program entrants entrants

• Acceptance that market captures but a fraction of Acceptance that market captures but a fraction of available efficiencyavailable efficiency

Maine’s Unique HistoryMaine’s Unique History

• No history of participatory program No history of participatory program development. CMP rejected the collaborative development. CMP rejected the collaborative approach in mid-80’sapproach in mid-80’s

• CMP outsourced efficiency (Power Partners), so CMP outsourced efficiency (Power Partners), so Maine never retained or developed (a) seasoned Maine never retained or developed (a) seasoned program administrators or (b) a support industry program administrators or (b) a support industry of private energy engineering or program of private energy engineering or program delivery firmsdelivery firms

• Power Partners shut down efficiency programs Power Partners shut down efficiency programs for 15 years – creating a gap in program for 15 years – creating a gap in program knowledge and experience while other state knowledge and experience while other state programs were growing and maturingprograms were growing and maturing

• Maine’s largest utilities vehemently opposed Maine’s largest utilities vehemently opposed creating a SBC, and remain largely creating a SBC, and remain largely uncooperativeuncooperative

• Efficiency policy and legislation is far more Efficiency policy and legislation is far more bipartisan in other statesbipartisan in other states

Maine in 2008Maine in 2008

• Maine’s large customers neither pay Maine’s large customers neither pay nor playnor play

• Maine potentially has two efficiency Maine potentially has two efficiency program delivery vehicles – Efficiency program delivery vehicles – Efficiency Maine and the Trust. Other states Maine and the Trust. Other states folded RGGI into existing program folded RGGI into existing program delivery structure.delivery structure.

• Maine’s system benefit charge is the Maine’s system benefit charge is the lowest in the region.lowest in the region.

• One of only 2.5 states in region with One of only 2.5 states in region with government-run programs (New Jersey government-run programs (New Jersey and New York).and New York).

Northeast Funding Levels:Northeast Funding Levels:

• Historic High: $900+ million (1994, NE, Historic High: $900+ million (1994, NE, NJ, NY)NJ, NY)

• Low: $450 million (1997, post-Low: $450 million (1997, post-restucturing)restucturing)

• 2007: $623+ million2007: $623+ million

• Future: On path towards $1.5 Future: On path towards $1.5 billion/yearbillion/year

SBC Levels:SBC Levels:

0

1

2

3

CT(3.0)

VT(3.0)

MA(2.5)

RI(2.0)

NY(1.8)

NH(1.8)

ME(1.5)

Mills/ kWh

Budget Levels (2008):Budget Levels (2008):

0102030405060708090

100110120130

MA ($125) CT ($70.9) VT ($29) NH ($17.3) RI ($14.7) ME($14.0)

Mills/ kWh

How to Prioritize Programs:How to Prioritize Programs:

• All states have some general statutory “program All states have some general statutory “program goals” language – serve low income (usually a set-goals” language – serve low income (usually a set-aside), supporting small business, market aside), supporting small business, market transformation, environmental benefits, reduce transformation, environmental benefits, reduce costs for consumers, etc. The portfolio should be costs for consumers, etc. The portfolio should be consistent with these and:consistent with these and:

• Minimize lost opportunities;Minimize lost opportunities;

• Leverage market and technology opportunities;Leverage market and technology opportunities;

• Address market barriers;Address market barriers;

• Be cost-effective;Be cost-effective;

• Be quantifiable;Be quantifiable;

• Be equitable;Be equitable;

• Be comprehensive;Be comprehensive;

• Have an exit strategyHave an exit strategy

Successful Programs =Successful Programs =

Appropriate Administrative Structure + Good Appropriate Administrative Structure + Good Program Model + Good Delivery (solid technical Program Model + Good Delivery (solid technical expertise + incentives)expertise + incentives)

• Appropriate Administrative Structure:Appropriate Administrative Structure: FlexibilityFlexibility to adapt organizationally, and staff to adapt organizationally, and staff

accordingly, in response to changing public policy; accordingly, in response to changing public policy; evolving program design, maturing delivery evolving program design, maturing delivery expertise;expertise;

Lean staffing: maintain flexibility to contract out Lean staffing: maintain flexibility to contract out functions or retain in house;functions or retain in house;

A strong evaluation capability (in-house or A strong evaluation capability (in-house or contract);contract);

Ability to pay market-based compensation (It’s a Ability to pay market-based compensation (It’s a very competitive labor market);very competitive labor market);

Ability to adapt program structure, rules, Ability to adapt program structure, rules, incentives quickly in response to changing market incentives quickly in response to changing market conditions and opportunities;conditions and opportunities;

Crisp, nimble and responsive decision-making Crisp, nimble and responsive decision-making authority;authority;

A vehicle for stakeholder input.A vehicle for stakeholder input.

• Good Program Models….Good Program Models…. This This isis Rocket Science, but the rockets have Rocket Science, but the rockets have

already been built and tested.already been built and tested. • www.eebestpractices.comwww.eebestpractices.com

• American Council for an Energy Efficient Economy: American Council for an Energy Efficient Economy: “America’s Best: Profiles of America’s Leading “America’s Best: Profiles of America’s Leading Energy Efficiency Programs”Energy Efficiency Programs”

• Energy Trust of Oregon: “Best Practices from Energy Trust of Oregon: “Best Practices from Energy Efficiency Organizations and Program”Energy Efficiency Organizations and Program”

• Dalhousie University: “Overview of Administrative Dalhousie University: “Overview of Administrative Models for DSM”Models for DSM”

Most of the Best Practices Programs are right Most of the Best Practices Programs are right here in New England – National Grid, NSTAR, here in New England – National Grid, NSTAR, Northeast Utilities, Efficiency VermontNortheast Utilities, Efficiency Vermont

This is an industry that shares well with othersThis is an industry that shares well with others

• ……. + Good Delivery:. + Good Delivery: Customers want independent technical Customers want independent technical

advice: (a) qualified and (b) not associated advice: (a) qualified and (b) not associated with a product (e.g., a vendor)with a product (e.g., a vendor)

They want someone who will hand-hold them They want someone who will hand-hold them through a process from: (a) opportunity through a process from: (a) opportunity identification, to (b) calculating out costs and identification, to (b) calculating out costs and savings, to (c) shepherding the project savings, to (c) shepherding the project through to completion, including (d) the through to completion, including (d) the program paperwork.program paperwork.

This includes looking at all the savings This includes looking at all the savings opportunities.opportunities.

Incentives are important, but often not as Incentives are important, but often not as important as the above.important as the above.

The art and science of incentives is in finding The art and science of incentives is in finding the Goldilocks Spot.the Goldilocks Spot.

A Small Craft Warning: We are experiencing We are experiencing a very, very tight labor market for a very, very tight labor market for experienced technical consultants and experienced technical consultants and program managers.program managers.

What We’ve Learned:What We’ve Learned:

• Don’t Reinvent the WheelDon’t Reinvent the Wheel

• A Wheel is Pretty Much a Wheel EverywhereA Wheel is Pretty Much a Wheel Everywhere

• Be first to be secondBe first to be second

• Have Serious Programs to be Taken SeriouslyHave Serious Programs to be Taken Seriously

• Have Broad, Umbrella ProgramsHave Broad, Umbrella Programs

• Work with the Market – and Add ValueWork with the Market – and Add Value

• Be Known for Your Technical CompetenceBe Known for Your Technical Competence

• Have Stable, Consistent ProgramsHave Stable, Consistent Programs

• Don’t Buy What You Can’t VerifyDon’t Buy What You Can’t Verify

• Hold Strictly to Cost-EffectivenessHold Strictly to Cost-Effectiveness

A Few “Best Practices" A Few “Best Practices" Examples….Examples….

• National Grid’s Design 2000+ ProgramNational Grid’s Design 2000+ Program

• Direct Install Program (National Grid, Direct Install Program (National Grid, NSTAR, PSNH, Efficiency Vermont, NSTAR, PSNH, Efficiency Vermont, Nova Scotia Power)Nova Scotia Power)

• High Performance T8 “Upstream” High Performance T8 “Upstream” Incentive Program (Efficiency New Incentive Program (Efficiency New Brunswick, Conserve Nova Scotia)Brunswick, Conserve Nova Scotia)

• NSTAR/Grid Performance LightingNSTAR/Grid Performance Lighting

• NSTAR Marshfield ProjectNSTAR Marshfield Project

Where Were Going:Where Were Going:• Much Bigger Budgets (FCM, REGGI, edicts to acquire “all cost Much Bigger Budgets (FCM, REGGI, edicts to acquire “all cost

effective” efficiency)……effective” efficiency)……

• ……..And accompanying delivery problems (lack of skilled program ..And accompanying delivery problems (lack of skilled program managers, engineers, evaluators, skilled installers)managers, engineers, evaluators, skilled installers)

• Integrating other funding streams (REGGI, FCM, gas or oil SBC) Integrating other funding streams (REGGI, FCM, gas or oil SBC) into a coherent and coordinated program….into a coherent and coordinated program….

• ……..And addressing the multiple policy objectives that accompany ..And addressing the multiple policy objectives that accompany thatthat

• Increased focus on Whole Building Solutions:Increased focus on Whole Building Solutions:

Home Energy PerformanceHome Energy Performance

Comprehensive Design ApproachComprehensive Design Approach

LEED, Advanced BuildingsLEED, Advanced Buildings

NetZero BuildingsNetZero Buildings

• New Technologies: Plug Load Energy Star Electronics, LEDs, etc.New Technologies: Plug Load Energy Star Electronics, LEDs, etc.

• Acquiring “all cost effective efficiency” – could mean $70 mil/yr in Acquiring “all cost effective efficiency” – could mean $70 mil/yr in MaineMaine

• Decoupling, and utilities reentering the gameDecoupling, and utilities reentering the game

• The “Efficiency Utility”?The “Efficiency Utility”?

• The challenge of “All Fuels”The challenge of “All Fuels”

• More aggressive energy codes and equipment standardsMore aggressive energy codes and equipment standards

QuestionsQuestions??