Northwest Power and Conservation Council Slide 1 Energy Efficiency As A Resource Option Three...

Northwest Power and ConservationCouncil

Slide 1

Energy Efficiency As A Resource Energy Efficiency As A Resource OptionOption

Three Decades of PNW ExperienceThree Decades of PNW Experience

National Association of Regulatory CommissionEnergy Resources and the Environment Committee

July 22, 2009

Tom EckmanTom EckmanNorthwest Power and Northwest Power and Conservation CouncilConservation Council

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Slide 2

What You’re About To HearWhat You’re About To Hear What We’ve DoneWhat We’ve Done

– 30 years of using energy efficiency as a resource30 years of using energy efficiency as a resource

Why We Did ItWhy We Did It

– Using Integrated Resource Planning to make the Using Integrated Resource Planning to make the business casebusiness case for for

utility reliance on energy efficiency as a resourceutility reliance on energy efficiency as a resource

How We Know What We DidHow We Know What We Did

– Standardizing Evaluation, Measurement and VerificationStandardizing Evaluation, Measurement and Verification

What We’re About To DoWhat We’re About To Do

– Goals for the coming decadeGoals for the coming decade

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Slide 3

Northwest Speak (Definitions)Northwest Speak (Definitions)

Average Megawatt (aMW)Average Megawatt (aMW) = 8760 = 8760 MWHMWH

ConservationConservation = Any reduction in = Any reduction in electric power consumption as a result electric power consumption as a result of increases in the of increases in the efficiencyefficiency of energy of energy use, production or distribution. use, production or distribution.

CurtailmentCurtailment = Sitting in a dark, hot = Sitting in a dark, hot house, drinking warm beerhouse, drinking warm beer

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Slide 4

The Evolution of Energy PolicyThe Evolution of Energy Policy

April 18, 1977 – Conservation means a cold dark house

President Carter announces we are engaged in the moral equivalent of war (MEOW)

December 5, 1980 - Conservation declared a resource equivalentto generation

President Carter signs Northwest Powerand Conservation Act

October 11, 2002

President Carter Awarded Nobel Peace Prize

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Slide 5

Northwest Power and Conservation Northwest Power and Conservation Planning Act of 1980 (PL96-501)Planning Act of 1980 (PL96-501)

Authorized States of ID, OR, MT and WA to form an Authorized States of ID, OR, MT and WA to form an “interstate compact” (aka, “The Council”)“interstate compact” (aka, “The Council”)

Directed the Council to develop 20-year load forecast and Directed the Council to develop 20-year load forecast and resource plan (“The Plan”) and update it every 5 – yearsresource plan (“The Plan”) and update it every 5 – years

– ““The Plan” shall call for the development of the The Plan” shall call for the development of the least costleast cost mix of resourcesmix of resources

– ““The Plan” shall considerThe Plan” shall consider conservation (energy efficiency) conservation (energy efficiency) its highest priority resourceits highest priority resource equivalent to generation with a equivalent to generation with a 10% cost advantage over power generating resources10% cost advantage over power generating resources

Mandated Mandated public involvementpublic involvement in Council’s planning process. in Council’s planning process.

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Slide 6

How Has It Worked?How Has It Worked?

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Slide 7

Utility Reaction to Council’s First Utility Reaction to Council’s First Plan Was “Mixed”Plan Was “Mixed”

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Slide 8

Three Decades of Utility Conservation Three Decades of Utility Conservation AcquisitionsAcquisitions

(aka “Mr. Toad’s Wild Ride”* for the PNW’s Energy Efficiency Industry)(aka “Mr. Toad’s Wild Ride”* for the PNW’s Energy Efficiency Industry)

0

50

100

150

200

250

1978 1982 1986 1990 1994 1998 2002 2006

Conse

rvati

on A

cquis

itio

ns

(aM

W)

See: http://en.wikipedia.org/wiki/Mr._Toad's_Wild_Ride

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Slide 9

NeverthelessNevertheless Since the Late 70’s Since the Late 70’s

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Avera

ge M

egaw

att

s

1978 1982 1986 1990 1994 1998 2002 2006

BPA and Utility Programs Alliance Programs State Codes Federal Standards

Since 1978 Utility & BPA Since 1978 Utility & BPA Programs, Energy Codes & Programs, Energy Codes & Federal Efficiency Standards Have Federal Efficiency Standards Have Produced Produced Almost Almost 3600 aMW of 3600 aMW of Savings.Savings.

We’ve Accomplished “Mass Quantities”We’ve Accomplished “Mass Quantities”

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Slide 10

So What’s 3600 aMW?So What’s 3600 aMW?

It’s enough electricity to serve more It’s enough electricity to serve more than the than the entireentire state of Idahostate of Idaho and and all all of Western Montanaof Western Montana

It saved the region’s consumers nearly It saved the region’s consumers nearly than than $1.6 billion$1.6 billion in 2007 in 2007

It lowered 2007 PNW carbon emissions It lowered 2007 PNW carbon emissions by an estimated by an estimated 14.1 million14.1 million tons. tons.

Energy Efficiency Is The Region’s Energy Efficiency Is The Region’s Third Largest ResourceThird Largest Resource

Energy Efficiency12%

Hydro55%

Coal18%

Biomass1%

Wind1%

Nuclear4%

Natural Gas9%

Petroleum & Pet Coke0%

We’ve Saved The Equivalent to Almost Two Grand Coulee Dams

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Slide 12

So How Did We Make “The Case” ?So How Did We Make “The Case” ?

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Slide 13

Two MethodsTwo Methods

Integrated Resource Planning (IRP)Integrated Resource Planning (IRP)– Systematic evaluation of the least Systematic evaluation of the least

cost/least risk portfolio of resource choices cost/least risk portfolio of resource choices where energy efficiency is treated where energy efficiency is treated equivalent to generating resourcesequivalent to generating resources

Energy Efficiency Resource Portfolio Energy Efficiency Resource Portfolio StandardsStandards– Mandated minimum share of energy Mandated minimum share of energy

efficiency resourcesefficiency resources

IRP Portfolio Analysis Determines How Much Energy IRP Portfolio Analysis Determines How Much Energy Efficiency to Develop in the Face of UncertaintyEfficiency to Develop in the Face of Uncertainty

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Annual Load Growth

Pro

bab

ilit

y (

%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 1% 2% 3% 4% 5%

Real Natural Gas Escalation Rate% )

Pro

bab

ilit

y (

%)

0%

5%

10%

15%

20%

25%

30%

3.27% 3.80% 3.85% 3.93% 2.50%

Nominal Annual Electricity Price Escalation Rate

Pro

bab

ilit

y (

%)

0

20

40

60

80

100

120

98

467

705

842

1,06

9

1,19

1

1,28

3

1,33

5

1,35

3

1,37

3

1,65

0

Resource Potential

Levelize

d C

ost

0%2%4%6%8%

10%12%14%16%18%20%

Carbon Tax Implementation Date

Pro

bab

ilty

(%

)

0

5000

10000

15000

20000

25000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975

Hydrosytem Year

Cap

acit

y (

MW

)

0%2%4%6%8%

10%12%14%16%18%20%

Pro

bab

ilit

y

$0 $6 $12 $18 $24 $30 $36

Carbon Tax

Frequency Chart

Dollars

Mean = $689.000

.011

.022

.032

.043

0

10.75

21.5

32.25

43

($3,509) ($1,131) $1,247 $3,625 $6,003

1,000 Trials 1,000 Displayed

Portfolio Portfolio Analysis Analysis ModelModel

$35,500

$36,000

$36,500

$37,000

$37,500

$23,500 $24,000 $24,500 $25,000

NPV System Risk (2004$Millions)

NPV

Syst

em

Cost

(2

00

4$

Mill

ion

s)

Efficient FrontierEfficient Frontier

NPV System Cost

Portfolio Analysis on Portfolio Analysis on OneOne Slide Slide

$0

$50

$100

$150

$200

$250

$300

$350

$400

0 2000 4000 6000 8000 10000 12000 14000 16000

MWa

20

06

$/M

Wh

Coal ConservationGasRenewablesNuclear

Generic coal, gas and nuclear units are shown at typical project sizes - more units could be built at comparable cost.

So How Do You Know You Did That?So How Do You Know You Did That?

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Slide 17

The PNW’s Approach To “Standardization” of Savings The PNW’s Approach To “Standardization” of Savings Measurement & VerificationMeasurement & Verification

(We’re Not California)(We’re Not California)

Established An Ongoing Centralized Established An Ongoing Centralized Process for Technical ReviewProcess for Technical Review– Carried out by Carried out by Regional Technical Forum (RTF)Regional Technical Forum (RTF)– RTF composed of utility and non-utility RTF composed of utility and non-utility

engineering and economic experts, staffed by engineering and economic experts, staffed by CouncilCouncil

– Funded by Bonneville Power Administration, Funded by Bonneville Power Administration, utilities and system benefits administratorsutilities and system benefits administrators

Public processPublic process RTF builds on historical program RTF builds on historical program

experience and ongoing evaluations of experience and ongoing evaluations of regional acquisition programsregional acquisition programs

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Slide 18

RTF’s Major FunctionsRTF’s Major Functions Establish a Standardized Regional Cost-Establish a Standardized Regional Cost-

Effectiveness MethodologyEffectiveness Methodology

– Public domain software for evaluating cost-effectivenessPublic domain software for evaluating cost-effectiveness

Recommend Measurement and Verification Recommend Measurement and Verification ProtocolsProtocols– Use IPMVP, ASHRAE, FEMP, Use IPMVP, ASHRAE, FEMP, NAPEE NAPEE Model Energy Efficiency Model Energy Efficiency

Program Impact Evaluation GuideProgram Impact Evaluation Guide– Develop “tailored” M&V Protocols for custom, but “recurring” projects Develop “tailored” M&V Protocols for custom, but “recurring” projects

(e.g. grocery store refrigerated case retrofits)(e.g. grocery store refrigerated case retrofits) Develop and Maintain Internet-based System for Develop and Maintain Internet-based System for

Tracking and Reporting Regional Energy Tracking and Reporting Regional Energy Efficiency Savings and ExpendituresEfficiency Savings and Expenditures– Deemed savings (with minimum technical specifications & Q/C criteria)Deemed savings (with minimum technical specifications & Q/C criteria)– EM&V protocolsEM&V protocols– Default inputs for cost-effectiveness evaluations (e.g., forecast of future Default inputs for cost-effectiveness evaluations (e.g., forecast of future

energy prices, cost of deferrable distribution and transmission, value non-energy prices, cost of deferrable distribution and transmission, value non-energy benefits such as water savings, etc.)energy benefits such as water savings, etc.)

– Forecast CO2 content/kWh saved (based on load shape of savings)Forecast CO2 content/kWh saved (based on load shape of savings)

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Slide 19

RTF’s Major FunctionsRTF’s Major Functions

Process for updating deemed Process for updating deemed savingssavings as technology and standard as technology and standard practices changepractices change..

Appeals processAppeals process– Utilities or other parties, including vendors, can Utilities or other parties, including vendors, can

demonstrate that different savings and value demonstrate that different savings and value estimates should applyestimates should apply

Collaborative Development of EM&V Collaborative Development of EM&V protocols for programs operated protocols for programs operated across multiple utility service areasacross multiple utility service areas

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Slide 20

Measure Screening Measure Screening ProcessProcess

All All Possible Possible MeasuresMeasures

ScreeningScreeningCriteria &Criteria &

Cost-Cost-EffectivenessEffectiveness

AnalysisAnalysis

““Deemed” Deemed” Savings and Savings and


““Deemed Deemed Calculated” Calculated” Savings and Savings and


““Custom Project” Custom Project” Valuation, Valuation,

Measurement and Measurement and Verification Verification ProtocolsProtocols

Online Online Planning, Planning, Tracking Tracking & & Reporting Reporting System System Data BaseData Base

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Slide 21

Online Planning, Tracking and Online Planning, Tracking and Reporting SystemReporting System

Designed to assist utilities and Designed to assist utilities and contractors:contractors:– Identify potential energy efficiency Identify potential energy efficiency

measures and programs eligible for utility measures and programs eligible for utility and/or SBC administrator programs.and/or SBC administrator programs.

– Track progressTrack progress toward savings goals toward savings goals using standardized values and protocolsusing standardized values and protocols

– ReportReport energy efficiency activity status to energy efficiency activity status to utility/SBC administrator management and utility/SBC administrator management and regulatorsregulators

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Slide 22

Major Components of the PNW Major Components of the PNW Online SystemOnline System

Two-Way SystemTwo-Way System– Users Users downloaddownload deemed savings, deemed savings,

calculators & protocols/custom project calculators & protocols/custom project reportsreports

– Users Users uploadupload results results Business RulesBusiness Rules

– Reporting periodsReporting periods– Verification requirementsVerification requirements

Software PlatformSoftware Platform

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Slide 23

So So What’s What’s Next?Next?

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Slide 24

Energy Efficiency is Still the Cheapest OptionEnergy Efficiency is Still the Cheapest Option

Assumptions :

Efficiency Cost = Average Cost of All Conservation in Draft 6th Power Plan Under $100 MWh

Transmission cost & losses to point of LSE wholesale delivery

2020 service - no federal investment or production tax credits

Baseload operation (CC - 85%CF, Nuclear 87.5% CF, SCPC 85%)

Medium NG and coal price forecast (6th Plan draft)

6th Plan draft mean value CO2 cost (escalating, $8 in 2012 to $47 in 2029).

$0

$50

$100

$150

$200

$250

$300

Energ

y Effic

iency

Geothe

rmal

Combin

ed C

ycle

Col. B

asin

Wind

AB Wind

Advan

ced N

uclea

r

Super

critic

al Coa

l (No C

SS)

IGCC (N

o CSS)

Recipr

ocat

ing E

ngine

Woo

d Res

idue

(No C

HP)

MT

Wind

WY W

ind

CSP Par

aboli

c Tro

ugh

Utility

Photo

volta

ic

Leve

lized

Life

cycl

e C

ost

(200

6$/M

Wh)

Emission (CO2) costTransmission & Losses

System IntegrationPlant costs

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Slide 25

There’s Still “Mass Quantities” To There’s Still “Mass Quantities” To DoDo

6th Plan Technically Achievable Conservation Potential by Sector6th Plan Technically Achievable Conservation Potential by Sector

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

< 0

<20

<40

<60

<80

<10

0

<12

0

<14

0

<16

0

<18

0

<20

0

Real Levelized Cost (2006$/MWh)

Tech

nic

alll

y A

chie

vable

Pote

nti

al (M

Wa) Utility Distribution

AgricultureIndustrialCommercialConsumer ElectronicsResidential

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Slide 26

Draft 6Draft 6thth Plan Calls for A Doubling of Plan Calls for A Doubling of Annual Energy Efficiency Savings the Annual Energy Efficiency Savings the

Over Next DecadeOver Next Decade

0

50

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400

2005 2010 2015 2020

Annual S

avi

ngs

(MW

a)

Plan Goals

Historical Savings

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Slide 27

Draft 6Draft 6thth Plan Goal: Plan Goal: Meet 85% of Load Growth with Meet 85% of Load Growth with

ConservationConservation

0

1000

2000

3000

4000

5000

6000

7000

2010 2015 2020 2025

Ave

rage M

egaw

att

s

Residual Load Growth - Medium Forecast

Cumulative Savings

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Slide 28

Impact on Regional Impact on Regional “Revenue Requirement”“Revenue Requirement”

$0

$100

$200

$300

$400

$500

$600

$700

2010 2011 2012 2013 2014

Regio

nal R

eve

nue R

equir

em

ent

(Mill

ion 2

006$)

Cumulative Conservation Cost/Expenses

Cumulative Cost of Equivalent Market Purchases

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Slide 29

Estimated Cumulative Impact on Regional Estimated Cumulative Impact on Regional “Revenue Requirement” to Achieve “Revenue Requirement” to Achieve

Proposed Conservation TargetsProposed Conservation Targets

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2010 2011 2012 2013 2014

Year

Cum

mula

tive

Change

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Slide 30

Impact of The PlanImpact of The Plan Meet Nearly All of Load Growth Over the Next 20 YearsMeet Nearly All of Load Growth Over the Next 20 Years With With

Energy Efficiency at an Average Cost of Less Than $40 MWHEnergy Efficiency at an Average Cost of Less Than $40 MWH

This Will Require Sustained and A Much Larger (2x-3x) This Will Require Sustained and A Much Larger (2x-3x) Investment In Cost-Effective Energy EfficiencyInvestment In Cost-Effective Energy Efficiency

Over the first five-years it will Over the first five-years it will reduce reduce regional revenue regional revenue requirements by 1% - 1.5% as a result of reduced power requirements by 1% - 1.5% as a result of reduced power market purchasesmarket purchases

Accomplishing the “Almost” Draft 6Accomplishing the “Almost” Draft 6thth Plan’s Conservation Goals Plan’s Conservation Goals Will “Will “Stretch”Stretch” the Columbia River the Columbia River

» In five years we’ll build the equivalent of another Chief In five years we’ll build the equivalent of another Chief Joseph dam,Joseph dam,

» In 12 years, we’ll build the equivalent of Chief Joseph, In 12 years, we’ll build the equivalent of Chief Joseph, plus Grand Coulee damsplus Grand Coulee dams

» In 20 years, we will have added the equivalent of 50% to In 20 years, we will have added the equivalent of 50% to the “output” of all hydroelectric resources in the PNWthe “output” of all hydroelectric resources in the PNW

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Slide 31

Carbon Emissions From the Northwest Carbon Emissions From the Northwest Power System Will Be Below 1990 LevelsPower System Will Be Below 1990 Levels

0

10

20

30

40

50

60

70

Mill

ion

To

ns

CO

2 P

er

Ye

ar

1990 Level: 44 Million Tons

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Slide 32

Conservation – Cheap, But Worth It?Conservation – Cheap, But Worth It?

Any Any Questions?Questions?

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Northwest Power and Conservation Council Slide 1 Energy Efficiency As A Resource Option Three...

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