northwest power and conservation council energy efficiency as a resource option 25 years of pnw...
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Northwest Power and ConservationCouncil
Energy Efficiency As A Energy Efficiency As A Resource OptionResource Option
25 Years of PNW Experience25 Years of PNW Experience
E-Source Members ForumSeptember 25, 2007
Tom EckmanTom EckmanNorthwest Power and Northwest Power and Conservation CouncilConservation Council
slide 2
Northwest Power and ConservationCouncil
What You’re About To HearWhat You’re About To Hear
What We’ve DoneWhat We’ve Done
– 25 years of using energy efficiency as a resource25 years of using energy efficiency as a resource
What’s Left to Do?What’s Left to Do?
– How to assess the remaining sources of How to assess the remaining sources of untapped potentialuntapped potential
Why It’s Worth DoingWhy It’s Worth Doing
– What it takes to make the What it takes to make the business casebusiness case for utility reliance on for utility reliance on
energy efficiency as a resourceenergy efficiency as a resource
slide 3
Northwest Power and ConservationCouncil
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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Northwest Power and ConservationCouncil
““PNW Power Act”PNW Power Act”
Federally Mandated “least cost Federally Mandated “least cost planning”planning”
Longest Running “Integrated Longest Running “Integrated Resource Plan” in the CountryResource Plan” in the Country
Planner’s Worst Nightmare: Our Planner’s Worst Nightmare: Our first plan can now be compared to first plan can now be compared to what really happened!what really happened!
slide 5
Northwest Power and ConservationCouncil
PNW Energy Efficiency PNW Energy Efficiency AchievementsAchievements1980 – 20051980 – 2005
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Avera
ge M
egaw
att
s
1980 1984 1988 1992 1996 2000 2004
BPA and Utility Programs Alliance Programs State Codes Federal Standards
Since 1980 Utility & BPA Since 1980 Utility & BPA Programs, Energy Codes & Programs, Energy Codes & Federal Efficiency Standards Have Federal Efficiency Standards Have Produced Produced OverOver 3100 aMW of 3100 aMW of Savings.Savings.How Has It Worked?How Has It Worked?
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Northwest Power and ConservationCouncil
Energy Efficiency Resources Met Half of Energy Efficiency Resources Met Half of
PNW 1980 – 2005 Load GrowthPNW 1980 – 2005 Load Growth
0%
25%
50%
75%
100%
125%
1980 1985 1990 1995 2000 2005
Cum
ula
tive S
har
e o
f G
row
th
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Northwest Power and ConservationCouncil
Since 1980 PNW Electric Use Per Since 1980 PNW Electric Use Per Capita Has Remain Unchanged*Capita Has Remain Unchanged*
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Year
Ele
ctri
city
Use
(kW
h/p
erso
n)
*Post 2000-2001 Energy Crisis Demand Destruction – Some Industries “went dark”
slide 8
Northwest Power and ConservationCouncil
Utilities Are Now Acquiring More Efficiency Resources Utilities Are Now Acquiring More Efficiency Resources Using A Smaller Share of Retail RevenuesUsing A Smaller Share of Retail Revenues
0%
1%
2%
3%
4%
5%
6%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Perc
ent
of
Tota
l R
egio
nal Ele
ctri
city
Revenues
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Northwest Power and ConservationCouncil
The Cost of Efficiency Has Fallen to Less The Cost of Efficiency Has Fallen to Less Than $15 Per MWHThan $15 Per MWH
0
5
10
15
20
25
30
35
40
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Real Le
veliz
ed C
ost
(2000$/M
WH
)
slide 10
Northwest Power and ConservationCouncil
Utility Acquired Energy Efficiency Has Been AUtility Acquired Energy Efficiency Has Been A
BARGAIN!BARGAIN!
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
May
-96
Nov-9
6
May
-97
Nov-9
7
May
-98
Nov-9
8
May
-99
Nov-9
9
May
-00
Nov-0
0
May
-01
Nov-0
1
May
-02
Nov-0
2
May
-03
Nov-0
3
May
-04
Nov-0
4
May
-05
Nov-0
5
May
-06
Whole
sale
Ele
ctri
city
Pri
ce (
2000$/M
WH
)
Levelized Cost of Utility Efficiency AcquisitionsWholesale Market Price
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Northwest Power and ConservationCouncil
So What’s 3100 aMW?So What’s 3100 aMW?
It’s enough electricity to serve the It’s enough electricity to serve the entireentire state of Idaho and Western Montanastate of Idaho and Western Montana
It saved PNW consumers nearly It saved PNW consumers nearly $1.6 $1.6 billionbillion in 2005 in 2005
It lowered 2005 PNW carbon emissions It lowered 2005 PNW carbon emissions by an estimated by an estimated 13.5 million13.5 million tons. tons.
slide 12
Northwest Power and ConservationCouncil
IS THAT AS GOOD AS IT GETSIS THAT AS GOOD AS IT GETS?
What’s Left To Do?What’s Left To Do?
- OR -- OR -
slide 13
Northwest Power and ConservationCouncil
55thth Plan Relies on Conservation and Plan Relies on Conservation and
Renewable Resources to Meet Load GrowthRenewable Resources to Meet Load Growth**
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2004 2007 2010 2013 2016 2019 2022
Cum
ula
tive C
apaci
ty (
aM
W)*
Coal (ICG)CCGTurbineSCGTurbineDemand ResponseWindConservation
**Actual future conditions (gas prices, CO2 control, conservation accomplishments) will Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedule and amountschange resource development schedule and amounts
Northwest Power and ConservationCouncil
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PNW Efficiency Potential
slide 15
Northwest Power and ConservationCouncil
Search Results:Search Results:Cost-Effective Savings by SectorCost-Effective Savings by Sector
Industrial 350 aMW
12%
Irrigation 80 aMW
3%
Commercial 1105 aMW
39%
Residential 1340 aMW
46%
slide 16
Northwest Power and ConservationCouncil
Search Results:Search Results:Major Sources of Cost-Effective Efficiency PotentialMajor Sources of Cost-Effective Efficiency Potential
1.7 1.7
1.2
4.3
1.5
3
5.2
3.4
1.8
3.4
2.2
0
100
200
300
400
500
600
700
Res. C
FLs
I ndu
stria
l
New C
om. L
ight
ing
HP W
ater
Hea
ters
AC/DC C
onve
rter
s
New C
om. H
VAC
Res. C
loth
es W
asher
s
Exist
. Com
. HVAC
Exist
. Com
. Lig
htin
g
Exist
. Com
. Equ
ipm
ent
Exist
.Com
. Inf
rast
ruct
ure
Ach
ieveab
le P
ote
nti
al (M
Wa)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Avera
ge L
evelized
Cost
(Cen
ts/kW
h)
How Do We Know How Much is Left To Do?How Do We Know How Much is Left To Do?
slide 18
Northwest Power and ConservationCouncil
It’s It’s OnlyOnly a Six Step Process a Six Step Process
Step 1 - Estimate Step 1 - Estimate TechnicalTechnical Potential Potential on a on a per applicationper application basisbasis
Step 2Step 2 – – Estimate Estimate EconomicEconomic Potential Potential on a on a per applicationper application basisbasis
Step 3Step 3 - Estimate number of- Estimate number of applicable unitsapplicable units Step 4Step 4 – – EstimateEstimate Technical PotentialTechnical Potential for for all all applicable applicable
unitsunits Step 5 - EstimateStep 5 - Estimate Economic PotentialEconomic Potential for for all all applicable unitsapplicable units Step 6Step 6 – Estimate – Estimate Realizable PotentialRealizable Potential for for all realistically all realistically
achievableachievable units units
slide 19
Northwest Power and ConservationCouncil
Before You Start –Before You Start –Decide On A Cost-Effectiveness MetricDecide On A Cost-Effectiveness Metric
Participant Cost Test (PTC)Participant Cost Test (PTC)– Costs and benefits to the program participantCosts and benefits to the program participant
Total Resource Cost (TRC)Total Resource Cost (TRC)– All Quantifiable costs & benefits regardless of who All Quantifiable costs & benefits regardless of who
accrues them. Includes participant and others’ costsaccrues them. Includes participant and others’ costs Utility Cost Test (UTC)Utility Cost Test (UTC)
– Quantifiable costs & benefits that accrue only to the Quantifiable costs & benefits that accrue only to the utility system. Specifically excludes participant costsutility system. Specifically excludes participant costs
Rate Impact Measure (RIM)Rate Impact Measure (RIM)– Net change in electricity utility revenue requirements.Net change in electricity utility revenue requirements.
» AttemptsAttempts to measure rate impact on all utility customers especially to measure rate impact on all utility customers especially those that do not directly participate in the conservation programthose that do not directly participate in the conservation program
» Treats “lost revenues” (lower participant bills) as a costTreats “lost revenues” (lower participant bills) as a cost
slide 20
Northwest Power and ConservationCouncil
The Basic FormulaThe Basic Formula
Achievable PotentialAchievable Potential = = Number of Applicable Units X Number of Applicable Units X (Energy Use @ Frozen Efficiency - Energy Use @ Cost (Energy Use @ Frozen Efficiency - Energy Use @ Cost Effectiveness Limit) X Expected Market PenetrationEffectiveness Limit) X Expected Market Penetration
Where :Where :Frozen Efficiency UseFrozen Efficiency Use = = Current efficiency adjusted for stock Current efficiency adjusted for stock turnover and adopted changes in codes and standards.turnover and adopted changes in codes and standards.
Cost Effectiveness LimitCost Effectiveness Limit = = Cost of next similarly available Cost of next similarly available and reliable generating resource (represented by future and reliable generating resource (represented by future wholesale market prices) adjusted for T&D cost deferrals, wholesale market prices) adjusted for T&D cost deferrals, environmental costs & risks (fuel price, carbon control, etc.)environmental costs & risks (fuel price, carbon control, etc.)
slide 21
Northwest Power and ConservationCouncil
Implementing the Basic Formula Requires REAL DATA Implementing the Basic Formula Requires REAL DATA and Detailed Analytical Processes (=$$ & Staff)and Detailed Analytical Processes (=$$ & Staff)
(It Ain’t A Weekend Project)(It Ain’t A Weekend Project)
Measure Cost
Measure Savings and Load Shape
MeasureLifetime
• Program Data• Contractor Bids• Retail Price Surveys
• End Use Load Research• Engineering Models• Billing History Analysis• Independent Testing Labs
• Evaluations• Census Data• Manufacturers Data• Engineering Estimates
AuroraMarketModel
Provides 20-year Forecast of Hourly Wholesale Market Prices & CO2 Emission/kWh Under Average Water Conditions, Medium Gas Price Forecast for Medium Load Growth Scenario
Cost-Effectiveness ModelDetermines measure and program level “cost-effectiveness” using:• Measure costs, savings & load shape• Aurora Market prices•T&D savings (losses & deferred $)•10% Act Credit•Quantifiable non-energy costs & benefits•Council Financial Assumptions (e.g. Discount Rate, Administrative costs, etc.)
PortfolioPortfolioModelModel
Determines NPV of Portfolios with Determines NPV of Portfolios with Alternative Levels of Conservation Alternative Levels of Conservation vs. Other Resources Under Wide vs. Other Resources Under Wide Range for Future ConditionsRange for Future Conditions
Plan’s Conservation TargetPlan’s Conservation Target
$35,500
$36,000
$36,500
$37,000
$37,500
$23,500 $24,000 $24,500 $25,000
NPV System Risk (2004$Millions)
NP
V S
yst
em
Co
st
(20
04
$M
illio
ns)
slide 22
Northwest Power and ConservationCouncil
Each End Use Has a Different Each End Use Has a Different “Cost-Effectiveness” Limit“Cost-Effectiveness” Limit
0
2
4
6
8
10
12
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN
Mo
nth
ly A
ve
rag
e M
ark
et
Pri
ce
(C
en
ts/k
Wh
)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Sh
are
of
An
nu
al S
av
ing
s
Wholesale Market Price Space Heating Savings Water Heating Savings
Weighted Average Value of Space Heating Savings = 3.1 cents/kWh
Weighted Average Value of Water Heating Savings = 3.7 cents/kWh
Steps 1 & 2Steps 1 & 2 Assessment of “Unit Level” Technical and Economic Potential Assessment of “Unit Level” Technical and Economic Potential
Example: Residential Space Heating for New Manufactured HomesExample: Residential Space Heating for New Manufactured Homes
0
20
40
60
80
100
120
FLOO
R R33
ATTI C
R25
VAULT R
25
ATTIC
R30
VAULT R
30
WIN
DOW
CL4
0
WIN
DOW
CL3
5
WALL
R21
ADV
ATTIC
R38
VAULT R
38
ATTI C
R49
FLOO
R R44
Real
Leveli
zed
Co
st
( M
ills
/kW
h)
Zone 1 Zone 2Zone 3
Cost-Effectiveness Limit for Residential Space Heating
slide 24
Northwest Power and ConservationCouncil
Steps 3 - Estimate of the Number of Applicable UnitsSteps 3 - Estimate of the Number of Applicable Units
Example: New Manufactured HousingExample: New Manufactured Housing
Number of New Electrically Heated Units Sited in PNW by Number of New Electrically Heated Units Sited in PNW by 20252025 = 186,000 (Forecast model estimate)= 186,000 (Forecast model estimate)
Location Location (Based on 2001 sales data)(Based on 2001 sales data)– Heating Zone 1 = 64 %Heating Zone 1 = 64 %– Heating Zone 2 = 27 %Heating Zone 2 = 27 %– Heating Zone 3 = 9 %Heating Zone 3 = 9 %
Frozen Efficiency UseFrozen Efficiency Use @ 2000 “Current Practice” = 9385 @ 2000 “Current Practice” = 9385 kWh/year (Characteristics based on survey data from kWh/year (Characteristics based on survey data from manufacturers & use based on simulation model calibrated to end manufacturers & use based on simulation model calibrated to end use metering)use metering)
Technically AchievableTechnically Achievable unit savings = 3450 kWh/year unit savings = 3450 kWh/year Economically Achievable (i.e.,Cost-Effective)Economically Achievable (i.e.,Cost-Effective) unit unit savings = savings =
3100 kWh/year3100 kWh/year
slide 25
Northwest Power and ConservationCouncil
Steps 4-6 Steps 4-6 Derive the Technical, Economical Derive the Technical, Economical
and Realistically Achievable and Realistically Achievable PotentialPotential
TechnicallyTechnically Achievable Potential Achievable Potential = = 3450 kWh/year X 1.07625 line loss 3450 kWh/year X 1.07625 line loss adjustmentadjustment
X 186,000 units => 80 MWX 186,000 units => 80 MW
EconomicallyEconomically Achievable Potential Achievable Potential = =3100 kWh/yr X 1.07625 line loss adjustment3100 kWh/yr X 1.07625 line loss adjustment
X 186,000 units => 70 MWX 186,000 units => 70 MW
RealisticallyRealistically Achievable Potential Achievable Potential = =70 MW X 85 % => 60 MW70 MW X 85 % => 60 MW
Who Made Up “That Number”?
slide 26
Northwest Power and ConservationCouncil
Illustrative New Manufactured Illustrative New Manufactured Housing Space Heating Resource Housing Space Heating Resource
Potential in 2025Potential in 2025
0
20
40
60
80
100
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110
Real Levelized Cost (2000$/MWh)
Reso
urc
e P
ote
nti
al (a
MW
)
Technical Potential
Economic Potential
Realizable Potential
slide 27
Northwest Power and ConservationCouncil
Realizable PotentialRealizable Potential - The amount of conservation you - The amount of conservation you acquire acquire will bewill be constrained by “budgets and infrastructure” – constrained by “budgets and infrastructure” –
NOT by cost-effectivenessNOT by cost-effectiveness
0%
10%
20%30%
40%
50%
60%
70%80%
90%
100%
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
Cum
ula
tive
Mark
et
Penetr
ati
on
Const
rain
ts
Non Lost Opportunity Resources Lost Opportunity Total
slide 28
Northwest Power and ConservationCouncil
Retrofit Resources and Lost-Opportunity Retrofit Resources and Lost-Opportunity Resources Will Be Deployed At A Different PaceResources Will Be Deployed At A Different Pace
0
20
40
60
80
100
120
140
2005 2010 2015 2020
Year
Reso
urc
e D
eplo
ym
en
t (a
MW
)
PNW Portfolio Planning – PNW Portfolio Planning – Scenario Analysis on SteroidsScenario Analysis on Steroids
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
Portfolio Portfolio Analysis Analysis ModelModel
Portfolio Model Calculates Risk and Portfolio Model Calculates Risk and Expected Cost Associated With Each Expected Cost Associated With Each
Plan Across 750 “Futures”Plan Across 750 “Futures”
Like
lihood
(Pro
bab
ility
) Average Net Present Value System Cost
10000 12500 15000 17500 20000 22500 25000 27500 30000 32500
Net Present Value of Power System Cost (millions)
Risk = average ofcosts> 90% threshold
slide 31
Northwest Power and ConservationCouncil
Plans Along the Efficient Frontier Permit Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against RiskTrade-Offs of Costs Against Risk
$35,500
$36,000
$36,500
$37,000
$37,500
$23,600 $23,800 $24,000 $24,200 $24,400 $24,600NPV System Cost (Millions)
NPV
Syst
em
Ris
k (
Mill
ion
s)
Least Risk
Least Cost
slide 32
Northwest Power and ConservationCouncil
All Plans Along the “Efficient Frontier” All Plans Along the “Efficient Frontier” Acquire Virtually the Same Amount of Acquire Virtually the Same Amount of
Energy EfficiencyEnergy Efficiency
2,250
2,350
2,450
2,550
2,650
2,750
0 20 40 60 80 100 120
Efficient Frontier Portfolio
Effi
cien
cy R
eso
urc
e A
ddit
ion
s (a
MW
)
Least Cost Portfolios
Least Risk Portfolios
Portfolio Analysis On Portfolio Analysis On OneOne Slide Slide
0
2
4
6
8
10
12
245 514 1598 2202 2560 3444 4934 6735 8945
Cumulative Resource Potential (Average Megawatts)
Real Le
veliz
ed C
ost
(C
ents
/kW
h -
2000$)
Energy Efficiency
Renewable
Coal
Gas
Co-generation
Resource potential for generic coal, gas & wind resources shown for typical unit size. Additional potential is available at comparable costs.
slide 34
Northwest Power and ConservationCouncil
SummarySummary Energy Efficiency Reduces NPV System Cost and Energy Efficiency Reduces NPV System Cost and
Risk Risk – Efficiency Resources Efficiency Resources AreAre A Cheap (avg. 2.4 cents/kWh) A Cheap (avg. 2.4 cents/kWh)
Hedge Against Market Price Spikes Hedge Against Market Price Spikes – They’re They’re NotNot Subject to Fuel Price Risk Subject to Fuel Price Risk– They’re They’re NotNot Subject to Carbon Control Risk Subject to Carbon Control Risk– They They Can BeCan Be Significant Enough In Size to delay “build Significant Enough In Size to delay “build
decisions” on more expensive and higher risk generationdecisions” on more expensive and higher risk generation
It takes REAL MONEY and ANALYSIS to properly It takes REAL MONEY and ANALYSIS to properly size and acquire efficiency resourcessize and acquire efficiency resources– We invested about $14 per capita in 2005 acquiring We invested about $14 per capita in 2005 acquiring
efficiency, VT and CA and several other states are spending efficiency, VT and CA and several other states are spending moremore
In a region with In a region with historically the historically the lowest electric rates, lowest electric rates, we’ve relied on we’ve relied on efficiency to meet efficiency to meet half our load growth half our load growth for 2 ½ decadesfor 2 ½ decades
And, we still find that And, we still find that efficiency can meet efficiency can meet half our load growth half our load growth over the next two over the next two decadesdecades
IF WE CAN DO IT, YOU CANIF WE CAN DO IT, YOU CAN
slide 36
Northwest Power and ConservationCouncil
Any Questions?Any Questions?