opportunities for natural gas efficiency in pennsylvania presented to keystone energy efficiency...
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Opportunities for Natural Gas Efficiency in Pennsylvania
Presented to Keystone Energy Efficiency Alliance
September 20, 2011
Steven Nadel
American Council for an Energy-Efficient Economy
2010 State Energy Efficiency Scorecard
Pennsylvania 2010 Scorecard Results
•Earned 24 points out of possible 50•Ranks 16th
•Average to above average scores for Combined Heat & Power (CHP), building energy codes, transportation policies, and state facilities & fleets
•Average score for utility-sector programs: ranks 28th in the nation (low efficiency program spending and savings, no actions to address utility incentives/disincentives)
Note: Ramping in of Act 129 will likely improve PA’s utility score in future Scorecards
ACEEE 2009 Study on Cost-Effective Resource Potential in Pennsylvania by 2025
Residential81%
Commercial19%
Residential52%
Industrial21%
Commercial27%
Residential32%
Combined Heat & Power
18%
Industrial21%
Commercial29%
Electricity: 33% Natural Gas: 27% Fuel Oil: 29%
Energy Efficiency Resource Potential: Residential Natural Gas
(84,000 MMBtu Gallons or 36% savings potential in 2025)
Space Heating, 47,539 MMBtu, 63%
Water Heating, 16,843 MMBtu, 22%
Cooking, 915 MMBtu, 1.2%
New Homes, 8,773 MMBtu, 12%
Impact of Efficiency Policies on Natural Gas Needs in Pennsylvania
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Nat
ura
l G
as C
on
sum
pti
on
(B
Btu
)
State and Local Facilities
Building Energy Codes
Utility Efficiency Programs
Federal Appliance Standards
Adjusted Reference Case
Projected Nat. Gas Consumption
Policy Scenario
15%
Economic and Environmental Impacts of EE Investment in Pennsylvania
Net Macroeconomic Impacts
2020 2025
Net Jobs (Actual) 14,500 27,200
Wages ($2006) $440 $1.1 Billion
GSP ($2006) $1 Billion $2.6 Billion
Reduce CO2 emissions ~45 million tons in 2025
Implementation of Electric Savings Targets (EERS) in 2010
• Thirteen of the twenty states with EERS policies in place for over two years are achieving 100% or more of their goals as of 2010
• Only three states are realizing savings below 80% of their goals but all 3 are still ramping up
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
State
Per
cen
t S
avin
gs
Co
mp
ared
to
Ret
ail
Sal
es
Annual % Goal
% Achieved
*Reference year for savings is 2009
Energy Efficiency Resource Standards – Natural Gas
12 States have natural gas EERS policies in place
Standard
Pending Standard
Minnesota
Year IOU Natural Gas Savings (MCF)
Savings as % of Average Sales
2006 N/A N/A
2007 N/A N/A
2008 1,534,121 0.54%
2009 1,777,369 0.63%
EERS: 0.75% annual savings from 2010-2012; 1.5% annual savings in 2013
Massachusetts
Year Savings Target as Percent of
Sales
Savings Goal
(Therms)
Natural Gas Savings
Achieved (Therms)
Percent of Target Achieved
2010 0.63% 13,586,666 13,926,865 103%
2011 0.89% 19,087,301
2012 1.15% 24,687,219
2010-2012 2.67% 56,368,432
State law requires the natural gas distribution utilities to procure all cost-effective efficiency resources through a 3-year Efficiency Procurement Plan and requires full funding of the Plan.
Vermont Gas
•Saved 82,151 McF in 2010; ~1% sales
•Will result in 1,467,673 Lifetime McF
Iowa
2004 2005 2006 2007
0.63% 0.83% 0.89% 0.68%
Iowa IOU Natural Gas Savings 2004-2007
• Statewide data for 2008-2009 unavailable. In 2010, all IOUs hit savings targets ~1%.
• Annual goals by 2013 vary by utility: 0.74% (Muni’s); 0.85% (MidAmerican); 0.94% (Black Hills) 1.2% (IPL)
Consider EE from a Utility Perspective
Need to make the business case:
1. Cost recovery
2. Address lost revenues needed to cover fixed costs
3. Some form of return on investment
Decoupling
• Rates are designed to recover fixed and variable costs
• Decoupling adjusts rates up or down so that authorized fixed costs are fully recovered.• Reduces over-recovery due to increases in
sales• Reduces under-recovery from reduced sales
such as due to a recession, warm weather or energy efficiency programs
Natural Gas Decoupling
Decoupling
Lost Revenue Adjustment Mechanism or Ratemaking Approach to Lost Revenues
Decoupling Pending
16 states with true natural gas decoupling; 11 with LRAM or other ratemaking approach to recover lost revenues; 8 with decoupling pending
Shareholder Incentives
• Utilities earn a rate of return on their supply-side investments
• To provide balance, many states provide incentives for energy efficiency:• Performance bonus for meeting savings goals; or• Share of net benefits due to programs (~10%)
• 25 states provide such incentives to electric and/or gas utilities
Conclusions
• Energy efficiency resource standards are working, including in Pennsylvania
• There are large opportunities to cost-effectively reduce natural gas use in PA
• Pennsylvania should enact:• A natural gas EERS with modest targets to start,
ramping up over time• Decoupling and shareholder incentives for natural
gas utilities (latter tied to savings goals)
Contact Information
Steven Nadel
202-507-4000
www.aceee.org