Effects of Condominium Submetering

Transcription

1 Effects of Condominium Submetering Presented to the ENERCOM Conference Toronto 11 March 2015 Donald N. Dewees Department of Economics University of Toronto

2 Sub-Metering Can Reduce Consumption Navigant Consulting Ltd. study 2012: Number of Condos and Apartments in Ontario (000) Condo Units Apartment Units Total Available for Sub-Metering If available units sub-metered by 2017: Reduce consumption >3,000 GWh/ year; Reduce summer peak demand 383 MW; Reduce greenhouse gas emissions. 2

3 Dewees-Tombe Study All-electric condo building Sub-metering reduced electricity usage 20%. Greater reduction in summer than in winter Sub-metering delivery costs offset much of the energy cost savings. Private cost-benefit analysis shows residents gain little. 3

4 Outline of Talk Review what we know about the effects of sub-metering on electricity use and cost. Who benefits most? Who are the losers? Why? Cost-benefit analysis of sub-metering: Private Social Effect of sub-metering on LDCs. 4

5 Why Does Sub-Metering Conservation? Bulk-metered building, residents save little from conservation. Assume 100 unit building, equal sharing of utility costs. One unit reduces consumption by $10/month of electricity. Common fee for the unit falls by $10/100 = $0.10. Peanuts. Utilities seem free to residents. 5

6 Demand Increases with Low Price Price Demand Quantity 6

7 Sub-metering Raises Marginal Price Demand curves slope down. Lower price, higher quantity demanded. Sub-metering means each unit pays its own cost. Price rises from zero to the marginal energy + distribution price. Higher marginal price, lower quantity demanded. 7

8 Previous Literature Large literature on residential elasticity of demand for electricity. Elasticity = % change quantity/% change price Short run: -0.3 Long run: -0.9 Higher in summer Higher with electric heat or a/c Rises with income. 8

9 Few Sub-Metering Studies Gov t, consultant studies: New York State 2001 SM saves 10%-19% usage. 73% of residents paid less after SM than before. Oakville Pilot Study of 2006 SM reduced consumption by 18 to 25% Little reduction in common areas. Navigant 2012 for EnerCare SM saves 34% for non-electrically heated buildings, 27% for electrically-heated. Little analysis of cost to residents; the focus has been on electricity use. 9

10 Dewees-Tombe Study Luxury low-rise condominium, 40 units Electric heat, A/C, hot water, laundry all wired separately for each unit. Average monthly unit kwh Winter 3600 Summer 1500 Various data available Our main analysis: More detail than previous studies. 10

11 Consumption Analysis, Results Regression equation corrects for weather: Log (Use) = β 0 + β 1 SM + β 2 HDD + β 3 CDD + Σα m + ε SM = dummy for SM date HDD = heating degree-days CDD = cooling degree-days α = month effects Sub-metering reduces consumption 20%. This is mid-range of other electrically-heated studies. Conservation is concentrated outside winter. Less appliance use less air conditioning 11

12 Monthly Sub-M Comparison kw/h per Month Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Actual Usage No-SM Counterfactual 12

13 Unit Consumption Analysis Exterior exposure increases winter usage. Corner units. Floor space increases winter & summer usage. Vacancy saves 34% in winter. Vacancy saves > 50% in summer. Tenant occupied no effect. 13

14 Dollars versus kwh Savings The kwh savings look great for consumers. But consumers perceive their bills, their $ cost, not their kwh. Two problems when we look at $ savings. Much smaller than kwh savings Varies among units Some units have INCREASED BILLS 14

15 Customer Cost Perception: simple before/after comparison Before ( Mar) After (Apr 08- Mar 09) Change (%) Average Annual Use (000 kwh) 1,577 1, % Average Annual Cost (excluding GST) $142,443 $141, % Actual whole-building consumption and cost totals in first year of SM compared to previous three years. Where are the $ savings? No adjustment for temperature changes, price increase. 15

16 Customer Perception (2) Pre-SubM, owners paid a share of common costs including electricity by an allocation formula based on floor area. Compare this to unit costs plus share of common electricity cost yr. 1 post-sub-m. About half the owners pay less than before. So, half the owners pay more. Not happy. Be careful what you promise. 11 March 2015 DN Dewees University of Toronto 16

17 Private Cost-Benefit Analysis: Delivery Charges New delivery costs (41 customers, not 1) both fixed and variable. No Sub-M: delivery charge based on building peak hour every month. Sub-M: fixed delivery charge + price*sum of peak hourly demand each day of month for each unit. Our estimation: Sub-M adds a monthly fixed delivery cost of $861/unit = $10,332/year. Lose half the value of electricity savings to increased delivery. Partly offset by less kwh less delivery costs. 17

18 Cost-Benefit Analysis: Consumer Satisfaction Sub-metering raised price from zero. Consumers reduce consumption. Are consumers less satisfied? No: owners eliminated pure waste, no cost. Yes: owners sacrificed comfort, convenience. Estimate value of loss. Automated appliance controls may mitigate customer inconvenience from conservation. Full lost consumer satisfaction deducts $9,145/yr. This is max could be zero. 18

19 Private Cost-Benefit Summary Sub-metered versus non-sub-metered Basis for savings Amount 20% less kwh at RPP price $12,415 20% less variable delivery charge $5,879 Increased fixed delivery charges -$10,322 Net cash flow $7,957 Lost consumer satisfaction -$9,145 Net private benefit (cost) change -$1,187 19

20 Social Cost-Benefit Adjustments Add environmental savings from reduced use: Less air pollution, less GHG. Add 3 cents/kwh = $6,076 more social benefits. Society is better off. Assume conservation avoids 13.5 cent wind. Big increase in net benefits. 20

21 Social Net Benefit Summary Basis for savings Savings* Net Benefits** Retail Price Plan $7,957 -$1,187 RPP plus externalities $14,034 $4,889 Displace 13.5 cent wind power $22,886 $13,741 * Commodity savings + changes in delivery cost **After subtracting lost consumer surplus of $9,

22 Conclusions 20% energy conservation from sub-metering in allelectric building; mostly non-winter. Non-electrically heated building would save fewer kwh. LDCs can reduce summer demand with sub-metering. Consumption varies considerably among units; partly explained by unit characteristics: vacancy saves electricity especially in summer. Owner $ savings much less than kwh savings. Delivery charges offset ~ 1/2 of savings; Lost consumer satisfaction may offset ~1/2 of savings. Net private benefits easily negative. Customers may not be thrilled. 22

23 Conclusions (2) Social net benefits require careful analysis Does energy price = marginal generation cost? Add environmental benefits. Most important where coal is the marginal fuel. Need environmental benefit to get positive net social value in average building. Some buildings will not show net social benefits. Sub-metering offers a business opportunity for LDSs, ESCs, but: Beware of over-selling benefits of sub-metering. 23