Industry Perspective: Economic Benefits and Effective Program Design. January 14 th, 2014

Transcription

1 Industry Perspective: Economic Benefits and Effective Program Design January 14 th, 2014

2 OMA: To protect and grow Ohio manufacturing The OMA 1,300+ manufacturers in Ohio Member-supported, member-driven, memberfocused Public policy, workers compensation, information services Communities Energy Environment Human Resources Leadership Safety/Workers Comp Tax

3 Go Sustainable Energy Unbiased, accurate information on energyefficiency Consumers Industrial, commercial, institutional energy audits, technical assistance, commissioning, Utilities technical assistance, measurement & verification Technical information for regulatory, policy, markets Columbus, Dayton, Cleveland 11 staff, 10 engineers All masters degreed, half PEs

4 OMA & Energy Efficiency OMA supports the least-cost resources to reduce operating costs to their members Agenda 1. Costs and benefits of efficiency - State Level 2. Costs and benefits of efficiency - Manufacturer Level 3. Making it better - Improving the benefit to cost ratio of energy efficiency working with manufacturers and program implementers

5 State Level Costs and Benefits It s about saving money Total benefits are important Wholesale price suppression just as important accrues to non-participants Participant benefits Non- Participant benefits

6 Manufacturing Plant Level Costs and Benefits Later work done by Go Sustainable Energy Price suppression work derivative of Synapse Energy Economics work in the ACEEE study Costs Anything in the energy-efficiency rider Rider - $ /kwh charge in electric tariffs, includes Program costs (administration, incentives) Lost revenue recovery Utility share-holder profit (shared-savings) Benefits Did not consider direct benefits from participants Only universal benefits from price mitigation, ie, the benefits from the resource Wholesale capacity markets, wholesale energy markets

7 Wholesale Energy Market

8 Wholesale Capacity Market Bid efficiency into PJM s forward capacity auctions (the size of the pie) Un-bid efficiency effects peak-load contribution (PLC) (the size of the slice of the pie you get) Synapse method uses VRR curve to estimate

9 Where Do Costs and Benefits Occur Reference:

10 Where Do Costs and Benefits Occur Reference: base-residual-auction-report.ashx

11 Cumulative Costs v Benefits for a Medium-Sized Manufacturer, RTO Medium-sized manufacturer approx. 2.2 MW peak load, roughly $1 million/yr in electricity spend

12 Time-Trend of Costs v Benefits for a Medium-Sized Manufacturer, RTO

13 Cumulative Costs v Benefits for Manufacturers, RTO Small (0.042 MW, $55,000/yr), Medium (2.2 MW, $1 million/yr), Extra Large (127 MW) Small Medium Large Benefit ($) $ 6,742 $ 94,367 $ 6,762,826 Benefit ($/kwh) $ $ $ Cost ($) $ 1,700 $ 36,782 $ 3,201,833 Cost ($/kwh) $ $ $ Ratio

14 ATSI benefit to cost ratio 4.1 RTO benefit to cost ratio 2.6 Cumulative Costs v Benefits for Medium- Sized Manufacturers, RTO & ATSI

15 Cumulative Costs v Benefits - Takeaways Cumulative universal benefits outweigh costs for all sized manufacturers, in all Ohio territories Load factor matters Price suppression in kwh and kw Extra large manufacturers have lower price suppression in terms of $/kwh Rider only in kwh The dates benefits accrue can, and generally are, different than the dates costs are charged Regional issue The least cost electricity is dependent on all utilities in the RTO bidding in efficiency

16 Costs v Benefits Of Note PJM takes up to 4 years of efficiency 1% /year x 4 years = 4% 100% of the PJM capacity price signal is within 7% of the load forecast About half of price signal is under the cost of new generation plant entry $28.5 billion dollars of price signal for RTO in 2016/17 - $3.67 billion paid 1% efficiency /year roughly offsets growth

17 Making it Better Increasing Benefits, Lowering Costs Benefits Costs Increasing price suppression Increasing participation rates Working with manufacturing membership & utilities to produce streamlined, costeffective programs Program Type Commercial & Residential Industrial Point of Sales CFL Notched V-belts No-cost/Low-cost Tuning, RCx O&M, Track & tune, CEI Prescriptive Lots Lighting, comp. air New Load New Construction, Energy Star New Production

18 Thank You Questions? John Seryak, PE Columbus, OH

19 Manufacturing Plant Level Costs and Benefits

20 The Role of a Trade Organization Maximize benefits Align efficiency programs with manufacturing interests Low-cost/no-cost track and tune type programs Increase prescriptive offerings Increase point-of-sale/market transformation offerings Develop a New Production offering CHP Maximize price suppression Minimize costs Maximize efficiency capacity bid into PJM capacity auctions Streamline transactional costs Lower program administration costs

21 Ohio s Self-Direct Program Eligible participant mercantile customers >700,000 kwh/year in consumption More than one facility May file with PUCO for a rider exemption More Exemption tracks utilities annual benchmark (ex., 1% efficiency yields 1 year exemption) Or, commitment payment of 75% of rebate value Savings may be filed for previous 3 years Behavioral savings count As Found rule applies, disregards national standards as baselines in an end-oflife project 60-day automatic approval

22 How is Self-Direct Used? Is the mercantile program still relevant and used? Yes (Data through 2012) Auto approval

23 How is Self-Direct Used? Is the mercantile program used as a business tool? Unclear 15 month lag-time (utility and PUCO may hold for 5 months combined) May allow for fairness for uninformed manufacturers that completed projects

24 How is Self-Direct Used? Is the mercantile program used for rider exemption or cash rebates? Initially, rider exemptions Recently, cash rebates

25 How is Self-Direct Used? Does the as found rule matter, in practice? Probably not Of 36 applications (roughly 10% of total) reviewed: 26 were early replacement of old equipment 9 were for new equipment for new construction 2 were for behavior and operations changes As found rule to be codified under SB 58 for all efficiency programs. Would impact equipment failure projects, like T12 retrofits Are self-direct projects adequately documented? Not uniformly In many cases no substantiating evidence was provided. Most frequently proof-of-purchase was not provided.

26 The New Self-Direct? Sen. Bill Seitz s Senate Bill 58 Signed affidavit that the company is doing all they can do. No other documentation required.

27 Pros to Self-Direct Could be used as a business tool Manufacturers decision making process moves at a different pace than utility programs Could promote fairness Paying rider in, but may not be informed that programs exist Check against expensive efficiency programs Rider includes program recovery, lost revenue recovery, shared savings agreements Allow operations changes Energy savings without capital expenditures

28 Cons to Self-Direct Energy efficiency is a resource Retro projects can t be bid into PJM we lose the price suppression Lack of a check could result in inappropriate use of ratepayer funds Documentation is on the public record Exemption: Monetizing efficiency payments too far into the future Exemption: Financial benefit is difficult to calculate (volatile riders)

29 Efficiency Riders: Where have we been?

30 Toss-ups to Self-Direct Who is better at acquiring the energy-efficiency resource? The utility provides infrastructure, specialization, economies of scale The manufacturer is the expert on their own process

31 Conclusions Energy efficiency programs produce significant savings to Ohio and to manufacturers Eliminating or watering down the standards turns these savings into anticompetitive costs Direct and Indirect benefits are important Self-direct programs have some merit Business tool Fairness to uninformed customers Check on rider costs Manufacturer may deliver efficiency more cost effectively Concerns Lost price mitigation No checks and balances Inability to accurately predict rider value