Energy Efficiency in Capacity Auctions: A Historical Review of Value. Grace Relf October 2017 Energy Efficiency as a Resource Conference

Transcription

1 Energy Efficiency in Capacity Auctions: A Historical Review of Value Grace Relf October 2017 Energy Efficiency as a Resource Conference

2 The American Council for an Energy-Efficient Economy is a nonprofit 501(c)(3) founded in We act as a catalyst to advance energy efficiency policies, programs, technologies, investments, & behaviors. Our research explores economic impacts, financing options, behavior changes, program design, and utility planning, as well as US national, state, & local policy. Our work is made possible by foundation funding, contracts, government grants, and conference revenue.

3 Agenda The PJM & ISO-New England capacity auctions Energy efficiency in load forecasting Auction results, value, and retail rate impacts Demand reduction induced price effect Conclusions

4 Capacity auctions: Overview Source: FERC

5 The PJM Base Residual Auction (BRA) Source: PJM PJM ISO-NE

6 The ISO-NE Forward Capacity Auction (FCA) Same 3-year in advance timeline structure as PJM 15 interim auctions Divides New England into capacity zones PJM ISO-NE

7 PJM s Load Forecast Load forecasts inform reliability requirements PJM has historically over-forecast load In response, PJM revised its forecasting process to include energy efficiency Efficiency resources that qualify for each auction are added back to the forecast to avoid double counting PJM ISO-NE

8 ISO-NE s Load Forecast Future efficiency is projected based on utility efficiency budgets and the cost of saved energy Each resource is assigned an availability score to meet reliability requirements Efficiency is assigned an availability score of 100%. PJM ISO-NE

9 ISO-NE s Load Forecast Peak demand is consistently over-forecast by 10-20% Energy efficiency is consistently under-forecast Forecast pro-rates savings based on the percentage of budget spent by utilities Forecast does not adjust utility budgets for inflation Correcting these factors increases efficiency by 700 MW over five years PJM ISO-NE

10 Historical Results Capacity Cleared (thousand MWs) PJM ISO-NE $350 $300 $250 $200 $150 $100 $50 $0 Base Clearing Price ($/MW-Day) Delivery Year ISO-NE clearing prices have been converted to $/MW-day for comparison with PJM.

11 Efficiency in PJM s BRA Energy efficiency cleared (MW) 1,800 1,600 1,400 1,200 1, Energy efficiency cleared (MW) Energy efficiency cleared of total (%) 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Energy efficiency cleared of total (%) Delivery year Data source: PJM

12 Energy efficiency cleared (MW) Efficiency in ISO-NE s FCA Energy efficiency cleared (MW) Energy efficiency cleared of total (%) 8% 7% 6% 5% 4% 3% 2% 1% Energy efficiency cleared of total (%) 0 0% Delivery year Data source: ISO-NE

13 Value of Demand Resources in the BRA Auction results are sensitive to the inclusion of demand resources Energy efficiency and demand response put downward pressure on bids The inclusion of demand resources in the BRA reduced payments to suppliers by $9 billion (124%) in the 2017/2018 delivery year. PJM ISO-NE

14 Customer Rate Impacts: Baltimore Gas & Electric 2017/2018 delivery year Capacity costs 13% of avg. residential bill 1.7 cents per kwh 30% increase in capacity clearing price Bill increase 4%

15 Demand Reduction Induced Price Effect (DRIPE) Source: Chernick and Plunkett 2014

16 Demand Reduction Induced Price Effect (DRIPE) Source: Chernick and Plunkett 2014

17 DRIPE Examples Ohio: Savings of $1.3 billion through 2020 by meeting efficiency regulatory standards New York: Savings of $600 million to $1.5 billion per year from increased efficiency Incremental savings are small, but accrue to significant savings across a system or region.

18 Conclusions Efficiency is increasing Efficiency reduces demand and suppresses wholesale and retail prices Payments to energy efficiency providers drives investment in efficiency Including energy efficiency in capacity auctions and load forecasting creates significant value for the PJM and ISO-NE regions.

19 Upcoming ACEEE Conferences ACEEE Workshops at VERGE 17 September 19 Santa Clara, CA 2017 Behavior, Energy, and Climate Change Conference October 15 Sacramento, CA 2017 Conference on Energy Efficiency as a Resource November 1 Litchfield Park, AZ The top convener in energy efficiency. aceee.org/conferences