California s Strategy for Achieving Energy Efficiency and Demand Response

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1 California s Strategy for Achieving Energy Efficiency and Demand Response Dian M. Grueneich, Commissioner California Public Utilities Commission EPRI Summer Seminar

2 Energy Action Plan CPUC, CEC and the California Power Authority adopted a roadmap, the Energy Action Plan (EAP), to implement the state s energy policies. (2003) EAP established policy goals to assure that the state s energy supplies are adequate, affordable, technologically advanced and environmentally sound. CPUC and CEC adopted EAP II. (2005) Similar to EAP I, EAP II maintains a loading order that provides direction regarding the state s energy resource preferences. Energy efficiency, demand response, and renewables are the preferred means to meet the state s increasing energy needs. 2

3 Energy Efficiency and Demand Response in EAP II EAP II identifies key action items including: Integrating all cost-effective energy efficiency (EE) and demand response into resource plans on an equal basis with supply-side options Adopting EE program portfolios Improving public awareness Integrating demand response programs with EE programs Processing the utilities Advanced Metering Infrastructure (AMI) proposals Adopting dynamic pricing tariffs to allow increased participation by customers with AMI technology Educating Californians about the time-sensitivity of energy use Creating standardized measurement and evaluation mechanisms to verify demand response savings 3

4 Policy Actions Promoting Energy Efficiency in California Integrated Resource Planning Bottoms up approach to resource additions and infrastructure improvements based on the EAP loading order 100% of new demand met by energy efficiency and renewables Biennial proceeding to approve utilities long-term (10-year) procurement plans Procurement plans must factor in financial risk of future carbon regulation 4

5 Policy Actions Promoting Energy Efficiency in California (cont d) Decoupling CPUC decoupled the utilities revenues from direct energy sales. (1980s) Statewide Marketing and Outreach Local Partnership Emerging Technologies 5

6 Policy Actions Promoting Energy Efficiency in California (cont d) Green Building Action Plan Sets a goal of reducing energy use in state-owned buildings by 20% by 2015 and encourages the private commercial sector to set the same goal EE cycle is a step in implementing the Governor s Green Building Action Plan. Building and Appliance Standards CEC adopted building energy efficiency standards for existing and new buildings and adopted appliance standards. (2005) CPUC and CEC approved programs to provide standards for building tune-ups and retrofits. Governor s CO 2 emission reduction goals 2000 levels by 2010 and 1990 levels by

7 The Most Aggressive EE Program in the Nation Energy Efficiency goals ( ) 26,506 GWh/year 5,000 MW off-peak 444 Million therms/year Eliminates need for 10 new power plants Eliminates 9 million tons of CO 2 emissions (equal to 1.8 million cars) $10 billion in net savings to consumers $2 billion in funding for Program Years Annual funding of $150 million from utility procurement dollars and $280 million from the Public Goods Charge Levelized cost of 3 cents/kwh and 21 cents/therm $2.7 billion in net savings to consumers over 3 years 7

8 Annual Energy Savings from EE Programs and Standards 45,000 40,000 ~15% of Annual Electricity Use in California in ,000 30,000 GWh/year 25,000 20,000 Utility Efficiency Programs at a cost of ~1% of electric bill 15,000 10,000 Building Standards 5, Appliance Standards Source: Rosenfeld, California Energy Commission 8

9 Comparison of EE Program Costs to Supply Generation Costs Supply Options $/kwk Demand Average Cost of EE Programs for Base Load Generation Shoulder Generation Peak Generation Source: Rosenfeld, California Energy Commission 9

10 Accomplishments in Demand Response Programs Rolled-out interval meters for large customers (>200 kw) and placed those customers on time-of-use tariffs. (2001) Developed new demand response (DR) programs and tariffs for customers as well as expanded existing emergency triggered programs. ( present) CPUC approved the utilities DR budget proposals.($262 m) Adopted an aggressive long-term dynamic pricing MW goal for the utilities: 5% of system peak demand by (2003) Completed a 2-year pilot program, the Statewide Pricing Pilot, to examine the demand response capability of residential and small commercial customers. (2003) 10

11 Accomplishments in Demand Response Programs (cont d) Directed the utilities to propose AMI implementation plans along with cost-benefit analyses. ( present) Authorized a total of $70 million in pre-deployment activities for the IOUs.(2005) Directed the utilities (and other Load Serving Entities) to incorporate demand response into their Resource Adequacy Requirements. (2004 present) Directed the utilities to propose default Critical Peak Pricing tariffs for large customers in their General Rate Cases. (2006) Completed Automated Demand Response System (ADRS) pilot that investigated DR capability of residential customers with automated DR technology and their willingness to pay for the technology. (2006) Approved PG&E s AMI deployment and CPP tariffs. (2006) 11

12 Guidance on AMI Functionality The goal is to maximize the amount of demand response that can be achieved cost effectively. CPUC visions that full scale implementation of AMI will provide all customers in all rate classes with the option to choose between dynamic and static rate structures. AMI system should be able to support a wide variety of potential rate structures and customer service options. Open architecture will lead to greater competition, lower cost, and more technology options for customers. 12

13 CPUC approved PG&E s AMI CPUC adopted a project budget of $1.74 billion for full deployment of AMI, based on a positive business case analysis. (July 2006) PG&E projects that operational savings cover 90% of AMI project costs (over 20-year useful life period) and the additional 10% would be covered through DR benefits. PG&E selected power line carrier technology for its electric meter communications network and fixed radio frequency network for its gas meters. Full deployment of PG&E s AMI system technology and network is scheduled to take 5 years. ( ) CPUC adopted voluntary CPP tariffs for the residential and small C&I customer classes (under 200kW) with a one year bill protection provision. 13

14 Update on SDG&E and SCE s AMI Projects SDG&E filed supplemental testimony with updated AMI project costs and benefits that show a positive business case. (March 2006) SDG&E s cost estimate for full scale AMI deployment is $635 million with $762 million in operational ($471 million) and demand response ($235 million) benefits. (NPV over 28 years) DR benefit calculation assumes implementation of CPP tariff as the default rate for C&I customers with demands less than 20 kw. A Commission decision is scheduled for the first quarter of AMI deployment is expected to be completed in 2 ½ years (mid ). SCE proposed a 7 ½-year multi-phased approach to develop and deploy the next generation of AMI ( ). SCE is defining its AMI functional requirements, determining commercial availability of the AMI technology, and developing its preliminary business case analysis. SCE expects to have its AMI beta product selection in the first quarter of AMI project application and business case filing is expected in December of

15 Next Steps in Energy Efficiency EE Rulemaking is addressing: Shareholder risk/reward incentive mechanism Embedded energy savings associated with water efficiency Evaluation, measurement and verification Update to energy efficiency potential studies and savings goals Implementation of portfolio plans and planning process for program cycle 15

16 Next Steps in Demand Response CPUC decision on SDG&E s full deployment AMI application CPUC decisions on default CPP tariff Staff has proposed a new OIR focusing on development of DR measurement protocol, cost-effectiveness methodology, and reassessment of the DR goals 16

17 Strategies for Greenhouse Gas Emission Reductions CPUC Programs GHG Savings (Million Tons CO 2 ) Percent Renewable Portfolio Standard 5 11 California Solar Initiative Energy Efficiency Programs through Additional Energy Efficiency Programs/Demand Response ( ) NA 6.3 Combined Heat and Power Initiative Electricity Sector Carbon Policy Total: Source: Climate Action Team Report to Governor Schwarzenegger and the Legislature, March

18 Conclusion Energy efficiency and demand response Lowering energy costs Promoting economic growth Protecting the environment California will work on Expanding customer participation Developing a viable cost/benefit framework Reassessing DR goals and updating EE savings goals Developing CPP tariffs 18

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