Driving Energy Efficiency with Non-Energy Benefits (NEBs)

Transcription

1 Driving Energy Efficiency with Non-Energy Benefits (NEBs) ACEEE Market Transformation Conference Baltimore, MD April 1, 2014 Ken Colburn, Senior Associate The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone:

2 Why limit assessment to only one class of benefits? IEA

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4 UTILITY SYSTEM BENEFITS These are most commonly considered by regulators. BUT: Many exclude or undervalue T&D benefits; Most undervalue line losses and reserves; Most exclude or undervalue risk benefits; Most undervalue environmental costs. 4

5 Utility System Capacity Benefits: Transmission and Distribution Costs When the Washington UTC included load shape, the value of residential retrofit weatherization doubled. 5

6 Utility System Benefits: Line Losses and Reserves Marginal losses are ~ 1.5X average losses; On-peak marginal losses can be 3X average losses. 6

7 NW Power and Conservation Council: High Value of Risk Mitigation Schedulable Resources Accorded Higher Generation Value Lost-Opportunity Resources Accorded Higher Risk Premium 7

8 Utility System Benefits: Environmental Costs (1) Existing emissions regulations typically require pollution control technologies and monitoring equipment Fixed & variable costs of operating and maintaining Costs depend on market structure Where EE contributes to early retirement, capital and fixed O&M costs of controls may be avoided 8

9 Utility System Benefits: Environmental Costs (2) Costs for future environmental regulations are similar: Capital costs and fixed O&M costs Variable O&M costs Allowance costs Permit fees Emission-based fees Other fees May not avoid these costs simply by reducing emissions or discharges But can do so where EE contributes to retirements or deferral or avoidance of new generation Careful to avoid double-counting of avoided costs 9

10 Utility System Benefits: Environmental Costs (3) Mercury & Air Toxics Standards (MATS) Transported pollution: Son of CSAPR? Clean Water Act: 316(b) Cooling water RCRA: Coal combustion residuals (CCR) New and forthcoming NAAQS revisions Clean Air Act 111: Control of greenhouse gas (GHG) emissions 10

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12 Air Quality and Climate Change: Avoiding Trade-offs; Creating Co-Benefits Wise climate policy choices can help air quality & water Wise air quality & water choices can help with climate End result: Lower overall costs 12

13 Some regulators consider only existing emission costs, not prospective emission costs for power plants. Utility System Benefits: Environmental Costs (4) 13

14 PARTICIPANT BENEFITS Regulators rarely consider non-electricity participant benefits; these can be very significant. - Affects consumer willingness to pay; - If ignored, many cost-effective measures may be omitted from utility programs. 14

15 Participant Benefits: Water, Sewer, Other Resources Northwest Power and Conservation Council: Cost-effective, but not electricity-only; Partner with natural gas and water utilities. 15

16 Participant Benefits: Health New Zealand Heat Smart efficiency retrofit program for all low-income households 90% of benefits were health-related. Hospital Admissions for Respiratory Ailments Down 43% Days off Work Down 39% Days off School Down 23% Significant Mortality Benefits: ~18 deaths/year 17

17 Missouri: Healthy Homes Initiative Some Missouri hospitals subject to penalty for respiratory infection recidivism Launched Healthy Homes initiative, echoing NZ s Heat Smart program Free weatherization to Medicare-eligible seniors with history of respiratory infections Used hospital unrestricted funds for weatherization, in order to protect their hospital Medicare reimbursement One 3-day hospitalization costs about $6,000; weatherization costs about the same Suggests Medicare would be wise to weatherize sick houses; at least partner with utilities to do so. Creates societal benefits too (e.g., less supply-side air pollution) 18

18 SOCIETAL BENEFITS 19

19 Societal Benefits: Emissions (1) Damage costs are larger than mitigation costs, but often considered externalities Illustrative Mitigation and Damage Costs Emission Type Mitigation Cost Damage Cost Mercury lb. $33,000 $181,500 PM2.5 ton $13,000 $60,000 CO2 ton $8 $80 20

20 Societal Benefits: Emissions (2) Using a weighted average may be appropriate 21

21 Societal Benefits: Water No water, no energy. No energy, no water. Power production = 2nd-largest water user (after irrigation); Water production, pumping, and wastewater treatment = huge users of electricity; Anything that saves water OR electricity saves both water and electricity. 22

22 all"embedded"energy"included,"all"the"efficiency"measures"are"costneffective"from"the"water"utilit E3-RAP Energy-Water Nexus (EWN) Work (Preliminary) (1) perspective"with"energy"savings"valued"at"the"retail"rate."this"is"true"even"with"the"lowest"cost"im groundwater"proxy"resource"though"the"results"are"roughly"60"percent"higher"with"the"bay"bridge desalination"proxy."in"actuality,"scvwd"pays"the"bill"for"only"a"portion"of"the"embedded"energy,"a may"not"find"the"measures"costneffective"from"their"perspective"alone." Table'12.'UCT/PAC'Results' Test: More measures cost-effective with water Imported Groundwater Contra Costa Desal Bay Bridge Desal Measure EU EU & EW EW & W EU EU & EW EW & W EU EU & EW EW & W LED Lighting Clothes Washer Toilet - Low Use WBIC - Small Food Steamer Toilet - High Use WBIC - Large EU#=#End'use#energy;#EW#=#Embedded#energy#in#water,#W=#Water#avoided#cost " Cost%test'ratios'above'1.0'are'shaded' Energy Water " 23

23 E3-RAP Energy-Water Nexus (EWN) Work (Preliminary) (2) TRC Test: Most measures are cost-effective 24

24 E3-RAP Energy-Water Nexus (EWN) Work (Preliminary) (3) Table'16.'SCT'Results' ' SCT Test: All measures cost-effective Imported Groundwater Contra Costa Desal Bay Bridge Desal TRC SCT TRC SCT TRC SCT Measure All EU All All EU All All EU All LED Lighting Clothes Washer Toilet - Low Use WBIC - Small Food Steam er Toilet - High Use WBIC - Large EU'='End%use'energy;'EW'='Embedded'energy'in'water,'W='Water'avoided'cost,'All='All'three Cost%test'ratios'above'1.0'are'shaded' Energy'Only Energy'&'Water Figure'27.'SCT'Results'for'Imported'Groundwater'and'Bay'Bridge'Desalination'Proxy'Resources' ' 25

25 Key Conclusions from E3-RAP EWN Work Implemented independently, energy & water DSM programs will overlook cost-effective measures Embedded energy in water improves costeffectiveness but isn t sufficient to achieve optimal efficiency Including avoided cost of water makes more efficiency measures cost-effective Including water in TRC moves toward comprehensive SCT 26

26 Utility Cost Test (or PACT): Flawed Even When Applied Properly Can be used to support funding for uneconomic measures (Washington); Can be used to deny funding for economic measures (Louisiana). 27

27 Vermont Benefits & UCT 28

28 Total Resource Cost Test: Complex (and Seldom Applied Well) Most commonly used (and misused) cost test. All costs, but not all benefits considered; Energy benefits often under-counted; and NEBs often ignored. If total < /kwh, benefits likely omitted 29

29 Societal Cost Test: Challenging for Regulators Utility regulators fairly resistant to quantifying NEBs; Utilities not well-suited either; Manufacturers, vendors, and installers should take responsibility for NEB justification; Default values should be applied to difficult-to-quantify (DTQ) NEBs (i.e., not zero); Judgment is required of regulators. 30

30 Progress, But Framework Still Needed Identify all benefits; Quantify those that are quantifiable; Measures that pass TRC always go forward; Vendors and manufacturers have a duty to establish values for DTQ NEBs; Use Judgment: regulators can establish default values for DTQ NEBs; zero is the wrong number; Find funding partners where cost-effectiveness depends on NEBs (e.g., other utilities, hospitals); Programs must ultimately be cost-effective. 31

31 Related RAP Publications Recognizing the Full Value of Energy Efficiency (2013) Energy Efficiency Cost-Effectiveness Screening (2012) US Experience with Efficiency As a Transmission and Distribution System Resource, (2012) Valuing the Contribution of Energy Efficiency to Avoided Marginal Line Losses and Reserves (2011) Preparing for EPA Regulations (2011) Incorporating Environmental Costs in Electric Rates (2011) Clean First: Aligning Power Sector Regulation With Environmental and Climate Goals Integrating Energy and Environmental Policy (2013) 32

32 About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power and natural gas sectors. RAP has deep expertise in regulatory and market policies that: Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers Learn more about RAP at Ken Colburn kcolburn@raponline.org