ORIENTATION FOR COUNCILORS Energy Efficiency Advisory Council EEAC - - PowerPoint PPT Presentation

ORIENTATION FOR COUNCILORS

Energy Efficiency Advisory Council

EEAC Consultant Team February 3, 2015

www.ma-eeac.org

INTRODUCTION

►Many topics and issues could have been on the

agenda for the orientation – we selected a subset to summarize and present

►Focus on planning, planning issues, and planning

schedule, as background for the process for developing and reviewing the 2016-2018 Plan

►Available to follow up on these issues or other issues ►Will NOT be covering program issues or strategies

(topics at workshops) NOR evaluation (EM&V)

►Thanks to DOER, PAs, ISO-NE, and others for slides

and graphics, which I have borrowed with my thanks

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MA: NUMBER 1 RANKING

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EE IS A SIGNIFICANT ENERGY RESOURCE WITH MANY BENEFITS

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59,000 61,000 63,000 65,000 67,000 69,000 71,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 GWh

RSP14 RSP14-FCM-EEF RSP14-FCM

MA Annual Energy: RSP14 Forecast (GWh)

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GREEN COMMUNITIES ACT (GCA)

►“…electric and natural gas resource needs shall first be

met through all available energy efficiency and demand reduction resources that are cost effective or less expensive than supply.” Section 21(a)

►“Each plan shall provide for the acquisition of all

available energy efficiency and demand reduction resources that are cost effective or less expensive than supply and shall be prepared in coordination with the energy efficiency advisory council…” Section 21(b)(1)

►“The council shall, as part of the approval process by the

department, seek to maximize net economic benefits through energy efficiency and load management resources and to achieve energy, capacity, climate and environmental goals through a sustained and integrated statewide energy efficiency effort.” Section 22(b)

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PLANNING SCHEDULE PER THE DATES IN GCA STATUTE

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PAs jointly prepare the draft plan in coordination with the EEAC April 30 EEAC submits its approval or comments to the PAs July 30 PAs submit the plan together with EEAC approval or comments to the DPU October 31 DPU issues a decision on the plan January 31

CONTEXT: WHERE DO THE SAVINGS AND BENEFITS COME FROM?

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www.ma-eeac.org Presentation Master Title Can Be Added in Master Layout

ELECTRIC SAVINGS AND BUDGET BY SECTOR, 2013-2015

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33,669,371 779,384 5,830,295

Electric Lifetime Savings, MWh

Commercial & Industrial Low Income Residential

$843,044,008 $165,973,663 $487,957,884

Electric Budget

Commercial & Industrial Low Income Residential

Electric Lifetime Savings: 40 M MWh Electric Budget: $1.5 Billion Electric savings equivalent to building ~ 100 MW power plant each year

Savings breakouts by program and initiative are in tables and workshop materials

www.ma-eeac.org Presentation Master Title Can Be Added in Master Layout

GAS SAVINGS AND BUDGET BY SECTOR, 2013-2015

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500,681,853 85,197,522 351,323,511

Gas Lifetime Savings, Therms

$154,628,516 $108,181,299 $260,460,224

Gas Budget

Commercial & Industrial Low Income Residential

Gas Lifetime Savings: 937,202,887therms Gas Budget: $523,270,039

www.ma-eeac.org Presentation Master Title Can Be Added in Master Layout

ELECTRIC AND GAS BENEFITS BY SECTOR, 2013-2015

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Electric Benefits $7 billion

Commercial & Industrial Low Income Residential

Gas Benefits $1.4 billion

$561,015,888 $174,988,643 $677,221,310 $4,618,244,348 $351,629,628 $2,048,122,010

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ELECTRIC BENEFITS - COMPONENTS

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$428,303,982 $1,033,325,631 $359,399,059 $122,327,159 $433,784,976

Electric Benefits, 2015 $2.4 Billion

Capacity Energy Price Effects (DRIPE) Other Resource Benefits Non Resource Benefits Note: $226M in

• il benefits, but
• ffset by higher

gas use (e.g., CHP) and associated gas DRIPE

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GAS BENEFITS - COMPONENTS

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$249,550,634 $24,605,137 $62,491,983 $11,819,182 $131,219,440

Gas Benefits, 2015 $480 Million

Gas Electric Gas Price Effects (DRIPE) Non Gas Non‐Electric Benefits Non Resource Benefits

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NON-RESOURCE BENEFITS AND NON-ENERGY IMPACTS

►Non-Resource Benefits (NRBs): term used in DPU

• rders and in Plan and Report data tables

►Non-Energy Impacts (NEIs): term used in planning

and analysis, and in evaluation studies

− One difference is that water is a non-energy impact but it is also a resource benefit (therefore water is not in NRBs) ►Examples of Non-Energy Impacts − O&M/maintenance savings − Heating system retrofit, increased safety − Reduced arrearages ►DPU disallowed three NEIs − National security, economic development, and refrigerator/ freezer turn in (e.g., reduced landfill)

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KEY STEPS EARLY IN THE PLANNING PROCESS

►Assessment of potential ►Goals framework and levels of goals ►Budgets and funding ►Cost to achieve savings (cost drivers) ►Cost effectiveness ►Performance incentives for the PAs ►Above “key terms” lead to the Term Sheets ►Priorities for 2016-2018 Plan ►Program strategies and enhancements

− Including the program workshops

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ASSESSMENT OF POTENTIAL

Assessment

• f Potential

Recent Studies Relevant to MA Evaluation (EM&V) Results and Data Forecasts of Market Changes Program Revisions and Enhancements Recent Actual Results Penetration/ Potential Analyses | 15

www.ma-eeac.org

(FROM MARCH 2012): SAVINGS GOALS FOR 2013-2015, INITIAL THOUGHTS

Annual Savings (% of Retail Sales) Assessment of Potential (% of Retail Sales) Electric 2013: 2.5% 2014: 2.6% 2015: 2.7% TBD Gas 2013: 1.3% 2014: 1.5% 2015: 1.7% TBD

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As noted below, it is important to focus on benefits and net benefits goals as well (early in the process, and not just as an output of the cost-effectiveness model at the very end).

LOOKING AHEAD: EE IN THE CLEAN ENERGY AND CLIMATE PLAN

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*Amount determined to meet greenhouse gas reduction targets

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 Percentage of Retail Sales

Clean Energy Climate Plan Forecast for Energy Efficiency

electric gas

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WHAT GOALS ARE REALLY USED? AND HOW?

►Initially, goals are developed and negotiated using %

savings – i.e., annual energy savings as a % of retail sales (in order to put all PAs on a level basis)

►BUT, in the Three-Year Plans and Annual Reports, the %

savings goals used for goal development and negotiation are translated into the real goals:

− Annual savings (physical units of kWh and therms, not %) − Lifetime savings (savings over the measure lives) − Benefits ($, economic value of the savings, from all fuels) − Net benefits ($, benefits minus costs) ►AND the performance incentives are based mainly on: − “Savings” component – incents achievement of benefits ($) − “Value” component – incents achievement of net benefits

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ELECTRIC TERM SHEETS, 2013-2015

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GAS TERM SHEETS, 2013-2015

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COST EFFECTIVENESS, TRC TEST

1.

Cost effectiveness is determined using the Total Resource Cost (TRC) Test

2.

Benefit cost ratio (BCR) = ratio of total lifetime benefits divided by total costs

3.

Benefits = economic value of the savings due to the programs

4.

Costs = costs to the PA and the participant that are associated with the program and measure For more detail, see: http://ma-eeac.org/wordpress/wp- content/uploads/TRCMassSave051011frev.pdf

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HOW DOES THE TRC TEST DETERMINE COST-EFFECTIVENESS?

 TRC test is applied by dividing the total lifetime benefits of a

program by the total costs of the program, to create a Benefit Cost Ratio (BCR): Total benefits ($) Total costs ($)

BCR =

If the BCR is it is considered because ≥ 1.0 cost-effective benefits exceed costs < 1.0 not cost-effective costs exceed benefits

COST-EFFECTIVENESS ANALYSIS: TRC TEST RESULTS

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Customer Sector B/C Ratio Net Benefits Benefits Costs

Residential (total) 3.25 $491,451,016 $709,881,986 $218,430,970

• 1. Residential Whole House

3.69 $387,009,318 $530,975,100 $143,965,782

• 2. Residential Products

3.02 $119,673,067 $178,906,886 $59,233,819

• 3. Residential Hard-to-Measure
• $15,231,369

$0 $15,231,369 Low-Income (total) 2.08 $61,591,012 $118,357,335 $56,766,322

• 4. Low-Income Whole House

2.15 $63,234,704 $118,357,335 $55,122,631

• 5. Low-Income Hard-to-Measure
• $1,643,691

$0 $1,643,691 Commercial & Industrial (total) 3.60 $1,118,367,485 $1,548,901,486 $430,534,001

• 6. C&I New Construction

4.73 $270,291,168 $342,767,691 $72,476,523

• 7. C&I Retrofit

3.41 $852,053,097 $1,206,133,794 $354,080,698

• 8. C&I Hard-to-Measure
• $3,976,780

$0 $3,976,780 GRAND TOTAL 3.37 $1,671,409,513 $2,377,140,806 $705,731,293

Total Resource Cost Test, 2015 (In 2013 $)

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REGIONAL AVOIDED COST STUDY

►Six New England States (ISO-NE area) ►Conducted every three years ►Provides consistent values for avoided costs

throughout all New England states – FOR ALL MA PROGRAMS

►Used for Energy Efficiency programs only ►To be completed by March 31, 2015 ►Will be used in next Three-Year Plans (2016-2018)

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EXAMPLE CALCULATION OF BENEFITS

Benefits = net savings * avoided costs of supply

$50 per kW electric capacity $0.08 per kWh electric energy $10 per mmbtu natural gas $13 per mmbtu other fuel $0.01 per gallon water $(variable) per units non-resources 9.215 kW electricity 13,823 kWh electricity 0 mmbtu natural gas 0 mmbtu other fuel 0 gallons water 0 units non-resources

Year 1 benefits = (9.215 * $50) + (13,823 * $0.08) + ($10 * 0) + ··· = $1,566.59

 The benefits are calculated for each year of the widget life and

present valued using a discount rate (calculated per D.P.U. Guidelines) to determine lifetime benefits

BUDGETS AND BUDGET CATEGORIES

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Program Planning and Administration Marketing and Advertising Participant Incentive Sales, Technical Assistance & Training Evaluation and Market Research Total PA Costs Residential (total) $18,968,583 $33,130,857 $329,394,242 $90,446,306 $16,017,896 $487,957,884

• 1. Residential Whole House

9,951,477 $ 11,277,468 $ 219,362,721 $ 64,544,953 $ 11,324,263 $ 316,460,882 $

• 2. Residential Products

4,622,517 $ 12,951,551 $ 83,896,515 $ 18,583,499 $ 4,260,042 $ 124,314,124 $

• 3. Residential Hard-to-Measure

4,394,588 $ 8,901,839 $ 26,135,005 $ 7,317,854 $ 433,592 $ 47,182,878 $ Low-Income (total) $9,706,891 $2,371,448 $119,754,757 $28,545,257 $5,595,310 $165,973,663

• 4. Low-Income Whole House

5,514,032 $ 1,578,475 $ 119,754,757 $ 28,501,607 $ 5,476,024 $ 160,824,895 $

• 5. Low-Income Hard-to-Measure

4,192,858 $ 792,973 $

• $

43,650 $ 119,286 $ 5,148,768 $ Commercial & Industrial (total) $55,174,060 $18,768,480 $647,884,317 $94,907,021 $26,310,131 $843,044,008

• 6. C&I New Construction

11,406,752 $ 4,310,420 $ 121,219,675 $ 24,574,178 $ 6,199,324 $ 167,710,348 $

• 7. C&I Retrofit

35,501,073 $ 11,007,698 $ 526,664,642 $ 70,332,844 $ 19,477,184 $ 662,983,441 $

• 8. C&I Hard-to-Measure

8,266,235 $ 3,450,362 $

• $
• $

633,623 $ 12,350,220 $ GRAND TOTAL $83,849,533 $54,270,785 $1,097,033,315 $213,898,585 $47,923,337 $1,496,975,555 Program PA Costs (3)

2013‐2015 (Three‐Year) PA Costs – Electric Budget

FUNDING SOURCES: WHERE DOES THE FUNDING COME FROM?

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Sector SBC (1) FCM (2) RGGI (3) Other (4) Carryover (5) EERF (6) TOTAL (7)

Residential $39,571,049 $7,849,088 $9,184,777 $0 $0 $149,323,344 $205,928,258 % of Residential 19% 4% 4% 0% n/a 73% 100% Low-Income $5,286,391 $1,055,050 $1,226,266 $0 $0 $2,147,694 $9,715,401 % of Low Income 54% 11% 13% 0% n/a 22% 100% Commercial & Industrial $77,534,267 $15,324,501 $18,051,634 $0 $0 $256,440,109 $367,350,511 % of Commercial & Industrial 21% 4% 5% 0% n/a 70% 100% TOTAL $122,391,707 $24,228,639 $28,462,677 $0 n/a $407,911,147 $582,994,170 % of Total 21% 4% 5% 0% n/a 70% 100%

Allocation of Funding Sources, 2015

(FROM 2012) INITIAL BUDGET SUGGESTION FOR 2013-2015 COST/UNIT SAVINGS RANGES

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$.35/kWh ELECTRIC $.42/kWh $5.50/therm GAS $6.35/therm Deeper Savings Comprehensive Investment in Future Harder to Reach/Serve Past Performance (data) Lighting/Single Measures Upstream Initiatives Leveraging Ratepayer $ EEAC Consultant initial analysis from April 2012.

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PERFORMANCE INCENTIVES: OBJECTIVES

►The Green Communities Act, in its directives on the

three year statewide plans, states in Section 21(b)(2): “A plan shall include…(v) a proposed mechanism which provides performance incentives to the companies based on their success in meeting or exceeding the goals in the plan;…”

►Performance incentives can be effective in supporting

achievement of goals and objectives

►Performance incentives should focus on key

• bjectives:

− Higher savings, more benefits for MA customers − Value and cost-effectiveness (net benefits) − Deeper savings (first), reaching broader, & others

MA PERFORMANCE INCENTIVE

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M J J A S O N D J F M A M J J A S O N 2013 Plan‐ Year Report EM&V Results EM&V Results 2014 Q4 Yr‐End Report 2014 Plan‐ Year Report EM&V Results EM&V Results

HOW ARE EVALUATION (EM&V) RESULTS USED, WHEN, AND WHERE?

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2016 ‐ 2018 Draft Plan 2016 ‐ 2018 Final Plan

Three‐Year Performance Report for 2013‐2015 is due in mid‐2016.

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WHERE ARE THE DATA LOCATED?

►www.ma-eeac.org ►www.masssavedata.com

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QUESTIONS CAN BE ADDRESSED OFFLINE, AFTER BUT NOT DURING THE WEBINAR

►February 3, 2015