Cost-effectiveness Workshop Three:
Energy Efficiency Resources
Energy Division
September 10th, 2012
1
Workshop Agenda
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2
Introduction and Overview
10:00 – 10:15am
Topic 1: Load Shapes
10:15 – 11:15am
Break
11:15 – 11:30am
Topic 2: Comprehensive Energy Savings
11:30am – 12:30pm
Lunch
12:30 – 1:30pm
Topic 3: Rebound Effects
1:30 – 2:00pm
Topic 4: NTG and Participant Motivation
2:00 – 2:45pm
Break
2:45 – 3:00pm
Topic 5: Additional Participant Costs and Benefits
3:00 – 3:30pm
Other Issues
3:30 – 4:00pm
Energy Efficiency Resources Workshop Objectives
• To provide parties the opportunity to discuss the cost-effectiveness
framework in the context of energy efficiency programs only.
• To explore new ideas of how the cost-effectiveness framework
could be modified to account for costs and/or benefits specific to
energy efficiency programs.
This workshop will not re-visit issues common to all demand-side
programs discussed during the June workshops.
3
Topic 1: Load Shapes used for Cost-effectiveness Calculations
• Background:
– The E3 Avoided Cost calculator uses hourly (8760) $/kWh
avoided costs for electricity and monthly (12) $/Therm avoided
costs for natural gas.
– The E3 Cost-effectiveness calculator uses these avoided costs as
the TRC and PAC benefit inputs. The benefits are calculated
based on the annualized energy saved allocated hourly (electric)
and monthly (natural gas).
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Measure Load Shape
• A measure load shape is the measure annual savings impact
allocated into each avoided cost hour (electric) or month (gas).
– This is not the end use shape but rather the difference between the
hourly or monthly value of the measure use shape minus the baseline
(code compliant, pre-existing, or non-efficient) use shape.
– Shape may be positive (load decrease or savings) or negative (load
increase) in each hour or month.
– The load shape is “normalized” to 1.0 – the sum of all the values
(hourly or monthly) is 1.0 such that multiplying the annual savings by
the load shape value provides the savings for each hour or month.
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Measure Load Shape (cont.)
• Measure load shapes can vary by:
– Measure type, efficiency level
– Building type (due to different use profiles and building
configurations)
– Location (if there is significant weather or regional sensitivity of
savings)
• May use “typical” or “average” load shapes if the normalized shape
due to the above sources of variation provide similar results.
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The E3 Cost Effectiveness Calculator
• The measure load shapes are inputs to the E3 Cost-Eff. Calculator.
• The pre-calculated quarterly benefits are reported for measure
groups (lighting, HVAC, process, technologies, etc.) across a range
of appropriate variation parameters (building type, location, etc.).
• Utilities select values via E3 Cost-Effectiveness Calculator inputs:
– Electric: Climate Zone, Target sector, Measure Electric End Use
Shape
– Natural Gas: Gas Sector, Gas Savings Profile
• DEER electric load shapes are supposed to be considered first.
Utilities may use other load shapes when DEER load shapes are not
available.
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Load Shape Discussion Questions
• Do we need additional load shapes to more accurately calculate the
avoided costs of generation energy and capacity?
• If so, what type of load shapes should be developed, given that the
development of additional load shapes would require significant
resources?
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BREAK
• Please return at 11:30am.
9
Topic 2: Measuring Lost Opportunities associated with
Comprehensive Energy Savings
• TURN’s proposal points to a general energy efficiency program
design issue of how cost-effectiveness as conventionally measured
does not capture how well EE programs are designed and
implemented.
• For instance, under current cost-effectiveness, the effects of cream
skimming and the resultant creation of lost opportunities are not
explicitly considered because there is no metric to determine the
economic value of the EE savings that are being “left on the table.”
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• TURN proposes that this approach should be used in the EE
program design and evaluation phases.
– What appears to be a very cost-effective program may in fact
be cream skimming and creating lost opportunities (ex: CFLs
and refrigerator replacement).
– What appears to not be a cost-effective program may in fact be
cost-effective IF additional EE measures and activities are
implemented within the same project (ex: space heating and
cooling, water heating, and lighting systems).
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TURN’s example illustrates what happens if EE programs only achieve part
of the otherwise cost-effective EE savings at a hypothetical building site
through a simplistic illustration that:
• First quantifies the total potential EE savings and calculates lifecycle economic
value (i.e., avoided cost) from achieving largely all cost-effective EE measures at
a site (assumed residential whole-house type EE program).
• Next, quantifies the monetary value of the EE savings achieved via the utility EE
program.
• Then, subtracts out the economic value of the EE savings that were “left on the
table.”
• By quantifying the economic benefits (i.e., avoided costs) of the additional
savings available but not achieved, this illustrates the additional economic
value of a more comprehensive EE building site treatment.
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Example of Problem
• Could achieve $177M benefit for $100M cost: Benefit-cost (B/C)
ratio 1.77.
• Administrator designs program to get $117M for $60M: B/C ratio
1.95.
• But remaining $60M benefits are no longer cost-effective
– Either one-time costs must be repeated, or
– Lost opportunity that had to be done at the same time as the
other work; OR failure to establish follow-up “harvest” of
additional EE savings.
• Accounting for cream skimming (lost opportunity) = adjusted B/C
ratio 1.63.
The Calculation
Full
Program
benefits
total cost
one-time
Measure
Net benefit
benefit-cost
As
Implemented Remaining
177
117
59
100
25
75
77
1.77
60
25
35
57
1.95
40
TURN Adjustment to Benefit-Cost Calculation
net benefit
unachievable due to design
adjusted
benefit-cost
57
(19)
38
1.63
40
19
1.48
LUNCH
• Please return at 1:30pm.
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Topic Three: Rebound Effects from Energy Efficiency Programs
• Direct rebound effects occur when a customer purchases an energy
efficiency device, but then increases the use of that device, for a
net increase in energy use on the grid.
• Indirect rebound effects occur when a customer take the money
saved through energy efficiency and uses it to purchase new energy
consuming devices or pursuits.
• Academic papers range the potential impact from rebound effects
between 10% of energy savings to greater than 100% of energy
savings.
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Rebound Effects Discussion Questions
• Is the rebound effect relevant to California’s energy efficiency
programs? To what extent are the various energy efficiency
measures likely to be contributing to the rebound effect?
• Should rebound effects be captured in energy savings calculations?
If so, how? Should effects be captured at measure, program, or
portfolio levels?
• What reliable data sources are available to inform the impact of
rebound effects?
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Topic 4: Net-to-Gross and Participant Motivation
• Parties have commented that the current net-to-gross calculations
do not accurately account for participant motivation, especially in
building performance programs.
• Discussion question: Are the current net-to-gross surveys (as shown
on the next slide) sufficiently capturing participant motivation,
especially for building performance programs? If not, should we
modify the net-to-gross surveys, or is another method required?
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Net to Gross Survey Results: Reasons for Doing the Project
Response
Rationale
To reduce energy costs
To reduce energy use
To replace old/outdated equipment
To get a rebate from the program
As part of a planned remodeling/build-out
To gain more control over how the equipment is operated
To update to the latest technology
To protect the environment
To improve equipment performance
Needed to increase capacity
To comply with codes set by regulatory agencies
To improve the product quality
Improve equipment reliability
Comply with company policies for normal maintenance
Had process problems and were seeking a solution
Reduce Maintenance downtime/associated expenses
To improve plant safety
Other
Total*
19
Frequency
61
22
17
11
7
7
6
6
5
5
3
3
2
1
1
1
0
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169
* Multiple responses allowed.
from Results of Nonresidential Net-to-Gross CATI Survey Pre-Test, Itron, 2011
Percentage
36%
13%
10%
7%
4%
4%
4%
4%
3%
3%
2%
2%
1%
1%
1%
1%
0%
7%
100%
BREAK
• Please return at 3:00pm
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Topic 5: Additional Participant Costs and Benefits
• During the June workshops, some parties commented that value of
service loss and transaction costs should be considered for energy
efficiency programs, as they are for demand response programs.
• Value of service loss includes productivity losses (e.g., closure of a
business to allow for energy efficiency upgrades) and comfort
losses (e.g., delay or poorer quality of light from CFLs). Transaction
costs include opportunity costs such as time spent for filling out
forms and “hassle” of learning about energy efficiency options.
• How should (if at all) value of service loss and/or transaction costs
be considered in energy efficiency programs?
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Additional Participant Costs and Benefits (Cont.)
• The cost-effectiveness tests used for the Energy Savings Assistance
(low income EE) program include non-energy benefits (NEBS) that
accrue to utilities and participants.
• During the June workshops, some parties commented that indoor
air quality, which is included in ESAP cost-effectiveness tests, may
be applicable to all energy efficiency programs.
• Should this benefit be calculated for all energy efficiency programs?
Are there other non-energy costs and benefits specific to energy
efficiency programs that are currently omitted from the costeffectiveness framework?
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Other Issues
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