PRESENTATION TO COST-EFFECTIVENESS SCREENING WORKSHOP
WORKSHOP - JUNE 25, 2009
Blair Hamilton
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• Docket 5270 (1990)
• Established cost-effectiveness guidance for efficiency investments made by utilities with ratepayer funds
• Adopted societal cost-effectiveness test as primary
• Set 5% environmental externality adder as rebuttable presumption
• Adopted 10% adjustment to reflect lower risk of efficiency
• Docket 5980 (1999 – Establishing Energy Efficiency Utility)
• Reaffirmed use of societal test and 10% risk adjustment from 5270
• Adopted 0.7 cent/kWh electric externality from MOU
• Asks DPS to develop externality adjustments for fuel-consuming measures consistent with the electric externality value
• Docket 6290
(2003 – Distributed Utility Planning Guidelines)
• Includes discussion of externalities and risk adjustment
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• Spreadsheet tool developed by the DPS
• Updated annually by Efficiency Vermont
• Inflation and discount rates:
• Inflation rate based on Consumer Price Index - All
Urban average of previous 10 years (2.60%)
• Discount rate based on average of utility debt
(6.13%) and equity (10.75%). Results in 8.4% nominal discount rate and 5.7% real discount rate.
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• Includes electric generation, residential fuel oil, commercial fuel oil, residential propane, commercial propane, kerosene, wood
• Electricity avoided costs include 4 energy costing periods, summer generating capacity, T&D
• Updated avoided costs proposed to PSB every two years by DPS (last done in 2007)
• Largely based on bi-annual regional study conducted every two years (regional study does not include avoided costs for transmission and distribution “T&D”)
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Units:
Winter
Peak Energy
$/kWh
Winter
Off-Peak
Energy
$/kWh
Summer
Peak
Energy
$/kWh
Summer
Off-Peak
Energy
$/kWh
Summer
Capacity
$/kW
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
0.1137
0.1258
0.1182
0.1178
0.1111
0.1126
0.1080
0.1105
0.1086
0.1099
0.1149
0.1110
0.1095
0.1126
0.1157
0.1181
0.1198
0.1216
0.1233
0.0831
0.0941
0.0902
0.0868
0.0819
0.0827
0.0773
0.0778
0.0776
0.0796
0.0825
0.0804
0.0778
0.0810
0.0816
0.0829
0.0841
0.0853
0.0866
0.1156
0.1172
0.1190
0.1173
0.1154
0.1172
0.1161
0.1156
0.1166
0.1190
0.1213
0.1196
0.1211
0.1238
0.1276
0.1296
0.1314
0.1333
0.1353
0.0851
0.0883
0.0816
0.0810
0.0771
0.0802
0.0768
0.0771
0.0777
0.0811
0.0802
0.0815
0.0802
0.0808
0.0798
0.0822
0.0834
0.0846
0.0858
0.00
0.00
0.00
72.77
131.25
146.85
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
Generic
T&D
Capacity
$/kW
191.65
191.60
191.66
191.72
191.77
191.68
191.59
191.49
191.39
191.28
191.24
191.12
191.02
190.91
190.82
190.73
190.63
190.53
190.44
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Res.
Distillate
Res.
High-Use
LPG
Res.
Natural Gas
Com
Distillate
Com.
LPG
Com.
Natural Gas Kerosene Wood
15.19
15.26
15.40
15.54
15.68
15.82
16.03
16.24
17.07
17.71
17.29
16.79
16.28
15.81
15.33
15.12
16.46
16.66
16.88
31.84
31.90
32.17
32.07
32.00
32.11
31.98
32.13
28.89
30.99
31.22
31.71
32.01
32.41
31.90
31.93
32.29
32.34
32.34
10.88
11.03
11.29
11.21
11.16
11.29
11.39
11.66
12.42
13.42
12.90
12.36
11.89
11.53
10.87
10.94
11.78
11.89
12.02
13.39
13.46
13.58
13.70
13.83
13.95
14.14
14.32
15.05
15.61
15.25
14.80
14.35
13.94
13.52
13.33
14.51
14.70
14.88
31.84
31.90
32.17
32.07
32.00
32.11
31.98
32.13
28.89
30.99
31.22
31.71
32.01
32.41
31.90
31.93
32.29
32.34
32.34
8.73
8.87
9.13
9.05
9.00
9.13
9.24
9.49
10.26
11.25
10.73
10.19
9.72
9.36
8.71
8.77
9.59
9.69
9.78
15.80
15.87
16.02
16.16
16.31
16.46
16.67
16.90
17.75
18.42
17.99
17.46
16.93
16.45
15.94
15.73
17.12
17.33
17.55
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5.44
5.46
5.51
5.57
5.62
5.67
5.74
5.82
6.11
6.34
6.19
6.01
5.83
5.66
5.49
5.42
5.89
5.97
6.04

• Externality values are added to costs for costeffectiveness screening, but not included when reporting Total Resource Benefits (TRB)
• Externality values are inflated (in State Screening
Tool) from values established in 2000 (yr 2000 $):
• $0.007/kWh
• $0.90/MMBTU Natural Gas
• $1.08/MMBTU Propane
• $1.43/MMBTU Oil
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Total Societal Benefits
- Total Societal Costs
= Net Societal Benefits
NPV of Avoided electric costs + externalities
+ NPV of Avoided fuel costs + externalities
+ NPV of Avoided water costs
Initial cost of measures
+ NPV of O&M costs (+ or -)
+ NPV of Increased fuel usage + externalities
+ Deferral credit (if early retirement)
- 10% Risk adjustment
+ Delivery/admin costs at program and portfolio levels
If Net Societal Benefits are >0, the measure/project/portfolio is cost effective
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• Electric energy avoided costs (by 4 costing periods)
• Electric generation capacity avoided costs
• Electric transmission and distribution avoided costs
• Fossil fuel avoided costs (only if decreased usage)
• Water avoided costs (may be positive or negative benefit)
• Electric externalities
• Fossil fuel externalities (only if decreased usage)
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• Installed cost of measures
• Operation and Maintenance (O&M) net costs (may be positive or negative cost)
• Fossil fuel costs (only if increased usage)
• Fossil fuel externality costs (only if increased usage)
• Deferral credit for early retirement retrofit (always a negative cost)
• Risk discount (10% reduction in positive costs, excluding fuel externalities)
• Delivery and administrative costs at the project, initiative and portfolio level (as further detailed)
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Inputs
• Measure name: Low Flow Showerhead with Oil DHW
• Installed cost: $15
• Measure life: 9 years
• Oil savings: 1.26 MMBTU per year
• Water savings: 4.6 CCF per year
Outputs
• Present Value of Societal Net Benefits: $482
• Present Value of Benefits: $496
• Present Value of Costs: $14
• Present Value of Fossil Fuel Benefits: $146
• Present Value of Water Benefits: $332
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• Market opportunity vs. discretionary retrofit:
• Market opportunity: Costs and savings incremental to new equipment baseline
• Discretionary retrofit: Full installed cost, including installation labor; initial savings relative to existing equipment efficiency
• Screening of “early retirement” of equipment:
• Reduced costs for deferring future replacements (deferral credit)
• Decrease in future savings at time that equipment would have been replaced (baseline shift)
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1. Individual measure:
• uses marginal measure cost only
2. Project:
• includes multiple measures that, bundled together, comprise a project for a customer
3. Initiatives:
• total of all measures and projects for a particular market includes allocated EVT delivery and administrative costs
4. Portfolios:
• total of all initiatives – includes all EVT Costs
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• Cost and savings assumptions and adjustments (free ridership, spillover, install rates) for most, common measures are documented in the Technical Reference
Manual (TRM)
• TRM characterizations are developed by the Technical Advisory Group, that includes EVT and BED technical staff, DPS staff and the Contract Administrator
• Measure characterizations are developed from evaluations and studies, both
Vermont and elsewhere, and calculations or estimates, as appropriate
• Measure characterization values are assigned for all prescriptive measures
• For common custom measures, savings algorithms are specified in the TRM
• Custom measures not in TRM are characterized by EVT
Project Managers and documented in project files
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• Efficiency Vermont has developed formal policies, guidance or standard practices to address a number of screening situations, including, but not limited to:
• Screening for “average” occupants vs. current occupants
• Adjusting baselines
• The value of water leak savings to water utilities
• Screening when a customer chooses a more-expensive measure or form of a measure
• Such policies are either documented and submitted for comment to the DPS as “Program Implementation Procedures,” or documented as internal EVT policies
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• Total Resource Benefits (TRB)
• Avoided cost of electricity
• Fossil fuel net savings
• Water savings
Reported on both annual and lifetime
(present value) basis
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• Costs reported by initiative and total portfolio:
• Efficiency Vermont costs
• Participant costs
• Third party costs
• O&M costs
• Costs reported for total portfolio
• Levelized net resource cost (¢/kWh), from both an
EVT and TRC perspective (net of fossil fuel, water and O&M savings)
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• For Prescriptive Measures/Projects: First-Year Savings at Current Retail
Prices
• For Custom Projects: Cash Flow, with potential for dynamic input
• Costs
• First cost of project & net cost after EVT incentives
• Costs for each year and NPV of:
• O&M costs (baseline, new and net)
• Any increases in fuel costs, by fuel
• Benefits
• First years savings at current retail prices
• Savings for each year, and net cash flow to customer at current retail rates (annual and NPV)
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Analyzes societal economics?
Analyzes customer economics?
Discount rate used
Analysis horizon (years)
Electric "avoided costs" used for economic analysis?*
Fossuil fuel "avoided costs" used for economic analysis?*
Externalities **
Water avoided costs
Retail prices
Lifetime savings
Installed cost
Risk discount
O&M
Early retirement deferral credit
Early retirement baseline shift
Yes
DRAFT –
7/1/09
Efficiency Vermont Vermont Gas
Yes
Yes Yes
5.7% real, 8.4% nom.
5.3% real, 8.55% nom.
50 measure life
AESC: 4 energy periods,
Generation, T&D
AESC: Oil, Propane,
No (Res electric measures installed)
Natural Gas only (4
Natural Gas, Wood
Yes periods)
Yes
Yes
Yes
No
Yes
Fuel Savings
Analysis
Calculator (Fuel
Dealers)
No
Yes
None
1,10, 15, 20
No
No
No
No
Yes
Hulstunk Model
No
Yes, undiscounted
None unlimited
No
No
No
No
Yes
Yes Yes
Yes
Applied as 10% discount on costs
Yes
Yes
Yes, for electric only
Yes
(B/C) * (10/9)
Yes, external calculation
No
Yes, residential only
Yes
Yes
No
No
No
No
Yes, undiscounted
Yes
No
No
No
No
Campbell
Model
No
Yes
4% measure life
No
Yes
Yes
No
No
No
No
No
No
No
Yes
NEAT Audit
(Weatherization
Assistance
Program)
No
Yes
3% real unlimited
No
Yes
Yes
No
No
No
No
No
No
No
Yes
* In this context, "avoided costs" refers to the year-by-year stream of future avoided supply costs from a system perspective, as the term is typically used in a regulatory setting. All of the listed analyses account for fuel use avoided from a consumer perspective using retail prices.
* *EVT and VGS use different fuel specifc externalities.
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Efficiency Vermont
255 S. Champlain St.
Burlington, Vermont
888 – 921 – 5990 www.efficiencyvermont.com
Blair Hamilton x 1024 bhamilton@veic.org
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