“Show me the money…”
$$$
Efficiency Vermont’s 2006-08
Investment Plan
Q. What IS money, anyway?




A store of value;
A means of exchange;
Not everything, but a great way of
keeping score; and
Unlike electricity, not necessarily fatal
if consumed directly (hence the
“derived” demand for energy)….
Time is money…
Q. Do you believe a dollar in the future is
worth MORE because of future generations?
A. If yes, I want to borrow as much money as
you’ll lend me right now for as long as
possible.
Q. Which would you rather have, $1,000 today
or $1,000 in ten years?
A.
Duh!
You and Your Discount Rate…


Money’s worth today depends on when you get it.
You (and every member of species homo economicus) implicitly or
otherwise apply an annual DISCOUNT RATE to future money outlays
and income (even if you’re certain to spend or receive it).

Until yesterday, Efficiency Vermont calculated our PRESENT WORTHS
of future money (benefits and costs) using a 6.8% discount rate.

From now until the DPS changes it again (with PSB approval), we’re
using a 5.8% discount rate.

This is the OPPORTUNITY COST of investing the public’s money
somewhere else, i.e., in some other “public good”.
Not all money is the same…
Q.
A.
How do we count money at Efficiency
Vermont (and VEIC)?
Let me count the ways….
Different Ways of Counting
Money at Efficiency Vermont
Societal Benefits and Costs
•
•
Total Resource Benefits and Costs – per contract
•
•
•
Benefits: Societal minus externalities
Costs: Not including CRA
Total Resource Benefits and Costs – per 5270 and PIP
•
•
Costs: with Comparative Risk Adjustment
Electric System Benefits and Costs
•
•
•
•
All costs and benefits, including externalities, comparative risk adjutment
Benefits: TRB without fossil, water
Costs: TRC minus participant, third-party cost
“GMP Value Test”
The Color of Money….
BENEFITS
Environmental externalities
Water
Fossil fuel savings
COSTS
Comparative Risk Adjustment (10% of EE costs)
Avoided T&D costs
Participant O&M and other costs (savings)
Participant and third-party costs
Avoided electric generating capacity costs
EVT Expenditures
Avoided electric energy costs
COLOR KEY
Electric system (aka utility) test
TRC test (in addition to components of EST)
Included in TRC in levelized cost PIP, and in societal test (on top of TRC)
Societal test only (on top of EST and TRC)
DSM Cost-Effectiveness
Indicators

Net benefits = PW Benefits – PW Costs



Benefit/Cost Ratio = PW Benefits / PW Costs (>>1.0)



Simple comparative indicator
Misleading
Cost of saved electric energy ($/kWh)


The economic “bottom line” (>>0)
Measure of increase in wealth
PW costs / PW lifetime kWh
 for comparison with avoided supply
 Like “yield”, except inverse, and accounting for lifetime
Net cost of saved peak demand ($/kW-yr)

= (PW costs minus PW electric energy benefits) / PW kW-yr
Supply Curves for Energy
Efficiency Savings
Total Resource Costs vs. Administrator Costs of Electric Energy Savings
10
9
Levelized avoided energy cost
8
Cost of Saved Electric Energy
7
6
5
4
3
2
1
0
Limit of TRC cost-effective savings
10,000
20,000
30,000
40,000
-1
-2
-3
MWh/year
Total resource costs of electric energy savings
EVT costs of electric energy savings
50,000
60,000
The Money Show for Efficiency Vermont
2006-2008

Societal

Total Resource (per Contract)




Total Resource With CRA per PIP
 Cost of saved electric energy
 Net cost of saved peak demand
Total Resource With CRA per PIP and 5270
 Comparison of benefits and costs
 Cost of saved electricity
Electric System
 Comparison of benefits and costs
 Cost of saved electric energy per kWh
 Net cost of peak demand savings
GMP Value from Energy Efficiency Fund
 Net Resource Benefits divided by EVT costs (NRB/EVT) >>1.0
Conclusions


Prospective performance
 Everything pretty much cost-effective from all perspectives.
 A few red flags.
What about the future?
 Prospective initiative economic assessment
 New avoided costs.
 Using analysis to make decisions about budget allocation over
time.
 Portfolio economic performance.
 Where are we on the supply curves for residential
efficiency?