Cost Benefit Analysis
•
•
•
•
•
Costs
Administration
Equipment
Incentives
Revenue Loss
Value of Service Lost
•
•
•
•
•
Benefits
Avoided Costs
Environmental
Non-energy
Non-monetary
Tax Credits
• Benefit Cost Ratio
• Net Benefits
• Payback Period
Cost-Effectiveness Analysis
Program A
Benefit
Net
Payback
Cost Ratio Benefits
Period
3.28
$1,234 K
7 years
Program B
1.65
$35.5 M
1 year
Program C
0.82
($9,036 K)
--
Program D
0.33
($15,678)
2 months
The Standard Practice Manual (SPM)
• Developed to measure the cost-effectiveness of
Energy Efficiency programs
• Use four tests to measure cost-effectiveness
from four perspectives:
– Society: The Total Resource Cost (TRC) test
– Program Administrator: The Program Administrator
(PAC) test
– Ratepayers: The Ratepayer Impact Measure (RIM)
test
– Participant: The Participant Test
ESAP tests
• MPT – Modified Participant Test
– Benefits are bill reductions and participant non-energy benefits
– Costs are measure costs (administrative and capital costs of the
measure)
• UCT – Utility Cost Test
– Benefits are the avoided costs of the energy savings and utility nonenergy benefits
– Costs are measure costs (administrative and capital costs of the
measure)
• TRC – Total Resource Cost
– Benefits are the avoided costs of the energy savings
– Costs are measure costs (administrative and capital costs of the
measure)
Avoided costs and NEBs are calculated by discounting annual values
over the lifetime of the equipment to determine the Net Present Value.
The % of ESAP’s administrative costs and NEBs assigned to
each measure are based on the measure’s energy savings.
Cost and Benefits Used
Administrative costs
Avoided costs of
supplying electricity
Bill Increases
Bill Reductions
CAISO Market
Revenue
Capital costs to
participant
Capital costs to
utility
Environmental
benefits (GHG only)
Incentives paid
Increased supply
costs
Market benefits
Non-monetary/Nonenergy benefits
Revenue gain from
increased sales
Revenue loss from
reduced sales
Tax Credits
Value of service lost
and transaction
costs to participant
EE TRC
EE PAC
DR TRC
DR PAC
DR RIM
COST
BENEFIT
COST
BENEFIT
COST
BENEFIT
COST
BENEFIT
COST
BENEFIT
DR
Participant
TRC
MPT
UCT
ESAP
TRC
COST
BENEFIT
ESAP
Participant
COST
ESAP
Utility
COST
BENEFIT
COST
BENEFIT
BENEFIT
COST
COST
COST
COST
COST
COST
COST
COST
BENEFIT
COST
COST
COST
BENEFIT
BENEFIT
COST
COST
COST
COST
BENEFIT
BENEFIT
COST
BENEFIT
BENEFIT
BENEFIT
COST
BENEFIT
COST
COST
BENEFIT
BENEFIT
BENEFIT
BENEFIT
BENEFIT
COST
BENEFIT
COST
BENEFIT
BENEFIT
COST
Blue text indicates optional, hard-to-quantify benefits.
Italic text indicates that value may be different for different tests
BENEFIT
BENEFIT
What is the difference between the ESAP
tests and the SPM tests?
• ESAP Utility test does not include the capital costs to
participant, tax credits, or increased supply costs.
However, these values should be zero for ESAP.
• ESAP Utility test includes NEBs, which are not included
in the PAC or the EE TRC, and included only as an
“optional benefit” in the DR TRC.
• Other than including NEBs, the ESAP Utility test is
effectively the same as both the TRC and PAC tests.
• ESAP Participant test measures bill reductions and
participant NEBs vs. measure costs (i.e., the benefits to
the participants vs. the costs to society). It is unclear
whose exactly whose perspective this represents.
Cost-effectiveness tests for Demand Response
TEST:
INPUT:
TRC
(Society)
PAC
(Utility)
RIM
(Ratepayers)
Administrative costs
COST
COST
COST
Avoided costs of supplying electricity
BENEFIT
BENEFIT
BENEFIT
Participant
Bill increases
COST
Bill reductions
BENEFIT
CAISO Market Participation Revenue
BENEFIT
Capital costs to participant
COST
Environmental Benefits
BENEFIT
Incentives paid
BENEFIT
BENEFIT
COST
COST
COST
Increased supply costs
COST
COST
COST
Market benefits
BENEFIT
BENEFIT
BENEFIT
Non-monetary benefits
BENEFIT
BENEFIT
BENEFIT
Revenue gain from increased sales
BENEFIT
Revenue loss from decreased sales
COST
Tax Credits
BENEFIT
BENEFIT
Transaction costs to participant
COST
COST
Value of service lost
COST
COST