A New View on Energy Efficiency
For Public Power Utilities
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1. Cover
(Greeting) We are here today to take a new look at energy efficiency and demand-side
resources for (insert utility name). This presentation is an introduction to why these
resources are important and what steps we can take to put them to work for our utility and
our community. This presentation is provided by American Public Power Association.
(Add other sponsors as applicable.) It accompanies a guidebook called A New View on
Energy Efficiency for Public Power Utilities, which you may already have or might want
to obtain.
2. Definitions
Why a New View? Well, these types of programs have been around in our industry for a
long time—but they are more relevant today than ever. Demand-side technologies have
improved greatly since the first wave of DSM in the 1980s. So have implementation
strategies and tools for measurement and verification. All these varieties of demand-side
resources have evolved. But energy efficiency is the variety that we’re most interested in
today. If we use it well, energy efficiency is the best overall tool to help the utility trim
costs, control risks, support the local economy, and achieve clean energy goals.
3. EE Has Made a Difference
We know that energy efficiency works. As a people, Americans like efficiency, and we
have put energy efficiency to work for decades. Thanks to improvements in every sector
from housing to industrial processes, plus the shift from heavy industries and other
factors, we use less energy per person and much less energy per unit of gross domestic
production in the US than we did in the Big 80s or the Go-Go 90s. You see that in the
graph on the left, where the green line is per capita energy use and the red line is energy
use per unit of GDP.
Electricity demand growth, which utility forecasters once assumed to be steadily rising,
has slowed, too. Now, I’m not talking about 2009, when the recession caused an
unprecedented dip in demand growth. But throughout the last decade, the Energy
Information Administration noticed a leveling of the demand growth curve, mostly due to
a healthy increase in energy efficiency and load management. That includes public
policies, like better building codes and appliance standards, and it includes innovations in
all kinds of products and processes. Utilities have played a role, though not every utility
in every state. Since 2000, electricity demand has been growing at just 1.1% per year on
average, nationwide. Our goal is to keep demand growth low, while keeping economic
growth strong.
4. But This Is Now
Even before this recession hit, we knew that the utility industry would face challenges.
The industry faces rising fuel costs. Regardless of whether one bill or another passes in
Congress, we face rising environmental compliance costs. We have a system that is full
of aging power plants, constrained transmission, and distribution infrastructure that has
served us well—and needs to be replaced. And while the industrial sector is getting
leaner in this country, many households are using more electricity… with near-universal
air conditioning, wide-screen TVs, and all those plug loads. As you can see in this chart,
the category called “other” is the fastest growing category of residential energy use.
5. Our Challenges
Let’s take a minute and list some specific challenges that come to our minds. These could
be challenges with upgrading our system, keeping costs low, helping customers who are
hurting, avoiding steep rate increases, or selling a plan to the council—whatever comes to
your mind.
(Take ideas.)
While we’re up to our eyeballs in these problems, it might be hard to see that there’s any
solution. But often, energy efficiency and other demand-side resources can be part of the
solution—whether that’s a matter of deferring supply-side investments, or getting ahead
of environmental rules, or just saving a little on our power-supply bills—these demandside strategies can help.
6. Our Future: Diverse and Efficient
I want to remind you that this struggle we’re up against has a purpose. The electric utility
industry is reinventing itself right now. Let’s not argue about just how smart we want our
grid to be. And if there is disagreement about the details of climate change in the room,
we’ll let that stand for now. The fact is, one way or another, the utility industry is
modernizing. The marriage of information and power is changing everything. One recent
NREL study, which looked at the crystal balls of Republicans and Democrats—and of
interest groups on either side of the spectrum—found that there are a couple of trends we
tend to agree on. One is the trend toward greater resource diversity, and the other is the
trend toward greater energy efficiency. In a world of change, that’s what we know. The
future belongs to the efficient.
7. Leaders in EE Innovation
We will be pioneers. We have little choice. When you think back to the people who first
built this utility—generations ago—they probably didn’t think they were up to the task.
But they did it. As we move forward, there may be times when we feel we’re in
uncharted territory. But we do have examples to follow. These are a few examples of
how leadership can pay off. As we start to get our ideas together, we can examine these
and other case studies to help guide us along the way.
(Details optional, at presenter’s discretion)
Since 1980, the Burlington Electric Department in Burlington, VT, has met the needs of
strong economic development with nearly flat load growth. Participating customers have
worked with the utility to save millions, and to put BED on the map as a leader in
defining what Sustainable Economic Development means.
WPPI Energy is a joint action agency serving Wisconsin and parts of Michigan and Iowa.
Through programs for every kind of customer, members have achieved cumulative
energy savings of more than 154,000 MWH per year. WPPI’s cumulative reduction in
diversified demand is equivalent to 23 MW of baseload power.
A 20-year commitment to energy efficiency has saved the 5,000 customers of Waverly
Light and Power, in Iowa, more than $1.5 million net, since it began a comprehensive
energy efficiency and demand-reduction program in 1992. Demand savings total more
than 2 MW. Waverly has shown how energy efficiency fits into a plan that includes
conventional energy supplies, but also a growing portion of demand-side resources and
renewables. That includes Waverly’s well-known community wind plant.
8. Conservation Power Plant
Our utility can learn from large utility examples, too, such as Sacramento Municipal
Utility District and Austin Energy. For example, Austin Energy has had decades of
experience with energy efficiency and renewables. It coined the term “conservation
power plant,” to describe the way carefully orchestrated demand-side resources can
reduce the need for conventional generation. For all it has achieved, Austin is still
expanding its “conservation power plant” to meet 15% of new energy needs by 2020.
9. New Heroes
Sometimes you’ll hear the argument that, oh, there are only a few public power utilities
that are always celebrated. Well, here is one recent example of a community—River
Falls, Wisconsin—that has won recognition for new, comprehensive energy efficiency
programs. For River Falls and a growing number of public power towns, energy
efficiency saves money and makes sense.
(Supplementary information is available.)
10. Energy Efficiency Affects Resource Needs
Now, let’s look at how energy efficiency affects future resource needs. We are speaking
today of the utility’s business case for energy efficiency. One change since the early days
of DSM is that utilities today have more partners in the community. We spoke earlier
about how the growth curve for electricity demand is flatter than it used to be. That is due
mostly to this red wedge, representing market changes, such as better building materials
and appliances, plus policy changes, such as energy codes and standards. As the utility,
we can focus on additional measures—in this green wedge—that address our unique
concerns.
11. Business Case for Demand-Side Resources
From the utility’s view, our program efforts must be aimed at reducing marginal costs
and improving net benefits to the utility. For example, we need to focus primarily on
electricity, not heating fuels if that’s not our business. Are we concerned about getting
ahead of environmental regulations? Probably. Saving on supply costs by lowering peak
demand? Probably. These are the kinds of things we need to focus on first. Then, as a
public power utility, we can support broader set of activities, which are good for the
utility because they are good for the community that we serve.
12. What Makes EE a Resource
People will say, energy efficiency is a wish, not a promise. Everybody has a story about
the family that picked up a handful of energy saving CFLs at a utility event and screwed
one in an empty socket in the closet. Or the family that did that, and then went to Best
Buy to get a big, flat-screen plasma TV. I don’t doubt those stories are true, but the
research on how large-scale energy efficiency programs perform takes account of all that.
If we take a serious approach to energy efficiency, it will perform in a predictable way,
for a predictable price, for a long, long time.
(Optional details for this slide--)
It is important to understand that there is a science to the development and
implementation of demand-side resources. Specifically, your efforts have to meet these
specific criteria. They have to be…
•
Measurable. The reduction in either energy use or peak reduction must be verifiable
and ongoing. We must see evidence that our expectations will be met.
•
Long-term. Most energy efficiency and load management program impacts last 10 to
20 years—if we plan well, we can count on these resources for a long time.
•
Reliable. A related concern is that equipment and installations required for utility
programs must be reliable—both for our sake and for the customers’.
•
Cost-effective. Cost-effectiveness tests will be discussed later in this presentation.
Put simply, when you line up all the costs against the value of your benefits, but
benefits need to win.
•
Suited to the Community. This is just a measure of relevance. We need to keep up
our dialog with customers and community leaders in order to confirm their support.
13. Side-Effects
And what are the side-effects of energy efficiency? Jobs. Energy efficiency and demandside resource investments help economic development in at least three ways. First,
electric bill savings will be re-spent—on everything from school supplies to dinner dates
for Mom and Dad. This is called the multiplier effect. Second, the demand for energy
efficiency improvements and better buildings creates green jobs. Politicians will debate
exactly how many jobs and what they pay. For us, the bottom line is simple—if people
decide to upgrade their homes or businesses in a down economy, then somebody’s going
to work. Third, when local businesses save energy, they’re cutting waste, not jobs. We
can use energy efficiency programs to keep our local businesses strong.
14. The Roadmap
If you refer to the APPA guide book, A New View on Energy Efficiency, you will see a
diagram similar to this one. This is a simple 10-step process for designing and developing
energy efficiency and demand-side resource programs that make sense. The guide book
gives a summary of what happens at each of these steps. The important point now is that
there is a proven path for developing these demand-side resources.
You’ll notice that it starts with understanding the utility’s costs and drivers. We started in
on that task already, when we made a list of our urgent challenges.
15. How Does Energy Use Drive Utility Costs?
Another way to identify our cost drivers is to gather information on how each class of
customers uses energy. Who is using the most energy and when? What kinds of
equipment or processes are driving our load?
(Sometimes the Joint Action Agency or a state or regional agency can provide data to
customize this.)
Here, for example, the Northwest Power Planning Council has plotted major off-peak
energy uses in each sector for the Northwest region. The vertical axis is the magnitude of
energy use and the horizontal axis is time, month by month over the year. Without
reading the fine print, you can see that the yellow line, with represents agricultural
irrigation pumping loads, use a lot of energy on this system in the summer. The blue line
and the red line are seasonal space conditioning—heating and cooling—for residential
customers. This kind of diagram obviously differs for each utility, but thinking about
energy use patterns is essential to planning an energy efficiency program that works.
16. On Peak Cost Drivers
This on-peak diagram has a familiar characteristic—a summer spike for residential air
conditioning. Obviously, if you were going after high-value demand savings on this
system, you would be smart to look at AC. A more detailed look at all kinds of on-peak
appliances and equipment would complete this picture. This type of peak-load data is
important, because the utility’s highest energy costs are usually those experienced on
peak. This is where a lot of the savings are.
(Again, the presenter should use actual data if possible.)
17. Sample Measures
Sometimes utility planners get stuck because they can’t imagine how to know how much
a given demand-side measure will save. We might simply model our programs on
successful programs at similar utilities. Or we could work with databases that provide socalled Deemed Savings numbers. These are energy and demand savings estimates that
have been carefully documented for very specific measures—everything from a
refrigerator replacement to lighting improvements, and more. In other words, if you
replace a room air conditioner that has a low efficiency rating with one that has a better
rating, how many kilowatts of demand and kilowatt-hours of energy could you save?
Researchers around the country have actually been working on these questions and
preparing guidelines for utilities like ours. The point is, demand-side planning is not
rocket science, but it is not guesswork, either.
18. McKinsey Chart
Here is a chart that I don’t expect you to read. But look at the sheer number of energy
efficiency measures listed. The horizontal axis shows total savings potential—up to the
equivalent of more than 9,000 trillion BTUs for the whole US. The vertical axis is cost—
and I can tell you that nearly every measure costs less per unit of savings than the
predicted price of energy in 2020. Today, the average cost of energy efficiency is 2 to 4
cents per kWh saved. That’s why even conservative analysts, like the management
consultants at McKinsey who developed this chart, say energy efficiency is a first-choice,
least-cost energy resource.
19. How Big is Our EE Resource?
The important question for us is, how big is our energy efficiency resource? Some
utilities will perform energy-efficiency potential studies to answer that question. We may
do that, or—again—we might model our efforts on utilities that have already had success.
By the time we consider which energy efficiency measures are really affordable and
practical for our market, our energy efficiency resource won’t be quite as gigantic as we
thought at first. But it will be a real resource that we can capture cost-effectively, by
working with the right target market of our customers.
20. Address Technical Needs
As we get into program planning, we can address some technical needs and limitations. If
we need to talk to appliance dealers or equipment suppliers, we can do that. If we need to
help local tradespeople to upgrade their skills, we can do that. Obviously, the better our
partnerships with trade allies and support organizations, the more cost-effective our
efforts will be.
21. Address Marketing Needs
You might have noticed the note on an earlier slide: A measure is not a program. A
program is a strategy for implementing many measures and creating energy savings.
Implementation is a marketing task. It is also an administrative task. We need to be sure
we’ve thought through every detail of how we plan to get this job done. One lesson
learned by successful small-utility programs is that community partnerships make a lot of
difference. Small utilities like River Falls, Waverly, and others have achieved a lot by
enlisting community support.
22. Pricing: Incentives
Here’s a question—what kinds of incentives do we need to offer to make our program
work? And what will that cost us? National research suggests that we probably need to
offer incentives—in effect, we will have to pay something for the kilowatts and kilowatthours we want to save. But we ought to put some effort into setting the right incentive—
neither too low nor too high and appealing to our specific target market. It’s surprising
how many large utilities pay more to achieve program results than they have to. We
ought to keep up with the news on state and federal incentives, too. For example, federal
energy-efficiency tax credits can make a big difference for many of our customers.
23. Pre-Test
Once we get a sketch of our program, we will need to test its cost-effectiveness. A lot of
public power pioneers in this field will tell you to do a benefit-cost analysis. You have to
know what you’re getting into. But they also say that you shouldn’t let a lack of fancy
software slow you down. At (insert utility name), we will have to decide how detailed our
analysis needs to be.
Cost-effectiveness testing is all about the point of view. Usually a program would have to
be cost-effective from the utility’s point of view. But other points of view matter, too—
the program participants’, the non-participants’ (or all ratepayers’), and the broadest point
of view, which is taken for the societal cost-effectiveness test. APPA’s New View guide
includes an explanation of each test, along with references on how to do the calculations.
(If the presenter is addressing a member of a Joint Action Agency, then add: If a utility is
part of a Joint Action Agency, then it’s really important to recognize that the regional
perspective might differ from our local perspective. The local utility, other JAA
members, and the Agency need to work together to find programs that succeed for all
parties.)
24. A New View
Some of you might still be wondering, why would we spend money to get people to buy
less of what we have to sell? The utility industry started to address this question 20 years
ago, when we were asked to get used to the idea that we sell energy services, not just
kilowatts and kilowatt-hours. But sometimes the math didn’t quite work out on the
energy services model. Today we recognize that if we want a sustainable utility, which
slows the need for new power plants and manages long-term costs to the customers, then
we need to lean and strong.
At first, the benefit of investing in low-cost energy efficiency can be so great that we will
not see revenue impacts—only savings. As we’ve mentioned, the average cost of energy
efficiency today is just 2 to 4 cents per kilowatt-hour saved. Some measures are nearly
free. How can you beat that? Well, you know those low-cost energy savings will result in
lower customer bills. If that translates directly into lower wholesale power bills for you,
then it’s all good. When we talk about saving the next kilowatt or kilowatt-hour, we are
talking about saving the most expensive capacity and energy you sell.
But the relationship between energy savings and utility cost savings is seldom direct.
Utility rate structures are complicated, and wholesale power contracts or generating plant
operations are even more complex. Maybe we need to get used to some revenue impact,
along with our lower costs.
This slide suggests how to deal with the costs and revenue impacts of energy efficiency.
Many of the utilities that have been pioneers in this field have paid for energy-efficiency
investments through small rate increases. That’s a hard truth, but then, most utilities are
facing rate repeated rate increases from conventional operations. An investment in energy
efficiency will cost a little bit now, but pay off for years to come.
25. Demand Savings
Let’s be clear, as we talk about energy efficiency, we are not only looking for programs
that save kilowatt-hours. Sometimes that is enough, but ideally the utility will run a
combination of programs to save energy and capacity, or peak demand. This is actual
data from Waverly, Iowa. There are a variety of reasons for year-to-year changes in peak
demand, but you can see how, overall, the introduction of energy efficiency programs has
had a fantastic effect on shaving that demand. That is a major source of savings in
Waverly’s overall program strategy. National program data shows that many energyefficiency programs have a demand-reducing effect. We might also couple load control
or time-of-use programs with our energy efficiency programs to maximize this effect.
26. Lead by Example
Now I hope you are getting curious. Exactly what kinds of energy efficiency and
demand-side programs might we consider? APPA often recommends that public power
utilities should lead by example—start with energy saving measures that reduce utility
operating costs or local government operating costs. Have we addressed any of these
measures yet? A number of resources provide detailed recommendations for launching
efforts to address everything from office and street lighting improvements to process
improvements at the wastewater treatment plant.
27. Business-Sector Programs
Turning to customer programs, those programs that are aimed at helping local businesses
often pay dividends. For one thing, they usually have a greater ability than most
customers to save energy. More bang for the buck. And when they save, the have more
money left to retain employees. That’s especially true in hard times, when business
revenues might be lagging.
(Optional note: An APPA publication called Energy Matters for Small Business can help
us to help those customers. APPA also has a publication aimed at helping industrial
customers.)
If we’re not ready yet to justify a business-energy expert, we might look into sharing
expertise with our neighboring utilities or with a nearby college or industry that could use
that expertise. For example, this photo is from Missouri River Energy Services, which
has a specialized industrial energy services program, available on a part-time basis to all
its members.
28. Residential-Customer Programs
As for residential customers—we have lots of opportunities, and we can find lots of help.
We will discuss some of these options after the presentation. Many public power utilities
have worked with the national Energy Star program on what they call Quick Start
programs. Some of these also dovetail with state-run or regional programs, which build
trade ally support. These kinds of programs can be up and running in a matter of months.
Another option might be to work with successful utilities that are willing to share their
experience. Springfield, Illinois, City Water Light and Power is one of those with decades
of experience and a current commitment to get measurable results from a range of
residential programs. You can see a few of them here: appliance replacement programs,
an air conditioning efficiency and peak reduction program, and financing to support
weatherization, among others efforts.
29. Energy Efficiency is the Foundation
As you know, when we talk to our customers, they often say they want renewable
energy—especially wind and solar power. These are viable and increasingly costeffective resources, but energy efficiency is the foundation to any strong, local utility
resource plan. This wind turbine is in Bowling Green, Ohio. It is part of a joint-venture
project with other members of American Municipal Power. As one of the first utility
wind projects east of the Mississippi, it won accolades for Bowling Green. But the truth
is, Bowling Green had been working with energy efficiency and load management for
decades. The wind project was, in many ways, just a logical next-step for this
community, in acting on its commitment to sustainability.
30. Engage the Public
The most successful public power energy efficiency programs have involved the
community at every stage, to take advantage of local expertise and insights, to spread the
word and spur greater participation in utility programs, and importantly, to win genuine
and lasting community support. How would we gauge our relationship with the
community here? Maybe good… maybe not so good. Should we spend a minute thinking
together about how we can engage the public more effectively in our energy efficiency
efforts?
31. Leadership Matters
Leadership matters. Study after study, including research from EPRI and from the
American Conference for an Energy Efficient Economy, has found that top-management
support is the number on predictor of program success. We will keep this discussion
going, to see where each of us stands—and if we can stand together to get this important
job done. At an APPA meeting, this short list of ideas seemed to bear the most weight in
gaining support for energy efficiency programs. (Read bullet points:)
- Bring economic arguments home. Energy efficiency saves dollars and grows jobs.
- Focus on bills, not rates.
- Work with the Joint Action Agency or neighboring utilities.
- Support public participation. Build relationships with partners in the community.
- Look to business programs for big savings, but offer residential programs—which build
pubic support, too.
- Evaluate! (They say a kilowatt saved doesn’t count until you count it.)
- And this point, I cannot stress too much: Celebrate success.
32. Resources
The people at APPA, who brought us this presentation, are ready and willing to provide a
lot more resources and support. They—and I—hope that you’ve enjoyed this show.