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Expanding Energy Efficiency for BC Hydro:Lessons from Industry Leaders
June 19, 2012
Prepared for the BC Sustainable Energy Association
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Overview
1. Key Terms and Concepts2. BC Hydro’s IRP3. US Data on Energy Efficiency4. GEEG’s Empirical Research and Analysis5. Predicting Efficiency Costs for BC Hydro6. Impact of Expanded Efficiency for BC Hydro7. Program Enhancements
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1. Key Terms and Concepts
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Types of Savings
4
kW
Year 1 Year 2 Year 3
Usage before EE
Annual Peak DemandSavings (kW-yr)
Annual Energy Savings (kWh-yr)Usage after EE
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Savings Depth (%)
5
kWh-
yr
Year 1 Year 2 Year 3
Sales
Savings ÷ Annual SalesAnnual Savings
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Why Use Sales as Basis for Depth?
1) Annual sales correlates more closely to the size of efficiency opportunities.
2) Growth rates more volatile.
6
Why not use sales growth rate as basis for savings depth?
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Savings Tiers
Tier Definition
Tier 1 Savings Depth ≥ 1.5%Target = 2%
Tier 2 1.5% > Savings Depth ≥ 0.67%Target = 1%
Tier 3 0.67% > Savings Depth ≥ 0.33%Target = 0.5%
Tier 4 0.33% > Savings DepthTarget = 0.25%
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Unit Costs vs Levelized Costs
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Initial Cost
$$$
=
Many years of savings
kWh-yr
Year 1
kWh-yr
Year 2
kWh-yr
Year 3
kWh-yr
Year N
… Amortize the cost overthe period of savings to get
Divide cost by annual savings to get
Unit Costs ($/kWh-yr)
Levelized Costs ($/kWh)
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Example Levelized Cost Calculation
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Unit Cost = $0.30/kWh-yrLifetime = 15 yearsReal Discount Rate = 5.5%
Levelized Cost =
Given:
Spread the initial cost over the life of the
savings, similar to an annual payment on a
$0.30 loan for 15 years at 5.5%
= $0.0299/kWh
A cost now comparable to supply-side resources.
Slide was added after the presentation, for purposes of clarity.
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Economies of Scale vs. Diminishing Returns
• Economies of Scale– Lower fixed costs as a percentage of total
spending• Diminishing Returns
– More expensive measures for deeper savings– Higher incentives required for everyone to get
additional participants
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Economies of Scale vs. Diminishing Returns (cont.)
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Savings as a Percentage of Sales
Cost of Energy Savings
As a portfolio ramps up, economies of scale drive down costs
Beyond a certain point, the law of diminishing returns pushes costs up
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Benefit/Cost Description TRC PAC
Cost Administration Costs X X
Cost Participant Costs X
Cost Customer Incentives X
Cost-effectiveness Tests
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Benefit/Cost Description TRC PAC
Benefit Avoided Electric Costs X X
Benefit Avoided Gas Costs X X
Benefit/Cost Description TRC PAC
TRC = Total Resource Cost Test
PAC = Program Administrator Cost Test (“Utility Cost Test”)
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Cost of Energy SavingsTRC vs PAC
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2. BC Hydro’s Latest IRP
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BCHydro Projected Savings
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F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 F2022 -
1,000
2,000
3,000
4,000
5,000
6,000
0
100
200
300
400
500
600
700
800
BCH Planned Energy-Focused DSM Program Cumulative Savings (From F2012)
GWh
MW
GW
h
MW
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BCHydro Savings % of Sales
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F2013 F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
Energy-Focused DSM Incremental Savings % of Sales
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BCHydro Projected Costs
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F2013 F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 $-
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
Energy-Focused DSM Program Spending and Savings
Budgets
$/kWh-yr
Bud
gets
(mill
ions
201
1$)
$/kW
h-yr
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3. US Data on Energy Efficiency
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Electric Energy Savings in the US by Sector (from US EIA)
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ACEEE Costs and Savings for States, 2006 and 2007
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Source: American Council for an Energy Efficient Economy
Tier 1Tier 2Tier 3Tier 4
-yr
Grouping in Tiers 2 & 4
General range of $0.10 - $0.30U
nit C
ost (
2011
$/kW
h-yr
)
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4. GEEG’s Empirical Research and Analysis
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Data Collected
• Incremental annual energy savings and spending for residential and non-residential sectors where possible
• Covering:– 23 States and 2 Canadian Provinces– 37 Program Administrators– 470 Program Years of Data– $25 Billion of Spending (2011$) – 105,000 GWh/y of Cumulative Annual Savings
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Collected Data by Savings Tier
Tier Definition Observations
Tier 1 Savings ≥ 1.5%Target = 2%
Includes 9 program-years since 2005 from VT, CA, and CT.
Tier 2 1.5% > Savings ≥ 0.67%Target = 1%
60 program-years fall in this tier, including IA, ME, MA, NV, NY, RI, HI,
the Pacific Northwest, British Columbia, and Nova Scotia
Tier 3 0.67% > Savings ≥ 0.33%Target = 0.5%
States in this tier include AR, NJ, and WI
Tier 4 0.33% > Savings > 0Target = 0.25% States in this tier include OK and TX.
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Historic Values
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Convergence
Most in Tier 2
Uni
t Cos
t (20
11$/
kWh-
yr)
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Planned Values
25
Uni
t Cos
t (20
11$/
kWh-
yr)
Trend higher
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Regression Model
• Conducted multiple regression on dataset testing correlation between resource acquisition costs and:– Savings Depth (% Savings)– Time– Customer Sector– Location
• Results:– Adjusted R2 = 0.875 (model accounts for all but 13.5%
of sample variance in costs)– Highly statistically significant variables (≥ 99.9%
confidence-level)
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Effects of Savings Depth on Resource Acquisition Costs
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Diminishing Returns over Time
• Each additional year of maturity adds $0.075/kWh-y to the costs
• Planned savings add $0.072/kWh-y to costs
• Some locations have higher acquisition costs. Being in– California adds $0.17/kWh-y– New England adds $0.20/kWh-y
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5. Predicting Efficiency Costs for BC Hydro
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Overview of Approach
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General Assumptions
Ramp up to 2.0% by 2014
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Savings as a % of Sales
Savings Goals
Load forecast from IRP
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Efficiency Resource Acquisition Costs
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
Tier 1 Spending per kWh-yr Savings
Residential
C&I
2011
$ pe
r kW
h/yr
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6. Impact of Expanded Efficiency for BC Hydro
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Tier 1 Savings Scenario
Year Incremental GWh Savings
Incremental MW Savings Budgets (Millions 2011$)
Incremental Annual2013 766 143 $ 217.56 2014 1,063 198 $ 268.62 2015 1,106 205 $ 287.88 2016 1,145 213 $ 306.99 2017 1,198 220 $ 330.20 2018 1,279 235 $ 361.51 2019 1,336 245 $ 387.97 2020 1,361 250 $ 406.64 2021 1,382 254 $ 424.40 2022 1,398 256 $ 441.02
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Tier 1 Savings Scenario
Year Cumulative GWh Savings
Cumulative MW Savings
Cumulative Budgets (Millions 2011$)
Cumulative Annual2013 1,455 271 $ 352.17 2014 2,469 460 $ 620.79 2015 3,466 642 $ 908.67 2016 4,463 829 $ 1,215.67 2017 5,481 1,005 $ 1,545.87 2018 6,514 1,195 $ 1,907.37 2019 7,465 1,369 $ 2,295.34 2020 8,371 1,535 $ 2,701.98 2021 9,228 1,693 $ 3,126.38 2022 10,017 1,837 $ 3,567.40
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Cumulative Budgets
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Cumulative Spending
Tier 1
BCH Planned Energy-Focused DSM
Ene
rgy-
Focu
sed
DSM
(Mill
ions
201
1$)
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Energy Requirements vs. Supply Resources
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2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2,500
12,500
22,500
32,500
42,500
52,500
62,500
72,500
82,500
92,500 Forecasts (with line losses)
Base Case (w/o Energy-Focused DSM)
Base Case (w/ BCH Planned DSM)
Including DSM: Tier 1
Supply Resources
FISCAL YEAR
GWh
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Peak Requirements vs. Supply Resources
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2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2,500
4,500
6,500
8,500
10,500
12,500
14,500
16,500 Forecasts (with line losses)
Base Case (w/o Energy-Focused DSM)Base Case (w/ BCH Planned DSM)Including DSM: Tier 1Supply Resources (Net of Reserves)
FISCAL YEAR
MW
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Cumulative Energy Savings
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 -
2,000
4,000
6,000
8,000
10,000
12,000
Cumulative GWh Savings
Tier 1
BCH Energy-Focused Planned DSM
Ene
rgy-
Focu
sed
DSM
Pro
gram
Sav
ings
(GW
h)
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Levelized Costs
Sector
Levelized Cost 2012$/MWh
Min (F2014)
Max (F2032)
Residential $40.8 $60.8 Non-Residential $23.0 $38.0
Total $29.3 $45.9
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7. Program Enhancements
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Scale up Savings
42
Increase pace and
scale
Target customer sectors
Maximize net benefits
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Avoid
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1. Cream-skimming
2. Lost-opportunities
=
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Encourage
44
Integration of program design and delivery Across fuels and service areas.
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Go Deeper
45
1. Low-income2. Residential3. Small-to-medium Commercial
Enhance programs to get as much a
savings per project as economically
possible
Important sectors include:
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Redesign Incentives
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Convert Street Lighting
47
LED Street Lights in Foshan, China
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Lead by Example
Long-term capital plan to capture all cost-effectively achievable efficiency
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