Energy Efficiency as a Resource: What is the Cost of Saved Electricity?

1. Energy Efficiency as a Resource: What is the Cost of Saved Electricity? Charles Goldman Lawrence Berkeley National Laboratory Missouri Energy Policy Workshop October 7, 2015 The work described in this presentation was funded by the National Electricity Delivery Division of the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability and the Office of Energy Policy and Systems Analysis under Lawrence Berkeley National Laboratory Contract No. DE-AC02-05CH11231.

2. Overview • Why study the cost of saving energy? • LBNL Cost of Saved Energy Project • Trends in Program Administrator Cost of Saved Electricity • Total Cost of Saved Electricity • National and Sectoral • Program • State • Summary: Implications for EE as a Resource

3. LBNL Cost of Saved Energy Project Standardization Is Critical • A common DSM lexicon and program typology • LBNL EE Program Reporting Tool – due out soon Approach • Collect & analyze reported annual EE program data LBNL DSM Program Database • Program Administrator CSE: 100+ administrators in 35 states • ~6,500 electric program years 2009-2014 • Total Cost of Saved Energy: 50+ administrators in 20 states • ~3,000 program years Data Collected • Annual & lifetime savings, net & gross • Budgets & expenditure details • Measure lifetimes for programs • Participation

4. LBNL Efficiency Program Typology 27 simple categories 7 sectors 65 detailed categories Program Type Categorization Level Portfolio Sector See LBNL Policy Brief: Energy Efficiency Program Typology and Data Metrics: Enabling Multi-State Analyses Through the Use of Common Terminology – at http://emp.lbl.gov Detailed Simplified

5. Why the Cost of Saved Energy Weighing Costs and Performance Among Efficiency Resources Assessing Market Dynamics and Trends Load Forecasting Integrated Resource Planning

6. Residential and C&I Sector Trends • Residential: Rising from 1.8 to 2.4 cents per kWh (6% per year) • C/I: Rising from 2.2 to 2.6 cents per kWh (5% per year)

7. Regional Trends • Regional trends are mixed • Average cost of electricity savings in all regions is level or rising • Cost of saving energy rising fastest in the West – about 9% annually since 2009 • Lighting influential, e.g., in Midwest Northeast South West Midwest

8. Total Cost of Saved Electricity: Data Coverage

9. Defining the Levelized Total Cost of Saved Energy * = Where the 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑅𝑒𝑐𝑜𝑣𝑒𝑟𝑦 𝐹𝑎𝑐𝑡𝑜𝑟 = [𝐴 ∗ (1 + 𝐴)^𝐵]/[(1 + 𝐴)^𝐵 − 1] A = Discount rate (6% real) B = Years of program savings, calculated as the savings-weighted life of the efficiency actions in aggregate *The total cost of saved energy is not the Total Resource Cost test.

10. Total vs. Program Administrator Cost of Saved Energy Source: LBNL DSM Program Database • Savings-weighted average Total CSE ($0.046/kWh) was roughly twice the PA CSE ($0.023/kWh) • Residential programs had the lowest savings-weighted total CSE ($0.033/kWh) followed by C&I programs ($0.055/kWh) Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database.  CSE values are for program administrator costs are based on gross savings.  Savings are levelized at a 6% real discount rate.  The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type.

11. Total Cost of Saved Energy by Sector Source: LBNL DSM Program Database • Median across all sectors is $0.069/kWh • Ranges are narrowest in the C&I sector, widest for low income Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database.  CSE values are for program administrator costs are based on gross savings.  Savings are levelized at a 6% real discount rate.  The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type.

12. Residential Total CSE: Program Weighted Averages Source: LBNL DSM Program Database • Low residential total CSE driven by lighting programs (60% of sector savings at $0.018/kWh) • Behavioral feedback programs were $0.057/kWh – with 1-year lifetime for savings • Many multi-measure programs – MF/SF retrofits and new homes– were $0.07-$0.11/kWh

13. Program Administrator (PA) Cost of Saved Electricity:National Trends • The average cost of saving electricity has been rising, going from 2.2 cents to 2.9 cents per kWh over 2009-2013 • Compound annual growth is 8% per year

14. C&I Total CSE: Program Weighted Averages Source: LBNL DSM Program Database • Average values for most C&I sector programs are $0.04-$0.06/kWh • C&I programs garner more participant investment than residential programs, particularly in custom and prescriptive programs

15. Total CSE by State Source: LBNL DSM Program Database Large variability in the relationship of program costs to participant costs from state to state Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database.  CSE values are for program administrator costs are based on gross savings.  Savings are levelized at a 6% real discount rate.  The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type.

16. Total CSE and Relative Savings by State Sources: LBNL DSM Program Database & Energy Information Agency Form 861; MA Energy Efficiency Advisory Council Greater savings moves states up the efficiency supply curve Coverage is percent of IOU retail sales in each state

17. Factors That May Influence Total CSE CSE may vary across program administrator portfolios for reasons other than programmatic efficiency

18. Summary The levelized program administrator cost of saved electricity increased from $0.022 to $0.029/kWh between 2009 and 2013 U.S. savings-weighted average total cost of saving energy: $0.046/kWh. Median: $0.069/kWh Residential programs had lowest total CSE, influenced strongly by lighting rebate programs Commercial & industrial programs on average drew greater participant investment Improved estimation and reporting of total costs help satisfy regulatory needs and instill market confidence in the efficiency resource

19. Thank You Project Contacts • Principal Investigators • Chuck Goldman cagoldman@lbl.gov • Lisa Schwartzlcschwartz@lbl.gov • Senior Project Team • Ian Hoffman, project leader, ihoffman@lbl.gov • Gregory Rybkagrybka@lbl.gov • Greg Leventisgleventis@lbl.gov • Sponsors: DOE Office of Electricity, National Electricity Delivery Division and Office of Energy Policy and Systems Analysis

20. Additional Slides

21. Residential Total CSE: Program Medians and Ranges Source: LBNL DSM Program Database • Sector median is $0.07/kWh, with the average for most programs at $0.05-$0.07/kWh • Cost performance ranges 3x-5x among residential program types • Variability in measure mix, maturity, state of the market and program design

22. C&I Total CSE: Program Medians and Ranges Source: LBNL DSM Program Database Median values for most C&I sector programs close to savings-weighted averages and ranges are narrower