Guidelines for Energy Efficiency Measure Cost and Non-Energy Benefits

1. Guidelines for Energy Efficiency Measure Cost and Non-Energy Benefits Kickoff Meeting August 12, 2011 2:00pm PST For the Regional Technical Forum

2. Agenda Introductions Scope of work Project timeline Cost collection/analysis approaches Non-energy benefits Project deliverables Project administration Discussion

3. Introductions: Navigant Consulting Staff

4. Introductions: RTF and the RTF Subcommittee RTF Subcommittee introductions

5. Statement of Work • Task 1: Project Management • Kickoff Meeting • Develop Work Plan • Coordinate Staff and Meetings • Bring Together Experts • Task 2 and 3: Develop Guidelines for Measure Cost and NEBs* • Prepare Draft Guidelines for Subcommittee Review • Revise Guidelines for RTF Review • Revised Guidelines and Recommendation Memo • Final Guidelines Presented to the RTF • Task 4: Reports and Presentations *Navigant proposes changing the statement of work to include the intermediate reporting tasks within Tasks 2 and 3. Task 4 will be reserved for the final reporting and presentations to the RTF and the Subcommittee.

6. Timeline – From Proposal • 5 weeks since proposed project start • Schedule change suggestions: • Shift schedule 4-5 weeks to reflect later start date. • 2011 RTF meetings: October 4, November 1, December 13

7. Timeline – Revised

8. Timeline – Revised * indicates a subcommittee meeting. Navigant proposes that all subcommittee meetings be held at 2 pm pacific time. Wednesday, August 31 - submit outlines, sample sections, questions to subcommittee *Wednesday, September 7 - review outline, sample sections, questions Wednesday, September 21 - submit draft guidelines *Wednesday, September 28 - review draft with subcommittee Wednesday, October 12 - submit draft guidelines (if needed) *Wednesday, October 19 - review draft with subcommittee (if needed) Tuesday, October 25 - submit draft to RTF Tuesday, November 1 - RTF meeting *Wednesday, November 2 - Discuss next steps with subcommittee Schedule beyond November 2 will depend on outcome of November RTF meeting if we are going to the December 13 RTF meeting… Wednesday, November 23 - submit draft to Subcommittee *Wednesday, November 30 - review draft with Subcommittee Tuesday, December 6 - Submit draft to RTF Tuesday, December 13 - RTF meeting

9. Purpose of Measure Costs and NEBs • Used to • determine the cost-effectiveness of energy efficiency measures (e.g. TRC B/C ratio), • plan programs • produce ex-post summary of savings and costs • Cost-effectiveness metrics are beyond the scope of this project. • They are defined by the RTF • Regionally accepted parameter estimates used to compute cost-effectiveness metrics • For each measure, the following inputs are needed • Energy savings (electricity and gas) – Savings Estimation Guidelines (June 1, 2011) • Load shapes (electric and gas) • Measure lifetime – current contract and subcommittee • Upfront costs • Periodic costs (magnitude and frequency)this contract and subcommittee • Non-energy benefits

10. Defining Costs and Non-Energy Benefits • Non-Energy Benefits Quantifiable dollar value • Water • Fuels besides electricity and gas • Soap savings/detergent savings • Local Emissions • Other? • O&M • O&M • Comfort • Water • Quantifiable • Hard toQuantify • Measure Costs • Material equipment • Ancillary materials (piping, etc) • Installation Labor • Define components • Establish templates and predefined structures

11. Measure Costs - Framing • Defining the Cost Application: • Retrofit (RET) • Replace-On-Burnout (ROB) • New Construction (NEW) • Defining the Cost Basis: • Incremental Measure Costs (current practice baseline) • Full Measure Costs (pre-conditions baseline)

12. Measure Costs – Guidelines • Use clearly defined technical specifications • Define boundaries and components of systems • Define different measure applications where costs vary widely (e.g. by installation cost variables) • Validate data • Data cleaning • Treatment of outliers • Influence of non-energy features (vendor, location, brand, finish) • Consider the program delivery method in measure costs • E.g, retail cost for rebate, wholesale cost for direct install

13. Measure Costs –Guidelines • Assess the rigor of cost research required for each measure • How is expected level of rigor expressed in the guidelines? • Should all measures receive the same level of rigor? • Factors • Technical/economic potential (e.g small savers) • Cost-effectiveness • Establish specific conventions for lifecycle costing: • Measure life (and baseline life) →separate subcommittee and contract

14. Measure Costs - Guidelines • Systematize the pricing process • Standardized workbooks and pricing approaches • Index costing elements to industry recognized methods and resources • R.S. Means • Proxy for labor costs in the absence of primary data • Benchmarking tool for labor and material costs • Provide the ability to update measure costs over time • Contextual data tracking (unique measure ID, source, contact information, etc.) • Identify where specific economic indicators can be used to adjust measure costs. • Consumer Price Index (CPI) • Producer Price Index (PPI)

15. Measure Costs - Guidelines • Data collection sources may include: • Web pricing • Retail surveys • Manufacturers/Distributors • Contractors • Cost data from industry accepted resources • Point of sales data • Economic statistics & indices

16. Measure Cost - Analysis Approaches • Arithmetic Mean • Averages all cost observations into a single point estimate and represents the “middle” or “expected” value. • Weighted Average • Similar to the arithmetic mean but assigns more “weight” or “value” to certain data points • Minimum • Used to isolate cost of higher efficiency from cost of other features • Regression Modeling • Attempts to quantify the behavior of an uncertain parameters relative to other observation, and potentially influential, variables • Custom Cost Estimates • Approach is unique to engineered and/or technically complex types of measures (e.g. EMS systems) • Often involves building up costs for various components through different resources

17. Non-Energy Benefits • Definition • “Quantifiable” – need to provide clarity on what this means (what level of certainty?) • Maybe this is left intentionally vague? • Need to quantify benefit • Need to value benefit • Many of same issues as with MEASURE cost • Rigor - Assess the rigor of research required for each measure • Establish specific conventions for lifecycle benefits

18. Non-Energy Benefits - Water • Standard water cost analysis? • Use for all measure analyses • Rates by sector, region • Use marginal water costs • Update periodically (for cost and embodied energy) • Sources? • Avoid double counting embodied energy • If you count the embodied energy in water, you need to discount the cost of the water

19. Non-Energy Benefits – O&M • Standard O&M cost analysis? • Use for all measure analyses • Rates by sector, region • Update periodically (for cost and embodied energy) • When is a labor cost of O&M justified? • Non-residential measures– always? • Residential – never? • Sources?

20. Non-Energy Benefits – Alternative fuels • Should alternative fuels be considered an NEB? • Propane • wood, oil • These aren’t included in ProCost because they don’t require a load-shape-based analysis • If so, should there be a standard cost analysis?

21. Questions • Are there other regional experts that we want to solicit for this subcommittee? • Is O&M a cost or NEB? • Aside from cost effectiveness tests and program planning, what are costs and NEBs used for? • Should fuels besides electricity and gas be counted as NEBs? (e.g. propane, oil, wood) • Should the guidelines address rigor? If so, how? • Should all measures receive the same level of rigor? • Factor - Technical/economic potential (e.g small savers) • Factor - Cost-effectiveness (e.g. less rigor for very cost effective measures?) • Factor – Cost-effectiveness sensitivity (e.g. less rigor for relatively small impacts on cost-effectiveness) • When does the RTF reject a cost analysis? • What happens if the RTF rejects a cost analysis? • Should uncertainty in cost and NEB estimates be specified? • Should residential labor be valued?

22. Questions • Is the word “benefits” in Non-energy Benefits misleading? • E.g. HPWH requires periodic filter replacement. This is a negative benefit. • What about having a Cost workbook that contains all of the most recent, RTF approved costs (water, labor, propane, soap, etc.)? This workbook would be used/referenced when possible for measure analyses.

23. Project Deliverables • Interim deliverables • outline • sample sections • identification of decision nodes for RTF/RTF subcommittee • e.g. what is an acceptable cost collection method? In what circumstances? • Deliverables • Draft guidelines • Guidelines • Recommendation Memo • Presentations to RTF (first on November 13, 2011. From there, depends on RTF meeting outcome)

24. Project Deliverables

25. Project Administration • Frequency of meetings? • With project manager (Adam) • With Subcommittee members (proposed approximately every three weeks) • Expected review period for interim deliverables (proposed one week) • Expected review period for draft guidelines (proposed one week)

26. Contact Information Floyd Keneipp, Engagement Manager Floyd.Keneipp@navigant.com (925) 930- 2716 Ryan Firestone, Project Manager Ryan.Firestone@navigant.com (925) 930-2708 Sam Piell, Project Coordinator Sam.Piell@navigant.com (925) 930-2711