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Opportunities for Natural Gas Efficiency in Pennsylvania

Opportunities for Natural Gas Efficiency in Pennsylvania. Presented to Keystone Energy Efficiency Alliance September 20, 2011 Steven Nadel American Council for an Energy-Efficient Economy. 2010 State Energy Efficiency Scorecard. Pennsylvania 2010 Scorecard Results.

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Opportunities for Natural Gas Efficiency in Pennsylvania

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  1. Opportunities for Natural Gas Efficiency in Pennsylvania Presented to Keystone Energy Efficiency Alliance September 20, 2011 Steven Nadel American Council for an Energy-Efficient Economy

  2. 2010 State Energy Efficiency Scorecard

  3. Pennsylvania 2010 Scorecard Results • Earned 24 points out of possible 50 • Ranks 16th • Average to above average scores for Combined Heat & Power (CHP), building energy codes, transportation policies, and state facilities & fleets • Average score for utility-sector programs: ranks 28th in the nation (low efficiency program spending and savings, no actions to address utility incentives/disincentives) • Note: Ramping in of Act 129 will likely improve PA’s utility score in future Scorecards

  4. ACEEE 2009 Study on Cost-Effective Resource Potential in Pennsylvania by 2025 Electricity: 33% Natural Gas: 27% Fuel Oil: 29%

  5. Energy Efficiency Resource Potential: Residential Natural Gas (84,000 MMBtu Gallons or 36% savings potential in 2025)

  6. Impact of Efficiency Policies on Natural Gas Needs in Pennsylvania

  7. Economic and Environmental Impacts of EE Investment in Pennsylvania Reduce CO2emissions ~45 million tons in 2025

  8. Implementation of Electric Savings Targets (EERS) in 2010 • Thirteen of the twenty states with EERS policies in place for over two years are achieving 100% or more of their goals as of 2010 • Only three states are realizing savings below 80% of their goals but all 3 are still ramping up

  9. Energy Efficiency Resource Standards – Natural Gas Standard Pending Standard 12 States have natural gas EERS policies in place

  10. Minnesota EERS: 0.75% annual savings from 2010-2012; 1.5% annual savings in 2013

  11. Massachusetts State law requires the natural gas distribution utilities to procure all cost-effective efficiency resources through a 3-year Efficiency Procurement Plan and requires full funding of the Plan.

  12. Vermont Gas • Saved 82,151 McF in 2010; ~1% sales • Will result in 1,467,673 Lifetime McF

  13. Iowa Iowa IOU Natural Gas Savings 2004-2007 • Statewide data for 2008-2009 unavailable. In 2010, all IOUs hit savings targets ~1%. • Annual goals by 2013 vary by utility: 0.74% (Muni’s); 0.85% (MidAmerican); 0.94% (Black Hills) 1.2% (IPL)

  14. Consider EE from a Utility Perspective • Need to make the business case: • Cost recovery • Address lost revenues needed to cover fixed costs • Some form of return on investment

  15. Decoupling • Rates are designed to recover fixed and variable costs • Decoupling adjusts rates up or down so that authorized fixed costs are fully recovered. • Reduces over-recovery due to increases in sales • Reduces under-recovery from reduced sales such as due to a recession, warm weather or energy efficiency programs

  16. Natural Gas Decoupling Decoupling Lost Revenue Adjustment Mechanism or Ratemaking Approach to Lost Revenues Decoupling Pending 16 states with true natural gas decoupling; 11 with LRAM or other ratemaking approach to recover lost revenues; 8 with decoupling pending

  17. Shareholder Incentives • Utilities earn a rate of return on their supply-side investments • To provide balance, many states provide incentives for energy efficiency: • Performance bonus for meeting savings goals; or • Share of net benefits due to programs (~10%) • 25 states provide such incentives to electric and/or gas utilities

  18. Conclusions • Energy efficiency resource standards are working, including in Pennsylvania • There are large opportunities to cost-effectively reduce natural gas use in PA • Pennsylvania should enact: • A natural gas EERS with modest targets to start, ramping up over time • Decoupling and shareholder incentives for natural gas utilities (latter tied to savings goals)

  19. Contact Information Steven Nadel snadel@aceee.org 202-507-4000 www.aceee.org

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