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Cost-Effectiveness Screening

Issue for RTF August 30, 2007. Cost-Effectiveness Screening. RTF Uses Total Resource Cost (& Benefits) Perspective. Best meets the requirements of the Regional Act Considers all quantifiable costs & benefits regardless of who accrues them

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Cost-Effectiveness Screening

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  1. Issue for RTF August 30, 2007 Cost-Effectiveness Screening

  2. RTF Uses Total Resource Cost (& Benefits) Perspective • Best meets the requirements of the Regional Act • Considers all quantifiable costs & benefits regardless of who accrues them • Ensures that conservation expenditures are good for the power system, the customer and society • Allows conservation to be compared to other resources considered for development by including all quantifiable costs & benefits • Was strongly recommended by utilities in first Council Plan

  3. Why RTF Uses TRC:Avoids Potential Double Counting of the Savings • Utility invest $2500 in efficient motor to acquire 5000 kWh/yr savings • Levelized Cost = 3.4 cents/kWh • B/C = 1.32 • Customer matches $2500 utility investment to save the same 5000 kWh/yr • Simple payback = 10 years, motor last 20 • Total of all direct cost is $5000 for 5000 kWh/yr of savings • Levelized cost = 6.8 cents/kWh • B/C ratio = 0.66

  4. Why RTF Uses TRCDirects Funds Toward Measures That Optimize Total Utility and Customer Investments • Utility invest $600 toward cost of $6000 solar PV system that saves 1200 kWh/yr • Alternatively utility and consumer could: • Invest $160 in 40 CFLs to save 1200, saving $440 • Invest $600 to buy 150 CFLs, saving 5000 kWh • Especially important when budgets are limited

  5. Why RTF Uses TRCAvoids promoting measures that may impose non-energy costs on others • Act directs the Council give second priority to the use of renewable resources • Analysis in 1st Plan concluded that cost of using wood stoves to offset use of electric heat was below cost of electricity from new generating facilities • 1st Plan excluded use of wood heat due to “non-energy” cost (air pollution) imposed on the region

  6. Why RTF Uses TRC:Expands list of conservation options by considering quantifiable “non-energy” benefits • Energy Star Clothes Washer in Homes with Gas Water Heater and Dryer • Present Value Capital Cost = $58/MWh • Present Value to Power System= $17/MWh (B/C = 0.3) • Value to Region/Society (includes natural gas, detergent & water savings)= $110/MWh (B/C = 2.0) • Power system’s “willingness-to-pay” for these savings should be limited to its present value benefits • Electric Utility could provide incentive up to $17/MWh for washer in a home with gas water and dryer heat

  7. Application of TRC to Projects and Programs – “What’s the incremental cost?” • It is not always practical and/or possible to quantify the incremental cost of energy efficiency improvements • It is often impractical to obtain “with” and “without” cost estimates, especially for large custom projects • Many measures/projects have “joint” features/purposes, so separating the cost imposed by higher efficiency from other features is often problematic • Incremental “cost” may be quite different than “incremental price”

  8. Joint Product Problem: Incremental Cost of Energy Efficiency Improvements, e.g., Dishwashers

  9. Joint Product Solution: Base Incremental Cost on “Minimum Cost to Achieve Efficiency”, e.g., Dishwashers

  10. Joint Product Problem: Incremental Cost of Clothes Washer Energy Efficiency Improvements

  11. Joint Product Solution: “Minimum Cost to Achieve Efficiency” Doesn’t Always Work, e.g., Clothes Washers

  12. And . . .Sometimes Higher Efficiency Cost Less:Average Retail Price Of Energy Star Clothes Washers *2004 Oregon Tax Credit Data

  13. Today’s Issue: “Cost vs. Price” – High Efficiency Heat Pumps • BPA has received comments that high efficiency air source heat pumps are costing considerably more than the RTF estimates • It appears there is a significant difference between incremental “cost” and incremental “retail price” • Issue: Which value should the RTF use for determining the cost-effectiveness of high efficiency heat pumps (and central AC)?

  14. Heat Pump Cost Estimates • Three Sources: • Existing RTF cost estimate based on federal Department of Energy data from standards setting process • STAC – Survey of regional HVAC contractors (preliminary returns from 23 contractors • Online HVAC equipment sales sites (“box cost” only)

  15. Cost to Consumers of HSPF 7.7/SEER 13 Three Ton Heat Pump

  16. Cost to Consumers of HSPF 8.5/SEER 14 Three Ton Heat Pump

  17. Cost to Consumers of HSPF 9.0/SEER 15 Three Ton Heat Pump

  18. Incremental “Cost” to Consumers of HSPF 8.5/SEER 14 Three Ton Heat Pump

  19. Incremental “Cost” to Consumers of HSPF 9.0/SEER 15 Three Ton Heat Pump

  20. Incremental “Cost” to Consumers of PTCS System Commissioning

  21. So What’s Your Call • The incremental cost of high efficiency heat pumps (and central AC) should be based on: • Current retail market prices (STAC?) • Incremental equipment cost from online data sources? • Adjusted for contractor markups? • Engineering estimates of incremental cost (DOE) • Other?

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