Transcript Slide 1

Investing in Energy Efficiency:
Experience from California
Managing Energy Demand – Bern ’09
November 4, 2009
Julie A. Fitch
Director, Energy Division
California Public Utilities Commission
Presentation Overview
 Introduction to California experience
• Regulatory / financial mechanisms for
utilities
• Recent energy efficiency results
• Current energy efficiency activities
• Climate change context
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California: A long history of investing in
clean power and energy efficiency
Yesterday…
… Today
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While the nation’s appetite for electricity has steadily grown,
California has become a model of efficiency.
Per Capita Electricity Sales (not including self-generation)
United States
∆(2005)
= 4,000kWh/yr
kWh/person
= $400/capita
California
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Energy Efficiency Strategies
• Flattening out the curve – yesterday
– Decouple sales from revenues– eliminate disincentive
– Set and strengthen building and appliance standards
– Invest in utility energy efficiency programs
• Bending the curve downward– tomorrow
– Strengthen incentives– “Decoupling Plus”
– Set long term goals to achieve durable, broad-based
reductions
– Enhance strategic planning: work backwards from goals
– Improve branding, messaging and marketing
– Invest in workforce and research and development
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Presentation Overview
• Introduction to California experience
 Regulatory / financial mechanisms for
utilities
• Recent energy efficiency results
• Current energy efficiency activities
• Climate change context
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Decoupling: How it works
• Utility revenues are de-linked from energy sales
• Utilities submit revenue requirements and
estimated sales annually
• Regulatory agency sets per-kWh rates by type of
customer
• If sales are lower, shortfall is covered in
subsequent year
• If sales are higher, excess revenues are credited
to customers
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Decoupling: Why it works
• Removes disincentive for utilities to
encourage conservation, since revenues
are not tied to amount of energy sold
• Aligns utility shareholder and customer
interests for more efficient resource
decisions
• Necessary, but not sufficient, to induce
utility enthusiasm for energy efficiency
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Decoupling “PLUS”
Utility shareholder incentives
• Financial rewards for utilities for successful
energy efficiency
• “Shared savings” with consumers
• Concept is to make financial return comparable
to investment in supply resources (generation,
transmission, distribution)
• First tried in 1990s; new mechanism adopted in
California in 2007
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Risk/Reward Incentive
Mechanism basic concepts
• Cost of utility energy efficiency programs is
subtracted from the value of energy saved each
year
• If utilities reach a certain percentage of their
savings goals, they are awarded a graduated
percentage of these “net benefits” (currently set
between 9 and 12%), up to a maximum cap, as
additional revenues
• If utilities fail to reach required goals, they face
potential for penalties
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Presentation Overview
• Introduction to California experience
• Regulatory / financial mechanisms for
utilities
 Recent energy efficiency results
• Current energy efficiency activities
• Climate change context
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Energy Efficiency Costs, Energy
Savings and Benefits: 2006-08
Costs
Ratepayer Cost: $1.8B
Customer Cost: $ .9B
Benefits
Energy Savings: $5.4B
Total Cost:
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$2.7B
Total Benefits:
$5.4B
The Bottom Line:
Net Social Benefit = $5.4B - $2.7B = $2.7B
Return on Investment = 100%
2006-2008 Savings
•Equivalent to three 500 MW power plants (one each year)
•3 Million metric tons of CO2 equivalent
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Presentation Overview
• Introduction to California experience
• Regulatory / financial mechanisms for
utilities
• Recent energy efficiency results
 Current energy efficiency activities
• Climate change context
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The California Long Term Energy
Efficiency Strategic Plan
http://www.CaliforniaEnergyEfficiency.com
2010-2012 Utility Program Goals
• Savings Impacts Anticipated:
– 6,965 GWH
– 1,537 MW
– 150.3 MMTherms
– 3.07 million tons of CO2e emissions avoided
• Equivalent of 3 large power plants
• Authorizes $3.1 billion in cost-effective
energy efficiency programs
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2010-12 Portfolio Highlights
12 Statewide Programs
• Cal SPREE (Statewide Program for Residential Energy
Efficiency) – existing homes
•
•
•
•
Commercial: Benchmarking
Industrial: Continuous Energy Improvement
Zero Net Energy New Construction
Heating, ventilation, & air conditioning: Focus on
compliance
• Statewide Marketing, Education & Outreach
• Six other Statewide programs: Agriculture; Building Codes &
Appliance Standards; Emerging Technologies; Lighting Market
Transformation; Integrated Demand Side Management; Workforce Training
• Plus Other Localized Programs: government partnerships;
individual utility and 3rd party programs, and pilot projects
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Zero Net Energy Buildings
• Advanced Home Partnership - $63.2 million
– Aims toward Strategic Plan 2011 milestone: 50% of new homes
exceed existing building standards by 20%; 10% exceed by 40%
• 15% above 2008 building code
• Calculated incentive structure up to 50% incremental cost
– Emphasizes “green” marketing- leverage existing consumer
awareness
• Zero Net Energy Pilots
– $43.16 million utility programs
– $60 million for innovative local government programs focused on
Advanced Building (“Reach”) Codes and GHG Action Plans
• Commercial buildings
– 100,000 building statewide benchmarking target (2010-2012)
– “Path to Zero” Commercial Buildings Collaborative
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Other Portfolio Highlights
• Advanced Lighting Programs (53% of total lighting budget)
– $89 million (LEDs, specialty/super CFLs, halogens); $78 M - CFLs
– 2020 Strategic Lighting Plan Work Group
• Codes and Standards Programs
– New Compliance Enhancement Program
• training/support to building officials;
• streamlining permitting and compliance requirements;
• enhanced certification processes; Focus on HVAC
– Reach Codes; coordination at state level and with voluntary codes
• Heating, Ventilation and Air Conditioning
– Compliance focus: certification and training, CA specifications, quality
installation and maintenance
• Industrial – certification/pilots on energy management
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Marketing/Brand that engages
moves customers to take action
• New or Revised Clean Energy Brand (2010)
• Interactive EE Web Portal
– exchange expert resources & engage average citizens
– Will utilize social networking techniques
• Variety of in-language marketing and outreach
programs
• Universal Integrated Audit/Survey Tool
• Behavioral Programs
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Financing Funds - Growing
• Additional financing of US$8 - $25 billion needed
– for efficient hardware alone 2010 -2020
• Statewide Utility On-bill financing (OBF):
– For commercial and institutional customers
– Initial $41.5 million in new funds for OBF loan pool
– Common loan caps and terms
• Utility program coordination with municipal
property-based financing
– linked to national economic stimulus funds/retrofit programs
• CPUC/State Treasurer’s office collaboration on
state facilities
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Economic Impact of Energy
Efficiency Programs 2010-2012
• 15,000 – 18,000 new “green collar” jobs
in 2010-2012 over 2006-08
– 6,000 – 10,000 jobs in Residential Retrofit alone
• $122 million budgeted for workforce
education
*Job benefits calculated based on Council of Economic Advisers’ May 2009 publication of
“Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009”
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McKinsey and Co’s Compelling Case for
Energy Efficiency as U.S. Climate Action
•
U. S. National Potential:
–
–
–
–
23% reduction in end use energy consumption
Reduce 1.1 gigatons GHG (15% of US 2005 emissions)
$1.2 trillion in gross energy bill savings (Net Present Value)
$540-630 billion net savings (NPV) after EE investment &
program costs*
• Strategies Needed:
– Comprehensive, innovative scale approaches to “unlock” EE in
100 million buildings, with billions of devices
• Biggest challenges:
– up-front funds, fragmented stage, stakeholder alignment, low
“mind-share”
* (@ 10-30% of investment)
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Presentation Overview
• Introduction to California experience
• Regulatory / financial mechanisms for
utilities
• Recent energy efficiency results
• Current energy efficiency activities
 Climate change context
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California Global Warming
Solutions Act of 2006 (AB 32)
• 2010: emissions at 2000
levels
• 2020: emissions at 1990
levels
• 2050: emissions 80% below 1990 levels*
- Covers all major emitters, to be defined by
California Air Resources Board (ARB).
- Covers all major greenhouse gases (GHGs).
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*Set in Executive Order S-3-05, June 2005.
California’s Greenhouse Gas Emissions
(480 MMTCO2E)
Residential 6%
Commercial
3%
Elec. Gen. (Imports)
13%
Transportation
40%
Elec. Gen.
(In State)
12%
Source: CEC
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6%
Agriculture
20% Industrial
CARB 2007
Electricity-Related Emissions: Imports
2004 Electricity Sales (MWh)
Emissions (MMT CO2e)
Imports
23%
In-State
Generation
77%
Imports
56%
Source: CEC (for electricity sales); CARB (for emissions inventory)
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In-State
Generation
44%
California’s Climate Policy Road Map
• Required by AB32
• Adopted by California Air Resources
Board (CARB) Dec. 2008
• Targets 174 MMtCO2e reduction
from BAU
• Multi-agency effort led by CARB
• CPUC provided formal
recommendation of strategies for
the electricity and gas industries
• Lays out comprehensive regulatory
program
• Combines mandates with market
based measures
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A Role for GHG Trading…
Reduce
Demand
GHG
Trading
Choose
Cleaner
Supplies
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Stimulate
Technological
Innovation
… And for Mandatory Measures
Reduce Demand
•Energy efficiency
•Advanced metering/demand response
•Water conservation
Choose Cleaner Supplies
•Loading Order
•Renewable Portfolio Std.
•CA Solar Initiative
•Emissions Performance Std.
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Promote
Technological
Innovation
•RD&D investments
•Standards
Nearly 40% of reductions from mandates
are from electric sector programs
Total Reductions from 2020 BAU:
169 MMTCO2E
Electricity/Gas Mandates:
49.7 MMTCO2E
33% Renewable
Portfolio Standard
Transportation
Mandates
21.2M
Energy
Efficiency
Other
Mandates
26.4M
Solar PV
2.1M
Cap and Trade
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Source: CARB Proposed Scoping Plan
California’s Loading Order
Staged priorities for procurement
of new resources
Efficiency and
Demand Response
Renewable Energy
Clean and Efficient
Fossil-fired Energy
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Mostly command and control mandates
Aggressive EE/GHG Goals
California Air Resources Board Scoping Plan
Target (Nov, 2008):
– 32,000 GWh and 800 MMTherms/year by 2020
– 19.5 MMT CO2E in 2020
CPUC 2020 interim energy efficiency goals (July,
2008):
– 16,000 GWh and 620 MMTherms/year
– Equal to nine or ten power plants avoided
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Climate/EE Policy Issues Ahead for
California and the U.S.
•
Demand-side management (DSM) strategies not part of
Cap and Trade; no mechanism to sell GHG benefits
from DSM
– Cap and trade places limits on sources of GHGs; demand-side
strategies not directly integrated into cap and trade.
– GHG emission price will make more DSM “cost-effective”
– “Offsets” typically allowed outside the capped jurisdiction only
•
•
•
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Local Governments can influence building and
transportation, but how to pay for actions?
Allowance auctions may provide EE funds to expand
programs &/or creative allowance “retirement”
EE Institutional challenge: Need broad vision, strong
and clear leadership, over sustained period – to
overcome ”friction” of diffuse markets and action venues
Thank You
Julie A. Fitch
[email protected]
www.cpuc.ca.gov
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