Energy Efficiency Action Plan Kathleen Hogan Director, Climate Protection Partnerships Division U.S. Environmental Protection Agency NARUC Winter Meetings Committee on Energy Resources and the Environment February.
Download ReportTranscript Energy Efficiency Action Plan Kathleen Hogan Director, Climate Protection Partnerships Division U.S. Environmental Protection Agency NARUC Winter Meetings Committee on Energy Resources and the Environment February.
Energy Efficiency Action Plan Kathleen Hogan Director, Climate Protection Partnerships Division U.S. Environmental Protection Agency NARUC Winter Meetings Committee on Energy Resources and the Environment February 13, 2006 • Efficiency can help control electricity growth 50%+ Total Energy Consumption by End-Use Sector, 1949-2004 40 Industrial 30 Transportation 20 Residential 10 Commercial 0 1949 1959 1969 1979 1989 1999 Year Growth in U.S. Electricity and Natural Gas Consumption, 1949-2004 Natural Gas (Tcf) 25 20 4 Natural Gas 3 15 2 Electricity 10 1 5 0 1949 0 1959 Sources: EIA Annual Energy Review 2004 1969 1979 1989 1999 Year 2 Electricity (Trillion kWh) • Energy demand continues to grow • Higher energy prices than seen for decades • High energy expenditures • Reliability issues • Capital expenses for generation, transmission and congestion relief • Investment risk associated with climate change • Security concerns Consumption (Quadrillion Btu) Time for Action on Energy Efficiency Energy Efficiency Action Plan Goal Statement To create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations. 3 Overview of Energy Efficiency Action Plan • Many cost-effective energy efficiency solutions – Well-designed and cost-effective programs that work – Significant potential for greater investment and savings • Utilities well positioned to deliver more efficiency, but barriers exist • Leadership Group: – Recognizes that utilities and regulators have critical role – Recognizes success requires the joint efforts – Will work across their spheres of influence to remove barriers – Commits to take action within their own organization 4 Energy Efficiency Action Plan • Who: Leadership Group Comprised of electric and gas utilities, state public utility commissions, state energy/environment agencies, energy consumers, energy service providers, NGOs • What: Working Groups to Address Barriers and Develop Business Solutions – – – – Utility Ratemaking and Revenue Requirements Rate Design Planning Processes Programs Best Practices Facilitated by US DOE and EPA 5 Path to Increased EE Investment Timeline: Actions to Encourage Greater Energy Efficiency Timeline: Actions to Encourage Greater Energy Efficiency Policy Structure Policy Structure Utility Resource Utility Resource Planning Planning Program Program Implementation Implementation Develop Utility Incentives forfor Develop Utility Incentives Energy Efficiency Energy Efficiency Include Efficiencyinin Include Energy Energy Efficiency Utility Mix Utility Resource Resource Mix Program Roll-out Program Roll-out Develop Rate Designs Develop Rate Designs toto Encourage Energy Efficiency Encourage Energy Efficiency Develop Effective Effective Energy Develop Energy Efficiency Programs Efficiency Programs Measurement & Evaluation Measurement & Evaluation RevisePlans Plans and and Policies Policies Based Revise Basedon onResults Results Action Plan Working Groups and Key Barriers Action Plan Working Groups and Key Barriers Utility Ratemaking & Utility Ratemaking Revenue & Revenue Requirement Requirement EE reduces utility earnings EE reduces utility earnings Rate Design Rate Design Rates do not encourage Rates do not EE investments. encourage EE investments. Planning Planning Processes Processes Planning does not incorporate Planning demanddoes not side resources incorporate demand- Model Model Program Program Documentation Documentation Limited information on existing bestinformation practices on Limited existing best practices side resources 6 Key Barrier -- Utility Incentive Structures • Net revenue linked to throughput creates disincentive for utility EE investment and other policies leading to lower use – Decoupling mechanisms are a solution • Investor-owned utilities do not earn the same rate of return on EE as supply side investments – Shareholder incentive mechanisms can reward investor-owned utilities • Publicly-owned utilities must justify rate increases or decrease net revenue to promote energy efficiency investments – Evaluate Average Bill Impact rather than Rate Impact 7 Key Barrier – Rate Designs • Frequently does not encourage energy efficiency • Do not encourage less usage when high costs for energy or capacity • Rate design changes to promote EE can be difficult, particularly when mandatory – Pilots are exploring what can work • Must address trade-off between economic efficiency and complexity to develop rates that provide appropriate signals 8 Key Barrier -- Utility Planning Processes • Standard utility resource planning processes do not typically evaluate EE as a competitive resource – While M&V is well-developed, there remains some skepticism that the system benefits from energy efficiency will be available when needed • Comparison of EE, supply side resources, T&D requires consideration of appropriate trade-offs in key areas – Cost – Reliability – Environmental Impact – Others • Portfolio of demand and supply options should consider policy direction, incentives and goals of commissions (Investor-owned) or communities (publicly-owned) 9 Key Barrier: Lack of Information/Awareness on Programs that Work • Document programs that work – Political/ administrative factors – Across end-use sectors and customer classes – Designing the portfolio • Established M&V procedures – Persistence of savings $0.10 $0.08 $0.06 $0.04 $0.02 – Cost-effectiveness tests – Gross to net Cost ($ / kWh) $0.12 $0.00 s ts nt ily ss on ents i c ct e t e m u u c n m a d d si H tru vem ro ve ultif ro u s o P P B ew R pr on pro ial ll /M N a m C e A I Im erc T R m w e Sm S y o A e c c m m T N Y n o S In G H m icie Co m Y w R G E o m Eff Lo N C ER E m EN om C om es Residential Sources: NYSERDA, CA, MN Xcel, VT, NWPPC Commercial 10 Expected Outcomes • Documenting business practices / solutions for overcoming barriers limiting utility investment in energy efficiency – Removing disincentives / providing incentives – Integrating EE into utility planning – Examples of EE programs that work – Tactics that help EE succeed • Communication strategy for spreading practices / solutions during Summer/Fall 2006 – regional/state workshops • A network of experts and resource materials on energy efficiency practices 11 Upcoming Milestones • Draft working group materials by early March 2006 – Short reports with links to additional resources – High-level spreadsheet tool to illustrate the value of energy efficiency to resource planning, customer bills and utility revenues based on your specific inputs • Next Leadership Group Meeting on March 23 – Review all draft Working Group material – Agree to Communication Strategy • Summer 2006 – Final Working Group materials – Initiate Communication Strategy – Update at Summer NARUC Meetings 12