Transcript EFFICIENCY VERMONT COST-EFFECTIVENESS SCREENING PRESENTATION TO COST-EFFECTIVENESS SCREENING WORKSHOP WORKSHOP - JUNE 25, 2009 Blair Hamilton.

EFFICIENCY VERMONT
COST-EFFECTIVENESS SCREENING
PRESENTATION TO COST-EFFECTIVENESS SCREENING WORKSHOP
WORKSHOP - JUNE 25, 2009
Blair Hamilton
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A Brief Summary of Relevant PSB Orders
• Docket 5270 (1990)
• Established cost-effectiveness guidance for efficiency investments
made by utilities with ratepayer funds
• Adopted societal cost-effectiveness test as primary
• Set 5% environmental externality adder as rebuttable presumption
• Adopted 10% adjustment to reflect lower risk of efficiency
• Docket 5980 (1999 – Establishing Energy Efficiency Utility)
• Reaffirmed use of societal test and 10% risk adjustment from 5270
• Adopted 0.7 cent/kWh electric externality from MOU
• Asks DPS to develop externality adjustments for fuel-consuming
measures consistent with the electric externality value
• Docket 6290 (2003 – Distributed Utility Planning Guidelines)
• Includes discussion of externalities and risk adjustment
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The “State Screening Tool”
• Spreadsheet tool developed by the DPS
• Updated annually by Efficiency Vermont
• Inflation and discount rates:
• Inflation rate based on Consumer Price Index - All Urban average of previous
10 years (2.60%)
• Discount rate based on average of utility debt (6.13%) and equity (10.75%).
Results in 8.4% nominal discount rate and 5.7% real discount rate.
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Avoided Costs Used for Screening
• Includes electric generation, residential fuel oil,
commercial fuel oil, residential propane, commercial
propane, kerosene, wood
• Electricity avoided costs include 4 energy costing
periods, summer generating capacity, T&D
• Updated avoided costs proposed to PSB every two
years by DPS (last done in 2007)
• Largely based on bi-annual regional study conducted
every two years (regional study does not include
avoided costs for transmission and distribution “T&D”)
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Example of Electric Avoided Costs
Units:
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Winter
Peak Energy
$/kWh
Winter
Off-Peak
Energy
$/kWh
Summer
Peak
Energy
$/kWh
Summer
Off-Peak
Energy
$/kWh
Summer
Capacity
$/kW
Generic
T&D
Capacity
$/kW
0.1137
0.1258
0.1182
0.1178
0.1111
0.1126
0.1080
0.1105
0.1086
0.1099
0.1149
0.1110
0.1095
0.1126
0.1157
0.1181
0.1198
0.1216
0.1233
0.0831
0.0941
0.0902
0.0868
0.0819
0.0827
0.0773
0.0778
0.0776
0.0796
0.0825
0.0804
0.0778
0.0810
0.0816
0.0829
0.0841
0.0853
0.0866
0.1156
0.1172
0.1190
0.1173
0.1154
0.1172
0.1161
0.1156
0.1166
0.1190
0.1213
0.1196
0.1211
0.1238
0.1276
0.1296
0.1314
0.1333
0.1353
0.0851
0.0883
0.0816
0.0810
0.0771
0.0802
0.0768
0.0771
0.0777
0.0811
0.0802
0.0815
0.0802
0.0808
0.0798
0.0822
0.0834
0.0846
0.0858
0.00
0.00
0.00
72.77
131.25
146.85
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
155.94
191.65
191.60
191.66
191.72
191.77
191.68
191.59
191.49
191.39
191.28
191.24
191.12
191.02
190.91
190.82
190.73
190.63
190.53
190.44
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Example of Fuel Avoided Costs ($/MMBtu)
Res.
Distillate
Res.
High-Use
LPG
Res.
Natural Gas
Com
Distillate
Com.
LPG
Com.
Natural Gas
Kerosene
Wood
17.07
17.71
17.29
16.79
16.28
15.81
15.33
15.12
15.19
15.26
15.40
15.54
15.68
15.82
16.03
16.24
16.46
16.66
16.88
28.89
30.99
31.22
31.71
32.01
32.41
31.90
31.93
31.84
31.90
32.17
32.07
32.00
32.11
31.98
32.13
32.29
32.34
32.34
12.42
13.42
12.90
12.36
11.89
11.53
10.87
10.94
10.88
11.03
11.29
11.21
11.16
11.29
11.39
11.66
11.78
11.89
12.02
15.05
15.61
15.25
14.80
14.35
13.94
13.52
13.33
13.39
13.46
13.58
13.70
13.83
13.95
14.14
14.32
14.51
14.70
14.88
28.89
30.99
31.22
31.71
32.01
32.41
31.90
31.93
31.84
31.90
32.17
32.07
32.00
32.11
31.98
32.13
32.29
32.34
32.34
10.26
11.25
10.73
10.19
9.72
9.36
8.71
8.77
8.73
8.87
9.13
9.05
9.00
9.13
9.24
9.49
9.59
9.69
9.78
17.75
18.42
17.99
17.46
16.93
16.45
15.94
15.73
15.80
15.87
16.02
16.16
16.31
16.46
16.67
16.90
17.12
17.33
17.55
6.11
6.34
6.19
6.01
5.83
5.66
5.49
5.42
5.44
5.46
5.51
5.57
5.62
5.67
5.74
5.82
5.89
5.97
6.04
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How Does EVT Currently Use Externality
Values?
• Externality values are added to costs for costeffectiveness screening, but not included when
reporting Total Resource Benefits (TRB)
• Externality values are inflated (in State Screening
Tool) from values established in 2000 (yr 2000 $):
• $0.007/kWh
• $0.90/MMBTU Natural Gas
• $1.08/MMBTU Propane
• $1.43/MMBTU Oil
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Cost-Effectiveness Summary
NPV of Avoided electric costs +
externalities
Total Societal Benefits
+ NPV of Avoided fuel costs +
externalities
+ NPV of Avoided water costs
Initial cost of measures
+ NPV of O&M costs (+ or -)
- Total Societal Costs
+ NPV of Increased fuel usage +
externalities
+ Deferral credit (if early retirement)
- 10% Risk adjustment
+ Delivery/admin costs at program
and portfolio levels
= Net Societal Benefits
If Net Societal Benefits are >0, the
measure/project/portfolio is cost
effective
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What Benefits are counted in Screening?
• Electric energy avoided costs (by 4 costing periods)
• Electric generation capacity avoided costs
• Electric transmission and distribution avoided costs
• Fossil fuel avoided costs (only if decreased usage)
• Water avoided costs (may be positive or negative
benefit)
• Electric externalities
• Fossil fuel externalities (only if decreased usage)
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What Costs are Counted in Screening?
• Installed cost of measures
• Operation and Maintenance (O&M) net costs (may be
positive or negative cost)
• Fossil fuel costs (only if increased usage)
• Fossil fuel externality costs (only if increased usage)
• Deferral credit for early retirement retrofit (always a
negative cost)
• Risk discount (10% reduction in positive costs,
excluding fuel externalities)
• Delivery and administrative costs at the project,
initiative and portfolio level (as further detailed)
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Example of Screening
Inputs
•
•
•
•
•
Measure name: Low Flow Showerhead with Oil DHW
Installed cost: $15
Measure life: 9 years
Oil savings: 1.26 MMBTU per year
Water savings: 4.6 CCF per year
Outputs
•
•
•
•
•
Present Value of Societal Net Benefits: $482
Present Value of Benefits: $496
Present Value of Costs: $14
Present Value of Fossil Fuel Benefits: $146
Present Value of Water Benefits: $332
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How Screening Varies in Different
Settings
• Market opportunity vs. discretionary retrofit:
• Market opportunity: Costs and savings incremental to new equipment baseline
• Discretionary retrofit: Full installed cost, including installation labor; initial savings relative to
existing equipment efficiency
• Screening of “early retirement” of equipment:
• Reduced costs for deferring future replacements (deferral credit)
• Decrease in future savings at time that equipment would have been replaced (baseline shift)
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How Screening Varies at the 4 Levels
1. Individual measure:
• uses marginal measure cost only
2. Project:
•
includes multiple measures that, bundled together,
comprise a project for a customer
3. Initiatives:
•
total of all measures and projects for a particular market includes allocated EVT delivery and administrative costs
4. Portfolios:
•
total of all initiatives – includes all EVT Costs
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Source of Measure Cost and Savings
Inputs Used by EVT in Screening
• Cost and savings assumptions and adjustments (free
ridership, spillover, install rates) for most, common
measures are documented in the Technical Reference
Manual (TRM)
• TRM characterizations are developed by the Technical Advisory Group, that
includes EVT and BED technical staff, DPS staff and the Contract Administrator
• Measure characterizations are developed from evaluations and studies, both
Vermont and elsewhere, and calculations or estimates, as appropriate
• Measure characterization values are assigned for all prescriptive measures
• For common custom measures, savings algorithms are specified in the TRM
• Custom measures not in TRM are characterized by EVT
Project Managers and documented in project files
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Other Cost-Effectiveness Screening
Standard Practices
• Efficiency Vermont has developed formal policies, guidance or
standard practices to address a number of screening situations,
including, but not limited to:
• Screening for “average” occupants vs. current occupants
• Adjusting baselines
• The value of water leak savings to water utilities
• Screening when a customer chooses a more-expensive measure or
form of a measure
• Such policies are either documented and submitted for
comment to the DPS as “Program Implementation Procedures,”
or documented as internal EVT policies
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What Benefits are Reported in EVT’s
Annual Report?
• Total Resource Benefits (TRB)
• Avoided cost of electricity
• Fossil fuel net savings
• Water savings
Reported on both annual and lifetime
(present value) basis
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What Costs are Reported in EVT’s Annual
Report?
• Costs reported by initiative and total portfolio:
• Efficiency Vermont costs
• Participant costs
• Third party costs
• O&M costs
• Costs reported for total portfolio
• Levelized net resource cost (¢/kWh), from both an
EVT and TRC perspective (net of fossil fuel, water
and O&M savings)
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What Costs and Savings are Presented to
Customers?
• For Prescriptive Measures/Projects: First-Year Savings at Current Retail
Prices
• For Custom Projects: Cash Flow, with potential for dynamic input
• Costs
• First cost of project & net cost after EVT incentives
• Costs for each year and NPV of:
• O&M costs (baseline, new and net)
• Any increases in fuel costs, by fuel
• Benefits
• First years savings at current retail prices
• Savings for each year, and net cash flow to customer at current retail
rates (annual and NPV)
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Comparison of Cost-Effectiveness Screening
DRAFT – 7/1/09
Efficiency Vermont
Vermont Gas
Fuel Savings
Analysis
Calculator (Fuel
Dealers)
Analyzes societal economics?
Yes
Yes
No
No
No
No
Analyzes customer economics?
Yes
Yes
Yes
Yes, undiscounted
Yes
Yes
None
1,10, 15, 20
None
unlimited
4%
measure life
3% real
unlimited
No
No
No
No
No
No
No
No
No
No
Yes
No
No
Yes
No
No
Yes
No
No
Yes
Yes
Yes, undiscounted
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Discount rate used
Analysis horizon (years)
Electric "avoided costs" used for
economic analysis?*
Fossuil fuel "avoided costs" used
for economic analysis?*
Externalities **
Water avoided costs
Retail prices
Lifetime savings
Installed cost
Risk discount
O&M
Early retirement deferral credit
Early retirement baseline shift
5.7% real, 8.4% nom.
5.3% real, 8.55% nom.
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measure life
AESC: 4 energy periods,
No (Res electric
Generation, T&D
measures installed)
AESC: Oil, Propane, Natural Gas only
(4
Natural Gas, Wood
periods)
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Applied as 10% discount
(B/C) * (10/9)
on costs
Yes
Yes, external calculation
Yes
No
Yes, for electric only
Yes, residential only
Hulstunk Model
Campbell
Model
NEAT Audit
(Weatherization
Assistance
Program)
* In this context, "avoided costs" refers to the year-by-year stream of future avoided supply costs from a system perspective, as the term is typically used in
a regulatory setting. All of the listed analyses account for fuel use avoided from a consumer perspective using retail prices.
* *EVT and VGS use different fuel specifc externalities.
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QUESTIONS OR COMMENTS ?
Efficiency Vermont
255 S. Champlain St.
Burlington, Vermont
888 – 921 – 5990
www.efficiencyvermont.com
Blair Hamilton x 1024
[email protected]
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