northwest power and conservation council 6 th plan conservation resource cost- effectiveness...

Northwest Power and ConservationCouncil

66thth Plan Plan Conservation Resource Cost-Conservation Resource Cost-

EffectivenessEffectiveness

Conservation Resource Advisory CommitteeConservation Resource Advisory Committee

March 12, 2009March 12, 2009


How the Plan’s Cost-Effectiveness How the Plan’s Cost-Effectiveness Analysis Impacts Regional Conservation Analysis Impacts Regional Conservation

ProgramsPrograms Council Plan Council Plan

– Establishes regional conservation targets based its Establishes regional conservation targets based its interpretation of the Act’s requirementsinterpretation of the Act’s requirements

– Contains methodology and assumptions (e.g., future market Contains methodology and assumptions (e.g., future market prices, measure cost & savings) for determining cost-prices, measure cost & savings) for determining cost-effectivenesseffectiveness

– Contains specific “measure level” (e.g. high efficiency Contains specific “measure level” (e.g. high efficiency electric water heaters) determinations of cost-effectivenesselectric water heaters) determinations of cost-effectiveness

Bonneville’s resource acquisitions are to be Bonneville’s resource acquisitions are to be consistent with the Council’s Planconsistent with the Council’s Plan

Utilities covered by I-937 in Washington state must Utilities covered by I-937 in Washington state must adhere to the Council’s “methodology”adhere to the Council’s “methodology”


The Plan’s Definition of Resource Cost-The Plan’s Definition of Resource Cost-Effectiveness Comes From the Regional ActEffectiveness Comes From the Regional Act

""Cost-effectiveCost-effective,”,” means that a measure or means that a measure or resource must be forecast:resource must be forecast:– to be to be reliable and availablereliable and available within the time it is within the time it is

neededneeded– to meet or reduce the electric power demand to meet or reduce the electric power demand

of the consumers of the consumers at an estimated incremental at an estimated incremental system cost no greater than that of the least-system cost no greater than that of the least-cost similarly reliable and available alternativecost similarly reliable and available alternative measure or resource, or any combination measure or resource, or any combination thereof. thereof.


Under the Act the term "system cost" means:Under the Act the term "system cost" means:

An estimate of An estimate of all direct costsall direct costs of a measure or of a measure or resource over its effective life, including:resource over its effective life, including:– the cost of distribution and transmission to the the cost of distribution and transmission to the

consumerconsumer– waste disposal costswaste disposal costs– end-of-cycle costsend-of-cycle costs– fuel costs (including projected increases)fuel costs (including projected increases)– and such quantifiable environmental costs and and such quantifiable environmental costs and

benefits as are directly attributable to such benefits as are directly attributable to such measure or resourcemeasure or resource


The Act’s Definition of Cost-The Act’s Definition of Cost-EffectivenessEffectiveness

Seeks to minimize the Seeks to minimize the total costtotal cost of of meeting the region’s need for the meeting the region’s need for the services provided by electricity, i.e., its services provided by electricity, i.e., its goal is goal is economic efficiency.economic efficiency.

Does not address the distribution of Does not address the distribution of these costs among parties in the regionthese costs among parties in the region


The Council Does Not Use A Single The Council Does Not Use A Single Regional Avoided Cost To Determine Regional Avoided Cost To Determine

Conservation’s Cost-EffectivenessConservation’s Cost-Effectiveness

We Use What We Learn from the Portfolio We Use What We Learn from the Portfolio ModelModel

1)1) Pick any forecast of future market pricesPick any forecast of future market prices

2)2) Add “Risk Premiums” for conservation’s Add “Risk Premiums” for conservation’s hedge value to that forecast (different ones hedge value to that forecast (different ones for lost-opportunity & dispatchable) for lost-opportunity & dispatchable)

3)3) Use this risk adjusted price to determine the Use this risk adjusted price to determine the value of the energy savings value of the energy savings


IRP MethodologyIRP Methodology

66thth Plan is testing thousands of “plans” Plan is testing thousands of “plans” against 750 futuresagainst 750 futures

Model identifies “plans” with the lowest cost Model identifies “plans” with the lowest cost for a given level of riskfor a given level of risk

Model tests alternative conservation Model tests alternative conservation deployment schedules (amount and timing) deployment schedules (amount and timing) as well as “risk mitigation” benefits of buying as well as “risk mitigation” benefits of buying conservation above forecast avoided costconservation above forecast avoided cost

Regional Conservation Targets are derived Regional Conservation Targets are derived from Plans on lowest-cost lowest-risk from Plans on lowest-cost lowest-risk frontierfrontier


Council Process for Estimating Cost-Effective Council Process for Estimating Cost-Effective Conservation Resource Potential & Setting Acquisition Conservation Resource Potential & Setting Acquisition

TargetsTargets

MeasureMeasure CostCost

Measure SavingsMeasure Savings and Load Shapeand Load Shape

MeasureMeasureLifetimeLifetime

• Program DataProgram Data• Contractor BidsContractor Bids• Retail Price SurveysRetail Price Surveys

• End Use Load ResearchEnd Use Load Research• Engineering ModelsEngineering Models• Billing History AnalysisBilling History Analysis• Independent Testing Labs

• EvaluationsEvaluations• Census DataCensus Data• Manufacturers DataManufacturers Data• Engineering EstimatesEngineering Estimates

MarketModel

Provides 20-year Provides 20-year Forecast of Hourly Forecast of Hourly Wholesale Market Wholesale Market Prices & CO2 Prices & CO2 Emission/kWh Under Emission/kWh Under Average Water Average Water Conditions, Medium Conditions, Medium Gas Price Forecast Gas Price Forecast for Medium Load for Medium Load Growth ScenarioGrowth Scenario

Cost-Effectiveness ModelCost-Effectiveness ModelDetermines measure and program level “cost-Determines measure and program level “cost-effectiveness” using:effectiveness” using:• Measure costs, savings & load shapeMeasure costs, savings & load shape• Aurora Market pricesAurora Market prices•T&D savings (losses & deferred $)T&D savings (losses & deferred $)•10% Act Credit10% Act Credit•Quantifiable non-energy costs & benefitsQuantifiable non-energy costs & benefits•Financial Assumptions (e.g. Discount Rate)Financial Assumptions (e.g. Discount Rate)•Risk “Premium” from Porfolio ModelRisk “Premium” from Porfolio Model

PortfolioPortfolioModelModel

Determines NPV of Portfolios with Determines NPV of Portfolios with Alternative Levels of Conservation Alternative Levels of Conservation vs Other Resources Under Wide vs Other Resources Under Wide Range for Future ConditionsRange for Future Conditions

Plan’s Conservation TargetPlan’s Conservation Target

$35,500

$36,000

$36,500

$37,000

$37,500

$23,500 $24,000 $24,500 $25,000

NPV System Risk (2004$Millions)

NP

V S

yste

m C

ost

(20

04

$M

illion

s)

Portfolio Analysis Determines How Much Energy Efficiency Portfolio Analysis Determines How Much Energy Efficiency to Develop in the Face of Uncertaintyto Develop in the Face of Uncertainty

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Annual Load Growth

Pro

bab

ilit

y (

%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 1% 2% 3% 4% 5%

Real Natural Gas Escalation Rate% )

Pro

bab

ilit

y (

%)

0%

5%

10%

15%

20%

25%

30%

3.27% 3.80% 3.85% 3.93% 2.50%

Nominal Annual Electricity Price Escalation Rate

Pro

bab

ilit

y (

%)

0

20

40

60

80

100

120

98

467

705

842

1,06

9

1,19

1

1,28

3

1,33

5

1,35

3

1,37

3

1,65

0

Resource Potential

Levelize

d C

ost

0%2%4%6%8%

10%12%14%16%18%20%

Carbon Tax Implementation Date

Pro

bab

ilty

(%

)

0

5000

10000

15000

20000

25000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975

Hydrosytem Year

Cap

acit

y (

MW

)

0%2%4%6%8%

10%12%14%16%18%20%

Pro

bab

ilit

y

$0 $6 $12 $18 $24 $30 $36

Carbon Tax

Frequency Chart

Dollars

Mean = $689.000

.011

.022

.032

.043

0

10.75

21.5

32.25

43

($3,509) ($1,131) $1,247 $3,625 $6,003

1,000 Trials 1,000 Displayed

Portfolio Portfolio Analysis Analysis ModelModel

$35,500

$36,000

$36,500

$37,000

$37,500

$23,500 $24,000 $24,500 $25,000

NPV System Risk (2004$Millions)

NPV

Syst

em

Cost

(2

00

4$

Mill

ion

s)

Efficient FrontierEfficient Frontier

NPV System Cost


Plans Along the Efficient Frontier Permit Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against RiskTrade-Offs of Costs Against Risk

$35,500

$36,000

$36,500

$37,000

$37,500

$23,500 $24,000 $24,500 $25,000

NPV System Risk ($Millions)

NPV

Syst

em

Cost

($

Mill

ion

s)

Least RiskLeast Risk

Least CostLeast Cost


Alternative Alternative Cost-Effectiveness TestsCost-Effectiveness Tests

Participant Cost Test (PTC)Participant Cost Test (PTC)– Costs and benefits to the program participantCosts and benefits to the program participant

Total Resource Cost (TRC)Total Resource Cost (TRC)– All Quantifiable costs & benefits regardless of who All Quantifiable costs & benefits regardless of who

accrues them. Includes participant and others’ costsaccrues them. Includes participant and others’ costs Utility Cost Test (UTC)Utility Cost Test (UTC)

– Quantifiable costs & benefits that accrue only to the Quantifiable costs & benefits that accrue only to the utility system. Specifically excludes participant costsutility system. Specifically excludes participant costs

Rate Impact Measure (RIM)Rate Impact Measure (RIM)– Net change in electricity utility revenue requirements.Net change in electricity utility revenue requirements.

» AttemptsAttempts to measure rate impact on all utility customers especially to measure rate impact on all utility customers especially those that do not directly participate in the conservation programthose that do not directly participate in the conservation program

» Treats “lost revenues” (lower participant bills) as a costTreats “lost revenues” (lower participant bills) as a cost


Plan Uses Total Resource Cost Plan Uses Total Resource Cost (& Benefits) Perspective(& Benefits) Perspective

Best meets the requirements of the Regional ActBest meets the requirements of the Regional Act Considers all quantifiable costs & benefits regardless of Considers all quantifiable costs & benefits regardless of

who accrues themwho accrues them Ensures that conservation expenditures are good for the Ensures that conservation expenditures are good for the

power system, the customer and societypower system, the customer and society Allows conservation to be compared to other resources Allows conservation to be compared to other resources

considered for development by including all quantifiable considered for development by including all quantifiable costs & benefitscosts & benefits

Was Was stronglystrongly recommended by utilities in first Council recommended by utilities in first Council PlanPlan

Plan targets would be significantly higher if Plan had Plan targets would be significantly higher if Plan had considered only “Utility Cost”considered only “Utility Cost”


Some Utilities Now Recommend Use Some Utilities Now Recommend Use of Utility Cost Test Perspectiveof Utility Cost Test Perspective

Considers only those costs & benefits that accrue to Considers only those costs & benefits that accrue to electric utility systemelectric utility system– Energy kWh at avoided wholesale cost at time savedEnergy kWh at avoided wholesale cost at time saved– Transmission & distribution kW benefits if coincident with Transmission & distribution kW benefits if coincident with

system peak and at value of deferred expansion costsystem peak and at value of deferred expansion cost– Utility cost for incentives & program administrationUtility cost for incentives & program administration

Does not count customer costs or benefitsDoes not count customer costs or benefits Ensure that conservation is good for the utilityEnsure that conservation is good for the utility Acts as the upper limit on utility incentives for Acts as the upper limit on utility incentives for

measures with large non-electricity benefitsmeasures with large non-electricity benefits Used as a measure of utility cost efficiency Used as a measure of utility cost efficiency

– Striving for low utility cost share keeps revenue requirements Striving for low utility cost share keeps revenue requirements lowerlower


NEET Process Raised Additional NEET Process Raised Additional IssuesIssues

Review method of calculating cost-effectivenessReview method of calculating cost-effectiveness– Is the Council’s existing interpretation of the Act’s Is the Council’s existing interpretation of the Act’s

definition “too conservative”?definition “too conservative”?

At what “level of aggregation” should the calculation At what “level of aggregation” should the calculation of costs and benefits be performed?of costs and benefits be performed?– MeasureMeasure– SystemSystem– BuildingBuilding– ProgramProgram– PortfolioPortfolio


Why Council Uses TRC:Why Council Uses TRC:Avoids Potential Double Counting of the SavingsAvoids Potential Double Counting of the Savings

Utility invest $2500 in efficient motor to Utility invest $2500 in efficient motor to acquire 5000 kWh/yr savingsacquire 5000 kWh/yr savings– Levelized Cost = 3.4 cents/kWhLevelized Cost = 3.4 cents/kWh– B/C = 1.32B/C = 1.32

Customer matches $2500 utility investment to Customer matches $2500 utility investment to save the same 5000 kWh/yrsave the same 5000 kWh/yr– Simple payback = 10 years, motor last 20 yearsSimple payback = 10 years, motor last 20 years

Total of Total of all direct costall direct cost is $5000 for 5000 is $5000 for 5000 kWh/yr of savingskWh/yr of savings– Levelized cost = 6.8 cents/kWhLevelized cost = 6.8 cents/kWh– B/C ratio = 0.66B/C ratio = 0.66


Why Council Uses TRCWhy Council Uses TRCDirects Funds Toward Measures That Optimize Directs Funds Toward Measures That Optimize TotalTotal

Utility and Customer InvestmentsUtility and Customer Investments

Utility invest $600 toward cost of $6000 Utility invest $600 toward cost of $6000 solar PV system that saves 1200 solar PV system that saves 1200 kWh/yrkWh/yr– Alternatively utility and consumer could:Alternatively utility and consumer could:

» Invest $160 in 40 CFLs to save 1200 kWh, Invest $160 in 40 CFLs to save 1200 kWh, reducing cost $440 reducing cost $440

» Invest $600 to buy 150 CFLs, saving 5000 Invest $600 to buy 150 CFLs, saving 5000 kWh, quadrupling savingskWh, quadrupling savings

Especially important when budgets are Especially important when budgets are limitedlimited


Why Council Uses TRCWhy Council Uses TRCAvoids promoting measures that may impose non-Avoids promoting measures that may impose non-

energy costs on othersenergy costs on others

Act directs the Council give second priority to Act directs the Council give second priority to the use of renewable resourcesthe use of renewable resources

Analysis in 1Analysis in 1stst Plan concluded that cost of Plan concluded that cost of using wood stoves to offset use of electric using wood stoves to offset use of electric heat was below cost of electricity from new heat was below cost of electricity from new generating facilitiesgenerating facilities

11stst Plan Plan excludedexcluded use of wood heat due to use of wood heat due to “non-energy” cost (air pollution) imposed on “non-energy” cost (air pollution) imposed on the regionthe region


Why Council Uses TRCWhy Council Uses TRCExpands list of conservation options by allowing Expands list of conservation options by allowing

consideration of quantifiable “non-energy” benefitsconsideration of quantifiable “non-energy” benefits

Energy Star Clothes Washer in Homes with Gas Energy Star Clothes Washer in Homes with Gas Water Heater and DryerWater Heater and Dryer – Present Value Capital Cost Present Value Capital Cost

== $58/MWh$58/MWh– Present Value to Power SystemPresent Value to Power System

= $17/MWh (B/C = 0.3)= $17/MWh (B/C = 0.3)– Value to Region/Society (includes natural gas, detergent & Value to Region/Society (includes natural gas, detergent &

water savings)water savings)= $110/MWh (B/C = 2.0)= $110/MWh (B/C = 2.0)

Power system’s “willingness-to-pay” for these savings Power system’s “willingness-to-pay” for these savings should be limitedshould be limited to its present value benefits to its present value benefits

» Electric Utility could provide incentive up to $17/MWh for Electric Utility could provide incentive up to $17/MWh for washer in a home with gas water and dryer heatwasher in a home with gas water and dryer heat


Consideration of Non-Energy Benefits Consideration of Non-Energy Benefits Expands the Conservation Supply CurveExpands the Conservation Supply Curve

0

500

1,000

1,500

2,000

2,500

3,000

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100

Real Levelized Cost (2000$/MWh)

Cum

ula

tive S

avin

gs

(aM

W)

Economically Achievable Potential w/o Non-Energy Benefits

Economically Achievable Potential w/Non-Energy Benefits

Conservation Resources in Plan Createdby Consideration of Non-Energy Benefits


Care Must Be Used in Applying The Plan’s Care Must Be Used in Applying The Plan’s Cost-Effectiveness Results “Prescriptively”Cost-Effectiveness Results “Prescriptively”

Not all measures are in the draft 6Not all measures are in the draft 6thth Plan Plan– Plan contains over 1000 applications of specific EE technologiesPlan contains over 1000 applications of specific EE technologies– NOT an exhaustive list of all possible measures & applications (e.g. NOT an exhaustive list of all possible measures & applications (e.g.

custom measures)custom measures)

Plan assumes administrative costs = 20% of capital Plan assumes administrative costs = 20% of capital – Administrative cost vary widely by measure & by program designAdministrative cost vary widely by measure & by program design

Measure cost-effectiveness in Plan is an estimateMeasure cost-effectiveness in Plan is an estimate– Measure costs and savings are a single point estimate, but vary Measure costs and savings are a single point estimate, but vary

widely in practicewidely in practice– Plan targets are based on full portfolio model analysis, 750 forecasts Plan targets are based on full portfolio model analysis, 750 forecasts

of “avoided costs”of “avoided costs”– Measure/Program/Portfolio cost-effectiveness generally determined Measure/Program/Portfolio cost-effectiveness generally determined

on a on a single single forecast of “avoided costs” for the next 20 years (with forecast of “avoided costs” for the next 20 years (with adders for “hedge risk”) adders for “hedge risk”)


Granularity/Bundling – Granularity/Bundling – So What’s “A Measure”?So What’s “A Measure”?

"Resource" means-- electric power, "Resource" means-- electric power, including the actual or planned electric including the actual or planned electric power capability of generating facilities, power capability of generating facilities, or actual or planned load reduction or actual or planned load reduction resulting from direct application of a resulting from direct application of a renewable energy resource by a renewable energy resource by a consumer, or from consumer, or from a conservation a conservation measuremeasure. .


Why “Bundle”Why “Bundle”

Measures are interactive, so total savings are not the Measures are interactive, so total savings are not the sum of their “parts”sum of their “parts”– Example: Heat pumps, duct sealing and commissioningExample: Heat pumps, duct sealing and commissioning

““Deeper” savings are lower costDeeper” savings are lower cost– Example: Conversions and/upgrades to HSPF 9.0 have a Example: Conversions and/upgrades to HSPF 9.0 have a

higher TRC B/C ratio than to HSPF 8.5higher TRC B/C ratio than to HSPF 8.5

Adding a “non-cost effective” measure reduces cost Adding a “non-cost effective” measure reduces cost per unit of savings by increasing market penetrationper unit of savings by increasing market penetration– Example: Adding “prime window replacements” increases Example: Adding “prime window replacements” increases

participation in weatherization program, spreading fixed cost participation in weatherization program, spreading fixed cost over more savingsover more savings


Risks of BundlingRisks of Bundling

Reduces in economic benefits of Reduces in economic benefits of conservationconservation– If the average cost of all conservation equals the If the average cost of all conservation equals the

avoided cost, there’s no room for a mistakesavoided cost, there’s no room for a mistakes If “non-cost effective” measure dominates If “non-cost effective” measure dominates

program/portfolio, it places all savings program/portfolio, it places all savings at risk at risk (i.e., not recoverable, not counted toward (i.e., not recoverable, not counted toward target)target)

Slippery slope – Can bundling of any Slippery slope – Can bundling of any measures (e.g. PVs w/CFLs) be justified?measures (e.g. PVs w/CFLs) be justified?– Is there a need for consistent application across Is there a need for consistent application across

the region?the region?


Care Must Be Used in Applying The Plan’s Care Must Be Used in Applying The Plan’s Cost-Effectiveness Results “Prescriptively”Cost-Effectiveness Results “Prescriptively”

Plan’s cost & savings estimates are “averages”Plan’s cost & savings estimates are “averages”– Site-specific applications may be Site-specific applications may be more or lessmore or less “cost- “cost-

effective” than in Planeffective” than in Plan– The Plan “average” may not accurately reflect specific The Plan “average” may not accurately reflect specific

program conditionsprogram conditions Programs should be tailored to reflect specific Programs should be tailored to reflect specific

program designs, delivery mechanisms, measure program designs, delivery mechanisms, measure applications, location and other key cost or savings applications, location and other key cost or savings factorsfactors

Program estimates need to be Program estimates need to be more or lessmore or less granular granular than Plan estimatesthan Plan estimates– Individual measures evaluated in Plan are aggregated into Individual measures evaluated in Plan are aggregated into

programs/portfolios (e.g., Plan doesn’t have “Energy Star programs/portfolios (e.g., Plan doesn’t have “Energy Star New Homes” as a measure)New Homes” as a measure)


Avoided Costs Are Forecast to Avoided Costs Are Forecast to Be Significantly HigherBe Significantly Higher

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2007 2010 2013 2016 2019 2022 2025 2028

Wh

ole

sale

Mark

et

Pri

ce

(20

06

$/M

Wh

)

5th Plan

Preliminary Draft 6th Plan


Energy Efficiency is Still the Energy Efficiency is Still the Cheapest OptionCheapest Option

Assumptions :

Efficiency Cost = Average Cost of All Conservation Targeted in 5th Power Plan

Transmission cost & losses to point of LSE wholesale delivery

No federal investment or production tax credits

Baseload operation (CC - 85%CF, Nuclear 87.5% CF, SCPC 85%, Wind 32% CF)

Medium NG and coal price forecast (Proposed 6th Plan)

Bingaman/Specter safety valve CO2 cost

$0

$20

$40

$60

$80

$100

$120

$140

$160

Energ

y Effic

iency

Gas C

omb

Cycle

MT

Wind

(Loc

al)

Advan

ced N

uclea

r

Super

critic

al PC (W

A/OR)

Colum

bia B

asin

Wind

AB Wind

> W

A/OR

ID W

ind (L

ocal)

MT

Wind

> W

A/OR

Le

veliz

ed

Life

cycl

e C

ost

(2

00

6$

/MW

h)

Emission (CO2) cost

Transmission & Losses

System Integration

Plant costs


Draft 6Draft 6thth MWa of “Technically MWa of “Technically Achievable” Conservation PotentialAchievable” Conservation Potential

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

< 0

<10

<20

<30

<40

<50

<60

<70

<80

<90

<10

0

<11

0

<12

0

<13

0

<14

0

<15

0

<16

0

<17

0

<18

0

<19

0

<20

0

>20

0


Tech

nic

alll

y A

chie

vable

Pote

nti

al (M

Wa) DEI_Non-LO

Agr_Non-LOInd_Non-LOCom_Non-LORes_Non-LOCom_LORes_LO



0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

< 0 <20 <40 <60 <80 <100 <120 <140 <160 <180 <200

Real Levelized Cost (2006$/MWH)

Ave

rage M

egaw

att

s by

2030

Dispatchable Lost-Opportunity

5th Plan Estimate


Backup SlidesBackup Slides


Customer PerspectiveCustomer Perspective Considers only those costs & benefits that accrue to Considers only those costs & benefits that accrue to

end use consumerend use consumer– Electric bill savings Electric bill savings – Quantifiable non-energy benefits Quantifiable non-energy benefits – Customer share of capital & labor cost Customer share of capital & labor cost – Customer share of periodic replacement costCustomer share of periodic replacement cost– Customer operation and maintenance Customer operation and maintenance

cost/savingscost/savings Ensure that conservation is good for the customerEnsure that conservation is good for the customer Common metrics: B/C ratio, by simple payback, Common metrics: B/C ratio, by simple payback,

return on investment, years to positive cash flowreturn on investment, years to positive cash flow


Common Expressions of Cost-Common Expressions of Cost-EffectivenessEffectiveness

PaybackPayback– Expressed as time to recoup investmentExpressed as time to recoup investment

Benefit/Cost ratioBenefit/Cost ratio– Expressed as a ratioExpressed as a ratio

Net Present ValueNet Present Value– Expressed as dollar valueExpressed as dollar value

Levelized CostLevelized Cost– Expressed as cost per kWh or $/MWhExpressed as cost per kWh or $/MWh


Common Metrics for TRC Cost-Common Metrics for TRC Cost-EffectivenessEffectiveness

=Discounted Present Value of Benefits ($)Discounted Present Value of Benefits ($)

Discounted Present Value of Costs ($)Discounted Present Value of Costs ($)

=Discounted Present Value Costs Annualized over Life ($)Discounted Present Value Costs Annualized over Life ($)

Annual kWh Saved at Bus Bar (kWh)Annual kWh Saved at Bus Bar (kWh)

Benefit/Cost RatioBenefit/Cost Ratio

Net Present ValueNet Present Value

Levelized Cost Levelized Cost (for comparison to other resources)(for comparison to other resources)

= Discounted PV of Benefits – Discounted PV of Costs ($)Discounted PV of Benefits – Discounted PV of Costs ($)


Conservation Measure Cost-EffectivenessConservation Measure Cost-Effectiveness“Inputs and Outputs”“Inputs and Outputs”

AuroraAuroraWest CoastWest Coast

Market PriceMarket PriceForecastForecast

ECM Costs, ECM Costs, Savings,Savings,

Load Shapes & Load Shapes & Coincidence FactorsCoincidence Factors

PNW PNW Avoided CostAvoided Cost

by Transmissionby TransmissionControl AreaControl Area

ProCosProCostt

Bulk Bulk PowerPowerSystemSystemValueValue

Carbon EmissionsCarbon EmissionsBenefitsBenefits

Local DistributionLocal Distribution System T&D BenefitsSystem T&D Benefits

Bulk Bulk Transmission Transmission

SystemSystem BenefitsBenefits

LocalLocalDistributionDistribution

SystemSystemValueValue

TotalTotalSocietalSocietal ValueValue

Non-EnergyNon-EnergyBenefitsBenefits


Council 5Council 5thth Plan Forecast of Future Plan Forecast of Future Average Monthly Market PricesAverage Monthly Market Prices

(Mid C-Trading Hub)(Mid C-Trading Hub)

$0

$10

$20

$30

$40

$50

$60

Jan-05 Jan-10 Jan-15 Jan-20 Jan-25

Month

ly A

vera

ge M

ark

et

Pri

ce

(2000$/M

Wh)


Typical “On-Peak” Load ProfilesTypical “On-Peak” Load Profiles

0%

5%

10%

15%

20%

25%

30%

35%

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Perc

ent

of

Annual U

se

Res. Space Heating

Res. Central AC

Irrg. Agriculture

Commerical HVAC


Forecast On-Peak Market Power Forecast On-Peak Market Power Prices by Month and YearPrices by Month and Year

$0

$50

$100

$150

$200

$250

$300

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Whole

sale

Mark

et

Pow

er

Pri

ce (

Mid

C -

$/M

Wh 2

000$)

20052010201520202025


Typical Off-Peak Load ProfilesTypical Off-Peak Load Profiles

0%

1%

2%

3%

4%

5%

6%

7%

8%


Per

Cent

of

Annual U

se

Res. Space HeatingRes. Central ACI rrg. AgricultureCommerical HVAC


Forecast Off-Peak Market Power Forecast Off-Peak Market Power Prices by Month and YearPrices by Month and Year

$0

$5

$10

$15

$20

$25

$30

$35

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Whole

sale

Mark

et

Pow

er

Pri

ce (

Mid

C -

$/M

Wh 2

00

0$

)

20052010201520202025


The Council’s Conservation’s Cost-Effectiveness The Council’s Conservation’s Cost-Effectiveness Analysis Compares Savings with Forecast Market Analysis Compares Savings with Forecast Market

Prices Prices at the time the savings occurat the time the savings occur

Four “Load Segments” are used to Four “Load Segments” are used to compute the value of savings:compute the value of savings:– Weekday Weekday “Peak”“Peak” Load Hours Load Hours – Weekday Weekday “Ramp Up/Ramp Down”“Ramp Up/Ramp Down”

hours and hours and “Weekend Peak”“Weekend Peak” Load Load HoursHours

– Weekday and Weekday and “Weekend Off-Peak”“Weekend Off-Peak” hourshours

– Weekend and Holiday Weekend and Holiday “Very-Low”“Very-Low”

Definition of Load Segment Hours

Hour Monday Tuesday WednesdayThursday Friday Saturday Sunday Holiday1 3 3 3 3 3 4 4 42 3 3 3 3 3 4 4 43 3 3 3 3 3 4 4 44 3 3 3 3 3 4 4 45 2 2 2 2 2 2 2 46 2 2 2 2 2 2 2 37 2 2 2 2 2 2 2 38 2 2 2 2 2 2 2 39 1 1 1 1 1 2 2 2

10 1 1 1 1 1 2 2 211 1 1 1 1 1 2 2 212 1 1 1 1 1 2 2 213 1 1 1 1 1 2 2 214 1 1 1 1 1 2 2 215 1 1 1 1 1 2 2 216 1 1 1 1 1 2 2 217 1 1 1 1 1 2 2 218 1 1 1 1 1 2 2 219 2 2 2 2 2 2 2 320 2 2 2 2 2 2 2 321 2 2 2 2 2 2 2 322 2 2 2 2 2 2 2 423 3 3 3 3 3 4 4 424 3 3 3 3 3 4 4 4


Each Conservation Measure Has a Each Conservation Measure Has a Different “Cost-Effectiveness” Limit Based Different “Cost-Effectiveness” Limit Based

on When It’s Savings Occuron When It’s Savings Occur

$0

$10

$20

$30

$40

$50

$60

$70

$80


PV

Mon

thly

Mar

ket

Pric

e ($

/MW

h 20

00$)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Sha

re o

f M

onth

ly S

avin

gs

Space Heating Market Price Central AC Market Price

Space Heating Savings Central AC Savings

Weighted Average Value of Space Heating Savings = $41/MWh

Weighted Average Value of Space CoolingSavings = $78/MWh


Impact Load Shape on Regional Bulk Impact Load Shape on Regional Bulk Power System ValuePower System Value

Impact on Present Value Benefit (20-year Impact on Present Value Benefit (20-year measure life)measure life)– Low EndLow End

»Street Lighting - $41/MWhStreet Lighting - $41/MWh»Residential Space Heating - $41/MWhResidential Space Heating - $41/MWh

– High EndHigh End»Central AC - $78/MWhCentral AC - $78/MWh»Solar Water Heating - $74/MWhSolar Water Heating - $74/MWh


Impact of Bulk Transmission System Impact of Bulk Transmission System T&D on Power System ValueT&D on Power System Value

Assumed Bulk Transmission System “Avoided Assumed Bulk Transmission System “Avoided Cost” of $3.00/kW-year Cost” of $3.00/kW-year

Impact on Present Value Benefit (20 year Impact on Present Value Benefit (20 year measure life)measure life)– Low endLow end

» Irrigated Agriculture - $0.00/MWhIrrigated Agriculture - $0.00/MWh» Residential AC - $0.00/MWhResidential AC - $0.00/MWh

– High endHigh end» Residential Space Heating - $1.05/MWhResidential Space Heating - $1.05/MWh» Residential Water Heating - $0.52/MWhResidential Water Heating - $0.52/MWh


Local Transmission and Local Transmission and Distribution BenefitsDistribution Benefits

There is value in delaying utility investments in local distribution There is value in delaying utility investments in local distribution networks (and sub-High Voltage Transmission) that is caused by networks (and sub-High Voltage Transmission) that is caused by load growthload growth

Not all load growth results in the immediate need to increase Not all load growth results in the immediate need to increase local distribution system network capacitylocal distribution system network capacity

Other “Demand Side Management” (e.g. load control) programs Other “Demand Side Management” (e.g. load control) programs may be better suited to deferring network expansionmay be better suited to deferring network expansion

The value of reducing load growth defer distribution capacity The value of reducing load growth defer distribution capacity expansions:expansions:

Capital expansion cost/KW-yr * Probability expansion will be Capital expansion cost/KW-yr * Probability expansion will be deferred by conservation measure’s impact on distribution deferred by conservation measure’s impact on distribution

system peaksystem peak


Illustrative Local Distribution Illustrative Local Distribution System T & D BenefitsSystem T & D Benefits

Company Transmission Distribution Total

PacifiCorp $21.40/ kW-yr $57.59/ kW-yr $78.99/ kW-yr

PGE $7.18/ kW-yr $15.40/ kW-yr $22.58/ kW-yr

SnohPUD NA $9.50/ kW-yr $NA


Impact of Local T&D on Impact of Local T&D on Power System ValuePower System Value

Assumed Local Distribution System “Avoided Cost” of Assumed Local Distribution System “Avoided Cost” of $20/kW-year$20/kW-year

Impact on Present Value Benefit (20-year measure Impact on Present Value Benefit (20-year measure life)life)– Low endLow end

» Solar PV - $0.14/MWhSolar PV - $0.14/MWh» Solar Water Heating - $0.30 MWhSolar Water Heating - $0.30 MWh

– High endHigh end» Residential Ovens - $26/MWhResidential Ovens - $26/MWh» Residential Air Source Heat Pumps - $19/MWhResidential Air Source Heat Pumps - $19/MWh


Environmental Externalities Environmental Externalities ValueValue

Based on Carbon Dioxide Emissions from Based on Carbon Dioxide Emissions from West Coast Power SystemWest Coast Power System

Consensus that $0 is wrongConsensus that $0 is wrong Used $5- $40/ton of CO2 emittedUsed $5- $40/ton of CO2 emitted Varied amount and future date of carbon Varied amount and future date of carbon

control implementationcontrol implementation Adds about $3/MWh to Present Value Benefit Adds about $3/MWh to Present Value Benefit

of Savings (also varies by shape of savings)of Savings (also varies by shape of savings)


Expected Value of CO2 Expected Value of CO2 Control Cost by YearControl Cost by Year

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

S-05 S-09 S-13 S-17 S-21 S-25Year

Expect

ed V

alu

e C

arb

on C

ost

(2

004$/t

on)


COCO22/MWh Trends for Conservation /MWh Trends for Conservation Savings by Load SegmentSavings by Load Segment

0

0.2

0.4

0.6

0.8

1

2005 2010 2015 2020 2025

CO

2 O

ffse

t (t

on

s/M

Wh

saved

)

Segment 1

Segment 2

Segment 3Segment 4


““Cost-Effectiveness” of Conservation Varies by Cost-Effectiveness” of Conservation Varies by PerspectivePerspective

Energy Star Clothes Washer (MEF 2.2) Energy Star Clothes Washer (MEF 2.2) with Electric Water Heating and Electric Dryerwith Electric Water Heating and Electric Dryer

Present Value Capital Cost = $0.44/kWhPresent Value Capital Cost = $0.44/kWh– Value to Bulk Power SystemValue to Bulk Power System

= $53/MWh (B/C = 1.17)= $53/MWh (B/C = 1.17)– Value to Local Distribution System (includes bulk Value to Local Distribution System (includes bulk

power system value)power system value)= $66/MWh (B/C = 1.47)= $66/MWh (B/C = 1.47)

– Value to Region/Society (includes detergent & water Value to Region/Society (includes detergent & water savings, plus carbon credit)savings, plus carbon credit)= $123/MWh (B/C = 2.8)= $123/MWh (B/C = 2.8)


Northwest Energy Efficiency Northwest Energy Efficiency Implementation WebImplementation Web

Bonneville Power

Administration

PublicUtilities

InvestorOwnedUtilities

Northwest Powerand Conservation

Council

StateRegulatory

Commissions Northwest EnergyEfficiencyAlliance

Energy TrustEnergy Trustofof

OregonOregon

RegionalTechnical

Forum

End Use ConsumersEnd Use Consumers

Markets, Markets, Codes & Codes & StandardsStandards

= = Policy Policy RecommendationsRecommendations

= Technical= TechnicalRecommendationsRecommendations

= Program= ProgramFundingFunding

= Conservation= ConservationProgramsPrograms

= Market TransformationPrograms/Projects

The “Plan”The “Plan”

= = Policy Policy

= Rate= Rate RevenuesRevenues


55thth Plan Identified Nearly 4,600 MWa Plan Identified Nearly 4,600 MWa of “Technically Available” of “Technically Available”

Conservation PotentialConservation Potential

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

$10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $100+


Ave

rag

e M

eg

aw

att

s b

y 2

02

5 Lost Opportunity Conservation

Dispatchable Conservation


Adjustments to 5Adjustments to 5thth Plan’s Plan’s Conservation Resource PotentialConservation Resource Potential Reductions in Available PotentialReductions in Available Potential

– Program AccomplishmentsProgram Accomplishments– Changes in Law Changes in Law

» Federal Standards for general service lightingFederal Standards for general service lighting» State Building CodesState Building Codes

– Changes in MarketsChanges in Markets» Improved “Current Practice” due to Energy Star, LEED, Improved “Current Practice” due to Energy Star, LEED,

Programs, Market TransformationPrograms, Market Transformation» Other Changes to Federal Standards (10 adopted, 21 Other Changes to Federal Standards (10 adopted, 21

under revision, and 12 with effective dates by 2014)under revision, and 12 with effective dates by 2014)– Changes in ForecastChanges in Forecast

» Less new commercial floor areaLess new commercial floor area» Lower industrial forecastLower industrial forecast


Adjustments to 5Adjustments to 5thth Plan’s Plan’s ConservationConservation Resource Potential Resource Potential

Increases in Available PotentialIncreases in Available Potential– Changes in ScopeChanges in Scope

» Distribution System Efficiency ImprovementsDistribution System Efficiency Improvements» Consumer electronics (TV’s, set top boxes)Consumer electronics (TV’s, set top boxes)» Irrigation Water Management and Dairy FarmIrrigation Water Management and Dairy Farm

– Changes in Data and TechnologyChanges in Data and Technology» Detailed Industrial Sector PotentialDetailed Industrial Sector Potential» New Measures (e.g. ductless heat pumps, solid New Measures (e.g. ductless heat pumps, solid

state lighting)state lighting)


Avoided Costs Are Forecast to Avoided Costs Are Forecast to Be Significantly HigherBe Significantly Higher

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2007 2010 2013 2016 2019 2022 2025 2028

Wh

ole

sale

Mark

et

Pri

ce

(20

06

$/M

Wh

)

5th Plan

Preliminary Draft 6th Plan


Energy Efficiency is Still the Energy Efficiency is Still the Cheapest OptionCheapest Option

Assumptions :

Efficiency Cost = Average Cost of All Conservation Targeted in 5th Power Plan

Transmission cost & losses to point of LSE wholesale delivery

No federal investment or production tax credits

Baseload operation (CC - 85%CF, Nuclear 87.5% CF, SCPC 85%, Wind 32% CF)

Medium NG and coal price forecast (Proposed 6th Plan)

Bingaman/Specter safety valve CO2 cost

$0

$20

$40

$60

$80

$100

$120

$140

$160

Energ

y Effic

iency

Gas C

omb

Cycle

MT

Wind

(Loc

al)

Advan

ced N

uclea

r

Super

critic

al PC (W

A/OR)

Colum

bia B

asin

Wind

AB Wind

> W

A/OR

ID W

ind (L

ocal)

MT

Wind

> W

A/OR

Le

veliz

ed

Life

cycl

e C

ost

(2

00

6$

/MW

h)

Emission (CO2) cost

Transmission & Losses

System Integration

Plant costs



0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

< 0

<10

<20

<30

<40

<50

<60

<70

<80

<90

<10

0

<11

0

<12

0

<13

0

<14

0

<15

0

<16

0

<17

0

<18

0

<19

0

<20

0

>20

0


Tech

nic

alll

y A

chie

vable

Pote

nti

al (M

Wa) DEI_Non-LO

Agr_Non-LOInd_Non-LOCom_Non-LORes_Non-LOCom_LORes_LO



0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

< 0 <20 <40 <60 <80 <100 <120 <140 <160 <180 <200


Ave

rage M

egaw

att

s by

2030

Dispatchable Lost-Opportunity

5th Plan Estimate

northwest power and conservation council 6 th plan conservation resource cost- effectiveness...

Documents

resource slide

conservation council

northwest power

cost of distribution

measure cost savings

councils methodology

total cost

regional conservation