Raising the Bar: At What Cost? A Twenty State Review of Savings and Spending on Energy Efficiency Programs Versus Potential Presented at: 2017 National Conference Energy Efficiency As a Resource American Council for an Energy Efficient Economy Litchfield Park, AZ Presented by: Toben Galvin, Navigant Consulting Inc. October 31, 2017 1
INTRODUCTION ENERGY EFFICIENCY SAVINGS & SPENDING HOW ARE WE DOING? Two part presentation: Part I: 2015 / 2016: Benchmarking Update: A 20 utility review of EE savings and spending as a percent of electric sales and electric revenue. Part II: Targets/ Potential Forecasts/ Results. A comparative review of 15 utilities: Energy efficiency savings Energy efficiency resource standards Achievable potential 2
CONTEXT ENERGY EFFICIENCY ROLES AND RESPONSIBILITIES Investor-owned and publicly-owned utilities are the major channels for acquiring energy efficiency. Policies, rules, and interpretations impact results. EE Utility Program Development & Deployment POLICY: State Law, Executive Order, Commission Rulemaking & Precedent, Federal Appliance/Equipment Standards OVERSIGHT: State Public Utilities Commission/Board (PUC), Municipal/State Jurisdiction IMPLEMENTATION: Investor-Owned Utilities (IOUs), Publicly-Owned Utilities Hybrid (e.g. Utility & State Government) Non-Utility (Government, Third Party Franchise) 3
OVERVIEW ENERGY EFFICIENCY MARKET ECOSYSTEM Some states have aggressively pursued energy efficiency over a number of years developing a mature and dynamic markets. In states in the northeast and on west coast there are wellestablished market players and a rapidly evolving startup landscape. Governance EE Market Stakeholders Regulators (CPUC, CEC) Utilities/ Admin Channel Partners The market is defined by decisions from governance authorities and activity between potential competitors and partners, and influential stakeholders. Channel Partners Competition/ Partners Implementers Regional Energy Networks Industry Associations Customers & Ratepayer Advocates Partners/ Market Influencers Partners/ Market Influencers 4
PART 1: PORTFOLIO BENCHMARKING RESULTS 5
METHODOLOGY SOURCES & APPROACH Benchmarking Research Objective Benchmarking utility, sector and program-level DSM spending and savings statistics for select 2015-2016 portfolios. Sample Twenty-one peer utilities Approach 1. Collected the following data points for each utility at the portfolio, sector, and program-level for 2015 and 2016: Utility sales and revenue Sector and program level spending and savings 2. Calculated the following for a normalized comparison: Energy savings as percent of sales First-year cost of savings 6
METHODOLOGY BENCHMARKED UTILITIES FOR 2015-2016 Utility State Program Type Electric AEP Ohio OH Younger X ConEdison NY Mature X Connecticut Light & Power CT Mature X Consumers Energy MI Younger X DTE Energy MI Younger X Duke Energy Progress NC Mature X Efficiency Maine ME Mature X Efficiency Vermont VT Mature X Eversource Energy MA Mature X Interstate Power & Light IA Mature X MidAmerican Energy IA Mature X MN Power MN Mature X National Grid MA Mature X National Grid RI Mature X NJCEP NJ Mature X PECO PA Younger X PSEG - LI LI Younger X PSEG - NJ NJ Younger X Puget Sound Energy WA Mature X Southern California Edison CA Mature X Xcel Energy MN Mature X 7
BENCHMARKING RESULTS INCREMENTAL ANNUAL ELECTRIC SAVINGS AS A PERCENT OF RETAIL SALES 3.5% 3.0% 2.5% 2.0% Median 2015-2016, 1.33% 1.5% 1.0% 0.5% 0.0% 8
BENCHMARKING RESULTS ANNUAL ELECTRIC SPENDING AS A PERCENT OF REVENUE 12% 10% 8% 6% 4% Median 2015-2016, 2.22% 2% 0% 9
RESULTS PORTFOLIO SUMMARY RESULTS Electric 2015-2016 Results Overall All Utilities Median (2015 and 2016) Spending as % of Revenue Energy Savings as % of Sales Peak Demand Savings as % of Peak Demand Retail Cost of Energy $/kwh Cost of First year Savings $/kwh $/kw 2.22% 1.33% 0.22% $0.11 $0.23 $699.88 Note: Savings are gross, verified, and at the meter. Note 2: 2015 baseline data (retail kwh/mcf sales and revenue) was used to normalize 2015 savings data and 2016 baseline data was used to normalized 2016 savings data. 10
BENCHMARKING RESULTS 2015 / 2016 PORTFOLIO ELECTRIC RESULTS (FIRST YEAR UTILITY COSTS AND SAVINGS) High Savings, Low Cost Eversource (MA) 2015 11
PART 2: SAVINGS VS. POTENTIAL VS. ENERGY EFFICIENCY RESOURCE STANDARDS 12
RESEARCH QUESTION ACTUAL SAVINGS VS. POTENTIAL VS. ENERGY STANDARD Research Objective: How do estimates of energy efficiency achievable potential compare, in both cost and savings, to actual achievement, and the state energy efficiency resource standards? Approach: Navigant reviewed the performance of 15 utility energy efficiency portfolios to recently published potential study forecasts, projected for the 2014-2015 period. Why: Assess the inter-relationship between results, targets, and potential estimates.and consider what are key driving forces. 13
ACEEE: STATE ENERGY EFFICIENCY SCORE CARD The Northeast and West Coast tend to be the leaders in aggressive and comprehensive EE. ACEEE 2017 State Energy Efficiency Scorecard Source: American Council for an Energy Efficient Economy, 2017 State Scorecard 14
OVERVIEW NATIONAL ENERGY EFFICIENCY RESOURCE (EER) TARGETS Similarly, these regions tend to have the highest EERS goals. EE Savings % of Annual Retail Sales Source: ACEEE, 2017 15
2014-2015 Savings Achieved (% of Sales) RESULTS EERS TARGET VS. 2014-2015 SAVINGS ACHIEVEMENT Resource acquisition is well correlated with EERS targets (Sample R2 = 0.84). 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% = Annual EERS > 2.0% = Annual EERS ~1.5% = Annual EERS <1.2% DTE (MI) AEP Ohio MAEC (IA) PECO CE (MI) MN Power PSE XE (MN) IPL (IA) EME CL&P NGrid (RI) NGrid (MA) EVT Eversource (MA) Only administrator below EERS target. 0.50% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 2.75% EERS Savings Target (% of Sales) 16
FOUR LEVELS OF ENERGY EFFICIENCY POTENTIAL 17
HIDDEN BUT INFLUENTIAL FACTORS IN ACHIEVABLE POTENTIAL STUDIES What are you defining as achievable? Budget constrained or not? (e.g. DSM spending limited to 2% of revenue?) State specific benefit-cost criteria such as: - Cost-effective at the total resource cost test, or utility cost test? - Cost-effective at net or gross savings? - Avoided cost calculation methodologies? - Allowance of multipliers for non-energy benefits? - Integrity of the measure level savings estimates and accuracy of forecasted delivery costs? 18
Actual Savings (% of Sales) RESULTS ACHIEVABLE POTENTIAL VS. SAVINGS ACHIEVEMENT Utilities in our sample saved 84% of their achievable potential savings in 2014-2015 overall, though there is a relatively weak correlation between achievable potential forecasts and actual savings for individual utilities (R 2 = 0.50). 3.5% 3.0% NGRID 2.5% EVERSOURCE 2.0% 1.5% PECO PSE CL&P EME EVT MAEC DTE Xcel R² = 0.4968 1.0% AEP OH CE 0.5% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Achievable Potential (% of Sales)) 19
RESULTS SAVINGS ACHIEVEMENT VS. ACHIEVABLE POTENTIAL Most utilities savings were driven largely by EERS targets, regardless of published potential, though in many cases potential studies formed the basis for EERS targets. 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% NSTAR (MA) NGrid (MA) EVT CL&P EME XE (MN) PSE Median MAEC (IA) DTE (MI) CE (MI) AEP Ohio PECO 2015 EERS Target 2015 Actual Electric Savings 2015 Potential Savings 20
RESULTS 2015 SAVINGS ACHIEVEMENT VS. ACHIEVABLE POTENTIAL Utilities exceeded their 2015 residential achievable potential forecasts on average (115%), but achieved only 41% of C&I potential. 140% 120% 100% 80% 60% 40% 20% 0% AEP OH Ameren DTE ComEd Median Xcel MN CE MidAmerican IA Res C&I Total Achievable Res. Sector Potential: Forecast 35% savings from res. lighting, average actual was 50% from res. lighting, and three utilities achieving 75% of res. sector savings from lighting. 21
RESULTS SAVINGS ACHIEVEMENT VS. COST OF SAVED ENERGY (CSE) The average EERS goal in 2015 among our utility sample was 1.5%. An increase in achieved savings does not alone explain an increase in CSE. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% $0.00 Low Savings, High Savings, Low Costs Low Costs $0.10 $0.20 $0.30 MN Power XE (MN) IPL (IA) PECO CE (MI) AEP Ohio PSE DTE EME MAEC (IA) 1.5% Annual EERS Eversource (MA) NGrid (RI) $0.40 CL&P NGrid (MA) $0.50 EVT >1.5% Annual EERS $0.60 Low Savings, High Costs High Savings, High Costs 22
RESULTS FORECAST FIRST YEAR COST /KWH VS. ACTUAL The median portfolio cost of savings in 2015 ($0.24/kWh) corresponded to the median potential study forecast for 2015 ($0.25/kWh) though individual utilities varied widely. $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 DTE (MI) CE (MI) MAEC (IA) PSE NGrid (RI) Median XE (MN) EME AEP Ohio CL&P PECO 2015 Potential $/kwh 2015 Actual $/kwh Admin Costs: Median admin cost $0.07/kwh, min ($0.04 (Maine), max ($0.23/ (VT) 23
RESULTS FINDINGS ON COST & KEY DRIVERS OF PERFORMANCE Administrative spending is not correlated to total savings obtainment Total acquisition costs scale up according to savings targets though administrative costs do not scale proportionately. Lack of correlation found between administrative spending and energy savings Best-Practice utility interviews found that these utilities are: More aggressive vendor contract negotiations More actively managing and optimizing their portfolio spending through more sophisticated budget and project management tools and dashboards. Shifting budget to hot markets in effort to do more with less. 24
CONCLUSION WHAT S NEXT FOR EE SAVINGS TARGETS AFTER 2020? Potential study results are highly variable to actual performance, except in states with all cost-effective EE targets. Cautious interpretation of portfolio results and potential studies is critical. Savings from residential lighting savings are expected to drop dramatically Portfolio designs will need to innovate and diversify to find new savings Energy efficiency resource standards will likely be revised and / or move to a process where utilities integrated resource plans become a more significant factor in setting efficiency targets. More research is needed now to forecast and potentially re-calibrate EERs for post-2020. What will be the new high bar savings targets post 2020? 25
TOBEN GALVIN Director 802.526.5112 Toben.Galvin@navigant.com LEE WOOD Managing Consultant 802.526.5116 Lee.Wood@navigant.com DAVID PURCELL Managing Consultant 802.526.5118 David.Purcell@navigant.com CHRISTINE ZOOK Senior Consultant 312.583.4179 Christine.Zook@navigant.com 26