investing in energy efficiency: experience from california julie a. fitch director, energy division...
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![Page 1: Investing in Energy Efficiency: Experience from California Julie A. Fitch Director, Energy Division California Public Utilities Commission Managing Energy](https://reader036.vdocuments.site/reader036/viewer/2022081519/56649d445503460f94a20f89/html5/thumbnails/1.jpg)
Investing in Energy Efficiency:Experience from California
Julie A. Fitch
Director, Energy Division
California Public Utilities Commission
Managing Energy Demand – Bern ’09November 4, 2009
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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: 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.
∆(2005)
= 4,000kWh/yr
= $400/capita
kWh/
pers
on
United States
California
Per Capita Electricity Sales (not including self-generation)
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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: $2.7B Total Benefits: $5.4B
The Bottom Line:
Net Social Benefit = $5.4B - $2.7B = $2.7B
Return on Investment = 100%
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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
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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 Highlights12 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).*Set in Executive Order S-3-05, June 2005.
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California’s Greenhouse Gas Emissions (480 MMTCO2E)
Source: CEC 20%6%
40%
6%3%
12%
13%Elec. Gen. (Imports)
CommercialResidential
Transportation
AgricultureIndustrial
Elec. Gen. (In State)
CARB 2007
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Electricity-Related Emissions: Imports
Source: CEC (for electricity sales); CARB (for emissions inventory)
2004 Electricity Sales (MWh)
In-State Generat-
ion77%
Imports23%
Emissions (MMT CO2e)
In-State Generat-
ion44%
Imports56%
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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
ChooseCleaner Supplies
StimulateTechnologicalInnovation
GHGTrading
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… 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.
Promote Technological Innovation•RD&D investments•Standards
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31Cap and Trade
33% Renewable Portfolio Standard
Solar PVOther
Mandates
Energy Efficiency
Transportation Mandates
26.4M
Electricity/Gas Mandates:49.7 MMTCO2E
Total Reductions from 2020 BAU: 169 MMTCO2E
2.1M
21.2M
Source: CARB Proposed Scoping Plan
Nearly 40% of reductions from mandates are from electric sector programs
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Efficiency andDemand Response
Renewable Energy
Clean and EfficientFossil-fired Energy
California’s Loading OrderStaged priorities for procurement
of new resources
Mostly command and control mandates
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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
• 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