Energy Efficiency as a Resource for the Electric Utility Industry Presented to Center for Energy Workforce Development 2009 Summit Presented by Lisa Wood Executive Director October 8, 2009

Talking Points Institute for Electric Efficiency Energy efficiency is first fuel for electric utility industry Importance of energy efficiency in carbon emissions reductions Expected growth in energy efficiency and demand response Uncertainty about roles for future investments in energy efficiency Energy efficiency: implications of growth

The Institute for Electric Efficiency Mission: To advance energy efficiency practices and demand response (DR) among electric utilities. Role of IEE Provide resources/share information and best practices re: regulatory models for energy efficiency and programs Identify key issues & barriers/enablers Provide forum for EE leaders for dialogue on advancing energy efficiency (industry, advocacy, and government leaders) Provide thought leadership around key energy efficiency issues for electric utility industry

IEE governance Management committee of 17 CEOs of investor owned utilities (IOUs) Chaired by Jeff Sterba, PNM Resources Advisory committee of leading energy efficiency advocacy organizations and policy makers ASE, ACEEE, CEE, EPRI, NRDC, NARUC, NASUCA, RMI, Sierra Club DOE, EPA, FERC Strategy committee of VPs overseeing energy efficiency in IOUs

Energy efficiency is fundamental to the power business – our “1st” fuel! In US, 40% of CO2 emissions come from power generation sector Energy efficiency is a cost effective way to: Reduce carbon emissions Moderate the expected growth in electricity demand Average cost to save = $0.035 per kWh saved

Proposed federal climate bill includes combined efficiency & renewable standard Waxman-Markey climate change bill – HR 2454 (introduced May 15, 2009) Efficiency and renewable electricity standard: 20% by 2020 1/4 can be met by energy efficiency (5% of the 20%) Governors can petition for up to 2/5 (8% of the 20%) to be met by EE in a given year 18 states already have EERS 29 states (including DC) have RPS. 7 states allow EE to act as a resource in the RPS. Carbon reduction goals – EE will play a major role 17% below 2005 levels by 2020 42% below 2005 levels by 2030

But, 18 states have already adopted energy efficiency resource standards & more to follow

Both EE and DR expected to grow significantly by 2020: forecast bookends Energy efficiency forecast by 2020 EPRI: 372 TWh by 2020 (maximum achievable potential up to 473 TWh by 2020 (economic potential) – Jan 2009 McKinsey: 1,080 TWh by 2020 (“economic” potential) – July 2009 Demand response forecast by 2020 EPRI: 79 GW by 2020 (realistic achievable potential) up to 147 GW by 2020 (maximum achievable potential) – Jan 2009 FERC demand response forecast: 82 GW by 2019 (expanded business as usual) up to188 GW by 2019 (full participation) – June 2009

Comparison between EPRI and McKinsey energy efficiency potential values, year 2020 2020 Electricity Energy Efficiency Potential (Relative to AEO 2008 Reference Case) TWh = Billion kWh ~60 ~120 ~1,080 ~180 ~80 ~160 ~250 473 372 141 EPRI Realistic Achievable Potential EPRI Maximum Achievable Potential EPRI Economic Potential McKinsey includes more types of electrical devices1 McKinsey includes wider set of technologies in selected end-uses1 McKinsey includes additional market segments McKinsey allows accelerated equipment replacement (i.e. prior to end of life) McKinsey assumes evolution of LED lighting technology & economics over time1 EPRI estimates greater heat pump and commercial lighting potential1 McKinsey NPV- Positive Potential 1 Includes small differences in technology performance and cost assumptions, discount rates, and electricity rates between the two reports

Historical vs. projected U. S Historical vs. projected U.S. energy savings due to energy efficiency programs only (EIA and EPRI Report #1016987) – relative to baseline forecast

Historical vs. projected U. S Historical vs. projected U.S. summer peak load reduction (GW) due to energy efficiency and demand response (EIA and EPRI Report #1016987)

FERC national assessment of DR potential – June 2009 NERC baseline (no DR)

Over 58 million smart meters will be deployed to mass market customers over next 5 to 7 years (excluding $4.5 billion in DOE stimulus funds)

Smart meter platform and home area network technologies will take EE and DR to new levels …Giving customers the tools and the know-how to be smarter energy consumers HAN communication SmartMeter communication

Utility spending on energy efficiency: $3 billion in 2008 expected to grow to $5 billion in 2012 Source: LBNL’s The Shifting Landscape of Ratepayer-Funded Energy Efficiency in the U.S. (2009) by Galen Barbose, Charles Goldman, and Jeff Schlegel

But, in 2009, $14 billion in recovery act funds for energy efficiency bypasses utility industry

EE expected to grow significantly but some uncertainty about roles for future investments Other State Gov’t, Including Air Office Ratepayer Programs ~$5B ? ARRA/ Weatherization $ ? CO2 Allowances ~$4B ? Market Services Funding Lead Oversight Program/Service Administrator State PUC State Energy Office Federal Gov’t / Regions Utilities NGOs, Community Action Orgs Third Party Local Gov’ts ESCOs, Private Sector Uncertainty Exists in Future Landscape for Energy Efficiency Programs ?

Energy efficiency will grow over next decade: workforce implications Utilities will grow energy efficiency as a resource over next decade. How does this happen? Utilities: Administer energy efficiency programs in house (small numbers of jobs generated) Contract for fieldwork/technical assistance/audits/program implementation Contract for evaluation, measurement, and verification of program savings (EM&V) Work with ESCOs if it makes sense to do so

Energy efficiency is a critical resource for electric utilities & a national priority Utility industry & other players will have key roles in growing energy efficiency over next decade. Many new players already entering the energy efficiency/smart grid/energy management space Specialized niche companies; ESCOs GE, IBM, Google, etc. Smart meter platform and home area networks will open up new innovations and applications