Northwest Power and Conservation Council Slide 1 Energy Efficiency As A Resource Option Three Decades of PNW Experience National Association of Regulatory Commission Energy Resources and the Environment Committee July 22, 2009 Tom Eckman Northwest Power and Conservation Council

Northwest Power and Conservation Council Slide 2 slide 2 What You’re About To Hear What We’ve Done What We’ve Done –30 years of using energy efficiency as a resource Why We Did It Why We Did It –Using Integrated Resource Planning to make the business case for utility reliance on energy efficiency as a resource How We Know What We Did How We Know What We Did –Standardizing Evaluation, Measurement and Verification What We’re About To Do What We’re About To Do –Goals for the coming decade

Northwest Power and Conservation Council Slide 3 slide 3 Northwest Speak (Definitions) Average Megawatt (aMW) = 8760 MWH Average Megawatt (aMW) = 8760 MWH Conservation = Any reduction in electric power consumption as a result of increases in the efficiency of energy use, production or distribution. Conservation = Any reduction in electric power consumption as a result of increases in the efficiency of energy use, production or distribution. Curtailment = Sitting in a dark, hot house, drinking warm beer Curtailment = Sitting in a dark, hot house, drinking warm beer

Northwest Power and Conservation Council Slide 4 slide 4 The Evolution of Energy Policy April 18, 1977 – Conservation means a cold dark house President Carter announces we are engaged in the moral equivalent of war (MEOW) December 5, Conservation declared a resource equivalent to generation President Carter signs Northwest Power and Conservation Act October 11, 2002 President Carter Awarded Nobel Peace Prize

Northwest Power and Conservation Council Slide 5 slide 5 Northwest Power and Conservation Planning Act of 1980 (PL96-501) Authorized States of ID, OR, MT and WA to form an “interstate compact” (aka, “The Council”) Authorized States of ID, OR, MT and WA to form an “interstate compact” (aka, “The Council”) Directed the Council to develop 20-year load forecast and resource plan (“The Plan”) and update it every 5 – years Directed the Council to develop 20-year load forecast and resource plan (“The Plan”) and update it every 5 – years –“The Plan” shall call for the development of the least cost mix of resources –“The Plan” shall consider conservation (energy efficiency) its highest priority resource equivalent to generation with a 10% cost advantage over power generating resources Mandated public involvement in Council’s planning process. Mandated public involvement in Council’s planning process.

Northwest Power and Conservation Council Slide 6 slide 6 How Has It Worked?

Northwest Power and Conservation Council Slide 7 slide 7 Utility Reaction to Council’s First Plan Was “Mixed”

Northwest Power and Conservation Council Slide 8 slide 8 Three Decades of Utility Conservation Acquisitions (aka “Mr. Toad’s Wild Ride”* for the PNW’s Energy Efficiency Industry) See:

Northwest Power and Conservation Council Slide 9 slide 9 Nevertheless Since the Late 70’s Since 1978 Utility & BPA Programs, Energy Codes & Federal Efficiency Standards Have Produced Almost 3600 aMW of Savings. We’ve Accomplished “Mass Quantities”

Northwest Power and Conservation Council Slide 10 slide 10 So What’s 3600 aMW? It’s enough electricity to serve more than the entire state of Idaho and all of Western Montana It’s enough electricity to serve more than the entire state of Idaho and all of Western Montana It saved the region’s consumers nearly than $1.6 billion in 2007 It saved the region’s consumers nearly than $1.6 billion in 2007 It lowered 2007 PNW carbon emissions by an estimated 14.1 million tons. It lowered 2007 PNW carbon emissions by an estimated 14.1 million tons.

Energy Efficiency Is The Region’s Third Largest Resource We’ve Saved The Equivalent to Almost Two Grand Coulee Dams

Northwest Power and Conservation Council Slide 12 slide 12 So How Did We Make “The Case” ?

Northwest Power and Conservation Council Slide 13 slide 13 Two Methods Integrated Resource Planning (IRP) Integrated Resource Planning (IRP) –Systematic evaluation of the least cost/least risk portfolio of resource choices where energy efficiency is treated equivalent to generating resources Energy Efficiency Resource Portfolio Standards Energy Efficiency Resource Portfolio Standards –Mandated minimum share of energy efficiency resources

IRP Portfolio Analysis Determines How Much Energy Efficiency to Develop in the Face of Uncertainty Frequency Chart Dollars Mean = $ ($3,509)($1,131)$1,247$3,625$6,003 1,000 Trials 1,000 Displayed Portfolio Analysis Model Efficient Frontier NPV System Cost

Portfolio Analysis on One Slide

So How Do You Know You Did That?

Northwest Power and Conservation Council Slide 17 slide 17 The PNW’s Approach To “Standardization” of Savings Measurement & Verification (We’re Not California) Established An Ongoing Centralized Process for Technical Review Established An Ongoing Centralized Process for Technical Review –Carried out by Regional Technical Forum (RTF) –RTF composed of utility and non-utility engineering and economic experts, staffed by Council –Funded by Bonneville Power Administration, utilities and system benefits administrators Public process Public process RTF builds on historical program experience and ongoing evaluations of regional acquisition programs RTF builds on historical program experience and ongoing evaluations of regional acquisition programs

Northwest Power and Conservation Council Slide 18 slide 18 RTF’s Major Functions Establish a Standardized Regional Cost- Effectiveness Methodology Establish a Standardized Regional Cost- Effectiveness Methodology –Public domain software for evaluating cost-effectiveness Recommend Measurement and Verification Protocols Recommend Measurement and Verification Protocols –Use IPMVP, ASHRAE, FEMP, NAPEE Model Energy Efficiency Program Impact Evaluation Guide –Develop “tailored” M&V Protocols for custom, but “recurring” projects (e.g. grocery store refrigerated case retrofits) Develop and Maintain Internet-based System for Tracking and Reporting Regional Energy Efficiency Savings and Expenditures Develop and Maintain Internet-based System for Tracking and Reporting Regional Energy Efficiency Savings and Expenditures –Deemed savings (with minimum technical specifications & Q/C criteria) –EM&V protocols –Default inputs for cost-effectiveness evaluations (e.g., forecast of future energy prices, cost of deferrable distribution and transmission, value non- energy benefits such as water savings, etc.) –Forecast CO2 content/kWh saved (based on load shape of savings)

Northwest Power and Conservation Council Slide 19 slide 19 RTF’s Major Functions Process for updating deemed savings as technology and standard practices change. Process for updating deemed savings as technology and standard practices change. Appeals process Appeals process –Utilities or other parties, including vendors, can demonstrate that different savings and value estimates should apply Collaborative Development of EM&V protocols for programs operated across multiple utility service areas Collaborative Development of EM&V protocols for programs operated across multiple utility service areas

Northwest Power and Conservation Council Slide 20 slide 20 Measure Screening Process All Possible Measures Screening Criteria & Cost-EffectivenessAnalysis “Deemed” Savings and Cost- Effectiveness “Deemed Calculated” Savings and Cost- Effectiveness “Custom Project” Valuation, Measurement and Verification Protocols Online Planning, Tracking & Reporting System Data Base

Northwest Power and Conservation Council Slide 21 slide 21 Online Planning, Tracking and Reporting System Designed to assist utilities and contractors: Designed to assist utilities and contractors: –Identify potential energy efficiency measures and programs eligible for utility and/or SBC administrator programs. –Track progress toward savings goals using standardized values and protocols –Report energy efficiency activity status to utility/SBC administrator management and regulators

Northwest Power and Conservation Council Slide 22 slide 22 Major Components of the PNW Online System Two-Way System Two-Way System –Users download deemed savings, calculators & protocols/custom project reports –Users upload results Business Rules Business Rules –Reporting periods –Verification requirements Software Platform Software Platform

Northwest Power and Conservation Council Slide 23 slide 23 So What’s Next?

Northwest Power and Conservation Council Slide 24 slide 24 Energy Efficiency is Still the Cheapest Option Assumptions : Efficiency Cost = Average Cost of All Conservation in Draft 6 th Power Plan Under $100 MWh Transmission cost & losses to point of LSE wholesale delivery 2020 service - no federal investment or production tax credits Baseload operation (CC - 85%CF, Nuclear 87.5% CF, SCPC 85%) Medium NG and coal price forecast (6 th Plan draft) 6 th Plan draft mean value CO2 cost (escalating, $8 in 2012 to $47 in 2029).

Northwest Power and Conservation Council Slide 25 slide 25 There’s Still “Mass Quantities” To Do 6th Plan Technically Achievable Conservation Potential by Sector

Northwest Power and Conservation Council Slide 26 slide 26 Draft 6 th Plan Calls for A Doubling of Annual Energy Efficiency Savings the Over Next Decade

Northwest Power and Conservation Council Slide 27 slide 27 Draft 6 th Plan Goal: Meet 85% of Load Growth with Conservation

Northwest Power and Conservation Council Slide 28 slide 28 Impact on Regional “Revenue Requirement”

Northwest Power and Conservation Council Slide 29 slide 29 Estimated Cumulative Impact on Regional “Revenue Requirement” to Achieve Proposed Conservation Targets

Northwest Power and Conservation Council Slide 30 slide 30 Impact of The Plan Meet Nearly All of Load Growth Over the Next 20 Years With Energy Efficiency at an Average Cost of Less Than $40 MWH Meet Nearly All of Load Growth Over the Next 20 Years With Energy Efficiency at an Average Cost of Less Than $40 MWH This Will Require Sustained and A Much Larger (2x-3x) Investment In Cost-Effective Energy Efficiency This Will Require Sustained and A Much Larger (2x-3x) Investment In Cost-Effective Energy Efficiency Over the first five-years it will reduce regional revenue requirements by 1% - 1.5% as a result of reduced power market purchases Over the first five-years it will reduce regional revenue requirements by 1% - 1.5% as a result of reduced power market purchases Accomplishing the “Almost” Draft 6 th Plan’s Conservation Goals Will “Stretch” the Columbia River Accomplishing the “Almost” Draft 6 th Plan’s Conservation Goals Will “Stretch” the Columbia River »In five years we’ll build the equivalent of another Chief Joseph dam, »In 12 years, we’ll build the equivalent of Chief Joseph, plus Grand Coulee dams »In 20 years, we will have added the equivalent of 50% to the “output” of all hydroelectric resources in the PNW

Northwest Power and Conservation Council Slide 31 slide 31 Carbon Emissions From the Northwest Power System Will Be Below 1990 Levels Carbon Emissions From the Northwest Power System Will Be Below 1990 Levels 1990 Level: 44 Million Tons

Northwest Power and Conservation Council Slide 32 slide 32 Conservation – Cheap, But Worth It? Any Questions?