1. Energy efficiency cost-effectiveness CEC IEPR Workshop on 2030 Efficiency Goals July 6, 2015 Snuller Price

2. Two Key EE Cost-effectiveness Frameworks in California CEC Title 24 for new construction Time Dependent Valuation (TDV) determines what is ‘cost- effective’ in the prescriptive package home, as well as the tradeoffs between measures. Eg. if you want more window glazing, you have to add efficiency somewhere else in the building In Warren-Alquist Act, requires code to be cost-effective, has been interpreted as a participant cost perspective CPUC Energy Efficiency program Cost-effectiveness required to safeguard public money spent on energy efficiency programs and incentives (~$1B/yr) Evaluation is done on cost-effectiveness overall (TRC), and then on distribution tests as well (PCT, PAC, RIM) 2

3. 3 The changing nature of EE cost effectiveness in a low-carbon future 1.Energy efficiency will still be about saving money EE saves GHGs and $$ today, but there are diminishing returns to GHG savings over time (e.g. due to higher renewables and other decarbonized energy supplies) 2.Updates, not wholesale replacement, of cost- effectiveness metrics are needed To reflect best available information  e.g. CEC TDVs could use measure-specific equipment lifetimes To reflect a low-carbon electricity future  50% renewables by 2030, fully integrated, will impact energy and capacity needs EE cost-effectiveness evaluation will remain useful to allocate limited $$ intelligently and to define code

4. 4 The changing nature of EE cost effectiveness in a low-carbon future 3.Fuel-switching (natural gas  electricity) can save GHGs, but breaks down under existing cost-effectiveness frameworks CEC’s TDVs discourage fuel-switching even if measure achieves GHG savings because it doesn’t pass cost- effectiveness screens CPUC EE Policy Manual requires a benefit-cost ratio of 1.0 or greater (for total resource cost test and participant cost test) Framework for fuel-switching needs to be updated if these measures are to be part of the state’s GHG reduction strategy

5. Thank You! Snuller Price, Senior Partner snuller@ethree.comsnuller@ethree.com Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Tel 415-391-5100 Web http://www.ethree.com