1. Northwest Power and Conservation Council The Role of Energy Efficiency in Could (and Should) Play in Montana’s Future Insights from the 5 th Northwest Power and Conservation Plan Tom Eckman Manager, Conservation Resources Northwest Power and Conservation Council Presented October 18, 2005 Montana Energy Futures Conference

2. Northwest Power and Conservation Council slide 2 What You’re About To Hear Energy Efficiency in the Region’s Current Resource Mix Energy Efficiency in the Region’s Current Resource Mix Regional Efficiency Goals Regional Efficiency Goals –What These Might Mean for Montana What’s Behind the Goals What’s Behind the Goals The Challenges Ahead The Challenges Ahead

3. Northwest Power and Conservation Council slide 3 PNW Energy Efficiency Achievements 1978 - 2004 Since 1978 Utility & BPA Programs, Energy Codes & Federal Efficiency Standards Have Produced Nearly 3000 aMW of Savings.

4. Northwest Power and Conservation Council slide 4 So What’s 3000 aMW? It was enough electricity to serve the entire state of Montana, plus 60% of Idaho in 2004 It was enough electricity to serve the entire state of Montana, plus 60% of Idaho in 2004 - OR – It was enough electricity to serve the entire state of Idaho plus Western Montana in 2004 It was enough electricity to serve the entire state of Idaho plus Western Montana in 2004 It Saved the Region’s Consumers Nearly $1.25 billion in 2004 It Saved the Region’s Consumers Nearly $1.25 billion in 2004

5. Northwest Power and Conservation Council slide 5 Energy Efficiency Resources Significantly Reduced Projected PNW Electricity Sales

6. Northwest Power and Conservation Council slide 6 Energy Efficiency Met Nearly 40% of PNW Regional Firm Sales Growth Between 1980 - 2003

7. Northwest Power and Conservation Council slide 7 Regional Utility Conservation Acquisitions Have Helped Balance Loads & Resources Response to West Coast Energy Crisis Response to NW Recession Response to “Restructuring Discussions” Creating Mr. Toad’s Wild Ride for the PNW’s Energy Efficiency Industry

8. Northwest Power and Conservation Council slide 8 Utility Acquired Energy Efficiency Has Been A BARGAIN!

9. Northwest Power and Conservation Council slide 9 So Much for the Past, What’s Ahead

10. 5 th Plan Relies on Conservation and Renewable Resources to of Meet Load Growth * * Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedule

11. Northwest Power and Conservation Council slide 11 Cost-Effective and Achievable Conservation Should Meet Over 45% of PNW Load Growth from 2005-2025* *Medium Load Forecast Loads & Market Prices

12. Northwest Power and Conservation Council slide 12 Regional Near-Term Conservation Targets (2005-2009) = 700 aMW

13. Northwest Power and Conservation Council slide 13 Montana’s Share of Near-Term Conservation Targets (2005-2009) = 57 aMW

14. Northwest Power and Conservation Council Why Should We? What’s Behind the 5 th Plan’s Conservation Targets?

15. PNW Portfolio Planning – Scenario Analysis on Steroids Frequency Chart Dollars Mean = $689.000.011.022.032.043 0 10.75 21.5 32.25 43 ($3,509)($1,131)$1,247$3,625$6,003 1,000 Trials 1,000 Displayed Portfolio Analysis Model Efficient Frontier NPV System Cost

16. Northwest Power and Conservation Council slide 16 Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against Risk Least Risk Least Cost

17. Northwest Power and Conservation Council slide 17 Three Conservation Options Tested Option 1: Accelerated – Similar to the “best performance” over the last 20 years Option 1: Accelerated – Similar to the “best performance” over the last 20 years –Non-lost opportunity limited to 120 aMW/year –Ramp-up lost-opportunity to 85% by 2017 Option 2: Sustained - Similar to typical rates over last 20 years Option 2: Sustained - Similar to typical rates over last 20 years –Non-lost opportunity limited to 80 aMW/year –Ramp-up lost-opportunity to 85% by 2017 Option 3: Status Quo - Similar to lowest rates over last 20 years Option 3: Status Quo - Similar to lowest rates over last 20 years –Non-lost opportunity limited to 40 aMW/year –Ramp-up lost-opportunity to 85% penetration by 2025

18. Northwest Power and Conservation Council slide 18 Average Annual Conservation Development for Alternative Levels of Deployment Tested

19. Northwest Power and Conservation Council slide 19 Accelerating Conservation Development Reduces Cost & Risk

20. Northwest Power and Conservation Council slide 20 WECC Carbon Dioxide Emissions Reductions for Alternative Conservation Targets

21. Northwest Power and Conservation Council slide 21 Why Energy Efficiency Reduces NPV System Cost and Risk It’s A Cheap (avg. 2.4 cents/kWh TOTAL RESOURCE COST) Hedge Against Market Price Spikes It’s A Cheap (avg. 2.4 cents/kWh TOTAL RESOURCE COST) Hedge Against Market Price Spikes It has value even when market prices are low It has value even when market prices are low It’s Not Subject to Fuel Price Risk It’s Not Subject to Fuel Price Risk It’s Not Subject to Carbon Control Risk It’s Not Subject to Carbon Control Risk It’s Significant Enough In Size to Delay “build decisions” on generation It’s Significant Enough In Size to Delay “build decisions” on generation

22. Northwest Power and Conservation Council slide 22 The Plan’s Targets Are A Floor, Not a Ceiling When we took the “ramp rate” constraints off the portfolio model it developed 1500 aMW of Conservation in 2005

23. Northwest Power and Conservation Council slide 23 Where Are The Savings?

24. Northwest Power and Conservation Council slide 24 Sources of Savings by Sector

25. Northwest Power and Conservation Council slide 25 Residential Sector Target = 1340 aMW

26. Northwest Power and Conservation Council slide 26 Commercial Sector Target = 1105 aMW

27. Northwest Power and Conservation Council slide 27 Irrigated Agriculture Sector Target = 80 aMW

28. Northwest Power and Conservation Council slide 28 Industrial Sector Target = 350 aMW Estimate of 5% of 2025 forecast loads Estimate of 5% of 2025 forecast loads 350 aMW at 1.7 cents per kWh 350 aMW at 1.7 cents per kWh Process controls, drive systems, lighting, refrigeration, compressed air, etc Process controls, drive systems, lighting, refrigeration, compressed air, etc Potential is a function of the ongoing changes in region’s industrial mix Potential is a function of the ongoing changes in region’s industrial mix

29. Northwest Power and Conservation Council slide 29 Implementation Challenges

30. Northwest Power and Conservation Council slide 30 Plan Conservation Action Items Plan Conservation Action Items Ramp up “Lost Opportunity” conservation Ramp up “Lost Opportunity” conservation »Goal => 85% penetration in 12 years »10 to 30 MWa/year 2005 through 2009 Accelerate the acquisition of “Non-Lost Opportunity” resources Accelerate the acquisition of “Non-Lost Opportunity” resources »Return to acquisition levels of early 1990’s »Target 120 MWa/year next five years Employ a mix of mechanisms Employ a mix of mechanisms »Local acquisition programs (utility, SBC Administrator & BPA programs) »Regional acquisition programs and coordination »Market transformation ventures

31. Northwest Power and Conservation Council slide 31 The Total Resource Acquisition Cost* of 5 th Plan’s Conservation Targets 2005 – 2009 = $1.64 billion *Incremental capital costs to install measure plus program administration costs estimated at 20% of capital.

32. Northwest Power and Conservation Council slide 32 Meeting the Plan’s Efficiency Targets Will Likely Require Increased Regional Investments

33. Northwest Power and Conservation Council slide 33 Although, The Share of Utility Revenues Required is Modest Regional Average Revenues/kWh will need to increase by $0.000006/kWh

34. Northwest Power and Conservation Council slide 34 Utility* Efficiency Acquisition Plans for 2005 Are Close to 5 th Plan Targets *Targets for 15 Largest PNW Utilities. These utilities represent approximately 80% of regional load.

35. Northwest Power and Conservation Council slide 35 Most IOU Efficiency Plans are Close to 5 th Plan’s Targets

36. Northwest Power and Conservation Council slide 36 However, Several Large Public Utility Efficiency Plans Are Well Below 5 th Plan Targets

37. Northwest Power and Conservation Council slide 37 Summary The 5th Plan’s Goal Is To Make The Inefficient Use of Electricity... The 5th Plan’s Goal Is To Make The Inefficient Use of Electricity... – Immoral – Illegal – Unprofitable If We Fail Both Costs and Risk Will Be Higher

38. Northwest Power and Conservation Council slide 38 Backup Slides

39. Northwest Power and Conservation Council slide 39 Montana Electric Sales 1,490 aMW in 2004 Source: US DOE/EIA

40. Northwest Power and Conservation Council slide 40 Montana Electricity Sales Represent 8% of Regional Sales Across All Sectors

41. Northwest Power and Conservation Council slide 41 Residential Sector Results What’s Left To Do At Home? 65 Average MW

42. Northwest Power and Conservation Council slide 42 Montana Has The Region’s Lowest Market Shares of Electric Water and Space Heating

43. Northwest Power and Conservation Council slide 43 Montana’s Average Electricity Use/Residential Customer Is The Lowest in the Region

44. Northwest Power and Conservation Council slide 44 But Residential Customer Use Has Not Declined Since 1990, While Use in Other PNW States Has

45. Northwest Power and Conservation Council slide 45 Montana’s Housing Stock is Predominantly Single Family and Manufactured Homes

46. Northwest Power and Conservation Council slide 46 Regional Residential Sector Cost- Effective & Realistically Achievable Regional Potential = 1340 aMW

47. Northwest Power and Conservation Council slide 47 Montana Residential Sector Cost- Effective & Realistically Achievable Regional Potential = 65 aMW

48. Northwest Power and Conservation Council slide 48 Regional Residential Sector Realistically Achievable Potential for Appliances

49. Northwest Power and Conservation Council slide 49 Montana Residential Sector Achievable Conservation Resource Potential for Appliances

50. Northwest Power and Conservation Council slide 50 Regional Residential Sector Realistically Achievable Potential for Water Heating

51. Northwest Power and Conservation Council slide 51 Montana Residential Sector Conservation Resource Potential for Water Heating

52. Northwest Power and Conservation Council slide 52 Regional Residential Sector Realistically Achievable Potential for Space Conditioning

53. Northwest Power and Conservation Council slide 53 Montana Residential Sector Conservation Resource Potential for Space Conditioning

54. Northwest Power and Conservation Council slide 54 Commercial Sector Results What’s Left To Do At the Office? 95 Average MW

55. Northwest Power and Conservation Council slide 55 Regional Non-Building Resource Potential = 430 aMW

56. Northwest Power and Conservation Council slide 56 Montana Non-Building Resource Potential = 30 aMW

57. Northwest Power and Conservation Council slide 57 0 100 200 300 400 500 600 New and ReplacementRetrofit MWa in 2025 Equipment Refrigeration Envelope Lighting HVAC Cost-Effective Commercial Conservation Potential in 2025 For Building Lighting, HVAC & Equipment- Regional = 950 aMW / Montana = 65 aMW

58. Northwest Power and Conservation Council What’s Left To Do Out on the Farm? Irrigated Agriculture Sector Results >1 Average MW

59. Northwest Power and Conservation Council slide 59 Industrial Sector Assessment Fourth Plan’s Estimate = 8% savings (670 aMW) Fourth Plan’s Estimate = 8% savings (670 aMW) Fifth Plan is lower due to changing (less electrically intensive) industrial mix ) = 5% of 2025 sector loads Fifth Plan is lower due to changing (less electrically intensive) industrial mix ) = 5% of 2025 sector loads Montana potential @ 5% of 2004 sales Montana potential @ 5% of 2004 sales = 30 aMW = 30 aMW

60. Northwest Power and Conservation Council slide 60 While PNW Annual Utility System Investments in Energy Efficiency Have Declined Since the Early 1990’s

61. Northwest Power and Conservation Council slide 61 Total PNW Annual Energy Efficiency Achievements Have Been Growing, Largely Due To The Impact of Energy Codes and Standards

62. Northwest Power and Conservation Council slide 62 PNW Utilities Now Invests Less Than 2% of Their Retail Sales Revenues in Energy Efficiency

63. Northwest Power and Conservation Council slide 63 Fortunately... The “First Year” Cost ($/aMW) of Utility Acquired Energy Efficiency Has Declined

64. Northwest Power and Conservation Council slide 64 PNW Utilities Have Gotten More Efficient at Acquiring Energy Efficiency - Cost Are Now Below $15 MWH

65. Northwest Power and Conservation Council slide 65 Cumulative 1978 - 2004 Efficiency Achievements by Source

66. Northwest Power and Conservation Council slide 66 The Share of PNW Retail Electricity Sales Revenues Invested In Energy Efficiency Has Declined Since The Early 1990’s

67. Northwest Power and Conservation Council slide 67 Utility Acquired Energy Efficiency Has Been Cost- Competitive with Market Purchases