2. Efficiency Energy for the Future Energy Future of the West: (1) Demand Response and Dynamic Pricing; (2) Energy Use and Sustainable Growth Utility Energy Forum Granlibakken Conference Center May 6, 2005 Arthur H. Rosenfeld, Commissioner California Energy Commission 916 654 4930 ARosenfe@Energy.State.CA.US www.energy.ca.gov www.utilityforum.com

3. Efficiency Energy for the Future 2 Time-of-Use (TOU), Critical Peak Pricing(CPP), and Real-Time Pricing (RTP) uTime-of-Use (TOU) rates consist of 2 or 3 price/time blocks published in advance: peak, off-peak, and in some cases, shoulder uCritical Peak Pricing (CPP) rates include a higher price for 50-100 hours per year when prices are high or system conditions are critical –In exchange for facing these higher-priced hours, prices in other hours are proportionally reduced –Customer pays the critical peak price when invoked by the utility day ahead CPP forecast offers additional time for response uReal-Time Pricing (RTP) is an hourly price related to the marginal cost of a kWh –Reflects hot weather, scarcity, or equipment failure day ahead RTP forecast offers additional time for response

4. Efficiency Energy for the Future Joint CPUC-CEC Demand Response Proceeding R.02-06-001 Working Group 1. Peevey, Rosenfeld, now joined by Grueneich. Joint CPUC-CEC staff WG-2. Large Buildings, >200 kW interval meters installed TOU tariff mandatory, CPP voluntary now, default in ’06. Facilitators: Hungerford (CEC) + PUC staff WG-3. AMI. Sponsored SPP (Statewide Pilot Pgm) Facilitators: Messenger (CEC) + PUC Staff. CEC has Load Management Power, and plans to require interval meters and communicating thermostats in new buildings under Title-24/Title-20, starting in 2008. We’re looking for new-building pilot programs NOW.

5. Efficiency Energy for the Future 4 An Example of a CPP Tariff for Large Customers $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 0:001:002:003:004:005:006:007:008:009:00 10:0011:0012:0013:0014:0015:0016:0017:0018:0019:0020:0021:0022:0023:00 hour of day $/KWh Prices on CPP Days Prices on non-CPP days TOU Prices

6. Efficiency Energy for the Future 5 CEC/CPUC Vision: Dynamic Prices & Choice uAlways TOU or Better if digital meters available and if economic u“CPP” is an extension of TOU uResidential and Small Commercial –Default = CPP –Hedge = TOU uIntermediate Size Customers (perhaps 200 kw to 1 MW) –Default = CPP –Hedge = TOU –Option = RTP (voluntary) uLarge (perhaps > 1 MW) –Default = RTP –Hedges to CPP or perhaps TOU uGoal of an additional 1% of Load Response per year

7. Efficiency Energy for the Future 6 Note: Tariffs have additional tiered surcharges based on monthly consumption Residential Tariffs Tested in California Statewide Pilot 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 1:002:003:004:005:006:007:008:009:00 10:0011:0012:0013:0014:0015:0016:0017:0018:0019:0020:0021:0022:0023:00 0:00 Hour Ending $ (U.S.)/ KWH FLAT RATE TOU RATE CPP-F RATE (NON CRITICAL DAY) CPP-F RATE (CRITICAL DAY)

8. Efficiency Energy for the Future 7 Small Customers Statewide Pricing Pilot “SPP” uResults for the two-summer pilot –Average savings for CPP_F customers of 12% to 13% during the critical peak periods CPP_F = 5 hour event; customers without smart thermostats –Average savings for CPP_V customers of 27% during the critical peak periods CPP_V = event period varies 2 to 5 hours; customers have smart thermostats and receive signal from utility that sets-up thermostat uSavings show little degradation from summer 2003 to summer 2004 uSavings remain nearly the same even over three-day heat events

9. Efficiency Energy for the Future 8 Observations Regarding the Statewide Pricing Pilot uResults indicate demand elasticity does exist in the residential electricity market uSuch price responsive demand will enhance the competitiveness of electricity markets uHowever, other types of electrical system emergencies may require instantaneous load response uCalifornia had a separate proceeding dealing with interruptible load programs uWe plan to merge price-sensitive demand response and interruptible programs –For example, one approach could involve a curtailment signal that a customer would not have the option to over ride. –The next graph illustrates how this might work

10. Efficiency Energy for the Future 9 Critical Peak Pricing (CPP) with additional curtailment option 0 5 10 15 20 25 30 35 40 Price (cents/kWh) Standard TOU Critical Peak Price Standard Rate Sunday Monday Tuesday Wednesday Thursday Friday Saturday Extraordinary Curtailment Signal Price Signal ?

11. Efficiency Energy for the Future 10 Demand Response and Interval Electricity Meters uCurrently large customers have interval meters, mandatory time-of-use pricing, and limited participation in interruptible programs uStarting Summer 2006, these customers expected to be put on default Critical Peak Pricing (CPP) tariffs in IOU areas uAlso in 2006, PG&E and SDG&E expect to begin installation of interval meters for electricity customers and will relay gas use and will offer CPP to customers will meters uInstallation to take several years during which time SCE plans to follow suit uCEC will define communicating thermostats which can be programmed to respond to CPP and for grid protection uThe state has an ambitious goal of 5% demand response (2000 MW) from “price-sensitive” load by 2007

12. Efficiency Energy for the Future 11 Dependable DR in IOUs, 2004

13. Efficiency Energy for the Future 12 Time dependent valuation (TDV) prices vary over the year uAlthough TDV prices in some hours exceed 50 ¢/kWh, annual average TDV price equals ~15 ¢/kWh

14. Efficiency Energy for the Future 13 Cost of Conserved Energy (CEE) can also be used to evaluate designs CEE = Cost of Conserved Energy Δ$ AC = Consumer price increase due to hot/dry AC design CRR = Capital recovery rate; set at 10% per year ΔkWh per year = Annual energy savings due to hot/dry AC design

15. Efficiency Energy for the Future 14 Fresno: Payback Periods 2.6 5.8 7.0 2.0 3.5 4.6 0 1 2 3 4 5 6 7 8 AC Design 1AC Design 2AC Design 3 Payback Period (years) Residential TDV TDV impacts cost-effectiveness

16. Efficiency Energy for the Future Energy Future of the West: (1) Demand Response and Dynamic Pricing; (2) Energy Use and Sustainable Growth Utility Energy Forum Granlibakken May 6, 2005 Arthur H. Rosenfeld, Commissioner California Energy Commission 916 654 4930 Arosenfe@Energy.State.CA.US www.Energy.CA.gov www.utilityforum.com

17. Efficiency Energy for the Future 16 0

18. Efficiency Energy for the Future 17 Californians have a net savings of $1,000/family

19. Efficiency Energy for the Future 18 Costs and Pollution Saved by Avoiding a 50% expansion of California Electric System. uAvoids 18 Million tons/year of Carbon uEquivalent to getting 12 million cars off the road, –along with their NOx, CO, and particulate emissions. uCalifornia has ~25 million motor vehicles, –avoided 50% more equivalent pollution. uThe Pavley bill, starting in model year ’09, should start to reduce another 30%. uCalifornia annual electric bill in 2004 ~ $30 Billion uAvoided ~$16 Billion of bills, but net saving is only ~$12Billion/year, i.e. $1000/family.

20. Efficiency Energy for the Future 19

21. Efficiency Energy for the Future 20

22. Efficiency Energy for the Future 21

23. Efficiency Energy for the Future 22 Public Interest Energy Strategies –CEC #100-03-12F GWh Impacts from Programs Begun Prior to 2001 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 197519801985199019952000 GWH Utility Programs: at a cost of ~1% of Electric Bill Building Standards Appliance Standards ~ 14% of Annual Use in California

24. Efficiency Energy for the Future 23 Source: David Goldstein 1 st Federal Stds ‘92

25. Efficiency Energy for the Future 24 Source: David Goldstein

26. Efficiency Energy for the Future 25 The Value of Energy Saved and Produced (production @.03 and savings @.085 $/kWh) 0 5 10 15 20 25 Billion $ per year Energy Saved from 150 M Refrig/Freezers at 2001 efficiency Nuclear Conventional Hydro Existing Renewables ANWR @10,000 Btu/kWh 100 Million Rooftop PV System @ 1kW

27. Efficiency Energy for the Future 26 Impact of Standards on Efficiency of 3 Appliances Source: S. Nadel, ACEEE, in ECEEE 2003 Summer Study, www.eceee.org 75% 60% 25%

28. Efficiency Energy for the Future 27

29. Efficiency Energy for the Future 28 300 GW 200 GW 100 GW of U.S. Nuclear Power Stations

30. Efficiency Energy for the Future 29 Source: Stabilization Wedges: Pacala and Socolow, Science Vol 305, page 968 Growth = 1.5%/yr

31. Efficiency Energy for the Future 30 Carbon Dioxide Emissions from Fossil Fuel Combustion in California -- 1999 Source: Inventory of GHG Emissions, CEC, Nov. 2002

32. Efficiency Energy for the Future 31

33. Efficiency Energy for the Future 32 United States

34. Efficiency Energy for the Future 33 or $6000/family

35. Efficiency Energy for the Future 34 Annual Rate of Change in Energy/GDP for the United States International Energy Agency (IEA) and EIA (Energy Information Agency) -6% -5% -4% -3% -2% -1% 0% 1% 2% 198119821983198419851986198719881989199019911992199319941995199619971998199920002001 IEA dataEIA data - 2.7% Average = - 0.7% - 3.4%

36. Efficiency Energy for the Future 35 Annual Rate of Change in Energy/Gross State Product for California (Sources: EIA and California Department of Finance) -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 19811982198319841985198619871988198919901991199219931994199519961997199819992000 Average = -1.0% -4.5% -3.9%

37. Efficiency Energy for the Future 36 20-year annual growth was 1.7%