Opportunities for Natural Gas Efficiency in Pennsylvania Presented to Keystone Energy Efficiency...

Opportunities for Natural Gas Efficiency in Pennsylvania

Presented to Keystone Energy Efficiency Alliance

September 20, 2011

Steven Nadel

American Council for an Energy-Efficient Economy

2010 State Energy Efficiency Scorecard

Pennsylvania 2010 Scorecard Results

•Earned 24 points out of possible 50•Ranks 16th

•Average to above average scores for Combined Heat & Power (CHP), building energy codes, transportation policies, and state facilities & fleets

•Average score for utility-sector programs: ranks 28th in the nation (low efficiency program spending and savings, no actions to address utility incentives/disincentives)

Note: Ramping in of Act 129 will likely improve PA’s utility score in future Scorecards

ACEEE 2009 Study on Cost-Effective Resource Potential in Pennsylvania by 2025

Residential81%

Commercial19%

Residential52%

Industrial21%

Commercial27%

Residential32%

Combined Heat & Power

18%

Industrial21%

Commercial29%

Electricity: 33% Natural Gas: 27% Fuel Oil: 29%

Energy Efficiency Resource Potential: Residential Natural Gas

(84,000 MMBtu Gallons or 36% savings potential in 2025)

Space Heating, 47,539 MMBtu, 63%

Water Heating, 16,843 MMBtu, 22%

Cooking, 915 MMBtu, 1.2%

New Homes, 8,773 MMBtu, 12%

Impact of Efficiency Policies on Natural Gas Needs in Pennsylvania

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Nat

ura

l G

as C

on

sum

pti

on

(B

Btu

)

State and Local Facilities

Building Energy Codes

Utility Efficiency Programs

Federal Appliance Standards

Adjusted Reference Case

Projected Nat. Gas Consumption

Policy Scenario

15%

Economic and Environmental Impacts of EE Investment in Pennsylvania

Net Macroeconomic Impacts

2020 2025

Net Jobs (Actual) 14,500 27,200

Wages ($2006) $440 $1.1 Billion

GSP ($2006) $1 Billion $2.6 Billion

Reduce CO2 emissions ~45 million tons in 2025

Implementation of Electric Savings Targets (EERS) in 2010

• Thirteen of the twenty states with EERS policies in place for over two years are achieving 100% or more of their goals as of 2010

• Only three states are realizing savings below 80% of their goals but all 3 are still ramping up

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

State

Per

cen

t S

avin

gs

Co

mp

ared

to

Ret

ail

Sal

es

Annual % Goal

% Achieved

*Reference year for savings is 2009

Energy Efficiency Resource Standards – Natural Gas

12 States have natural gas EERS policies in place

Standard

Pending Standard

Minnesota

Year IOU Natural Gas Savings (MCF)

Savings as % of Average Sales

2006 N/A N/A

2007 N/A N/A

2008 1,534,121 0.54%

2009 1,777,369 0.63%

EERS: 0.75% annual savings from 2010-2012; 1.5% annual savings in 2013

Massachusetts

Year Savings Target as Percent of

Sales

Savings Goal

(Therms)

Natural Gas Savings

Achieved (Therms)

Percent of Target Achieved

2010 0.63% 13,586,666 13,926,865 103%

2011 0.89% 19,087,301    

2012 1.15% 24,687,219    

2010-2012 2.67% 56,368,432    

State law requires the natural gas distribution utilities to procure all cost-effective efficiency resources through a 3-year Efficiency Procurement Plan and requires full funding of the Plan.

Vermont Gas

•Saved 82,151 McF in 2010; ~1% sales

•Will result in 1,467,673 Lifetime McF

Iowa

2004 2005 2006 2007

0.63% 0.83% 0.89% 0.68%

Iowa IOU Natural Gas Savings 2004-2007

• Statewide data for 2008-2009 unavailable. In 2010, all IOUs hit savings targets ~1%.

• Annual goals by 2013 vary by utility: 0.74% (Muni’s); 0.85% (MidAmerican); 0.94% (Black Hills) 1.2% (IPL)

Consider EE from a Utility Perspective

Need to make the business case:

1. Cost recovery

2. Address lost revenues needed to cover fixed costs

3. Some form of return on investment

Decoupling

• Rates are designed to recover fixed and variable costs

• Decoupling adjusts rates up or down so that authorized fixed costs are fully recovered.• Reduces over-recovery due to increases in

sales• Reduces under-recovery from reduced sales

such as due to a recession, warm weather or energy efficiency programs

Natural Gas Decoupling

Decoupling

Lost Revenue Adjustment Mechanism or Ratemaking Approach to Lost Revenues

Decoupling Pending

16 states with true natural gas decoupling; 11 with LRAM or other ratemaking approach to recover lost revenues; 8 with decoupling pending

Shareholder Incentives

• Utilities earn a rate of return on their supply-side investments

• To provide balance, many states provide incentives for energy efficiency:• Performance bonus for meeting savings goals; or• Share of net benefits due to programs (~10%)

• 25 states provide such incentives to electric and/or gas utilities

Conclusions

• Energy efficiency resource standards are working, including in Pennsylvania

• There are large opportunities to cost-effectively reduce natural gas use in PA

• Pennsylvania should enact:• A natural gas EERS with modest targets to start,

ramping up over time• Decoupling and shareholder incentives for natural

gas utilities (latter tied to savings goals)

Contact Information

Steven Nadel

snadel@aceee.org

202-507-4000

www.aceee.org