Embed Size (px)
DESCRIPTION
Jenny Edwards explains how Demand Side Management programs benefit ratepayers by keeping costs down overall, allowing customers to save on the energy they do use as well as the energy they don’t.
Citation preview
Counting the Capacity
that Didn’t Hatch: The Rate Mitigation Effects of DSM Programs
December 12, 2013
Jenny Edwards| Program Manager • CEE Innovation Exchange
Page 2
Requires a better understanding of the system wide revenue benefits of DSM programs
Counting the Capacity
that Didn’t Hatch: The Rate Mitigation Effects of DSM Programs
December 12, 2013
Jenny Edwards| Program Manager
Page 4
Requires a better understanding of the system wide revenue benefits of DSM programs
Energy Efficiency as a System Resource…
• Efficiency Costs recovered through rates and
“trued up” regularly
• Utilities are incentivized to meet and exceed
targets
• Costs are often more transparent to customers
than traditional capacity additions & incentives
• Savings from avoided costs are less visible
Energy Efficiency Context
• Analyzed 20-year program data from Xcel Energy
• Conducted a backward-looking scenario analysis
to compare capacity options
• Focused on additional revenue requirements for
two scenarios: DSM and No DSM
• Revenue requirements are distinct from rates
Minnesota DSM Case Study
Page 7
The Resource Wedge
Additional Revenue Requirements = Σ Annual Additional Costs ÷ Total Sales
Customer Charge $8/mo
Energy Charge $0.08/kWh
Demand Charge $15/kW
Riders $0.003/kWh
Example Utility Bill
What is cost of itemized power plant capacity?
Page 9
• Lower Resource Costs
• Fewer Sales
DSM Scenario Power Plant Scenario
• Higher Resource Costs
• More Sales
0.24 ¢/kWh 0.66 ¢/kWh
Additional Revenue Requirements = Σ Annual Additional Costs ÷ Total Sales
Cost Considerations
• Conservation and Load Management Program Costs
• Indirect Impact Program Costs
• Incentives & Lost Revenues
• Capital & Financing Costs
• Shareholder Returns
• Fuel Costs
• O&M
• T&D maintenance
DSM Scenario Power Plant Scenario
Page 11
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
Incremental Demand Savings
Cumulative Offset Capacity
Power Plant Offsets from DSM
Page 12
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
250 MW
Power Plant Offsets from DSM
Cumulative Offset Capacity
250 MW
250 MW
250 MW
250 MW
250 MW
250 MW Assumed Combined Cycle Power Plants
Page 13
$-
$200
$400
$600
$800
$1,000
$1,200
No
min
al $
/kW
Combined Cycle Overnight Capital Costs
Source: AEO Assumptions
Years when plants came online
Page 14
Capital Revenue Requirement Calculations
Page 15 Source: EIA Electric Power Producer Price
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
$2
01
1/M
MB
tu
Historical Natural Gas Fuel Costs
Page 16
Results
$1.14 Billion
Total Cost $4.16 Billion
Natural Gas Power Plants
DSM Programs
580,855 GWh Total Sales 629,212 GWh
0.24 ¢/kWh Addl Revenue 0.66 ¢/kWh
Incentives 23%
Program Costs 77%
Page 17
Scenario: Coal Plant Displacement
Page 18
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
250 MW
Power Plant Offsets from DSM
500 MW
250 MW
250 MW
250 MW
250 MW Add one 500-MW Coal Plant
Page 19
Scenario: Coal Plant Displacement
Coal Capital
42%
Coal Operatio
n 19%
Gas Capital
18%
Gas Operatio
n 19%
Transmission 2%
$4.89 billion
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSMResource
Gas Only Coal + GasR
eve
nu
e R
eq
uir
em
en
ts
(¢/
kWh
)
0.78 ¢/kWh
Page 20
Scenario: Avoided Transmission Lines
Page 21
Scenario: Avoided Transmission Lines
$4.30 billion 0.68 ¢/kWh
0.000.100.200.300.400.500.600.700.800.90
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
Capital Costs 33%
Fuel 54%
O&M 8%
Transmission 5%
Page 22
Scenario: Average Measure Life
Page 23
10-Year Measure Life
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSM Resource Gas Only 10-yr MeasureLife
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
Capital Costs 30%
Fuel 58%
O&M 9%
Transmission 3%
$3.26 billion 0.53 ¢/kWh
Page 24
20-Year Measure Life
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSMResource
Gas Only 10-yrMeasure Life
20-yrMeasure Life
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
$4.50 billion 0.71 ¢/kWh
Capital Costs 31%
Fuel 58%
O&M 9%
Transmission 2%
Page 25
Summary of Scenario Results
0.24
0.66
0.78
0.68
0.53
0.71
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSM Resource Gas Only Coal + Gas NewTransmission
Lines
10-yr MeasureLife
20-yr MeasureLife
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
• System wide avoided revenue requirements are 3-4 times higher than DSM program costs
• DSM programs allow customers to save on the energy they do use, as well as the energy they don’t
• Includes total DSM costs, but only power plant costs recovered during the 20-yr time frame
• One specific example, but relevant for other DSM programs, especially those just beginning.
• Conditions going forward will be different
Summary
www.mncee.org/Innovation-Exchange/Resource-Center
Jennifer Edwards | Program Manager
(612) 335-5873
Megan Hoye | Engagement Coordinator
(612) 244-2417
www.mncee.org/Innovation-Exchange/Resource-Center
Questions?
