The Value Energy Efficiency As A Resource Option

Three Decades of PNW Experience

US DOE, IEA and RAP

Workshop on Policies for Energy Provider Delivery of Energy Efficiency

April 18, 2012

Tom Eckman

Northwest Power and Conservation Council

Utility Programs, Energy Codes & Federal Efficiency Standards

Now Produced Over 40,000 GWH/yr of Savings

slide 2

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1978 1983 1988 1993 1998 2003 2008

GW

H/y

r

Utility Programs NEEA Programs State Codes Federal Standards

Utility Delivered or Funded Programs & Initiatives Acquired 60% of the Savings

slide 3

So What’s 40,000 GHW/yr?

It’s enough electricity to serve the entire states of Idaho and Montana

– (or all of Kansas)

It saved the region’s consumers nearly $2.5 billion in 2010

It lowered 2010 PNW carbon emissions by an estimated 18.2 million MTE.

Since 1980 Efficiency Has Met Over 50% of PNW Load Growth

-

50,000

100,000

150,000

200,000

250,000

GW

H/y

r

Efficiency Resource

Load Net of Efficiency

1980 Load

Energy Efficiency Is The PNW Region’s Third Largest Resource

slide 5

Hydro 46%

Coal 18%

Energy Efficiency 16%

Geothermal 0%

Natural Gas 11%

Nuclear 4%

Wind 4%

Biomass 1%

Petroleum & Pet Coke 0%

Energy Efficiency Developed Since 1978 Now Exceeds the Annual Firm Energy Output of the Four Largest

Hydroelectric Projects on the Columbia River

slide 6 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Annual

Fir

m E

ner

gy

Outp

ut

(GW

H/y

r) The Dalles

John Day

Chief Joseph

Grand Coulee

1978 – 2010 Savings

slide 7

Utility Acquired Energy Efficiency Has Been Both Low Cost and Low Risk

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Whole

sale

Ele

ctr

icity P

rice

(2006$/M

WH

)

Levelized Cost of Utility Efficiency Acquisitions Monthly Average Wholesale Market Price @ Mid-C Trading Hub

PNW Treats Efficiency As a Resource “Supply Curve” for Technically Achievable Potential by 2030

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

< 0 <20 <40 <60 <80 <100 <120 <140 <160 <180 <200

Technic

ally

Achie

vable

Pote

ntial

(GW

H/y

r)

Real Levelized Cost (2006$/MWh)

Utility Distribution Agriculture Industrial Commercial Consumer Electronics Residential

Portfolio Analysis Determines the Type, Amount and Timing of Resource Development in the Face of Uncertainty

0%

2%

4%

6%

8%

10%

12%

14%

16%

Pro

bability (

%)

Annual Load Growth

$0

$5

$10

$15

$20

$25

2010 2015 2020 2025

2006$/M

MBtu

Natural Gas Prices

$0

$50

$100

$150

$200

$250

$300

2010 2015 2020 2025

2006$/M

WH

Wholesale Market Electricity Price

0

5000

10000

15000

20000

25000

Capacity (

MW

)

Hydrosystem Ouput

0

2

4

6

8

10

12

245 514 1598 2202 2560 3444 4934 6735 8945

Real Levelized C

ost

(Cents

/kW

h -

2000$)

Cumulative Supply (MW)

Resource Supply Curve

Portfolio

Analysis

Model

$0

$20

$40

$60

$80

$100

$120

2010 2015 2020 2025

2006$/T

on

Carbon Price

0

10

20

30

40

50

60

70

$50 $75 $100 $125 $150 $175 $200 $225

Fre

quency

NPV System Cost (billion2006$)

Portfolio ABCD

$155.0

$155.5

$156.0

$156.5

$157.0

$157.5

$158.0

$104.0 $104.5 $105.0 $105.5 $106.0 N

PV S

yste

m Ris

k

(2006$Billions)

NPV System Cost (2006$Billions)

Efficient Frontier

slide 10

Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against Risk

$155.0

$155.5

$156.0

$156.5

$157.0

$157.5

$158.0

$104.0 $104.5 $105.0 $105.5 $106.0

NPV S

yste

m Ris

k

(2006$Billions)

NPV System Cost (2006$Billions)

Least Risk

Least Cost

slide 11

Portfolio Analysis on One Slide

$0

$50

$100

$150

$200

$250

$300

$350

$400

0 2000 4000 6000 8000 10000 12000 14000 16000

20

06

$/M

Wh

MWa

Coal

Conservation

Gas

Renewables

Nuclear

Generic coal, gas and nuclear units are

shown at typical project sizes - more units

could be built at comparable cost.

$0

$50

$100

$150

$200

$250

$300

$350

$400

0 2000 4000 6000 8000 10000 12000 14000 16000

20

06

$/M

Wh

MWa

Coal

Conservation

Gas

Renewables

Nuclear

Generic coal, gas and nuclear units are

shown at typical project sizes - more units

could be built at comparable cost.

Insights from Resource Portfolio Analysis

slide 12

0

10,000

20,000

30,000

40,000

50,000

60,000

0 20 40 60 80 100 120

Eff

icie

ncy

Res

ou

rce A

dd

itio

ns

(GW

H/y

r)

Portfolios On Efficient Frontier

Least Cost

Portfolios

Least Risk Portfolios

-

10,000

20,000

30,000

40,000

50,000

60,000

2010 2015 2020 2025

Cum

ula

tive

Dev

elopm

ent

(GW

H/y

r)

Year

Least Cost

Least Risk

- 10 20 30 40 50 60

Least Cost Plan

Least Risk Plan

Current Carbon Policy Case

$100 Carbon Price

$20 Carbon Price

Cumulative Efficiency Development (1,000 GWh/yr) 50

55

60

65

70

75

80

85

90

95

100

2010 2015 2020 2025

$/M

Wh a

nd $

/Month

(2006$)

6th Plan Average Revenue/kWh

No Conservation Case Average Revenue/kWh

6th Plan Monthly Average Bill

No Conservation Case Monthly Average Bill

The Least Cost and Least Risk Resource Portfolios Both Rely Heavily on Energy Efficiency

The Pace of Energy Efficiency Development Does Not Vary Significantly Between Least Cost and Least Risk Portfolios

Energy Efficiency’s Share

of the Resource Portfolio Does Not Depend on Climate Policy Assumptions

Cost-Effective Efficiency Decreases Consumers’ Future Bills Compared to Reliance on Market Purchases and New Generation

slide 13

Why We Rely on Energy Efficiency

It’s A Cheap (avg. 2.4 cents/kWh) Hedge Against Market Price Spikes

It’s Not Subject to Fuel Price Risk

It’s Not Subject to Carbon Control Risk

It’s Significant Enough In Size to Delay “build decisions” on generation

IF you can find any other resource with the same characteristics . . . buy them.