CleanTech.Org

Subject: UFTO Note - Energy Efficiency as a Resource

Date: Wed, 11 Jun 2003

ACEEE National Conference on Energy Efficiency as a Resource

Berkeley CA Jun 9,10

A number of the papers are already posted online (when the author's name is a link):

http://www.aceee.org/conf/03ee/03eeagenda.htm

This event was a real eye opener. The energy efficiency crowd is on a roll, very much back from near death. These are the champions of Energy Efficiency (EE) and Demand Response (DR, not to be confused with distributed resources) who push for equal treatment of the demand side "resource" alongside generation and supply. In California especially, they feel vindicated by the failure of deregulation, and gleefully describe the end of a "dark age" with the return of rate-base regulation and integrated resource planning (IRP). In this view, reliance on the "market" to deliver the right mix of supply and conservation has been completely discredited.

The emphasis was on California, with two PUC commissioners giving major speeches supporting the basic premise. We heard about recent 3-2 votes to push efficiency as an integral part of a state "action plan". Various state agencies are pledging to coordinate their efforts. The state's investor-owned utilities have submitted major plans that go well beyond using the public benefits charge to "procure" energy and capacity from the demand side. Since the utilities are the default/only provider, but don't have their own generation anymore (they are pipes and wires companies!), they now need to submit detailed resource plans--thus the rebirth of "IRP".

This all felt like a jump back in time--apparently I hadn't realized how little deregulation has progressed. Clearly, "prices" haven't replaced "rates"; "revenue requirement" still has meaning; utilities are still utilities, and a key issue is how to put efficiency investments into the rate base and assure they get a rate of return comparable to generation facilities.

There was, however, a recognition that things would be different -- that the intervening experience and lessons learned could be built on. One speaker compared it to a second marriage, where you're wiser and may have a better chance to get it right. In particular, there's a lot of support for "decoupling". This refers to the idea that distribution utilities should not have their cost recovery/revenues tied to throughput of kwhs, but to performance based measures like reliability of service.

The California Action Plan includes goals for 5% of peak demand from efficiency along with renewables, distributed generation, transmission upgrades, and "reliable affordable energy". California led the nation over the last 20 years in conservation and efficiency, and will again. Cities like San Diego and San Francisco are undertaking their own resource planning efforts as well.

Other areas are proceeding vigorously. In New York, the governor's office is running a multi-agency Coordinated Electric Demand Reduction Initiative (CEDRI), with a goal of making 600 MW available on short notice. The state's goal is to create a vigorous market for efficency; 92 ESCOs are operating there currently. The Northwest has a multistate program; Montana has come up with an ambitious approach; the Northeast is active as well (NEDRI). In the midwest, the situation was described as being "several years behind", since energy is cheap and plentiful there. In Texas, there doesn't seem to be a problem incorporating demand aspects alongside restructuring. Their markets are set up so that "DR" can compete directly, and as much as 500 MW is in the game.

Another issue receiving a lot of attention is the relationship between "efficiency", i.e. energy, and "demand response", i.e. capacity. In many regions, it seems problematic to work these two pieces together, but there was a strong recognition that they are really two sides of the same coin. Chuck Goldman of LBL has been studying the lay of the land in states all across the country, and noted a marked drop in traditional load control and interruptible rate programs--these are practically 'stranded assets' -- ignored until price spikes appeared. Now there are wildly varying arrangements for retail competition, and for EE and DR, which are rarely coordinated. (http://eetd.lbl.gov/ea/ems/res.html)

For the rulemaking in Calif for demand response, go to:

http://www.energy.ca.gov/demandresponse/

There was a lot of support for real time pricing, which must eventually become a reality as the only real mechanism that can send the proper economic signals to consumers. In fact, the Calif plan has it starting in 2004.

Monica Rudman of the Calif Energy Commission reported on how they managed to rush a set of programs together to try to alleviate the demand crunch during the California crisis. The state legislature urgently approved $50 million in August of 2000 and then an additional $327 million in April 2001. The CEC launched a wide array of over a dozen measures with astonishing speed, and almost in time to help. (Efficiency may not take as long to "construct" as generators, but it still has a lead time.) http://www.aceee.org/conf/03ee/Rudman-3w.pdf

Art Rosenfeld, former head of energy programs at LBL, and now commissioner on the Calif Energy Commission, is widely viewed as the father of the conservation movement, in California in particular. See http://www.energy.ca.gov/commission/commissioners/rosenfeld.html

He tells a convincing story about the scope the efficiency resource, citing the example of how refrigerators now consume 1/4 of the energy each (and they're larger) compared with 20 years ago when "market transformation" efforts and appliance efficiency standards began. This "resource" is now comparable to the entire US hydro or nuclear power contribution to the nation's energy mix..

http://www.aceee.org/conf/03ee/Rosenfeld-WSw.pdf

There's a great deal more detail to talk about from this conference, and about this whole subject, than can fit in one UFTO Note. If there's interest in pursuing any of this in greater detail, please let me know.

By coincidence, this morning's UtiliPoint IssueAlert was on this very subject! " Energy Conservation is Now In Vogue". Go to:

http://www.UtiliPoint.com/issuealert/article.asp?id=1710

(I hope you are on the list to get this daily commentary. It's almost always interesting, timely and useful.)

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Several months ago I put together a set of references on demand studies. You can download it here (UFTO client password required):

http://www.ufto.com/clients-only/clientdocs/Demandrefs.doc

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A personal view.... I'm struggling with one aspect of efficiency as a resource-- just what kind of a "resource" is it? And why does it exist in the first place? The refrigerator example makes sense as public policy--not too different from needing government to overcome the inability of the "market" to put smog controls in cars. When it comes to "bidding" negawatts into the power market, however, one might reflect that there's no other instance where a product or service is "unsold" (except maybe in agriculture, and look what a mess that is). If that negawatt is available, then maybe it should have already been taken up. Its existence is purely a result of an existing market imperfection. The question of what demand "would have been" is fundamentally messy, and despite all the brave talk, "Measurement and Verification" (another huge topic of interest at the conference) is never going to feel entirely satisfactory as an answer. Efficiency advocates don't seem to understand, and aren't addressing, what critics are uncomfortable with, and they need to.