1. Energy Efficiency as a Resource: What is the Cost of Saved Electricity? Charles Goldman Lawrence Berkeley National Laboratory Missouri Energy Policy Workshop October 7, 2015 The work described in this presentation was funded by the National Electricity Delivery Division of the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability and the Office of Energy Policy and Systems Analysis under Lawrence Berkeley National Laboratory Contract No. DE-AC02-05CH11231.

2. Overview Why study the cost of saving energy? LBNL Cost of Saved Energy Project Trends in Program Administrator Cost of Saved Electricity Total Cost of Saved Electricity  National and Sectoral  Program  State Summary: Implications for EE as a Resource

3. Approach  Collect & analyze reported annual EE program data LBNL DSM Program Database  Program Administrator CSE: 100+ administrators in 35 states  ~6,500 electric program years 2009- 2014  Total Cost of Saved Energy: 50+ administrators in 20 states  ~3,000 program years Data Collected  Annual & lifetime savings, net & gross  Budgets & expenditure details  Measure lifetimes for programs  Participation LBNL Cost of Saved Energy Project Standardization Is Critical  A common DSM lexicon and program typology  LBNL EE Program Reporting Tool – due out soon

4. LBNL Efficiency Program Typology Program Type Categorization Level Portfolio Simplified Sector Detailed See LBNL Policy Brief: Energy Efficiency Program Typology and Data Metrics: Enabling Multi-State Analyses Through the Use of Common Terminology – at http://emp.lbl.gov 7 sectors 27 simple categories 65 detailed categories

5. Why the Cost of Saved Energy Load Forecasting Integrated Resource Planning Weighing Costs and Performance Among Efficiency Resources Assessing Market Dynamics and Trends

6. Residential and C&I Sector Trends Residential: Rising from 1.8 to 2.4 cents per kWh (6% per year) C/I: Rising from 2.2 to 2.6 cents per kWh (5% per year)

7. Regional Trends Regional trends are mixed Average cost of electricity savings in all regions is level or rising Cost of saving energy rising fastest in the West – about 9% annually since 2009 Lighting influential, e.g., in Midwest Midwest West South Northeast

8. Total Cost of Saved Electricity: Data Coverage

9. Defining the Levelized Total Cost of Saved Energy Where the = [ ∗ (1 + )^]/[(1 + )^ − 1] A = Discount rate (6% real) B = Years of program savings, calculated as the savings-weighted life of the efficiency actions in aggregate * * The total cost of saved energy is not the Total Resource Cost test.

10. Total vs. Program Administrator Cost of Saved Energy Savings-weighted average Total CSE ($0.046/kWh) was roughly twice the PA CSE ($0.023/kWh) Residential programs had the lowest savings-weighted total CSE ($0.033/kWh) followed by C&I programs ($0.055/kWh) Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs are based on gross savings. Savings are levelized at a 6% real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type. Source: LBNL DSM Program Database

11. Total Cost of Saved Energy by Sector Median across all sectors is $0.069/kWh Ranges are narrowest in the C&I sector, widest for low income Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs are based on gross savings. Savings are levelized at a 6% real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type. Source: LBNL DSM Program Database

12. Residential Total CSE: Program Weighted Averages Source: LBNL DSM Program Database Low residential total CSE driven by lighting programs (60% of sector savings at $0.018/kWh) Behavioral feedback programs were $0.057/kWh – with 1-year lifetime for savings Many multi-measure programs – MF/SF retrofits and new homes– were $0.07-$0.11/kWh

13. Program Administrator (PA) Cost of Saved Electricity: National Trends The average cost of saving electricity has been rising, going from 2.2 cents to 2.9 cents per kWh over 2009-2013 Compound annual growth is 8% per year

14. C&I Total CSE: Program Weighted Averages Average values for most C&I sector programs are $0.04-$0.06/kWh C&I programs garner more participant investment than residential programs, particularly in custom and prescriptive programs Source: LBNL DSM Program Database

15. Total CSE by State Large variability in the relationship of program costs to participant costs from state to state Values in this figure are based on the 2009-2013 data in the LBNL DSM Program Impacts Database. CSE values are for program administrator costs are based on gross savings. Savings are levelized at a 6% real discount rate. The savings-weighted average CSE is calculated using all savings and expenditures at the level of analysis. The inter-quartile range and median CSE values are calculated for each program type. Source: LBNL DSM Program Database

16. Total CSE and Relative Savings by State Greater savings moves states up the efficiency supply curve Coverage is percent of IOU retail sales in each state Sources: LBNL DSM Program Database & Energy Information Agency Form 861; MA Energy Efficiency Advisory Council

17. Factors That May Influence Total CSE CSE may vary across program administrator portfolios for reasons other than programmatic efficiency Lower CSEHigher CSE Lower Assumed Program Lifetimes All Cost-Effective EE Comprehensive programs High labor costs Solely incremental measure costs Longer Assumed Program Lifetimes Focus on low hanging fruit

18. Summary The levelized program administrator cost of saved electricity increased from $0.022 to $0.029/kWh between 2009 and 2013 U.S. savings-weighted average total cost of saving energy: $0.046/kWh. Median: $0.069/kWh Residential programs had lowest total CSE, influenced strongly by lighting rebate programs Commercial & industrial programs on average drew greater participant investment Improved estimation and reporting of total costs help satisfy regulatory needs and instill market confidence in the efficiency resource

19. Thank You Project Contacts Principal Investigators –Chuck Goldman cagoldman@lbl.govcagoldman@lbl.gov –Lisa Schwartz lcschwartz@lbl.gov Senior Project Team –Ian Hoffman, project leader, ihoffman@lbl.govihoffman@lbl.gov –Gregory Rybka grybka@lbl.govgrybka@lbl.gov –Greg Leventis gleventis@lbl.govgleventis@lbl.gov Sponsors: DOE Office of Electricity, National Electricity Delivery Division and Office of Energy Policy and Systems Analysis

20. Additional Slides

21. Residential Total CSE : Program Medians and Ranges Source: LBNL DSM Program Database Sector median is $0.07/kWh, with the average for most programs at $0.05-$0.07/kWh Cost performance ranges 3x-5x among residential program types Variability in measure mix, maturity, state of the market and program design

22. C&I Total CSE: Program Medians and Ranges Median values for most C&I sector programs close to savings-weighted averages and ranges are narrower Source: LBNL DSM Program Database