LOS ANGELES DEPARTMENT OF WATER AND POWER ENERGY EFFICIENCY POTENTIAL STUDY Demand Analysis Working Group (DAWG) September 25, 2014

AGENDA  Introduction and Study Overview – Project Overview and Goals – Methodology  Study Results – Technical and Economic Potential – Program Potential Scenarios – Achievable Potential Details  Final Discussion and Questions 2

STUDY OVERVIEW AND METHODOLOGY 3

EE POTENTIAL - GOALS AND SCOPE  Produce estimates of the total potential energy and demand savings that exists across all customer segments in LADWP’s service territory that can cost-effectively be achieved over the 10- year period from through – Energy Efficiency impacts, not including Demand Response or Renewable Energy technologies – Attention paid to expected achievements in

EE POTENTIAL – POTENTIAL ASSESSMENT TYPES 5

EE POTENTIAL –ASSESSMENT METHODOLOGY 6 Baseline End-Use Consumption (EUC) by Sector and Market Segment Energy-Efficiency Technology Technical Potential Economic Potential Maximum Achievable Potential Program Potential Program Planning & Target Adoption Technology Characteristics Savings Fraction Fuel Share Saturation Feasibility Interactions Customer Choice Participant Benefits Participant Costs Market Barriers Program Design Scenario Analysis Measures Offered Incentive Levels Marketing Cost-Effectiveness Load Shapes Avoided Cost Benefits Measure Costs

EE POTENTIAL – BASELINE FORECAST  Forecast disaggregated end-uses and segments into the future, considering: – Expected growth – Codes and standards – Integrated resource plans 7

TASK 1: EE POTENTIAL – END-USE CHARACTERIZATION  Profile customers by sector, segment, and end-use level.  Estimate saturation of energy using equipment in homes and businesses.  Relied on customer and equipment saturation data provided by LADWP, as well as secondary sources 8

EE MEASURE DEVELOPMENT  EE measure database assembled relying primarily on secondary research  Key data sources included: – LADWP program data – 2013 CA PUC potential study – Database for Energy Efficiency Resources (DEER) – CA IOU EE measure work papers – E3 Calculator – Industrial Assessment Center Database – Energy Star calculators – Nexant and Cadmus implementation & evaluation experience 9

EE POTENTIAL – MEASURE ANALYSIS 10

MEASURE ANALYSIS  Measures classified into two categories: – Equipment (Lost-Opportunity) Savings are realized as existing equipment turns over as more efficient equipment is installed Savings are calculated relative to standard equipment – Retrofit (Discretionary) Aside from new construction, savings can be captured at any time Savings are calculated as a % improvement on existing equipment  Modeling accounts for competition and captures year-to- year interactions between the measure types – Example: Weatherization installed in one year and high efficiency furnace installed the next. Savings for high efficiency furnace are lower because weatherization reduces baseline and efficient equipment per-unit consumption. 11

EE POTENTIAL - TECHNICAL POTENTIAL  To calculate technical potential, the most efficient measures are selected, regardless of cost and applied in the basic equation Technical Potential Economic Potential Achievable Potential Program Potential 12

EE POTENTIAL - ECONOMIC POTENTIAL  Calculated by screening for cost effectiveness and only including the measures/bundles/programs that meet the established criteria  Total Resource Cost (TRC) test is most commonly used in potential studies, and was used for this study Technical Potential Economic Potential Achievable Potential Program Potential 13

EE POTENTIAL – MAX ACHIEVABLE POTENTIAL  Market penetration is percentage of eligible customers who will actually participate in utility programs due to market barriers.  Unlike a traditional potential studies, focus was on sector and portfolio-level cost-effectiveness, therefore: Technical Potential Economic Potential Achievable Potential Program Potential 14 – Measures with B/C ratio < 1 were included – Applicability adjustments applied to non-cost effective measures based on B/C ratio

ACHIEVABLE & PROGRAM POTENTIAL METHODOLOGY 15 Benefit Cost RatioApplicability Adjustment Up to 0.30% 0.3 to 0.55% 0.5 to 0.815% 0.8 to 1.030% 1.0 and above100%  Applicability for non-cost-effective measures were established to target sector-level B/C ratios >1.0  Measures with ratio <0.3 were excluded  Additional caps necessary for residential sector

EE POTENTIAL – PROGRAM POTENTIAL  Subset of maximum achievable potential to reflect resource constraints: – Limited incentive dollars – Limited marketing intensity 16 Technical Potential Economic Potential Achievable Potential Program Potential  Seven scenarios analyzed  Each scenario included unique assumptions regarding spending on incentives and other program costs, and acquisition rates.

EE POTENTIAL – PROGRAM POTENTIAL SCENARIOS  Program potential scenarios investigated the following: – Based on a range of incentive levels and outreach/marketing intensity levels that are both lower and higher than LADWP’s current EE activities and business plan – EE scenarios that assess feasibility and cost to reach: 10% savings by % savings by 2020 >15% savings by

ANALYSIS OF PROGRAM PLANNING IMPLICATIONS  Refinement of targeted program potential scenario with program-level analysis of: – Measure bundles included in program offerings – Incentive expenditures – Administrative and marketing expenditures – Ramp rates for discretionary measures  Ten planning scenarios developed to demonstrate delivery and budget options for achieving 15% savings target  LADWP selected preferred scenario to adopt for updated 10-year program plan 18

PROGRAM POTENTIAL SCENARIO ASSUMPTIONS 19 Assumption/ScenarioLowMediumHigh High - Advanced High - Extreme Minimum TRC B/C Threshold Incentives as % of Incremental Cost 25%50%75%90%100% Admin/marketing as % of incremental Cost 20%35%40%65%75% Achievable Program Potential as % of Total Program Potential46%64%74%79%81% Discretionary Ramp Rate10 Year Accelerated : 8 Year Normal: 10 Year Accelerated : 7 Year Normal: 10 Year

PLANNING SCENARIO ASSUMPTIONS 20 ScenarioAssumption/Scenario Min B/C Threshold Ramp Assumption 1Incentive 90% of incremental cost; 60% admin – all programs0.3Logistic ramp 2Incentive 90% of incremental cost; 60% admin – all programs0.5Logistic ramp 3 Incentives range from 30% to 100% of incremental cost by program; Admin ranges from 20% to 60% by program0.3Logistic ramp 4 Incentives Range from 50% to 90% of incremental cost by program; Admin ranges from 40% to 60% by program0.5Logistic ramp 5 Incentives range from 50% to 100% of incremental cost by program; Admin fixed at 40% for all programs0.5Logistic ramp 6 Incentives range from 30% to 100% of incremental cost by program; Admin ranges from 20% to 40% by program0.5Logistic ramp 7 Incentives 100% of incremental cost for all programs; Admin ranges from 20% to 60% by program0.5 9 Year Linear Ramp 8 Incentives range from 50% to 100% of incremental cost by program; Admin ranges from 20% to 40% by program0.3 9 Year Linear Ramp 9 Incentives range from 30% to 100% of incremental cost by program; Admin ranges from 20% to 40% by program;0.5 8 Year Linear Ramp 10Incentives defined by target incentive rates for program groups 0.5 for D.I.; 0 for other programsLogistic ramp

STUDY RESULTS - SUMMARY 21

EE POTENTIAL –RESULTS SUMMARY 22

PROGRAM PLANNING - ADOPTED SCENARIO 23 FY FY FY FY FY FY FY FY FY FY Incremental Program Savings (GWh) Incremental C&S Savings (GWh) Annual Program Budget ($M)$84.6$94.7$144.9$177.6$193.8$189.8$171.9$80.9$50.6$35.7 Cumulative Energy Savings as Percent of Baseline Sales

STUDY RESULTS - SCENARIO DETAILS 24

EE POTENTIAL – TECH & ECO POTENTIAL RESULTS 25 Sector Technical PotentialEconomic Potential GWh Savings % of Base Sales GWh Savings % of Base Sales Residential 3,33433%1,62516% Commercial 3,33223%2,18815% Institutional 14319%11015% Industrial 31414%26512% Codes & Standards* 1,690NA1,690NA Total 8,81331%5,87721% * Includes savings from Huffman Bill, Title 24 codes, and Title 20 standards, as well as federal standards not covered by California standards.

EE POTENTIAL – 2020 PROGRAM POTENTIAL RESULTS Scenario Energy savings* (GWh) (cumulative) % of 2020 Base Sales** Avg. Annual Savings % ( ) Avg Annual Budget ($000) TRC Ratio UCT Levelized Cost Low1, %1.1%$47, $0.024 Moderate2, %1.4%$125, $0.046 High2, %1.5%$174, $0.063 Aggressive Normal2, %1.7%$281, $0.085 Accelerated3, %1.9%$319, $0.085 Extreme Normal3, %1.7%$358, $0.115 Accelerated3, %2.2%$438, $ *Includes both EE program potential and impacts of codes & standards **Includes energy savings accomplishments from EE programs and C&S

EE POTENTIAL – 2023 PROGRAM POTENTIAL RESULTS Scenario Energy savings* (GWh) (cumulative) % of 2023 Base Sales** Avg. Annual Savings % ( ) Avg Annual Budget ($000) TRC Ratio UCT Levelized Cost Low2, %1.1%$48, $0.024 Moderate3, %1.4%$125, $0.046 High4, %1.6%$175, $0.063 Aggressive Normal4, %1.7%$283, $0.085 Accelerated4, %1.7%$283, $0.085 Extreme Normal4, %1.7%$364, $0.115 Accelerated4, %1.7%$368, $ *Includes both EE program potential and impacts of codes & standards **Does not include energy savings accomplishments from EE programs and C&S

CUMULATIVE SAVINGS – PROGRAM POTENTIAL 28

EE POTENTIAL – FORECAST COMPARISON 29

PLANNING SCENARIO RESULTS 30 ScenarioAssumption/Scenario Avg Annual Budget ($M) Incentive 90%,; admin 60% – all programs, 0.3 B/C threshold $3897.4%16.4%18.2% 2Incentive 90%,; admin 60% – all programs, 0.5 B/C threshold $3267.2%15.9%17.6% 3 Incentive 30% to 100% by program; Admin 20% to 60% by program, 0.3 B/C threshold $1926.9%15.0%16.6% 4 Incentive 50% to 90% by program; Admin 40% to 60% by program, 0.5 B/C threshold $2427.1%15.5%17.2% 5 Incentive 50% to 100% by program; Admin 40% for all programs, 0.5 B/C threshold $1796.7%14.5%16.0% 6 Incentive 30% to 100% by program; Admin 20% to 40% by program, 0.5 B/C threshold $1616.7%14.5%16.0% 7 Incentive 100% all programs; Admin 20% to 60% by program, 0.5 B/C threshold $2477.9%14.5%17.4% 8 Incentive 50% to 100% by program; Admin 20% to 40% by program, 0.3 B/C threshold $2247.9%14.6%17.5% 9 Incentives 30% to 100% by program; Admin 20% to 40% by program, 0.5 B/C threshold $1577.9%14.4%16.1% 10 Target incentive rates for program groups, 0.5 B/C threshold for DI, 0 for other program groups $1516.8%14.5%16.1%

EE POTENTIAL – ECONOMIC RESULTS 31 *Includes energy savings from programs but does not include program spending from that time period

STUDY RESULTS - SECTOR AND END-USE DETAILS 32

EE POTENTIAL – RESIDENTIAL RESULTS 33 By SegmentBy End Use

EE POTENTIAL – COMMERCIAL RESULTS 34 By SegmentBy End Use

EE POTENTIAL – INSTITUTIONAL RESULTS 35 By SegmentBy End Use

EE POTENTIAL – INDUSTRIAL RESULTS 36 By SegmentBy End Use

FINAL QUESTIONS/DISCUSSION 37