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Energy Efficiency MarketsFueling Innovation through Behavioral Strategies
November 18, 2009Behavior, Energy & Climate Change Conference
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Presentation Format Energy Efficiency Markets: Fueling Innovation through Behavior Strategies
Brief Introduction
Connecticut Context
Energy Efficiency Resource Standard
Residential Market Development
Regulatory Process
Behavior as an Eligible Resource
Lessons Learned from Connecticut for the Nation
MegaWatts on Main Street – Carbon Finance Speaker Series 3
3
Innovator
Employee
Operations
Fund Manager
State & Society
Customer
Competition
Investor
Biodiversity Water LandAir Energy Society
Innovator
Employee
Operations
Fund Manager
State & Society
Customer
Competition
Investor
Biodiversity Water LandAir Energy Society
Business and the Environment at YalePreparing Leaders for Business and Society to Solve the Problems that Matter
Economic Progress
Environmental Degradation
Efficiency 2.0
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Residential Electricity Use in ConnecticutUsage and Costs Continue to Increase Despite Significant Incentives
Nearly 1.5 million residential ratepayers paid over $2.5 billion in electricity costs in 2007!
7,500
8,000
8,500
9,000
9,500
10,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
Electricity Usage (kWh) Electricity Costs ($)
Increase in electricity use of 15‐20% since 2000!Increase in electricity cost of 90% since 2000!!Greenhouse gas emissions of 4 tons per household!!!
~200 MM in Incentives from SB Fund
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Global Warming Public OpinionConnecticut
ReferencesAnnual Report for the Connecticut Clean Energy Fund’s Public Awareness, Education, and Voluntary Market Demand Initiatives. Nexus Market Research (June 2008)
50%
25%
2006 (Q2)
75%
2006 (Q4) 2007 (Q2) 2007 (Q4)
61%
28%
40%
46%33%
increase
12% increase
18% increase
What actions do you think individuals can take to help reduce global warming? [Energy Efficiency and Conservation]
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Energy Efficiency Resource StandardConnecticut’s Class III Renewable Portfolio Standard
Standard – from 1% in 2007 to 4% in 2010
Eligibility – includes (1) customer sited CHP with operating efficiency of 50% installed at C&I facilities, (2) electricity savings from C&LM programs, and (3) systems that recover waste heat or pressure from C&I processes.
Demand – approximately 310,000 MWh (1%) in 2007 to 1,240,000 MWh (4%) in 2010
Price –a floor price of $10 set by statute and a ceiling price of $31 set by regulation (statute allows for $55)
Market size of between $3.1‐9.6 ($17.1) MM in 2007 to $12.4‐38.4 ($68.2) MM in 2010
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Connecticut (#3 in ACEEE 2009 Report Card)Innovative Market‐Based Public Policy for Energy Efficiency
Most Innovative Public Policy – Connecticut tends towards gutsy moves when it comes to energy policy…We like Connecticut’s energy efficiency certificate market or “white tag” trading program…
For U.S. EEPS policy makers and those seeking to understand the prospects for broader U.S. ESC compliance trading, the ESC trading program in Connecticut merits attention.
Energy Efficiency Markets – A Blog by Reid Smith1
NREL and LBNL2
References1. Energy Efficiency Markets chooses its favorites for 2008. #2 – Most innovative public policy: Connecticut for the Class III RPS (January 2009)2. Considerations for Emerging Markets for Energy Savings Certificates by NREL and LBNL (October 2008)3. Credits for Cutbacks: Connecticut Hopes to Expand its ‘Efficiency Market’ to Households by Mark Peters in the Wall Street Journal (June 15, 2009)
Connecticut is in the forefront of states developing market incentives to encourage the biggest consumers of electricity – households – to use a little less…Moreover, the program wasn’t designed just with cost savings in mind. It really is about achieving larger climate‐change and energy goals.
Wall Street Journal – Environment Section by Mark Peters3
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From Statute to RegulationAdvocating for Residential Sector Market Participation
2008 Estimated 2008 Electric Demand (MWh)
ACP Price2 Max Cost of Clean Energy and Energy
Efficiency Public Policy on Ratepayers
Average Household Cost
of Public Policies 3,4
CL&P and UI 1 31,363,000
Class I RPS @5.0% 1,568,150 $55.00 $86,248,250 $24.75
Class II RPS @3.0% 940,890 $55.00 $51,748,950 $14.85
Class III RPS @2.0% 627,260 $31.00 $19,445,060 $5.58
Total Costs $157,442,260 ~$45.18
References1. Estimated annual electric demand for 2008 based on the Connecticut Siting Council’s “Review of the Ten Year Forecast of Connecticut Electric Loads and Resources” for CL&P and UI2. Maximum price if the Alternative Compliance Payment (ACP) price set by statute (i.e. Class I and II) and regulation (i.e. Class III). The actual cost to the ratepayer is somewhere between the ACP and the market price. Based on Evolution Markets July 2008 price data, the Class I, II and III RPS would cost about $15.00 per household.3. Class I RPS Cost = $0.00275/kWh, Class II RPS Cost =$0.00165/kWh, and Class III RPS Cost = $0.00062/kWh4. Average household energy usage is 9,000 kWh/year
The Department will allow independently funded residential projects of 100 kW or greater to receive 100% of the value of the Class III RECsgenerated by the projects. The Department will allow aggregation of residential installations, with a minimum aggregation of 100 kW. All residential energy efficiency or demand response projects shall adhere to the M&V standards established in Docket No. 05‐07‐19, Decisions dated February 16, 2006 and June 28, 2006. In addition, the project aggregator and the residential participants shall sign affidavits attesting that the customers’ energy efficiency or demand
response installations have not received C&LM funds for the project.
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Policy Decision Attracts Private SectorRegulator and Utilities Didn’t Expect This!
Docket No. 09‐01‐18 – Earth Markets (lighting);
Docket No. 09‐01‐22* – Efficiency 2.0 (behavior)
Docket No. 09‐02‐18 – Cool NRG (lighting);
Docket No. 09‐03‐03 – Global Climate Strategies (lighting);
Docket No. 09‐04‐23 – CPower (retail products);
Docket No. 09‐06‐15 – Greendiesel Company (lighting); and
Docket No. 09‐10‐23 – Global Climate Strategies (lighting).
Public policy succeeds in attracting private sector investors, however, utilities get defensive and argue
policy intended to fund system benefit fund
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Energy Savings CertificateResidential Aggregation Case in Point – Micro Project Finance through Lighting
Take‐Out and Recycle20 (80 W) ICLs
Replace with20 (20 W) CFLs
(‐) (+)
(=)
Electricity Savings1,000 kWh’s or 1 ESC
Independent M&V
(+)
(x)
CASH OUT‐FLOWS
CASH IN‐FLOWS
ESCs Over the UsefulLife of the Measure
(=)
If Positive NPV then Planet‐Profit Model
INVESTMENT RETURN
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Measurement & Verification StandardizationRegulatory Approval Process and Timeline for Declaratory Ruling
Docket No. Initiate Complete Time Result
09‐01‐18 01‐18‐09 06‐24‐09 5 months Approved, discounted, no‐go
09‐01‐22* 01‐22‐09 12‐16‐09 11 months In process, draft decision 11‐20‐09
09‐02‐18 02‐18‐09 07‐15‐09 5 months Approved, discounted, no‐go
09‐03‐03 03‐03‐09 ? ? No indication – assume approved
09‐04‐23 04‐16‐09 12‐09‐09 8 months Draft decision 11‐23‐09
Average 7 months
ProcessDeclaratory Ruling – (pre‐project) request for declaratory ruling, interrogatories, hearing, late file exhibits, brief, reply brief, draft decision, written exceptions, oral arguments, and final decision; and/or
Application as an Eligible Renewable Resource – (post‐project) independent 3rd party PE certification of M&V plan and application.
Timeline for Declaratory Ruling
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Enter Behavior with Efficiency 2.0 Docket No. 05‐02‐19RE02 (from 09‐01‐22*)
Request – (1) allow behavior‐based strategies an opportunity to participate in the Class III RPS, (2) provide access to utility bill information, and (3) acknowledge large‐scale data analysis as a form of M&V –intervention vs. control, and baseline vs. performance.
Docket Issues – also includes market participation of utility‐run system benefit fund
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Docket No. 05‐07‐19RE02 Timeline Regulator Struggles to Make a Decision Delays at Least 5 Times!
Event DateBeginning of the Docket
Written Comments Due 05/20/09
Reply Comments Due 05/29/09
Interrogatories Sent 06/22/09
Interrogatories Response Due 07/07/09
Hearing ‐ Confirmed 07/14/09
Late File Exhibits Due 07/22/09
Late File Exhibits Hearing 07/28/09
Briefs Due 08/25/09
Reply Briefs Due 09/01/09
Distribution of Draft Decision 11/20/09
Written Exceptions Due 11/30/09
Oral Arguments 12/07/09
Final Decision 12/16/09
Event Date
Distribution of Draft Decision 09/09/09
Distribution of Draft Decision 09/23/09
Distribution of Draft Decision 10/07/09
Distribution of Draft Decision 10/14/09
Distribution of Draft Decision 10/28/09
Distribution of Draft Decision 11/20/09
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Energy Efficiency Resource Standard Challenges Connecticut Experience and US Climate and Energy Legislation
Utility Caps – establish caps on how much market participation the utility system benefit funds can have in an EERS – suggest 25% of the market;
Transparency – require system benefits funds to be 100% transparent with how many ESCs they are registering and selling into the market; and
Measurement & Verification – allow various forms of M&V (i.e. deemed savings, large‐scale bill analysis, and dataloggersampling), but don’t permit program savings documentation to serve as independent verification of savings – require independent 3rd party verification of savings!
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Carbon Finance Speaker Series at Yale MegaWatts on Main Street
GHG Emissions – residential sector emits 20% of US GHG emissions;
Webinar – free at noon (EST) – sign‐up to be put on the list serve;
Topics – finance, technology, policy, and marketing‐behavior; and
ScheduleDecember 3rd – Jonathan Koomey (LBNL, Stanford, Yale);
December 8th – Anthony Leiserowitz (Yale); and
December 10th – Yerina Mugica (NRDC).
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Yale Center for Business and the EnvironmentContact Information
For further information, please contact:
Bryan GarciaProgram DirectorYale Center for Business and the [email protected](203) 432‐3736www.yale.edu/cbey
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…to Many Things=
=Move People from One Thing…
By getting them on the “food chain”of sustainable energy usage
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Pathway to a Clean Energy FuturePolicy, Finance, Technology and Behavior?
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Participation of Utility‐Run Incentive Programs Market Challenges #1 – Over‐Supply Controls Market Price
REMEDY – establish a cap on how much utility‐run incentive programs can participate in the market – suggest 25%
ReferencesEstimate by UI of Class III REC Demand and Supply (2009‐2011) in Docket No. 05‐07‐19RE02.
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Participation of Utility‐Run Incentive Programs Market Challenges #2 – Transparency
REMEDY– do not allow protective orders to conceal supply of ESCs from utility‐run programs, require complete transparency
Deemed Savings – $98.2 MM in system benefit funds saved an estimated 355,400 MWh in 2007 (235,600 MWh from C&I and 119,900 MWh from residential);
ESC Revenues – estimated $2 MM in initial budget projections, however, received $3.9 MM – no mention in annual report of how many ESCs the ratepayer supported system benefit fund sold; and
Case in Point – deemed savings of 355,400 MWh exceeds the Class III RPS compliance requirement of 310,000 MWh by nearly 50,000 MWh. What percent of the market do the utility‐run programs control – supply and ESC price?
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Participation of Utility‐Run Incentive Programs Market Challenges #2 – Measurement & Verification
REMEDY – measurement methodology does not constitute verification, so require independent 3rd party verification of deemed energy savings…even for utility‐run programs!
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Energy Efficiency Potential in ConnecticutSystem Benefit Fund (CEEF) and Class III RPS in 2007 – An Opportunity Lost?
ReferencesBrief by Earth Markets in Docket No. 05‐07‐19RE02 (August 25, 2009)
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Present Price for Energy EfficiencyConnecticut Ratepayer Contributions Over Deemed Electricity Savings
ReferencesBrief by Earth Markets in Docket No. 05‐07‐19RE02 (August 25, 2009)
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NPV of Class III vs. System Benefit FundPrivate Sector Can Deliver More Cost Effective Energy Efficiency
ReferencesBrief by Earth Markets in Docket No. 05‐07‐19RE02 (August 25, 2009)
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New England End Use EnergyApplied to Connecticut Electric Demand for 2007 (percent – kWh usage)
HVAC17.6% ‐ 1,613
Lighting13.2% ‐ 1,210
Water Heater8.0% ‐ 733
Kitchen Appliances32.6% ‐ 2,987
Laundry Appliances8.6% ‐ 788
Home Electronics11.3% ‐ 1,036
ReferencesU.S. Household Electricity Report by EIA for New England (2005)