OwnerJuly 2015 to presentEl Cerrito

Finding best available technologies for meeting energy needs today and tomorrow: energy efficiency, demand response,, solar, wind, electric vehicles, biofuels and smart grid. It’s all the innovations that make the energy we use more secure, clean, and affordable. The energy world's best hopes lie in what's happening in the digital realm, especially in data analytics.

Friday, October 28, 2011

Vehicle to Grid (V2G)

“Plug-ins can earn money supporting the grid, so we call them cash-back cars” – Jon Wellinghoff, FERC Chairman

Plug-in hybrids may help balance out a smarter electricity grid capable of easily sending power back and forth between generators and consumers, much like we send and receive e-mails on the Internet today.

Navigate this Report
Back to EV Index
1. Background
2. Acronyms/Definitions
3. Business Case
4. Benefits
5. Risks/Issues
6. Success Factors
7. Companies
8. Next Steps
9. Links

  • Vehicle-to-grid (V2G) describes a system in which power can be sold to the electrical power grid by an electric-drive motor of a hybrid vehicle that is connected to the grid when it is not in use for transportation. Alternatively, when the car batteries need to be fully charged, the flow can be reversed and electricity can be drawn from the electrical power grid to charge the battery.
  • There has been considerable discussion of the merits of using EVs and PHEVs as a distributed source connected to the grid. It is envisaged that this could provide help load leveling at times of high demand and provide storage of energy from renewable sources.
  • Electric Storage is a new and emerging technology that has been identified by FERC as a functionality of smart grid. Due to the infancy of this technology, few standards exist that capture how it should be utilized on the Smart Grid. For example, to-date there exist no guidance or standards to address large or small mobile storage such as PHEVs. Electric Storage is treated as a distributed energy resource in some standards, but there may be distinctions between electric storage and connected generation.
  • When the car is in the V2G setting, the battery’s charge goes up or down depending on the needs of the grid operator, which sometimes must store surplus power and other times requires extra power to respond to surges in usage. The ability of the V2G car’s battery to act like a sponge provides a solution for utilities, which pay millions to generating stations that help balance the grid.
  • Note: the conversion efficiency of the battery is 0.93 and 80% of its capacity is available.
Flow of electricity and communications in a Vehicle-to-Grid infrastructure.
Source: Kempton and Tomic 2005. Journal of Power Sources

2. Acronyms/Definitions
  1. ACE – Area Control Error – A measure of the quality of operation of the grid. ACE includes a frequency regulation component. ACE must be kept within grid operating requirements.
  2. Carbitrage - This is a fusion of 'car' and 'arbitrage'. When the electric utility would like to buy power from the V2G network, it holds an auction. The car owners are able to define the parameters under which they will sell energy from their battery pack. Many factors would be considered when setting minimum sale price including the cost of the secondary fuel in a PHEV and battery cycle wear. When this minimum price is satisfied, it is deemed as meeting carbitrage.
  3. DSM - Demand-Side Management- In the context of plug-in vehicles is simply the interruption or reduction of recharging when required to ease grid imbalances, and the resumption and completion of recharging at a later time.
  4. Dynamic Demand - A semi-passive technology for adjusting load demands on an electrical power grid. The concept is that by monitoring the frequency of the power grid, as well as their own control parameters, individual, intermittent loads would switch on or off at optimal moments to smoothen the overall system load, offsetting and reducing spikes in peak-load demand on the grid. As this switching would only advance or delay the appliance operating cycle by a few seconds, it would be unnoticeable to the end user.
  5. GIEV – Grid Integrated Electric Vehicles
  6. GVI - Grid Vehicle Integration - Term coined by Tom Gage, CEO of electric car tech maker AC Propulsion. Taken literally (flowing in one direction from the vehicle to the grid) V2G represents a misnomer for a comprehensive system for managing that spiky load to match supply and demand. He said "Maybe V2G isn’t the right term in the big picture. What we want to talk about is grid-vehicle integration, or GVI.” In otherwords a two-way flow."
  7. Regulation -The continuous adjustment of AC electricity frequency (60 Hz)
  8. Regulation Ancillary Service – The continuous matching of supply with demand in a control area. This would represent an economic opportunity for Vehicle to be available for short bursts of charge and discharge. Power plants provide regulation today, but they have slow response, low efficiency, energy and economic.
  9. V1G – Grid to Vehicle One Way Communication - Utilizing Electric Vehicles in demand response include providing proportional charge rate signals
  10. V2G –Vehicle to Grid - Letting the vehicle take and give power back to the grid. Electric utility may be willing to purchase energy from customer during periods of peak demand
  11. V2G "Lite" - Drawing power from a battery could shorten the battery’s life and cause warranty tangles -- but simply reducing the level of car charging can accomplish many of the same tasks that V2G is targeting.   Most plug-in cars don't require a full night’s worth of charging to refill their batteries.  In fact, research from Idaho National Laboratory on Nissan Leaf owners’ charging habits shows that most spend about two hours out of their typical 10- to 11-hour overnight plug-in status not charging at all. While turning chargers completely off might not be a welcome use of that window of opportunity, slightly reducing the level of charging when it’s needed -- say, from full charge to 80 percent -- could help balance grid frequency fluctuations.

    By taking a similar process, but in reverse, utilities could allow plug-ins to charge at 80 percent most of the time, then use that extra charging capacity to absorb temporary spikes in intermittent wind or solar power that would otherwise threaten to destabilize the grid.

    Both these approaches could avoid the problems associated with the concept of vehicle-to-grid (V2G) systems that directly tap car batteries to serve the grid.
  12. V2H - Vehicle to Home – Linking the car to house rather than the grid. This potentially provides three benefits: it obviates the issue of exporting energy back to the grid; can reduce demands on the grid as a supplementary supply to the house; and could also provide emergency backup in the event of power outages.
  13. V2L - Vehicle to Load - Use of the PEV storage to provide power to a remote site or load that does not otherwise have electrical service. Examples include construction sites or camp sites.
  14. V2V – Vehicle to Vehicle - Use of the PEV storage to transfer electrical energy to another PEV

Regulation vs. Economic Dispatch

3. Business Case
  • PHEVs can potentially be used to store electrical energy in their onboard batteries for peak-shaving or power-quality applications, offering potentially powerful synergies to complement the electric power grid. With parallel advances in smart vehicles and the Smart Grid, PHEVs may become an integral part of the distribution system itself, providing storage, emergency supply, and grid stability.
  • Aggregation to provide 1 MW of power in order to enter the frequency regulation market. Vehicles provide 19 kW of power at home and 16 kW in commercial locations—given a high-power plug connection—but, due to driving requirements, not every vehicle will be available for V2G at the same time so about 200 vehicles would be needed to provide 1 MW of frequency regulation on demand.
  • Smart metering would also need to encompass dynamic pricing to make export of electricity to the grid more attractive during periods when wholesale prices are high.
  • GIEVs will be aggregated together as one electric power resource so that grid operators don’t have to interact with thousands of vehicles. An aggregator will monitor different energy markets and bid into those markets according to their aggregated vehicles’ available capacity and market price. The Smart Grid is key to the aggregation of devices to provide regulatory services.
  • In the new world of plugs-ins, your car should be able to sell energy you don't need back to the grid during times of peak power demand, such as in late summer afternoons, when both office buildings and homes are running air conditioning. Today, that peak demand is served by older, usually dirtier and less-efficient "peaker" generators that utilities fire up when needed. A national fleet of a million or more EVs, most sitting idle roughly 90 percent of the time, could serve as a massive national storage device that can be tapped as needed to meet peak demand. But you, the driver, will call the shots, determining how much power, if any, you'd be willing to sell to the grid on a given day. (Of course, your electric utility could call the shots, too, telling you what time of day you can, and can't, recharge your vehicle, at least without paying premium rates.) All this affects battery architecture, smart metering systems, communications protocols, a standard user interface, and common (and simple) messaging terminology — "bi-direction power flow management," in the argot of utilities.
  • A way 

4. Benefits
  • Peak Load Leveling - V2G vehicles to provide power to help balance loads by "valley filling" (charging at night when demand is low) and "peak shaving" (sending power back to the grid when demand is high).
  • Regulation Services - Keeping voltage and frequency stable. Since demand can be measured locally by a simple frequency measurement, dynamic load leveling can be provided as needed. Consumer Financial Benefits for Participating in Regulation
    • Plugged In 12 hours each day (6 pm–6 am) 365 days * 12 hours = 4380 hours/year
    • Average historic price paid for regulation = $35/MWh
    • Average Regulation price during valley load periods = $28/MWh
    • Per Vehicle: 4380 hrs * $28 * .015 MW = $1800 annually
  • Spinning Reserves - Meet sudden demands for power
  • Renewable Integration - Electric vehicles could buffer renewable power sources such as wind power, for example, by storing excess energy produced during windy periods and providing it back to the grid during high load periods, thus effectively stabilizing the intermittency of wind power. Some see this application of vehicle-to-grid technology as a renewable energy approach that can penetrate the baseline electric market.
  • Protection During Power Outage - V2G could also be used as a buffer during power outages. As the New York Times explains: “After a power outage, a Florida man plugged his Toyota Prius into the backup uninterruptible power supply unit in his house and soon the refrigerator was humming and the lights were back on. “It was running everything in the house except the central air-conditioning” ... As long as it has fuel, the Prius can produce at least three kilowatts of continuous power, which is adequate to maintain a home’s basic functions.”

5. Risks/Issues
  • Battery Life - Concerns exist that the increased cycling of the batteries in this application will adversely affect the life of the battery. Current Li-ion batteries have a cycle life of 1,000 cycles irrespective of whether they are used for transport or static needs. The following calculation illustrates the additional cost of using the vehicle’s battery as a storage device for V2G applications based on today’s costs.
    • Currently a Li-ion battery with 35kWh storage capacity costs around $35,000 to manufacture.
    • With its life being 1,000 cycles, that equates to a cost per cycle of $35.
    • Assuming the charging efficiency is 92% and the battery is charged from 80% depletion at an overnight tariff of $0.10/kWh, then the cost for a charge is $3.01
    • Add this to the cycle cost and the cost to the owner is $38.01.
    • Therefore the price that the electricity would need to be bought back from the consumer to break even is $38 / (35 x 80%) = $0.86
    This is ten times the cost that the consumer paid for the electricity in the first instance. This breakeven sell back rate will reduce over time as battery costs reduce. The requirement for electricity from vehicles into the grid is only likely to happen at times of peak demand, because of the costs associated. In addition to the above costs to the consumer is the cost of installing the replacement power pack. On the other hand, the extra cycling for V2G are supposed to be shallow cycles that create less wear on the battery. It is the deep cycles that really hurt battery life.
  • Equipment Life - Transformers are designed to have a load and then cool off. There may be an impact on life expectancy if they are run constantly.
  • Capital Cost - Vehicle based bi-directional power interfaces can be expensive and require adding an onboard inverter so that the vehicle can send power upstream since most vehicles were designed only to take power from the grid. Nuvve claims that there are 5 vehicles either on or coming to market that won’t require additional hardware, but neither the Nissan Leaf nor Chevrolet Volt are in this category.
  • Battery Exchange - Batteries can be readily changed in vehicles with a simple architecture, but vehicles with integrated power packs to improve vehicle dynamics will not be so amenable to a swap and this operation may prove to be very costly. The extent of this cost is not known and not easily estimated without a known architecture.
  • Modeling - The implication of integrating information from individual customers, widespread sensors, and large numbers of PEVs with the real time operation of the grid needs study and modeling.
  • Complexity - We need a system that reduces the cost of vehicle fuel without any user interaction.
  • Fragmented Market - Utilities would have to get comfortable with the idea of buying power from millions of car batteries that will be plugged in and out by individual drivers at random times. Traditional demand response is far simpler. Several megawatts' worth of car batteries would likely have to become available before a utility would be convinced that a statistically stable asset for storing (and drawing) electricity exists at any given time in cars, and even then an excess buffer would have to exist -- and that would likely require hundreds of thousands of cars at a minimum. Utilities might even require a power provider to aggregate the electricity from cars into some sort of central substation before delivering it to a utility, which could upend the economics for the power provider.
  • Limited Life of Cars - We think of cars as long lasting machines, but really, they only last a limited number of hours: 100,000 miles at an average of 40 miles an hour is only 2,500 running hours. So maybe you can rely on the new car to last 2,500 to 5000 hours. You know there’s over 8,000 hours in a year, and the reason we put up with such short lifetimes for cars is that they spend almost all of their time parked. A bathroom fan is 50,000 hours. A kitchen refrigerator is 100,000 hours. From an economic standpoint, it doesn’t make any sense because it wears out the most expensive and life-limited part of an already life-limited product very fast.
  • Power Electronics Cost - If you decide to make a car able to be both charged and to sell electricity back to the grid, it increases the cost of the power electronics in the car. Now the battery charger, which originally only had to take current from the wall socket and use it to charge the battery, now has to be a bi-directional device and therefore much more expensive, more than twice as expensive than if it was just the charger. So you end up adding additional cost to the electrical part of a car.

6. Success Criteria
  • The energy providers will need to be fully confident of the availability and consistent reliability of the V2G energy.
  • Vehicle users will want to be confident of having a fully charged battery when they need it.
  • A controller that allows the vehicle owner to limit the amount of battery discharge to ensure they can meet the range needed for their next driving event.

7. Companies
  • Magic Consortium Mid-Atlantic Grid Interactive Cars Consortium - Created to further develop, test, and demonstrate Vehicle-to-Grid technology. The Consortium includes core partners from academia and the electric, automotive, and communications industries.
  • Nuvve, El Cajon, CA - Vehicle to grid technology (V2G) is approaching the commercialization stage thanks in part to the work of Professor Willet Kempton of the University of Delaware, who is now the CTO at startup Nuvve. Nuvve recently found its first customer in Denmark, where 30 vehicles will be used to support the grid.
    V2G Schematic - Source: Nuvve
       V2G requires aggregating the power potential from hundreds to thousands of vehicles into a sizeable power market that would be useful to utilities and grid operators. That is Nuvve’s added value – a server that can track the availability of the vehicles and send signals and data back and forth with the grid.

      The Nuvve solution has been tried in a field trial with PJM in USA for 2 years with 9 EVs participating in the trial. PJM is the largest RTO - Regional Transmission Organization - and serves 51 million people in the Eastern part of USA. They have a peak power demand of 144 GW and are a very large, advanced and experienced customer. During this trial it was determined that each car in average could "earn" $2,500 per year by participating in Nuvve's V2G solution. Assuming an 8 year lifetime of the EV (battery) and taking into account the cost of Nuvve’s operation, it corresponds to, discounted to today $ to around $10,000 per car over the lifetime of the car (battery) The actual amount the EV owner can expect earn will be determined in pilot trials about to start in 2011.

    8. Next Steps
    • ABB, the Swiss energy conglomerate, and GM have teamed up to study how Volt batteries perform during power outages or times of peak energy demand. The first phase of the experiment is nearly complete as the lithium ion cells are readied for interconnection with a utility power grid. Three power companies are expected to sign agreements in the coming months to test the batteries, said Pablo Rosenfeld, manager of ABB's distributed energy storage program.

      At N.C. State University's Centennial Campus, where ABB has its Corporate Research Center and North American headquarters for the Power Products and Power Systems Division, a Volt T-pack rests on a lab floor, wired to equipment and monitors. The battery is rapidly drained and charged, simulating how it would be called to duty in a neighborhood.

      Ultimately the ABB-GM study will determine whether the benefits of reusing Volt batteries are worth the cost when compared to other available options. Those could include buying power on the wholesale market, building power plants, or paying customers incentives to participate in energy conservation programs.

      ABB teamed up with GM in September and has spent several months creating a lab prototype of the battery pack to be tested in the field.

      More than 1,000 individual cells will be reconfigured into a boxy cabinet that will contain the equivalent of five T-packs, holding enough power to keep a half-dozen homes running for at least several hours.

      ABB is running final tests on the inverter and software that will link the batteries, which operate on direct current, to the power grid, which uses alternating current. The inverter will monitor the power supply and draw electricity as needed, functioning as a power management system.
      ABB has yet to determine how the batteries will be cooled in the summer and warmed in the winter, said Sandeep Bala, an ABB engineer in Raleigh. Lithium ion cells are prone to overheating, controlled in the Volt with liquid coolant.

    • Charlotte-based Duke Energy also is doing a pilot study in Indiana with Itochu, a Japanese company with energy and technology interests. It remains to be seen whether used batteries are preferable to new batteries, said Mike Rowand, Duke's director for technology development.
      "What is a given is energy storage," Rowand said. "Intuitively, a used battery is going to be cheaper than a new battery, but if 50 percent of the cost is taken up in repurposing it, then it may not be such a great deal."

    9. Links
    1. University of Delaware - Vehicle to Grid Technology
    2. BERR – UK Department for Business Enterprise and Regulatory Reform - Investigation into the Scope for the Transport Sector to Switch to Electric Vehicles and Plugin Hybrid Vehicles October 2008
    3. V2G - Green Car Congress
    4. Bucks for balancing: Can plug-in vehicles of the future extract cash – and carbon – from the power grid - a research collaboration between a team of engineers from Ricardo and National Grid, the operator of the high voltage electricity transmission system within Great Britain (GB).
      Key findings:
      • Using demand side management alone, the projected fleet of plug-in electric vehicles in 2020 would be able to provide an average of 6% of daily GB network balancing service requirements. This rises to a maximum of 10% in the evening and overnight.
      • Demand side management would provide a modest annual financial return to the individual vehicle owner of approximately £50 (US$82) for zero investment (effectively the equivalent of an 18% saving on recharging costs).
      • Vehicle-To-Grid (V2G) based grid balancing was shown to provide significantly greater revenue on an individual vehicle basis—ranging from approximately £600 (US$980) per year for a 3 kW system to in the region of £8,000 (US$13,000) per year for a 50 kW three phase installation. However, the very significant capital cost of a vehicle based bi-directional power interface and the balancing market size limitations that would restrict the value of the service if implemented fleet wide, would serve to render the fleet scale roll-out of the V2G balancing service uneconomic.
      • V2G operation may however be attractive for owners of captive vehicle fleets such as industrial or local delivery vehicles, battery exchange depots or aggregated batches of life expired vehicle batteries, where interface costs might be shared across multiple vehicles or battery packs.
      • With the increased requirement for grid balancing services arising from the changing dynamics of the generation mix, plug-in vehicles could be made to work in synergy with the electricity market to help balance supply and demand, so reducing the reliance on conventional generation for the provision of these services; hence this has the potential to reduce CO2 emissions.

    Saturday, October 22, 2011

    Verifying Energy Efficiency Benefits

    Efficiency can be the most cost effective utility investment, but it can be hard to measure. Smart Grid technology can ensure that efficiency investment is optimized and meet the need for accurate evaluation of program benefits.

    According to EPRI, the Smart Grid can help bridge the 205 billion KWh gap between the maximum realistic acheivable potential energy efficiency savings due to enhanced measurement and verification

    Navigate this Report
    Back to Energy Efficiency
    1. Background

    2. Acronyms/Definitions
    3. California Energy Efficiency Programs
    4. Business Case
    5. Benefits
    6. Risks/Issues
    7. Next Steps
    8. Companies/Organizations
    9. Links
    Energy Efficiency Creates the Most Jobs and is Among the Least Costly Options Available

    • Efficiency is unquestionably the largest, cheapest, and cleanest wedge among the many we need de-carbonize our energy economy. Energy efficiency tends to cost just 1 to 3 cents per kWh saved, far less than even coal-fired generation. Every renewable technology, from wind to solar, to biomass, has trade-offs.

    • Given these advantages over generation and given an even moderately efficient market, you would expect that all the cheap energy efficiency measures would long ago have been taken until the marginal price of the next efficiency measure was above the marginal price of added electricity generation. So why hasn’t it?

    • The usual answers, lack of financing, perverse incentives, and disinterest on the part of people for whom energy is only a tiny part of the budget don't explain the whole picture. A key reason we haven't created effective markets for energy efficiency is that it’s also hard to measure in a way that everyone will agree. To compute the energy savings from any activity, you have to establish a baseline: how much energy would you have used if you had not changed your methods. Even in the simplest case of replacing an incandescent bulb with a CFL, we don’t really know that the bulb we replace would really have stayed in the socket until the CFL breaks: A CFL can easily last 10 years, and by that time, we may be replacing all our bulbs with LEDs (light emitting diodes). And that does not even begin to account for the effects on our HVAC systems.

    • California's experience with its Risk Reward Incentive Mechanism (RRIM) is a pertinent case study of the mechanics and issues around measuring energy efficiency savings. California's utility restructuring law provides funding for energy efficiency programs through a Public Goods Charge. Since 2006, these programs have been managed in 3-year cycles. California utilities spent over $1.9 billion for 2006-08 programs, about 40% funded by the Public Goods Charge, and the rest recovered through electric rates. An additional $300 million was spent on natural gas efficiency programs, funded through gas rates
    • There has been continued controversy on how to measure savings. Utilities reported that they had achieved 118% of the California Public Utility Commission's(CPUC) goals for 2006-07, but independent evaluators calculated that they had achieved only 82% of goals in the best-case scenario (CPUC Verification Report -Table ES2a)

    • In December 2010, CPUC commissioners voted 3-2 to give PG&E, SDG&E, and So Cal Edison an additional $68 million for energy efficiency programs the utilities ran between 2006 and 2008. That was on top of nearly $144 million in incentives already paid to utilities for the same programs

    • The commission spent $97 million developing an exhaustive system for evaluating and verifying the utilities' energy savings, a process that wrapped up in 2010. But the utilities wanted their performance to be evaluated by the standards that the commission used when the rewards program began. The program sets efficiency goals in three-year cycles, and the utilities complained that changing measurement standards after the start of a cycle would be unfair.

    • By the old measurement standards, the utilities met their efficiency goals in the most recent three-year cycle, which ran from 2006 through 2008. By the new standards, they didn't. As a result, one of the commission's administrative law judges had proposed that the utilities receive no additional awards. Commissioners Dian Grueneich and Nancy Ryan sided with the judge, arguing that the utilities knew their measurement standards were out of date and should have changed their efficiency programs. "Efficiency programs and their administrators must be able to adapt to evolving market conditions in real time," Grueneich said. "Otherwise, actual savings may fall woefully short." The three other commissioners, however, sided with the utilities, even as they acknowledged that the rewards program needs reform.

    • A key factor contributing to the differences between ex ante and ex post savings is the much lower than expected impact of interior screw lighting measures (CFL's), as they made up a significant portions of the portfolio, adjustments to NTG ratios, installation rates, and unit energy savings based on the Energy Division evaluation all contributed to these impacts.

    • Rather than assessing the performance of the utilities’ energy efficiency programs based on updated parameters, as was the CPUC's original intent, the CPUC modified the mechanism such that the performance against the goals as well as the total savings attributed to the utility programs for purposes of determining incentives are calculated using the parameters that were in place at the time the Commission approved the utility energy efficiency portfolios.

      Because this increased the risk to ratepayers of providing incentives for savings that based on updated assumptions may not be attributable to the utility programs (and conversely, reduces the risk to the utilities of incurring penalties) they also make a commensurate change in the shared savings rate applied to the performance earning basis, reducing it from the 9% and 12% levels adopted in D.07-09-043, to 7%.

    • In September 2009, the CPUC approved funding and programs for the 2010-2012 energy efficiency program cycle. The Commission authorized $3.1 billion in funding for energy efficiency programs that are projected to save 7000GWh, 3460MW, and 150 MMTherms. The funding is 42% higher than the prior three-year cycle and will support programs designed to produce deeper and more comprehensive savings that the Commission believes California's utilities can and will achieve. The commission is still trying to decide how to measure energy savings for the current three-year cycle.
    Source: Current Public Goods Energy
    Efficiency Programs for Existing Buildings - CEC IEPR Staff Workshop on Achieving Energy Savings in California Buildings - July 20, 2011 - Cathy Fogel, Energy Division California Public Utilities Commission (CPUC)

    2. Acronyms/Definitions
    1. EM&V - Evaluation, Measurement and Verification - The crux of the success of energy efficiency as California's resource of first choice. EM&V is important for several reasons.
      1. It is necessary to determine whether and how well current individual programs are working.
      2. EM&V is critical in considering how to improve programs and for development of new measures.
      3. EM&V is used on a broad level to measure whether the investor-owned utilities (IOUs) are meeting, on a portfolio basis, the overall energy savings goals established by the Commission.
      4. EM&V results are used to determine whether IOUs should receive rewards or pay penalties as part of the Risk Reward Incentive Mechanism (RRIM) adopted by the Commission
      5. Robust EM&V is critical to ensure that the IOUs and the state can depend on energy efficiency as a resource.

    2. DEER - Database for Energy Efficiency Resource - A CEC and CPUC sponsored database designed to provide well-documented estimates of energy and peak demand savings values, measure costs, and EUL all with one data source. The users of the data are intended to be program planners, regulatory reviewers and planners, utility and regulatory forecasters, and consultants supporting utility and regulatory research and evaluation efforts. DEER has been has been designated by the CPUC as its source for deemed and impact costs for program planning.The database contains NTG, EUL and UES values for standard or “deemed” energy efficiency measures. Deemed measures are energy efficiency projects and technologies that are relatively simple to analyze and evaluate, and do not vary tremendously with individual projects. Measures whose performance varies significantly due to the specifics of the individual projects are categorized as “custom” measures and are not currently covered by DEER UES values. However, DEER NTG and EUL values are used for custom measures.

      DEER Values for standard or “deemed” energy efficiency include:
      • EUL - Effective Useful Life - The general approach for selecting EULs for the 2008 DEER Update was to review the various data sources and their underlying strengths and weaknesses and provide EUL recommendations that were determined to be most appropriate, based on the information that was available. Factors that contributed to selection of an EUL for a given measure included: the technical strength of the study supporting an EUL, the appropriateness of the study for the measure and market under consideration, the number of studies recommending the same EUL (or similar EULs), and the reasonableness of the source EUL in light of EULs for similar measures. In some cases, EULs were extracted directly from source data, and in other cases, EULs from different sources were averaged. This second approach was used when there were a range of EUL estimates from different sources, and a preferred source could not be identified.

        For a number of measures, there was very limited information on EULs. For these measures, it was necessary utilize EULs from similar types of measures and to utilize judgment-based EUL estimates.

        For example, the EUL for residential indoor CFLs failed to reflect usage patterns associated with those CFLs and led to shorter lamp life than the rated life. After considering available studies and other evidence, the Energy Division adjusted the EUL for indoor residential CFLs to reflect usage patterns associated with indoor residential CFLs.
      • NTFR - Net of Free Rider Ratio - In the context of energy efficiency, "free riders" are those program participants who would have undertaken the energy efficiency activity in the absence of the program. Program savings are adjusted to remove the effect of free riders because their participation would have happened anyway, and therefore the savings associated with their actions cannot be considered a benefit of the program.

        For each measure that is installed it must be determined if the installation can be attributed to the IOU portfolio or if the installation would have happened without the IOU activity in order to determine the free ridership level or net-to-gross ratio
      • NTG - Net-to-Gross Ratio - Total number of participants that are not free riders - Has two conceptual components Free-ridership is a subtraction (the savings of those who would have done it anyway or the partial savings for those who would have done it later are subtracted from the gross savings). Spillover is an adder (savings are added for things that are done outside the program).

        The principal complaint about net-to-gross is measurement related. That is, free-ridership and spillover are difficult to measure. The contention is that because there are so many things going on within our society and culture, it is difficult to measure and disentangle the effects of past programs and other influences (climate change, green building, climate change, etc.). The flip side of the argument is that it is important to establish NTG because without it, it is difficult to determine where to put the limited dollars that are available for efficiency. In California, there are real concerns expressed by the utilities about the forecasting uncertainties they face with respect to "truing up" NTG ratios.

        For example, The NTG for CLFs is one of the key parameters that has changed, as consumer demand for CFLs has increased due to the combined impacts of utility rebate programs, supply growth and price declines from large retailers such as WalMart, and greater public awareness of the impact of climate change and its relation to electricity production.

      • RUL - Remaining Useful Life - relevant for early replacement measures that are designed to retire equipment before the end of their useful live. Early replacement measures capture additional energy savings that result from the replacement of older, less efficient equipment with newer, higher efficiency equipment.

        Normally, energy savings for “replace on burnout” measures are calculated as the difference in energy use between the high-efficiency equipment and standard-efficiency equipment that would have been purchased without program intervention. For early replacement measures, energy savings are calculated in two parts: for the RUL of the old equipment, savings are calculated as the difference between the energy use of high efficiency equipment and the old equipment that is being replaced, and for the remaining measure live, savings are calculated as the difference in energy use for the high-efficiency equipment and the standard-efficiency equipment.

        For RULs we have proposed using 1/3 of the estimated EUL for a measure. This approach provides a reasonable RUL estimate without the requiring any a priori knowledge about the age of the equipment being replaced.

        It has also been proposed that RULs could be estimated as a function of the age of the equipment and the measure EUL. One simple equation is:
        RUL = EUL – replaced equipment age.
        Alternate equations involve the use of survival functions. However, these equations all require knowledge about the age of the equipment being replaced, which is not available for program planning, but could be available for program reporting.

        One could use a combination approach to deal with situations where equipment age is known and where it is unknown:
        • If replaced equipment age is known, use equation involving EUL and equipment age
        • If replaced equipment is unknown, use 1/3 of the EUL

        The primary drawback to the combined approach is that it can be gamed to get higher lifetime measure savings. If the equipment age is less than 2/3 of the EUL, then one might want to use the equation approach. If the equipment age is greater than 2/3 of the EUL, then one could claim not to know the equipment age and thus use 1/3 of the EUL for the RUL.

        Given our limited current understanding about appropriate RULs to use for energy savings calculations, we believe that simple use of 1/3 the EUL to be appropriate for the current DEER update. Kema recommended that RULs receive additional study as part of ongoing program evaluation studies.

      • UES - Effective Useful Life - Values for standard or “deemed” energy efficiency measures
      The most fundamental revision from the 2005 to 2008 DEER is the reclassification of many residential and non-residential building measures from “non-weather sensitive” to “weather sensitive”. Previously, for many measures, impacts were determined using very simplified engineering calculations that provided only a net annual estimate of impacts in electricity kWh, electricity kW and natural gas therms. Impacts are now determined via a full year energy analysis using the DOE-2.2 building energy modeling software . This approach has the following benefits:
      • Energy use impacts are now distributed throughout an entire year (8760 hours) so that time of use impacts can be calculated including a demand reduction which utilizes the CPUC adopted DEER methodology and load shapes which can be extracted and applied to the CPUC adopted hourly avoided costs for energy efficiency
      • Interactive affects with heating and cooling systems are now included in the impacts
      Impacts for the following groups of measures are now calculated using wholebuilding energy simulation (i.e are weather sensitive):
      • Interior Lighting (for residential and nonresidential building types)
      • Refrigerator/Freezer replacements (for residential building types)
      • Refrigerator/Freezer recycling (for residential building types)
      • Domestic Water heater replacements (for residential building types; nonresidential DHW measures were weather sensitive in the 2005 DEER update.)
    3. Free Rider - Those who consume a resource without paying for it, or pay less than the full cost of its production. Free riding is usually considered to be an economic "problem" only when it leads to the non-production or under-production of a public good The name "free rider" comes from a common textbook example: someone using public transportation without paying the fare. If too many people do this, the system will not have enough money to operate.

    4. Interactive Effects - Historically, the energy savings profile of a given efficiency measure has been considered in isolation. The impact of installing a single CFL, for instance, is estimated as the difference in its own energy consumption and that of the incandescent bulb it is assumed to replace. However, in some cases, measures have systems impacts, or “interactive effects,” which are not captured by baseline comparisons along a single parameter. Some energy efficiency measures, for example, produce less heat than the measure they replace. Depending on factors, including where they are installed, certain energy efficiency measures may increase the need for heating or decrease the need for air conditioning.

    5. IOU - Investor Owned Utility - The IOU's in California covered by RRIM are Pacific Gas & Electric (PG&E), Southern California Edison (SCE), Southern California Gas (SoCalGas) and San Diego Gas & Electric (SDGE&E).

    6. M & V – Measurement and Verification.
    7. Market Transformation - Any intervention in the market is transformative to some degree. Some interventions lead to greater levels of transformation than others. Some interventions have few transformative effects. It is also important to keep in mind that interventions can have negative outcomes, i.e., the early cool roof programs gave cool roofs a bad name as did the early heat pumps in the Tennessee Valley. Thus, we are working along a continuum from total and utter rejection to total and utter acceptance and acceptance aided by programs. Also, there is a tendency to treat interventions as having a singular effect when in fact the effects of interventions vary through time.

    8. RRIM – Risk Reward Incentive Mechanism - CPUC Proceeding R0901019 - An incentive mechanism adopted by the CPUC in 2007 to encourage the utilities to invest in energy efficiency. The mechanism enables the investor owned utilities to earn rewards on energy efficiency programs in amounts comparable to what the companies would otherwise earn through supply side investments. Decision 07-09-043 and 08-01-042, establish a performance standard for the utilities, under which the utilities earn incentives if their energy efficiency program portfolios achieve certain quantitative energy efficiency savings goals.

      The RRIM is a “shared savings rate” mechanism that awards a percentage of net program benefits to utility administrators as an incentive for maximizing cost-effective energy savings
      Rewards are provided only after a minimum performance standard (MPS) is achieved. The reward rate increases from 9% to 12% if the utilities reach 100% of the energy savings goals.
      Penalties are included in the mechanism to discourage gross mismanagement, and the RRIM includes two penalties: per-unit (kilowatt, kilowatt-hour, therm) penalties are levied if performance falls below 65% of goals and a “performance guarantee” requires utilities to refund ratepayers if their energy efficiency programs produce negative net program benefits.

      The costs of shareholder incentives are included both when evaluating the cost-effectiveness of program plans submitted during the program planning cycle, as well as when conducting a cost-effectiveness review of portfolio performance in hindsight. In addition participant costs and benefits are both adjusted to account for free riders, unless those costs represent program expenditures (utility revenue requirements).

    9. Resource acquisition programs aim to provide measurable energy savings capable of offsetting energy procurement. In the industrial sector for example, resource acquisition programs transfer funds from ratepayers to industrial customers, such that conversions to more energy efficient buildings and processes have reasonable payback periods. One facet of the RRIM that has generated considerable debate is how incentives are paid through the “earnings claim process.” RRIM establishes that utility performance is ultimately determined by independent evaluation after programs are completed in a “final earnings claim,” but the RRIM also provides the potential for annual “interim earnings claims.” Determination of interim earnings has generated considerable controversy. RRIM Acronyms and Definitions:
      • ERT - Evaluation Reporting Tools/Database - a combination of tools and processes that work in concert to calculate 2006-2008 energy efficiency portfolio performance results. The ERT core features were used to compile and evaluate alternative scenarios and resulting RRIM earnings based upon changes to key parameters. The ERT aggregates and reports efficiency savings performance at the level of measure group, program, and total portfolio. Based on specified parameter assumptions, the ERT generated scenario runs showing corresponding RRIM earnings.

      • Ex Ante- Predictions in program planning documents - Assumed energy savings associated with a particular energy efficiency measure or equipment prior to installation. Thus, ex ante refers to using program metric assumptions based on past program performance. Ex ante measurement relies on engineering estimates or the results of ex post savings measurement (e.g., load impact studies) from previous program years or other programs.

      • Ex Post - Completed & measured savings
      • Ex Post True-up - An after-the-fact adjustment in the RRIM that was a key ratepayer protection. The original CPUC decision in 2007 provided that the utilities and the ratepayers would each be made whole in the event of overpayment or underpayment of interim incentives to the utilities.
      • HIM - High Impact Measures - End-use measures or technologies that dominated portfolio savings. The IOUs claim that HIM methodology developed point estimates for certain measures and then applied them to similar measures across the portfolio. The Energy Division’s HIM focus allowed for a more efficient use of Energy Division resources, allowing for approximately 85% of the reported kWh, kW and therms to be included in the direct evaluation of gross savings.

        The error bound for the net savings estimates for GWh, MW, and MMTherms were added to Energy Division’s final evaluation report. Across the IOUs, the error bounds are +6% for electricity, +4% for peak, and +11% for natural gas at the 90% confidence interval.

      • MPS – Minimum Performance Standard - The minimum level of savings that utilities must achieve relative to their savings goal before accruing any earnings, and is expressed as a percentage of that savings goal.

      • PEB – Performance Earning Basis – Used with RRIM, predefined calculation of net present value of program benefits minus specific program costs. The PAC and TRC tests are used on a prospective basis in evaluating the projected cost-effectiveness of the utility's proposed portfolio plans, as well as after-the-fact to assess the actual cost-effectiveness of the implemented portfolio. In addition, a weighted average of cost and benefit values for the TRC and PAC tests is used in the calculation of net benefits under the PEB formula adopted in D.05-04-051. More specifically, the TRC net benefit results are weighted by 2/3 and the PAC net benefit results are weighted by 1/3 to produce the PEB

      • PAC- Program Administrator Cost – Cost Benefit Analysis Methodology commonly used for evaluating utility sector Demand-Side Management. Contributes one-thirds of PEB. Under this test the program benefits are the same as the TRC test, but costs are defined differently to include all the costs incurred by the program administrator, including all incentives and all other program costs that become revenue requirements. The PAC test does not include the costs incurred by the participating customer.

      • SSR - Shared Savings Rate - Varied depending upon the extent of success in meeting or exceeding adopted goal.

      • TRC - Total Resource Cost - As discussed in D.06-06-063, the TRC test is the measurement of net resource benefits of a program from the perspective of all ratepayers, and is produced by combining the net benefits of the programs to participants and non-participants. The benefits are the costs of the supply-side resources avoided or deferred. The costs included in the TRC test are all costs paid by both the utility and the participant, which encompass the costs of the measures/equipment installed and the costs incurred to start and administer the program.

        • The TRC and PAC benefits include estimates of supply-side costs avoided by the implementation of energy efficiency programs.
      California Incentive Mechanism Earnings/Penalty Curve - There are no earnings or penalties within the "deadband" range of performance, i.e., greater than 65% and less than 85% of goal achievement. In order to provide reasonable limits to the risks and rewards under the incentive mechanism, penalties and earnings are capped at $450 million (all four utilities combined) for each three-year program cycle. In December 2010, the CPUC ruled that performance would be based on ex-ante assumptions and the ER would be paid at 7%.

    10. SAVE - Solar Advantage Value Estimator - A online tool launched in August 2011 by the California Energy Commission which helps the housing market evaluate the value of solar on California homes. The Solar Advantage Value Estimator (SAVE) will give the industry a long term and cost-effective method for calculating the added value of solar photovoltaic (PV) systems on new and existing solar homes.

      SAVE calculates the value of a solar PV system on a new or existing solar home including the estimated value in annual energy savings. The tool uses the homeowner's unique address and zip code, the solar system size, specific climate zone data, and local electric utility rates. The solar PV system information is captured from existing solar rebate data including the Energy Commission's New Solar Homes Partnership (NSHP) and the Emerging Renewables Program. The information can also be entered by the user.

      Once the three-step calculation is complete, the user receives a present value amount for their solar PV system. Real estate professionals, appraisers, and builders can connect this information to potential homebuyers who may be deciding to 'Go Solar,' or to homeowners who are selling their solar homes.

      3. California Energy Efficiency Programs
      1. CalSPREE - California Statewide Program for Residential Energy Efficiency - A CPUC plan launched in 2009 earmarking $3.1 billion to retrofit homes and other programs. California's strategic vision for the residential sector: “Residential energy use will be transformed to ultra-high levels of energy efficiency resulting in zero net energy new buildings by 2020. Expected results
        • Cut power needs equivalant to three medium sized power plants.
        • Avoid 3 million tons of greenhouse gas emissions.
        • Create between 15,000 and 18,000 jobs.
        • Cut Energy use by 20 percent for up to 130,000 homes in the state by 2012.
        • Promote innovative programs to make zero net energy homes and commercial buildings ($175 million).
        • Retrofit Public Sector Building ($260 million).
        • Education and Training programs ($100 million).
        • Promote Solid State lighting and other efficient light technologies.
      2. CLEO - LADWP's Commercial Lighting Efficiency Offer - Program provides per-unit rebates for efficient lighting products ranging from compact fluorescent lamps to high-intensity discharge fixtures

      3. EA - Enhanced Automation Initiative - Pays large commercial and institutional customers to improve energy efficiency of existing building automation systems (BAS) or energy management systems (EMS). The program assists customers in the design and optimization of controls systems to help them manage their loads and participate in demand response programs in the state. The EAI is part of PG&E’s 2010-2012 energy efficiency program portfolio and is implemented by the EAI staff at KEMA Services, Inc.

      4. Energy Saving Bid Program - SDG&E provides incentives for electric or gas efficiency projects that save at least 500,000 kWh or 25,000 therms annually. The incentives range from $0.07 to $0.20/kWh for electric measures and gas projects are paid at $0.80/therm saved"

      5. Energy efficiency projects for large business in existing buildings. PG&E and SDG&E offer customized financial incentives.

      6. Equipment Rebates - SCE, PG&E, and SDG&E offer standard rebates for upgrading or replacing equipment such as lighting, HVAC, boilers, water-heaters, refrigerators, and others.

      7. LIEE - Low Income Energy Efficiency - Provides no-cost weatherization services to low-income households who meet the CARE (California Alternate Rates for Energy ) income guidelines. Services provided include attic insulation, energy efficient refrigerators, energy efficient furnaces, weather stripping, caulking, low-flow showerheads, waterheater blankets, and door and building envelope repairs which reduce air infiltration.

      8. Natural Gas Programs - SoCal Gas offers the following additional natural gas efficiency programs:
        • The Commercial & Industrial Incentive Program provides incentives of up to $1,000,000 per customer for gas efficiency projects with an energy savings of at least 200,000 therms per year.
        • The Express Efficiency Rebate program offers up to $200,000 in rebates per year and covers many energy-efficient gas appliances and improvements.
        • The Gas Engine program pays 30% of the cost of replacing a natural gas engine, or $0.80/therm saved, whichever is lower. Incentives are capped at $25,000 per year.
        • BEEP –SoCal Gas’ Business Energy Efficiency Program - Offers up to 50 percent of the equipment cost or $0.50 per therm saved, whichever is lower, capped at $1 million per project, and $2 million per premise, per year

      9. RNC - Residential New Construction sub-program. PG&E’s RNC encourages builders to construct homes that exceed Title 24 through a combination of technical education, design assistance and incentives. RNC also works closely with Zero Net Energy Homes Pilots Program.

      10. Savings by Design - Provides incentives for energy efficiency measures in new commercial construction and major renovations. The program offers building owners and their design teams a range of services, including design assistance; "owner incentives" to help offset the costs of new energy-efficient buildings; and "design team incentives" to reward designers who meet ambitious energy efficiency targets. Offered by PG&E, SCE, and SDG&E, and SMUD

      11. SMUD offers both customized and express incentives, generally for 30% of a project or up to about $50,000, depending on the measure. For the express program, incentives are provided for qualified efficient lighting, packaged air conditioners, process improvements, refrigeration, motors, and "cool" roofs.

      12. SPC- Standard Performance Contract Program - Provides financial incentives to offset the capital cost of installing high efficiency equipment or systems including lighting, HVAC, and refrigeration upgrades, as well as more specialized process improvements and customized equipment replacements. Offered by SCE and SDG&E

      13. SMUD offers both customized and express incentives, generally for 30% of a project or up to about $50,000, depending on the measure. For the express program, incentives are provided for qualified efficient lighting, packaged air conditioners, process improvements, refrigeration, motors, and "cool" roofs.

      14. SWH - Solar Water Heating - On January 21, 2010, the CPUC approved a decision that creates a new statewide program providing $358.3 million in financial incentives and market development funding for Solar Water Heating (SWH) and other solar thermal technologies. The new CSI - Thermal Program sets aside $305.8 million for direct financial incentives for consumers of SWH systems and another $31.25 million for market facilitation, with the balance going to program administration, inspections, measurement and evaluation
      4. Business Case
      • The Smart Grid with advanced metering infrastructure could provide interval metering used to approximate or simulate sub-metering, i.e., measurement of energy consumption at the end-use level. Consider the example of a utility program offering a rebate for an energy-efficient refrigerator. Today, the energy savings associated with that appliance would likely be deemed or calculated ex ante for evaluation purposes. Typically, such ex ante energy savings assumptions are discounted due to their inherent uncertainty, since they cannot be measured at the end use level.

      • A Smart Grid infrastructure could allow the utility to sub-meter the energy consumption of refrigeration for households that participate in the refrigerator rebate program. By being able to measure and compare refrigeration consumption of program participants ex ante and ex post, the utility can reduce the uncertainty of, and more precisely gauge, the program’s energy savings impact. Assuming that the program proves cost-effective in yielding energy savings, the utility would be encouraged to expand the program and pursue it more aggressively, resulting in incremental energy savings attributable to a Smart Grid.

      4. Benefits
      • Reduced Risk - More precise and reliable measurement and verification, as enabled by a Smart Grid, reduces the uncertainty of program impact and encourages greater program investment – as previously postulated – its impact can contribute towards bridging the gap between realistic achievable and maximum achievable potential.
      • Automation – A Smart Grid infrastructure would automate aspects of M&V and thereby reduce M&V costs. Since M&V costs are typically included in a utility’s administrative costs to implement energy efficiency programs, this automation capability would render programs more cost-effective.
      • Enhanced Cost Recovery - The link between enhanced M&V and greater realization of energy efficiency is reinforced under the assumption that new ––business models may emerge that allow utilities to recover costs for energy efficiency in a manner competitive with cost recovery for generation resources, thereby providing greater incentives for verifiable energy efficiency.
      • Saved Finance Costs - Steel-in-the-ground investments (generation, transmission, distribution) ratepayers have to pay not only the cost of the facilities, but also the financing costs (debt service, return-on-equity, and associated taxes) to compensate those that put up the initial capital. In contrast, since energy efficiency expenditures are expensed and reflected in rates immediately, energy efficiency saves ratepayers substantial financing costs.

      California Ratepayer and Shareholder "Share" of Verified Net Benefits - Under Adopted Shareholder Risk/Reward Incentive Mechanism(Based on 2006-2008 Portfolio Costs and Savings Goals

      Potential earnings for the 2006-2008 program cycle start at $176 million if all four utilities achieve the minimum performance threshold of 85%, which in turn would deliver approximately $1.9 billion in net benefits. At the 85% level, the vast majority of the net benefits--$1.775 billion--goes to ratepayers.

      5. Risks/Issues
      • Energy Efficiency Savings are Difficult to Verify – Under the California RRIM - Risk Reward Incentive Mechanism , utilities reported that they had achieved 118% of the CPUC’s goals for 2006-07, but independent evaluators calculated that they had achieved only 82% of goals in the best-case scenario (CPUC Verification Report -Table ES2a). The final arbitration of this issue of performance did not come until December 2010, when the ex post evaluation of 2006-08 programs were completed and actual savings achieved verified. The final decision awarded $68 million additional profits to utilities for the final true-up for 2006-08 energy efficiency. The proceeding was marked by controversy all the way to the final decision. There were three proposed decisions, one by the ALJ and alternates by two Commissioners. Two other Commissioners issued emphatic dissent
        1. DRA opposes the CPUC Alternate Proposed Decision that would award the utilities $108 million based on outdated, inflated utility assumptions based on their self-reported goal achievements. It also seeks to change rules to the incentive mechanism going forward to favor expediency over actual energy savings, resulting in no accountability for the investment of ratepayer dollars.
        2. DRA has consistently argued that an incentive mechanism that motivates real, incremental, and persistent energy savings, is extremely difficult to craft. The mechanism adopted in D.07-09-044 may increase EE program costs by as much as $450 million, yet there is no evidence that this will increase energy savings, or the quality of savings. DRA’s fundamental position is that if there is going to be a shareholder incentive mechanism, it should hold the Utility administrators accountable for their EE program design and implementation, and that incentives must be based on actual verified energy savings.
        3. In January 2009, the CPUC initiated a new Order to review and reform the Energy Efficiency Risk/Reward Incentive Mechanism (RRIM). (Whitepaper)
      • Behavior is Difficult to Predict and Measure
      • Ex Ante vs. Ex Post Measurement Issues - By way of example, for PG&E’s CFL programs, allocations of incentives to upstream lighting manufacturers/distributors must be made at least 120 days prior to the movement of the products into the marketplace. Therefore, the IOUs argue that the October 2007 draft EM&V Study (which indicated, among other things, that NTG values for lighting were declining) allowed little time for adjustments to program delivery and implementation to take hold during the 2006-2008. They argue therefore, it is inappropriate to apply these NTG values to the entire 2006-2008 program cycle for purposes of awarding incentives.

      • Measurement Complexity – The implementation of IOU energy efficiency portfolios involves the installation of millions of individual measures across the state. Each of these installations can be any one of thousands of individual measures, each with an equipment cost, and installation cost, an estimated life, an energy impact estimate and an annual impact load provide that must all be know or estimates in order to convert the energy load impacts to both an avoided resource cost and GHG emissions reduction.

        Unlike expenditures for energy resources that are measured through arms-length transactions, energy savings cannot always be as easily quantified. To calculate cost savings associated with energy efficiency measures, it is necessary to develop assumptions as to relevant parameters based on surveys, sampling, and extrapolation of estimates over extremely large volumes of data points.
      • Free Ridership – For each measure that is installed, it must be determined if the installation can be attributed to the IOU portfolio or if the installation would have happened without the IOU activity in order to determine the free-ridership level or the net-to-gross ratio.
      • NTG Measurement Subjectivity- PG&E claims that in the final performance evaluation, many of the NTG ratios were estimated based upon inadequate sample size, insufficient survey response levels, and excessive delays in surveying customers regarding their motivation for participation in energy efficiency programs. Judgments may differ in estimating the effects of free ridership. Any measure of the NTG can at best only be an approximation. Measurement of NTG ratios has caused particular controversy both because evaluation methods depend on customer behavior survey results and because positive impacts in market transformation – for example, greater consumer awareness of the benefits of CFLs – will reduce the energy savings yielded by a given measure that will be attributed to the utilities.

        Studies that evaluate NTG ratios ask customers deploying energy efficiency measures to recall whether their decision to adopt such measures, sometimes more than a year before, was directly attributable to utility programs. However, if certain measures and their associated savings would be deployed regardless of the utility programs, it would be a waste of ratepayer REUmoney to continue to support those programs.
      • Rapid Market Changes – Result in ex-ante free-ridership assumptions for some program strategies that may significantly underestimate current market conditions (for example, CFL’s)
      • Regulatory FrameworkAccording to PG&E, The current regulatory framework is flawed due to the extremely high level of variability that exists between ex-ante planning assumptions and ex-post evaluation results that are retroactively applied to adjust achievements as if IOU administrators had the benefit of such information prior to portfolio design and implementation. This framework is unjustly punitive in nature because essentially IOUs are penalized based on ex post information that was not known at the time of portfolio design and was not considered when savings goals were adopted.
      • Challenges of Implementing EM&V for POUs  
        • POUs are very diverse in size, customer types, and program delivery approaches, making it difficult to issue “one size fits all” prescriptive guidelines for EM&V activities.  
        • Many POUs are very small and have limited access to EM&V resources or staff time to pursue evaluation activities.
        • POUs have substantial faith in their internal verification procedures, which they believe ensure their programs are on track and delivering expected savings. As a consequence, few perceive a need for comprehensive third‐party EM&V, especially the extra expense of net savings analysis to determine free ridership and spillover savings impacts.
        • POUs have no strong incentive to perform EM&V to prove that they did not inflate their savings claims. They do not have the shareholder reward mechanism that, at least partially, drives the EM&V process for the IOUs’ efficiency programs.
        • Some POUs have had difficulties communicating their specific needs to EM&V contractors and reaching agreements about project scope and products
      • PG&E Issues – PG&E requested that as part of this proceeding, the California Energy Commission:
        1. Adopt a policy that ex ante benefit and measure cost assumptions adopted for 2009-2011 portfolio planning will also be used for 2009-2011 portfolio evaluation
        2. Adopt IOU proposed revisions to the 2008 DEER update issued by Energy Division in December, 2008, including removal of all residential interactive effects and heating-related commercial interactive effects
        3. Adopt a timely process for inclusion of new measures and development of new measure benefit and costs
        4. Define Cumulative Savings for 2009-2011 as the sum of the annual savings for the three-year cycle
        5. Adopt a policy explicitly allowing IOUs to receive energy savings credit for providing support for energy efficiency actions taken by customers who may be motivated by Federal, State or legislative policies, or local codes and ordinances
        6. Exempt from the RRIM, activities in direct support of the Strategic Plan that Produce Minimal or No Measurable, Cost Effective savings in 2009-2011
        7. Utilize a societal discount rate; or, alternatively allow PG&E to use the after-tax discount rate for energy efficiency cost-effectiveness evaluation
        8. Extended the Maximum Expected Useful Life of Energy Efficiency Measures to 30 Years
        9. Adopt Codes and Standards Policies that align C&S savings with savings from other portfolio programs (i.e., for 2009-2011 allow PG&E to count 100% of savings from pre and post-2006 advocacy; allow full savings for activity beyond advocacy including improving compliance; clarify calculation of gross savings for C&S; and adopt counting rules to support “reach codes” pursued via IOU partnership with local jurisdiction/ agencies.)
        10. Order that IOUs can fully count energy efficiency savings that occur due to PG&E’s on-bill financing activities or financing of energy efficiency through a Utility Energy Service Contract (UESC)

      7. Next Steps
      • In April 2010, The CPUC adopted a protocol to count energy savings from behavior-based energy efficiency programs in a decision on Evaluation, Measurement and Verification (EM&V) of energy efficiency programs for 2010 through 2012.

        This will afford programs that provide home energy reports, designed to engage customers to make better choices about their energy consumption using neighbor comparisons and personalized, targeted energy-saving recommendations, to be rolled out in California on a larger scale than in the past.

        Because these programs aim to motivate behavioral change, as opposed to hard-wired efficiency, they have thus far been treated as non-resource programs, ineligible for energy savings credit. However, the experience through a number of pilots in California and other region shows that these programs can produce a very real capacity for significant and measurable energy savings.

      • Next cycle California IOU Energy Efficiency Programs: 2014-2016 (with 2013 “bridge” year)
        • Portfolio guidance decision: June 2012 (est.)
        • Budget applications: Q1 2013 (est.)
      8. Companies/Organizations
      1. CALMAC offers a downloadable list of firms that are interested in providing Evaluation, Measurement and Verification (EM&V) services for energy efficiency and demand response programs in California. You can download the file either in Microsoft Word or Excel format.

      2. CALMAC - California Measurement Advisory Council - Managed by the IOUs for the purpose of warehousing energy efficiency evaluation reports. Provides a forum for the development, implementation, presentation, discussion, and review of regional and statewide market assessment and evaluation (MA&E) studies for California energy efficiency programs and demand response conducted using Public Goods Charge funds
      3. CEC - California Energy Commission - Sacramento, CA -The Efficiency and Renewables Division is committed to making California's businesses, homes, and appliances more energy efficient by:
        • Developing and implementing energy efficiency building standards that help ensure comfort and affordability
        • Identifying and developing ways to streamline energy use in agriculture, manufacturing, water systems, and processing functions
        • Letting Californians know that using energy wisely is a good investment in the economy and the environment
        • Assisting Schools (K-12), Public Colleges & Hospitals, Local Government, and others to identify and implement energy efficiency measures
      4. CPUC - California Public Utility Commission - San Francisco, CA - The PUC plays a key role in making California a national and international leader on a number of energy related initiatives and policies designed to benefit consumers, the environment, and the economy
      5. DRA – Division of Rate Payer Advocates - San Francisco, CA - Public Advocate in California An independent consumer advocacy division of the California Public Utilities Commission (CPUC), Part of the California PUC Our statutory mission is to obtain the lowest possible rate for service consistent with reliable and safe service levels. In fulfilling this goal, DRA also advocates for customer and environmental protections.
      6. KEMA - HQ Arnhem, Netherlands, US: Burlington, MA - A global, leading authority in energy consulting and testing & certification Contracted with CEC to build DEER - Database for Energy Efficiency Resource - A CEC and CPUC sponsored database designed to provide well-documented estimates of energy and peak demand savings values, measure costs, and EUL all with one data source. 
      7. LADWP - Los Angeles Department of Water and Power - the largest municipal utility in the United States, serving over four million residents.
      8. TURN - The Utility Reform Network - San Francisco, CA - A non-profit consumer advocacy group, on Wednesday submitted an application for rehearing on the CPUC’s recent decision to award shareholders of California’s investor-owned energy utilities $68 million in ratepayer-funded energy efficiency bonuses, because the decision was not based upon verified results as a previous CPUC decision had required.

      9. Links
      1. CPUC - Demand Response Cost-Effectiveness Protocols - Final (MS-Word)
      2. Achieving Cost-Effective Energy Efficiency for California, Draft Staff Report. Pub # CEC-200-2011-007-SD. Posted July 28, 2011, revised July 29, 2011. (PDF file, 61 pages, 1.3 mb)
      3. California Public Utilities Commission - Energy Efficiency Home Page
      4. California’s Shareholder Incentive Mechanism – a Ratepayer Perspective Tom Roberts, Division of Ratepayer Advocates California Public Utilities Commission
      5. Alternate Proposed Decision of Commissioner Peevey to the Proposed Decision of Administrative Law Judge (ALJ) Pulsifer on Order Instituting Rulemaking to examine the Energy Efficiency Risk/Reward Mechanism Nov 2010
      6. DSIRE – Database of State Incentives for Renewables & Efficiency. The DSIRE site provides detailed information on a large number of programs that provide incentives for renewable distributed generation in for all 50 states and US territories including local, utility, state and federal incentive program information
      7. California Energy Commission - Staff Workshop on Publicly Owned Utilities' Energy Efficiency Program Achievements - June 9, 2009
      8. Flex Your Power Initiative - The California Energy Commission (CEC) maintains a database of California programs (searchable by zip code) that provide rebates and other forms of assistance for energy efficiency, load management, and distributed generation.
      9. DEER – CEC’s Commission’s December 2008 Database for Energy Efficiency Resource DEER is a database of Net-to-Gross (NTG), Effective Useful Life (EUL), and Unit Energy Savings (UES) values for standard or “deemed” energy efficiency measures.
      10. PG&E 2009-2011 Energy Efficiency Portfolio – Submissions to CPUC
      11. White Paper, Proposed Energy Efficiency Risk-Reward Incentive Mechanism and EM&V Activities” San Francisco Calif.: Energy Division, California Public Utilities Commission. 2009c
      12. Energy Efficiency 2006-2008 Verification Reports - February 5, 2009. California Public Utilities Commission.
      13. California Energy Efficiency Groupware Application - This site allows public access to CPUC Energy Efficiency (EE) program reports for various program cycle.
      14. 2008 DEER Update - Summary of Measure Energy Analysis Revisions December 2008 Version 2008.2.05 for 2009-2011 Planning/Reporting