counting the capacity that didn’t hatch: the rate mitigation effect of dsm programs
DESCRIPTION
Presented at the 2013 ACEEE National Conference on Energy Efficiency as a ResourceTRANSCRIPT
Counting the Capacity that Didn’t Hatch: The Rate Mitigation Effect of DSM Programs
Jennifer Edwards & Nancy Lange*
MN Center for Energy & Environment
*MN Public Utilities Commission
Presented at the 2013 ACEEE National Conference on Energy Efficiency as a Resource
September 22-24, 2013 – Nashville, TN
Page 2
Non-profit based in Minneapolis, MN
Energy efficiency program and service provider
Energy and Home Improvement Financing
Building Science and Program Design Research
Minnesota Energy Policy
Center for Energy and Environment
Page 3
A better understanding of the system
wide revenue benefits of DSM programs
Energy Efficiency as a BIG Resource means…
Page 4
Xcel Energy’s 20-year program history
Backward looking scenario analysis to compare
capacity options
Compare additional revenue requirements
Minnesota DSM Case Study
Page 5
The Resource Wedge
Page 6
Itemized Utility Bill
What if alternative power plant capacity was itemized?
Page 7
Lower Resource Costs
Fewer Sales
DSM Scenario Power Plant Scenario
Higher Resource Costs
More Sales
0.24 ¢/kWh 0.66 ¢/kWh
Additional Revenue Requirements = Σ Annual Additional Costs ÷ Total Sales
Page 8
+ Conservation and Load
Management Program
Costs
+ Indirect Impact
+ Lost Revenue &
Incentives
+ Capital & Financing
Costs
+ Shareholder Returns
+ Fuel Costs
+ O&M
+ T&D maintenance
DSM Scenario Power Plant Scenario
Cost Considerations
Page 9
Power Plant Offsets from DSM
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
Incremental Demand Savings
Cumulative Offset Capacity
Page 10
250 MW
Power Plant Offsets from DSM
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
Cumulative Offset Capacity
250 MW
250 MW
250 MW
250 MW
250 MW
250 MW 7 250-MW
Combined Cycle
Page 11
$-
$200
$400
$600
$800
$1,000
$1,200
No
min
al $
/kW
Combined Cycle Overnight Capital Costs
Source: AEO Assumptions
Years when plants came online
Page 12
Capital Revenue Requirement Calculations
Page 13 Source: EIA Electric Power Producer Price
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
$2
01
1/M
MB
tu
Historical Natural Gas Fuel Costs
Page 14
Results
$1.14 Billion
Total Cost $4.16 Billion
Natural Gas Power Plants
DSM Programs
580,855 GWh Total Sales 629,212 GWh
0.24 ¢/kWh Addl Revenue 0.66 ¢/kWh
Incentives 23%
Program Costs 77%
Page 15
Scenario: Coal Plant Displacement
Page 16
250 MW
Power Plant Offsets from DSM
-
250
500
750
1,000
1,250
1,500
1,750
2,000
Cap
acit
y (
MW
)
500 MW
250 MW
250 MW
250 MW
250 MW
5 250-MW Gas Plants
+
1 500-MW Coal Plant
Page 17
Scenario: Coal Plant Displacement
Coal Capital
42%
Coal Operatio
n 19%
Gas Capital
18%
Gas Operatio
n 19%
Transmission 2%
$4.89 billion
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSMResource
Gas Only Coal + GasR
eve
nu
e R
eq
uir
em
en
ts
(¢/
kWh
)
0.78 ¢/kWh
Page 18
Scenario: Avoided Transmission Lines
Page 19
Scenario: Avoided Transmission Lines
$4.30 billion 0.68 ¢/kWh
0.000.100.200.300.400.500.600.700.800.90
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
Capital Costs 33%
Fuel 54%
O&M 8%
Transmission 5%
Page 20
Scenario: Average Measure Life
Page 21
10-Year Measure Life
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSM Resource Gas Only 10-yr MeasureLife
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
Capital Costs 30%
Fuel 58%
O&M 9%
Transmission 3%
$3.26 billion 0.53 ¢/kWh
Page 22
20-Year Measure Life
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSMResource
Gas Only 10-yrMeasure Life
20-yrMeasure Life
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
$4.50 billion 0.71 ¢/kWh
Capital Costs 31%
Fuel 58%
O&M 9%
Transmission 2%
Page 23
Summary of Scenario Results
0.24
0.66
0.78
0.68
0.53
0.71
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
DSM Resource Gas Only Coal + Gas NewTransmission
Lines
10-yr MeasureLife
20-yr MeasureLife
Rev
en
ue
Re
qu
ire
me
nts
(¢/
kWh
)
Page 24
DSM programs allow customers to save on the energy
they do use, as well as the energy they don’t
System wide avoided revenue requirements are 3-4
times higher than DSM program costs
Includes total DSM costs, but only power plant costs
recovered during the 20-yr time frame
One specific example, but relevant for other DSM
programs, especially those just beginning.
Summary
Page 25
Thank you!
Jennifer Edwards
(612) 335-5873
White paper forthcoming:
www.mncee.org/Innovation-Exchange/Resource-
Center