I am Mary Sue Lobenstein, the R&D Program Administrator at the Minnesota Department of Commerce, Division of Energy Resources. In today’s webinar we will review the results of a White Paper project which investigated electrification as it relates to Minnesota, and more specifically within the utility Conservation Improvement Program (CIP). With me today is Anthony Fryer who is the CIP Coordinator at the Division of Energy Resources. Anthony will provide some context for this topic as well as review the Department’s plans for future engagement. Our main presenter today is Carl Samuelson who is the Manager for Client Solutions at Michaels Energy. At Michaels Carl works to bridge the technical and human elements of energy efficiency. Carl has been the project manager on several past CARD projects, and led the research behind the White Paper results we are presenting today.
Before we start, I’d like to go over a few webinar basics All attendees will be in listen-only mode As questions occur to you during the presentation, type them into the Q&A box on the WebEx panel and send them to “All Panelists.” To display the Q&A box, click the Question Mark Icon in the upper right corner of the WebEx dashboard We will do our best to answer all questions within the time allocated, but if for some reason we don’t get to all questions. we will answer them later and email all participants a copy of the Q&A from the webinar. This webinar is being recorded and a link to it will be available on both the Department’s and Michaels’ websites at a later date. The slide set will also be available.
Minnesota Applied Research & Development Fund
State Capitol Image: Courtesy Minnesota Department of Administration
• Purpose - to help Minnesota utilities achieve 1.5% energy savings goal by:
• Identifying new technologies or strategies to maximize energy savings;• Improving effectiveness of energy conservation programs;• Documenting CO2 reductions from energy conservation programs.
Minnesota Statutes §216B.241, Subd. 1e
• Utility may reach its energy savings goal• Directly through its Conservation Improvement Program (CIP);• Indirectly through energy codes, appliance standards, behavior, and other
market transformation programs.4
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This webinar is one in an ongoing series designed to summarize the results from research projects funded by Minnesota’s Applied Research and Development Fund, which was established in the Next Generation Energy Act of 2007. The purpose of the fund is to help Minnesota utilities achieve their 1.5% energy savings goal. $2.6 million of this fund is set aside annually for the CARD program which awards research grants in a competitive Request for Proposal process. Results from CARD projects provide utilities with information to enhance energy efficiency program designs within their CIP portfolios.
CARD RFP Spending by Sector thru June 2018 (FY2018)
• 9 funding cycles• Over 420 proposals• 107 projects funded• Almost $24.5 million in research 5
Multi-sector (26), 24.6%
Commercial (41), 36.6%
Residential 1 - 4 unit
(18), 20.4%
Industrial (11), 7.8%
Multifamily 5+ unit (5),
7.2%
Agricultural (6), 3.4%
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As you can see by the pie chart, CARD projects funded to date have been in all building sectors. The subject of today’s webinar is multi-sector and will present an introduction to electrification in Minnesota in order to provide baseline information and resources on this topic. Now, I’ll turn it over to Anthony to start today’s presentation.
Current CIP Fuel Switching Policy
•Department order issued in 2005 prohibits inclusion of targeted fuel-switching projects in CIP.
•Department guidance issued in 2012 provided exception:• Electric utilities may provide direct space heating and domestic hot
water energy savings measures to low-income delivered fuel customers and low-income small gas utility customers offered in conjunction with the Weatherization Assistance Program.
6
Department of Commerce Initiatives
Electrification White Paper
Fuel Switching Stakeholder Process
US DOE Funded Electrification Action Plan
7
1
2
3
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Recent discussion around beneficial electrification, has led the department to revisit the conversation around fuel switching though 3 related initiatives: White paper – Michaels Energy (expected this fall) Fuel switching stakeholder process – revisit current policy in 2019 2019 we will commence a DOE funded stakeholder process to develop a beneficial electrification state action plan Passover to Carl when done.
THE ELECTRIFIED FRONTIER
STAKEHOLDER VIEWS ON THE INTERSECTION OF ELECTRIFICATION, EFFICIENCY, AND DE-CARBONIZATION
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Thank you Anthony, and thank you all for attending the webinar today. I would like to thank the Department of Commerce for their leadership engaging stakeholders and exploring what this topic means in Minnesota. I would also like to thank the staff from the 24 different organizations that participated in this research. I am always deeply grateful that I work in a such a collaborative industry in Minnesota.
Who We Are
Headquarters in La Crosse, Wisconsin
Engineering and energy efficiency consulting
Program implementation and program evaluation
Michaels Energy
On-going Commissioning for Outpatient Medical Facilities
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By way of brief introduction, Michaels Energy is an engineering and energy efficiency consulting firm headquartered in La Crosse, WI, with offices in a number of other Midwestern cities – including Minneapolis. Locally in MN and Iowa we partner with utilities to implement programs for Commercial and Industrial customers. In the context of this presentation, I want to mention that Research and Evaluation is a core part of our company. In the past 10 years we’ve conducted eight CARD funded studies for the MN Department of Commerce, and we also have conducted dozens of program evaluations for utilities, regulators, and program administrators across the country.
Overview of White Paper
Explore the topics of electrification and fuel switching – in the context of Minnesota and CIP
This webinar is an oral/visual version of a white paper that will soon be published by the Department of Commerce. Please look to that white paper when it gets published for more information. I was not able to fit everything into the presentation today. In the paper you will find more background on MN policy, specific reviews of recently published research, a wealth of information about technologies, and more quotes from stakeholders.
Provide Minnesota-centric analysis Be a primer to inform CIP
stakeholders Frame-up key questions
Project Goal
The Electrified Frontier
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This work focuses on Minnesota’s policies, stakeholders, program dynamics, our state’s fuel mix, and our even our weather in order to pare down the focus of a very wide topic and add something unique to what is becoming a sea of research on electrification. As a contribution to that abundance of research and writing, I hope this presentation and white paper serve to raise the baseline level of knowledge on the topic here in Minnesota so that more people can feel competent and able to participate in the dialogue. And finally, one of the goals was to frame up key questions for stakeholders to engage with in the future.
Background
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Let’s begin with some background on Minnesota Policies and review the key concepts.
State GHG Reduction Goal
Minnesota is behind on reaching its
The Electrified Frontier
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In 2007, Minnesota enacted the Next Generation Energy Act. This landmark legislation established a goal for the state of Minnesota of an 80% reduction of Greenhouse Gases from 2005 levels by 2050. It also expanded the state’s energy efficiency programs into the form we know them in today. On this slide you can see the data from the Minnesota Pollution Control Agency, that shows that MN is in fact not doing that well in meeting the goal on a sector by sector basis. This chart shows data through December 2014, as an aside, new data will be released in January 2019, and the utility sector is the only sector on-track to meet the interim goal of a 15% reduction by 2015. Transportation and Agriculture have declined some, but emissions from Industrial, Residential, Commercial and Waste sectors increased during this period. The fact that MN is not meeting its goal in every sector has led many to the conclusion that capitalizing on the electric sector’s decarbonization is key to reducing emissions from other sectors in the economy.
Electrification is Beneficial When…Core premise
Saves consumers money over the
long run
Reduces environmental
impacts
Enables better grid
management
The Electrified Frontier
*Must achieve at least one of the three, without negatively impacting the other two.
Source: Regulatory Assistance Project
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This leads us to the concept of “Beneficial Electrification” and the idea of using this de-carbonized electricity to replace traditionally fossil-fueled end-uses, like transportation and space heating, could achieve a net reduction in carbon emissions. This idea of achieving a societal benefit sets this type of electrification apart from good old fashioned load building. Some kind of standard or test is required to define when an instance of electrification is beneficial. While many people are working on this topic, I’m referencing work done by the Regulatory Assistance Project on this slide. In their definition they suggest that electrification is beneficial when it can achieve one of three litmus tests without negatively impacting the other two. Those tests include 1) that the project saves consumers money over the long run, 2) that it reduces environmental impacts (specifically reducing carbon emissions), and 3) that it enables better grid management (such as offering the ability to schedule or control a new electric load so that it doesn’t exacerbate the grid’s peak).
Three Enabling TrendsA new era of electrification has benefited from
Efficient Technology
RenewableEnergy
Advanced Control
The Electrified FrontierSource: Regulatory Assistance Project
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I think it’s helpful to step back a bit and reflect on why today we can talk about beneficial electrification. Historically (as in only 10 or 15 years ago) beneficial fuel switching would have been a proposal to switch from electric heat to high efficiency natural gas appliances because of their low fuel cost and high efficiency, when the whole life-cycle of fuel consumption, starting at the power plant, was taken into account. But today, the conversation has shifted and that is because of three enabling trends in the industry, again as identified by the Regulatory Assistance Project. First, electric technology has gotten more efficiency. Cars with electric motors and batteries provide a viable alternative to internal combustion vehicles. Heat Pump performance and efficiency has improved so that now they are a realistic heating option even in cold climates. Second, there is a lot more renewable energy on the grid. Particularly in Minnesota, wind generation makes up a sizable share of our energy mix. The state’s largest utility forecasts that they will be 85% carbon-free by 2030. Finally, we have much better abilities to control equipment into running at certain times of day. Instead of a pneumatic valve turning something on and off, we have cheap digital controls and internet connectivity that make it easy to ask a piece of equipment in a home or business to run when low-cost and renewable energy is available.
That brings us to our state’s policy context. As Anthony mentioned, Electrification is, by definition, fuel switching. And fuel switching is prohibited within the conservation improvement programs. As one stakeholder commented, “MN’s statutes are fairly silent on the topic of fuel switching and electrification” and that means that guidance on the topic has come from regulatory interpretation. The primary piece of interpretation is a 2005 department of commerce order prohibiting fuel switching. It was issued after a multi-year effort engaging stakeholders, researching and reviewing comments. Unlike today, it’s origin came from a gas company’s proposal to incentivize high efficiency gas water heaters in new construction. Evidently an inadvertent code change had effected the new construction market, and Minnegasco proposed to adjust this with a CIP incentive, rooted in a total Btu analysis which showed natural gas was more efficiency when the fuel inputs to electricity production were included. In documentation around that 2005 order, the Department staff noted that an exception for allowing fuel-switching programs for low-income customers might be warranted. And in 2012, the department issues that guidance, which allows low income programs to claim energy savings from fuel switching as long as the customer was using propane, fuel oil (both of which are called delivered fuels) or CIP-exempt natural gas. Small natural gas providers in MN are exempt from participation in CIP. Finally, we arrive at Otter Tail Power’s program modification request in 2017, in which Otter Tail was proposing to essentially extend that low-income exception to customers of any income in order to promote heat pumps as an efficient heating option.
Groups releasing papers or holding conferences about electrification this year:
> Regulatory Assistance Project > American Gas Association> Midwest Energy Efficiency Alliance> Southwest Energy Efficiency Partnership> National Renewable Energy Laboratory> Rocky Mountain Institute> Center for Energy and Environment> Electric Power Research Institute> And more…..
A Hot Topic in 2018
The Electrified Frontier
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This topic has been of great interest across the industry in 2017 and 2018. On the screen are a list of organizations that came out with publications, research studies, conferences, or white papers on the topic of electrification in the first half of 2018. In the white paper, a number of these studies are discussed in some detail. I would commend many of them to you, you can start with our white paper and the 3-4 page works cites page as a good a reading list.
Modeling of Economy Wide TrendsEPRI Efficient Electrification
While I’m not going to take the time in this presentation to review all of that literature, I did want to share a bit of info by way of illustrating trends that emerged across studies I reviewed. In this case I’m sharing information from the Electric Power Research Institute’s efficient electrification report issued in 2018, which I commend to you, but since this is data from the electric power research institute, an organization devoted to researching and promoting electric technology, I want to point out that data from NREL and the Rocky Mountain Institute found similar trends within their modeling scenarios. I’m using the EPRI data because it’s well presented and I liked their modeling approach of building up their scenarios based on measure cost-effectiveness and the current pace of technology adoption. But as I’ve said there are a number of excellent studies. In this chart you see the four scenarios EPRI modeled. Their reference scenario is a business-as-usual scenario that assumes that current technology advances and adoption trends continue, in some cases rapidly based on current patterns. They back off on those technology adoption assumptions to create their conservative scenario. In the progressive and transformation scenarios adoption is augmented by a public policy that puts a price on carbon (that might be a carbon tax for instance). In the progressive scenario they model the effect of a $15/ton price of carbon, and their transformational scenario uses a $50/ton price of carbon. As you can see, in every scenario (and these trends were true in other modeling efforts as well) final energy dropped by 2050. Final energy is the amount of energy consumed in the building or end-use equipment itself. This is largely due to energy efficiency gains in buildings, equipment, and vehicles. Of that final energy, electricity comprises an increased share of all energy consumed in the economy. Interesting, in EPRI’s model natural gas consumption also increases in every scenario. This is largely due to the expanded role that natural gas plays in electric generation as electricity consumption increases. But natural gas continues to play a role as a primary home heating fuel and as a back-up to air-source heat pumps. Natural gas also continues to be used in industrial applications. Finally, economy wide EPRI’s models resulted in a drop in carbon emissions. I think it’s interesting that, unlike other models that set an 80% reduction target as the goal and developed strategies that could reach that goal at low cost, EPRI’s model builds up the end-uses based on economic decision making. This means that in their transformational scenario a $50 per ton price on carbon is enough to drive down economy-wide carbon emissions by nearly 70% by 2050.
One of the goals of this research was to look around and collect efforts from other states to inform policy directions for Minnesota. These efforts can be broken into states that are addressing fuel switching within their conservation programs and states that are promoting electrification for meeting carbon reduction goals.
Illinois> Definition in state statute> TRM measures for Heat Pumps, CHP
Maine> High fuel oil use> RGGI funds support carbon reductions
California> Allowed under three-prong test> Test criticized as too onerous
Fuel Switching PolicyHow other states are addressing
The Electrified Frontier
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Here are three examples of states that have approached fuel switching within their conservation programs. First Illinois provides a good example for Minnesota, because their statutes are similar to ours. They have a little more openness in their definition of energy efficiency, and the legislature has made that distinction more explicit that efficiency means any savings of any fuel type. The rest of the implementation has come through regulatory interpretation, and as is, the state includes 3 fuel switching measures within their Technical Reference Manual: heat pumps – geothermal and air source, and combined heat and power. The TRM specifies that savings can be shared between participating gas and electric utilities. For heat pumps, for instance, the gas utility gets credit for switching a customer to a baseline heat pump, and the electric utility gets credit for incentivizing a customer to get to a high efficiency unit. In Maine, fuel switching measures get some funding support from the regional cap-and-trade program. The state, like many in the Northeast, is focused on opportunities to reduce fuel oil use in home heating. This incentive operates through the state’s 3rd party efficiency program: Efficiency Maine. California has an approved protocol for allowing fuel switching measures called the 3-prong test. Measures are allowed when 1) source Btu consumption does not increase, 2) cost-effectiveness tests are passed, and 3) there aren’t adverse effects to the environment. While this sounds like a straightforward formula, the California PUC recently agreed to review the tests because advocates in the state argued that the test is serving as a roadblock to implementation of fuel switching measures because stakeholders lack clarity around how to pass the tests and meet the required burden of proof.
Vermont> Energy Transformation included in RES
Massachusetts> New language in statute as of summer 2018
New York> REV emphasis on renewable heat
British Columbia> Allow state-owned utility to pursue electrification
Electrification PolicyHow other states are addressing
The Electrified Frontier
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On the electrification policy side, the Northeast is again a strong leader in policy development. Vermont created a path for compliance in its renewable energy standard for energy transformation projects – or projects that “reduce customer fossil fuel consumption and save money”. In massachusetts, just this summer, new legislation was passed that added “load management programs” to the existing “efficiency programs” that utilities are expected to offer. Strategic electrification is specifically identified as an element of those load management plans. Since the legislation is relatively new, it still remains to be seen exactly how the change will work its way into utility programs. New York’s Reforming the Energy Vision effort has been an industry leader on a number of fronts, and electrification is one of them via their renewable heating initiatives. There is quite a lot of activity there. Also of interest in New York, a few utilities have had Earning Adjustment Mechanisms approved by the Public Service Commission to reward them for Environmentally Beneficial Electrification. The paper goes into a bit more detail on both those and offers some reference. British Columbia is a Canadian province worth watching, they have passed legislation enabling the state-owned utility, BC Hydro, to promote electrification. BC Hydro is piloting some efforts. This is particularly interesting because natural gas is produced in British Columbia and is a very low cost resource in that region.
Sacramento Municipal Utility District> Large rebates of home electrification
Tennessee Valley Authority> Offering only electrification programs
Action Without Specific Policy Direction
The Electrified Frontier
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Some utilities have taken action without policy direction. I’ve listed two examples, but I know there are more: Sacramento Municipal Utility District (SMUD) is providing large rebates to incentivize customers to convert to heat pumps in their homes. And Tennessee Valley Authority has converted all their energy efficiency programs to electrification programs.
Technologies
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Let’s move on to a brief overview of some key technologies that could offer benefits if electrified.
Components
Primer includes: Description Metrics Other notes Gap analysis
Analysis includes: Site efficiency Source energy consumption Annual emissions First cost and operating cost Impact on coincident peak
Technology Review
The Electrified Frontier
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I’d refer you to the final white paper as an excellent primer on these various technologies. For each technology we provide background information, some performance metrics, and additional resources. And while we conducted a careful analysis on each technology, this is an appetizer, not the entrée. This report isn’t intended to be the final word on the benefits of a given technology or to decisively pick winners and losers among the technology pool. More analysis will be needed.
In the weeds…
The Electrified Frontier
Source Energy Emissions
Used DOE EERE “captured energy” approach
Gives renewables a heat rate of 3412 Btus to 1 kWh
Used average annual emissions for Minnesota
Marginal emissions would improve the analysis
Of keen interest to stakeholders
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Specifically, I’d like to preempt some questions I expect might come by highlighting two aspects of the way we analyzed these technologies. First on source energy – we used the Department of Energy’s “Captured Energy” methodology for calculating source energy consumption. For a fossil fuel burning power plant, source energy consumption, expressed as a “heat rate” for the power plant includes all the energy in the fuel that was consumed in the process to make electricity. For renewable energy, the captured energy approach sets that heat rate factor at the conversation value of Btus to kWh. While renewables are not 100% efficient at capturing the sun that shines on their panels or wind that passes by their blades, this methodology accounts for the fact that the sun would shine and the wind would blow regardless of whether there was a panel or turbine there to collect that energy. This means that as a grid gets more renewable the overall source energy use for electricity will decrease. My second caveat: Emissions are tricky to calculate. The easy straightforward approach that we took was to use the average emissions for the entire state. This makes the math easy, but does a poor job reflecting the variation in each utility’s generation mix, and the variation of the generation mix at different times of day and times of year in Minnesota. A more accurate approach would be to use a marginal emissions analysis. A marginal emissions analysis accounts for the incremental generation asset required to run because of an incremental new load added to the grid. The challenge is that to do this right, you really need to model both loads and generation on an hourly basis. We didn’t have the ability to do that in the scope of this paper, and one comment from stakeholders was that small utilities don’t necessarily have the ability to do this either. But suffice it to say, this topic is of keen interest to stakeholders because how you calculate the emissions impact could make or break a measure given Minnesota’s current generation mix.
Home Heating with Heat Pumps
Air and ground source Ductless and ducted Need to consider back-up
heating source See MN CEE’s Cold
Climate Air Source Heat Pump field assessment
The Electrified Frontier
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Heat pumps use a vapor compression system (just like an air conditioner or refrigerator) to transfer heat from a heat sink either into or out of a home in order to heat or cool the building. The heat sink can either be the ground (a ground-source or geothermal heat pump), water (water-source heat pumps), or the ambient air (air-source heat pumps). Inside the home the hot or cold air can either be distributed through ductwork, like a forced air furnace or can be directed distributed into the rooms with a header unit mounted on a wall, this is often call a mini-split or ductless heat pump. Recent technology advances have allowed specialty cold-climate air-source heat pumps to provide heat down to an ambient out-door temperature of -15 degrees. After that point an air source heat pump would require a back-up heating source, either an electric resistance furnace or a natural gas or propone furnace. Geothermal systems, since their heat sink is under the ground where temperature is more constant, do not require a backup heat source. Most of all, if this technology interests you, go read the Center for Energy and Environment’s Cold Climate Air Source Heat Pump field assessment study that was funded by CARD.
Air-source heat pump (natural gas backup heat, 80% AFUE)
2.3 (COP)7.7 (HSPF)
$900 88 MMBtu 11,900 lbsCO2
$3,700 -$4,600
5 kW
Ground-source heat pump
3.7 (COP) $400 43 MMBtu 6,100 lbsCO2
$9,800 -$12,000
2 kW
The Electrified Frontier
“”
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In this chart, we’ve shown a few of our numbers from our analysis of heat pumps. I’m not going to walk through each of these, nor will I be showing this level of detail for every technology. The point I want to make here is that nuance matters in the conversation about which technology can deliver the most benefits for Minnesotans. As you’ll see here, one technology stands out as having the lowest annual heating costs, the lowest source energy consumption, and the lowest carbon emissions. That is the Geothermal heat pump. They also have the highest first cost at 2 to 3 times more expensive than some of their competitor technologies. Likewise because propane is more expensive and slightly more carbon intensive than natural gas, there is an opportunity there too. For a Minnesotan who has a propane furnace, especially an inefficient unit, they could reduce their annual costs and carbon emissions by replacing their propane furnace with an Air Source Heat Pump, with either a propane or natural gas furnace as a back-up heat source.
Heat Pump Water Heaters
Very efficient water heater in terms of site energy consumption
Well established technology Natural gas condensing water
heater is a strong competitor Controls could mitigate peak
Heat Pump Water Heaters use a vapor compression system to extract heat from the air and transfer it into water. They are very efficient pieces of equipment, from a site energy perspective, converting more than 200% of the energy they consume into heat in water. Heat pumps water heaters are a well-developed technology and an especially excellent option for replacing an existing electric resistance water heater. However, in our analysis, heat pump water heaters, on the average MN grid, were not cheaper, more efficiency, or lower emitting than natural gas or propane water heaters. The cost and carbon components of the analysis would change if the heat pump water heater were controlled to charge only when renewable and low-cost energy was available.
Electric Lift Trucks
Long history of electrification
Reduction of operating cost, emissions (including indoor emissions)
20-30% higher first cost
The Electrified Frontier
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These are poster-child of electrification, so I’m not going to spend much time on them. Electric Lift Trucks continue to be a great example of a technology that can reduce emissions and operating costs through electrification – regardless of the grid mix. Especially for indoor applications, they improve indoor air quality and occupant health. The consensus seems to be that there is a slight premium in the first cost of electric lift trucks. But, some of the data on costs is getting a bit long in the tooth. It might be that with battery prices declining, so too has the cost gap between propane/diesel and electric fork-lifts.
Refrigerated trailers use diesel-powered cooling units to keep goods cold during transport. There are now products that provide either a hybrid diesel-powered unit which can be plugged in while parked, or an electric-first unit that runs only on electricity, and while the truck is driving a diesel-powered generator delivers that electricity. In either case, there is significant cost savings to running the refrigeration unit off of electricity. And electric units reduce emissions, both carbon dioxide but also particulate emissions from burning diesel while parked. Electric units cost about 10% more than standard units to purchase. One consideration, from the infrastructure perspective, is that trucks require “shore power” when they docked for loading or parked for the night. So in some cases truck stops and rest stations might need to add access to electricity.
Industrial Electrification
Large variety of industrial applications> Especially process heat
There are a large variety of industrial applications – especially for process heat. However the key with industrial applications is that no one solution will work for every plant. In fact, the motivation to switch to an electric application might be motivated by benefits beyond cost or carbon savings. Key benefits an industrial facility might realize through electrification include reduced production time, reduced waste, better control/precision, more responsive and localized heating, faster dry times, etc.
Finally, electric vehicles. Every stakeholder was watching the growth of electric vehicles, which has been rapid. According to a Frontier Group report, EV sales have increased more than 30% every year since 2015. We see many major car manufacturers planning new models. And costs continue to decline, led by declines in battery costs. With our current grid electric vehicles reduce carbon emissions, but customer barriers like range anxiety, higher first costs, and charging infrastructure are still issues that the industry is working to address.
Stakeholder Interviews
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We’re going to move into the final part of the webinar and review results from the stakeholder interviews.
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Interview Participants28
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There were 28 unique interview participants representing 24 different organizations.
Participant Organizations
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ACEEECenter for Energy and EnvironmentCenterPoint EnergyConnexus EnergyEPRI (Electric Power Research Institute)Fresh EnergyFuels InstituteGeothermal ExchangeGreat Plains InstituteGreat River EnergyGTI (Gas Technology Institute)McKnight Foundation
Minnesota Chamber of CommerceMinnesota Citizen's Utility BoardMinnesota Environmental Quality BoardMinnesota Municipal Utilities AssociationMinnesota Public Utilities CommissionMissouri River Energy ServicesNational Rural Electric Cooperative AssociationOtter Tail Power CompanyRegulatory Assistance ProjectRochester Public UtilitiesSouthern Minnesota Municipal Power AgencyXcel Energy
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Participant organizations included a wide variety of local utilities, NGOs, government, trade associations, and researchers. Some participants represented a national constituency or were national electrification experts. Of the utilities interviewed both gas, combination, and electric utilities participated, and included different business models – investor owned, municipal and cooperative. It is worth noting that this isn’t a statistically representative sample – so in the stakeholder response we’d done our best to represent all perspectives, but numerical results should be taken with that caveat. This is not a comprehensive list of all stakeholders, in fact 32 stakeholder organizations were invited to participate. Future engagement efforts will continue to expand the number of people involved.
1 2
Interview Goals:
Information Gathering
Input on Process and Policy
The Electrified Frontier
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The interview questions had two goals: One – to gather information about electrification and fuel switching from the interviewees, specifically about technologies, policies, and other stakeholders to include. The second goal was to gather the stakeholders input and ideas on how to approach this topic from both a policy and process perspective.
Utility
AgencyUtility
AdvocateAssociation
Cross-Cutting CleavagesStakeholder groups demonstrated
The Electrified Frontier
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On conclusion from working on this: the areas of consensus on this topic are greater than the areas of disagreement. The cleavages between stakeholders were generally cross-cutting and not reinforcing, meaning that, for instance, not all electric utilities held the same opinions. Generally, stakeholders expressed a lot of nuance in their answers, which indicates open-mindedness to other positions on the topic.
Consensus
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Let’s start by discussion some areas of consensus that emerged.
Broad agreement: Electrification could reduce carbon emissions
> Especially for transportation> But not in all cases, at least not at
this point in time
Benefits: Carbon Reduction
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First, it might go without saying, but there was consensus across almost all participants that electrification could result in carbon emission reductions. This was especially agreed-up for the transportation sector. For some other sectors, like home heating, stakeholders recommended looking at a case by case basis, because as I just showed in our technical analysis, nuance matters. Some stakeholder did point out that as the electric grid continues to decarbonize, so too will the end-uses that consume electricity. They recommend the carbon reduction analysis should extend over the life of the equipment, not just the first year it’s installed.
Stakeholder quote:
One of my big worries through a lot of this process is that people are taking a paint roller
to what really needs to be a pretty fine brushed sort of picture.”
The Electrified Frontier
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Getting the policy right was a common concern among stakeholders. Here one person expressed it, like this “One of my big worries though a lot of this process is that people are taking a paint roller to what really needs to be a pretty fine brushed sort of picture.”
An Important Topic
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24 out of 28 respondents
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24 out of 28 respondents said that the topic was important or very important for regulators to consider. People shared that this topic is trendy, electric utilities are pushing for it and therefor regulators need to know their positions. The few that didn’t express that same level of priority shared that if regulators were pushing for carbon reductions, then it was probably important, but that consumers themselves aren’t pushing for electrification in a way that necessitates regulatory intervention.
Transparency Clearly defined goals Understand costs and who pays Determine metrics
A Route to an Equitable Process
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Stakeholder identified some key pieces to in a decision making process that would help all participants feel like their voice was heard and that they could accept the outcomes. Those were transparency, clearly defined objectives for the process, a clear understanding of costs, and a stakeholder inclusive process to determine the appropriate metrics.
Status Quo Needs to Change
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19 out of 28 respondents
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19 of 28 respondents were not concerned at all about changing the status quo prohibition on fuel switching. In fact many of those 19 respondents strongly felt that the prohibition of fuel switching was a barrier to efficiency, carbon-reductions, and restricted customer access to efficient technology. Some respondents were more cautious in their response, they identified some of the past justifications for the prohibition and wanted to make sure that future actions maintained the commitment to cost-effectiveness, customer protections, and real emissions reductions.
Stakeholder Quote #1:
“The reason those [fuel switching] provisions were put in place still exists. Electrification can
certainly be done for the benefit of the utility only, increasing sales.”
The Electrified Frontier
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Here’s one stakeholder’s comment “The reason those fuel switching provisions were put in place still exists. Electrification can certainly be done for the benefit of the utility only, increasing sales”
Treat All Fuels in a Unified Manner
Existing policy only applied to propane, fuel oil, and CIP-exempt natural gas
Consensus recommended no technical distinction
Some pragmatic justifications
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Stakeholders expressed that fuel switching needs to be fuel neutral. In fact this was an interesting place to find consensus, because I would have expected more distinction given that the current policy only applies to delivered fuels like propane and natural gas and CIP-exempt fuels. However, stakeholders broadly agreed that from a technical perspective, each fuel should be evaluated by the same methodology. A few stakeholders did suggest their might be pragmatic reasons for starting with delivered and CIP exempt fuels: 1) Political expediency; 2) Access to energy efficiency: start with customers who don’t currently have access to CIP’s benefits on their heating side. 3) Might want to avoid situation where regulators need to consider their responsibility to protect the ratepayers of a regulated fuel. For instance, if customers switch away from natural gas, what responsibility do regulators have to control costs for the remaining natural gas customers.
Stakeholder Quote #2:
“I think that we should be evaluating fuel switching on a list of criteria, not simply by
fuel.”
The Electrified Frontier
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Fuel-switching needs to be fuel neutral.
Electric Vehicle Enthusiasm
Advantages: Clear market demand Every stakeholder was
tracking EV opportunities Plenty of room for utility-
customer engagement
Opportunities: Not a clear fit within CIP Need for regulatory
guidance
The Electrified Frontier
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Electric vehicle enthusiasm among stakeholders was pretty high. Every stakeholder mentioned it as a technology they were watching or expecting to make an impact. Electric utilities in particular are very engaged in thinking about the opportunity to meet customer demand and leverage this opportunity. While enthusiasm was high, a majority of stakeholders expressed doubt about how it would fit within the current framework of energy efficiency programs in the state. Stakeholders also expressed a need for more clarity from regulators about how electric utilities will be allowed to participate in shaping and supporting the market adoption of EVs.
Disagreement
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Let’s move on to some areas of disagreement.
ChallengesDiversity of
The Electrified Frontier
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6
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3
Existing policy/regulation
Consumer information/ adoption barriers
Upfront customer cost
Infrastructure
Politics
Somebody's livelihood/ business at risk
Other
Status quo inertia
Challenges for Electrification
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When asked an open ended question about the challenges facing electrification or fuel switching efforts, stakeholders responded with a wide variety of responses. The number one challenge identified was the prohibition on fuel switching. The second and third most common challenges identified centered around customer adoption – either information barriers or cost barriers that customers were likely face that would limit the adoption of new electric technology. I heard from stakeholders that customers have to want to choose electric products in order for electrification to catch on.
Policy Outcomes> Modest adjustments> Drastic changes> Maintain commitment to efficiency
Consumer and Market Outcomes> Protect consumers> Be cost-effective> Enable market expansion
Desired Outcomes for Regulation
The Electrified Frontier
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Desired outcomes for regulation came in two main groups – policy outcomes and consumer/market outcomes. On the policy side responses varied from those who wanted modest tweaks to major overhauls of CIP, to those who wanted to be sure the state maintained its commitment to energy efficiency through the process. On the consumer side some stakeholders mentioned wanting to protect consumers’ interests in the process, to be sure the outcomes were cost-effective and affordable, and those who wanted to make sure utilities could be active in supporting this market expansion.
Stakeholder Quote #3:
“I hope we get to, not to a point where [electrification] is required, but allowed.”
The Electrified Frontier
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Presentation Notes
One utility stakeholder expressed “I hope we get to, not a point where Electrification is required, but allowed.”
Address cost-benefit testing methodology
Program and project level Cost effectiveness matters to
stakeholders> Businesses> Consumers
Cost-Effectiveness
The Electrified Frontier
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Cost effectiveness was a persistent theme among those with more cautious voices. First and foremost it was recognized by many people that work will need to be done to figure out cost-benefit testing for electrification and fuel switching both from a program design level and from a project approval level. Voices representing businesses and consumers raised concerned about making sure energy costs stay low and that non-participating ratepayers get value out of electrification, as they do from energy efficiency programs.
Within CIP or Outside of CIP
Does electrification belong in CIP?
Within CIP Separate It's complicated
The Electrified Frontier
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In the category of “truly no-consensus”, was the question of whether electrification belongs within CIP. About a third of people suggested it did, saying that CIP is an effective model, and it’s the best thing we have in the state to quickly accommodate our goals for electrification. About a third said it should not be part of CIP at all, than it would jeopardize efficiency programs, and if carbon reductions were important they needed their own framework – perhaps modeled on CIP but separate. And about a third of participants felt both ways – they could see a few specific measures being included in CIP, but also thought a separate program might be needed.
Stakeholder Quote #4:
“If electrification is simply lumped into CIP, I think there's a real risk of a zero-sum game
adversely affecting energy efficiency.”
The Electrified Frontier
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Presentation Notes
And to that end, some stakeholders warned that given limited resources to apply to programs, utilities would probably prioritize the one that grew their load, if they were allowed to. The respondent says “If electrification is simply lumped into CIP, I think there is a real risk of a zero-sum game adversely affecting energy efficiency.”
Ideas for discussion and further engagement
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So, the conversation continues. Here are a few themes that were recognized as topics for further engagement
Relationship with CIP
Policy direction Effect on goals Utility
compensation
Goal of CIP
EE as a resource, time
and place specific value
Costs and Benefits
Methodology
Carbon emissions, marginal emissions
Equitability
Value to non-participants,
regulators responsibility to customers
Accessibility, price concerns
for business and
consumers
Stakeholder Engagement Needed
The Electrified Frontier
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First there is work to be done on how these efforts relate to CIP. Obviously there is some policy direction on the table, but interesting questions remain around how electrification might impact CIP goals, especially since CIP goals are pegged to a % of sales, and how utilities would be compensated. Utilities in Minnesota receive incentives for meeting their efficiency goals, in large part because there is not a natural business incentive for utilities to reduce sales… that is not true for electrification. Secondly, and part of a much broader conversation, the goal of CIP was identified as something we need to better understand, specifically as we continue to grow into an understanding of the time and place specific value of energy and energy efficiency. Cost and benefits are a reoccurring theme of this presentation – so work is needed on figuring out the right methodology, but also in particular carbon emissions calculations and figuring out the right mix of rigor and accessibility for emissions data. Finally, equity is an important component. What is the value and costs of electrification to non-participants, how do you create accessible programs, and how do we address price concerns for businesses and consumers.
The Beginning.The End.
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We can continue the conversation because as I say, this is the end of the presentation, but just the beginning of quite a lot of work in Minnesota.
Send us your questions usingWebEx Q&A Box
Questions?The Electrified Frontier: Sharing Results from Stakeholder Interviews
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Anthony FryerConservation Improvement Program (CIP) Coordinator
Thanks Carl. If you have not already done so, please send us your questions via the Q&A box in your WebEx panel. Now, I’m going to turn it back over to Anthony who has been monitoring the questions as they’ve come in. Anthony, do you have any questions from the audience? Thanks, Anthony. If you have follow-up questions about this research, feel free to contact Anthony or Carl.
For Webinars use CARD Webinars & Videos Quick Link
For Other research documents use CARD Fact Sheets, Guidelines & Tools Quick Link
R&D Web Page (https://mn.gov/commerce/industries/energy/utilities/cip/applied-research-development/)
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Presentation Notes
The recording of this webinar and the final report will be available on the Department’s Applied Research and Development web page at a later date. When available, you can link to them from either the “Webinar” quick link or the “CARD Search” quick link as indicated on this slide. This R&D web page has additional resources and information related to the CARD program and to CARD research projects which you can check out. The address is at the bottom of this slide.
Upcoming CARD Webinar:• Dec 12: Examining Potential for Prepay as an Energy Efficiency Program• Dec 17: Center for Energy and Environment (CEE) – MN DSM Potential Study
Commerce Division of Energy Resources e-mail list sign-up
If you have questions or feedback on the CARD program contact:Mary Sue Lobenstein
Thanks for participating today! We appreciate your interest in the results of CARD projects. Before we leave, I want to take this opportunity to mention a couple of upcoming CARD webinars: On Dec 12 – the American Council for an Energy Efficient Economy and Seventhwave will share their findings from an exploration of prepaid electric plans including potential benefits and drawbacks for utilities and customers. On Dec 17 – the Center for Energy and Environment will present the results from the Minnesota Demand-Side Management Potential Study which they conducted. Announcements about upcoming webinars and other news related to the Minnesota Conservation Improvement Program can be found in the CIP Newsletter. You can use the link on this slide to sign up for the Newsletter. In the meantime, contact me if you want more information on these upcoming webinars or if you have questions, feedback or suggestions for the CARD program or CARD webinars. Thanks, again!
