Overview of California’s Policy &

Funding Resource Commitments to

Energy Efficiency

Reference material for October 12, 2012 Governor’s Office Energy Efficiency “Big Think” Forum

Comprehensive Policy Approach

• Clear Policy • “EE is #1 in resource loading order” • Linked to resource plans & procurement

• Firm Standards • Statewide EE building codes & and

appliance standards

• Adequate Utility Financial Motivators & Funding

• Decoupling sales from revenues• Performance-based incentives/penalties• Non-bypassable EE surcharge

• Rigorous Evaluation, Measurement, and Verification (EM&V)

California Energy Agency Roles

3

CPUC ROLE Establish direction for investor

owned utility (IOU) energy efficiency programs

Approve and monitor IOU’s implementation of the their efficiency programs

Independently evaluate IOU program energy savings  and establish shareholder incentives based upon program performance

CEC ROLE Regulate minimum standards

for building energy efficiency and work with local building departments to oversee enforcement

Regulate minimum energy efficiency standards for appliances sold in California

Implement a comprehensive program to reduce energy consumption in existing buildings

1 – 2% of electric bill

Annual Energy Savings from Efficiency Programs and Standards

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,0001

97

5

19

76

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00

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01

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02

20

03

GW

h/y

ear

Appliance Standards

Building Standards

Utility Efficiency Programs and Market

Transformation

~15% of Annual Electricity Use in California in 2003

Energy Savings Achieved both from Utility Efficiency Programs and CEC Standards

CPUC and CEC Coordination on EE Programs & Activities

• Codes & Standards (C&S)– C&S advocacy; Codes & Standards Enforcement (CASE) studies– Compliance Enhancement – Training, tools, outreach to building departments

• Emerging Technologies Program (ETP)– Commercialization focus; coordinate with PIER through Emerging Technologies Coordinating

Council (ETCC)

• AB 758 – Financing assessment underway in anticipation of coordinating with CEC on program design

• Energy Upgrade California (EUC)* – IOU-administered activities funded by ratepayers - $110M

• “Whole-house retrofit” incentives, marketing, training, quality assurance– CEC-administered activities funded by ARRA / SEP - $52M

• Marketing, website, financing support, training, (limited) local government incentives– Local government-administered activities funded by ARRA block grants / DOE “Better

Buildings” - $40M• (Limited) local government incentives, innovative marketing

• ARRA appliance rebates & IOU rebates

• Evaluation coordinating group (CEC / CPUC staff)– Lending CPUC expertise / resources to CEC’s limited ARRA evaluation budget– Ensuring no double-counting of savings

* Note: EUC is residential and commercial buildings retrofit program and brand. Initially, the program was focused mostly on single-family residential. $ figures are for residential sector only.

Slide 5

CEC Role on Energy Efficiency Policies and Regulations

Appliance Standards: Title 20 • Requires Minimum levels of energy efficiency for appliances

and equipment sold or offered for sale in California

• SB 454 authorized Energy Commission to levy fines for violations

Building Standards: Title 24 Part 6 • Standards for newly constructed buildings, additions and

alterations

• Title 24 enforced by local building departments

• Up to 90% of HVAC retrofits fail to pull permits

• SB 454 (Pavley, 2011) directed IOUs to not provide rebates unless permits are pulled

6

Additional Legislative Action on Energy Efficiency Policies and Regulations

Existing Buildings :

SB 1922 (Lewis, 1994): Home Energy Rating

System (HERS) Regulations AB 549 (Longville, 2001): Recommendations of

energy use disclosure regulations AB 1103 ( Saldana, 2007): Benchmarking and

disclosure of EE for commercial buildings AB 758 (Skinner, 2009): Comprehensive EE

program for existing buildings (see next slide for detail)

7

AB 758 (Skinner, 2009)

Calls for a comprehensive program to achieve energy savings in California’s existing buildings

CEC must develop and implement program, in collaboration with all stakeholders, particularly the CPUC. Proceeding open and underway 2012-2013.

Program Components: Energy Assessments Energy Use Disclosures Building Energy Use Ratings and Labels Financing Options Cost Effective Efficiency Improvements Public Outreach and Awareness Campaign Workforce Development

8

CA Building Efficiency Standards and Appliance Efficiency Standards saved more than $65 billion in electricity, natural gas costs since 1978

Energy Efficiency is a Resource

• Generation Benefits– Saves capacity and energy– Lowers fuel costs– Reduces required reserves

• Transmission and Distribution Benefits– Defers new investment– Improves reliability

• Resource Benefits – Promotes Integrated Resource Planning

• Environmental Benefits– Paves the way for sustainable growth– Reduces GHG emissions

Decouplingfor gas

Deregulated market begins

Utilities’ resume portfolio management; PGC takes effect

Electricity Crisis

Energy Action Plan makes EE top priority

IOU decoupling restored; CPUC sets aggressive 10-year targets

SB 1037 makes EE top priority and requires POU reporting

IOU administration restored; new incentive mechanism; AB 2021 requires POUs to set targets

California’s History of Energy Efficiency Action – Utility Program Perspective

Decouplingfor electric

Source: Natural Resources Defense Council (NRDC), as modified by Energy Division 4/25/2011

Aggressive California EE/GHG Goals

California Air Resources Board Scoping Plan EE Target (Nov, 2008): – 32,000 GWh and 800 MMTherms/year – 19.5 MMT CO2E in 2020– Utility programs, codes & standards, voluntary action – EE and solar water heating 15% of AB32 Plan– (Cap and trade target is 20% of Plan)

CPUC 2020 interim “Total Market Gross” EE goals (July, 2008): – 16,000 GWh and 620 MMTherms/year– Equal to nine or ten power plants avoided

CPUC EE Goals Through 2020

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Goals set for CPUC-regulated utilities from 2004 through 2020, in accordance with best available data on energy efficiency potential.

• Does not take into account potential within Publicly-Owned Utility Service Areas• Based primarily on existing technologies and rates of adoption

The AB 32 Challenge

14.313.3 13.3

9.6

5.8

3.4

1.4

427452

522

422

284

185

85

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1990 2000 2010 2020 2030 2040 2050

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issi

ons Per

Cap

ita

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Statew

ide E

mission

s

Emissions Per Capita Statewide Emissions

While California efforts in EE have contributed to stabilized per capita emission levels, California’s long-term goals will require dramatically redoubled efforts and success.

Challenges to California’s EE Programs

2010-2012 Funding Source

3 yr total= $3.1 Billion

ProcurementFunds

2.16

2.67

1.141.47 1.36

0

0.5

1

1.5

2

2.5

3

2002-2003 (Reported) *

2004-2005 (Reported)

2006-2008 (Evaluated)

2009 (Evaluated)

2010-2012 (Forecast)

IOU EE Portfolio Cost-effectiveness

Ben

efi

t /

Co

st (

TR

C)

Portfolio Cycle

Declining IOU Portfolio Cost Effectiveness over time

(excluding Low Income EE Programs)

PublicGoodsCharge*

* Replaced by utility procurement funds for 2012 due to sun-setting of PGC statutory authority

EE Potential by End Use (Illustrative)

Source – Itron 2008 Potential Study as exhibited in Southern California Edison Testimony, Application for Approval of Low Income Assistance Programs and Budgets for Program Years 2009-2011, pg. 32.

Long-Term Energy Efficiency Strategic Plan

In September 2008, Strategic Plan established a roadmap for energy efficiency through 2020 and beyond. Updated 2011. Features:

• A long term vision to achieve market transformation.

• Engaged wide-ranging stakeholders including builders and designers, operators & managers, manufacturers & distributors.

• Workforce development viewed as vital issue.

• Marketing, education and outreach effort recognized as critical to create demand for efficiency solutions.

Identifying Strategies to Fill in the “White Space”

IOU Programs

BBEES

Huffman Bill

Economic

0

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cu

mu

lati

ve G

Wh

Sav

ing

s

T24+Fed StandardsCurrent Goals

(gross equivalent)

Current Goals (net)

savings eligible to

be partially claimed by

IOUs

naturally-occurring

2010-2012 Investor-Owned Utility Planned Efficiency Resource Program Savings

Slide 19

2010-12 Investor-Owned Utility Energy Efficiency Budget by Program

• Local government partnerships ($233M); institutional partnerships ($95M) included

• Third-party programs + Local Government Partnerships ~ 1/3 of portfolio spending by non-utility entities

StatewidePrograms

[63%]

•Residential•Commercial•Industrial•Agricultural

•Heating, Ventilation, Air Conditioning•New Construction•Emerging Technologies•Codes & Standards

•Marketing, Education & Outreach•Workforce Education & Training•Integrated Demand-side Management•Lighting Market Transformation

PG&E (7)

SCE (4)

SDG&E (6)

SCG (5)

PG&E (50)

SCE (31)

SDG&E (14)

SCG (18)

PG&E (25)

SCE (30)

SDG&E (14)

SCG (17)

Composition of 2010-12 IOU Efficiency Programs Portfolio

[%] = Percent of total portfolio budget ($3.1 billion)(#) = Number of individual programs

Utility “Local” Programs[3%]

Third-Party Programs[20%]

State & Local Gov’t Programs

[10%]

Note: Evaluation, Measurement & Verification is 4% of total portfolio budget

Looking Ahead…Issues for EE

• Market Transformation– Need to distinguish market transformation (MT) from “resource

acquisition.” Consider statewide administration of MT approaches?

• Innovation– Many promising technologies. How to bring to market and scale-up

faster?– New business models for EE program deliverers. How support these to

flourish?

• Competition– Increase competition for highly effective programs to access ratepayer

funds in some way?– Utilize 3rd-party program solicitations to drive new program approaches

and scaling?

• Financing– California needs to find market-specific solutions for EE financing. CPUC

is guiding ratepayer $ involvement and support. – Need solutions that allow cost repayment by successor owners or tenants

(“transferability” or “tied to meter”. Solutions, structures, risk TBD.

Slide 22

EE Market-Place Challenges

• Market strategies need to extend beyond utility programs, leverage private resources, capture economic value

• Promote the business potential, capital investment opportunities • Mobilize bold action and create a "movement" for EE and other

demand-side actions, behavior, investment:– Achieve deeper action – 20%, 40 %, 70% efficiency gains            – Pull consumer and business demand; call on comparative benchmarks – Marketing to reflect understanding of market segments, motivations,...

• Expand knowledgeable and trained providers who can successfully sell and deliver results

• Innovate effective financing mechanisms – long amortization terms and transferable to successive owners/occupants (OBF, PACE, ...)