Are LED-Only Retail Lighting Programs Cost Effective?

March 19, 2014

Presenter: Scott Heinz, Manager, Retail Promotions with Ecova

Introduction

Are LED Programs cost effective? LED Total Resource Cost (TRC) sensitivity analysis

When will LEDs be as cost effective as CFLs? Comparing LED & CFL trends

Agenda

Defining Cost Effectiveness

Total Resource Cost (TRC) is the most widely used cost effectiveness test by utilities

Approach

Dissect the TRC to Learn:

Sensitivity of TRC variables

Trends impacting TRC

Projections for LED and CFL cost effectiveness

TRC Breakdown

The TRC variables represent:

Market conditions

Regulatory environment

Utility financials

NPVΣBenefits

NPVΣCosts

TRC =

NPV (Savings * Avoided Cost) * Units*NTG

Admin Cost + Units*IMC*NTG + Units*Incentives(1-NTG)TRC =

Power Usage Unit Conversion

Savings = Δwatts * HOU*Days/Year*ISR * (W to kW Conversion)

TRC Breakdown

> 1 is cost effective

LED TRC Variables

Range of LED values

Low High StandardLED NTG 0.8 1.1 0.95Discount rate 10% 6% 8%Avoided Cost 0.05$ 0.12$ 0.08$ LED Admin Cost/ Unit 8.00$ 4.00$ 6.00$ Hou LED 1.9 3.25 3LED incentive 10.00$ 3.00$ 6.00$ ISR 0.8 1 0.95IMC 20.00$ 8.00$ 12.00$ Delta Watts 15 48 32

LED TRC Price Sensitivity

TRC Values of 1.4 = Cost Effective

Most sensitive variables are Delta Watts, Avoided Cost and IMC

Are Led-Only Utility Programs Cost Effective?

YES! Base case passes the TRC at 1.4

Incremental Measure Cost is a key variable to monitor

Sophisticated analysis and data-driven program design and management are essential to effective utility programs

Next Steps:

Compare your utility TRC values to the tornado chart to see if LEDs are cost effective for you

When Will LED Programs’ Cost Effectiveness Surpass CFLs?

CFL TRC Values are Dropping

Free Ridership

Savings

LED TRC Values are Increasing

Incremental Measure Cost

Economies of Scale

CFL TRC Variables

Low High StandardCFL NTG 0.35 1.1 0.55Discount rate 10% 6% 8%Avoided Cost 0.05$ 0.12$ 0.08$ CFL Admin Cost/ Unit 1.00$ 0.50$ 0.75$ Hou LED 1.9 3 2.5CFL incentive 1.50$ 0.50$ 1.20$ ISR 0.7 1 0.85IMC 3.00$ 1.00$ 2.00$ Delta Watts 15 46 29

Range of CFL values

CFL TRC Price Sensitivity

TRC Value of 2.2 = Cost Effective

Most sensitive variables are Delta Watts, Net to Gross (NTG), Avoided Cost

LEDs surpass current CFL cost

effectiveness

TRC Trend

Assumes

10% decrease in CFL NTG

15% decrease in LED IMC

2013 2014 2015 2016 2017 2018 2019 -

0.50

1.00

1.50

2.00

2.50

LED V CFL TRC ModelIsolating CFL NTG and LED IMC

LED TRC

CFL TRC

Current CFL

Current LED

TR

C V

alu

e

CFL drops below current LED cost

effectiveness

LED surpasses CFL cost

effectiveness

Summary

Cost-effectiveness of LEDs may surpass that of CFLs as early as 2015

LED–only programs are already cost effective for most utilities

Review your TRC values and recent trends to estimate when LEDs will surpass CFLs in cost effectiveness

Q & ATo learn more about how Ecova can help you design and implement retail energy efficiency programs please contact Scott Heinz at sheinz@ecova.com

Thank You!