Counting the Capacity that Didn’t Hatch: The Rate Mitigation Effect of DSM Programs
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Transcript of Counting the Capacity that Didn’t Hatch: The Rate Mitigation Effect of DSM Programs
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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
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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
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A better understanding of the system
wide revenue benefits of DSM programs
Energy Efficiency as a BIG Resource means…
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Xcel Energy’s 20-year program history
Backward looking scenario analysis to compare
capacity options
Compare additional revenue requirements
Minnesota DSM Case Study
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The Resource Wedge
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Itemized Utility Bill
What if alternative power plant capacity was itemized?
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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
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+ 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
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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
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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
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$-
$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
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Capital Revenue Requirement Calculations
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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
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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%
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Scenario: Coal Plant Displacement
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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
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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
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Scenario: Avoided Transmission Lines
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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%
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Scenario: Average Measure Life
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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
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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%
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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
)
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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
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Thank you!
Jennifer Edwards
(612) 335-5873
White paper forthcoming:
www.mncee.org/Innovation-Exchange/Resource-
Center