Energy efficiency costeffectiveness CEC IEPR Workshop on 2030

Energy efficiency cost-effectiveness CEC IEPR Workshop on 2030 Efficiency Goals July 6, 2015 Snuller Price

Two Key EE Cost-effectiveness Frameworks in California CEC Title 24 for new construction • Time Dependent Valuation (TDV) determines what is ‘costeffective’ in the prescriptive package home, as well as the tradeoffs between measures. • Eg. if you want more window glazing, you have to add efficiency somewhere else in the building • In Warren-Alquist Act, requires code to be cost-effective, has been interpreted as a participant cost perspective CPUC Energy Efficiency program • Cost-effectiveness required to safeguard public money spent on energy efficiency programs and incentives (~$1 B/yr) • Evaluation is done on cost-effectiveness overall (TRC), and then on distribution tests as well (PCT, PAC, RIM) 2

The changing nature of EE cost effectiveness in a low-carbon future 1. Energy efficiency will still be about saving money • EE saves GHGs and $$ today, but there are diminishing returns to GHG savings over time (e. g. due to higher renewables and other decarbonized energy supplies) 2. Updates, not wholesale replacement, of costeffectiveness metrics are needed • To reflect best available information e. g. CEC TDVs could use measure-specific equipment lifetimes • To reflect a low-carbon electricity future 50% renewables by 2030, fully integrated, will impact energy and capacity needs • EE cost-effectiveness evaluation will remain useful to allocate limited $$ intelligently and to define code 3

The changing nature of EE cost effectiveness in a low-carbon future 3. Fuel-switching (natural gas electricity) can save GHGs, but breaks down under existing cost-effectiveness frameworks • CEC’s TDVs discourage fuel-switching even if measure achieves GHG savings because it doesn’t pass costeffectiveness screens • CPUC EE Policy Manual requires a benefit-cost ratio of 1. 0 or greater (for total resource cost test and participant cost test) • Framework for fuel-switching needs to be updated if these measures are to be part of the state’s GHG reduction strategy 4

Thank You! Snuller Price, Senior Partner snuller@ethree. com Energy and Environmental Economics, Inc. (E 3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Tel 415 -391 -5100 Web http: //www. ethree. com