Measuring and Evaluating Energy Efficiency

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?
Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Virginia’s investor-owned gas and electric utilities administer 38 programs between them that are designed to increase energy efficiency or shift consumption away from periods of peak demand. The question periodically arises: Are these programs worthwhile? Do they save rate payers money?

Those are questions that most Virginians can readily understand. But getting answers isn’t so easy.

The answers depend on how one goes about evaluating, measuring and verifying the programs (a set of issues referred to in the biz as EM&V). How does one calculate the “Levelized Cost of Saved Energy” (the present value per kilowatt-hour of an energy-efficiency program over its economic life)? How does one construct the Total Resource Cost Test (an indicator of total program costs, including those of ratepayers and utilities)? What is the methodology behind the Ratepayer Impact Measure Test (known as the RIM test, which ascertains the impact of energy-efficiency measures on gas and electric rates)?

For the layman, these arcane issues “surpasseth all understanding,” to borrow a phrase from Philippians. But Virginians can take some comfort in the fact that the SCC is on top of the job. Earlier this year, the commission held a hearing attended by 20 interested persons and entities (whose comments were supplemented by 23 written submissions) to discuss how the energy-efficiency programs should be evaluated.

After deliberating on these matters of great complexity and subtlety, the SCC issued a report today finding that the system can be fine-tuned. Accordingly the commission has directed its staff to draft proposed rules to be considered in a future proceeding.

Wrote the commissioners:

The goal of the proposed Rules is to achieve, to the extent, possible, reliable and consistent estimation of energy savings and related impacts at a reasonable and appropriate cost; to provide guidance to utilities in planning and offering energy efficiency programs, and to provide a transparent basis for assessing cost-effectiveness of proposed programs.

One issue I found interesting (mainly because I found it comprehensible, unlike much of the report) is how to estimate kilowatt-hours of electricity saved. Most approaches rely upon Technical Resource Manuals (TRMs) that provide “deemed values,” or industry assumptions derived from professional judgment and engineering calculations — not from direct measurement. The problem is that industry averages may not apply to Virginia. Opines the SCC: “These estimates can introduce considerable inaccuracy into estimates of  energy savings.”

Therefore, the commission declared that estimates of kilowatt or kilowatt-hour savings “should be, where possible, based upon Virginia-specific data so as to reflect as closely as possible the actual savings achieved.”

The hoped-for benefit: If your utility offers an air duct-testing program, an appliance-recycling program, or rebates on Wi-Fi programmable thermostats, the SCC has thoroughly vetted them as cost-effective.

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9 responses to “Measuring and Evaluating Energy Efficiency”

  1. Dear BR: the very opacity you make light of is exactly what the SCC was created to make transparent, and consumer friendly. That’s a tall order for a business so filled with jargon and acronyms that it’s laughably impenetrable. But consumers are leaving a lot of money on the table, here. Energy efficiency and participation in a load management program can save a tidy percentage of your monthly electric bill!

    The fact is, most consumers still won’t pay attention. The SCC might hope that third party entrepreneurs and consumer groups will help spread the word, that commercial customers with energy managers will listen, that the utilities themselves will tout the SCC’s endorsement in their publicity — but it’s too complicated, too boring, too little immediate payback, for most ratepayers.

    Utilities have pondered this for years. Should they be more interventionist, actually knock on doors and offer to spend ratepayer funds on “behind-the-meter” home improvements in order to reduce their own sales? It’s not as crazy as it sounds; there are circumstances when everyone including the utility would benefit; but within most utilities there’s a strong cultural resistance to “interfering” with what consumers do with the electricity they buy. Think of it as a libertarian bias.

    I don’t expect the SCC’s new rules will change any of this. But they might help. Kudos to the SCC for doing what few State regulators have done to reach out and try to give consumers better tools to help themselves..

    1. Acbar, you’re right. Energy efficiency makes great sense in the abstract. But the dollars saved are relatively trivial, and most people don’t think it’s worth the hassle. They have other ways they’d rather spend their money and time.

      I’ve begun replacing old light bulbs with LED bulbs. The LEDs cost six or seven times as much, but I’m hoping there will be a payback in the form of less electricity consumption and fewer of the old, crappy light bulbs purchased. Another advantage: The longer the light bulbs, the less frequently I have to change them!

      This energy saving shift is easy to implement because purchasing and changing light bulbs is something I do in the normal course of things. On the other hand, I’ve got weather stripping stuck in my closet that I haven’t gotten around to installing for two or three years now.

      The human tendency to sloth and procrastination are hard to overcome.

  2. LarrytheG Avatar

    Well.. I have to ask – why should the SCC be involved in this any more or less than they are involved – say in fuel efficient cars and at the same time point out the real IRE of the public these days with regard to other govt regulation that specifies energy and conservation standards for things like light bulbs to water restriction devices on faucets and showers…

    but why does the SCC think it needs to be involved in these areas where consumers can decide what things can save them money on energy ?

    I actually do not want the SCC involved in that area at all.. unless Acbar or others can point out the error of my thinking on that.

    I don’t think the SCC should be involved in ANYTHING that involves “value proposition” because they are the same agency that actually works to undermine value proposition on things like Solar… I’d rather not have them involved in it at all given the way they make it harder for people to manage demand.

    1. I don’t agree the SCC “works to undermine value proposition on things like solar.” They may reach different conclusions, but “works to undermine” is a harsh judgment. As for “the way they make it harder to manage demand,” I don’t know what you are referring to. Anyway, I can’t conclude those disqualify the SCC from expressing an opinion on the value of energy efficiency measures.

  3. The SCC must be involved if the utility is spending ratepayer’s money on the program. Up to now, the SCC did not have too positive a view of energy efficiency. They thought all ratepayers would pay but only some would benefit from the programs. Now they are beginning to understand that lowering the peak is good for all ratepayers (but not so much for Dominion).

    Utility programs not always well executed. They often take an engineer’s approach to public interaction and communicate in ways that are not easy for the public to understand. This gives rise to perceptions such as Jim’s “But the dollars saved are relatively trivial, and most people don’t think it’s worth the hassle.”

    Energy efficiency is currently a major contributor to our nation’s generating capacity. In 2015, contributing 18% of the generation in the U.S., larger than nuclear power (16%) according to ACEEE.

    There is a great deal of low cost (2-3 cents/kWh) energy efficiency to be developed, especially in the commercial and public sector (office buildings, universities, hospitals, gov’t buildings, etc). But this would best be handled by private energy service companies (ESCOs) not utilities. The SCC and the GA should either promote these activities because they lower the cost for everyone, or at least not obstruct them because they lower Dominion’s revenues.

  4. LarrytheG Avatar

    re: “not obstruct”

    that’s how I perceive the SCC these days when it comes to electricity and energy conservation.

    I do NOT think the SCC should be deciding what is reasonable and feasible for the utilities to be doing – as long as those activities are self-supporting and not subsidized by ratepayers. You want the utilities to have that flexibility to try different pilot programs to see which ones might be successful – and to me that would include the modern-day equivalent of what we used to call “all-electric” homes.. this time for energy conservation.

    What we need is for a way for the utilities to expand their business and make a profit – by empowering people using LESS electricity rather than they be so controlled and restricted that the only option they have is to – sell more electricity.

    we’re screwed up and how the SCC is regulating is a big part of it in my view.

    If there ever was a case for getting the govt out of regulation – this might be a candidate.

    Don’t get me wrong – they STILL need to do their duties relative to the monopoly – but the world has changed an the SCC is regulating on an obsolete economic model that basically presumes that the utility should be restricted to making and selling more and more electricity- and that’s a fail in the 21st century – and it motivates actions by Dominion – to try to squeeze their profits out of selling more electricity rather than making money on the conservation of electricity.

    1. Larry, without SCC involvement, electric utilities have little incentive to promote energy conservation. Why would they spend their own money to reduce demand for their product and reduce their revenue? (Note: Energy Efficiency is not the same as Demand Side Management, the purpose of which is to reduce peak electric loads.) To encourage socially beneficial behavior, the SCC needs to grant Dominion, Apco or whomever a rate rider that will compensate them for lost revenue. If you want more energy efficiency, there is no alternative to having the SCC involved.

      1. LarrytheG Avatar

        Jim – people are going to pursue money saving energy conservation with or without Dominion.

        What the SCC is doing is making it harder for Dominion to pursue that consumer-driven conservation as a profitable part of it’s business model.

        it’s not about “socially beneficial” behavior – it’s about evolving technology that consumers will use if they can – to save money …

        I don’t think we want to “compensate” with rate riders – essentially subsidies soften the advent of energy-saving technologies, we want to get out of their way and let Dominion pursue profitable business opportunities associated with saving money by using less electricity.

        Right now – we’ve got a lose-lose environment for Dominion and others – and we should not be “compensating” them for a failing 20th century business model .. but rather letting them find a path to a sustainable 21st century business model …

        The ACP pipeline and the two gas plants are tortured efforts to hang on to a SCC-favored 20th century business model – that is likely going to be steamrolled by solar and other consumer-side conservation technology.

  5. A while back, the General Assembly passed a law that allowed Dominion to recover all costs and a rate of return (even if no money was invested) on all energy efficiency programs they conduct. They also allowed them to recover any lost revenues, but I do not believe the SCC has granted any “lost revenues” yet that are related to efficiency programs. Larry has it right, we need to change the rules to allow our utilities to prosper by serving the interests of the ratepayers. The 20th-century model keeps encouraging them to build more, even when it is not necessary and that only increases rates.

    Other states are doing this. I hope the pain doesn’t have to get too severe in Virginia before we consider a better way.

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