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Benefit/Cost Analysis for Energy Efficiency Programs . July 11, 2008 Presentation to VEPGA By Richard Spellman GDS Associates. Topics To Be Discussed. Benefit/Cost Tests for energy efficiency projects Data Sources Avoided Costs Overview Questions and Answers. Benefit/Cost Tests.

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benefit cost analysis for energy efficiency programs

Benefit/Cost Analysis for Energy Efficiency Programs

July 11, 2008

Presentation to VEPGA

By Richard Spellman

GDS Associates

topics to be discussed
Topics To Be Discussed
  • Benefit/Cost Tests for energy efficiency projects
  • Data Sources
  • Avoided Costs Overview
  • Questions and Answers
benefit cost tests
Benefit/Cost Tests
  • Participant Test
  • Utility Test
  • Total Resource Cost Test (TRC)
  • Rate Impact Measure Test (RIM)
  • Societal Test
  • Electric System Test
  • All Ratepayers Test
general assumptions for benefit cost analysis
Period of analysis

Start year of analysis

End year of analysis

Inflation forecast

Avoided Costs of Electricity, Natural Gas, etc.

Retail Rates

Discount rate

Non energy benefits

General Assumptions for Benefit/Cost Analysis
program or measure specific data needed
Program or Measure Specific Data Needed
  • Description of energy efficiency measures included in each project or program
  • Measure energy savings
  • Measure costs
  • Measure life assumptions
key information sources
Key Information Sources
  • Electric and gas utilities
  • Federal government agencies (DOE, EPA, NREL)
  • Energy Star web site
  • State government agencies (NYSERDA, Wisconsin Focus on Energy, etc.)
  • Equipment manufacturers and distributors
  • National Labs (ORNL, PNL, LBL, etc.)
  • National non profit organizations
    • ACEEE, CEE, Alliance to Save Energy, GAMA, GTRI
valuing energy savings
Valuing Energy Savings
  • Avoided Costs – these are costs avoided on an electric or gas supply system due to the adoption of energy efficiency measures –generally used for TRC Test, Utility Test and Societal Test
  • Retail rates – retail rates are used in the benefit/cost analysis when the Participant test is being calculated
cfl example
CFL Example
  • The cost of a CFL is $1.65 at Walmart
  • A CFL bulb will last 7.5 years if used 1,000 hours a year
  • Electricity savings are 50 kWh a year
  • At $.08 per kWh for avoided costs (busbar cost), savings to the electric utility are $4.00 per year, or $30 over the life of the bulb
  • At $.10 per kWh for retail rates, savings to the participant are $5.00 per year, plus participant avoids purchases of 10 incandescent bulbs
summary b c analysis
Summary – B/C Analysis
  • Are benefits greater than costs?
  • Need to consider costs and benefits over the life of the equipment – not just the “first” cost
  • Several B/C models exist
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