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Key Elements of a Comprehensive DSM Programme

Key Elements of a Comprehensive DSM Programme. Presentation at Forum of Regulators Lawrence Berkeley Laboratory Team Mahesh Patankar, PhD, CMVP; Director – Market Innovations (Asia) – Customized Energy Solutions and Cathie Murray; Regulatory Assistance Program November 16, 2010. Outline.

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Key Elements of a Comprehensive DSM Programme

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  1. Key Elements of a Comprehensive DSM Programme Presentation at Forum of Regulators Lawrence Berkeley Laboratory Team Mahesh Patankar, PhD, CMVP; Director – Market Innovations (Asia) – Customized Energy Solutions and Cathie Murray; Regulatory Assistance Program November 16, 2010

  2. Outline • Part 1: Recapping need for DSM initiatives • Part 2: DSM design and implementation plans • Part 3: Key attributes of DSM programs (and plans) • Part 4: Structure of DSM plan and program design document

  3. Part 1 – Recapping need for DSM implementation

  4. What Is Demand-Side Management? • Incorporation of customer load modifications as alternatives or additions to traditional resource planning • Intervention by utility on the “customer side of the meter” to change magnitude or shape of customer loads • Broad range of alternatives for reducing, adding or changing load • Partnership between customer and utility with benefits to both • Usually involves actions by utility on the customer side of the meter

  5. DSM Can Reduce Costs of Electric Services .. equitable investment Without DSM Cost With DSM Time

  6. DSM can end shortages and increase GDP in India • Cost-effective end-use electricity efficiency measures have the potential to eliminate the expected electricity deficit by 2014 while at the same time requiring less investment for new power supply compared to the BAU scenario. • Removal of the electricity deficit through these means leads to a $505 billion and $608 billion increase in India’s economic output by 2017 and 2020 respectively (Reference – 2010 publication by Dr. Jayant Sathaye et al)

  7. Benefits of DSM BENEFITS OF DSM UTILITY BENEFITS CUSTOMER BENEFITS SOCIETAL BENEFITS • More Reliable Energy Service • Reduced tariff • Improved Value of Service • Maintain/Improve Life-style & Productivity • Reduce Pollution • Conserve Resources • Protect Global Environment • Maximize CustomerWelfare • Lower Cost of Service • Improve OperatingEfficiency, Flexibility • Reduce Capital Needs • Improve Customer Service

  8. Load Shape Objectives • Peak Clipping • Valley Filling • Load Shifting • Strategic Conservation • Strategic Load Growth (Load Building) • Flexible Load Shape

  9. Peak Clipping & Valley Filling

  10. Load Shifting & Strategic Conservation

  11. Load Building & Flexible Load Shape

  12. DSM measures result in reducing peak power costs of utilities Source – Wartsila presentation/analysis

  13. Barriers to Customer Investments In Energy Efficiency • Capital availability • Energy prices • Lack of information/motivation • Other investment opportunities • High transaction costs • Perception of risk • Management priorities • Split-incentives (ownership)

  14. Energy Efficiency Programs:Level of Involvement of Distribution Company

  15. Part 2 – DSM design and implementation plans

  16. Framework for DSM Planning and Implementation INPUTS TO DSM ANALYSIS • Market Research • Rate Design • Profitability Analysis • Load Research • Competitive Analysis • Benefit/Cost Analysis CONDUCT DETAILED ANALYSIS Assess End Uses/ Technologies External Operating Environment Segment Markets Develop Marketing Strategies Customer Needs and Benefits DSM Goals and Objectives Conduct Situation Analysis Screen Program Choices Develop Marketing Strategies Evaluate Programs Implement Programs Utility Characteristics and Mission Estimate Market Potential Evaluate Impacts

  17. Development of a DSM Action Plan Technology Characteristics Load Shapes Information for Integrated Resource Planning DSM OPTIONS ANALYSIS DSM PLAN DEVELOPMENT Market Segments • Technologies • Marketing strategies • Incentives • Benefits/costs Analysis of cost-effective program packages DSM Plan % $ Supporting Data Customer Acceptance Rate Structures Utility Characteristics

  18. Load Research is one key DSM planning step

  19. DSM regulatory framework has evolved over the years • Forum of Regulators issued a Draft Model DSM Regulations document • http://www.forumofregulators.gov.in/ • Maharashtra Electricity Regulatory Commission issued 2 regulations • http://www.mercindia.org.in/Regulations.htm • DSM Implementation Framework Regulation • Cost-effectiveness Assessment Regulation

  20. Part 3 – DSM design and implementation plans

  21. Attributes of DSM portfolios • Customer reach ~ equity • Meets the load-shape objectives • Peak and non-peak demand benefits – load shifting • Conservation and efficiency • Provides long-lasting savings • Equipment with high useful life • Facilitates market transformation • One-time intervention towards technical standards • Pricing policies • Behavioral change • Incentivizing high-cost DSM interventions • Getting over high first-cost barrier

  22. Cost-Effectiveness Tests

  23. Maharashtra Regulation 2 – Cost-effectiveness tests (used as an example) • Three tests proposed around the Net Present Value (NPV) of Benefits - Costs: • Total Resources Cost (TRC) Test (Hurdle Test) • Compares total cost of technology and benefits over its life cycle (B-C >0 q) NPV of Benefits = ∑ [(Bt)/ (1+r)t-1 ] (equation 1) NPV of Cost = ∑ [(Ct)/ (1+r)t-1 ] (equation 2) Benefits = Avoided power purchase cost • Ratepayer Impact Measure (RIM) • Compares utility expenditure and avoided costs Cost includes “Loss of Revenue” for the utility; cost socializes for non-participants as well • Life-cycle revenue impact (LRIIRM) (B-C/total MWh sales) • Should be less than INR 0.01/kWh or less than 1% of existing tariff • Other two supporting tests for structuring incentives • Participants’ Cost Test (PCT) and Societal Cost Test (SCT) Confidential (www.ces-ltd.com)

  24. Benefit-cost tests ~ hurdle and sufficiency tests (MERC example)

  25. EE Incentive Effects • Adoption curves by measure • ƒ(participant test w. and w/o program)

  26. Examples of EE Adoption Curves • Adoption curves for different EE measures reflect different levels of market barriers, e.g.:

  27. Load research – an important step to design meaningful programs • Macro-level • Coincident feeders with the utility load shapes • Historic and current seasonal variations • Sector-level • Sector-wise peak and non-peak load contribution • Cost-to-serve and tariff realization • Segment-level • End-uses by sectors, segments and tariff categories • Ownerships and vintage of appliances/equipment • Appliances/equipment saturation • Efficiencies of existing stocks

  28. Load research involves multi-pronged strategies • Top-down, metering approach (Automated Meter reading) • Focused Energy Audits of sample clients • Questionnaire-based Surveys of residential customers Components of LR of Mumbai utilities Strategies are multifold

  29. Sector-wise load research strategies

  30. Load-shapes – Electric - example • Distribute annual savings by energy period • Generally by end use and building type • Can derive from hourly 8760 usage data • Specific to geographic region & climate

  31. Peak Coincidence Factors • Portion of demand reduction occurring at peak demand period(s) • Can derive from 8760 usage data • Based on max kWh/kW ratio

  32. Part 4 – Example of DSM program design document

  33. Table of contents of DSM Plan document • Executive Summary • Introduction • Characteristics of distribution licensee system • DSM plan targets and resource availability estimates • Identification of sectors, segments and end-uses • Identification of DSM technologies • Individual program description • Annual and cumulative achievements • DSM plan monitoring and EM&V • Implementation plan

  34. Table of contents of DSM Program Design Document • DSM program description Description of target sector, segment, geographical reach, technologies, standards, pricing, replacement/guarantee facility, stakeholders, financiers; barriers addressed, program delivery strategy (incentives/promotion), program management and oversight • EM&V and reporting Baseline calculations, metering/measurement requirements, third-party engagement, • Detailed implementation plan Phase-wise implementation of the DSM program, milestones, reporting mechanism • Estimates of annual and cumulative savings • Annual program funding requirements • Cost-effectiveness calculations • Dispute resolution mechanism

  35. References • LBNL training at FOR and utilities • USAID ECO II presentations

  36. Questions? • Contact details – mpatankar@ces-ltd.com cmurray@raponline.org

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