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Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs. Kansas Corporation Commission. Mitchell Rosenberg, Vice President Topeka, Kansas March 26, 2008. Overview. Practical Approaches and Results

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practical approaches to benefit cost challenges in energy efficiency programs

Practical Approaches to Benefit-Cost Challenges in Energy Efficiency Programs

Kansas Corporation Commission

Mitchell Rosenberg, Vice President

Topeka, Kansas

March 26, 2008

overview
Overview
  • Practical Approaches and Results
    • Formulating cost-effectiveness tests to address a jurisdiction’s policy objectives: Expanding the Total Resources Test (TRC)
    • Estimating benefits not included in the TRC
    • Selection of appropriate analysis periods and discount rates to reflect policy objectives and specification of benefits
  • References
    • KEMA work in Wisconsin
policy drives the test
Policy Drives the Test
  • Total Resource Test
    • Meet energy needs at lowest social cost, including environmental externalities
  • Wisconsin Goals for Energy Efficiency Programs
    • Reduce energy used per unit of production
    • Improve energy reliability
    • Enhance economic development & competitiveness of WI businesses
    • Reduce environmental impacts of energy use
    • Expand ability of market to deliver energy-efficient goods & services
    • Deliver return on public investment
wisconsin approach other elements
Wisconsin Approach: Other Elements
  • Analysis Period: 25 years, beginning 2001
    • Needed to capture economic benefits
  • Program Period: 10 years, beginning 2001
    • Need to assume levels of program activity from 2007 – 2011
  • Two funding scenarios
    • Low-funding: continues first 5 years
    • High-funding: spending increase per current legislation. More market effects reflected in benefits
  • Net Present Value: All benefit and cost streams discounted to $2007, then netted.
non energy benefits
Non-Energy Benefits

Estimates developed from combination of surveys to assess incidence and secondary sources to assess unit values.

indirect economic impacts modeling
Indirect Economic Impacts Modeling

Economic Benefit Drivers

Direct Program Effects

Benefits Counted

estimates of economic development impacts
Estimates of Economic Development Impacts

Note: Benefits not discounted in Sum columns.

Import substitution and increased business competitiveness are the primary drivers of economic benefits generated.

putting it together simple test
Putting it together: Simple Test

Residential Programs: High Funding Scenario

putting it together expanded test
Putting it together: Expanded Test

Residential Programs: High Funding Scenario

lessons learned
Lessons Learned
  • Extended cost-effectiveness framework is analytically manageable, with significant areas of uncertainty remaining
  • Extended cost-effectiveness creates considerable program ‘headroom’.
  • Incremental cost data a major weakness.
    • Need to build cost data collection into program operations and evaluation
  • Must ensure that assumptions used in b-c calculations are incorporated into program planning
    • Example of California’s E3 calculator
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