Should CDR or SARA be Adjusted to Better Account for EE, DR, DG and Renewables?

1. Should CDR or SARA be Adjusted to Better Account for EE, DR, DG and Renewables? Cyrus Reed DSWG/GATF Updated on October 19, 2012

2. What I Will Cover Very Briefly 1. What is currently covered in SARA and CDR 2. Areas for possible expansion of EE/DR Resource in CDR A. IOU Efficiency Programs -- goals and achievements B. NOIE Efficiency Programs -- What we know and way forward E. Building Code Adjustments -- do Codes matter?  F. . Political Subdivision EE Programs -- what we know and don’t G. Distributed Generation -- Already covered above?  H. Wind Update I. Others – Price-Responsive DR? J. Market-Based DR? 3. Conclusions and Next Steps

3. Why do we care? Fundamental changes are being discussed at PUC in regards to wholesale energy cap, potential for more ancillary services and potential for capacity market The CDR is the one document read by policy makers, investors and others to determine the adequacy of our market to provide energy The role of EE, DR and DG is being recognized more and more, but has not been fully incorporated into CDR

4. 1. What DR/EE is currently covered in SARA and CDR • SARA • Not Much • short-term ERS and LARS depending on season • CDR • A bit more • ERS, LARS • Investor-Owned Utilities EE • Have now incorporated 50% of the required Demand Savings (50% of 0.4% of Peak Demand) for ERCOT-based IOUs from 2013 through 2022

5. Investor-Owned Utilities EE Programs Most utilities in Texas are not only meeting their goals but exceeding them CDR takes 50 percent of 0.4% of peak demand – or 0.2% of peak demand total – of whole state SARA Could be Adjusted to Take Into Account some Percentage of EE Demand Reduction in that Year CDR Should be Adjusted to Take A Larger Portion of EE Expected Savings – most demand reduction is focused on summer demand reduction and IOUs are running load management programs We could at least adjust the next calendar year based upon April Filings

6. 2013 EE Numbers in CDR and in IOU Reports

7. NOIE Efficiency NOIEs already report their demand forecasts which incorporate their normal EE and DR NOIE have efficiency programs as well though they are not statutorily required SB 924 (2011) requires all Cooperatives and Municipal Utilities to report their EE programs, goals and achievements to SECO annually The First reports were delivered in April of 2012 and only covered 2011 year The Reports are not helpful generally in determining the amount of EE – all over the map in type of information provided SECO has sent the reports to ESL for analysis of any EE savings, which is required by statute Likely ESL will not be able to say much because reports are too incomplete

8. Some NOIE Numbers, 2011

9. How to Incorporate NOIE EE Two largest Municipal utilities – AE and CPS Energy – have long term goals, dedicated funding stream and do have annual reports separate from SECO reports. Both of these utilities are saving 20 to 50 MWs per year for EE plus much more for DR CPS has separate agreement with CEDANT to add 250 MWs. PEC, Bluebonnet, Brownsville and United Electric have established goals for Energy Efficiency and have annual budgets though savings are currently in the 1 to 5 MW range Recommendation: Improve reporting requirement and incorporate ESL report into CDR Long-term but for immediate work with CPS Energy and Austin Energy and maybe Pedernales to add municipal EE and DR into next CDR at some level

10. Political Subdivision EE Programs Under SB 5(2001) and more Recent SB 898 (2011), political subdivisions, educational facilities and state agencies in 41 non-attainment areas are required to look at annual 5% reduction in energy use and report to SECO on their savings achieved Reports for previous year due on October 1 Reports Analyzed by Energy Systems Lab to assess energy savings and emission reductions Reporting in KWhs not in Demand Reduction ESL currently does annual Emissions and Energy Savings Report – which includes SB 5 and SB 898 and includes projections – based on Kilowatt Hours and would need factor to convert to demand savngs Work with ESL to develop methodology to convert EE Savings into Projected Demand Savings

11. Do Energy Codes Matter? SECO is required to assess with input from ESL every next residential or commercial energy code SECO adopted 2009 IECC and 2009 IRC codes in 2010 and made them state law by 2012 ESL has now recommended 2012 Code Adoption and SECO should begin rulemaking process soon Local municipalities like Austin and Houston above state minimum ESL Analysis: 2012 Code can reduce peak demand by 20-40% compared to 2009 codes ESL charged with measuring energy savings and emissions reductions due to code compliant construction 2012 Report found that adopting of energy codes in Texas had reduced peak demand between 2002-2009 by 684 MWs Recommendation: Utilize ESL existing data to adjust energy savings projections to add demand reduction for energy codes (Example: 2012 codes lead to 30% reduction in peak demand from average home – project slight adjustment in growth curve because of new home starts in Texas being built to new energy codes)

12. ESL Already Does This Analysis In Part, but focus is NOX reductions RECOMMENDATION: INVITE ESL TO PRESENT THEIR RESULTS AND DISCUSS TO WHAT EXTENT WINTER AND SUMMER DEMAND REDUCTION CAN BE INCORPORATED ESL Generates Annual Energy Savings-NOX Generation Data from 10 Data Points, that are used to project savings: Single-family homes Multi-family homes Commercial Savings Federal Buildings PUC Efficiency Programs Political Subdivision EE Programs SECO Programs (LOANSTAR) Wind and Other Renewable Savings SEER 13 Analysis Furnace Pilot

13. Distributed Generation -- Already covered above?  Many of the utility EE programs already cover Renewable DR Programs and NO further Adjustment Needed (Example: Oncor, Austin, AEP) However, to the extent that self-generators start to report to ERCOT or Utilities report these connections or distributive resources to PUC this distributed generation could be added into ERCOT projections as a new resourceESL also looks at energy savings from renewables

14. Some Solar PV Numbers 120 MWs statewide –according to NREL database –utility-scale plants already accounted for but some DG that may not be covered by energy efficiency programs

15. What about current and future wind? • Assumption of 8.75% at peak • Assumption is wrong because: • New turbines are much more efficient according to recent ERCOT study • Coastal wind has much better capacity at peak than West Texas wind • Conclusion: Adjust Coastal vs. West Wind for existing • Increase Capacity for Wind Turbines Going Forward

16. Others Price responsive DR – leave it to survey and other work to determine Market-based DR – no adjustment needed yet until market rules in place

17. Conclusions Upward adjustment in CDR for IOU programs each year as programs are rolled out to better reflect reality Incorporate NOIE EE programs but begin only with AE and CPS Energy and maybe PEC until ESL and SECO establish more formal reporting and analysis Work with ESL and SECO to incorporate demand projection savings for SB 898and SB 924 reporting Work with ESL on incorporation of demand savings for energy code compliant housing and make slight adjustment in projections for new growth DRG – no adjustment today but potential incorporation of self-reported data in future Redo Capacity numbers for existing and future wind Market and passive DR – jury still out