issue for rtf august 30 2007 n.
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Cost-Effectiveness Screening

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Issue for RTF August 30, 2007. Cost-Effectiveness Screening. RTF Uses Total Resource Cost (& Benefits) Perspective. Best meets the requirements of the Regional Act Considers all quantifiable costs & benefits regardless of who accrues them

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rtf uses total resource cost benefits perspective
RTF Uses Total Resource Cost (& Benefits) Perspective
  • Best meets the requirements of the Regional Act
  • Considers all quantifiable costs & benefits regardless of who accrues them
  • Ensures that conservation expenditures are good for the power system, the customer and society
  • Allows conservation to be compared to other resources considered for development by including all quantifiable costs & benefits
  • Was strongly recommended by utilities in first Council Plan
why rtf uses trc avoids potential double counting of the savings
Why RTF Uses TRC:Avoids Potential Double Counting of the Savings
  • Utility invest $2500 in efficient motor to acquire 5000 kWh/yr savings
    • Levelized Cost = 3.4 cents/kWh
    • B/C = 1.32
  • Customer matches $2500 utility investment to save the same 5000 kWh/yr
    • Simple payback = 10 years, motor last 20
  • Total of all direct cost is $5000 for 5000 kWh/yr of savings
    • Levelized cost = 6.8 cents/kWh
    • B/C ratio = 0.66
why rtf uses trc directs funds toward measures that optimize total utility and customer investments
Why RTF Uses TRCDirects Funds Toward Measures That Optimize Total Utility and Customer Investments
  • Utility invest $600 toward cost of $6000 solar PV system that saves 1200 kWh/yr
    • Alternatively utility and consumer could:
      • Invest $160 in 40 CFLs to save 1200, saving $440
      • Invest $600 to buy 150 CFLs, saving 5000 kWh
  • Especially important when budgets are limited
why rtf uses trc avoids promoting measures that may impose non energy costs on others
Why RTF Uses TRCAvoids promoting measures that may impose non-energy costs on others
  • Act directs the Council give second priority to the use of renewable resources
  • Analysis in 1st Plan concluded that cost of using wood stoves to offset use of electric heat was below cost of electricity from new generating facilities
  • 1st Plan excluded use of wood heat due to “non-energy” cost (air pollution) imposed on the region
Why RTF Uses TRC:Expands list of conservation options by considering quantifiable “non-energy” benefits
  • Energy Star Clothes Washer in Homes with Gas Water Heater and Dryer
    • Present Value Capital Cost

= $58/MWh

    • Present Value to Power System= $17/MWh (B/C = 0.3)
    • Value to Region/Society (includes natural gas, detergent & water savings)= $110/MWh (B/C = 2.0)
  • Power system’s “willingness-to-pay” for these savings should be limited to its present value benefits
    • Electric Utility could provide incentive up to $17/MWh for washer in a home with gas water and dryer heat
application of trc to projects and programs what s the incremental cost
Application of TRC to Projects and Programs – “What’s the incremental cost?”
  • It is not always practical and/or possible to quantify the incremental cost of energy efficiency improvements
    • It is often impractical to obtain “with” and “without” cost estimates, especially for large custom projects
    • Many measures/projects have “joint” features/purposes, so separating the cost imposed by higher efficiency from other features is often problematic
    • Incremental “cost” may be quite different than “incremental price”
joint product solution base incremental cost on minimum cost to achieve efficiency e g dishwashers
Joint Product Solution: Base Incremental Cost on “Minimum Cost to Achieve Efficiency”, e.g., Dishwashers
joint product solution minimum cost to achieve efficiency doesn t always work e g clothes washers
Joint Product Solution: “Minimum Cost to Achieve Efficiency” Doesn’t Always Work, e.g., Clothes Washers
and sometimes higher efficiency cost less average retail price of energy star clothes washers
And . . .Sometimes Higher Efficiency Cost Less:Average Retail Price Of Energy Star Clothes Washers

*2004 Oregon Tax Credit Data

today s issue cost vs price high efficiency heat pumps
Today’s Issue: “Cost vs. Price” – High Efficiency Heat Pumps
  • BPA has received comments that high efficiency air source heat pumps are costing considerably more than the RTF estimates
  • It appears there is a significant difference between incremental “cost” and incremental “retail price”
  • Issue: Which value should the RTF use for determining the cost-effectiveness of high efficiency heat pumps (and central AC)?
heat pump cost estimates
Heat Pump Cost Estimates
  • Three Sources:
    • Existing RTF cost estimate based on federal Department of Energy data from standards setting process
    • STAC – Survey of regional HVAC contractors (preliminary returns from 23 contractors
    • Online HVAC equipment sales sites (“box cost” only)
so what s your call
So What’s Your Call
  • The incremental cost of high efficiency heat pumps (and central AC) should be based on:
    • Current retail market prices (STAC?)
    • Incremental equipment cost from online data sources?
      • Adjusted for contractor markups?
    • Engineering estimates of incremental cost (DOE)
    • Other?