Time Value of Energy Efficiency
Look beyond the “Hour”
Presented at ACEEE’s 2017 National Conference on Energy Efficiency as a Resource October 30‚ November 1, 2017.
Savings from energy efficiency have grown by leaps, methods for measuring their capacity contributions need to catch up.
In addition to electric energy (kWh) savings, nearly every energy efficiency effort delivers measurable capacity (kW) benefits in the form of avoided (or deferred) power generation as well as in transmission and distribution capacity. Energy efficiency’s impact on the electrical system, especially during peak hours, has become an increasingly important aspect of system planning in the many jurisdictions where capacity presents the main objective in resource adequacy planning.
Measurement of energy efficiency’s demand impacts also have significant ramifications for valuation of energy efficiency (and other energy-focused demand-side resources in general). In most jurisdictions, however, energy efficiency policy, planning, and evaluation continue to focus on energy (kWh) impacts rather than capacity (kW) impacts.
Two distinct‚ but interrelated‚ aspects arise in assessing the capacity impacts of energy efficiency. The first concerns the magnitude of capacity savings: that is, the methods used to convert energy savings into equivalent peak capacity impacts. The second concerns how avoided cost calculations capture the value of capacity savings and, ultimately, aid in analyzing the cost-effectiveness of energy efficiency resources.
Various utility regulatory jurisdictions in the United States provide specific instructions for utilities and energy efficiency program administrators to follow in calculating the demand impacts of energy efficiency measures and programs. Generally, technical reference manuals (TRMs) record and make these instructions available. Calculation methods vary state by state, but they generally fall into three general classes: engineering, load research, and end-use metering. Capacity benefits ($/kW saved) (i.e., the way that the capacity value of energy efficiency factors into the calculation of avoided costs) also differ across jurisdictions.
This presentation focuses on a comparative assessment of the various methods reported through local regulatory guidelines, TRMs, and evaluation reports; evaluates the results’ relative advantages in terms of validity and reliability; and recommends approaches that the authors believe most accurately capture the size and value of capacity savings that result from energy efficiency.