Presentation at Forum of RegulatorsLawrence Berkeley Laboratory Team

Mahesh Patankar, PhD, CMVP;Director – Market Innovations (Asia) – Customized Energy Solutions

and Cathie Murray; Regulatory Assistance Program

November 16, 2010

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

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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

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Cost

Without DSM

With DSM

Time

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Cost-effective end-use electricity efficiencymeasures have the potential to eliminate the

expected electricity deficit by 2014 while atthe same time requiring less investment for

new power supply compared to the BAUscenario. Removal of the electricity deficit through these

means leads to a $505 billionand $608 billion increase in India’s economic

output by 2017 and 2020 respectively(Reference – 2010 publication by Dr. Jayant

Sathaye et al)

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BENEFITS OF DSM

CUSTOMERBENEFITS

• More Reliable Energy Service

• Reduced tariff

• Improved Value of Service

• Maintain/Improve Life-style & Productivity

SOCIETALBENEFITS

• Reduce Pollution

• Conserve Resources

• Protect Global Environment

• Maximize CustomerWelfare

UTILITYBENEFITS

• Lower Cost of Service

• Improve OperatingEfficiency, Flexibility

• Reduce Capital Needs

• Improve Customer Service

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Peak Clipping Valley Filling Load Shifting Strategic Conservation Strategic Load Growth (Load Building) Flexible Load Shape

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Source – Wartsila presentation/analysis

Capital availability Energy prices Lack of information/motivation Other investment opportunities High transaction costs Perception of risk Management priorities Split-incentives (ownership)

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INPUTS TO DSM ANALYSIS

• Market Research• Rate Design• Profitability Analysis

• Load Research• Competitive Analysis• Benefit/Cost Analysis

ExternalOperatingEnvironment

CustomerNeeds andBenefits

UtilityCharacteristicsand Mission

DSM GoalsandObjectives

ConductSituationAnalysis

ScreenProgramChoices

SegmentMarkets

DevelopMarketingStrategies

AssessEnd Uses/Technologies

EstimateMarketPotential

EvaluateImpacts

DevelopMarketingStrategies

ImplementPrograms

EvaluatePrograms

CONDUCT DETAILED ANALYSIS

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Utility Characteristics

MarketSegments

Supporting Data

DSM OPTIONSANALYSIS

DSM PLANDEVELOPMENT

• Technologies• Marketing strategies• Incentives• Benefits/costs

Analysis ofcost-effectiveprogram packages

Information forIntegrated Resource Planning

Load Shapes

TechnologyCharacteristics

%

CustomerAcceptance

$

Rate Structures

DSMPlan

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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

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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

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TRC/

Societal Utility Ratepayer Participant

Avoided energy costs (fuel, O&M of power plants, T&D lines)

Benefit Benefit Benefit

Avoided capacity costs (constructing power plants, T&D lines, pipelines, balancing, storage)

Benefit Benefit Benefit

Participants’ incremental cost (above baseline) of efficient equipment

Cost Cost

Incentives (rebates) Transfer Cost Cost Benefit

Program administration costs (staff, marketing, evaluation, etc.)

Cost Cost Cost

Other benefits (fossil fuel savings, water savings, equipment O&M, etc.)

Benefit (Cost) Benefit (Cost)

Externalities (e.g., environmental benefits like emissions reductions)

Benefit

Lost utility revenue / lower energy bills (due to lower sales)

Transfer Cost Benefit

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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 costsCost 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)23

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Adoption curves by measure◦ ƒ(participant test w. and w/o program)

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 5 10 15 20 25 30

Participant Benefit-Cost Ratio

Max

imum

Pen

etra

tion

Rat

e

B-C Ratio: With 50% incentive

Initial B-C Ratio: No incentive

Net increase in adoption

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 5 10 15 20 25 30

Participant Benefit-Cost Ratio

Ma

xim

um

Pe

ne

tra

tion

Ra

te

Moderate Barriers

High Barriers

No Barriers

Low Barriers

Extremely High Barriers

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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

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Components of LR of Mumbai utilities Strategies are multifold

Top-down, metering approach (Automated Meter reading)

Focused Energy Audits of sample clients

Questionnaire-based Surveys of residential customers

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Sector Proposed load research strategy

Implementing agencies

Large Commercial and Industrial

Sponsored sample-audits

Utility Energy Accounting Dept + External Auditors

Small Commercial and Industrial

Sample walk-through audits and questionnaire-based surveys

External Auditors + University Students

Large Public Buildings Sponsored sample-audits

External Auditors

Public Water Works Sponsored sample-audits

External Auditors

Residential Questionnaire-based survey instruments

Market Survey Agency

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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

LoadshapeName

Summer On-Peak

Energy

Summer Off-Peak

Energy

Summer Intermed.

Energy

Winter Off-Peak

Energy

Winter Intermed.

EnergyGrocery_Cool 44.1% 15.8% 23.8% 0.8% 15.5%Grocery_ElecDHW 16.7% 3.9% 9.1% 9.3% 61.0%Grocery_ElecTotl 18.7% 9.6% 11.1% 15.5% 45.1%Grocery_Heat 0.0% 0.0% 0.0% 48.6% 51.4%Grocery_InLight 17.8% 6.2% 9.6% 12.3% 54.2%Grocery_OutLight 6.9% 15.5% 7.1% 34.4% 36.1%Grocery_Refrig 16.0% 9.6% 9.9% 17.9% 46.5%Grocery_Vent 14.2% 9.7% 9.4% 19.5% 47.2%

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Portion of demand reduction occurring at peak demand period(s)

Can derive from 8760 usage data ◦ Based on max kWh/kW ratio

LoadshapeName

Summer Gener.

Capacity

Winter Gener.

CapacityGrocery_Cool 0.95311 0.01925Grocery_ElecDHW 0.71869 0.83869Grocery_ElecTotl 0.86659 0.59967Grocery_Heat 0.00000 0.27096Grocery_InLight 0.94737 0.91866Grocery_Misc 0.71869 0.59967Grocery_OutLight 0.05000 0.13571Grocery_Refrig 0.94380 0.81351Grocery_Vent 0.99381 0.99916

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1. Executive Summary2. Introduction3. Characteristics of distribution licensee system4. DSM plan targets and resource availability

estimates5. Identification of sectors, segments and end-

uses6. Identification of DSM technologies7. Individual program description8. Annual and cumulative achievements9. DSM plan monitoring and EM&V10. Implementation plan

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1. DSM program descriptionDescription 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

2. EM&V and reportingBaseline calculations, metering/measurement requirements, third-party engagement,

3. Detailed implementation planPhase-wise implementation of the DSM program, milestones, reporting mechanism

4. Estimates of annual and cumulative savings5. Annual program funding requirements6. Cost-effectiveness calculations7. Dispute resolution mechanism

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LBNL training at FOR and utilities USAID ECO II presentations

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Questions?

Contact details –

mpatankar@ces-ltd.comcmurray@raponline.org

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