Strategic Planning for DSM in a Community-owned Utility

Strategic Planning for DSM in a Strategic Planning for DSM in a Community-owned UtilityCommunity-owned Utility

Presented by Shu-Sun Kwan & Ed Arguello

Colorado Springs Utilities2005 APPA Engineering & Operations Conference

Memphis, TNApril 19, 2005

Strategic Planning for DSM Strategic Planning for DSM in in

a Community-owned Utilitya Community-owned UtilityDisclaimer

The research findings and DSM strategies discussed are based upon circumstances that may be unique to Springs Utilities and may not be representative of nor applicable to other customer populations, and that personal opinions expressed are those of the presenters and are not necessarily those of Springs Utilities management or directors.

What is DSM?What is DSM?

DSM = Demand Side Management Utility activities to encourage customers to

modify their level and pattern of electricity usage in ways that will produce desired changes in utility’s load shape

Benefits of DSMBenefits of DSM Utility

Contribute as an alternative resource to meet customer electricity demand

Defer future generation additions Improve plant utilization efficiency

Customers Provide choices to better manage energy use Reduce electricity bills

Environment Contribute to energy conservation Reduce emissions and impacts to environment

DSM as Part of the DSM as Part of the Integrated Resource PlanIntegrated Resource Plan

Existing Supply

Resources Assessment

Existing Supply

Resources Assessment

Demand Forecast

Demand Forecast

AdditionalSupply

ResourcesAssessment

AdditionalSupply

ResourcesAssessment

Integrated Resource Planning

Integrated Resource Planning

ElectricIntegratedResource

Plan

ElectricIntegratedResource

Plan

SupplySide

Options

SupplySide

Options

DemandSide

Options

DemandSide

Options

Public Process

Public Process

Policies&

Limitations

Policies&

Limitations

Integrated Resource Planning Process

Public Process Inputs (1)Public Process Inputs (1) Community values demonstrate the following priorities (1)

Price, (2) Power Supply and (3) Environmental consideration People generally support renewable energy and DSM but

cost is a deciding factor in overall acceptance Different opinions exist between who should pay for

renewable energy and DSM programs – those that use it, or all ratepayers

Customers feel it is of equal importance to invest in renewable sources and to develop programs to help customers use less electricity (DSM)

Overall, customers favor renewable energy and DSM, but support decreases when price is added as a factor

Public Process Inputs (2)Public Process Inputs (2) 65% of residential customers want to include

renewable energy in our supply mix, even if it costs more than other supply options 66% of our customers feel the additional cost for

renewable energy and DSM (if there was incremental cost) should be charged to all customers through utility rates

The majority (slightly more than 50%) of residential customers would be willing to pay $1 - $2 more per month to increase or double DSM programs and renewable energy sources from current levels

Scenario Grid OptionsScenario Grid OptionsPartial General Public Preference

Parti

al G

ener

al P

ublic

Pre

fere

nce

General Public Preference is to Rates Low

Current DSM Modest ModerateModerate to Aggressive

Aggressive

Re

fere

nc

e

Ca

se Coal-2014

Coal-2019Coal-2023

Coal-2015Coal-2020Coal-2024

Coal-2016Coal-2020

Coal-2018Coal-2023

Coal-2020

Lo

w

3 MW Small Hydro-20065MW Wind-2006





Coal-2016Coal-2021


Coal-2018Coal-2023


Coal-2020

Me

diu

m

3MW Small Hydro-200610MW Wind-2006

13MW Med Hydro-2011Coal-2015Coal-2019Coal-2024


13MW Med Hydro-2011Coal-2016Coal-2020






13MW Med Hydro-2011Coal-2021

Hig

h


1MW PV-20077MW Biomass-2011

13MW Med Hydro-20111MW PV-2011

Coal-2015Coal-2020Gas-2024




Coal-2016Coal-2021




Coal-2017Coal-2021




Coal-2019Coal-2023




Coal-2021

DEMAND SIDE MANAGEMENT OPTIONS

RE

NE

WA

BL

ES

Resource Situation – Summer PeakResource Situation – Summer PeakRecommended CaseRecommended Case

Recommended Case - April 2004 Load Forecast Revised(Megawatts)

0

200

400

600

800

1000

1200

1400

1600

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Pe

ak

De

ma

nd

Plu

s R

es

erv

es

(M

W)

Nixon Drake Western Hydro Wind Solar PV CT's Birdsall New Coal FRPower Purchase Needed DSM Surplus

ExistingResources

Nixon - coal

Drake - coal

Springs - hydro

Birdsall & Turbines - natural gas

Front Range contracted - natural gas

Surplus (blue)

Need (red)

Need (red):

149 MW in 2020

New Wind(dark green)

New Hydro(aqua)

WAPA - hydro

DSM

$2,335

$2,340

$2,345

$2,350

$2,355

$2,360

$2,365

$2,370

$2,375

$2,380

$2,385

Current DSM Modest Moderate Moderate to Aggr Aggressive

Demand Side Management Options

To

tal

Su

pp

ly C

os

t ($

mil

lio

ns

)

Current Renewables Low Renewables Medium Renewables High Renewables

Present Value of Supply Cost Present Value of Supply Cost in Million Dollarsin Million Dollars

Reference Case Lowest Supply Cost

Present Value of Supply Cost over 20 Years

Recommended Strategy

$35.5

$36.0

$36.5

$37.0

$37.5

$38.0

$38.5

$39.0

$39.5

$2,350 $2,355 $2,360 $2,365 $2,370 $2,375 $2,380 $2,385

PV of Total Supply Cost ($ millions)

Le

ve

lize

d P

er

Un

it S

up

ply

Co

st

($/M

Wh

)

Black = Current DSM LevelBlue = Modest DSM Level

Green = Moderate DSM LevelRed = Moderate to Aggr DSM Level

Purple = Aggressive DSM Level

Lowest Total Supply Cost

Lowest Per Unit Supply Cost

Reference Case

Recommended Strategy

Levelized Supply Per Unit Cost vs. Present Value Levelized Supply Per Unit Cost vs. Present Value

of Supply Costsof Supply Costs

Base - Current DSM & Renewables: $36.10/MWh

Better

Better

Circle (●) = Current Renewable LevelTriangle (▲) = Low Renewable Level

X (Ж) = Medium Renewable LevelDiamond (◊) = High Renewable Level

SituationAnalysis

SituationAnalysis DSM

Objectives

DSMObjectives DSM

Strategies

DSMStrategies

MarketStrategies

MarketStrategies

DSMTarget

Scenarios

DSMTarget

Scenarios

ProgramOptions

ProgramOptions

EIRPProcess

EIRPProcess DSM

Targets

DSMTargets

OptionsScreening

&Prioritization

OptionsScreening

&Prioritization

ProgramDesign

ProgramDesign Launch

LaunchEvaluation

Evaluation

Economic &Environmental

ImpactAnalysis

Economic &Environmental

ImpactAnalysis

BenchmarkInformation

BenchmarkInformation

DSM Strategic Planning Process

Strategic Plan ComponentsStrategic Plan Components Situation Analysis DSM Objectives & Strategies Market Strategies Program Categories & Options Program Screening Criteria Economic & Environmental Modeling DSM Target Scenarios Measurement & Verification

Situation AnalysisSituation Analysis

High demand growth Declining load factors High spot market prices Increasing natural gas prices Community values on energy conservation

DSM ObjectivesDSM Objectives

Contribute to improved system reliability of power supply

Contribute to mitigate price volatility and associated risks

Help customers use electricity more efficiently

Contribute to environmental responsibilities

DSM StrategiesDSM Strategies

Load Management Peak clipping Peak shifting Valley filling

Energy Reduction Energy efficiency Energy conservation

Market StrategiesMarket Strategies

Detailed load research required for detailed analysis by segment

Current data indicates focus should be on the following segments Residential Commercial Industrial

DSM Program CategoriesDSM Program Categories Financial Incentives

Utility provides financial incentives to change behavior to use more efficient technologies and/or reduce peak load

Rates Rate structure provides incentives or penalties to change behavior

Regulatory Utility champions and shapes various regulatory changes to shape

behavior Market Transformation

Utility forms strategic partnerships to influence manufacturers, distributors and local business to stock EE products.

Research, Development and Demonstration Utility champions new technologies through demonstration projects

Customer Education Utility promotes the awareness and benefits of DSM programs

Low-Income Program Utility offers incentives to low income customers for EE installations

Utility Facility Energy Management Utility leverage its own facilities to demonstrate the use of energy

efficient systems/technologies

Program Prioritization Program Prioritization Screening CriteriaScreening Criteria

Technical Feasibility Costs & Cost Effectiveness Amount of Savings (Energy & Demand) Environmental Contribution Ends and Executive Limitations Level of Efforts

Economic & Environmental Economic & Environmental ModelingModeling

Economic It compares the benefits and costs of DSM

programs Benefits (e.g. avoided supply costs for generation,

T&D, O&M and energy) Costs (e.g. program administration costs, and

participant costs) Cost effective if benefits are greater than costs TRC test

Economic & Environmental Economic & Environmental ModelingModeling

Environmental Green-house gases (CO2, CH4, etc.)

Sulfur dioxide Nitrogen oxides Particulates Mercury

DSM Target ScenariosDSM Target Scenarios Developed 6 Scenarios for Consideration

* Modest but not trivial * Moderate

* Moderate to Aggressive * Aggressive

* Ramp up to “Moderate to Aggressive” in 3 years

* Ramp up to “Aggressive” in 3 years

Based on National Benchmarking Data Considers:

Energy and demand savings Load factor improvement Program costs Avoided Costs Potential Rate Impacts

Benchmarking - Benchmarking - Energy Efficiency Program Energy Efficiency Program Spending Categorized by State (% of Revenue)Spending Categorized by State (% of Revenue)

Range from 0% (Virginia, Kansas, N. Carolina, and Louisiana) to 2.33% (Connecticut)

National average = 0.47% Colorado (0.14%), ranked 24 out of 51states Springs Utilities (0.4%)

* Springs Utilities numbers based on 2003 spending

BenchmarkingBenchmarking - - Energy Efficiency Program Energy Efficiency Program Spending Categorized by State (per Capita)Spending Categorized by State (per Capita)

Range from $0 (Virginia, Kansas) to $19.48 per capita (Connecticut)

National average = $3.88 per capita Colorado ($0.81), ranked 27 out of 51states Springs Utilities ($2.5, estimated figure)

* Springs Utilities numbers based on 2003 spending

BenchmarkingBenchmarking - Energy Efficiency Program Savings - Energy Efficiency Program Savings (cumulative) Categorized by State (savings as % of Sales)(cumulative) Categorized by State (savings as % of Sales)

Range from 0% (Kansas) to 6.79%

(Connecticut) National average = 1.66% Colorado (1.15%), ranked 23 out of 51 states Springs Utilities (0.43%)

* Springs Utilities numbers based on 2000-2003 savings and 2003 sales

Target Scenario AnalysisTarget Scenario Analysis

Scenario

Annual Savings as % of System Energy

Annual Savings as % of System Demand

Max. MW

Saving in a

Given Year

Energy Saving over 21 Years (GWh)

Bill Reduction

/ Lost Revenue over 21

Years ($M)

Prog. Costs over

21 Years ($M)

Avoided Costs

over 21 Years ($M)

Cumulative Rate Increase (%)

TRC Benefit to Cost Ratio2005 2010 2020 2025

Modest But Not Trivial 0.15 0.25 32 1854 111.2 27.1 51.1 0.4 0.6 1.2 1.3 1.6

Moderate 0.25 0.40 51 3090 185.4 47.2 83.4 0.7 1.1 2.0 2.2 1.5

Moderate to Aggressive 0.60 1.00 129 7416 445.0 124.2 204.4 1.7 2.7 5.0 5.6 1.4

Target Scenario AnalysisTarget Scenario Analysis

Scenario

Annual Savings as % of System Energy

Annual Savings as % of System Demand

Max. MW

Saving in a

Given Year

Energy Saving

over 21

Years (GWh)

Bill Reduction

/ Lost Revenue over 21 Years ($M)

Prog. Costs over

21 Years ($M)

Avoided Costs

over 21 Years ($M)

Cumulative Rate Increase (%)

TRC Benefit to Cost Ratio2005 2010 2020 2025

Aggressive 1.00 1.50 193 12360 741.6 211.6 322.8 3.0 4.9 9.0 10.0 1.3

Ramp Up to "Moderate to Aggressive" in 3 Years

From 0.15 to 0.6 in 3 years


129 7096 425.8 115.4 190.1 0.4 2.4 5.0 5.6 1.4

Ramp Up to "Aggressive" in 3 Years


From 0.25 to 1.5 in 3

years

193 11755 705.3 194.5 297.5 0.4 4.3 8.9 9.9 1.3

Measurement & VerificationMeasurement & Verification

Engineering Approach Measurement Approach Utility Billing Data Analysis Approach

Next StepsNext Steps

Implement scenario approved by Board Reduce system energy and demand by 0.25%

and 0.4% per year respectively Conduct customer load study

Strategic Planning for DSM in a Community-owned Utility

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