October 26, 2009 Impact of Energy Efficiency and Demand Response on Electricity Demand Perspectives on a Realistic United States Electric Power Generation Portfolio: 2010 to 2050 Presented by Lisa Wood Executive Director
Talking Points The Institute for Electric Efficiency Why is energy efficiency the first fuel for the electric power industry? What regulatory structure are in place to foster electric utility energy efficiency investments? What can we expect to achieve with energy efficiency and demand response by 2020? What is driving growth in energy efficiency and demand response? 2
Institute for Electric Efficiency www.edisonfoudation.net/iee Mission and Governance To advance energy efficiency and demand response (DR) among electric utilities. Management committee of 17 CEOs of IOUs. Chair, Jeff Sterba, PNM. Advisory committee of leading energy efficiency advocacy organizations and policy makers Role of IEE Provide resources/information/best practices re: regulatory models for energy efficiency and programs Provide forum for EE leaders for dialogue on advancing energy efficiency (industry, advocacy, and government leaders) Identify and provide thought leadership around key energy efficiency issues for electric utility industry 3
Energy efficiency is fundamental to the power business our 1st fuel! In US, 40% of CO 2 emissions come from generation sector Energy efficiency is a cost effective way to: Reduce carbon emissions Moderate the expected growth in electricity demand Average cost = $0.035 per kwh saved Savings today about 70 billion kwh and 30 GW of summer peak demand
Energy efficiency critical in proposed federal climate legislation Waxman-Markey climate change bill HR 2454 (passed June, 2009) Carbon reduction goals EE will play a major role 17% below 2005 levels by 2020 42% below 2005 levels by 2030 Efficiency and renewable electricity standard: 20% by 2020 1/4 can be met by energy efficiency (5% of the 20%) Governors can petition for up to 8% of the 20% to be met by EE 18 states already have energy efficiency resource standards (EERS). Number expected to grow. 29 states (including DC) have RPS. 7 states allow EE to act as a resource in the RPS. 5
TWh EIA Annual Energy Outlook 2009 forecast predicts 4,117 TWh by 2020 (growth of 399 TWh) Electricity Forecast (TWh) Source: EIA Annual Energy Outlook, Updated Reference Case, April 2009 5,000 Industrial 2008 base year 3,718 TWh 4,500 4,000 3,500 Commercial Residential 4,117 TWh in 2020 3,000 2,500 2,000 1,500 1,000 500 0 2008 2010 2020 2030 6
What can we expect to achieve with energy efficiency and demand response by 2020? Energy efficiency forecasts EPRI: 372 TWh (maximum achievable potential) to 473 TWh (economic potential) saved by 2020 (Jan. 2009) McKinsey: 1,080 TWh saved by 2020 (July 2009) Peak load reduction forecasts EPRI forecast: 79 GW (realistic achievable potential) to 147 GW (maximum achievable potential) reduction by 2020 (Jan. 2009) half due to energy efficiency; half due to demand response (DR) FERC DR forecast: 82 188 GW reduction by 2019 (June 2009) 7
Forecasted Usage (TWh) EPRI maximum achievable potential forecast by 2020 relative to AEO baseline forecast 4200 4100 4000 AEO Baseline (4/20/09) EPRI MAP (est.) 4117 3900 3800 3718 3745 372 TWh savings in 2020 3700 3600 3500 3400 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 8
Utilities spent $3 billion on energy efficiency in 2008. LBNL forecast of $6 B in 2015 and $7.5 B in 2020 -- likely on low side given carbon constrained future. Ratepayer-Funding for EE ($billion, nominal) 14 Low Med High 12.4 12 10 8.8 8 6 4 2008 Approved Budgets (CEE) 4.1 6 5.4 7.5 2 0 2008 2015 2020 Source: LBNL s The Shifting Landscape of Ratepayer-Funded Energy Efficiency in the U.S. (October, 2009) by Galen Barbose, Charles Goldman, and Jeff Schlegel 9
Aligning incentives for utilities to invest in energy efficiency: three regulatory components Program cost recovery Lost margin recovery Performance incentives 10
Aligning utility incentives: decoupling or lost revenue recovery September 2009 Revenue Decoupling Mechanism Lost Revenue Adjustment Mechanism Pending 2009 The Institute for Electric Efficiency http://www.edisonfoundation.net/iee/ 11
Aligning utility incentives: performance incentives September 2009 Incentive Pending 2009 Institute for Electric Efficiency 12
Demand response (DR) defined Load shifting by retail end-use customers typically during summer peak demand due to Dynamic rates or other rate designs that incent customers to shift load during high priced periods (e.g., pricing programs) Cash incentives to curtail or shift usage from peak to off-peak periods (e.g., direct load control programs) DR events can be triggered by Economic conditions (prices spikes) Reliability conditions 13
Commercial Industrial Residential Realistic achievable potential (RAP): 44 GW of summer peak demand savings by 2020 (EPRI) Price-Response DLC-Water Heating DLC-Central AC Price-Response Interruptible Demand DLC-Process Price-Response Interruptible Demand DLC-Other Direct Control-Lighting DLC-Cooling 2030 2020 2010-5,000 10,000 15,000 20,000 25,000 Cumulative Summer Peak Demand Savings (MW) EPRI EE and DR potential study, 2009 14
Commercial Industrial Residential Maximum achievable potential (MAP) : 66 GW of summer peak demand savings by 2020 (EPRI) Price-Response DLC-Water Heating DLC-Central AC Price-Response Interruptible Demand DLC-Process Price-Response Interruptible Demand DLC-Other DLC-Lighting DLC-Cooling 2030 2020 2010-5,000 10,000 15,000 20,000 25,000 30,000 Cumulative Summer Peak Demand Savings (MW) EPRI EE and DR potential study, 2009 15
Peak Demand (GW) Savings Relative to Baseline FERC national assessment of DR potential much larger than EPRI estimates. Aggressive scenarios flatten peak demand growth 1,000 U.S. System Peak Demand Forecasts by Scenario Source: A National Assessment of Demand Response Potential, FERC (2009) 950 900 850 NERC baseline (no DR) 38 GW (4%) 82 GW (9%) 800 138 GW (14%) 750 188 GW (20%) 700 650 System Peak (without DR) Expanded BAU Full Participation BAU Achievable Participation 16
Over 58 million smart meters will be deployed to mass market customers over next 5 to 7 years (excluding $4.5 billion in DOE stimulus funds) Utility-Scale Smart Meter Deployments, Plans & Proposals* September 2009 Deployment for >50% of end-users Deployment for <50% of end-users *This map represents smart meter deployments, planned deployments, and proposals by investorowned utilities and some public power utilities Smart grid demonstration sites 2009 The Institute for Electric Efficiency http://www.edisonfoundation.net/iee/ 17
Smart meter platform and home area network technologies will take EE and DR to new levels Giving customers the tools and the know-how to be smarter energy consumers HAN communication SmartMeter communication 18
Energy efficiency and demand response are critical resources for electric utilities and a national priority going forward Energy efficiency will play a key role in dampening energy usage growth. And, is least expensive way to reduce carbon emissions. Demand response will play a key role in flattening peak demand in U.S. over next decade. A few states now have peak demand reduction goals (e.g., MD, Ohio, and PA) Smart meter platform and home area networks will open up new innovations and applications for DR and EE. 19
Reports and references Assessment of Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S. (2010-2030). EPRI, January 2009 EIA Annual Energy Outlook Updated Reference Case. April 2009 A National Assessment of Demand Response Potential. FERC, June 2009. Unlocking Energy Efficiency in the U.S. Economy. McKinsey, July 2009 Moving toward Utility Scale Deployment of Dynamic Pricing in Mass Markets. IEE, June 2009. Smart meter deployment map, IEE, September 2009. www.edisonfoundation.net/iee 20
IEE website targeted EE and DR information resource -- www.edisonfoundation.net/iee Resource for industry & policy makers 21
For more information, contact: Lisa Wood Executive Director Institute for Electric Efficiency 701 Pennsylvania Ave., N.W. Washington, D.C. 20004-2696 Office: 202.508.5550 Mobile: 202.257.5040 lwood@edisonfoundation.net www.edisonfoundation.net/iee 22