FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
A Business Case: Energy Efficiency in the New Environment
Investments in energy efficiency can be a growing revenue source. Strong programs, in conjunction with effective monitoring and verification, are the keys to success.
states while in others they are just now being set up. In California the monitoring and verification scheme is based on a protocol developed in 2005 that offers a way to valuate or assign value to the energy savings resulting from such programs. In other regions, such as in New England, there is an increasing call for similar standard protocols and methods for valuation of energy savings where regional trading markets are being developed.
The monitoring and verification scheme for GHG trading still is being determined, and like many things that affect the industry, most likely will be developed and tested in either California or the Northeast (in October, California signed on to participate in the RGGI). In regard to the capacity market, given the involvement of coordinated stakeholder groups like NEEP, the Northeast may solve that puzzle first. A new stakeholder group has been set up to determine exactly how the non-traditional resources will qualify for capacity credits. The earlier quoted NEEP article goes on:
“Critical to the effective participation of energy efficiency resources in the capacity market is the development of credible and sufficiently rigorous measure and verification requirements.”
That work is slated to be completed before the interim capacity market opens in January 2007.
The August 2006 issue of Public Utilities Fortnightly included an article by EPRI’s Clark Gellings, (“The Top 10 Utility Tech Challenges ”) who noted that of the top 10 challenges facing the electric utility industry today, “Increase End-Use Energy Efficiency” was number 5 and “Mitigate Environmental Impacts” was number 9. Whether or not one embraces the science of global climate change, the predictions about rising energy prices, or the appeals for a massive building program, the rising visibility of these issues all point to heightened interest in energy efficiency. This increased visibility will have significant implications for utility involvement in energy efficiency programs, and the measurement of their impact. While the opportunities are significant, they must be measurable, for as with electricity sales, if you can’t measure it, you can’t sell it.
1. The New York State Energy Research and Development Authority (NYSERDA) implements SBC programs in New York.
3. Even currently non-cost-effective energy efficiency might be considered now, since the cap and reduction goals themselves will make more types of energy efficiency cost-effective. In fact, this regulation might change the cost-effectiveness parameters for efficiency, giving it an even greater role.
4. NEEP Notes, Third Quarter 2006, www.neep.org.
5. The basis for avoided costs varied by state. In some states with no construction program planned, it was based on the average marginal cost of purchased power. In any event, few avoided cost studies survive today.
6. California Standard Practice Manual: Economic Analysis of Demand-Side Programs and Projects, October 2001.