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Conservation Road Map Mark Ohrenschall Con.Web, October 29, 2004

Council Recommends Actions, Strategies
for 700 aMW Five-Year Conservation Goal

The Northwest Power and Conservation Council has proposed both a destination and a large-view road map for regional energy-saving endeavors over the next five years.

In addition to its call for 700 average megawatts of Northwest conservation from 2005-2009 (see related story), the Council has put forth actions and strategies by which the region could progress toward that goal.

Those include more attention to so-called "lost opportunity" resources, increased "discretionary" conservation, expanded market transformation, more local spending on conservation, a regional strategic plan and upgraded government codes and standards. The Council, in its draft fifth power plan, also wants to remove systemic barriers to utility conservation, notably financial.

In addition, an array of potential approaches are outlined: direct acquisition ventures, market transformation, regional infrastructure, codes and standards, and tax credits. The Council suggests strategies for many specific measures, as "starting points for a regional dialogue of how best to capture the targeted conservation."

Council officials have acknowledged challenges in reaching the conservation targets, but they also believe the numbers are achievable and represent a least-cost, least-risk, environmentally friendly resource strategy for the Northwest.

Conservation Action Plan
The Council's Action Plan starts with a focus on acquiring 700 aMW of energy savings regionwide in 2005-2009.

More specifically, the draft calls for 600 aMW of discretionary savings and 100 aMW of lost opportunities. The Council defines discretionary conservation as that which can be realistically acquired as needed; building retrofits are a prime example. Lost opportunities, meanwhile, tend to have narrow windows during which efficiencies are viable. That prominently includes new construction, but also major remodels and equipment replacements, noted Council conservation resources manager Tom Eckman.

Both categories should be expanded in the coming five years, according to the action plan. It calls for 120 aMW of annual discretionary efficiencies, and a gradual increase in lost opportunities from 10 aMW in 2005 to 30 aMW regionwide in 2009. By 2017, the Council wants the region to get 85 percent of available cost-effective lost opportunities each year. At the moment, "Many of the lost opportunity resources identified in this power plan are relatively new and do not have established programs or approaches for their acquisition," the Council said.

On the money front, the action plan seeks more dollars. Bonneville Power Administration and Northwest utilities collectively spent about $200 million on conservation in 2002. The Council forecasts the annual utility system bill for its targets at $240 million in 2005 and $300 million by 2009 (all figures in 2000 dollars).

Some of this increase should be earmarked for expanded market transformation, which promises a more efficient and effective way to realize some of the proposed additional savings, the action plan said. It adds, " ... the level of investment in regional market transformation initiatives should be resolved during the development of the strategic plan for conservation acquisition."

The Council intends to gather stakeholders in early 2005 to "develop a strategic plan to achieve the conservation targets set forth in the power plan." That blueprint should be given to the Council within a year.

This conclave will also look at regional initiatives that might not fit under market transformation, such as coordinating and funding incentives for certain measures. These could be assigned to BPA, an expanded Northwest Energy Efficiency Alliance, another regional avenue or some combination, according to the draft plan.

The Council recommends upgraded energy codes and standards to gain further efficiencies, especially for lost opportunites. For example, states should adopt appliance standards not pre-empted by federal laws, for such technologies as commercial refrigerators, freezers and ice-makers. State and local codes should at least match the Council's Model Conservation Standards for new buildings, and program agencies should adopt MCS, the plan said.

The Council also thinks it "essential" to track conservation spending and savings, whether by the Regional Technical Forum or other entities.

The draft plan seeks to knock down a number of barriers to utility conservation, particularly on the financial side. For lost revenues, the Council broaches rate structures that "reduce the fixed costs recovered in per kilowatt-hour charges combined with carefully designed increasing block rates." Splitting utility revenues from kilowatt-hour sales (known as decoupling) is another option, if "limited to the effects of conservation."

Another thought is financing conservation similarly to other resources. This would lessen near-term conservation rate impacts compared to the common current practice of capital expensing, though it could increase long-term costs. State legislatures could help by "defining conservation investments as a non-resource regulatory asset ... backed by the states' ability to guarantee cost recovery."

The Council also encourages BPA to avoid conservation disincentives in its power supply allocations, and BPA and utilities to keep supporting cost-effective low-income weatherization.

It pledges to examine public-purposes funding, in the Northwest (Oregon and Montana) and beyond, by 2008. "If utility disincentives seriously impede utility investment in conservation, consideration should be given to a system benefits charge approach to conservation funding and acquisition."

In addition to conservation, the Council wants the region to pursue 500 megawatts of demand response, which it characterized as pricing programs and demand purchases. However, the Council acknowledged, "The size and value of this resource ... are somewhat uncertain."

Recommended actions for demand response include expansion and refinement of existing programs, development of cost-effectiveness methodologies, inclusions in utility integrated resource plans and technology evaluations.

Acquisition Strategies
The Council's draft plan includes an (appendix titled "Conservation Acquisition Strategies." This includes approaches for specific measures, which are deemed open for discussion in the upcoming regional conservation planning process.

In any case, these strategies should be diverse, the Council said: " ... a suite of mechanisms should continue to be the foundation used to tap the conservation resource."

They fall into six broad categories.

One is direct acquisition, defined as "typically programs run by local utilities, system benefits charge administrators, regional organizations, BPA and others that offer some kind of incentive to get decision makers to make energy-efficient choices." The Council calls this approach "relatively expensive," but initially necessary for many new products and services.

Market transformation is another strategy, designed to further marketplace adoption of efficiency measures. The Council praised the Alliance's "impressive track record" of gaining 100 aMW of savings at about $1 million per first-year average megawatt saved.

Conservation infrastructure development is a third category, encompassing education, training, common specifications, market research and program evaluations.

Energy codes, appliance/equipment standards and tax credits--enacted at various levels of government--round out the primary strategies.

The Council lays out recommendations for a host of energy-saving measures.

Residential clothes washers, as an example, are covered by minimum federal efficiency standards through 2012. In the meantime, the Council recommends a regional market transformation effort supported by local acquisition ventures and state tax credits for high efficiency models. Another promising residential measure, heat pump water heaters, should be promoted with a demonstration program (to allay technology concerns) and a regional and/or national market transformation venture.

In the commercial sector, where nearly two-thirds of identified conservation prospects are considered lost opportunities, the Council suggests "a relatively larger role for market transformation activities and regionally coordinated acquisition approaches compared to the residential sector." These could include, for example, education, training and marketing for influencing energy-saving practices and services, such as integrated commercial building design. Other approaches--including market transformation, acquisition programs, codes/standards and regional specifications--also have potential roles for commercial lost opportunities.

For Northwest industries, the Council recommends a mix of coordinated utility and public-purposes funding acquisition programs, along with regional market transformation. A regional industrial conservation strategy should be formulated, the plan said.

And, for irrigated agriculture, a blend of utility and public-purposes funding would best capture the potential savings, the plan said.

Related Pages:
Draft Fifth Power Plan (including Action Plan and Conservation Acquisition Strategies)