CONSERVATION RESOURCES

ADVISORY COMMITTEE MEETING NOTES

 

 

 

June 19, 2002, 9 a.m.-4:30 p.m.

 

NORTHWEST POWER PLANNING COUNCIL OFFICES

PORTLAND, OREGON

 

 

DRAFT

 

 

I. Greetings, Introductions and Review of the Agenda.

 

            The June 19, 2002 Conservation Resources Advisory Committee meeting, held at the Northwest Power Planning Council’s offices in Portland, Oregon, was chaired by Tom Eckman of the Council staff.

 

            The following is a distillation (not a verbatim transcript) of items discussed during the call, together with actions taken on those items.  Please note that some enclosures referenced in the body of the text may be too lengthy to attach; all enclosures referenced are available upon request from Eckman at 503/222-5161.

 

            Eckman welcomed everyone to today’s meeting, led a round of introductions, then reviewed today’s agenda. The minutes from the April 17 CRAC meeting were approved as written.

 

2. Value to the Region of Stabilizing Annual Conservation Acquisitions/Investments.

 

            Eckman began this agenda item with a presentation titled “Economic Value of Stabilizing Regional Conservation Investments.” To set the stage, he said, the work you’ll see today is very preliminary, and focused only on strategies for deploying conservation – it does not look at the value of conservation relative to other resources the region might buy. That is, this analysis focuses on whether one conservation resource development strategy is economically superior to another, he explained; later on, Council staff will be comparing conservation resources against other resources.

 

This analysis used the 1995 Plan analysis of conservation, moving it forward in time to make it current with 2000 dollars – the shape of the supply curve was not changed, Eckman said. The analysis also looks only at dispatchable resources, about 1,300-1,400 aMW in all -- it does not look at lost opportunities or conservation opportunities, such as renovations, that occur only on certain cycles, Eckman said.

 

The main points of Eckman’s presentation included the following:

 

·        The goal of the analysis (Determine whether there is a net economic value to the region’s power system that could result from stabilizing the annual level of conservation resource acquisition; identify and evaluate conservation deployment strategies that provide the best net economic value to the regional power system considering practical limitations on program ramp rates and market volatility.)

·        A summary of the problem (1. past plans have called for stable annual regional conservation acquisitions; 2. Utility investments in conservation have varied in response to short-run market and industry regulatory conditions; 3. Question – how does the cyclical investment in conservation impact its economic value to the region?)

·        The analytical approach selected – Stage 1 (Use AURORA model to generate future market prices under three conditions – “average water,” “random water” and “critical water.”

·        The analytical approach selected – Step 2 (Use ConSOD model to simulate two responses to variations in future market prices – “Sustained Orderly Development [SOD]” and “Market Price Response [MPR].”)

·        Analytical issues – required data and assumptions. Major assumptions: 1) relationship between rolling average market prices and annual level of conservation acquisition; 2) relationship between ramp rate and total resource cost of conservation acquisitions; 3) rate at which conservation acquisitions can be ramped up and down; 4) amplitude and frequency and duration of wholesale market price spikes

·        Is there a relationship between market prices and annual level of conservation acquisition (graph)

·        Utility conservation investments are strongly correlated to total conservation acquisitions (graph)

·        Annual conservation acquisitions are negatively correlated to “same-year’s” market prices (graph)

·        Annual conservation acquisitions are more strongly and positively correlated to “last-year’s” market prices (graph)

·        Changes in annual conservation acquisitions are strongly correlated to changes in prior year’s market prices (graph)

·        Relationship between market prices and annual level of conservation acquisition – Rationale (conservation acquisitions lag market prices due to the inertia intrinsic in budget cycles, infrastructure response and project/program lead times) and Assumption (ramp-ups in conservation acquisitions lag the “rolling average” market price changes by 0-36 months, with an “expected value” lag time of 6 months.

·        Is there a relationship between ramp rate and total resource cost of conservation acquisitions (no data on TRC – used utility cost – currently available)

·        Cost/aMW and magnitude of annual conservation acquisitions are only weakly correlated (graph)

·        Relationship between ramp rate and utility cost of conservation acquisitions – possible rationale (utility conservation acquisition costs [$/aMW] are higher when ramping up than when ramping down) and assumption (there is only a very weak relationship between ramp rates [up or down] and utility conservation acquisition costs)

·        The rate at which conservation acquisitions can be ramped up and ramped down – History (conservation can be ramped up >> 30-40 MW per year, OR 50% of prior year’s acquisitions; conservation can be ramped down >> 40-50 MW per year or 60% of prior year’s acquisitions) and Assumption (create five “price blocks,” constrain ramp rate to respond to “monthly” availability of next or higher cost block).

·        The amplitude, duration and frequency of wholesale market price spikes (wholesale market prices will fluctuate as a result of over/under building, extreme weather events, hydrosystem availability, short-run economic/business cycles); Assumption (randomize the forecast of future price spikes in response to hydrosystem availability, ignore “short-run” weather and business cycles).

 

            Eckman noted that both his presentation and the AURORA analysis underlying it are available via the CRAC website. During Eckman’s presentation, various CRAC participants offered clarifying questions, comments and suggestions. Jim Lazar observed that, throughout the late 1990s, energy prices were relatively low and stable, a condition that encouraged apathy in the conservation sector. It wasn’t until the sudden and extreme energy market volatility of 2000-2001 that conservation took on new urgency. Margie Gardner noted that 8 million compact fluorescent light bulbs were purchased and installed in 2001 alone, which by itself was a huge conservation resource.

 

            Several participants noted that 2001 was an anomalous year, one in which the cost per aMW of the conservation acquired increased, but the amount of conservation resource acquired more than doubled the amount acquired in 2000.

 

            Eckman then demonstrated how he had modeled the various data points included in this analysis,detailing various inputs, assumptions and outputs. Again, various CRAC participants explored the nuances of this modeling tool; Charlie Grist explained that the overall goal of this tool was to explore the differences between a planned, stable, orderly approach to conservation acquisition and a utility-driven, follow-the-wholesale-price approach to conservation acquisition. Eckman provided detailed responses to the questions asked at today’s meeting, particularly with respect to the model’s flexibility to incorporate a wide range of input and lag time assumptions.

 

            Eckman noted that the net present value this analysis is attempting to measure is the benefit to the region of a stable conservation resource acquired over a stipulated period vs. the cost of acquiring that resource under a market-driven conservation acquisition scenario. He reminded the group that the total resource this analysis is measuring is 1,400 a MW. The bottom line is that, according to this analysis, the region would be better off by approximately $1.2 billion under a stable, orderly 20-year conservation acquisition program. Eckman reiterated that, so far, this analysis is only measuring one conservation acquisition scenario vs. another; the analysis that will measure the value of conservation acquisition against the value of other energy resources is currently in development.

 

            Eckman then set up the model to run based on a set of parameters provided by the participants at today’s meeting. After lunch, he shared the results from that model run: the mean values of all 500 outcomes, together with the distribution of those values over 500 games. There is considerable variability in how much of the 1,400 available aMW actually gets built under the various “market driven” scenarios – in some cases only 750 aMW of the conservation potential is acquired, he noted. With respect to mean values, the amount of conservation resource acquired under the market-driven vs. sustained orderly development scenarios was 785 a MW vs. 1385 aMW; net present value was just over $2 billion (sustained orderly development) vs. just over $1 billion (market-driven development), Eckman said.

 

            Eckman stated that given the assumptions used, sustained orderly development is worth an additional $1 billion over the next 20 years, compared to a market-driven conservation scenario?  Eckman was asked by Zelenka whether it would be possible to “push” the assumptions in the model far enough to see what set of values would bring about zero difference in the net present value between these two cases? Yes, given time, Eckman replied. Zelenka then observed, that if this particular set of variables comes to pass, then sustained orderly development would no longer pencil out. We will be doing that type of analysis, Eckman replied – however, in 99% of the possible future scenarios, sustained orderly development is going to provide more economic benefit to the region than a market-driven conservation acquisition strategy. However, to put this into perspective, Lazar said, given the $4 billion-per-year cost of the 20,000 aMW Northwest power system, this scenario would reduce that $80 billion cost over the next 20 years by only $1 billion.

 

            The next step is to take the seven-year-old conservation numbers embedded in this analysis and bring them up to date, said Eckman; we’re working on that even as we speak.

 

3. Impact of Changes in State Codes, Federal Standards and Current Practice on Commercial Sector Forecast Loads and Future Conservation Potential.

 

            This is the most recent forecast from Terry Morlan of the Council staff, said Grist. He went through a series of overheads, which included the following main topic areas:

 

·        Recent growth (graph)

·        Morlan’s draft forecast 2005-2025 -- low, medium-low, medium, medium-high and high-growth assumptions (150 aMW-210 aMW/year under the highest-growth scenario, 10 aMW-30 aMW under the lowest-growth scenario) (graph)

·        Historic metric -- commercial employment and electricity use (graph)

·        Planned modifications (Washington code upgrade, Seattle code upgrade, Idaho code upgrade, federal ballast standard, federal updates if adopted, new federal if adopted)

·        Detailed descriptions of each of these planned modifications

·        Potential federal updates (packaged AC and HP, R/BR reflector lamps)

·        ACEEE proposed new measures (transformers, vending machines, refrigerators, freezers and ice makers, traffic signals, exit signs, washers, large packaged AC equipment)

 

            Stan Price agreed that the description in Grist’s presentation accurately captures the impact of the planned changes to Washington codes. The group also discussed the planned changes to Seattle codes; one participant said he would be more comfortable with an assumption of a 15% improvement over ASHRAE 1999, rather than a 20% improvement.

 

            Lazar noted that one concern he has had since the early days of the Council’s power planning efforts is the lack of future technological forecasting. New technologies have driven significant changes to energy demand over the past decade, he said, and it would be a mistake not to factor future technological innovation into this forecast. High-tech hotels and electric vehicles were offered as two examples of technologies with the potential to significantly impact Northwest energy loads. Eckman invited Lazar to bring his favorite technology forecast information to the next meeting of this group; Lazar said he would do so.

 

            Grist emphasized that this a preliminary, not a final, analysis; he said he would update the CRAC as the analysis is fleshed out over the coming weeks.

 

4. Impact of Changes in State Codes, Federal Standards and Current Practice on Residential Sector Forecast Loads and Future Conservation Potential.

 

            Eckman led this presentation, again working from a series of PowerPoint slides. He touched on the following main subject areas:

 

·        Changes in codes and standards improve baseline efficiency and reduce conservation potential. The Fourth Power Plan’s conservation supply curves were based on known codes and standards as of 1995, and were based on the market penetration of efficient products as of 1995. Federal standards state energy codes and current practices for some technologies are known to have changed significantly since 1995.

·        Changes impacting residential sector load growth (revised Washington State Energy Code, July 1, 2002; federal clothes washer, water heater and refrigerator/freezer standards; changes in market/current practice – Energy Star appliances, windows and lighting)

·        The status of these various efficiency improvements

 

            Eckman then moved on to the analytical assumptions included in this analysis, as well as the key outputs of the analysis:

·        Analysis period: 2001-2025

·        PNW households: 2000 – 4.844 million; 2025 – 6.622 million

·        New construction: SF 1.317 million (347 k electric heat), MF 520,500 (374 k electric heat), MH 222,540 (169 k electric heat)

·        Product average lifetimes – refrigerator/freezer 19 years, clothes washer 14 years, dishwasher 9 years, room AC 9 years, Energy Star windows 50+ years, CFL 3-5 years, water heaters 10 years

·        Market saturation in 2025 (preliminary): refrigerator 115%, freezer 60%, clothes washer 95%, clothes dryer 90%, dishwasher 80%, room AC 15%, electric water heaters 55%

·        Average life span of all existing appliances is less than the forecast period; all will be replaced

·        Average life span of all new appliances added before new federal standards take effect is less than forecast period; all will be replaced.

·        Estimated savings by measure type (spreadsheets)

·        Savings: the final (preliminary) number: 625 aMW.

 

            Lazar expressed skepticism about some of the analytical assumptions underlying this analysis, noting that the market saturation numbers in particular look like single-family numbers only. Eckman reiterated that these are all preliminary numbers, and welcomed any better estimates the other CRAC participants might be able to provide. The group also discussed the fact that the current Energy Star standards will not be the standards 15 or 20 years from now; Eckman agreed, noting that it is possible to factor future efficiency gains into the analysis. He added that, based on the input he has received at today’s meeting, the final preliminary estimate of 625 aMW in total residential sector future conservation potential is a very conservative number, at the extreme low end of the scale – my guess is that it will grow by at least a couple of hundred aMW by the time all is said and done, Eckman said.

 

5. Next CRAC Meeting Date.

 

            The next meeting of the Conservation Resources Advisory Committee was set for July 24. Meeting summary prepared by Jeff Kuechle, NWPPC contractor.

 

Conservation Resources Advisory Committee Meeting Attendees

 

June 19, 2002