Key Elements of a Comprehensive DSM Programme

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Key Elements of a Comprehensive DSM Programme

• Presentation at Forum of Regulators
• Lawrence Berkeley Laboratory Team
• Mahesh Patankar, PhD, CMVP
• Director Market Innovations (Asia) Customized
  Energy Solutions
• and
• Cathie Murray Regulatory Assistance Program
• November 16, 2010

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Outline

• Part 1 Recapping need for DSM initiatives
• Part 2 DSM design and implementation plans
• Part 3 Key attributes of DSM programs (and
  plans)
• Part 4 Structure of DSM plan and program design
  document

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Part 1 Recapping need for DSM implementation
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What Is Demand-Side Management?

• Incorporation of customer load modifications as
  alternatives or additions to traditional resource
  planning
• Intervention by utility on the customer side of
  the meter to change magnitude or shape of
  customer loads
• Broad range of alternatives for reducing, adding
  or changing load
• Partnership between customer and utility with
  benefits to both
• Usually involves actions by utility on the
  customer side of the meter

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DSM Can Reduce Costs of Electric Services ..
equitable investment
Without DSM
Cost
With DSM
Time
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DSM can end shortages and increase GDP in India

• Cost-effective end-use electricity efficiency
• measures have the potential to eliminate the
  expected electricity deficit by 2014 while at
• the same time requiring less investment for new
  power supply compared to the BAU
• scenario.
• Removal of the electricity deficit through these
  means leads to a 505 billion
• and 608 billion increase in Indias economic
  output by 2017 and 2020 respectively
• (Reference 2010 publication by Dr. Jayant
  Sathaye et al)

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Benefits of DSM
BENEFITS OF DSM
UTILITY BENEFITS
CUSTOMER BENEFITS
SOCIETAL BENEFITS

• More Reliable Energy Service
• Reduced tariff
• Improved Value of Service
• Maintain/Improve Life-style Productivity

• Reduce Pollution
• Conserve Resources
• Protect Global Environment
• Maximize CustomerWelfare

• Lower Cost of Service
• Improve OperatingEfficiency, Flexibility
• Reduce Capital Needs
• Improve Customer Service

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Load Shape Objectives

• Peak Clipping
• Valley Filling
• Load Shifting
• Strategic Conservation
• Strategic Load Growth (Load Building)
• Flexible Load Shape

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Peak Clipping Valley Filling
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Load Shifting Strategic Conservation
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Load Building Flexible Load Shape
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DSM measures result in reducing peak power costs
of utilities
Source Wartsila presentation/analysis
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Barriers to Customer Investments In Energy
Efficiency

• Capital availability
• Energy prices
• Lack of information/motivation
• Other investment opportunities
• High transaction costs
• Perception of risk
• Management priorities
• Split-incentives (ownership)

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Energy Efficiency ProgramsLevel of Involvement
of Distribution Company
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Part 2 DSM design and implementation plans
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Framework for DSM Planning and Implementation
INPUTS TO DSM ANALYSIS

• Market Research
• Rate Design
• Profitability Analysis

• Load Research
• Competitive Analysis
• Benefit/Cost Analysis

CONDUCT DETAILED ANALYSIS
Assess End Uses/ Technologies
External Operating Environment
Segment Markets
Develop Marketing Strategies
Customer Needs and Benefits
DSM Goals and Objectives
Conduct Situation Analysis
Screen Program Choices
Develop Marketing Strategies
Evaluate Programs
Implement Programs
Utility Characteristics and Mission
Estimate Market Potential
Evaluate Impacts
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Development of a DSM Action Plan
Technology Characteristics
Load Shapes
Information for Integrated Resource Planning
DSM OPTIONS ANALYSIS
DSM PLAN DEVELOPMENT
Market Segments

• Technologies
• Marketing strategies
• Incentives
• Benefits/costs

Analysis of cost-effective program packages
DSM Plan


Supporting Data
Customer Acceptance
Rate Structures
Utility Characteristics
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Load Research is one key DSM planning step
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DSM regulatory framework has evolved over the
years

• Forum of Regulators issued a Draft Model DSM
  Regulations document
• http//www.forumofregulators.gov.in/
• Maharashtra Electricity Regulatory Commission
  issued 2 regulations
• http//www.mercindia.org.in/Regulations.htm
• DSM Implementation Framework Regulation
• Cost-effectiveness Assessment Regulation

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Part 3 DSM design and implementation plans
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Attributes of DSM portfolios

• Customer reach equity
• Meets the load-shape objectives
• Peak and non-peak demand benefits load shifting
• Conservation and efficiency
• Provides long-lasting savings
• Equipment with high useful life
• Facilitates market transformation
• One-time intervention towards technical standards
• Pricing policies
• Behavioral change
• Incentivizing high-cost DSM interventions
• Getting over high first-cost barrier

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Cost-Effectiveness Tests
TRC/ Societal Utility Ratepayer Participant
Avoided energy costs (fuel, OM of power plants, TD lines) Benefit Benefit Benefit
Avoided capacity costs (constructing power plants, TD lines, pipelines, balancing, storage) Benefit Benefit Benefit
Participants incremental cost (above baseline) of efficient equipment Cost Cost
Incentives (rebates) Transfer Cost Cost Benefit
Program administration costs (staff, marketing, evaluation, etc.) Cost Cost Cost
Other benefits (fossil fuel savings, water savings, equipment OM, etc.) Benefit (Cost) Benefit (Cost)
Externalities (e.g., environmental benefits like emissions reductions) Benefit
Lost utility revenue / lower energy bills (due to lower sales) Transfer Cost Benefit
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Maharashtra Regulation 2 Cost-effectiveness
tests (used as an example)

• Three tests proposed around the Net Present Value
  (NPV) of Benefits - Costs
• Total Resources Cost (TRC) Test (Hurdle Test)
• Compares total cost of technology and benefits
  over its life cycle (B-C gt0 q)
• NPV of Benefits ? (Bt)/ (1r)t-1
  (equation 1)
• NPV of Cost ? (Ct)/ (1r)t-1
  (equation 2)
• Benefits Avoided power purchase cost
• Ratepayer Impact Measure (RIM)
• Compares utility expenditure and avoided costs
• Cost includes Loss of Revenue for the utility
  cost socializes for non-participants as well
• Life-cycle revenue impact (LRIIRM) (B-C/total MWh
  sales)
• Should be less than INR 0.01/kWh or less than 1
  of existing tariff
• Other two supporting tests for structuring
  incentives
• Participants Cost Test (PCT) and Societal Cost
  Test (SCT)

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Benefit-cost tests hurdle and sufficiency tests
(MERC example)
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EE Incentive Effects

• Adoption curves by measure
• ƒ(participant test w. and w/o program)

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Examples of EE Adoption Curves

• Adoption curves for different EE measures reflect
  different levels of market barriers, e.g.

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Load research an important step to design
meaningful programs

• Macro-level
• Coincident feeders with the utility load shapes
• Historic and current seasonal variations
• Sector-level
• Sector-wise peak and non-peak load contribution
• Cost-to-serve and tariff realization
• Segment-level
• End-uses by sectors, segments and tariff
  categories
• Ownerships and vintage of appliances/equipment
• Appliances/equipment saturation
• Efficiencies of existing stocks

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Load research involves multi-pronged strategies

• Top-down, metering approach (Automated Meter
  reading)
• Focused Energy Audits of sample clients
• Questionnaire-based Surveys of residential
  customers

• Components of LR of Mumbai utilities

• Strategies are multifold

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Sector-wise load research strategies
Sector Proposed load research strategy Implementing agencies
Large Commercial and Industrial Sponsored sample-audits Utility Energy Accounting Dept External Auditors
Small Commercial and Industrial Sample walk-through audits and questionnaire-based surveys External Auditors University Students
Large Public Buildings Sponsored sample-audits External Auditors
Public Water Works Sponsored sample-audits External Auditors
Residential Questionnaire-based survey instruments Market Survey Agency
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Load-shapes Electric - example

• Distribute annual savings by energy period
• Generally by end use and building type
• Can derive from hourly 8760 usage data
• Specific to geographic region climate

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Peak Coincidence Factors

• Portion of demand reduction occurring at peak
  demand period(s)
• Can derive from 8760 usage data
• Based on max kWh/kW ratio

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Part 4 Example of DSM program design document
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Table of contents of DSM Plan document

1. Executive Summary
2. Introduction
3. Characteristics of distribution licensee system
4. DSM plan targets and resource availability
   estimates
5. Identification of sectors, segments and end-uses
6. Identification of DSM technologies
7. Individual program description
8. Annual and cumulative achievements
9. DSM plan monitoring and EMV
10. Implementation plan

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Table of contents of DSM Program Design Document

• DSM program description
• Description of target sector, segment,
  geographical reach, technologies, standards,
  pricing, replacement/guarantee facility,
  stakeholders, financiers barriers addressed,
  program delivery strategy (incentives/promotion),
  program management and oversight
• EMV and reporting
• Baseline calculations, metering/measurement
  requirements, third-party engagement,
• Detailed implementation plan
• Phase-wise implementation of the DSM program,
  milestones, reporting mechanism
• Estimates of annual and cumulative savings
• Annual program funding requirements
• Cost-effectiveness calculations
• Dispute resolution mechanism

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References

• LBNL training at FOR and utilities
• USAID ECO II presentations

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• Questions?
• Contact details
• mpatankar_at_ces-ltd.com
• cmurray_at_raponline.org