2012 Integrated Resource Plan. Appendix. DSM Implementation Plan

Transcription

1 Appendix 9A DSM Implementation Plan

2 Table of Contents 1 Context and DSM Strategy Legal and Policy Context Definition of DSM British Columbia s Energy Objectives Future Approval Process DSM Regulation Bill 32 (Energy and Water Efficiency Act) Conservation Potential DSM Strategy DSM Plan Description Contents Energy-focused DSM Capacity-focused DSM Energy and Capacity Savings Energy-focused DSM Capacity-focused DSM Utility Costs Justification Energy-focused DSM Cost-Effectiveness Rate Impact Environmental and Economic Benefits Comprehensive and Flexible Policy Alignment Capacity-focused DSM Alignment with Clean Energy Act DSM Risk Management Risk Mitigation Codes and Standards Rate Structures Programs Portfolio Performance Management Page 9A-i

3 List of Figures Figure 1 DSM Strategic Framework... 5 List of Tables Table 1 DSM Tools and the Strategic Contexts... 6 Table 2 Energy-Focused DSM Tools and Initiatives in DSM Option Table 3 Supporting Initiatives Table 4 Capacity-focused Program Areas Table 5 Energy-focused DSM: Cumulative Energy Savings since F2012 at Customer Meter in F2021 (GWh) (mid) Table 6 Energy-focused DSM: Cumulative Associated Capacity Savings since F2012 at Customer Meter in F2021 (MW) (mid) Table 7 Capacity-focused DSM: Cumulative Capacity Savings since F2012 at Customer Meter in F2021 (MW) (mid) Table 8 Utility Costs ($ million) Page 9A-ii

4 1 Context and DSM Strategy BC Hydro s Demand-Side Measure (DSM) Implementation Plan is guided by government legislative requirements and policies including Bill 32 (Energy and Water Efficiency Act) (section 1.1), an estimate of the potential energy and capacity savings that could be achieved among BC Hydro s customers (section 1.2) and BC Hydro s strategy for attaining this DSM potential (section 1.3). The DSM Implementation Plan describes how BC Hydro will implement the DSM recommendations of the IRP (section 2). The remainder of the Plan provides a justification for proceeding with implementation and a discussion of risk management tactics. 1.1 Legal and Policy Context Definition of DSM The term demand-side measure is broadly defined in subsection 1(1) of the British Columbia (B.C.) Clean Energy Act 1 (CEA): demand-side measure means a rate, measure, action or program undertaken (a) to conserve energy or promote energy efficiency, (b) to reduce the energy demand a public utility must serve, or (c) to shift the use of energy to periods of lower demand, but does not include (d) a rate, measure, action or program the main purpose of which is to encourage a switch from the use of one kind of energy to another such that the switch would increase greenhouse gas emissions in British Columbia, or (e) any rate, measure, action or program prescribed. 1 S.B.C. 2010, c 22. Page 9A-1

5 With respect to (e), to date no rate, measure, action or program has been excluded by B.C. Minister of Energy regulation under subsection 37(b) of the CEA. BC Hydro does not consider the following to be DSM, all of which is captured in BC Hydro s Load Forecast: Closure of industrial facilities as a result of economic conditions; Rate increases from Revenue Requirement Applications (RRAs) or as set out in BC Hydro s Long Term Rate Forecast (LTRF) (as opposed to conservation rate structures described below); Natural conservation, defined as natural changes in efficiency that are expected to occur in the absence of DSM initiatives British Columbia s Energy Objectives The following British Columbia s energy objectives are relevant to BC Hydro s DSM Plan: To achieve self-sufficiency (CEA, subsection 2(a)). Subsection 6(2) of the CEA requires that BC Hydro achieve electricity self-sufficiency by 2016 and each year thereafter. To take demand-side measures and to conserve energy, including the objective of BC Hydro reducing its expected increase in demand for electricity by the year 2020 by at least 66 per cent (CEA, subsection 2(b)). To use and foster the development in B.C. of innovative technologies that support energy conservation and efficiency (CEA, subsection 2(d)). To reduce greenhouse gas emissions (CEA, subsection 2(g)) To encourage communities to reduce GHG emissions and use energy efficiently (CEA, subsection 2(i)). Page 9A-2

6 To reduce waste by encouraging the use of waste heat (CEA, subsection 2(j)). and To encourage economic development and the creation and retention of jobs (CEA, subsection 2(k)) Future Approval Process Pursuant to subsection 44.2(1)a of the UCA, BC Hydro will file an application for BCUC approval of expenditures related to the DSM Plan. It is expected that the application will include an updated DSM Plan that will reflect new information available at the time of filing on plan performance, DSM costs and energy savings opportunities DSM Regulation In its determination of DSM cost-effectiveness when considering DSM expenditure applications, the BCUC must consider and be guided by the Demand Side Measures Regulation. 2 The Total Resource Cost (TRC) test results reported in Attachment 1, Tables 5 and 6, have been calculated in accordance with this Regulation Bill 32 (Energy and Water Efficiency Act) Bill 32 (Energy and Water Efficiency Act) provides a new framework for the development, administration and enforcement of codes and standards. Together with the Pacific Coast Collaborative s 2012 West Coast Action Plan on Jobs that seeks to jointly develop energy efficiency upgrades, technologies and standards, additional and more cost effective DSM savings would be anticipated. 1.2 Conservation Potential BC Hydro s DSM strategy development is grounded in an estimate of the size of the electricity conservation and efficiency resource, being the potential to save electricity through DSM measures. The 2007 Conservation Potential Review (CPR) 2 Pursuant to section 44.2(5.1)(d) of the UCA. Page 9A-3

7 estimated the potential energy and capacity savings that could be achieved among BC Hydro s customers from 2006 to The CPR is a technical, end-use analysis of where, how and at what cost electricity demand in British Columbia could be reduced and estimates potential savings without assuming which DSM tools would be employed. The CPR identified 19,000 GWh/year of economic potential electricity savings by F2021 at a cost less than 13 cents/kwh. In addition, further savings are possible through changes that are not reflected in the CPR estimates, such as lifestyle changes, emerging technologies beyond those reflected in the CPR and step-changes in energy efficiency technologies. 1.3 DSM Strategy BC Hydro s strategic objective to Mind Our Footprint outlines the goal of fostering an energy conservation and efficiency culture. This objective is the starting point for BC Hydro s DSM strategy. The strategic framework introduced in the 2008 LTAP continues to influence BC Hydro s thinking on achieving electricity savings. 3 The framework depicts three levels through which conservation and efficiency actions can be influenced. (i) (ii) Individual refers to the context of the individual consumer who makes decisions about energy-using equipment and buildings and how to operate or use them. Market refers to the context of the marketplace where a number of market parameters, such as prices and rules, influence decisions about energy consumption and conservation by all consumers and market players. (iii) Societal refers to the context of the community or society where societal norms and patterns of living and work influence market parameters and individual choices. The figure below provides a visual representation of the three contexts. 3 The strategic framework is consistent with that developed by BC Hydro s Electricity Conservation and Efficiency Advisory Committee. Page 9A-4

8 Figure 1 DSM Strategic Framework Societal Market Individual With the strategic framework as its foundation, BC Hydro s DSM strategy is to pursue a diverse set of DSM tactics that: Transform British Columbia s economy by changing market parameters and shifting societal norms and patterns to increase energy efficiency and conservation, Collaborate with customers and partners to leverage our efforts, and Integrate with other offers and efforts, both internally and with other organizations, to increase the effectiveness of programs and support market and societal initiatives. The DSM tactics fall under the following categories: Codes and standards, designed to influence energy efficiency through regulations on equipment, buildings and industry, tax measures and municipal zoning and building permitting processes. Page 9A-5

9 Conservation rate structures aimed at conserving energy, promoting energy efficiency or reducing the demand BC Hydro must serve, such as the Residential Inclining Block (RIB) rate, the Large General Service (LGS) rate, and the Transmission Service Rate (TSR). Energy-focused programs, designed to address barriers to energy efficiency and conservation and capture additional conservation potential after codes and standards and conservation rate structures, as well as to set the stage for further changes to codes and standards; Capacity-focused programs, including industrial load curtailment and a suite of technology-focused programs, to specifically achieve capacity savings during BC Hydro s system peak by addressing barriers to peak shaving and peak shifting; Supporting initiatives, including support for the adoption of codes and standards by various levels of government; public awareness and education; community engagement; technology innovation; information technology; and indirect and portfolio-level enabling activities that provide a critical foundation for the success of the DSM tools in the DSM Plan. Table 1 DSM Tools and the Strategic Contexts Individual Market Societal Codes & Standards Rate Structures Energy-focused Programs Capacity-focused Programs Supporting Initiatives 2 DSM Plan Description As described in Chapter 9, three key recommendations are made in the area of DSM energy and capacity savings. Page 9A-6

10 (i) (ii) Pursue DSM Option 3 - Increase energy savings target to 9,800 GWh per year by F2021 (1,000 GWh more than the current plan) based upon the first two LNG loads being confirmed, through conservation and efficiency programs, incentives and regulations. 4 The utility cost of Option 3 over the four-year period of F2014 F2017 is estimated to be $1.4 billion. Advance DSM Options 4 & 5 Explore more codes, standards, and rate options for savings beyond the 9,800 GWh target. This action supports Bill 32 (Energy and Water Efficiency Act). It also supports BC Hydro s preparation for the next IRP and has an approximate cost of $7 million from F2014 F2017. (iii) Pursue DSM Capacity Options - Pursue voluntary capacity-focused conservation programs that encourage residential, commercial and industrial customers to reduce energy consumption during peak periods. The utility cost of DSM capacity options over the four-year period of F214 F2017 is estimated to be $143 million. This section summarizes the contents of the DSM Plan. 2.1 Contents The DSM Plan is made up of three DSM tools -- codes and standards, conservation rate structures and programs -- along with six supporting initiatives focused on energy and capacity savings. The Plan is flexible and will be adjusted over time as appropriate to account for new information or new opportunities. The following sections describe these tools and initiatives Energy-focused DSM Table 2 summarizes the energy-focused initiatives within each of the DSM tools. Each of these tools is described in turn. 4 DSM Option 3 targets energy savings by F2021 equivalent to approximately two Site C projects. Page 9A-7

11 Table 2 Energy-Focused DSM Tools and Initiatives in DSM Option 3 Tools Codes and Standards Rate Structures Lighting Torchieres Traffic & Pedestrian Lights Ceiling Fans Fluorescent Lamps Residential Appliances Dishwashers Portable Air Conditioners Room Air Conditioners Residential Electronics Standby Power Digital Television Adapters External Power Supplies Other Residential Equipment Furnace Blower Motors Hot Tubs Building Codes BC Building Code Commercial/Industrial Equipment Commercial Clothes Washers Ice Makers Commercial Refrigeration Dry Transformers Large Air Conditioners Residential Inclining Block Large General Service Medium General Service Small General Service Transmission Service Initiatives High Intensity Discharge Lamps and Ballasts Incandescent Reflector Lamps Fluorescent Ballasts General Service Lamps Clothes Washers Freezers Refrigerators Battery Chargers Set-Top Boxes Televisions Electric Water Heaters City of Vancouver Building By-law Liquid-filled Transformers Single Package Vertical Air-conditioners Packaged Terminal Air Conditioners Pre-rinse Spray Valves Large Motors Page 9A-8

12 Tools Initiatives Programs Residential Behaviour Lighting Refrigerator Buy-Back Low Income New Home Appliances Consumer Electronics Renovation Rebate Load Displacement Sector Enabling Activities Commercial Power Smart Partner Product Incentive New Construction Load Displacement Sector Enabling Activities Industrial Power Smart Partners, Transmission Power Smart Partners, Distribution New Plant Design Load Displacement Sector Enabling Activities Cross Sector Lead By Example Codes and Standards The term codes and standards refers to a range of government policy instruments that can influence energy efficiency, including product/equipment regulations, building codes, tax measures and municipal zoning and building permitting processes. Codes and standards are coordinated with programs to help drive the efficient technologies and practices. The DSM Plan supports and relies on government implementation of a suite of changes to codes and standards. The codes and standards included in DSM Option 3 have either been enacted, announced or are planned by government. The provincial government has introduced Bill 32 (Energy and Water Efficiency Act) and initiated development of additional codes and standards since DSM Option 3 was developed. The DSM Plan will support the development of these additional codes and standards and rely on their eventual implementation. Electricity savings from additional codes and standards will increase the prospect of achieving targeted Page 9A-9

13 electricity savings and may allow BC Hydro to reduce its DSM costs relative to those forecast in this DSM Plan. Additional details on the codes and standards projected in the DSM Plan are provided in Attachment 3. While these actions are expected to result in further codes and standards to rely upon in the future, BC Hydro will continue to pursue and rely on Option 3 until sufficient certainty has been achieved to adjust future DSM implementation plans Rate Structures Rate structures are changes to the design of electricity rates to provide more economically efficient price signals to customers which encourage conservation, while collecting the same amount of revenue as previous rate structures. BC Hydro has conservation rates in place (or with planned implementation) for 92 per cent of its domestic load. Over the past five years, BC Hydro has implemented four conservation rate structures for residential, commercial and industrial customers. A conservation rate structure for small commercial customers in the Small General Service rate class is planned for introduction in F2018. BC Hydro will continue to consider potential changes to these rate structures that could achieve additional electricity savings Programs The DSM Plan includes a suite of DSM programs that deliver a mix of information, access to efficient technology and services, technical assessment and support, and financial assistance to address barriers to cost-effective energy efficiency, conservation and load displacement. The DSM programs are designed to capture additional DSM energy savings potential that remains beyond that obtained from codes and standards and rate structures. In addition, programs are designed to complement rates structures and are critical in setting the stage for changes to codes and standards. Sector enabling activities, such as trade ally support and training, support the residential, commercial and industrial sector programs in 5 The government has initiated a review of industrial electricity policy, including industrial rates and rate design. Page 9A-10

14 achieving their savings. Programs will be adjusted as appropriate to account for new information, such as aligning incentives with promising codes and standards or changing program designs to work with new DSM financing mechanisms. 6 A description of the program strategy by sector is provided in the following sections. Residential Programs The suite of programs in the residential sector target a range of end-uses and aims to address the barriers faced by all residential customers, including low-income customers, in adopting energy efficiency and conservation measures. The residential programs are designed to complement the RIB rate by helping customers to respond to its conservation price signal and to set the stage for changes to codes and standards, as they can help to advance and prepare the market for the adoption of a regulation by government and acceptance by customers. Behaviour: Provides customers with information and motivation to reduce their consumption, including incentives to increase participation. This program will be further enhanced with the introduction of Smart Metering, through the introduction of in-home feedback. Lighting: Targets increasing the efficiency of residential lighting by providing incentives for residential customers to replace inefficient lighting technologies with energy efficient products and raising awareness of efficient lighting technologies, like specialty CFLs and light emitting diode products. In doing so, the Lighting program sets the stage for government regulations on lighting. Refrigerator Buy-Back: Encourages customers to give up their inefficient second refrigerator, reducing the number of secondary refrigerators in the marketplace. 6 In 2011, the government amended the Clean Energy Act (section 17.1) to enable the establishment of new energy efficiency financing mechanisms by public utilities. Page 9A-11

15 Low-Income: Targets the energy-efficiency of low-income households by addressing capital, awareness and education and other unique barriers that often prevent these customers from participating in other DSM programs. New Home: Encourages builders and developers to incorporate energy-efficient products and design at construction, in order to increase the market share of energy efficient new home construction and set the stage for changes to the energy efficiency requirements in the BC Building Code. Appliances: Encourages customers to consider energy efficiency when making their appliance purchases by increasing awareness and providing upstream incentives to retailers for targeted energy efficient products. Consumer Electronics: Aimed at reducing the electricity consumption of televisions and computers by residential customers through upstream incentives directed at retailers. Renovation Rebate: Encourages residential customers to undertake energy efficient upgrades to their existing homes, primarily focused on their space heating load. This program is embedded within the provincial government s LiveSmart BC offer and is managed and administered by the Ministry of Energy in conjunction with BC Hydro and Fortis BC providing a seamless, fuel-neutral and simple offer for customers. Load Displacement: Expected to start in F2015, this program will target the displacement of residential load through solar PV arrays for home use. The objective of the program will be to prepare the market to take off when these technologies become cost-effective in the future. Finally, the DSM Plan includes residential Sector Enabling activities such as home energy labelling, development of a financing initiative to provides access to loans for energy efficiency home improvements, training to tradespeople and other partners to enable them to deliver energy efficiency solutions and retailer partnerships that support the success of residential DSM initiatives. Page 9A-12

16 Commercial Programs The Commercial programs address the diverse needs and barriers businesses face in undertaking energy conservation and efficiency measures. The suite of offers includes financial resources, tools and education to identify and implement energy saving capital projects and help to instil a conservation culture in the workplace. The programs and sector enabling activities are designed to set the stage for changes to codes and standards and to help customers respond to the conservation price signals delivered by the LGS and MGS rate structures. This is realized through a variety of program offers. The Power Smart Partners program targets larger customers to implement energy efficiency retrofits, make operational and maintenance changes, behavioural changes and to integrate energy management into their ongoing business practices and corporate culture. The Product Incentive program provides a simple mechanism to help businesses implement simple retrofits as well as operations and maintenance and behavioural actions. The New Construction program targets electricity savings of new commercial buildings through more efficient design and construction relative to standard practice and aims to transform the new commercial building industry to a higher level of energy efficiency by influencing developers, designers, architects and engineers. In the process, this program sets the stage for changes to the energy efficiency requirements in the B.C. Building Code. The commercial load displacement program (expected to start in F2015) will capture energy savings by displacing existing electrical load at the customer site through the implementation of a range of renewable distributed generation projects. The DSM Plan also includes commercial sector enabling activities, which include the Power Smart Alliance, which fosters collaborative relationships with energy efficiency contractors, consultants, architects and design teams, the ecatalog which addresses the availability barrier for energy efficiency products aimed at business customers, and activities to further develop building labelling and a financing Page 9A-13

17 initiative to provides access to loans for energy efficiency measures and to build workforce capacity in energy management. Industrial Programs The Industrial programs target opportunities among large industrial customers, such as customer-based generation, process improvements, industrial equipment upgrades and operations and maintenance improvements, as well as opportunities in small and medium-sized industrial customers, such as lighting, compressed air, process improvements and pumping. A primary strategy for the industrial sector is to motivate and support industrial customers to integrate energy management into their businesses and enable customers to undertake more energy efficiency projects. The programs do so by providing tools, education and incentives to help customers overcome barriers to implementing energy efficiency upgrades and improved energy management practices. 7 Industrial programs help customers to respond to the conservation price signals delivered by the TSR and LGS rate structures and set the stage for changes to codes and standards in the future. The Industrial programs are designed to reflect the particular needs of customers (e.g., size or sub-sector). The Power Smart Partners-Transmission program targets large industrial customers who receive electricity supply at transmission voltage to implement energy efficiency retrofits, make operational and maintenance changes, behavioural changes and to integrate energy management their ongoing practices and corporate culture. The Power Smart Partners-Distribution program is aimed at small and medium industrial customers who receive electricity supply at distribution voltage with a similar offer and objectives. The New Plant program provides a comprehensive offer to support efficient facility design for new industrial plants in British Columbia. The Load Displacement program provides support and incentives 7 The programs could also support customer compliance with industrial energy reporting requirements that are contemplated under Bill 32 (Energy and Water Efficiency Act). Page 9A-14

18 for customers to displace purchased electrical load at their site through the implementation of additional on-site generation of electricity. The DSM Plan includes industrial sector enabling activities, such as the Power Smart Alliance, which fosters collaborative relationships with energy efficiency contractors and consultants to industrial customers, education and training on new technologies and best practice information for customers and Alliance members and activities to develop industrial plant certification as a tactic to increase energy efficiency of industrial plants. Lead By Example The Lead by Example program targets electricity savings at BC Hydro s facilities through energy efficiency capital projects and working to instil conservation policies, procedures and behaviours throughout BC Hydro s organization Supporting Initiatives The DSM Plan includes six supporting initiatives, shown in Table 3, that provide a critical foundation of awareness, engagement and other conditions to support the success of the DSM Plan s tools and initiatives. Page 9A-15

19 Table 3 Supporting Initiatives Supporting Initiatives Public Awareness & Education Community Engagement Technology Innovation Codes and Standards Support Information Technology Indirect and Portfolio Enabling Description Addresses market barriers to energy conservation by increasing: awareness of actions people and companies can take, acceptance of energy conservation as being the norm, understanding of the purpose and importance of energy conservation in general and participation in DSM initiatives specifically Leverages the potential of communities and local governments to become energy efficient and embed conservation in community planning, and increase public energy conservation behaviour and interest in Power Smart programs Identifies world-leading energy efficient technologies and accelerates their commercialization and adoption in B.C. Supports government implementation of codes and standards with funding and technical assistance Design, development and deployment of IT infrastructure to support successful implementation of the Updated DSM Plan General management and infrastructure to support implementation of the DSM Plan Advancing Options 4 and 5 As outlined in Chapter 3, section 3.3.1, Options 4 and 5 would involve a shift in DSM tactics to place a greater emphasis on changes in market parameters and societal norms, including additional codes and standards, such as a building retrofit code, and rate structures tied to building or facility energy intensity. These tactics have considerable potential to deliver additional, cost-effective electricity savings but face considerable uncertainty with respect to their feasibility, cost and impacts. The IRP recommends that BC Hydro take action prior to the next IRP to begin to reduce uncertainty about the feasibility and/or savings estimates for a selection of the tactics in Options 4 and Option 5. A significant aspect of these activities will be working with the government implementing Bill 32 (Energy and Water Efficiency Act), and the Pacific Coast Collaborative s 2012 West Coast Action Plan on Jobs. These activities could target building labelling, innovative rate concepts and industrial plant certification. These activities are expected to include: Strategy development Page 9A-16

20 Market research, studies and opportunity assessments; Measure design, including modelling and cost-benefit analysis; Customer, trade ally and/or stakeholder engagement; and Pilots. BC Hydro will develop an implementation plan for these activities for inclusion in future DSM expenditure applications to the BCUC Capacity-focused DSM While the energy-focused initiatives described above generate associated capacity savings, additional capacity savings are achievable through capacity-focused DSM, which targets capacity savings specifically. These activities, namely industrial load curtailment and capacity-focused programs, will be pursued as a long-term capacity resource and could represent a short-term resource if successful. These initiatives represent BC Hydro s first major implementation of capacity-focused DSM, and as a result, experience will need to be gained to increase certainty of the expected electricity savings Industrial Load Curtailment Industrial load curtailment targets large customers who agree to curtail load on short notice in return for a financial payment when total customer load exceeds BC Hydro s capabilities Capacity-focused Programs The programs are designed to provide capacity savings that can be dispatched under utility control. Programs may involve payment for customer equipment and a financial payment for participation in the program. These program efforts will need to be designed to encourage customer participation in the absence of peak and off-peak price signals. In addition, as smart appliances are introduced with the Page 9A-17

21 capability to communicate with smart meters, new capacity-focused opportunities are expected to emerge. Table 4 Capacity-focused Program Areas Residential Commercial Industrial - Water heater control - Thermostat or switch controlled heat - Switch controlled radiant heat - Energy management system load control - Water heater load control - Thermostat or switch controlled heat - Air conditioning load control - Direct load control for distribution customers 2.2 Energy and Capacity Savings The DSM Plan will deliver an increasing volume of energy and capacity savings over a 20-year period. This section provides a snapshot of energy and capacity savings from the DSM Plan at roughly the ten-year mark, in F2021. The energy and capacity savings presented in the tables are the mid savings estimates stemming from the DSM uncertainty assessment, as described in Chapter 5, section and are at the customer meter and do not include additional savings through reduced line losses Energy-focused DSM Table 5 and Table 6 provide expected energy and capacity savings from energy-focused DSM in F2021. Attachment 1 provides more detailed information on savings. Page 9A-18

22 Table 5 Energy-focused DSM: Cumulative Energy Savings since F2012 at Customer Meter in F2021 (GWh) (mid) Codes and Standards Rate Structures Programs Total Residential 1, ,165 Commercial ,507 3,079 Industrial ,084 3,710 Total 2,301 1,438 5,216 8,954 Table 6 Energy-focused DSM: Cumulative Associated Capacity Savings since F2012 at Customer Meter in F2021 (MW) (mid) Codes and Standards Rate Structures Programs Total Residential Commercial Industrial Total , Capacity-focused DSM Table 7 provides a snapshot of expected capacity savings from capacity-focused DSM at roughly the ten-year mark in F2021. Attachment 2 provides more detailed information on savings. Table 7 Capacity-focused DSM: Cumulative Capacity Savings since F2012 at Customer Meter in F2021 (MW) (mid) Industrial Load Curtailment 286 Capacity-Focused Programs Residential 99 Commercial 31 Industrial 61 Sub-total 191 Total 477 Page 9A-19

23 2.3 Utility Costs Implementation of the DSM Plan requires investment on the part of BC Hydro to implement rate structures, programs and supporting initiatives. Table 8 summarizes these costs over a 4 and 19 year period. The costs have been risk-adjusted to align with the mid savings estimates provided above. Attachments 1 and 2 provide more details on BC Hydro costs. Table 8 Utility Costs ($ million) DSM Plan Initiatives Four Years: F2014-F Years: F2014-F2032 Energy-Focused DSM Rate Structures Programs Residential 248 1,223 Commercial 470 3,005 Industrial 498 2,183 Total Programs 1,217 6,411 Supporting Initiatives Sub Total 1,374 7,287 Capacity-Focused DSM Industrial Load Curtailment Capacity Programs Sub Total DSM Plan Total 1, ,094 9 To the extent that additional codes and standards, DSM financing mechanisms or rate structure changes deliver additional electricity savings, BC Hydro s DSM costs may be lower than indicated in the table. 3 Justification The following section provides justification for the DSM Plan, including how the plan aligns with the Clean Energy Act objectives. 8 9 Includes Codes and Standards support. Includes $7 million for activities to advance Options 4 and 5. Page 9A-20

24 3.1 Energy-focused DSM Cost-Effectiveness Option 3 would deliver electricity savings at an average unit net cost of less than $10 per MWh 10, compared to new electricity supply costing an average of $129 per MWh. 11 As shown in Chapter 6, the expected cost of portfolios with Options 3, 4 and 5 are quite close, with Option 4 being the lowest cost option. 12 However, going beyond Option 3 is not recommended at this time because the small cost advantage is outweighed by the additional deliverability risk associated with Options 4 and 5. Nevertheless, the upside potential of Options 4 and 5 warrants further attention, as discussed in recommended action II. All DSM tools in the DSM Plan have a Total Resource benefit-cost ratio greater than 1.0 (refer to Attachment 1, Table 6) Rate Impact Despite the fact that Option 3 is expected to result in a rate impact compared to Option 2, it is expected to result in lower overall electricity bills ($180 million relative to Option 2 over the 20-year life of the IRP). Option 3 is expected to result in a 2 per cent rate increase over Option 2 over a ten-year period by F Environmental and Economic Benefits DSM avoids the environmental impacts associated with the construction of new generation facilities. Specifically, the energy-focused DSM outlined above would avoid the environmental impacts of approximately 1,300 MW of new electricity supply. Additionally, DSM has the potential to reduce the province s greenhouse gas emissions. Customers are forecast to reduce their natural gas consumption as a Chapter 6, Figure $129/MWh is BC Hydro s current reference energy price based on levelized UEC for the Clean Power Call firm energy price (adjusted for delivery to the Lower Mainland and for transmission losses and other Clean Power Call-related adjustments). Chapter 6, Figure Page 9A-21

25 result of BC Hydro s electricity DSM activity, resulting in a 146,000 tonnes reduction in GHG emissions in F2021. Incremental DSM also provides economic development benefits through the creation and retention of jobs and increases in GDP Comprehensive and Flexible The DSM Plan provides a comprehensive portfolio of DSM measures with a broad offering to all customer groups, which work in concert to affect significant and enduring change in the way electricity is utilized in the province. DSM measures are designed to complement one another and capture synergies. They are flexible and can be changed over time in response to new information in order to optimize performance and ensure DSM savings targets are achieved. The DSM Plan is designed for learning in that it includes actions to begin to establish and reduce uncertainty with respect to the feasibility and/or potential electricity savings from selected DSM tactics that were identified as having considerable savings potential. In F2032, in high DSM scenario, Option 5 could provide 8,100 GWh more savings than Option 3. Therefore, this learning will inform future IRPs Policy Alignment Option 3 aligns with several Clean Energy Act (CEA) objectives, as discussed in section 3.3. The work undertaken to implement Option 3 will also support Bill 32 (Energy and Water Efficiency Act). Bill 32 provides a new framework for the development, administration and enforcement of codes and standards. Together with the Pacific Coast Collaborative s 2012 West Coast Action Plan on Jobs that seeks to jointly develop energy efficiency upgrades, technologies and standards, the Energy and Water Efficiency Act creates the potential for additional, cost-effective DSM savings. Page 9A-22

26 3.2 Capacity-focused DSM The load-resource balance indicates a capacity gap starting in F2017 that persists at different levels over time despite the addition of large increments of generation capacity from Mica Units 5 and 6, Revelstoke Unit 6 and Site C. At that point BC Hydro will have exhausted the supply of relatively low cost and large scale increments of generation capacity and will need to advance a number of long-term capacity options to fill the remaining gap. Two capacity-focused DSM (CF-DSM) options, Industrial Load Curtailment and Capacity-focused Programs, have the potential to deliver capacity savings over the long-term, at an estimated cost of $32/kW-year and $53/kW-year respectively. 13 These costs are lower than gas-fired generation and pumped storage, the marginal capacity resources depending on the timeframe. If successful, CF-DSM will avoid the need for 475 MW of generation and bulk transmission capacity, resulting in a lower environmental footprint. In addition, CF-DSM would support BC Hydro in meeting its self-sufficiency and 93 per cent clean requirements as part of the CEA. Section 6.10 in Chapter 6 discusses the capacity analysis. CF-DSM represents a new capacity resource to BC Hydro and is subject to uncertainty with respect to its ability to reduce the system peak over the long-term. For this reason, BC Hydro will not yet rely on capacity savings from CF-DSM for resource planning purposes. However, implementation of CF-DSM starting in F2014 is justified based on BC Hydro s need for capacity resources and the low cost of CF-DSM relative to alternatives. CF-DSM provides the capacity potential to reduce the need for bridging resources and the likelihood of new gas-fired generation being used in contingency plans. Implementation will provide BC Hydro with information on the cost and impacts of CF-DSM that will inform decisions in future IRPs on whether to rely on CF-DSM as a long-term capacity resource. 13 Includes transmission and distribution losses. Page 9A-23

27 3.3 Alignment with Clean Energy Act The DSM Plan contributes to and aligns with British Columbia s energy objectives as outlined in the Clean Energy Act. Specifically: to achieve electricity self-sufficiency: The DSM Plan s forecast energy and capacity savings will contribute to BC Hydro achieving electricity self-sufficiency. to take demand-side measures and to conserve energy, including the objective of BC Hydro reducing its expected increase in demand for electricity by the year 2020 by at least 66 per cent: The DSM Plan is forecast to reduce BC Hydro s increase in electricity demand in F2021 by approximately 58 per cent including the Initial LNG load. Without the Initial LNG load, the plan would reduce the increase in demand by 78 per cent. None of the DSM Options meet the 66 per cent objective; Option 3 goes further towards meeting the objective than the current 2008 LTAP target. to generate at least 93 per cent of the electricity in British Columbia from clean or renewable resources and to build the infrastructure necessary to transmit that electricity: The implementation of DSM lowers the demand for new resources, assisting in the achievement of this objective at lower cost. to use and foster the development in British Columbia of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources: Both the DSM programs contained within the DSM Plan and the Technology Innovation supporting initiative will promote the use of innovative technologies supporting energy conservation. to ensure BC Hydro s rates remain among the most competitive of rates charged by public utilities in North America: The DSM Plan is expected to result in a cumulative 2 per cent increase in rates over a ten year period by F2021 relative to Option 2. However, the DSM Plan is forecast to reduce Page 9A-24

28 customer s electricity bills by $180 million relative to Option 2 over the 20-year life of the IRP. to reduce BC greenhouse gas emissions: The DSM Plan is forecast to result in natural gas savings that will reduce BC greenhouse gas emissions. BC Hydro estimates that the DSM Plan will reduce greenhouse gas emissions by 146,000 tonnes in F2021. to encourage the switching from one kind of energy source or use to another that decreases greenhouse gas emissions in B.C.: The DSM Plan includes the Community Engagement supporting initiative which supports local governments and developers to consider and develop community wide energy plans that encourage energy efficiency and decrease GHG emissions. to encourage communities to reduce greenhouse gas emissions and use energy efficiently: The DSM Plan s Codes and Standards Support and Community Engagement supporting initiatives provide support for communities to incorporate electricity efficiency into community energy planning and implement energy efficiency policies and projects. to reduce waste by encouraging the use of waste heat, biogas and biomass: The DSM Plan s Commercial and Industrial Load Displacement programs encourage load displacement using waste heat or renewable fuels such as biogas and biomass. to encourage economic development and the creation and retention of jobs: BC Hydro s analysis indicates that economic development benefits and employment increase with increasing effort on DSM. Page 9A-25

29 4 DSM Risk Management BC Hydro s approach to DSM risk management begins with the identification and assessment of risk and the development of mitigation measures at various stages in the DSM process. Performance management of the DSM Plan is a key component in managing the risks related to DSM savings and costs. In addition, BC Hydro uses Contingency Resource Plans to mitigate DSM-related risks. 4.1 Risk Mitigation Codes and Standards A key aspect of codes and standards risk mitigation is that BC Hydro does not have direct control over the implementation of codes and standards and thus relies on the action of governments to deliver these savings. Thus there is uncertainty regarding the timing, coverage and efficiency level of codes and standards outlined in the DSM Plan. However, these risks are mitigated by BC Hydro using its influence to support the implementation of codes and standards through its DSM programs and codes and standards supporting initiative. In addition, BC Hydro monitors government approval of codes and standards and uses the best available information, including results from completed evaluations, to estimate codes and standards savings. If it becomes apparent that codes and standards savings might be less than planned, BC Hydro can respond in a number of ways, for example: Approach the most appropriate government (i.e., federal, provincial or local government) to expedite the enactment of regulations; and Continue DSM programs to capture some of the savings expected from a code or standard. Page 9A-26

30 4.1.2 Rate Structures BC Hydro has implemented or is in the process of implementing four conservation rate structures that have been approved by the BCUC. 14 Together these rate structures will deliver an efficient price signal to customer classes that consume 92 per cent of BC Hydro s domestic load. The principal risk for rate structures is that the customer response from the rate structures is lower than planned. BC Hydro mitigates this risk in several ways during design and implementation - by applying rigorous rate design that includes customer consultations, forecasting rates using the best information available and educating customers on rate structure and how they can respond to it and achieve bill savings. If rate structure savings are lower than planned, BC Hydro can take the following actions: Redesign rate structures; Increase customer communication and support effort related to rate structures; and Expand DSM programs to achieve additional savings Programs To minimize the risk of lower participation than planned, DSM programs are designed to address barriers to energy efficiency and elicit customer participation using information from BC Hydro customers, trade allies and other jurisdictions. BC Hydro also undertakes comprehensive market and technical research into current and future DSM opportunities to develop the most effective Program and Initiative designs. In addition, conservation rate structures complement programs by motivating customers to participate. 14 The Transmission Service Rate, Large General Service Rate, Medium General Service Rate and Residential Inclining Block Rate. Page 9A-27

31 Programs also face a risk of delivering lower savings per participant than planned. This risk is mitigated by using a variety of sources on unit savings to forecast overall program savings, including market research, technical reviews of projects, measurement and verification results and program evaluations. If DSM program electricity savings fall below plan, BC Hydro can modify the program to respond and increase participation, for example by: Increasing or modifying program advertising; Modifying the program application process or eligibility criteria; Increasing or modifying program incentives; and Revising the list of qualifying products Portfolio At the portfolio or plan level, relying upon the flexibility of DSM is a key risk mitigation strategy. If DSM savings fall below plan or costs rise above plan, BC Hydro can shift costs or resources between initiatives or sectors. For example, through the diversity of the DSM plan, if one program is more successful than planned, resources may be shifted from another program to take advantage of that success. In doing so, these adjustments allow for the improvement of the DSM Plan as it is implemented and the mitigation of both cost and deliverability risk. 4.2 Performance Management BC Hydro manages the performance of the DSM Plan in a comprehensive manner than includes tracking a number of performance metrics, regular management reporting and oversight and electricity savings confirmation. The primary performance metrics for the DSM Plan are energy savings and costs, which are tracked monthly by initiative in addition to a number of supplemental leading and lagging indicators. Variances from plan are identified and discussed by management with a view to take corrective measures if needed. Page 9A-28

32 To further gauge performance, BC Hydro is continuously collecting feedback from manufacturers, retailers and other trade allies and partners on its initiatives. Management judgement, industry input and stakeholder feedback are then combined with these key performance indicators, when assessing changes to programs and initiatives. During the implementation of a program or initiative, risks are monitored through the tracking of indicators as described above. If the program is not performing as expected or if there is new information that could impact the program, program management will work to identify and analyze the issue and understand its potential impact on program performance. Issue identification and analysis could involve gathering feedback from customers and trade allies and additional market research. Once the issue is identified and understood, solutions would be explored and if a specific change has a good prospect of mitigating the issue, adjustments would be made to the program. Finally, reliably estimating DSM savings is also an important strategy to mitigate DSM deliverability risk. To accomplish this, BC Hydro undertakes a comprehensive approach to DSM evaluation, measurement and verification. Page 9A-29

33 Appendix 9A - Attachment 1 Energy-Focused DSM Table 1. Cumulative Acquired Energy Savings from F2012 at Customer Meter (GWh) F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 F2022 F2023 F2024 Codes and Standards Residential ,013 1,154 1,274 1,379 1,465 1,540 1,608 1,670 1,727 Commercial Industrial Sub-total 807 1,286 1,535 1,741 1,911 2,061 2,188 2,301 2,402 2,495 2,583 Rate Structures Residential Commercial 645 1,119 1,066 1,031 1, Industrial Sub-total 1,039 1,684 1,627 1,595 1,598 1,565 1,533 1,438 1,421 1,410 1,413 DSM Programs Residential Commercial ,026 1,208 1,364 1,507 1,645 1,781 1,910 Industrial ,144 1,477 1,827 2,256 2,660 3,084 3,372 3,569 3,689 Sub-total 1,363 1,866 2,356 2,925 3,445 4,033 4,615 5,216 5,676 6,040 6,317 TOTAL 3,208 4,835 5,518 6,261 6,954 7,660 8,337 8,955 9,500 9,946 10,313 DRAFT Note: F2012 and F2013 are not shown as detailed and updated information for these years is included in BC Hydro's F F2014 Revenue Requirements Application. Page 1 of 10

34 Codes and Standards Residential Commercial Industrial Sub-total Rate Structures Residential Commercial Industrial Sub-total DSM Programs Residential Commercial Industrial Sub-total TOTAL Energy-Focused DSM Table 1. Cumulative Acquired Energy Savings from F2012 at Customer Meter (GWh) F2025 F2026 F2027 F2028 F2029 F2030 F Integrated Resource Plan Appendix 9A - Attachment 1 21 Year Total: F2032 1,776 1,820 1,862 1,907 1,951 1,995 2,044 2, ,661 2,733 2,803 2,873 2,943 3,011 3,083 3, ,029 1,079 1, ,456 1,508 1,562 1,616 1,690 1,760 1,838 1, ,063 1,146 1,223 2,022 2,104 2,171 2,232 2,256 2,271 2,289 2,305 3,757 3,809 3,877 3,916 3,820 3,727 3,600 3,589 6,530 6,705 6,888 7,047 7,054 7,060 7,035 7,117 DRAFT 10,646 10,946 11,253 11,537 11,686 11,831 11,956 12,147 Page 2 of 10