Presented at the 2013 ACEEE National Conference on Energy Efficiency as a Resource

1. Counting the Capacity that Didn’t Hatch:
The Rate Mitigation Effect of DSM Programs
Jennifer Edwards & Nancy Lange*
MN Center for Energy & Environment
*MN Public Utilities Commission
Presented at the 2013 ACEEE National Conference on Energy Efficiency as a Resource
September 22-24, 2013 – Nashville, TN

2. Center for Energy and Environment
 Non-profit based in Minneapolis, MN
 Energy efficiency program and service provider
 Energy and Home Improvement Financing
 Building Science and Program Design Research
 Minnesota Energy Policy
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3. Energy Efficiency as a BIG Resource
means…
A better understanding of the system
wide revenue benefits of DSM programs
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4. Minnesota DSM Case Study
 Xcel Energy’s 20-year program history
 Backward looking scenario analysis to compare
capacity options
 Compare additional revenue requirements
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5. The Resource Wedge
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6. Itemized Utility Bill
What if alternative power plant
capacity was itemized?
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7. DSM Scenario
Power Plant Scenario
0.24 ¢/kWh
0.66 ¢/kWh
 Lower Resource Costs
 Higher Resource Costs
 Fewer Sales
 More Sales
Additional Revenue Requirements =
Σ Annual Additional Costs ÷ Total Sales
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8. Cost Considerations
 DSM Scenario
 Power Plant Scenario
+ Conservation and Load
Management Program
Costs
+ Indirect Impact
+ Lost Revenue &
Incentives
+ Capital & Financing
Costs
+ Shareholder Returns
+ Fuel Costs
+ O&M
+ T&D maintenance
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9. Power Plant Offsets from DSM
2,000
1,750
Cumulative Offset Capacity
Capacity (MW)
1,500
1,250
1,000
750
500
250
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Incremental Demand Savings

10. Power Plant Offsets from DSM
2,000
1,750
Capacity (MW)
1,500
1,250
Cumulative Offset Capacity
250 MW
7 250-MW
250 MW
Combined Cycle
250 MW
1,000
250 MW
750
250 MW
500
250 MW
250
250 MW
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11. Combined Cycle Overnight Capital Costs
$1,200
Nominal $/kW
$1,000
$800
Years when plants came online
$600
$400
$200
$-
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Source: AEO Assumptions

12. Capital Revenue Requirement Calculations
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13. Historical Natural Gas Fuel Costs
10.00
9.00
$2011/MMBtu
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
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Source: EIA Electric Power Producer Price

14. Results
Natural Gas Power Plants
DSM Programs
Incentives
23%
Program Costs
77%
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$1.14 Billion
580,855 GWh
0.24 ¢/kWh
Total Cost
Total Sales
Addl Revenue
$4.16 Billion
629,212 GWh
0.66 ¢/kWh

15. Scenario: Coal Plant Displacement
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16. Power Plant Offsets from DSM
2,000
1,750
Capacity (MW)
1,500
5 250-MW Gas Plants
+
250 MW
1 500-MW Coal Plant
250 MW
1,250
250 MW
1,000
250 MW
750
250 MW
500
250
-
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500 MW

17. Scenario: Coal Plant Displacement
Gas
Operatio
n
19%
Coal
Capital
42%
Gas
Capital
18%
Coal
Operatio
n
19%
$4.89 billion
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Revenue Requirements
(¢/kWh)
Transmiss
ion
2%
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
DSM
Resource
Gas Only
0.78 ¢/kWh
Coal + Gas

18. Scenario: Avoided Transmission Lines
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19. Scenario: Avoided Transmission Lines
O&M
8%
Capital
Costs
33%
Fuel
54%
$4.30 billion
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Revenue Requirements (¢/kWh)
Transmis
sion
5%
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.68 ¢/kWh

20. Scenario: Average Measure Life
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21. 10-Year Measure Life
9%
Capital
Costs
30%
Fuel
58%
Revenue Requirements (¢/kWh)
Transmiss
O&M ion
3%
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
DSM Resource
$3.26 billion
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Gas Only
10-yr Measure
Life
0.53 ¢/kWh

22. 20-Year Measure Life
Transmissi
on
2%
0.90
O&M
9%
Capital
Costs
31%
Fuel
58%
$4.50 billion
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Revenue Requirements (¢/kWh)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
DSM
Resource
Gas Only
10-yr
20-yr
Measure Life Measure Life
0.71 ¢/kWh

23. Summary of Scenario Results
Revenue Requirements (¢/kWh)
0.90
0.78
0.80
0.66
0.70
0.71
0.68
0.60
0.53
0.50
0.40
0.30
0.24
0.20
0.10
0.00
DSM Resource
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Gas Only
Coal + Gas
New
Transmission
Lines
10-yr Measure 20-yr Measure
Life
Life

24. Summary
 DSM programs allow customers to save on the energy
they do use, as well as the energy they don’t
 System wide avoided revenue requirements are 3-4
times higher than DSM program costs
 Includes total DSM costs, but only power plant costs
recovered during the 20-yr time frame
 One specific example, but relevant for other DSM
programs, especially those just beginning.
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25. Thank you!
Jennifer Edwards
jedwards@mncee.org
(612) 335-5873
White paper forthcoming:
www.mncee.org/Innovation-Exchange/ResourceCenter
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