American Gas - July 2014 - (Page 27)

STILL THE BEST VALUE in natural gas consumption. By reducing customer demand in aggregate, gas and electric energy-efficiency programs can reduce gas prices to all consumers, regardless of whether they participate in an efficiency program. In California, the Pacific Northwest, and the Northeast, where regulators have accepted this demand reduction effect on wholesale electricity and capacity prices as a program benefit, policymakers have not extended that benefit to natural gas programs by placing an explicit value on the price reduction benefit of gas energy efficiency. By reducing demand, energy-efﬁciency programs could also reduce "transmission bottlenecks," where infrastructure is constrained: In those regions, system operators have raised concerns about the reliability of electricity supply during periods of high demand. For example, in Massachusetts, a recent [2012] study by the New England Independent System Operator concluded the region's gas supply infrastructure, despite planned new pipeline additions, "is inadequate to satisfy New England power sector gas demands on a winter peak (design) day over the next decade" (ISONE 2012). These transmission constraints put customers at some risk of electricity brownouts or blackouts. Natural gas and electricity energy-efficiency programs can reduce these transmission bottlenecks. Most states that test efﬁciency programs for cost-effectiveness choose the Total Resource Cost economic test, which "is intended to include all costs and beneﬁts associated with securing energy savings." Five states use the Program Administrator Cost test, which excludes the customer's share of project costs. Five other states use the Societal Cost Test, "a variant of the TRC which takes a broader societal perspective." With the SCT: More types of benefits are included, the benefits extend beyond utility customers, and the benefits are valued over a longer time horizon than is typical for private sector investments. This test often in- The ACEEE's most recent cost analysis (March 2014) suggests that natural gas energyefﬁciency programs are still a lower-cost resource than natural gas production: As efficiency programs gain wider traction as a utility resource, the need increases in step for high-quality, comprehensive, and consistent data metrics on energyefficiency program costs and cost-effectiveness. In this report [ACEEE] review[s] utility-sector energy-efficiency program costs in recent years (2009-2012). [ACEEE] collected data from reports by program administrators to calculate the levelized cost of saved energy, which is the best way to compare energy efficiency to other energy resource options. [ACEEE finds] that energy-efficiency programs are holding steady as the leastcost energy resource option that provides the best value for America's energy dollar. At an average of 2.8 cents per kWh, electric utility energy-efficiency programs are about one-half to one-third the cost of alternative new electricity resource options. At an average of 35 cents per therm, natural gas utility energy-efficiency programs are less than the current average price of natural gas (39 cents per therm in 2013). These data represent a large number of diverse jurisdictions across the nation (20 states for electricity programs and 10 states for natural gas programs) and show that energy efficiency has remained consistent as the lowest-cost resource, even as the amounts of energy efficiency being captured has increased significantly. The full report, "The Best Value for America's Energy Dollar: A National Review of the Cost of Utility Energy Efﬁciency Programs," is at http://bit.ly/1h3IXsA. In another report, the ACEEE summarizes the broader beneﬁts of efﬁciency programs: New supplies of natural gas have become available in the United States as a result of a substantial increase in shale gas development, lowering gas prices. Changes in the natural gas market represent challenges and opportunities for energy-efficiency programs and policies. An extended period of very low gas prices could make certain energy-efficiency measures uneconomical, but experts do not expect the recent low prices to be sustainable. Past experience indicates that most well-designed electric and natural gas energy-efficiency programs should continue to be cost-effective under the forecasted moderate natural gas prices. Moreover, low gas prices make some measures, such as CHP, more competitive, and the United States should take advantage of this opportunity. Planning for energy-efficiency policies and programs should also incorporate an assessment of several natural gas market risk factors, including the outlook for competing demands and potential export markets as well as production, regulatory, and litigation risks. These factors tend to increase the value of energy efficiency as a means of mitigating risk. However there is no substitute for the core economic benefits inherent in simply reducing energy consumption. Energy efficiency will help reduce the demand for natural gas, which will keep gas market prices low and benefit consumers. In addition, energy efficiency can benefit all ratepayers by helping avoid new power plant costs. Energy efficiency is cost-competitive even when the average price of natural gas is low and there are many additional benefits on top of the cost savings: job creation emissions reductions, and more stable electricity and natural gas markets. The full report, "How Energy Efﬁciency Enhances the Beneﬁts of the Natural Gas Boom," is at http://bit.ly/1nKGbLO. JULY 2014 AMERICAN GAS 27 http://www.bit.ly/1h3IXsA http://www.bit.ly/1nKGbLO

Table of Contents for the Digital Edition of American Gas - July 2014

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American Gas - July 2014