Opinionated: The Diablo Energy Efficiency Opportunity

12 Dec 2017

Editor’s Note: The California Public Utilities Commission was set to vote Dec. 14 on the decision to reduce funding for Pacific Gas & Electric to close its Diablo Canyon Nuclear Plant from $1.76 billion to $172 million. However,  the commission announced at the start of the Thursday business meeting that a vote on the proposed closure terms for the 2,240 MW plant will be held until Jan. 11.

By Mark Shahinian

“Doubling” energy efficiency in existing buildings as required by Senate Bill 350 means utilities, and the California Public Utilities Commission, must radically accelerate development of next-generation efficiency programs. As a practical matter, this acceleration has to happen in parallel with utility administration, and CPUC oversight, of ongoing energy savings programs.

A unique opportunity to do just that is presented by Pacific Gas & Electric’s proposal to close its Diablo Canyon Nuclear Plant by 2025. It includes procuring a large chunk of energy efficiency to replace the nuke’s output.

Unfortunately, the Commission is poised to punt consideration of this additional efficiency spending to another proceeding.

The non-profit Future Grid Coalition has worked to reframe PG&E’s proposed Diablo energy efficiency procurement as the world’s largest meter-based energy efficiency program. The basic idea of meter-based approaches to savings is that automated software will generate a “baseline” energy use, against which actual use will be compared. The difference between the two is the measured savings.

Shifting the focus of the Diablo efficiency procurement offers an extraordinary opportunity to advance next-generation efficiency programs by directing money toward and setting the needed standards for meter-based energy efficiency technology.

PG&E’s closure application, sponsored by a number of parties including major environmental groups, proposes to buy a large slug of energy efficiency for $1.2 billion spread over seven years.  This is equivalent to roughly half of PG&E’s current energy efficiency spending for non-low-income energy efficiency programs.

Procurement of energy efficiency as a resource–as PG&E and the other Joint Parties propose–means moving to meter-based approaches to energy efficiency, where efficiency is metered the same as generation resources.  In the variable, distributed grid of the future, meter-based approaches are inevitably a big piece of energy efficiency, as the Legislature recognized in AB 802 when it mandated consideration of meter-based programs.

Meter-based approaches accomplish three main goals. First, they increase project transparency, and therefore allow for projects to become financed by private capital. Second, this transparency allows for program administrators–and regulators–to better verify results. Third, knowing the temporal and locational value of energy efficiency allows it to become a grid resource, and stack up against other resources in an Integrated Resource Planning-like proceeding.

There are problems with the Joint Parties’ proposal, mainly to do with how cost-effectiveness is calculated. However, the proposal, if implemented as we envision, does open up a previously-blocked road to significant negawatt gains.

The Diablo closure deal also is important because it puts in place the key components for utility-scale procurement of energy efficiency in the proceeding. They include:

  • Treatment of energy efficiency as a generation-equivalent resource–though we would push for more specific requirements around meter-based efficiency measures than are proposed by PG&E and the joint parties; and
  • Sufficient money to attract market and investor interest in meter-based energy efficiency in a way that has historically been lacking. No death-by-pilot here.

That is what makes the Diablo closure such a great opportunity. It can be used to make meter-based energy efficiency a reality.

The Commission needs more and different energy efficiency, and, it needs it fast (in regulatory terms). “Fast” here means by 2025 to cover Diablo; and by 2030 to comply with the savings mandates of SB350.

The second point is perhaps the more critical: The Commission maximizes its chances of achieving SB 350’s goals if it starts building the foundation for the next suite of efficiency programs right now.

If you think the twelve years between now and 2030 is a long time, and that the SB350-mandated doubling of savings in existing buildings can be achieved in the normal course, think again.

For example, consider the meter-based High Opportunity Programs and Projects (HOPPs) pilots.  The CPUC issued a ruling authorizing meter-based pilots back in 2015, but the HOPPs pilots are just now getting off the ground.  For another example, consider the time it has taken to put energy efficiency “rolling portfolios” in place.  The Commission approved the shift to “rolling portfolios” in October of 2015.  That process is still under way.

The appeal of turning to the Integrated Resource Planning proceeding is understandable, but chimerical. While the Integrated Resource Planning proceeding is in theory a great alternative, the gap between theory and practice is larger in practice than it is in theory.  The IRP is untested and still in large part inchoate.  Moreover, when energy efficiency is lumped into a proceeding with gas-fired generation, various types and sizes of renewable generation, and myriad other distributed resources, efficiency will be a side-show.  It will never get the time and attention needed for resolution of the thorny questions that it presents.

Hence, some form of siloed energy efficiency proceeding is inevitable.  But current stand-alone energy efficiency proceedings are not the answer to the timing challenges the Commission faces.  Current proceedings require a focus on the next few steps that effectively precludes looking to the horizon. A longer perspective is critical if the Commission wants to avoid cornering itself in a place where it has to meet SB350’s goals, but has maxed out what it can do with existing program approaches, as is already the case.  See http://cacurrent.com/subscriber/archives/29593.

The bandwidth problems the Commission faces in trying to both address current concerns and plan for the future of energy efficiency all in one proceeding must be recognized.  Only multiple proceedings allow for the kind of parallel processing needed here. Layering on to an existing proceeding means a sequential process, which carries with it an unacceptable delay given SB 350’s deadlines.

The critical pieces are in place in the Diablo proceeding: conceptual commitment to energy efficiency as a utility-scale generation-equivalent resource, and the money to motivate market participants to help clear the hurdles that have held up performance-based approaches to energy efficiency.

The pieces are all there.  The CPUC just needs to pick them up!

Mark Shahinian is the President of the Future Grid Coalition, a 501(c)(3) working on meter-based energy efficiency.

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