Cost-effectiveness is widely understood as the single biggest factor in determining what energy efficiency (“EE”) investments, both traditional (e.g., use of rebates, direct install programs, etc.) and innovative (e.g., use of distributed energy resources, customer engagement programs, etc.), should be made by a utility and whether such investments will be acceptable to utility regulators. Yet at the same time, the calculation of cost-effectiveness is among the least consistent and most contentious parts of the utility energy efficiency review, approval and compliance reporting processes.Download the thought piece on cost effectiveness to find out why and where to go from here
Low gas prices present a significant challenge to justifying gas energy efficiency (“EE”) programs, since the primary benefit of gas EE, as calculated in a cost effectiveness test, is the avoided gas cost. Given the critical role avoided gas costs play in cost effectiveness tests, we might have expected by now that the industry (i.e., regulators, advocates and EE planners) would have settled on one universally accepted approach to calculating avoided gas costs. But the industry hasn’t, creating an environment where the approach taken to avoided costs may not be aligned with a utility’s objectives and situation.
Four alternative avoided gas cost methodologies are in use today. Which method does your utility currently use? Which approach should your utility be using? Read the full paper to learn about the different approaches, their relative strengths and weaknesses, and strategic questions for utilities to ask when choosing their preferred approach.Download the white paper on avoided gas costs
New York’s “Reforming the Energy Vision” or “REV” seeks a great many changes to the way utilities do business and how distribution systems and the buildings connected to them work. Thus far, most of the discussion of REV in the literature has focused on utility earnings incentives and treatment of energy efficiency (EE) as any other distributed energy resource for the purpose of avoiding distribution system investments.
Recently under REV, one of the more interesting changes involving EE has emerged whereby EE will evolve from a regulatory compliance exercise with dedicated cost recovery mechanisms to a core element of the utility’s business and a part of base rates. The challenge here is: How do utilities analyze EE investment options to fit within their business planning, budgeting and ratemaking processes and simultaneously address their state EE regulatory requirements?Download the thought piece on running energy efficiency as a business
As energy efficiency programming and the closely related issue of distributed energy rapidly change within the broader evolutions of the utility business model, two recent proceedings in Missouri raise fundamental questions for utilities nationwide. Together, the Missouri Public Service Commission’s 2015 generic decoupling proceeding and Ameren Missouri’s second Missouri Energy Efficiency Investment Act energy efficiency plan, approved earlier this year, speak to issues of rates and revenue, resource planning, and capital planning, as these issues are juxtaposed against sometimes misaligned or even competing mandates.
Download the Missouri white paper for MCR’s thoughts on how these proceedings might apply on a national level.
DEERFIELD, IL, January 29, 2016: MCR Performance Solutions, LLC, a leading management consulting firm serving electric, natural gas and water utilities, will be participating in the Midwest Energy Efficiency Alliance’s Midwest Energy Solutions Conference on February 24-26 in Chicago, Illinois. This annual conference raises awareness and reinforces the importance of energy efficiency in the Midwest.
Tom Crooks, Vice President of MCR’s Energy Efficiency practice, will provide insights during the kWh20: A Mashup of Water and Energy panel on Wednesday, February 24 at 4:00 pm. Tom has developed and tested prototype energy efficiency programs for water and wastewater agencies, drafted major portions of the California’s Water–Energy Relationship Report and developed research program roadmaps for the commercial, industrial, water and agriculture sectors. He has planned, implemented and evaluated energy efficiency programs for utilities in 25 states.
“In the past decade, we have learned a lot about the water-energy nexus and methodologies for identifying the amount of embedded energy in water. This work prepares us well to employ water-energy project approaches that optimize resource management,” Crooks said in anticipation of participating in the upcoming conference.
MCR’s Energy Efficiency practice assists clients in developing policy and providing regulatory support, program and project planning and implementation. MCR’s expertise includes developing models that forecast technical, economic and achievable efficiency gain potential across diverse geographies and climates. Additional areas of expertise include efficiency strategy and rate impact; load forecasting and research; performance measurement and process improvement. We assist our clients to evaluate, diagnose and implement systemic improvement and provide associated regulatory support.
MCR is a management consulting firm specializing in the electric, natural gas and water utility industries. MCR helps clients achieve superior performance through innovative and effective solutions in their strategies, operations, processes, finances, forecasting, organizational designs, economics, testimony, and business cases. Our practices include Regulatory Services, Energy Efficiency, Transmission Strategy, Nuclear Generation, Financial Advisory and Utility Transformation Services. For more information, please visit www.mcr-group.com.
This summer, Ed Schmidt (Director of the Energy Efficiency practice at MCR) attended the Southern Gas Association’s Marketing, Customer Experience and Communications conference in San Antonio. A key topic of discussion was building and equipment codes and standards and the impact they have on energy efficiency (EE) program planning, performance and costs, as well as on non-EE sales and marketing oriented toward load retention and growth. In this follow-up paper, Ed explores the issues affecting EE and non-EE strategies, and develops five high-impact plays in a utility’s game plan to strategically address the issues of changing codes and standards.Download the codes and standards paper
In the implementation of many types of energy efficiency (EE) programs, trade allies often play an important delivery role in each of the major market segments –residential, commercial and industrial. In fact, a substantial portion of non-retail (mid-stream/upstream) program activity is enabled, developed, sold and quantified for EE cost and savings purposes by networks of trade allies. Unfortunately, all too often, we see utilities failing to extract the full potential value from their trade allies. The good news is that a properly developed, trained and managed trade ally network can create significant value for a utility by decreasing administrative costs; reducing evaluation, measurement and verification (EM&V) risk; and increasing overall customer satisfaction.Download the trade ally network white paper
All energy efficiency professionals know it is challenging to design a portfolio of energy efficiency programs that will withstand tough scrutiny by third-party evaluators and achieve high realization rates. But, you can achieve that goal with high cost effectiveness if you follow our guideline: Programs designed to be measured … measure well. MCR’s case study explores the methods for creating a portfolio of programs that feature evaluation at the core of the program design.Download the Duquesne Light Company EM&V case study
MCR presented “Effective C&I Gas EE Programming” at the 2014 Southern Gas Association Conference, where we discussed opportunities to invest in natural gas energy efficiency, enhanced approaches to shareholder return and advanced cost effectiveness tests that work in an environment of low natural gas commodity costs.Download the C&I gas EE presentation
Running a portfolio of energy efficiency programs is a data intensive business. Baseline and replacement technologies, measure lives, deemed savings, budgets, program and cost effectiveness tests results: these represent a small sample of the energy efficiency business information. The users of this information are diverse and support a wide range of processes, including program management, regulatory reporting and customer relationship management.
Having accurate, timely and accessible data is critical to running an energy efficiency portfolio. However, MCR`s research suggests there is no standard set of data management strategies or software systems to manage this important business information. Instead, a wide range of incomplete solutions are being used across the industry.Download the EE business management systems white paper
MCR presented at the 2013 NARUC Summer Committee Meetings, where we discussed win-win options, challenges and examples of energy efficiency and demand response programs that work for energy companies, water companies and customers.Download the energy and water EE presentation
Often neglected, if they exist at all, utility street lighting strategies and programs are becoming increasingly important given the emerging excitement (and reality) of solid-state lighting (LEDs). The quality of light, the promise of long product life and the potential benefits of high energy efficiency seem to make replacement of the traditional sodium and mercury vapor street lights with LEDs a “no-brainer.” However, as is often the case with new technology, LED street lights are both a tremendous opportunity to create customer satisfaction and financial benefits, and a potential risk as well. To be successful in this changing environment, utilities must develop a well thought out strategy.Download the LED street lighting white paper
With the prospect of abundant supply and low natural gas prices into the foreseeable future, and the potential for continued declining use per customer, many natural gas companies are asking themselves a fundamental question about energy efficiency: why do it? Or perhaps better stated, why do anything more than meet the minimum regulatory or legislative requirements?
The case for doing more in natural gas energy efficiency revolves around answering two central questions:
(1) With low natural gas prices, are there any energy efficiency measures that make economic sense for customers and utilities alike?
(2) Is there an approach to energy efficiency that makes sense for shareholders?
Low natural gas prices are generally very good for customers. Nonetheless, low commodity costs produce less potential savings from traditional natural gas energy efficiency measures, perhaps leading customers to conclude that higher upfront costs for greater efficiencies may not be recovered over a product’s useful life. Similarly, low avoided costs create challenges for natural gas local distribution companies (LDCs) in terms of meeting traditional regulatory cost-effectiveness tests for these programs. In pure economic terms, customers seek a solid return on investment (ROI) or simple payback on efficiency investment; and, LDCs seek certain cost recovery (and perhaps more). That’s a tall order on both counts.
This paper is the first in a series of white papers. Learn more about the other white papers in the series by following the links to Natural Gas Energy Efficiency: Making It Work for Shareholders and Natural Gas Energy Efficiency: Cost Effectiveness-Getting It Right.Download the first natural gas EE white paper
This paper is the second paper in a series of MCR white papers focused on energy efficiency for natural gas utilities. The entire three-part series is focused on addressing two central questions:
(1) When natural gas prices are low, such as they are today, do energy efficiency measures exist that make economic sense for customers and utilities alike?
(2) Is there an approach to energy efficiency that makes sense for shareholders?
The first white paper in the series, Natural Gas Energy Efficiency: Finding the Win-Win, addressed the first question and made the case for energy efficiency from both the customer and utility perspective. This paper addresses the second question and explores an approach to creating shareholder value through energy efficiency. The third, and final, paper in the series, Natural Gas Energy Efficiency: Cost Effectiveness-Getting It Right, addresses the question, “How do we get there?”Download the second natural gas EE white paper
This white paper is the third and final paper in a series about energy efficiency for gas utilities. In the first two MCR white papers, two questions were addressed:
(1) With low natural gas prices, are there any energy efficiency measures that make economic sense for customers and utilities alike? (Natural Gas Energy Efficiency: Finding the Win-Win)
(2) Is there an approach to energy efficiency that makes sense for shareholders? (Natural Gas Energy Efficiency: Making It Work for Shareholders)
Answers to both questions were favorably developed, leaving one key remaining question: “How do we get there?” Answering this last question becomes a matter of securing regulatory approval of the energy efficiency portfolio, which hinges upon cost-effectiveness. In most jurisdictions this means the total resource cost test (TRC), and there are several potential modifications to the TRC calculation that LDCs ought to consider.Download the third natural gas EE white paper