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When it comes to energy efficiency, a kilowatt-hour saved is more than a penny earned.
Spending money on energy conservation has been a better investment for most utility ratepayers than building new power plants and transmission lines.
In Minnesota, utility conservation programs have returned an average of 8 cents per kWh for every 1.5 cents spent, according to the Center for Energy and Environment (CEE), a nonprofit that promotes efficiency.
Yet the two are rarely compared head-to-head in planning discussions. Savings are generally seen as an accounting adjustment to be made before decisions about how much and what kind of new generation to add to the system.
A subtle change to a state statute this spring seeks to change that by making Minnesota’s “energy efficiency power plant” a part of future energy planning debates.
Mike Bull, policy and communications director for the CEE, said the changes will likely be incremental at first, but the aim is to change the way utilities and regulators think about efficiency.
“We’re trying to pull it out, make it visible, and make it a clearer choice between supply- and demand-side resources,” Bull said.
The CEE is a member of RE-AMP, which also publishes Midwest Energy News.
‘You didn’t see it’
Every few years, regulated utilities in Minnesota need to get approval for a long-term resource plan, a forecast of future electricity demand and how the utility intends to supply enough power to meet that load.
Utilities also file regular energy conservation plans that outline how they expect to satisfy the state’s energy efficiency target, which asks utilities to achieve annual energy savings equal to 1.5 percent of sales.
The projected impact of those conservation plans gets subtracted from utilities’ long-term electricity demand forecasts early on in the resource planning process, said Bull, who previously worked as a resource planner for Xcel Energy.
“You didn’t see it. It was just a mathematical change in the load forecast. It wasn’t a visible option for comparing against supply-side resources,” he said.
As a result, there’s been little consideration given to whether it might be a better deal for customers if the utility spent money on lowering electricity use instead of building new power plants.
As part of a broader jobs and energy bill this spring, the Minnesota Legislature said that conservation should be considered an “energy resource,” and a preferred one at that:
“The legislature finds that energy savings are an energy resource, and that cost-effective energy savings are preferred over all other energy resources. The legislature further finds that cost-effective energy savings should be procured systematically and aggressively in order to reduce utility costs for businesses and residents, improve the competitiveness and profitability of businesses, create more energy-related jobs, reduce the economic burden of fuel imports, and reduce pollution and emissions that cause climate change.”
Bull said it clarifies that conservation isn’t only about meeting the state’s efficiency target. Efficiency, he says, should also be pursued above and beyond 1.5 percent whenever it’s more cost-effective than building new power plants and transmission lines.
“It’s to solidify its place in the resource hierarchy,” Bull said. “[What] we were looking to do with that language was to make it more clear that energy efficiency should be the first resource that’s turned to as we collectively do resource planning for our utilities.”
What happens next
One challenge early on will be figuring out how to compare efficiency projects side-by-side with generation projects. The state’s energy office is already discussing how it will measure cost and reliability on the same scale, Bull said.
The changes also clarify that the 1.5 percent annual efficiency target isn’t the sole responsibility of utilities; that the state can and should pursue savings “without direct utility involvement,” such as through codes and appliance standards, Bull said.
The Legislature also instructed the state’s Division of Energy Resources to conduct a series of meetings and produce a report on some of the questions and challenges that lie ahead for the state’s energy efficiency goals.
Among the questions to be addressed is how efficiency should be incorporated into resource planning and certificate-of-need proceedings in the state. The report is due to legislators on January 15.
While it’s still unclear how conservation will factor into those discussions, Bull said it makes sense for the Public Utilities Commission to consider efficiency in them:
“If it can be shown that energy efficiency resources are available to a utility at a lesser cost than, say, a supply side resource, than I think everybody’s better off if the commission encourages the energy efficiency resource.”