GDS’ potential studies have assumed that rebates (or other forms of assistance to customers) will be set at 50% of measure incremental cost. Their estimation of achievable potential is made in that context. Applying standard economic models to find the optimum rebate strategy for any given budget level leads to the conclusion that rebates should be zero for measures whose energy use is above market average for substitute measures and that rebates for measures whose energy usage is below market average should be proportional to avoided energy costs relative to market average. Since modeling market shares does not appear to be within GDS’ standard practice, a reasonable approximation to this strategy is to set rebates such that the UCT ratio is constant across all beneficial measures and zero for those for which the resulting rebate would be trivially small. I therefore recommend that you ask GDS to redo the potential calculations on this basis, beginning with the same total budget level as results from rebates equal to 50% of measure incremental cost. I consider that modeling measure adoption rates in relation to rebate levels is the weakest aspect of GDS’ practice, so the results of this analysis will warrant scrutiny for reasonable results. If the results of the preceding analysis appear reasonable, then it would be useful to model the achievable energy waste reduction and budget levels at a series of different UCT ratios so as to construct an energy waste reduction supply curve for use in integrated resource planning. Customer interest in energy efficiency measures is affected by customer avoided cost of electricity, which is affected by rate design. Since time-of-use rate designs will be amongst the options examined in the demand response potential study, I further recommend that once a rate design for evaluation in the demand response potential study is established, GDS should be requested to analyze the achievable potential under that rate design. Significant additional economic and achievable potential may be available for utilities that adopt on-bill repayment programs. An analysis of that potential could be a very useful additional work product.
GDS’ potential studies have assumed that rebates (or other forms of assistance to customers) will be set at 50% of measure incremental cost. Their estimation of achievable potential is made in that context. Applying standard economic models to find the optimum rebate strategy for any given budget level leads to the conclusion that rebates should be zero for measures whose energy use is above market average for substitute measures and that rebates for measures whose energy usage is below market average should be proportional to avoided energy costs relative to market average. Since modeling market shares does not appear to be within GDS’ standard practice, a reasonable approximation to this strategy is to set rebates such that the UCT ratio is constant across all beneficial measures and zero for those for which the resulting rebate would be trivially small. I therefore recommend that you ask GDS to redo the potential calculations on this basis, beginning with the same total budget level as results from rebates equal to 50% of measure incremental cost. I consider that modeling measure adoption rates in relation to rebate levels is the weakest aspect of GDS’ practice, so the results of this analysis will warrant scrutiny for reasonable results. If the results of the preceding analysis appear reasonable, then it would be useful to model the achievable energy waste reduction and budget levels at a series of different UCT ratios so as to construct an energy waste reduction supply curve for use in integrated resource planning. Customer interest in energy efficiency measures is affected by customer avoided cost of electricity, which is affected by rate design. Since time-of-use rate designs will be amongst the options examined in the demand response potential study, I further recommend that once a rate design for evaluation in the demand response potential study is established, GDS should be requested to analyze the achievable potential under that rate design. Significant additional economic and achievable potential may be available for utilities that adopt on-bill repayment programs. An analysis of that potential could be a very useful additional work product.
5Lakes-EWR_Potential_Study_Recommendations_560317_7.docx