Time-varying value of electric energy efficiency

Electric energy efficiency resources save energy and may reduce peak demand. Historically, quantification of energy efficiency benefits has largely focused on the economic value of energy savings during the first year and lifetime of the installed measures. Due in part to the lack of publicly available research on end-use load shapes (i.e., the hourly or seasonal timing of electricity savings) and energy savings shapes, consideration of the impact of energy efficiency on peak demand reduction (i.e., capacity savings) has been more limited. End-use load research and the hourly valuation of efficiency savings are used for a variety of electricity planning functions, including load forecasting, demand-side management and evaluation, capacity and demand response planning, long-term resource planning, renewable energy integration, assessing potential grid modernization investments, establishing rates and pricing, and customer service.

This study reviews existing literature on the time-varying value of energy efficiency savings, provides examples in four geographically diverse locations of how consideration of the time-varying value of efficiency savings impacts the calculation of power system benefits, and identifies future research needs to enhance the consideration of the time-varying value of energy efficiency in cost-effectiveness screening analysis. Findings from this study include:

• The time-varying value of individual energy efficiency measures varies across the locations studied because of the physical and operational characteristics of the individual utility system (e.g., summer or winter peaking, load factor, reserve margin) as well as the time periods during which savings from measures occur.
• Across the four locations studied, some of the largest capacity benefits from energy efficiency are derived from the deferral of transmission and distribution system infrastructure upgrades. However, the deferred cost of such upgrades also exhibited the greatest range in value of all the components of avoided costs across the locations studied.
• Of the five energy efficiency measures studied, those targeting residential air conditioning in summer-peaking electric systems have the most significant added value when the total time-varying value is considered.
• The increased use of rooftop solar systems, storage, and demand response, and the addition of electric vehicles and other major new electricity-consuming end uses are anticipated to significantly alter the load shape of many utility systems in the future. Data used to estimate the impact of energy efficiency measures on electric system peak demands will need to be updated periodically to accurately reflect the value of savings as system load shapes change.
• Publicly available components of electric system costs avoided through energy efficiency are not uniform across states and utilities. Inclusion or exclusion of these components and differences in their value affect estimates of the time-varying value of energy efficiency.
• Publicly available data on end-use load and energy savings shapes are limited, are concentrated regionally, and should be expanded.