Maximizing energy savings reliability in BC Hydro industrial Demand-Side Management programs: an assessment of performance incentive models.




Gosman, Nathaniel

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For energy utilities faced with expanded jurisdictional energy efficiency requirements and pursuing demand-side management (DSM) incentive programs in the large industrial sector, performance incentive programs can be an effective means to maximize the reliability of planned energy savings. Performance incentive programs balance the objectives of high participation rates with persistent energy savings by: (1) providing financial incentives and resources to minimize constraints to investment in energy efficiency, and (2) requiring that incentive payments be dependent on measured energy savings over time. As BC Hydro increases its DSM initiatives to meet the Clean Energy Act objective to reduce at least 66 per cent of new electricity demand with DSM by 2020, the utility is faced with a higher level of DSM risk, or uncertainties that impact the cost-effective acquisition of planned energy savings. For industrial DSM incentive programs, DSM risk can be broken down into project development and project performance risks. Development risk represents the project ramp-up phase and is the risk that planned energy savings do not materialize due to low customer response to program incentives. Performance risk represents the operational phase and is the risk that planned energy savings do not persist over the effective measure life. DSM project development and performance risks are, in turn, a result of industrial economic, technological and organizational conditions, or DSM risk factors. In the BC large industrial sector, and characteristic of large industrial sectors in general, these DSM risk factors include: (1) capital constraints to investment in energy efficiency, (2) commodity price volatility, (3) limited internal staffing resources to deploy towards energy efficiency, (4) variable load, process-based energy saving potential, and (5) a lack of organizational awareness of an operation’s energy efficiency over time (energy performance). This research assessed the capacity of alternative performance incentive program models to manage DSM risk in BC. Three performance incentive program models were assessed and compared to BC Hydro’s current large industrial DSM incentive program, Power Smart Partners – Transmission Project Incentives, itself a performance incentive-based program. Together, the selected program models represent a continuum of program design and implementation in terms of the schedule and level of incentives provided, the duration and rigour of measurement and verification (M&V), energy efficiency measures targeted and involvement of the private sector. A multi criteria assessment framework was developed to rank the capacity of each program model to manage BC large industrial DSM risk factors. DSM risk management rankings were then compared to program cost-effectiveness, targeted energy savings potential in BC and survey results from BC industrial firms on the program models. The findings indicate that the reliability of DSM energy savings in the BC large industrial sector can be maximized through performance incentive program models that: (1) offer incentives jointly for capital and low-cost operations and maintenance (O&M) measures, (2) allow flexible lead times for project development, (3) utilize rigorous M&V methods capable of measuring variable load, process-based energy savings, (4) use moderate contract lengths that align with effective measure life, and (5) integrate energy management software tools capable of providing energy performance feedback to customers to maximize the persistence of energy savings. While this study focuses exclusively on the BC large industrial sector, the findings of this research have applicability to all energy utilities serving large, energy intensive industrial sectors.



utilities, energy efficiency, DSM, project, British Columbia