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The latest news, projects, and reports from our experts in the
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 Energy Externalities and Co-benefits in Utah The production of electricity and its associated emissions result in external costs to society ranging from human health problems to climate change impacts to natural resource depletion. How much of these costs can be avoided by replacing fossil fuel energy with energy efficiency and renewable resources? What are the added social benefits of avoiding these costs? In a new study, Synapse quantifies these values for two types of external costs- human health and water consumption- and finds that green policies in the state of Utah could result in societal benefits reaching $79 per MWh generated. Fossil fuel-fired electric generation can result in indirect costs to society that may not be captured in resource plans that focus on direct capital and operating costs. Synapse estimated the value of human health and water consumption costs caused by electric generation in Utah in a March 2010 study. The estimated social costs total $1.6 to $2 billion annually, translating to $36 to $43 per MWh and exceeding the operating costs of most generators in the state. By replacing the most inefficient coal-fired generators in Utah with energy efficiency, renewable energy, and natural gas sources, avoided health and water costs could result in co-benefits of up to $79 per MWh. The study, prepared for a coalition of Utah state agencies, creates opportunities for Utah and other states to better quantify social costs in generation resource planning. Avoiding Premature Death, Hospitalization, and Water Shortages in Utah Synapse found that fossil fuel generators in Utah are responsible for 200 premature deaths and 350 hospitalizations per year, and consume 24 billion gallons of water annually. If generation from these plants were replaced with generation from wind and solar photovoltaics, the co-benefits of avoided deaths, hospitalizations, and water consumption are $27 per MWh. If the fossil fuel generation were replaced with solar thermal energy, a resource that uses a lot of water, the resulting co-benefits are $4 per MWh. If all of the most inefficient coal-fired generators in the state were replaced with renewable technologies, energy efficiency, and natural gas generators, Utah could avoid $79 per MWh of external costs. Synapse developed a statistical dispatch simulation to estimate which generators would be replaced with renewable technologies and energy efficiency. Green energy programs do not displace large amounts of coal-fired generation given that it represents 80% of Utah's generators and the fact that much of this generation is exported out of state. Nonetheless, co-benefits remain substantial. Quantifying Social Costs in Integrated Resource Planning The externalities, or indirect social and environmental costs, associated with fossil fuel generation include health problems, regional haze, acid rain, natural resource depletion, and climate change among others. Co-benefits represent the externalities avoided by replacing fossil fuel generation with renewable technologies and energy efficiency. Like other states, Utah considers externalities in its integrated resource planning process, however, in the past these considerations have mostly been qualitative. The Synapse study provides an opportunity for states to consider external costs in a more quantitative manner. [ Download Report ] |
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Synapse Senior Consultant Rick Hornby and energy consultant Nancy
Brockway recently submitted testimony on behalf of consumer advocates
in Maryland and Pennsylvania regarding smart grid filings by utilities
in both states. Based on their analyses of the Company's filings as
well as independent research, Hornby and Brockway concluded that without
SGIG grant, the cost effectiveness of many smart grid plans are questionable.
In addition, many aspects of these proposals raise concerns including
cost recovery mechanisms, cost allocation, rate design, and consumer
protection. The cost-effectiveness of these proposals improves substantially
with a SGIG, but the other concerns regarding ratemaking and consumer
protection remain.
  Determining a "Reasonable" Shareholder Incentive for Utility Energy Efficiency Programs In the face of increased emphasis on energy efficiency, more and more utilities are proposing incentives to give shareholders an opportunity to earn a return on efficiency programs. What criteria should regulators consider in order to determine if a proposed incentive is reasonable? Regulators have well-established methods and benchmarks for setting a utility's revenue requirements at a level that will result in "just and reasonable rates" and provide shareholders a reasonable opportunity to earn a reasonable return on their investments in distribution, transmission, and generation resources. Those allowed returns are set at levels designed to meet three key ratemaking principles: maintain the utility's financial integrity, attract necessary capital, and provide a return on equity commensurate with the returns being earned by other companies facing similar risk. In contrast, currently, there is no standard methodology or set of benchmarks for determining a reasonable shareholder incentive for energy efficiency programs. Recent testimony and research by Synapse has identified a wide variation in the shareholder incentives for efficiency requested and/or approved to date. Some utilities have incentives that compensate their shareholders generously for relatively low reductions in usage from efficiency programs while other utilities receive limited incentive amounts for relatively high levels of reductions. This wide variation highlights the need for a standard methodology and set of benchmarks for determining a reasonable shareholder incentive. Synapse Senior Consultant Rick Hornby has analyzed efficiency program compensation proposals, including shareholder incentives, in testimony addressing the Duke Energy "Save-a-Watt" filings in North Carolina and Indiana, as well as in Progress Energy filings in the Carolinas. [ Download Duke SAW NC Testimony ] [ Download Progress NC Testimony ] [ Download Progress SC Testimony ] |
Energy
Efficiency in the Dakotas Residential electricity customers in the Dakotas pay some of the lowest rates in the country, yet because they use more electricity than residents of most other states, their average electric bill is almost as high as the average in California. This high level of consumption, paired with a current lack of sustained commitment to reduce it, offers tremendous potential for energy efficiency programs to lower consumers' electric bills. In recent reports to both states, Synapse estimates that 1% cumulative annual energy efficiency sustained from 2012 through 2020 can result in $250 million in savings and create 3,680 net jobs-in each state. Dakotans Pay Less, Use More In 2007, despite relatively low electric rates, the average residential electric bill for North Dakota was about $79 and $80 for South Dakota. These bills are similar to the $84 bills paid by residents in Vermont and California. North Dakota and South Dakota electric bills also compare to those from Iowa and Minnesota, although the rates in these neighboring states are slightly higher than those in either of the Dakotas. A major reason for this similarity is that residents of North and South Dakota consume significantly more electricity than residents of other states. Even in Minnesota, a state with a similar climate, the average resident used 245 kWh less per month than the average North Dakota resident and 155 kWh less than the average South Dakota resident. Synapse's
report on potential for energy efficiency in South Dakota supports
South Dakota Governor Mike Rounds' commitment to the Midwestern Governor's
Association to increase the level of energy saved through energy efficiency
measures to 2% per year by 2015. Energy efficiency programs that achieve
annual energy savings of 1% per year are considered to be effective
programs today. Leading states are achieving cumulative annual energy
savings of 2% or higher. |
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Long-Term Value of Avoiding Energy Use in New England Continues High Synapse released the sixth in a series of biannual reports sponsored by energy efficiency program administrators in New England and with input from state energy offices and regulatory commission staff. The report indicates that the value of avoiding energy use in the long-term continues to be high, despite the current recession and historically low prices for natural gas. The AESC 2009 report and an associated presentation are available on our website at www.synapse-energy.com. In August 2009, Synapse released the 2009 Avoided-Energy-Supply-Cost (AESC) report for New England. This report is the sixth in a series of biannual reports sponsored by the majority of energy efficiency program administrators throughout New England and with input from state energy offices and regulatory commission staff. The report indicates that the total value of avoiding energy use continues to be high in the long-term despite the current recession and relatively low prices for natural gas. The report also highlights some important changes from the AESC study Synapse conducted in 2007. For example, the report projects a long-term avoided cost of electricity capacity of $18 per kW-year, dramatically lower than the avoided capacity cost projected in 2007. | |
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The AESC 2009 report provides annual projections through 2024 of energy
supply costs that will be avoided due to energy efficiency programs
that reduce the use of electricity, natural gas, and other fuels. The
report also provides projections of avoided electricity costs based
upon a detailed simulation of the New England wholesale electric energy
over the same time period. The projections are estimates the avoided
costs from reductions in the quantity of energy used and capacity required,
as well as the avoided costs from the reductions in market prices resulting
from those quantity reductions. The avoided electric energy costs reflect
projected cost of CO2 allowances based on Synapse’s
mid-case CO2 price projection which assumes the
current Regional Greenhouse Gas Initiative (RGGI) will be superseded
by Federal regulation. The Report also estimates the externality value
of air emissions, based upon a “sustainability target” level for carbon
at a control cost of $80/ton. The 2009 report assumes that the Demand Reduction Induced Price Effect (DRIPE) of reductions in electric demand and annual energy will phase-in more rapidly and dissipate more slowly than assumed in 2007. This change in assumptions resulted in DRIPE effect estimates almost double those estimated in 2007. The longer projected dissipation of energy DRIPE is based on an analysis of the various factors that tend to offset the reduction in energy prices including price elasticity, renewable resource additions, and retirement of existing capacity. [ Download 2009 AESC Report ] [ Download Graph ] |
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