STATE OF NEW JERSEY
BOARD OF PUBLIC UTILITIES
IN THE MATTER OF THE FILING OF THE ) |
BPU Docket Nos. |
COMPREHENSIVE RESOURCE ANALYSIS ) |
EX99050347, EO99050348, |
OF ENERGY PROGRAMS PURSUANT TO ) |
EO99050349, EO99050350, |
SECTION 12 OF THE ELECTRIC DISCOUNT ) |
EO99050351, GO99050352, |
AND ENERGY COMPETITION ACT OF 1999 ) |
GO99050353, GO99050354 |
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COMMENTS ON THE NEW JERSEY CLEAN ENERGY COLLABORATIVE’S PRESENTATIONS
TO THE BOARD OF PUBLIC UTILITIES
ON JUNE 5 AND JUNE 13, 2002
Acting Director and Ratepayer Advocate
31 Clinton Street, 11th Floor
P.O. Box 46005
Newark, New Jersey 07101
Dated: July 8, 2002
COMMENTS ON NEW JERSEY CLEAN ENERGY COLLABORATIVE’S PRESENTATIONS TO
THE BOARD OF PUBLIC UTILITIES
ON JUNE 5 AND JUNE 13, 2002
Prepared by Dr.
David Nichols on Behalf of the
New Jersey Division of the Ratepayer Advocate
1.
Summary
On June 5 and 13, 2002, the Board of Public Utilities (BPU or the Board) held open meetings to take comments from the New Jersey Clean Energy Collaborative (NJCEC or the Collaborative). The Collaborative presented briefings concerning the status of the Comprehensive Resource Analysis (CRA) programs and the Collaborative’s plans for the programs. The meetings occurred against the backdrop of the Board’s consideration of the Davies Associates Incorporated (DAI) Report of April 2002 (the Report). My present comments result from considerations raised by representatives of the Collaborative and by Commissioners of the Board at the two presentation meetings.
The Ratepayer Advocate filed my Comments and Reply Comments on the DAI Report on June 7 and June 24, respectively. My comments here aim to amplify and extend points made in those previously filed Comments, in the light of information and issues raised at the Collaborative’s presentations to the BPU. A summary of my conclusions follows.
None of the changes recommended here imply a change in the total Board-ordered CRA budget for (a) renewable energy and (b) energy efficiency programs. New initiatives would be funded through application of underspent budget, and reduction in budget for existing CRA programs through a combination of phase out of some program components and economies in the administration of all programs. The overall intent is to fully apply the Board-ordered budget in ways that increase the impact of CRA programs on energy use and on the markets for renewable and energy-efficient products and services. In Sections 2 through 6, I explain my conclusions and recommendations in more detail.
2.
Administration Issues
At the briefings the Collaborative explained the
incurrence of program costs by category: administration, grants and
implementation contractors, marketing, training, sales, and other (June 5,
pages 52-54). According to NJCEC presentation slides, reported “grants and
implementation contractor expenditures” were 73% of costs in 2001 and 79% in
the first quarter of 2002. President Fox asked a number of cost-related
questions, including how much program consultants cost, and what is included
in administration costs. Fred Lynk of the Collaborative explained that the 6.6
percent reported “administration” costs are limited to utility labor and
overhead, that other utility labor and overhead costs are also included in the
“sales” and “marketing” cost categories, and that administrative type
costs incurred by contractors are not included in reported
“administration” costs (June 5, page 53). These questions and answers seem
to underscore the need for the Board to have a more accurate report of
administrative costs, including a break-out of what contractors are paid to
do. This information should be provided on a regular basis as part of the CRA
reporting protocol.
3.
Renewable Energy Program
The Collaborative’s presentation on the customer-sited
renewable energy program (the “Clean Energy Program”) highlighted the
difference in market impact among commercial and residential facilities.
Nonresidential customers have participated in the program to a moderate
degree, installing larger solar photovoltaic cell systems (PVs) and natural
gas fuel cells (NGFCs). But, according to Elaine Bryant of the Collaborative,
participation among residential customers who would install smaller renewable
energy systems such as rooftop PVs of under 10 kW has been below expectations
to date, despite intensive marketing outreach (June 13, pages 5-13). Ms.
Bryant also indicated that the market price of residential size renewable
energy systems is less likely to decline than the price for commercial sizes
of systems (June 13, pages 13-14). Based on these considerations, I suggest
that the incentives for small sized systems (below 10 kW) be increased
substantially.
The Clean Energy Program incentive structure sets out four
blocks of capacity. When the number of MW in the first block have been filled
by program participants, the program moves on to the second block. When the
number of MW in the second block have been subscribed, the third block becomes
operative, and when the MW in the third block are subscribed by participants,
the program moves to the fourth and final block. In general, incentives
decrease as the program moves through the blocks. The incentives are defined
differently for different sizes of renewable system. Each size category is
called a “tier”. Tier 1 are the smallest systems, under 10 kW. For tier 1
systems, the very first block is not nearly filled. Currently, Tier I
incentives for blocks 1, 2, 3, and 4 are $5, $5, $4, and $3 per Watt,
respectively. Moreover, the incentives are currently limited to 60, 50, 40,
and 30% of the cost of the renewable energy system for blocks 1, 2, 3, and 4
respectively. The need is to provide stronger incentives for the uptake of
small renewable energy systems. I suggest that for Tier 1 the incentives
should be increased to $7, $6, $5, and $4 per Watt for blocks 1, 2, 3, and 4;
and that for Tier 1 projects only, the incentives be capped at 80, 60, 50, and
40% of system cost, respectively.[1]
The Collaborative’s presentation included information
on the amount of renewable program funding taken by natural gas fuel cells (NGFCs)
to date, compared to other technologies. Mr. Ambrosio argued that the fraction
of funds taken by NGFCs in the future could be controlled by the structuring
of the program (June 13, pages 30-31). My suggestion, however, is that NGFCs
be removed from the program and from the CRA, for reasons explained in my
Comments on the DAI Report. Once that is done, the issue of structuring the
program to control their share will become moot.
4.
Residential Efficiency Programs
There is no general residential retrofit program in the current portfolio of CRA programs. As Chris Siebens of the Collaborative succinctly explained, the existing “residential retrofit is a name for the on-line energy audit” (June 5, page 40, emphasis added). In my Reply Comments, I proposed the establishment of a comprehensive, audit-based residential efficiency program. This program would have the following features:
Models for this program exist, for example in the
Massachusetts Energy Conservation Service. This program would fill a void in
the CRA offerings. The existing residential “retrofit” program should be
phased out to help provide funding for the more substantial program proposed
here.
The presentations to the Board revealed that the market impact of the “New Jersey for Energy Star®” program is quite uncertain. This is the residential program to promote compact fluorescent lighting (CFL), efficient windows, and appliances (such as refrigerators, dishwashers, washing machines and room air conditioners). There is evidence of increased sales of CFLs in New Jersey, but the effect of the CRA program is mixed in with the effect of retailer programs and marketing by the U.S. Environmental Protection Agency (EPA). On June 13, Elaine Bryant stated that “the EPA has targeted the national retailers as their first priority and has had great success in enrolling many of those in promoting the Energy Star label.” (June 13, page 44.) Federal government agencies have hired marketing consultants to promote voluntary efficiency programs like Energy Star products and the Compressed Air Challenge throughout the country, including of course New Jersey. In considering how to add value to these ongoing and already funded promotional efforts, it is important that CRA dollars not be expended on educational and public relations efforts that are unlikely to produce measurable incremental market impacts.[2]
Based on information raised at the Collaborative briefings and reconsidering the likely impacts of this program, I believe it should be shifted to new approaches that the EPA is not pursuing and that are likely to have more measurable market impacts. This would be consistent with the interest that President Fox showed in seeing market impacts expressed at numerous points in the June 5 meeting. I therefore recommend consideration be given to two new program components, as follows:
5.
Non-Residential Efficiency Programs
During the June 5 meeting, President Fox discussed the number of energy efficiency service provider contractors involved in delivering CRA programs for the Collaborative. She stated to the Collaborative, “What I want you to think about over the next month or so is, is there a way of getting more business to more companies …” (June 5, pages 37-38). In this context, I would like to underscore the proposal for a major new energy efficiency program that I made in my Reply Comments. I proposed a pay-for-performance program in which contractors --who are energy efficiency service provider companies-- are paid on the basis of electricity and gas savings from new efficiency projects at non-residential facilities. Such a program is open to all vendors and its structure is particularly suited to generating incremental business for companies who specialize in energy efficiency.
Also on June 5, Chris Siebens of the Collaborative observed that the amount of participation in the major nonresidential program, energy-efficient commercial and industrial construction, has been surprisingly strong in recent months (June 5, pages 11-12). It appears that customers and energy service vendors are beginning to understand that they can pursue energy efficiency retrofits projects through this program (which is also called “New Jersey SmartStart Buildings®”). This is consistent with experience with pre-CRA demand-side management programs at several utilities, which showed that there is a ready market for nonresidential retrofit programs in New Jersey. We should move to serve this market more aggressively by establishing the new pay-for-savings program that I recommended in my Reply Comments. With its different approach to incenting efficiency projects, the new program will complement the existing C&I program and the two together will synergistically increase the overall amount of efficiency retrofit activity.
6.
Table of Recommendations on Energy Efficiency Programs
In the table below I summarize my recommendations regarding continuation or change in CRA programs. The table refines similar tables in my Comments and Reply Comments, in order to be more precise and, in particular, to take account of my conclusions arising from the BPU meetings of June 5 and 13.
Energy
Efficiency Programs -- Design & Performance Issues
CRA Program |
Comment |
Residential
Central Air Conditioner Cycling |
Successful
AC cycling programs at PSE&G, JCP&L, and Atlantic Electric that
should be maintained. They are clearly consistent with the explicit State
energy policy of promoting load management. It may be possible to shift
the cost basis for these programs from CRA to the basic generation
services. Electric
distribution utilities should assess the potential for additional load management programs to help trim their costs for
power to meet summer peak demands. |
Residential
HVAC (electric) |
Saves
energy and peak demand in the near term while changing the cooling market
over the longer run. Including both better equipment and improved
installation standards, this model approach is being replicated and
studied in other states. The program should be continued, and extended to
room air conditioners (see “Energy Star” row, below). |
Residential
HVAC (gas) & water heating |
Saves
energy in the near term while changing the gas equipment market over the
longer run. The program should be continued. |
Energy
Star Program |
It
increasingly appears that it will be difficult for this program as
currently designed to have a measurable impact on markets in the State. It
should be replaced by two program approaches more likely to have
measurable energy savings and peak demand impacts: incentives for
high-efficiency room air conditioners; and a program to retire older
residential refrigerators and freezers. |
Comfort
Partners |
This
low-income efficiency/education program is finally operating effectively,
and it is critical that it continue to be, preferably through a State
agency. |
Residential
New Construction |
This
is a promising new program that is beginning to have a market impact and
which can help to develop a basis for eventual upgrades to the State’s
new construction code. |
Residential
Retrofit |
This
program has low activity levels and a design that cannot succeed. It is a
poor substitute for the residential programs it replaces. A second
generation comprehensive retrofit program should be developed instead,
including on-site energy surveys with direct installation of low-cost
measures, and arranging services to assist householders to procure
installation contractors and financing services for higher cost efficiency
measures that they want to install. |
School
Education Program |
Evolution
of programs at several utilities. This well-conceived program helps to
develop energy awareness among students and teachers. It should be
continued. |
Commercial/Institu-tional/Industrial (C&I)
Construction |
This
new program provides a wide range of technical assistance services and
financial incentives toward high-efficiency design and equipment
investments by builders and customers at new and existing facilities. The
new-construction components of the program can help to develop a basis for
eventual upgrades to the State’s new construction code. The program
should be continued. |
Other
C&I: Building Operation & Main-tenance; Compressed Air
Optimization |
These
programs may be useful as far as their very limited objectives go, but
they do not help to fill the need for pay-for-performance retrofit
initiatives in the C/I market. The portfolio of energy efficiency programs
should be expanded as soon as feasible to include such programs to incent
C&I customers to work with energy efficiency service provider
companies to pursue cost-effective energy efficiency retrofits at their
existing facilities. |
[1]
The Collaborative’s “Proposed Modifications to
the Customer Sited Clean Generation Program” would create a lower
incentives tier for large projects of 300 kW up to 1000 kW. This proposal of
May 6, 2002, is pending before the Board. It does not address the need for
stronger incentives for smaller projects.
[2]
In the case of Energy Star
homes, targeted technical assistance and financial incentives do “give
legs” to the federal program, producing measurable incremental market
impacts. These program elements are lacking with “New Jersey for Energy
Star®”.