Guide to Resource 

Planning with Energy Effi ciency 
About This Document 

This Guide to Resource Planning with Energy Effi ciency is provided to assist gas and electric utilities, utility regulators, and others in the implementation of the recommendations of the National Action Plan for Energy Effi ciency (Action Plan) and the pursuit of its longer-term goals. This Guide describes the key issues, best practices, and main process steps for integrating energy effi ciency into resource planning. The intended audience for this Guide is any stakeholder interested in learning more about how to promote energy effi ciency resource decisions. Utility resource planners who are early in the process of integrating energy effi ciency into resource planning may turn to the Guide to address their questions about how to proceed. Those overseeing utilities, such as public utility commissions and city councils, can use the Guide to help ask the right questions and understand the key issues 
Guide to Resource 


Planning with Energy 


Effi ciency
 

A RESOURCE OF THE NATIONAL ACTION PLAN FOR 
The Guide to Resource Planning with Energy Effi ciency is a product of the National Action Plan for Energy Effi ciency 

Leadership Group and does not refl ect the views, policies, or otherwise of the federal government. The role of the U.S. Department of Energy and the U.S. Environmental Protection Agency is limited to facilitation of the Action Plan. This document was fi nal as of December 2007 and incorporates minor modifi cations to the original release. If this document is referenced, it should be cited as: National Action Plan for Energy Effi ciency (2007). Guide to Resource Planning with Energy Effi ciency. Prepared by Snuller Price et al., Energy and Environmental Economics, Inc. <www.epa.gov/eeactionplan> 

For More Information 

Regarding the Guide to Resource Planning with Energy Effi ciency, please contact: 

Katrina Pielli 

U.S. Environmental Protection Agency 

Offi ce of Air and Radiation 

Climate Protection Partnerships Division 

Tel: (202) 343-9610 

E-mail: pielli.katrina@epa.gov 
Table of Contents
 

List of Figures ......................................................................................................................................................................i
 

List of Tables ......................................................................................................................................................................ii
 

List of Abbreviations and Acronyms...................................................................................................................................iii
 

Acknowledgements ..........................................................................................................................................................vi
 

Executive Summary ................................................................................................................................. ES-1
 

1: Introduction ............................................................................................................................................ 1-1
 

1.1 About the Guide ............................................................................................................................................... 1-1
 

1.2 Structure of the Guide ....................................................................................................................................... 1-3
 

1.3 Development of the Guide ................................................................................................................................ 1-4
 

1.4 Notes ................................................................................................................................................................ 1-4
 

2: Potential Studies .................................................................................................................................... 2-1
 

2.1 Determining Energy Effi ciency Potential ............................................................................................................. 2-1
 

2.2 Types of Potential Studies .................................................................................................................................. 2-2
 

2.3 Resources on Energy Effi ciency Potential ............................................................................................................ 2-4
 

2.4 Notes ................................................................................................................................................................ 2-9
 

3: Development of Energy Efficiency Avoided Costs .............................................................................. 3-1
 

3.1 Overview........................................................................................................................................................... 3-1
 

3.2 Components of Avoided Costs .......................................................................................................................... 3-1
 

3.3 Considerations When Developing Avoided Costs ............................................................................................... 3-2
 

3.4 Forecasting Methodologies and Data Sources .................................................................................................... 3-9
 

3.5 Integration with Supply-Side Capital Planning.................................................................................................. 3-10
 

3.6 Resources on Energy Effi ciency Avoided Costs ................................................................................................. 3-13
 

3.7 Resources on Energy Effi ciency and Greenhouse Gases .................................................................................... 3-14
 

3.8 Notes .............................................................................................................................................................. 3-14
 

4: Development of Energy Effi ciency Measures ..................................................................................... 4-1
 

4.1 Developing Energy Effi ciency Measures .............................................................................................................. 4-2
 

4.2 Resources for Energy Effi ciency Measure Development ...................................................................................... 4-4
 

4.3 Notes ................................................................................................................................................................ 4-5
 

5: Determining Cost-Effectiveness ............................................................................................................ 5-1
 

5.1 Overview........................................................................................................................................................... 5-1
 

5.2 Use of Discount Rates ....................................................................................................................................... 5-4
 

National Action Plan for Energy Effi ciency 
Table of Contents (continued)
 

5.3 Resources for Determining Cost-Effectiveness .................................................................................................... 5-5
 

5.4 Notes ................................................................................................................................................................ 5-6
 

6: Development of Energy Efficiency Programs and Portfolios.............................................................. 6-1
 

6.1 Types of Programs ............................................................................................................................................. 6-1
 

6.2 Criteria to Use in Developing Programs .............................................................................................................. 6-3
 

6.3 Resources for Developing Energy Effi ciency Programs and Portfolios .................................................................. 6-4
 

6.4 Notes ................................................................................................................................................................ 6-5
 

7: Estimating Energy Efficiency Impacts for Resource Planning ............................................................. 7-1
 

7.1 Overview........................................................................................................................................................... 7-1
 

7.2 Estimation of Energy Effi ciency Reductions ........................................................................................................ 7-1
 

7.3 Estimation of Peak Capacity Reductions............................................................................................................. 7-2
 

7.4 Energy Effi ciency and Greenhouse Gas Emissions ............................................................................................... 7-4
 

7.5 Incorporating Energy Effi ciency Forecasts into Integrated Planning ..................................................................... 7-8
 

7.6 Building Codes and Standards ........................................................................................................................... 7-8
 

7.7 Resources for Forecasting Load .......................................................................................................................... 7-9
 

7.8 Notes .............................................................................................................................................................. 7-10
 

8: Reporting Energy Efficiency Impacts for Resource Planning .............................................................. 8-1
 

8.1 Reporting Energy Effi ciency Impacts for Resource Planning ................................................................................ 8-1
 

8.2 Resources for Reporting Energy Effi ciency Impacts ............................................................................................. 8-4
 

8.3 Notes ................................................................................................................................................................ 8.4
 

9: Evaluation and Measurement ............................................................................................................... 9-1
 

9.1 Procurement of Energy Effi ciency Services .......................................................................................................... 9-1
 

9.2 Resources for Procurement of Energy Effi ciency Services .................................................................................... 9-5
 

9.3 Notes ................................................................................................................................................................ 9-6
 

10: Evaluation, Measurement, and Verifi cation .................................................................................... 10-1
 

10.1 Overview....................................................................................................................................................... 10-1
 

10.2 EM&V Strategies ........................................................................................................................................... 10-3
 

10.3 Estimating the Net-to-Gross Ratio .................................................................................................................. 10-4
 

10.4 Isolating Program Effects ............................................................................................................................... 10-5
 

10.5 Resources on EM&V ...................................................................................................................................... 10-5
 

10.6 Notes ............................................................................................................................................................ 10-9
 

Guide to Resource Planning with Energy Effi ciency 
Table of Contents (continued)
 

11. Best Practices...................................................................................................................................... 11-1
 

11.1 Overview....................................................................................................................................................... 11-1
 

11.2 Coordinate Potential Studies and Actual Energy Effi ciency Programs and Portfolios ........................................ 11-2
 

11.3 Adjust Capacity Value Based on Expected Load Reductions ............................................................................ 11-3
 

11.4 Use EM&V Results in the Development of Measures and Energy Effi ciency Programs ...................................... 11-4
 

Appendix A: National Action Plan for Energy Efficiency Leadership Group ........................................ A-1
 

Appendix B: Glossary.................................................................................................................................B-1
 

Appendix C: ISO New England’s Forward Capacity Market....................................................................C-1
 

Appendix D: References ........................................................................................................................... D-1
 

National Action Plan for Energy Effi ciency 
 

 

 

 

 

List of Figures
 

Figure ES-1. Overall Organization of the Guide to Resource Planning with Energy Effi ciency ...................... ES-2
 

Figure 1-1. National Action Plan for Energy Effi ciency Recommendations and Options ................................. 1-2
 

Figure 1-2. Overall Organization of the Guide to Resource Planning with Energy Effi ciency ..........................1-3
 

Figure 2-1. Defi nitions of Energy Effi ciency Potential .................................................................................... 2-2
 

Figure 2-2. Example of Results From a Policy-Focused Energy Effi ciency Potential Study ................................ 2-3
 

Figure 2-3. BPA Study Illustrates When Peak Load Reductions Are Needed to Avoid Transformer
 

Bank Overload......................................................................................................................................2-3
 

Figure 3-1. Comparison of Avoided Costs in Texas and California ................................................................. 3-5
 

Figure 3-2. Implication of Time-of-Use Avoided Costs .................................................................................. 3-5
 

Figure 3-3. Average Avoided Costs for Air Conditioning, Outdoor Lighting, and Refrigeration in California ......... 3-6
 

Figure 3-4. Average Electricity Sector CO2 Emission Rate by Region in 2004................................................. 3-7
 

Figure 3-5. Generation by Fuel Type and Region in 2004 .............................................................................. 3-8
 

Figure 3-6. Comparison of Marginal CO2 Emission Rates for a Summer Day in California 


and Wisconsin ............................................................................................................................ 3-8
 

Figure 3-7. Example of the Value of Deferring a Transmission Line .............................................................. 3-11
 

Figure 7-1. Marginal CO2 Emissions Rate by Hour for California Over a Two-Week Period ............................ 7-6
 

Figure 7-2. Hourly Shape of MWh Savings From Energy Efficiency Measures in California ...................................7-7
 

Figure 7-3. Hourly Shape of MWh Savings from Energy Effi ciency Measures ................................................. 7-7
 

Figure 8-1. Tracking Energy Effi ciency Resources in Load Forecasts ............................................................... 8-2
 

Figure 9-1. Potential Roles of Third-Party Contractors in Providing Energy Effi ciency Services and Savings ........ 9-3
 

Figure 11-1. Areas to Increase Coordination to Improve Energy Effi ciency in Resource Planning. ................. 11-2
 

Figure 11-2. Transmission Alternative Targets, 2004–2013 ......................................................................... 11-3
 

Figure C-1. Demand Resource Show of Interest ............................................................................................C-4
 

i Guide to Resource Planning with Energy Effi ciency 
 

List of Tables
 

Table 3-1. Typical Components of Avoided Costs Energy Effi ciency Program Types ........................................ 3-2
 

Table 3-2. Summary of Approaches to Value Energy and Capacity by Utility Type .......................................... 3-3
 

Table 4-1. Defi ning Costs and Impacts of Energy Effi ciency Measures ........................................................... 4-3
 

Table 5-1. Questions Addressed by the Various Cost Tests ............................................................................ 5-2
 

Table 5-2. Benefi ts and Costs of Various Test Perspectives ............................................................................. 5-3
 

Table 5-3. The Use of Discount Rates in Cost Tests ........................................................................................ 5-4
 

Table 6-1. Energy Effi ciency Program Types ................................................................................................... 6-2
 

Table 7-1. Illustrative CO2 Emissions Factors for Fossil Fuel Combustion........................................................ 7-5
 

Table 7-2. Illustrative Upstream CO2 Emission Factors for Fuels Used in Electricity Generation, 


from Mining, Cleaning, and Transportation in California .............................................................. 7-5
 

Table 8-1. Example Summary Table for Long-Term Energy Effi ciency Impacts ................................................ 8-3
 

Table 9-1. Functional Overview of Energy Effi ciency Program Management and Delivery .............................. 9-2
 

Table 10-1. EM&V Resources ...................................................................................................................... 10-8
 

National Action Plan for Energy Effi ciency ii
 

 

 

 

 

List of Abbreviations and Acronyms
 

A
 

ACEEE American Council for an Energy-Efficient 

Economy 

AEE Association of Energy Engineers 

AEO (Department of Energy’s Energy Information 

Agency) Annual Energy Outlook 

AP2 Air Pollution Prevention (forum) 

ASHRAE American Society of Heating, Refrigerating, 

and Air Conditioning 

B 

BPA Bonneville Power Administration 

Btu British thermal unit 

C 

CEE Consortium for Energy Efficiency 

CRF capital recovery factor 

CFL compact fluorescent light bulb 

CH4 methane 

CO2 carbon dioxide 

CO2eq carbon dioxide equivalent 

CONE cost of new entrant 

CPUC California Public Utilities Commission 

CT combustion turbine 

D 

DEEM Database of Energy Effi ciency Measures (EPRI) 

DEER Database of Energy Efficiency Resources 

(California) 

DOE U.S. Department of Energy 

DRG Demand Resources Group 

DSM demand-side management 

ECMB Energy Conservation Management Board 

E 

EE energy efficiency 

eGRID Emissions & Generation Resource Integrate 

Database (EPA) 

EIA Energy Information Administration (DOE) 

EM&V evaluation, measurement, and verification 

EPA U.S. Environmental Protection Agency 

EPRI Electric Research Power Institute 

ERCOT Electric Reliability Council of Texas, Inc. 

ESCO energy service company 

EVO efficiency valuation organization 

F 

FCA forward capacity auction 

FCM forward capacity market 

FEMP Federal Energy Management Program 

FERC Federal Energy Regulatory Commission 

G 

GHG greenhouse gas 

GWh gigawatt hour 

H 

HVAC heating, ventilation, and air conditioning 

I 

ICAP installed capacity 

ICE IntercontinentalExchange 

ICR installed capacity requirement 

iii Guide to Resource Planning with Energy Effi ciency 
 

 

 

 

List of Abbreviations and Acronyms (continued)
 

IEA International Energy Agency 

IECC International Energy Conservation Code 

IEPEC International Energy Program Evaluation 

Conference 

IGCC integrated gasification combined cycle 

IPMVP International Performance Measurement and

 Verification Protocol 

IRP integrated resource planning 

ISO independent system operator 

ISO-NE Independent System Operator—New England 

K 

kW kilowatt 

kWh kilowatt hour 

L 

LBNL Lawrence Berkeley National Laboratory 

LEED Leadership in Energy and Environmental Design 

LNG liquefied natural gas 

LOLP loss of load probability 

LSE load serving entity 

M 

M&E monitoring and evaluation 

MCF thousand cubic feet (of natural gas) 

MMBtu million British thermal units 

MW megawatt 

MWh megawatt hour 

MVA megavolt ampere 

N
 

N2O nitrous oxide 

NARUC National Association of Regulatory Utility

 Commissioners 

NEEP Northeast Energy Efficiency Partnerships, Inc. 

NEMS National Energy Modeling System 

NOX nitrogen oxide 

NTGR net-to-gross ratio 

NYMEX New York Mercantile Exchange 

NY ISO New York Independent System Operator 

NYSERDA New York State Energy Research and 

Development Authority 

P 

PACT program administrator cost test 

PCT participant cost test 

PG&E Pacific Gas and Electric Company 

PJM Pennsylvania New Jersey Maryland 

Interconnection Inc. 

PM particulate matter 

PM10 particulate matter of 10 microns in 

diameter or smaller 

PUC public utility commission 

PUCT Public Utility Commission of Texas 

R 

RFP request for proposals 

RIM ratepayer impact measure 

National Action Plan for Energy Effi ciency iv
List of Abbreviations and Acronyms (continued)
 

S U 

SDG&E San Diego Gas and Electric UCAP unforced capacity 

SEER Seasonal Energy Efficiency Ratio UCT utility cost test 

SCE Southern California Edison UNEP United Nations Environment Programme 

SCT 

SF6 

SPC 

societal cost test 

 sulfur hexafluoride 

standard performance contract 

W 

WACC 

WECC 

weighted average cost of capital 

Wisconsin Energy Conservation Corporation 

T WGA Western Governors’ Association 

TOU time-of-use 

TRC total resource cost 

v Guide to Resource Planning with Energy Effi ciency 
Acknowledgements
 

This Guide to Resource Planning with Energy Effi ciency 

is a key product of the Year Two Work Plan for the National Action Plan for Energy Effi ciency. This work plan 

was developed based on feedback from Action Plan 

Leadership Group members and Observers during the 

fall of 2006. The work plan was further refi ned during 

the March 2007 Leadership Group meeting in Washington, D.C. A full list of Leadership Group members is 

provided in Appendix A. 

With direction and comment by the Action Plan Leadership Group, the Guide’s development was led by Snuller 

Price, Energy and Environmental Economics, Inc., under 

contract to the U.S. Environmental Protection Agency 

(EPA). Chapters 7 and 8 were authored by Chuck Goldman and Nicole Hopper, Lawrence Berkeley National 

Laboratory, under contract to the U.S. Department of Energy (DOE). Additional preparation was performed by Dr. 

Jim Williams, Amber Mahone, Jack Moore, and Dr. C.K. 

Woo, all of Energy and Environmental Economics, Inc. 

Rich Sedano of the Regulatory Assistance Project and 

Alison Silverstein of Alison Silverstein Consulting provided 

their expertise during review and editing of the Guide. 

DOE and EPA facilitate the National Action Plan for 

Energy Effi ciency, including this Guide. Key staff include 

Larry Mansueti (DOE Offi ce of Electricity Delivery and 

Energy Reliability); Dan Beckley (DOE Offi ce of Energy 

Effi ciency and Renewable Energy); and Kathleen Hogan, 

Katrina Pielli, and Stacy Angel (EPA Climate Protection 

Partnership Division). 

Eastern Research Group, Inc., provided copyediting, 

graphics, and production services. 

National Action Plan for Energy Effi ciency vi

Executive Summary 


This Guide to Resource Planning with Energy Efficiency describes the key issues, best practices, and main 

process steps for integrating energy efficiency into electricity resource planning. The Guide is provided to 

assist in the implementation of the National Action Plan for Energy Effi ciency’s five policy recommendations for creating a sustainable, aggressive national commitment to energy effi ciency. 

Improving energy effi ciency in our homes, businesses, 

schools, governments, and industries—which collectively consume more than 70 percent of the natural 

gas and electricity used in the country—is one of the 

most constructive, cost-effective ways to address the 

challenges of high energy prices, energy security and 

independence, air pollution, and global climate change. 

Despite these benefi ts and the success of energy effi ­

ciency programs in some regions of the country, energy 

effi ciency remains critically underutilized in the nation’s 

energy portfolio. It is time to take advantage of more 

than two decades of experience with successful energy 

effi ciency programs, broaden and expand these efforts, 

and capture the savings that energy effi ciency offers. 

Integrating energy effi ciency into resource planning is a 

key to capturing these benefi ts. 

This Guide details how to use a variety of methods to 

help ensure that energy effi ciency programs provide 

a resource as dependable and valuable to utilities and 

their customers as any supply-side resource. The Guide 

organizes the planning process into ten important steps, 

each with their own associated technical issues, best 

practices, and information resources. 

Since multiple approaches exist, the best choice is generally the one that works well with existing practices, 

the institutional structure in place, the experience of the 

teams doing the analysis and developing the programs, 

the time and budget available, and the data available. 

With this in mind, the steps and techniques described in 

this Guide should be understood as a starting point for 

tailoring an approach that best fi ts conditions and existing planning processes for a given utility or jurisdiction. 

Figure ES-1 shows the topics covered in this Guide and 

their overall relationship in the energy effi ciency planning 

process. The three main sequential topic areas are energy 

effi ciency potential studies; portfolio development and 

reporting; and procurement, measurement, and verifi cation. After addressing these topics, the Guide discusses 

emerging techniques and best practices. 

The key points from this Guide include: 

• 	Energy effi ciency is an important utility resource 

which should be incorporated into utility resource 

planning, along with supply-side resources. 

• 	Energy effi ciency is a quantifi able resource, and this 

Guide can help resource planners learn to: 

– Predict the energy effi ciency potential within 

their jurisdiction using a potential study. 

–	 Calculate the economic benefi ts of energy savings through an avoided cost methodology. 

–	 Develop energy effi ciency measures and determine their cost-effectiveness. 

–	 Use the information about energy effi ciency 

measures to develop an energy effi ciency program or portfolio. 

–	 Estimate and report on the impacts of the 

program for resource planning. 

–	 Effectively implement an energy effi ciency 

program or portfolio through procurement of 

energy effi ciency resources from contractors, 

and track program performance with evaluation, 

measurement, and verifi cation tools. 

National Action Plan for Energy Effi ciency	 ES-1 
Figure ES-1. Overall Organization of the Guide to Resource Planning with 

Energy Effi ciency 

Potential Studies 

(Chapter 2) 

Portfolio Development and 

Reporting (Chapters 3 to 8) 

Procurement, Measurement, and 

Verification (Chapters 9 and 10) 

Potential 

Studies 

Chapter 2 Chapter 3 Chapter 4 

Chapter 5 

Chapter 6 

Chapter 7 

Chapter 8 

Chapter 9 

Chapter 10 

Chapter 11 

Development 

of 

Avoided Costs 

Development 

of EE 

Measures 

Procurement 

of EE 

Services 

Determining 

CostEffectiveness Evaluation, 

Measurement, and 

Verification 

Development 

of EE 

Programs and 

Portfolios 

Estimating EE 

Impacts for 

Resource 

Planning 

Reporting EE 

Impacts for 

Resource 

Planning 

Best Practices 

Best Practices 

(Chapter 11) 

• 	Utilities and regulators should aim toward the integration of all of these resource planning functions 

into a unifi ed whole. 

This Guide has been developed to help parties implement the fi ve key policy recommendations of the 

National Action Plan for Energy Effi ciency. (See page 

1-2 for a full listing of options to consider under each 

Action Plan recommendation.) The Action Plan was 

released in July 2006 as a call to action to bring diverse 

stakeholders together at the national, regional, state, or 

utility level, as appropriate, and foster the discussions, 

decision-making, and commitments necessary to take 

investment in energy effi ciency to a new level. 

This Guide directly supports the Action Plan recommendations to “recognize energy effi ciency as a high-priority energy resource” and “make a strong, long-term 

commitment to implement cost-effective energy effi ­

ciency as a resource.” The Guide elaborates upon many 

of the options identifi ed by the Action Plan, and makes 

more concrete many of the tools and techniques needed to implement the Action Plan’s recommendations. 

ES-2Guide to Resource Planning with Energy Effi ciency 
1: Introduction
 

Improving the energy efficiency of homes, businesses, schools, governments, and industries—which 

consume more than 70 percent of the natural gas and electricity used in the United States—is one of the 

most constructive, cost-effective ways to address the challenges of high energy prices, energy security 

and independence, air pollution, and global climate change. Mining this energy efficiency could help us 

meet on the order of 50 percent or more of the expected growth in U.S. consumption of electricity and 

natural gas in the coming decades, yielding many billions of dollars in saved energy bills and avoiding 

significant emissions of greenhouse gases (GHGs) and other air pollutants.1 

Recognizing this large untapped opportunity, more than 

60 leading organizations representing diverse stakeholders from across the country joined together to develop 

the National Action Plan for Energy Effi ciency.2 The Action Plan identifi es many of the key barriers contributing 

to underinvestment in energy effi ciency, outlines fi ve 

key policy recommendations for achieving all cost-effective energy effi ciency, and provides a number of options 

to consider in pursuing these recommendations (Figure 

1-1). As of November 2007, nearly 120 organizations 

have endorsed the Action Plan recommendations and 

made public commitments to implement them in their 

areas. Conducting resource planning that includes energy effi ciency is key to making the Action Plan a reality. 

1.1 About the Guide 

This Guide elaborates upon many of the options identifi ed above by the Action Plan, and makes more concrete 

many of the tools and techniques needed to implement 

the Action Plan’s recommendations. The Action Plan’s 

Leadership Group (see Appendix A for a list of group 

members) identifi ed the area of energy effi ciency in 

resource planning as one where additional guidance is 

needed to help parties pursue the recommendations and 

meet their commitments to energy effi ciency. Specifi cally, 

this Guide supports the Action Plan recommendations to 

“recognize energy effi ciency as a high-priority energy resource” and “make a strong, long-term commitment to 

implement cost-effective energy effi ciency as a resource.” 

The Guide has ten chapters, each of which focuses on 

an important step in the process and the associated 

technical issues, best practices, and information resources. When correctly used, the methods described here 

help ensure that energy effi ciency programs can provide 

a resource as dependable and valuable to utilities and 

their customers as any supply-side resource. 

Since multiple approaches exist, the best choice is generally the one that works well with existing practices, 

the institutional structure in place, the experience of the 

teams doing the analysis and developing the programs, 

the time and budget available, and not least the data 

available. With this in mind, the steps and techniques 

described in the Guide should be understood as a starting point for tailoring an approach that best fi ts conditions and existing planning processes for a given utility 

or jurisdiction. 

Guide Objective 

After reading this Guide, the reader should be 

able to use the methods described to help ensure 

that energy effi ciency programs provide a resource 

as dependable and valuable to utilities and their 

customers as any supply-side resource. 

This Guide should be of interest to several different types 

of readers. First, it aims to help utility resource planners who are early in the process of integrating energy 

effi ciency into resource planning and have questions 

National Action Plan for Energy Effi ciency 1-1
Figure 1-1. National Action Plan for Energy Effi ciency Recommendations 

and Options 

Recognize energy efficiency as a high-priority 

energy resource. 

Options to consider: 

• Establishing policies to establish energy effi ciency as a 

priority resource. 

• Integrating energy effi ciency into utility, state, and regional 

resource planning activities. 

• Quantifying and establishing the value of energy effi ciency, 

considering energy savings, capacity savings, and environmental benefi ts, as appropriate. 

Make a strong, long-term commitment to implement cost-effective energy efficiency as a resource. 

Options to consider: 

• Establishing appropriate cost-effectiveness tests for a 

portfolio of programs to refl ect the long-term benefi ts of 

energy effi ciency. 

• Establishing the potential for long-term, cost-effective 

energy effi ciency savings by customer class through proven 

programs, innovative initiatives, and cutting-edge technologies. 

• Establishing funding requirements for delivering long-term, 

cost-effective energy effi ciency. 

• Developing long-term energy saving goals as part of energy planning processes. 

• Developing robust measurement and verifi cation procedures. 

• Designating which organization(s) is responsible for administering the energy effi ciency programs. 

• Providing for frequent updates to energy resource plans to 

accommodate new information and technology. 

Broadly communicate the benefits of and opportunities for energy effi ciency. 

Options to consider: 

• Establishing and educating stakeholders on the business

case for energy effi ciency at the state, utility, and other 

appropriate level, addressing relevant customer, utility, and 

societal perspectives. 

• Communicating the role of energy effi ciency in lowering customer energy bills and system costs and risks 

over time. 

• Communicating the role of building codes, appliance 

standards, and tax and other incentives. 

Provide sufficient, timely, and stable program 

funding to deliver energy effi ciency where 

cost-effective. 

Options to consider: 

• Deciding on and committing to a consistent way for

program administrators to recover energy effi ciency 

costs in a timely manner. 

• Establishing funding mechanisms for energy effi ciency 

from among the available options, such as revenue 

requirement or resource procurement funding, system 

benefi ts charges, rate-basing, shared-savings, and 

incentive mechanisms. 

• Establishing funding for multi-year period.

Modify policies to align utility incentives with 

the delivery of cost-effective energy effi ciency 

and modify ratemaking practices to promote 

energy effi ciency investments. 

Options to consider: 

• Addressing the typical utility throughput incentive and 

removing other regulatory and management disincentives to energy effi ciency. 

• Providing utility incentives for the successful management of energy effi ciency programs. 

• Including the impact on adoption of energy effi ciency 

as one of the goals of retail rate design, recognizing 

that it must be balanced with other objectives. 

Source: National Action Plan for Energy Effi ciency Report. 

1-2 Guide to Resource Planning with Energy Effi ciency 
Figure 1-2. Overall Organization of the Guide to Resource Planning with 

Energy Effi ciency 

Potential Studies 

(Chapter 2) 

Portfolio Development and 

Reporting (Chapters 3 to 8) 

Procurement, Measurement, and 

Verification (Chapters 9 and 10) 

Potential 

Studies 

Chapter 2 Chapter 3 Chapter 4 

Chapter 5 

Chapter 6 

Chapter 7 

Chapter 8 

Chapter 9 

Chapter 10 

Chapter 11 

Development 

of 

Avoided Costs 

Development 

of EE 

Measures 

Procurement 

of EE 

Services 

Determining 

CostEffectiveness Evaluation, 

Measurement, and 

Verification 

Development 

of EE 

Programs and 

Portfolios 

Estimating EE 

Impacts for 

Resource 

Planning 

Reporting EE 

Impacts for 

Resource 

Planning 

Best Practices 

Best Practices 

(Chapter 11) 

about how to proceed. Second, it is meant to help those 

overseeing utilities, such as PUCs and city councils, to ask 

the right questions and understand the key issues when 

reviewing utility resource planning decisions. Finally, it 

assists stakeholders who are increasingly concerned with 

how to promote energy effi ciency in resource decisions, 

as evidenced by the broad interest and participation in 

the Action Plan. This document benefi ts all Action Plan 

participants for its direct application to, and as a useful 

reference for, their resource planning activities. 

1.2 Structure of the Guide 

The following diagram shows the topics addressed in 

this Guide and their overall relationship in the energy 

effi ciency planning process. The three main sequential topic areas are energy effi ciency potential studies, 

portfolio development and reporting, and procurement, 

measurement and verifi cation. This is followed by a 

discussion of emerging techniques and best practices. 

1. 	Development of energy effi ciency potential studies 

(Chapter 2). Chapter 2 describes the standard practices employed in potential studies, including methodologies for analyzing technical, economic, and achievable potential. Potential studies are generally the 

starting place in designing energy effi ciency programs 

and incorporating them into resource planning. There 

are three main types of potential studies: (1) a highlevel policy study to set program goals and budgets 

and to make the policy case to initiate or expand an 

energy effi ciency program; (2) a planning study to 

identify energy effi ciency alternatives to supply-side 

National Action Plan for Energy Effi ciency 1-3
investments, including generation, transmission, or distribution; and (3) a detailed program-design study to 

identify the best mix of energy effi ciency measures to 

be offered to customers. Each type of potential study 

is described in the Action Plan’s Guide for Conducting 

Energy Effi ciency Potential Studies, available at www. 

epa.gov/eeactionplan. 

2. 	Energy effi ciency portfolio development and reporting 

(Chapters 3 to 8). Energy effi ciency portfolio development entails generating good ideas about energy 

effi ciency opportunities, evaluating cost-effectiveness, 

continuing established programs, offering programs 

to a full range of customers, and communicating 

expected reductions to energy procurement and planning. These chapters describe the details in developing the energy effi ciency portfolio and reporting on 

program results. 

3. 	Procurement, measurement, and verifi cation (Chapters 9 and 10). How the energy effi ciency portfolio is 

implemented is critical to the overall success of the 

programs. These chapters provide information on 

procurement of energy effi ciency services and tracking overall performance through evaluation, measurement, and verifi cation (EM&V). 

In addition to these three topics, the Guide’s last chapter 

discusses best practices, including coordination of each 

resource planning function into an integrated whole. 

1.3 Development of the Guide 

The Guide to Resource Planning with Energy Effi ciency 

is a product of the Year Two Work Plan for the National 

Action Plan for Energy Effi ciency. With direction and 

comment by the Action Plan Leadership Group, the 

Guide’s development was led by Snuller Price, Energy 

and Environmental Economics, Inc., under contract to 

the U.S. Environmental Protection Agency (EPA). Chapters 7 and 8 were authored by Chuck Goldman and 

Nicole Hopper, Lawrence Berkeley National Laboratory, 

under contract to the U.S. Department of Energy (DOE). 

Additional preparation was performed by Dr. Jim Williams, Amber Mahone, Jack Moore, and Dr. C.K. Woo, 

all of Energy and Environmental Economics, Inc. 

1.4 Notes 

1. 	 See the National Action Plan for Energy Effi ciency (2006), available 

at <www.epa.gov/cleanenergy/actionplan/report.htm>. 

2. 	 See <www.epa.gov/eeactionplan>. 

1-4 Guide to Resource Planning with Energy Effi ciency 
2: Potential Studies
 

Potential studies are often the first step taken in initiating or expanding energy effi ciency programs. 

This chapter provides an overview of potential studies for use in resource planning. For a more detailed 

discussion of conducting a potential study, see the Action Plan’s Guide for Conducting Energy Effi ciency 

Potential Studies (National Action Plan for Energy Effi ciency, 2007a). 

High-Level Summary Key Questions for Utilities and 

Regulators 

• Potential studies are typically the fi rst step taken in initi­ • Does the potential study establish the potential for

ating or expanding energy effi ciency programs. They are long-term, cost-effective energy effi ciency savings by 

conducted to determine the potential for saving energy customer class?1 

and capacity through energy effi ciency measures. • What is this potential study’s goal (promoting effi ciency 

• Potential studies typically start by determining technical at the policy/regulatory level, integrating effi ciency into 

feasibility, then apply different screens such as customer the utility planning process, or designing effi ciency proeligibility, cost-effectiveness, and estimates of program grams)? Does it achieve that goal? 

uptake (i.e., customer participation) to determine what • Are the potential study results realistic, refl ecting what we the program can be realistically expected to achieve. are likely to achieve through energy effi ciency programs? 

• Potential studies vary in scope and methods according • How do the results of this study compare to the results to their objectives, of which there are three main kinds: for other jurisdictions? (1) promoting effi ciency at the policy/regulatory level, (2) 

integrating effi ciency into the utility planning process, and • Does the potential study highlight any new opportunities

(3) designing effi ciency programs. to add to the effi ciency portfolio? 

2.1 Determining Energy Effi ciency 

Potential 

Potential studies are conducted to determine the potential for saving energy (e.g., of electricity, MCF of natural 

gas) and capacity (e.g., MW, MCF/day) through energy 

effi ciency measures. Since “energy effi ciency potential” 

can have different meanings, Figure 2-1 lists the four 

defi nitions commonly used in resource planning. 

These definitions mirror the sequential estimates in a typical potential study. The process begins with a technical 

potential estimate of what kWh and kW savings would 

be achieved if all technically feasible effi ciency measures 

were implemented for all customers. The technical potential is then adjusted by applying a series of screens of 

real-world constraints. Economic potential is the result of 

reducing the technical potential by applying cost-effectiveness and program eligibility criteria. There are several 

tests for evaluating cost-effectiveness, each refl ecting 

the different interests in energy effi ciency of various 

stakeholders. Chapter 5 discusses in more detail how to 

determine cost-effectiveness. Achievable potential is the 

result of estimating how much market barriers and program uptake limits will reduce the economic potential. 

Examples of these barriers and limits are: 

• Customer willingness to adopt effi ciency measures. 

• Customer criteria for cost-effectiveness. 

• Customer awareness of energy effi ciency opportunities. 

• Customer access to information about energy effi ciency. 

National Action Plan for Energy Effi ciency 2-1
-

-

-

Figure 2-1. Definitions of Energy Effi ciency Potential
 

Not technically 

feasible Technical Potential 

Not technically 

feasible 

Not cost 

effective Economic Potential 

Not technically 

feasible 

Not cost 

effective 

Market and 

adoption 

barriers 

Achievable Potential 

Not technically 

feasible 

Not cost 

effective 

Market and 

adoption 

barriers 

Program design, 

budget, staffing, and 

time constraints 

Program 

Potential 

Note: For more complete defi nitions, see National Action Plan for Energy Effi ciency, 2007a, and XENERGY, 2002. 

• 	Rates of equipment turnover. 

• 	Program incentives and activity. 

• 	Availability of energy-efficient equipment in the 

marketplace. 

• 	“Split incentive” barriers in which the person investing in the equipment is not in a position to receive 

the savings (e.g., landlords and tenants; institutions 

with separate operations and capital budgets and 

bureaucracies). 

Finally, the program potential is the effi ciency savings 

that can be realistically realized from the achievable potential, given the budget, staffi ng, and time constraints 

for the effi ciency program. Program potential establishes the total, or gross, savings expected from a program. 

As a final step, some potential studies net out “naturally 

occurring” energy efficiency improvements in order to 

identify the savings actually attributable to the program. 

For example, if a refrigerator rebate program pays 10 

customers to upgrade to an ENERGY STAR® model, but 

two customers would have upgraded even without the 

program, then the net savings is 80% of the program 

potential (e.g., the program can take credit for eight out of 

every 10 participants). The 80% value is commonly known 

as a “net-to-gross” ratio (NTGR), useful for determining 

both the cost-effectiveness and achievements attributable 

to energy effi ciency efforts. 

2.2 Types of Potential Studies 

Potential studies differ in scope and methods as a function 

of their objectives and who is conducting them. They can 

be divided into three main types: 

1. 	Policy studies, used to promote efficiency in policies 

and regulations. 

2. 	Planning studies, used to integrate energy effi ciency 

into utility resource planning. 

3. 	Program-design studies, used to develop the details 

of energy effi ciency programs. 

Potential studies for policy are typically high-level (i.e., not 

extremely detailed) studies, primarily designed to develop 

a policy consensus for initiating new energy effi ciency 

programs or making changes to existing programs. A 

policy study might be commissioned by a utility regulator 

or legislative body that would like more information on the 

benefits of establishing a program, or by third-party energy 

efficiency advocates who want to bring energy effi ciency 

2-2 Guide to Resource Planning with Energy Effi ciency 
Hours Hours13 2350-2850 

10 1850-2350 

7 1350-1850 

4 850-1350 

1 

2010 Covington Transformer Bank Loadings by Day and Hour 

Emergency Unit = 2850 MVA 

22 

19 MVA

3350-3850 

2850-3350 

16 

13 

2350-2850 10 1850-2350 

7 1350-1850 

4 850-1350 

1 

Figure 2-2. Example of Results From a Policy-Focused Energy Effi ciency 

Potential Study 

5,000 10.0% 

4,000 8.0% 

3,000 6.0% 

2,000 4.0% 

1,000 2.0% 

0 

Business as Usual Advanced Efficiency 

Efficiency Funding Scenarios 

Max Efficiency 

0.0% 

Peak Capacity Reduced Percent of Peak Reduced 

Source: XENERGY, 2002. 

Figure 2-3. BPA Study Illustrates When Peak Load Reductions Are Needed to 

Avoid Transformer Bank Overload 

2004 Covington Transformer Bank Loadings by Day and Hour 

Emergency Unit = 2850 MVA 

16 

19 

22 

2850-3350 

MVA

Note: Thermal overload limit shown in red.
 

Source: Bonneville Power Administration [BPA] 2007. (In references section)
 

National Action Plan for Energy Effi ciency Total Capacity Saved Through 2011 (MW) 15-Nov 18-Nov 21-Nov 24-Nov 27-Nov 30-Nov 15-Nov 18-Nov 21-Nov 24-Nov 27-Nov 30-Nov 3-Dec 3-Dec 6-Dec 6-Dec 9-Dec 9-Dec

12-Dec 12-Dec

15-Dec 15-Dec18-Dec 18-Dec

21-Dec 21-Dec

24-Dec 24-Dec27-Dec 27-Dec30-Dec 30-Dec

2-Jan 2-Jan

5-Jan 5-Jan

8-Jan 8-Jan

11-Jan 11-Jan

14-Jan 14-Jan

17-Jan 17-Jan20-Jan 20-Jan23-Jan 23-Jan26-Jan 26-Jan

29-Jan 29-Jan

1-Feb 1-Feb

4-Feb 4-Feb7-Feb 7-Feb

10-Feb 10-Feb

13-Feb 13-Feb

Percent of 2011 Peak Capacity Reduced 

2-3
benefits to the attention of regulators and policy-makers. 

An example is a 2002 Energy Foundation study that played 

an important role in convincing California legislators to 

aggressively fund energy efficiency in that state (see Figure 

2-2). Policy studies can also be designed jointly by a utility 

and its regulator to establish prudent spending on energy 

efficiency and to justify its cost recovery. 

Planning studies of energy effi ciency potential are used 

by demand-side planners within utilities to incorporate 

effi ciency into an integrated resource planning (IRP) 

process. The objective of a planning study is to identify 

energy effi ciency opportunities that are cost-effective alternatives to supply-side resources in generation, transmission, or distribution. This often means developing a 

case that specifi c effi ciency measures have the potential 

to eliminate or defer the need for specifi c new investments in a supply resource plan, which may encompass 

generation, wires, substation upgrades, or gas pipelines. 

As an example, in the Bonneville Power Administration’s (BPA’s) Kangley-Echo Lake non-wires alternative 

planning study, the focus was on identifying energy effi ­

ciency improvements that would allow the deferral of a 

new transmission line and substation upgrades needed 

to prevent transformer thermal overloadings. Figure 2-3 

illustrates what the peak loading hours were expected 

to be in 2004 and 2010, and therefore the kW impact 

shapes of energy effi ciency that would be needed as an 

alternative to the conventional upgrades (BPA, 2007). 

Potential studies for program design can be undertaken 

by utilities or third parties for the purpose of developing specific measures for the energy effi ciency portfolio. 

They can also be used for developing customer program 

features, such as outreach and education, rate incentives, 

and rebates for customer purchases of energy effi cient 

equipment. More details about the types of potential 

studies and the methodologies used can be found in the 

Guide for Conducting Energy Efficiency Potential Studies 

(National Action Plan for Energy Efficiency, 2007a) and in 

Section 2.3. 

2.3 Resources on Energy 

Effi ciency Potential 

Title/Description URL Address 

Emerging Energy-Saving Technologies and 

Practices for the Buildings Sector as of 2004. 

This study identifi es new research and demonstration projects that could help advance high-priority 

emerging technologies, as well as new potential 

technologies and practices for market transformation 

activities. 

<http://aceee.org/pubs/a042toc.pdf> 

A Responsible Electricity Future: An Effi cient, 

Cleaner and Balanced Scenario for the U.S. 

Electricity System. This report develops a scenario for 

the future evolution of the electric power system in the 

U.S., including increased investment in energy effi ciency 

and in renewable and distributed generating technology, and compares it with the current situation. 

<www.uspirg.org/uploads/J9/ 

vu/ J9vuJffJAiEQLJuNjf1BHg/ 

responsibleelecfuture.pdf> 

Scenarios for a Clean Energy Future, 2000. 

This document reflects efforts of the Interlaboratory 

Working Group, commissioned by DOE, to examine 

the potential for public policies and programs to foster 

efficient and clean energy technology solutions. 

<www.ornl.gov/sci/eere/cef/> 

National 

2-4 Guide to Resource Planning with Energy Effi ciency 
Title/Description URL Address 

National 

Midwest 

Screening Market Transformation Opportunities: Lessons from the Last Decade, Promising 

Targets for the Next Decade. This report examines past and recent trends in the market transformation fi eld and presents an updated screening analysis 

and categorization of the most promising opportunities. 

<www.aceee.org/pubs/u022full.pdf> 

The Technical, Economic and Achievable 

Potential for Energy Efficiency in the U.S.— 

A Meta-Analysis of Recent Studies. This study 

compares the findings from 11 studies on the technical, economic, and/or achievable potential for energy 

efficiency in the U.S. to recent-year actual savings from 

efficiency programs in leading states. 

<www.aceee.org/conf/04ss/rnemeta.pdf> 

Examining the Potential for Energy Effi ciency 

to Address the Natural Gas Crisis in the 

Midwest. The results of this study suggest that a 

modestly aggressive, but pragmatically achievable 

energy effi ciency campaign (achieving about a 5% 

reduction in both electricity and natural gas customer 

use over 5 years) could produce tens of billions of 

dollars in net cost savings for residential, commercial, 

and industrial customers in the Midwest. 

<www.aceee.org/pubs/u051.htm> 

Repowering the Midwest: The Clean Energy 

Development Plan for the Heartland. This 

Web site is supported by the Environmental Law and 

Policy Center as a source for clean energy information in the Midwest. It provides information on the 

Clean Energy Development Plan for the Heartland, 

which proposes policies to implement underutilized 

energy effi ciency technologies and to aggressively 

develop renewable energy resources. 

<www.repowermidwest.org> 

National Action Plan for Energy Effi ciency 2-5
Title/Description URL Address 

Northeast Economically Achievable Energy Effi ciency Potential in New England. This report provides an 

overview of areas where energy effi ciency could potentially be increased in the six New England states. 

<www.neep.org/fi les/Updated_ 

Achievable_Potential_2005.pdf> 

Electric Energy Efficiency and Renewable Energy in New England: An Assessment of Existing Policies and Prospects for the Future. This 

report applies analytical tools, such as economic and 

environmental modeling, to demonstrate the value 

of consumer-funded energy effi ciency programs and 

renewable portfolio standards and addresses market 

and regulatory barriers. 

<http://raponline.org/Pubs/ 

RSWS-EEandREinNE.pdf> 

Northwest 

NEEP Initiative Review: Commercial/Industrial 

Sectors Qualitative Assessment and Initiative 

Ranking. Synapse Energy Economics. Submitted to 

Northeast Energy Efficiency Partnerships, Inc., 

October 1, 2004. 

The Fifth Northwest Electric Power and Conservation Plan. This plan is a blueprint for an adequate, 

low-cost, low-risk energy future. Technical appendices 

include conservation cost-effectiveness methodologies. 

<www.neep.org/html/NEEP_C&IReview. 

pdf> 

<www.nwcouncil.org/energy/powerplan/ 

plan/Default.htm> 

Southeast Powering the South: A Clean & Affordable 

Energy Plan for the Southern United States. 

Powering the South shows that a clean generation mix can meet the region’s power demands and 

reduce pollution without raising the average regional 

cost of electricity and lists the policy initiatives that 

can make the changes. 

<www.crest.org/articles/static/1/binaries/ 

pts_repp_book.pdf> 

Southwest The Potential for More Efficient Electricity Use 

in the Western U.S.: Energy Effi ciency Task 

Force Draft Report to the Clean and Diversified Energy Advisory Committee of the Western Governor’s Association, Draft Report for 

Peer Review and Public Comment. This report 

demonstrates how the adoption of the best practice 

energy effi ciency policies and programs in all western 

states could reduce most of the projected load growth 

during 2005–2020, reduce overall electricity consumption, and yield economic and environmental benefi ts. 

<www.westgov.org/wga/publicat/ 

CDEAC06.pdf> 

2-6 Guide to Resource Planning with Energy Effi ciency 
Title/Description URL Address 

Southwest The New Mother Lode: The Potential for More 

Efficient Electricity Use in the Southwest. This 

report for the Southwest Energy Effi ciency Project examines the potential for, and benefi ts from, increasing the effi ciency of electricity use in the southwest 

states of Arizona, Colorado, Nevada, New Mexico, 

Utah, and Wyoming. 

<www.swenergy.org/nml/index.html> 

Economic Assessment of Implementing the 

10/20 Goals and Energy Effi ciency Recommendations. This report examines the Grand Canyon 

Visibility Transport Commission’s air pollution prevention recommendations. It articulates the potential 

emission reductions, costs, and secondary economic 

impacts of meeting the 10/20 goals and implementing the energy effi ciency recommendations given 

the assumptions and scenarios developed by the Air 

Pollution Prevention (AP2) forum. 

<www.wrapair.org/forums/ap2/docs. 

html> 

California 

A Balanced Energy Plan for the Interior West. 

This report shows how energy effi ciency, renewable 

energy, and combined heat and power resources can 

be integrated into the region’s existing power system 

to meet growing electric demands in a cost-effective, 

reliable way that reduces risk and improves environmental quality for the Interior West region of Arizona, 

Colorado, Montana, New Mexico, Nevada, Utah, and 

Wyoming. 

California’s Secret Energy Surplus: The Potential for Energy Effi ciency. This study focuses 

on assessing electric energy potential in California 

through the assessment of technical, economic, and 

achievable potential savings over the next 10 years. 

http://westernresources.org/energy/bep. 

html 

<www.ef.org/documents/Secret_Surplus. 

pdf> 

Connecticut Independent Assessment of Conservation and 

Energy Efficiency Potential for Connecticut 

and the Southwest Connecticut Region. This 

study estimates the maximum achievable cost-effective potential for electric energy and peak demand 

savings from energy effi ciency measures in the 

geographic region of Connecticut served by United 

Illuminating Company and Connecticut Light and 

Power Company. 

<www.env-ne.org/Publications/CT_EE_ 

MaxAchievablePotential%20Final%20 

Report-June%202004.pdf> 

National Action Plan for Energy Effi ciency 2-7
Title/Description URL Address 

Georgia Assessment of Energy Efficiency Potential in 

Georgia. This report presents a profi le of energy use 

in Georgia; the potential for, and public benefi ts of, 

energy effi ciency; and a public policy review. 

<www.gefa.org/Modules/ 

ShowDocument.aspx?documentid=46> 

Iowa The Potential for Energy Efficiency in the 

State of Iowa. This report uses existing programs, 

surveys, savings calculators, and economics simulation to estimate the potential for energy savings in 

Iowa. 

<www.ornl.gov/sci/btc/apps/ 

Restructuring/IowaEEPotential.pdf> 

Massachusetts The Remaining Electric Energy Effi ciency 

Opportunities in Massachusetts. This report 

addresses the remaining electric energy effi ciency 

opportunities in the residential, commercial, and 

industrial sectors in Massachusetts. 

<www.mass.gov/Eoca/docs/doer/pub_ 

info/e3o.pdf> 

Nevada Nevada Energy Effi ciency Strategy. Nevada has 

taken a number of steps to increase energy effi ciency. This report provides 14 policy options for further 

increasing the effi ciency of electricity and natural gas 

and reducing peak power demand. 

<www.swenergy.org/pubs/Nevada_ 

Energy_Effi ciency_Strategy.pdf> 

New Jersey New Jersey Energy Efficiency and Distributed 

Generation Market Assessment. This study estimates mid- and long-term potential for energy and 

peak-demand savings from energy effi ciency measures and for distributed generation in New Jersey. 

http://www.policy.rutgers.edu/ceeep/ 

images/Kema%20Report.pdf 

New York Energy Efficiency and Renewable Energy 

Resource Development Potential in New York 

State. Final Report Volume One: Summary Report. 

This study examines the long-range potential for 

energy effi ciency and renewable energy technologies to displace fossil-fueled electricity generation in 

New York by looking at the potential available from 

existing and emerging effi ciency technologies and 

practices and by estimating renewable electricity 

generation potential. 

<//www.nyserda.org/sep/ 

>EE&ERpotentialVolume1.pdf 

Oregon Energy Efficiency and Conservation Measure 

Resource Assessment for the Residential, Commercial, Industrial and Agricultural Sectors. This 

report is designed to inform the project development 

and selection process for a list of potential energy 

effi ciency and renewable energy measures that could 

provide electricity savings for Oregon consumers. 

<www.energytrust.org/library/reports/ 

Resource_Assesment/ETOResource 

AssessFinal.pdf> 

2-8 Guide to Resource Planning with Energy Effi ciency 
Title/Description URL Address 

Oregon Natural Gas Efficiency and Conservation Measure Resource Assessment for the Residential 

and Commercial Sectors. This is a resource assessment to evaluate potential natural gas conservation 

measures that can be applied to the residential and 

commercial building stock serviced by Northwest 

Natural Gas. 

<www.energytrust.org/library/reports/ 

Resource_Assesment/GasRptFinal_ 

SS103103.pdf> 

Texas Potential for Energy Effi ciency, Demand 

Response, and Onsite Renewable Energy to 

Meet Texas’s Growing Electricity Needs. This 

report assesses the potential for energy effi ciency, 

demand response, and onsite renewable energy 

resources to meet the immediate and long-term 

demand growth in Texas. 

<www.aceee.org/pubs/e073.htm> 

2.4 Notes
 

1. 	 This key question is based on the National Action Plan for 

Energy Effi ciency recommendation to “make a strong, long-term 

commitment to implement cost-effective energy effi ciency as a 

resource” and options to consider. 

National Action Plan for Energy Effi ciency 2-9

Development of Energy 3: Efficiency Avoided Costs 

This chapter provides a discussion of how to calculate the economic benefits of energy savings through an 

avoided cost methodology. This includes discussion of the typical components of avoided costs, considerations for developing avoided costs, and the forecasting methods required to value the long-term nature 

of energy effi ciency measures. 

3.1 Overview
 

The typical approach for quantifying the benefi ts of energy effi ciency is to forecast long-term “avoided costs,” 

defi ned as costs that would have been spent if the 

energy effi ciency had not been put in place. For example, if an electric distribution utility expects to purchase 

energy at a cost of $70/MWh on behalf of customers, then $70/MWh is the value of reduced purchases 

from energy effi ciency. In addition, the utility may not 

have to purchase as much system capacity (installed or 

unforced),2 make as many upgrades to distribution or 

transmission systems, buy as many emissions offsets, or 

incur as many other costs. All such cost-saving components due to energy effi ciency are directly counted as 

avoided cost benefi ts. In addition to the directly counted benefi ts, the state PUCs or governing councils may 

request that the utility account for indirect cost savings 

High-Level Summary Key Questions for Utilities and 

Regulators 

• Avoided costs are the forecasted economic 

“benefi ts” of energy savings. 

• The avoided costs should be evaluated in enough 

detail to refl ect any signifi cant cost variations by 

time and area. 

• Avoided costs can include the value of reduced 

GHG emissions. 

• How transparent will we require our assumptions 

to be? Will we rely on proprietary internal forecasts 

of avoided costs or non-proprietary avoided costs in 

our energy effi ciency planning?1 

• Do our avoided costs capture the major costs that 

can be avoided with energy effi ciency? 

• Do we want to include the value of GHG reductions in the avoided cost? 

• Do we want to use hourly, time-of-use (TOU), or annual average avoided costs for different end-uses? 

that are not priced by the market (e.g., reduced CO2 

emissions). 

3.2 Components of Avoided Costs
 

There are two main categories of avoided costs: energyrelated avoided costs and capacity-related avoided costs, 

as discussed in the Action Plan report. “Energy-related 

avoided costs” refers to market prices of energy, losses, 

natural gas commodity prices, and other benefi ts associated with energy production such as reduced air emissions and water usage. “Capacity-related avoided costs” 

refers to infrastructure investments such as power plants, 

transmission and distribution lines, pipelines, and liquefi ed 

natural gas (LNG) terminals. From an environmental point 

of view, saving energy reduces air emissions including 

GHGs, and saving capacity reduces land use and siting issues such as new transmission corridors and power plants. 

National Action Plan for Energy Effi ciency 3-1
Table 3-1 describes the main components in avoided costs 

and the primary options for their development. Electric 

utilities typically include both energy and capacity components of avoided costs. Natural gas utilities will typically include energy, and may or may not include capacity. These 

components make up the majority of the overall avoided 

cost. Depending on the utility and the focus of the state 

PUC or governing council, additional avoided cost components may be included, as shown in Table 3-1. 

3.3 Considerations When 


Developing Avoided Costs
 

Depending on the utility type and market structure in 

a region, there are several choices for methodology in 

developing avoided costs. 

Table 3-1. Typical Components of Avoided Costs Energy Efficiency Program Types 

Avoided Component Description 

Electricity energy (with losses) • Market-forecast of electricity procurement, or 

• Operating cost of power plants if using production simulation. 

• Loss factors.

Electricity capacity (with 

losses) 

• Market-forecast of capacity, or 

• Assessment of deferred power plant construction based on adjusted 

load forecast. 

• Loss factors.

Natural gas commodity (with 

losses) 

• Market-forecast of natural gas procurement with basis adjustment for 

delivery to utility city-gate. 

• Loss and compression factors. 

Natural gas capacity (with 

storage and compression) 

• Assessment of deferred infrastructure including pipelines, storage 

facility, and LNG terminals. 

Other Components Description 

Ancillary services • Reduced costs of ancillary services associated with reduced energy 

and capacity. 

Transmission and distribution 

capacity 

• Deferral value of additional transmission and distribution capacity to

meet customer peak demand growth. 

• For electricity, the transmission and distribution capacity avoided costs 

vary by sub-area within the utilities. Capacity costs also vary by hour, coincident with the timing of the local area peak demands. Peak demand 

is correlated to local climate. 

• For natural gas, the avoided transmission and distribution costs vary by

utility service territory and are typically driven by gas loads in the winter 

heating season. 

3-2 Guide to Resource Planning with Energy Effi ciency 
Table 3-1. Typical Components of Avoided Costs Energy Efficiency Program Types 

(continued) 

Avoided Component Description 

Hedge of fossil fuel prices • Depending on the approach taken to forecast market prices, this may 

already be included. For example, natural gas forward prices already 

contain the risk premium for changes in natural gas prices. Fundamental forecasts based on cost also include the risk premium. 

Price effect of demand 

reduction 

• Reduction in total spot market purchase costs attributable to reduction 

in demand curve. 

• Depending on the market conditions, the change in wholesale market 

prices may be large or small. 

Savings in water, fuel oil, or 

other value streams 

• Depending on region and the types of programs, additional avoided 

cost streams may be included. 

3.3.1 Forecast Approaches 

For the purposes of developing avoided costs, there are 

two primary market structures that result in a different 

approach to forecasting avoided energy costs—market 

forecast and production simulation. The choice depends 

on the assumption that best refl ects actual avoided costs. 

1. 	For utilities that are tightly integrated into the wholesale energy market, such as distribution utilities that 

buy electricity or natural gas, or vertically integrated 

electric utilities that are active buyers or sellers of 

electricity in the wholesale market, a forecast of 

future market prices establishes avoided costs. This 

is typically called a “market forecast.” See Section 

3.4.1, “Market-Based Approaches,” for a more detailed discussion of this approach. 

The market price is the preferred approach here 

because if the utility is buying electricity or natural 

gas in the market (whether a distribution utility or 

a vertically integrated utility), fewer purchases due 

to energy effi ciency result in energy savings valued 

at market. If the utility is selling excess electricity, 

energy savings from energy effi ciency enables additional sales, resulting in incremental revenue. In 

either case, the market price is the per kWh value of 

energy effi ciency. 

2. 	For self-reliant electric utilities that do not have 

wholesale market access or actively trade electricity, 

a “production simulation” forecast that produces the 

expected production costs may be the best approach. 

See “Production Simulation Modeling” in Section 

3.4.2 for a more detailed discussion of this approach. 

Table 3-2 summarizes the approaches for developing 

avoided costs by utility type. 

3.3.2 Proprietary Versus Public Forecasts 

The easiest approach for a utility to develop long-term 

avoided costs may be to simply use their internal forecast 

of market prices, or to benchmark the avoided costs to 

the costs of building and operating the next power plant 

or resource. This results in a proprietary methodology 

specifi c to the utility. The methodology may be confi dential, since utilities actively involved in procuring electricity 

or natural gas on the market will probably not want to 

reveal their expectations of future prices publicly. 

To develop a more open process for energy effi ciency 

evaluation and planning, public forecasts of avoided 

National Action Plan for Energy Effi ciency 3-3
Table 3-2. Summary of Approaches to Value Energy and Capacity by Utility Type 

Near Term (Market Data Available) Long Term (No Market Data Available) 

Distribution electric 

or natural gas utility 

Current forward market prices of energy 

and capacity 

Long-term forecast of market prices of 

energy and capacity 

Electric vertically 

integrated utility 

Current forward market prices of energy 

and capacity 

or 

Expected production cost of electricity and 

value of deferring generation projects 

Long-term forecast of market prices of 

energy and capacity 

or 

Expected production cost of electricity and 

value of deferring generation projects 

costs can be developed. California, Texas, the Northwest 

Power and Conservation Council, Ontario, and others 

use a non-proprietary methodology. An open process 

allows non-utility stakeholders to evaluate and comment on the methodology, and to have confi dence that 

the analysis is fair. This approach also makes it possible 

for energy effi ciency contractors to evaluate the costeffectiveness of proposed energy effi ciency upgrades, as 

is done in California. 

Rather than create a forecast, it is common to use a 

publicly available forecast of electricity or natural gas. 

The most universal source of forecasts is DOE’s Energy 

Information Agency Annual Energy Outlook (AEO). This 

public forecast provides regional long-term forecasts of 

electricity and natural gas. In addition to the AEO, state 

energy agencies or regional groups may provide their 

own independent forecasts, which may include sensitivity 

analysis. 

3.3.3 Simple Versus Complex 

Avoided costs for energy effi ciency do not necessarily 

require signifi cant precision to the fractions of a cent to 

be useful. With long-term forecasts (up to 30 years), it 

is inherently impossible to be exact in predicting future 

market prices and the amount of energy and capacity 

savings ultimately achieved. Therefore, the methodology 

should be as complex as necessary to get the major decisions correct, but still should be workable and transparent to the stakeholders involved in their calculation. The 

level of detail and complexity in the methodology will 

depend on the jurisdiction and its unique circumstances. 

In Texas, for instance, avoided costs are assumed to 

be the estimated cost of a new gas turbine. They do 

not vary by time or area. The energy avoided cost was 

initially set in PUCT Section 25.181-5 at $0.0268/kWh 

saved annually at the customer’s meter. The capacity 

avoided cost was set at $78.5/kW saved annually at the 

customer’s meter (PUCT, 2000). Environmental benefi ts 

of up to 20% above this cost-effectiveness standard can 

also be applied to projects in an area not meeting ambient air quality standards. 

In California, hourly avoided costs for a typical year (8,760 

hourly values) were developed for each of 16 climate 

zones in the state. This approach adds significant detail to 

the area- and time-specific differences in the value of energy savings. This level of detail reflects the state’s extreme 

summer peak and possible capacity shortfall, thus capturing the capacity value of energy effi ciency. 

Figure 3-1 presents a comparison of Texas’s and California’s avoided costs for three types of loads: air conditioning, outdoor lighting, and refrigeration. The calculations 

for both states are based on the hourly normalized load 

shape for air conditioning, outdoor lighting, and refrigeration for one climate zone in California (climate zone 

12). Both states place a higher value on energy effi ciency 

that reduces peak demand (such as effi ciency for air 

conditioning units, which operate substantially more 

3-4 Guide to Resource Planning with Energy Effi ciency 
Figure 3-1. Comparison of Avoided Costs in Texas and California 

$140 

Avoided Cost (Levelized $/MWh) 

$120 

$100 

$80 

$60 

$40 

$20
 

$0
 

Air Conditioning Outdoor Lighting Refrigeration 

Source: Public Utilities Commission of Texas, 2000. Energy & Environmental Economics, Inc. and Rocky Mountain Institute, 2004. 

Figure 3-2. Implication of Time-of-Use Avoided Costs 

$0.15 

Weighted Average Avoided Cost

($/kWh) 

Air Conditioning Outdoor Lighting 

$0.10 

$0.05 

$0 

Refrigeration 

Hourly Time-of-use Average Annual Average 

Source: Energy & Environmental Economics, Inc. and Rocky Mountain Institute, 2004. 

often during peak demand hours) compared to reductions Figure 3-2 shows the differences in results in using hourly, 

in baseload demand (such as effi ciency for refrigeration TOU, and annual average avoided costs for different endunits, which represent a constant load across time). Since uses based on the California study. Hourly avoided costs 

the Texas legislation was passed in September 2005, the are defi nitely most detailed, capturing the cost variance 

state’s avoided cost values have not risen in tandem with within and across major time periods. In contrast, annual 

higher natural gas prices (as of early August 2007). This average ignores the timing of energy savings. 

has resulted in lower avoided costs in Texas than in California using the current adopted values. 

National Action Plan for Energy Effi ciency 3-5
In California, the decision to use hourly avoided costs was 

made in part because the system peak is so closely correlated with air conditioning load that hourly results are 

necessary to fully capture the value of air conditioning 

energy efficiency. While a summary to the established TOU 

periods would provide an avoided cost of approximately 

$0.10/kWh, the hourly evaluation provides over $0.12/ 

kWh in benefits for an air conditioning energy effi ciency 

program. In the cases of other end-uses, such as outdoor 

lighting efficiency, there is very little difference between 

hourly and TOU, and in the case of end-uses that operate 

evenly within a 24-hour period (e.g., refrigeration), there is 

no difference in method. 

Another consideration of time-dependent avoided cost 

analysis is to correctly evaluate the tradeoffs between 

different types of energy effi ciency measures. For example, with an annual average methodology, low-cost 

lighting such as compact fl uorescent light bulbs (CFLs) 

or outdoor lighting effi ciency will receive the same value 

as air conditioning energy effi ciency, even if they do not 

reduce the peak load signifi cantly. 

3.3.4 Value of Avoided GHG Emissions 

Another factor to consider when determining the 

avoided cost of energy effi ciency programs is whether 

to value the commensurate reductions in GHG emissions associated with the effi ciency program and, if 

so, how. The fi rst step is to determine the quantity of 

avoided CO2 emissions from the effi ciency program (see 

Chapter 7). Once the amount of CO2 reductions has 

been determined, its economic value can be calculated 

and added to the net benefi ts of the energy effi ciency 

measures used to achieve the reductions. 

Currently, some jurisdictions have an explicit monetary 

CO2 value to use in cost-benefi t calculations, and some 

do not. For example, in California, CO2 is one of the 

air emissions (along with NOX and PM) included in the 

California Public Utilities Commission’s (CPUC’s) avoided 

costs for energy effi ciency. The CO2 avoided cost adder 

had an initial value of $8 per ton of carbon dioxide 

equivalent in 2004, and escalates annually thereafter 

at 5% per year. As Figure 3-3 shows, the carbon adder 

in California has a measurable impact on the average 

avoided cost of effi ciency programs, although relative 

Figure 3-3. Average Avoided Costs for Air Conditioning, Outdoor Lighting, and 

Refrigeration in California 

$140 

$120 

$100
 

$80
 

$60
 

$40 

$20 

$0 

Refrigeration 

Weighted Average Avoided Cost

(Levelized $/MWh) 

Air Conditioning Outdoor Lighting 

Generation Transmission and Distribution Carbon Adder 

Source: Energy & Environmental Economics, Inc. and Rocky Mountain Institute, 2004. 

3-6 Guide to Resource Planning with Energy Effi ciency 
Figure 3-4. Average Electricity Sector CO2 Emission Rate by Region in 2004
 lbs. 

CO2/MWh
 

RMPA
 

SPNO
 

MROE
 

SRMW
 

MROW
 

SPSO
 

HIOA
 

RFCM
 

RFCW
 

SRTV
 

SRSO
 

HIMS
 

ERCT
 

NYLI
 

FRCC
 

AKGD
 

AZNM
 

SRVC
 

SRMV
 

RFCE
 

NYCW
 

NWPP
 

NEWE
 

CAMX
 

NYUP
 

AKMS
 

Note: Regions are as defi ned on the map. 

Source: EPA, 2007a. 

to savings from generation, the carbon adder impact 

remains fairly modest.3 

The GHG profi les of electricity generation in the United 

States differ greatly by technology, fuel mix, and region. 

Figure 3-4 shows the variation among the 26 regions 

defi ned in the U.S. EPA’s eGRID emissions tracking database. The highest annual average emission rate in 2004 

was 2,036 lbs CO2/MWh, and the lowest was 480, with 

a national average of 1,363. 

A very rough estimate of GHG emissions savings from 

energy effi ciency can be obtained by multiplying the 

kWh saved by an average emission factor, which can 

be taken from a data source such as the eGRID regional 

average emissions factors in Figure 3-5. Alternatively, it 

can be estimated based on a weighted average of the 

heat rates and emission factors for the different types 

of generators in a utility’s generation mix. Such “back 

of the envelope” methods are not a substitute for using 

marginal emission rates in formal calculations, but they 

NEWE

NYUP

RFCE

SRVC

RFCW

SRTV

SRSO

FRCC

MROW MROE

SPNO

SRMW

RFCM

SRMV

SPSO

ERCT

AZNM

RMPA

AKMS

AKGD

HIOA

HIMS

CAMX

NWPP

NYLI

NYCW

480 

1328 

1412 

1421 

1456 

1490 

1495 

1556 

1641 

1728 

1761 

1814 

1844 

1859 

1971 

2036 

U.S. Average 1363 

820 

879 

909 

921 

922 

1096 

1135 

1146 

1254 

1257 

can be useful for agency staffs and others who wish to 

check quickly whether results from more sophisticated 

methods are approximately accurate. 

Marginal emissions rates that more accurately refl ect 

the change in emissions due to energy effi ciency have 

an hourly profi le that varies by region. For states in 

which natural gas is both a baseload and peaking fuel, 

marginal emissions will be higher during peak hours because of the lower thermal effi ciency of peaking plants, 

and therefore energy effi ciency measures that focus 

their kWh savings on-peak will have the highest avoided 

GHG emissions per kWh saved. However, in states in 

which coal is the dominant fuel, off-peak marginal 

emission rates may actually be higher than on-peak, if 

the off-peak generation is coal and on-peak generation 

is natural gas. An illustration of this is shown in Figure 

3-6, which compares reported marginal emission rates 

for California and Wisconsin. 

National Action Plan for Energy Effi ciency 3-7
Note: See Figure 3-4 for region defi nitions. 

Source: EPA, 2007b. 

Figure 3-6. Comparison of Marginal CO2 Emission Rates for a Summer Day in 

California and Wisconsin Marginal CO2 Emission Rate

(tons CO2 /MWh)

0 24 

Hour 

Wisconsin California 

Note: The on-peak marginal emissions rates of both states are set by natural gas peaking units. The off-peak rates are quite different, refl ecting the 

dominance of coal baseload generation in Wisconsin and natural gas combined cycle in California. 

Source: California Energy Commission. Erickson, J. et al., 2004. 

3-8 Guide to Resource Planning with Energy Effi ciency 3-8 Guide to Resource Planning with Energy Effi ciency

Figure 3-5. Generation by Fuel Type and Region in 2004

Coal Oil Gas Nuclear Hydro Biomass Wind Solar Geothermal Other

RMPA

SPNO

MROE

SRMW

MROW

SPSO

HIOA

RFCM

RFCW

SRTV

SRSO

HIMS

ERCT

NYLI

FRCC

AKGD

AZNM

SRVC

SRMV

RFCE

NYCW

NWPP

NEWE

CAMX

NYUP

AKMS

0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
3.4 Forecasting Methodologies 

and Data Sources 

Since energy effi ciency measures are often long-lasting, 

the forecasting methods required to evaluate energy 

effi ciency must span a long time-frame. For example, if 

a new residential heating, ventilation, and air conditioning (HVAC) system is expected to operate for 20 years, 

then a 20-year forecast must be developed to value an 

HVAC measure. Typically, a minimum length of 20 to 30 

years must be developed to include all of the possible 

measures. A combination of market-based and forecastbased approaches, as described in Section 3.4.1, can be 

used to estimate avoided costs. 

3.4.1 Market-Based Approaches 

Market Price of Energy 

One approach to valuing savings is to use the current market price of energy for future delivery. In most 

markets, transaction price data can provide the value 

of energy savings for 4 to 6 years. Beyond the available 

market period, a forecast approach must be used. The 

following list shows the common sources of market 

data that are available. 

Electricity markets (available out ~4 years): 

• 	Electricity futures price data from futures exchanges 

(e.g., NYMEX and IntercontinentalExchange [ICE]). 

• 	Forward price data from bilateral wholesale electricity 

trades (e.g., summaries by Platt’s MW Daily). 

• 	Daily locational marginal prices for next day delivery 

(e.g., ERCOT, PJM, ISO-NE, and NY ISO), which provide hourly price “shape” information, but are only 

available a day ahead. 

Natural gas markets (available out ~6 years): 

• 	Futures price data from futures exchanges (e.g., 

NYMEX futures contract for Henry Hub delivery). 

• 	Basis price data for a delivery point that differs from the 

cash market underlying the futures contract (e.g., PG&E 

Citygate basis data from NYMEX ClearPort trading). 

Market Prices of Capacity 

Some U.S. regions (e.g., the Northeast) have capacity markets for electricity that require a utility to purchase capacity to meet its expected peak load. In these 

markets, generators bid to supply, and utilities bid to 

purchase, capacity to meet their forecasted peak loads 

and reserve margins. These payments support the carrying costs of existing power plants and provide a price 

signal for power plant investment. Depending on the 

market, different time-frames will be available. In some 

regions (e.g., New England), capacity prices are being 

developed for several years into the future. In other jurisdictions, capacity auctions establish prices the season 

prior to delivery. For example, the New York ISO’s ICAP 

auction establishes capacity prices for the upcoming 

season in 6-month intervals (NYISO, 2007). 

In regions without a capacity market, there can still be a 

capacity value of energy effi ciency. In this case, the value 

of electric capacity is the reduced cost of building or contracting with new power plants to serve peak load. 

3.4.2 Modeling Approaches 

Beyond the near term for which actual market price 

data for future delivery may be available, a forecast 

must be used to quantify long-term avoided costs. 

There are several main approaches to developing such 

long-term forecasts. 

Production Simulation Modeling 

One approach to valuing electricity energy and capacity is to develop a forecast using production simulation modeling. A production simulation model is a 

software tool that performs system dispatch decisions 

to serve load, as driven by the transmission constraints 

and economics of each type of generation resource. 

The operating cost of the least effi cient power plant, 

the “marginal unit,” is used to establish the avoided 

cost of energy. In addition to the marginal energy cost, 

the production simulation tools can be used to determine when new power plants and transmission lines 

are needed, and how additional power plants would 

change the dispatch of the system. Increasing the load 

forecast over time allows a forecast of marginal energy 

costs to be developed. 

National Action Plan for Energy Effi ciency 3-9
The downside of production simulation models is that 

they are complex, rely on sophisticated algorithms that 

can appear as a “black box” to stakeholders, and have 

to be updated when market prices of inputs such as natural gas change. They can also have diffi culty predicting 

market prices, since the marginal energy cost is based on 

production cost, rather than supply and demand interactions in a competitive electricity market.4 

Developing a Long-Term Forecast for Electricity 

The typical approach to developing a long-term forecast for 

electricity price is to use the Cost of New Entrant (CONE). In 

this approach, the avoided cost is set at the “all-in” cost of 

the next generation resource, which may be a new natural 

gas combined-cycle gas turbine, but possibly also a pulverized coal plant or integrated gasification combined cycle 

(IGCC) plant. The term “all-in” means both the costs of 

building the power plant (e.g. the capacity costs) and the 

costs of generating electricity such as fuel, maintenance, 

and other costs (e.g. energy costs). For regions with an 

energy market, the idea is that if the market prices rise 

above this level, they induce entry and competition will 

drive down prices. For vertically integrated utilities, the 

“all-in” cost is the cost savings of not having to build and 

operate the next new power plant. The method works in 

both cases. 

A similar approach is to develop a long-term forecast of 

electricity capacity value using the cost of a new combustion turbine (CT). Since a CT is often the least cost 

technology to serve peak load, it is often used as the 

value of peak load relief. 

The two approaches are related by the economic 

tradeoff between a baseload plant (e.g., IGCC) and a 

peaking plant (e.g., CT). A baseload plant has higher capacity cost but lower fuel cost than a peaking plant. The 

decision to build a baseload plant refl ects an expectation 

that the plant’s many operation hours per year will yield 

fuel cost savings that will more than offset the capacity 

cost difference between the two plant types. This line of 

reasoning also explains the use of the capacity cost of a 

peaking plant to value energy effi ciency’s kW impact, as 

the plant has lower capacity cost than a baseload plant. 

3.5 Integration with Supply-Side 

Capital Planning 

In addition to the avoided costs of displaced electricity 

and natural gas, integration of energy effi ciency and 

supply-side capital planning can defer investments in 

supply-side infrastructure and lead to additional value 

from energy effi ciency. Through coordination with the 

supply-side planning process, energy effi ciency programs 

can target areas where peak loads are forecasted to 

exceed ratings of existing infrastructure, thereby deferring or eliminating the need to invest. Potential targets 

include transmission and distribution facilities, power 

plants, natural gas pipelines, and LNG terminals. 

Coordination with the supply-side planning processes is 

important to capture value. Typically, supply-side planners use a set of pre-defi ned reliability criteria, and build 

new supply-side investments when the existing infrastructure is expected not to reliably serve the forecasted 

peak load. Depending on the type of investment, the 

reliability criteria may be different. For example, a new 

electric distribution transformer may be added when the 

existing substation can no longer serve the forecasted 

load with the single largest piece of equipment out of 

service (called N-1 criteria). For natural gas infrastructure, the reliability criteria may be based on the pressure 

available when winter temperatures drop and natural 

gas usage spikes. In both cases, energy effi ciency can 

reduce the peak load and delay the need for investment 

to maintain the target reliability level. However, if the 

supply-side planners do not anticipate the load reductions from energy effi ciency, they may proceed with their 

project and no savings will be achieved. 

Calculating the value of deferring supply-side investments is typically done with a differential revenue 

requirement method, also known as the Present Worth 

Method. The approach calculates (a) the present value 

revenue requirement without the investment in energy 

effi ciency and (b) the present value revenue requirement 

with the investment in energy effi ciency. If the supplyside investments can be delayed because of the load 

3-10 Guide to Resource Planning with Energy Effi ciency 
 

 

 

 

reduction achieved with energy effi ciency, (a) exceeds 

(b) and the positive difference between (a) and (b) is the 

savings due to the energy effi ciency investment. 

Equation 3.1 can be used to calculate the value of energy 

efficiency using the Present Worth Method. The present 

value of deferring capacity in year 1 for Δt years is: 

Δt n k n k (1 + i) PW =	 ∑ t − ∑ t 

t t+ Δt 

t =0(1 + r ) t=0(1 + r)	 (eq. 3.1) 

Where: n = planning horizon in years

 k = distribution investment in year t t 

i = 	infl ation rate net of technological progress 

r = 	a utility’s cost of capital (discount rate) 

Δt = 	deferral time, i.e., peak load reduction 

divided by annual load growth 

The decision to invest in supply-side infrastructure is typically made year by year. If the existing infrastructure is 

suffi cient to reliably supply an area through the annual 

peak period (summer or winter, depending on the region 

and fuel type), then it will be suffi cient until the following 

year. The size of supply-side investments and the annual decision of investments make the value of avoiding 

supply-side investments “blocky” in nature. The value of a 

one-year deferral is achieved only if enough load reduction is achieved to defer a project for a year. No additional 

savings are achieved until enough energy effi ciency is 

implemented for a two-year deferral, and so on. 

However, for simplicity in evaluation of energy effi ciency 

programs, a “marginal avoided capacity cost” is often 

calculated and expressed as the value per kW of peak 

reduction. The $/kW marginal cost is calculated by dividing 

the deferral value by the amount of load reduction required 

to defer the plan by a year. Equation 3.2 can be used to 

calculate the marginal avoided capacity cost. 

PW deferral value $/kW marginal cost = deferral (eq. 3.2) kW 

Where: PW deferral value = 	result in Equation 3.1 

above 

Figure 3-7. Example of the Value of Deferring a Transmission Line
 Lifecycle Value of Deferral ($1000s) 

$4,000 

$3,500 

$3,000 

$2,500 

$2,000 

$1,500 

$1,000 

$500 

$0 

Assumptions: 

Revenue Requirement of Transmission Line 

Utility Weighted Average Cost of Capital 

Annual Inflation Rate 

$10 Million 

8.50% 

2.50% 

0 10 20 30 40 50 60 70 80 

Firm Peak Load Reduction (MW) 

Actual avoided transmission cost Marginal Cost $/kW 

Note: Marginal cost is an approximation that ignores (1) ‘blocky’ nature of avoided transmission cost, and (2) decreasing returns to additional MWs. For 

illustrative value based on author’s calculations and not an actual system representation. 

National Action Plan for Energy Effi ciency 3-11
 

 

 

 

 deferral kW = the amount of load 

reduction needed to get a 

1-year deferral (i.e., Δt 

= 1 in Equation 3.1) 

For example, Figure 3-7 shows that the value of deferring a transmission investment is the solid line with the 

“step” shape calculated using Equation 3.1, under the 

assumptions that the revenue requirement of this line is 

$10 million present value, the load growth is 10 MW per 

year, r = 8.5% WACC, and i = 2.5% infl ation. In addition, 

we assume that the line can be deferred for Δt = 1 year 

for every 10 MW of peak load reduction from energy effi ciency. Based on Equation 3.2, these assumptions imply 

a marginal avoided capacity cost of $52.30/kW of load 

reduction, as shown by the dotted line. 

If 30 MW of load reduction is achieved, the transmission 

line is deferred for 3 years, yielding a total deferral value 

of is $1,569,000. If only 5 MW of load reduction are 

achieved, the transmission line is not delayed, resulting 

in no cost savings. Hence, while it is convenient to use 

the marginal value and apply avoided cost per kW, it is 

important to check (1) if suffi cient load reduction can 

be achieved and (2) if that load reduction is realistic and 

acceptable to the supply-side planners. 

The Present Worth method based on Equations 3.1 and 

3.2 produces $/kW capacity costs. Sometimes it is more 

convenient to express the value of load reduction in $/ 

kW-year estimates. For example, the $/kW-year estimate is 

useful to gauge the size of an annual incentive to be paid 

to a customer to reduce load. Equations 3.3 and 3.4 use a 

capital recovery factor (CRF) to annualize the avoided costs 

calculated in Equations 3.1 and 3.2.5 

annual value ($/Year) = lifecycle value ($) × CRF 

(eq 3.3) 

annual marginal value = marginal cost ($/kW) × CRF 

($/kW-year) (eq 3.4) 

n 

r (1 + r ) Where: CRF = n (1 + r ) − 1 

n = 	planning horizon in years 

r = 	 a utility’s cost of capital 

(discount rate) 

3.6 Resources on Energy 


Efficiency Avoided Costs
 

Title/Description URL Address 

Sources of Market 

Value of Energy 

NYMEX Natural Gas Futures prices show current market estimates of natural gas traded at 

Henry Hub. 

<www.nymex.com/ng_fut_csf. 

aspx?product=NG> 

Basis Swap Contracts between Henry Hub and 

other location in the U.S. are also traded at 

NYMEX. 

<www.nymex.com/cp_produc. 

aspx#ngb> 

Platt’s MW Daily reports broker quotes of 

long-term forward electricity transactions. 

<www.platts.com> 

Sources of Publicly Available 

Forecasts 

DOE EIA Annual Energy Outlook uses the 

National Energy Modeling System (NEMS) to 

publish a publicly available long-term forecast 

of electricity and natural gas prices. 

<www.eia.doe.gov/oiaf/aeo/index. 

html> 

Forecasts of fuel prices to electric generation <www.eia.doe.gov/oiaf/aeo/excel/ 

fi gure65_data.xls> 

3-12 Guide to Resource Planning with Energy Effi ciency 
Title/Description URL Address 

Sources of Publicly Available 

Forecasts 

Forecast of well-head and Henry Hub Natural 

Gas prices. 

<www.eia.doe.gov/oiaf/aeo/excel/ 

fi gure71_data.xls> 

Integration of 

Energy Effi ciency 

and Supply-Side 

Planning 

Expansion of BPA Transmission Planning 

Capabilities (November 2001) describes an improved transmission planning process for BPA 

to incorporate energy effi ciency, distributed 

generation, and demand response. 

<www.transmission.bpa.gov/ 

PlanProj/bpa_tbl_planning.pdf> 

The Non-Wires Solutions Roundtable is a 

group organized by the BPA to evaluate issues 

surrounding using non-wires solutions, including energy effi ciency, to avoid the need for 

transmission projects. 

<www.transmission.bpa.gov/ 

PlanProj/Non-Wires_Round_Table/ 

default.cfm?page=news> 

3.7 Resources on Energy 

Efficiency and Greenhouse Gases 

Title/Description URL Address 

EPA’s eGRID (Emissions and Generation Resource Integrated Database). A comprehensive inventory of environmental attributes of all U.S. power plants that provide electricity to the grid, including CO2 emissions data. 

<www.epa.gov/cleanenergy/egrid/index.htm> 

Power Profi ler. <www.epa.gov/cleanenergy/powerprofi ler.htm> 

Personal Greenhouse Gas Emissions Calculator. <www.epa.gov/climatechange/emissions/ 

ind_calculator.html> 

Climate Leaders: Indirect Emissions from Purchases/Sales 

of Electricity and Steam. 

<www.epa.gov/climateleaders/docs/ 

indirectelectricityguidance.pdf> 

EIA (Energy Information Administration, U.S. Department of Energy). Energy-related greenhouse gas emissions 

data and reporting. 

<www.eia.doe.gov/environment.html> 

California Climate Action Registry. California emissions 

inventories and reporting protocols. 

<www.climateregistry.org> 

The Climate Registry. A multi-state and -tribe collaboration 

aimed at developing and managing a common greenhouse 

gas emissions reporting system. 

<www.theclimateregistry.org/> 

National Action Plan for Energy Effi ciency 3-13
3.8 Notes 3. The calculations for hourly avoided costs are based on the hourly 

normalized load shape for air conditioning, outdoor lighting, and 

refrigeration for one climate zone in California (climate zone 12). 

1. This key question is based on the National Action Plan for Energy 

Effi ciency recommendation to “recognize energy effi ciency as a 4. Some commonly used production models include GE MAPSTM, 

high priority energy resource” and options to consider. PROSYMTM, IPMTM, and PLEXOS for Power SystemsTM. 

2. Installed capacity (ICAP), or unforced capacity (UCAP) in some 5. Note that CRF is equivalent to the PMT function in MS Excel. 

markets, is an obligation of the electric utility (load serving entity, 

or LSE) to purchase suffi cient capacity to maintain system reliability. The amount of ICAP an LSE must typically procure is equal 

to the LSE’s forecasted peak load plus a reserve margin. Therefore, 

reduction in peak load due to energy effi ciency reduces the ICAP 

obligation. 

3-14 Guide to Resource Planning with Energy Effi ciency 
Development of Energy 4: Effi ciency Measures 

This chapter provides a discussion of how to develop energy effi ciency measures.1 Measures are specifi c 

actions taken to reduce a specific type of load and are the building blocks of a utility’s energy effi ciency 

portfolio. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• Specifi c actions to improve energy effi ciency are 

called measures. 

• Measures are the building blocks for energy effi ciency efforts. Measures are typically aggregated 

together into programs that focus on delivery 

mechanisms, market segments, or end uses. Programs are then aggregated into a portfolio at the 

utility or program administrator level. 

• For planning, the key elements of a measure are its 

kWh and kW impacts, and its incremental cost. 

• Measure impacts can be estimated by performing 

engineering calculations, often done with building 

energy simulation software models such as DOE-2, 

and by referring to existing databases. Estimated 

impacts are often referred to as deemed savings. 

• Evaluation, measurement, and verifi cation is 

performed to obtain actual impacts, which can be 

used for performance evaluation and to improve 

future impact estimates. 

• Are we missing any good energy savings opportunities?2 Measures are the building blocks for energy 

effi ciency efforts. Measures are typically aggregated 

together into programs that focus on delivery mechanisms, market segments, or end uses. Programs 

are then aggregated into a portfolio at the utility or 

program administrator level. 

• Have we developed measures and programs that 

provide savings to the range of residential, commercial, industrial, agricultural and other energy 

user types? For example, do we have measures to 

address the harder-to-reach customers such as lowincome and small commercial customers? Measure 

impacts can be estimated by performing engineering calculations, often done with building energy 

simulation software models such as DOE-2, and by 

referring to existing databases. Estimated impacts 

are often referred to as deemed savings. 

• Do we have a mix of measures so that we are able 

to reach customers at different stages of the energy 

effi ciency purchase decision? (New construction, 

retrofi t, replacement of failed old equipment, early 

replacement to high effi ciency devices, etc.) 

• Have we considered the way that energy effi ciency 

measures can be integrated together into a comprehensive approach that considers the interactions and 

potential for overlap between measures? 

National Action Plan for Energy Effi ciency 4-1
4.1 Developing Energy Effi ciency 

Measures 

The building block of a utility’s energy effi ciency portfolio is the measure. A measure is a specifi c action taken 

to reduce a specifi c type of load. For example, replacing T-12 lamps with T-8 lamps is a lighting effi ciency 

measure, and replacing a SEER 10 air conditioner with 

a SEER 13 air conditioner is a space conditioning effi ciency measure. A lighting effi ciency program typically 

consists of many different lighting measures, and a 

portfolio is the aggregate of all of the programs including lighting, space conditioning, and others. 

Developing effi ciency measures involves identifying 

the loads on the system and determining the cost and 

impact of the different means available for reducing 

them. The importance of developing effi ciency measures in a thorough, bottom-up fashion cannot be 

overemphasized, although it is sometimes obscured by 

the availability of large databases of measures—which 

may or may not be applicable—and by the challenges 

of data management. Measures, by defi nition, are critical because they are the point at which creative ideas 

and new technologies can best be incorporated into the 

effi ciency portfolio. 

4.1.1 Measure Costs and Impacts 

From the planning standpoint, the key elements of each 

measure are its load impact and its incremental cost. 

There are two types of impact: energy and demand. Energy impact is the decrease in kWh due to the measure, 

and demand impact is the decrease in peak kW. (Chapter 7 details the different ways in which energy and 

demand impacts are defi ned and calculated.) 

Ideally, efficiency improvements would occur the fi rst time 

an end-user decides to buy a piece of energy-using equipment—appliances for the home, the building design and 

structure for a new office building, or the manufacturing 

devices and processes in a new factory. Quite often, however, energy efficiency measures are applied after the initial 

purchase. Some occur when an old device reaches the end 

of its useful life, for example when a water heater wears 

out. However, some energy efficiency programs offered by 

a utility seek to motivate energy users to replace ineffi cient 

devices with high-efficiency devices years earlier than the 

device’s natural lifetime. Incremental cost depends on the 

manner in which the measure is implemented. For example, the incremental cost of “early replacement” differs 

from the cost of “failure replacement,” since early replacement incremental costs are the whole amount of the new 

efficient equipment being purchased and failure replacement incremental costs are only the costs to upgrade from 

the standard device that the customer would have purchased to the effi cient device. 

Table 4-1 summarizes the basic method for quantifying 

the impacts and incremental costs of effi ciency measures 

for different types of replacement. In the table, “Effi cient 

Device” refers to the equipment that replaces an existing less-effi cient piece of equipment. “Standard Device” 

refers to the equipment that would be used in industry 

standard practice to replace an existing device. “Old 

Device” refers to the existing equipment to be replaced. 

All of the formulas in the table can also be expanded 

to include an adjustment term, for example a weather 

adjustment in the case of an air conditioning measure. 

Estimation of Measure Impacts 

There are three principal methods by which utilities 

develop and refi ne estimates of the impact of energy 

effi ciency measures. These methods are described below, followed by a list of links to some frequently used 

examples of each method. 

• 	Engineering calculations and building energy 

simulation software models. Utilities can do their 

own calculations of the energy and demand impacts 

for a particular measure, given an existing set of 

technologies, building stock, load patterns, etc. This 

is typically done with the help of software tools that 

model energy consumption under different weather 

conditions and over the course of a year. Some of the 

more sophisticated models can be quite complex and 

require specialized training to use. 

• 	Energy effi ciency databases. Utilities can obtain 

information from existing databases that contain 

4-2 Guide to Resource Planning with Energy Effi ciency 
Table 4-1. Defining Costs and Impacts of Energy Effi ciency Measures 

Type of Measure Incremental Cost 

($/unit) 

Impact Measurement (kWh/unit and 

kW/unit) 

Failure replacement Cost of effi cient 

device minus cost 

of standard device 

Consumption of standard device minus 

consumption of effi cient device 

New construction Cost of effi cient 

device minus cost 

of standard device 

Consumption of standard device minus 

consumption of effi cient device 

Retrofi t Cost of effi cient 

device plus installation costs 

Consumption of old device minus consumption of effi cient device 

Early replacement Present value of 

(effi cient device 

plus installation 

costs) minus present value of (standard device plus 

installation costs) 

During remaining expected life of old 

device: 

Consumption of old device minus consumption of effi cient device 

After normal replacement time for old 

device: 

Consumption of standard device minus 

consumption of effi cient device 

Note: The early replacement case is essentially a combination of retrofi t treatment (for the period when the existing measure would have otherwise remained in service) and the failure replacement treatment for the years after the existing device would have been replaced. “Present value” indicates that 

the early replacement costs should be discounted to refl ect the time value of money associated with the installation of the effi cient device compared to 

the installation of the standard device that would have occurred at a later date. 

energy consumption data for a wide variety of appliances and effi ciency measures. While these databases 

can provide useful information about available measures, the applicability of the data must be carefully 

considered, particularly for end-uses with weatherdependent consumption. Since the databases are 

usually specifi c to a certain geographical area or set 

of climate zones, their impact estimates may not be 

transferable for use in a different location (for example, it would be inappropriate to apply California’s 

DEER data to the climate zones of the eastern or 

southern United States). While corrective adjustments 

can be made to database impact estimates, they 

often require an understanding of the underlying 

methodology. 

• 	EM&V. EM&V (also known by other names and acronyms, such as monitoring and evaluation, or M&E) 

is the use of actual data collected from the operation 

of already installed measures to determine the actual 

impacts of these measures. The determination may 

be based on direct metering and other methods (e.g., 

statistical inference). EM&V is discussed more thoroughly in Chapter 10 (and in the Action Plan’s Model 

Energy Effi ciency Program Impact Evaluation Guide 

[National Action Plan for Energy Effi ciency, 2007b]); 

in short, it aims to refi ne estimates obtained from existing databases or engineering models, or to develop 

a new database that is specifi c to a utility’s climate 

zone and area if one does not already exist. 

National Action Plan for Energy Effi ciency 4-3
4.2 Resources for Energy Effi ciency 

Measure Development 

4.2.1 Engineering Software Models 

Title/Description URL Address 

DOE-2 Industry standard building energy 

simulation model, developed by 

LBNL. 

<http://gundog.lbl.gov/dirsoft/d2whatis.html> 

EnergyPlus DOE building energy model 

based on DOE-2 with additional 

features. 

<www.eere.energy.gov/buildings/energyplus/> 

Building Energy Software Tools Directory Directory of 300+ software tools. <www.eere.energy.gov/buildings/tools_directory/> 

Home Energy Saver Consumer home energy simulator with simple Web interface. <http://hes.lbl.gov/> 

4.2.2 Databases of Programs, Measures, and Impacts 

Title/Description URL Address 

Database of Energy 

Effi ciency Resources 

(DEER) 

California measures database. <www.energy.ca.gov/deer/> 

EPA Energy Star Savings calculators for ENERGY 

STAR certifi ed products. 

<www.energystar.gov/index.cfm?c=bulk_ 

purchasing.bus_purchasing> 

EPRI Database of 

Energy Effi ciency 

Measures (DEEM) 

Available for purchase. <www.epriweb.com/public/0000000000 

01008848.pdf> 

ACEEE Energy Effi ciency Program 

Database 

Programs and measures in 20 

states. 

<www.aceee.org/new/eedb.htm> 

Northwest Power 

and Conservation 

Council 

BPA qualifi ed measures and 

impacts. 

<www.nwcouncil.org/energy/rtf/supportingdata/ 

default.htm> 

4-4 Guide to Resource Planning with Energy Effi ciency 
4.2.3 State Programs and Studies 

Title/Description URL Address 

California 2005 Measure Cost Study. Final Report. CALMAC Study ID: PGE0235.01. 

This report provides cost information on 

the non-weather-sensitive and weathersensitive residential and nonresidential 

measures and refrigeration measures that 

are included in the Database for Energy 

Efficiency Resources (DEER) and used by 

energy efficiency program planners in California to estimate potential demand and 

energy savings and costs. 

<http://calmac.org/publications/MCS_Final_ 

Report.pdf> 

New Jersey New Jersey Clean Energy Program 

Protocols to Measure Resource Savings. These protocols were developed 

to measure energy capacity and other 

resource savings. Specifi c protocols are 

presented for each eligible measure and 

technology. 

<www.njcleanenergy.com/fi les/fi le/Protocols_ 

REVISED_VERSION_1.pdf> 

Texas Deemed Savings, Installation & Effi ciency Standards: Residential and 

Small Commercial Standard Offer 

Program, and Hard-to-Reach Standard 

Offer Program. This document contains 

all of the approved energy and peak demand deemed savings values established 

for energy efficiency programs in Texas. 

<www.puc.state.tx.us/rules/subrules/ 

electric/25.184/25.184fi g(d)(1).pdf> 

Vermont Technical Reference User Manual 

(TRM) No. 4-19. Measure Savings 

Algorithms and Cost Assumptions 

Through Portfolio 19. Vermont provides a set of deemed-savings methods 

in this manual. 

<www.effi ciencyvermont.org/> 

4.3 Notes 2. This key question is based on the National Action Plan for Energy 

Effi ciency recommendation to “make a strong, long-term commitment to implement cost-effective energy effi ciency as a resource” 

1. Projects, one or more measures at a single facility or site, are also and options to consider. 

aggregated into programs. Considerations at the measure level are 

applicable to resource planning. 

National Action Plan for Energy Effi ciency 4-5

Determining
 5: Cost-Effectiveness
 

This chapter provides a discussion of the various tests used to determine the cost-effectiveness of energy 

efficiency programs and portfolios. Each test reflects various stakeholder perspectives on the impact of 

energy efficiency. A discussion on the importance of discount rates is also provided. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• There are several tests for evaluating energy ef­ • What perspective(s) should we use to determine 

fi ciency’s cost-effectiveness, each refl ecting a cost-effectiveness?1 The utility cost test (UCT), 

different stakeholder perspective on the impact of also called the program administrator cost test, is 

energy effi ciency. consistent with least cost utility resource planning. 

• The utility cost test (UCT), also called the program The UCT compares the utility costs and benefi ts of 

administrator cost test, is consistent with least cost energy effi ciency. 

utility resource planning. The UCT compares the • Have we defi ned the appropriate costs and benefi ts 

utility costs and benefi ts of energy effi ciency. to get the right program trade-offs? Other tests are 

• The total resource cost (TRC) test is typically used used to evaluate impacts of energy effi ciency on 

to defi ne what is cost-effective from a regulatory other stakeholders and include such perspectives as 

perspective. The TRC test compares all of the direct the impact on retail rates, participating customers, 

costs that both utilities and customers pay with the and society. 

regional benefi ts received from energy effi ciency. • Are we using the correct discount rate? 

• Other tests are used to evaluate impacts of energy • Do we have a Standard Practice Manual for deeffi ciency on other stakeholders and include such termining cost-effectiveness of energy effi ciency 

perspectives as the impact on retail rates, partici­ to ensure that the criteria used are transparent to 

pating customers, and society. stakeholders? 

5.1 Overview
 

For this discussion, we use the criteria developed by the 

California Energy Commission and CPUC for defi ning cost-effectiveness: the California Standard Practice 

Manual.2 This manual publicly and transparently sets 

the state standard for determining cost-effectiveness, 

and helps to further the development and use of consistent defi nitions of categories, programs, and program 

elements. Other states now also refer to the California 

Standard Practice Manual as the source of their own 

cost-effectiveness criteria. The benefi t of having such 

a standard practice manual is that it both encourages 

transparency and consistency. The California criteria 

include fi ve major tests. While other jurisdictions may 

modify cost-effectiveness defi nitions to suit their needs, 

these fi ve tests are generally inclusive of the different 

perspectives that most jurisdictions consider. 

• 	Participant cost test (PCT). Measures the economic 

impact to the participating customer of adopting an 

energy effi ciency measure. 

National Action Plan for Energy Effi ciency 5-1
• 	Ratepayer impact measure (RIM). Measures the 

impact on utility operating margin and whether rates 

would have to increase to maintain the current levels of 

margin if a customer installed energy effi cient measures. 

• 	Utility cost test (UCT). Measures the change in the 

amount the utility must collect from the customers every year to meet earnings target, e.g. change in revenue 

requirement. In a number of states, this test is referred 

to as the program administrator cost test (PACT). In 

those cases, the definition of the “utility” is expanded 

to program administrators (utility or third party). 

• 	Total resource cost test (TRC). Measures the net 

direct economic impact to the utility service territory, 

state, or region. 

• 	Societal cost test (SCT). Measures the net economic 

benefi t to the utility service territory, state, or region, 

as measured by the TRC, plus indirect benefi ts such 

as environmental benefi ts. 

A common misperception is that there is a single best 

perspective for evaluation of cost-effectiveness. Each 

test is useful and accurate, but the results of each test 

are intended to answer a different set of questions. The 

key questions answered by each cost test are shown in 

Table 5-1. Note that throughout this discussion we use 

the term “utility.” In some jurisdictions that term should 

be expanded to include third-party administrators of the 

energy effi ciency programs. 

Table 5-1. Questions Addressed by the Various Cost Tests 

Cost Test Questions Addressed 

Participant Cost Test Is it worth it to the customer to install energy effi ciency? 

Is the customer likely to want to participate in a utility program that promotes 

energy effi ciency? 

Ratepayer Impact 

Measure 

What is the impact of the energy effi ciency project on the utility’s operating 

margin? 

Would the project require an increase in rates to reach the same operating margin? 

Utility Cost Test 

(Also Called Program 

Administrator Cost Test) 

Do total utility costs increase or decrease? 

What is the change in total customer bills required to keep the utility whole (the 

change in revenue requirement)? 

Total Resource Cost Test What is the regional benefi t of the energy effi ciency project including the net 

costs and benefi ts to the utility and its customers? 

Are all of the benefi ts greater than all of the costs (regardless of who pays the 

costs and who receives the benefi ts)? 

Is more or less money required by the region to pay for energy needs? 

Societal Cost Test What is the overall benefi t to the community of the energy effi ciency project, 

including indirect benefi ts? 

Are all of the benefi ts, including indirect benefi ts, greater than all of the costs 

(regardless of who pays the costs and who receives the benefi ts)? 

5-2 Guide to Resource Planning with Energy Effi ciency 
Table 5-2. Benefits and Costs of Various Test Perspectives 

Tests and Perspective Energy Effi ciency Benefi ts Energy Effi ciency Costs 

Participant Cost Test Incentives from utility and others, plus 

reduction in electricity bill 

Participants’ direct cost of participation 

Ratepayer Impact 

Measure 

Avoided supply costs (production, 

transmission, and distribution) based 

on net energy and load reductions 

Utility program costs (including administration costs plus incentives to participants) plus net lost utility revenues 

caused by reduced sales 

Utility Cost Test (Also 

Called Program Administrator Cost Test) 

Same as above Utility program costs (including administration costs plus incentives to participants) 

Total Resources Cost 

Test 

Same as above plus benefits that do not 

affect the utility (e.g., water savings, fuel 

oil savings) 

Utility program costs (excluding incentives to participants) plus net participant 

costs (prior to any cost reduction due to 

incentives from the utility) 

Societal Cost Test Same as above plus externality benefi ts; excludes some tax credit benefi ts Same as above 

Consideration of Non-Monetary Costs 

and Benefi ts 

The fi ve cost tests presented above do not explicitly 

recognize changes in customer non-monetary costs 

and benefi ts such as comfort. Generally, energy effi ciency programs provide the same service (lighting, 

refrigeration, cooling, heating) as the ineffi cient base 

units they replace, so there is no appreciable change 

in non-monetary costs or benefi ts. For other types of 

programs there can be positive and negative impacts 

on comfort. For example, the cost of lower comfort 

during a demand response event that turns off air 

conditioning should be included. Conversely, the 

benefi t of increased comfort of low-income participants with better heating and insulation should be 

included. Customer value of service studies can be 

used to monetize the value of customer comfort as 

well as the value of avoiding an outage. 

The TRC test, which measures the regional net benefi ts, 

is the appropriate cost test from a regulatory perspective. 

All energy effi ciency that passes the TRC will reduce the 

total costs of energy in a region. Thus, regulators of most 

states use the TRC as the primary cost test for evaluating 

their energy effi ciency programs. The TRC cost test includes only direct costs and benefi ts, not externalities or 

non-monetized factors. Regulators who want to consider 

these factors in the cost test can use the SCT, which does 

include externalities. The TRC and SCT do not differentiate who pays for the energy effi ciency and who receives 

the benefi ts. Therefore, the other cost tests are used to 

evaluate the impact on specifi c stakeholders. 

The UCT is the appropriate cost test from a utility 

resource planning perspective, which typically aims 

to minimize a utility’s lifecycle revenue requirements. 

Adoption of an energy effi ciency measure that is costeffective according to the UCT will reduce the utility 

revenue requirement relative to traditional utility procurement. The UCT and TRC cost tests are related, and 

most measures that are cost-effective from the TRC 

National Action Plan for Energy Effi ciency 5-3
are also cost-effective from the utility perspective. If 

two measures have the same net benefi ts from a TRC 

perspective, but different incentive levels, using the UCT 

to choose between them will favor the measure with 

lower incentives, since the costs to the utility are lower 

to implement this measure. 

Table 5-2 lists the specifi c benefi t and cost components 

in each test for economic screening. Note that the term 

“net” in Table 5-2 refers to values that are reduced by 

the net-to-gross ratio (NTGR). Thus, the test focuses on 

the costs and benefi ts attributable solely to the program 

activities. 

5.2 Use of Discount Rates 

The choice of discount rate can have a large impact on 

the cost-effectiveness results for energy effi ciency. As 

each cost-effectiveness test compares the net present value of costs and benefi ts for a given stakeholder perspective, its computation requires a discount rate assumption. 

A discount rate measures the time value of money. 

When expressed in percent per year (say, 10%), it converts a future year’s monetary amount (say, $1,100) to 

an equivalent amount in today’s dollars (that is, $1,000 

= $1,100 ÷ (1 + 0.1)). In the context of an energy effi ciency investment, spending money today to install a 

measure makes economic sense if the cost today is less 

than the sum of discounted benefi ts in future years. 

Thus, the higher the discount rate, the greater the 

future benefi ts are discounted and the harder it is for an 

energy effi ciency investment to be cost-effective. 

As each perspective portrays a specific stakeholder’s view, 

each perspective comes with its own discount rate. Thus, 

the five cost-effectiveness tests listed in Table 5-2 can have 

different discount rates. Using the appropriate discount 

rate, the cost-effectiveness tests correctly calculate the net 

benefits from making an investment in energy effi ciency. 

Three kinds of discount rates are used, depending on 

which test is being calculated. For the PCT, the discount 

rate of an individual is used. For a household, this is taken 

to be the consumer lending rate, since this is the debt cost 

that a private individual would pay to finance an energy 

efficiency investment. It is typically the highest discount 

rate used in the cost-effectiveness tests. However, since 

there are potentially many different participants, with very 

different borrowing rates, it can be difficult to choose a 

single appropriate discount rate. Based on the current 

consumer loan market environment, a typical value may 

be in the 8% to 10% range; this is notwithstanding that 

a credit card rate can often exceed 20%. For a business 

firm, the discount rate is the firm’s weighted average cost 

of capital (WACC). In today’s capital market environment, 

a typical value would be in the 10% to 12% range; even 

though it can be as high as 20%, depending on the fi rm’s 

credit worthiness and debt-equity structure. 

Table 5-3. The Use of Discount Rates in Cost Tests 

Tests and Perspective Discount Rate Used Illustrative 

Value 

Present 

Value of $1 

a Year for 

20 Years 

Today’s Value 

of the $1 

Received in 

Year 20 

Participant Cost Test Participant’s discount rate 10% $8.51 $0.15 

Ratepayer Impact Measure Utility WACC 8.5% $9.46 $0.20 

Utility Cost Test Utility WACC 8.5% $9.46 $0.20 

Total Resources Cost Test Utility WACC 8.5% $9.46 $0.20 

Societal Cost Test Social discount rate 5% $12.46 $0.38 

5-4 Guide to Resource Planning with Energy Effi ciency 
For the SCT, the social discount rate is used. The social 

discount rate refl ects the benefi t to society over the 

long term, and takes into account the reduced risk of 

an investment that is spread across all of society, such 

as the entire state, or region. This is typically the lowest discount rate. For example, California uses 3% real 

discount rate (~5% nominal) for evaluation of costeffectiveness of the Title 24 Building Standards. 

Finally, for the TRC, RIM, or UCT/PACT, the utility’s 

WACC is typically used as the discount rate. The WACC 

takes into account the average cost of borrowing of the 

utility, and is the same rate used to borrow money for 

other utility resource investments on the supply-side. The 

WACC is typically between the participant discount rate 

and the social discount rate. The correct application of 

discount rates to the fi ve SPM cost-effectiveness tests 

is shown in Table 5-3. For example, California currently 

uses 8.6% for evaluation of the investor-owned utility 

energy effi ciency programs. 

Using these illustrative values for each cost test, Table 

5-3 shows the value of receiving $1 per year for 20 years 

from each perspective. This is analogous to the value of 

not having to purchase $1 of electricity per year. From a 

participant perspective assuming a 10% discount rate, 

this stream is worth $8.51; from a utility perspective 

it is worth $9.46; and from a societal perspective it is 

worth $12.46. The effect of discount rate increases over 

time. The value today of the $1 received in the 20th 

year ranges from $0.15 from the participant perspective 

to $0.38 in the societal perspective, more than twice 

as much. Since the present value of a benefi t decreases 

more over time with higher discount rates, the choice of 

discount rate has a greater impact on energy effi ciency 

measures with longer expected useful lives. 

5.3 Resources for Determining 

Cost-Effectiveness 

Title/Description URL Address 

California The California Standard Practice Manual: Economic Analysis of Demand Side Programs and 

Projects. This manual describes cost-effectiveness 

procedures for conservation and load management 

programs from four major perspectives: participant, 

RIM, PACT, and TRC. A fifth perspective, the societal 

test, is treated as a variation on the TRC test. 

<http://calmac.org/publications/MCS_ 

Final_Report.pdf> 

<www.energy.ca.gov/greenbuilding/ 

documents/background/07-J_CPUC_ 

STANDARD_PRACTICE_MANUAL. 

PDF> 

Oregon Cost-Effectiveness Policy and General Methodology for the Energy Trust of Oregon. This report 

describes the Energy Trust of Oregon’s policy for analyzing the cost-effectiveness of its energy effi ciency 

investments. This policy encompasses three generic 

perspectives: consumer, utility system, and societal. 

<www.energytrust.org/library/ 

policies/4.06_CostEffect.pdf> 

All States Tools and Methods for Integrated Resource 

Planning: Improving Energy Effi ciency and 

Protecting the Environment. This report provides 

information on calculating and analyzing the cost-effectiveness of energy conservation measures against 

supply-side options, as well as methods for IRP. 

<www.uneprisoe.org/IRPManual/ 

IRPManual.pdf> 

National Action Plan for Energy Effi ciency 5-5
5.4 Notes
 

1. 	 This key question is based on the National Action Plan for Energy 

Effi ciency recommendation to “make a strong, long-term commitment to implement cost-effective energy effi ciency as a resource” 

and options to consider. 

2. 	 For more details, including specifi c formulas for each cost test, 

download the California Standard Practice Manual: <www. 

energy.ca.gov/greenbuilding/documents/background/07-J_CPUC_ 

STANDARD_PRACTICE_MANUAL.PDF>. 

5-6 Guide to Resource Planning with Energy Effi ciency 
Development of Energy 

Effi ciency Programs 6: and Portfolios 

This chapter provides a discussion of the types of energy efficiency programs and their characteristics and objectives. A brief discussion of the importance of including criteria beyond cost-effectiveness is also provided. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• There are different types of energy effi ciency • Have we clearly defi ned the program and portfolio 

programs, each with their own advantages and criteria? 

disadvantages.The utility cost test (UCT), also called • Have we developed a program that is cost-effec­ the program administrator cost test, is consistent tive, achieves energy savings, and meets other with least cost utility resource planning. The UCT criteria appropriate for our service territory?1 Are 

compares the utility costs and benefi ts of energy we using the correct discount rate? effi ciency. 

• Does the portfolio of programs reach all of the 

• More than cost-effectiveness should be considered customer classes and consider all of the energy ef­ when building up an energy effi ciency program: fi ciency opportunities? criteria include energy savings, cost-effectiveness, 

continuity of programs, service for all customer 

classes, education, and other factors. 

6.1 Types of Programs
 

There are different types of energy effi ciency programs, 

each of which has its own advantages, disadvantages, 

and considerations. Table 6-1 summarizes the major 

different types. 

Another way to categorize energy efficiency programs is 

by their intended objective. The following list summarizes 

common efficiency program objectives: 

• 	Resource acquisition. Primary objective is to directly 

achieve energy and/or demand savings, and possibly 

avoid emissions through specifi c actions. 

• 	Market transformation. Primary objective is to 

change the way in which energy effi ciency markets 

operate (how manufacturers, distributors, retailers, 

consumers, and others sell and buy energy-related 

products and services); tends to cause energy and/or 

demand savings in a more indirect manner. 

• 	Increased stringency of codes and standards. 

Primary objective is to defi ne and enforce mandated 

levels of effi ciency in buildings and products. 

• 	Education and training. Primary objective is to inform consumers and providers about energy effi ciency and encourage them to act on that information. 

• 	Multiple objectives. Objectives can include some or 

all of the above-listed objectives. 

Other programs often associated with effi ciency, but 

which are aimed at reducing capacity requirements, not 

energy consumption, are load shifting and demand response programs. These programs are intended to modify 

energy (typically electricity) TOU patterns and may increase 

consumption, decrease consumption, or not affect consumption at all. 

National Action Plan for Energy Effi ciency 6-1
Table 6-1. Energy Efficiency Program Types 

Program Type Characteristics 

Energy Audit An energy audit is a survey or site visit to a customer premise by a knowledgeable 

contractor or utility representative. The audit is part review of customer equipment, 

part education of the customer, and part marketing of appropriate energy effi ciency programs to the customer. 

Best practices in energy audits both increase awareness of how to improve building 

effi ciency and encourage building-owners to follow through in the implementation 

of the audit’s recommendations. In EPA and DOE’s program “Home Performance 

with ENERGY STAR,” specially trained contractors evaluate homes, recommend 

comprehensive improvements, and may encourage homeowners to take advantage of federal tax credits for energy effi ciency improvements. 

Rebate Program Cash rebate program: Provides customers with a cash rebate toward the purchase of a high-effi ciency appliance or device. 

Upstream rebate program: provides a rebate to the manufacturer or wholesaler 

so that they can discount the fi nal price to the customer. Eliminates the need for 

the customer to apply for the rebate to receive the discount. 

Direct Install Program Utilities, or utility-hired third-party contractors, directly install energy effi ciency 

measures for customers. For example, a commercial lighting retrofi t program may 

directly install new, energy-effi cient lighting. 

This type of program can improve the quality of the installation and make it easier 

for customers to participate in the program. 

Education and Training Efforts to educate and train customers, retailers, architects, contractors, and building 

Program inspectors to identify energy effi ciency opportunities, properly install energy savings 

measures, and maintain equipment so that it continues to operate as effi ciently as 

possible. 

Loans and On-Bill Financing or Grants Programs to remove the disincentive caused by the initial cost of energy effi ciency 

measures. 

Bidding/Standard 

Performance Contracts 

Allow contractors to develop programs and deliver savings to the program administrator. The contractor can often leverage existing relationships with customers 

more effectively than a utility or program administrator’s agent. 

Upstream and Midstream Incentives Program administrators provide incentives or assistance to manufacturers, distributors, or dealers to promote energy-effi cient products. 

6-2 Guide to Resource Planning with Energy Effi ciency 
Table 6-1. Energy Efficiency Program Types (continued) 

Program Type Characteristics 

Failure Replacement 

Program 

Targets customers to purchase and install high-effi ciency equipment or appliances 

at the time that they replace old energy using equipment—for example, encouraging customers to purchase ENERGY STAR–certifi ed equipment. 

Informing participants of the program when they are replacing equipment can 

help keep recruitment costs low. This can be done through working with retailers 

and rebates at the cash register, or working with contractors whose business is in 

equipment replacement (e.g., HVAC contractors). 

Early Replacement 

Program 

Replaces existing equipment/appliances that are currently working and in use with 

more effi cient units. 

Generally more costly than failure replacement because it requires an incentive 

closer to the entire cost of the effi cient unit to attract customers. 

As in failure replacement, targeting the most likely participants can keep recruitment costs low. This can be done by approaching customers with the most opportunity. Commercial lighting retrofi ts are a successful example of this approach. 

New Construction 

Program 

Targets new construction as the time to install energy effi ciency measures that go 

above and beyond the building standard. 

Sometimes called “lost opportunity” programs because many of the energy effi ciency upgrades that must be designed into the building are expensive or impossible to develop once the building is complete (Northwest Power and Conservation 

Council, 2005).2 

Commissioning After an energy effi ciency project or new building is completed, confi rms that the 

building is operating properly. For example, confi rms that the building shell is tight 

and the ducts are not crushed or bent. It is possible to reward builders who construct an energy-effi cient home with a cash rebate and/or certifi cation/award. 

6.2 Criteria to Use in Developing 

Programs 

Developing an energy effi ciency program is not just 

about maximizing cost-effective energy and capacity 

savings. There are often additional criteria to consider, 

such as making sure that there are programs for all 

classes and for low-income and hard-to-reach customers, that programs have continuity, and that programs 

provide for education. There may also be other utility, 

regional, or policy factors to consider in developing the 

energy effi ciency program. 

Another common example is a focus on initiatives to 

serve the new construction market to minimize lost 

opportunities for energy effi ciency. While new buildings 

are more effi cient than the existing building stock, failure to capture opportunities at the initial construction 

stage can result in long-term energy effi ciency losses. 

Generally, programs are designed so that they meet 

some minimum level of aggregate cost-effectiveness at 

National Action Plan for Energy Effi ciency 6-3
the portfolio level. In the case of requests for proposals 

(RFPs) for energy effi ciency, cost-effectiveness could be 

required at the program level, although this requirement 

is often relaxed for programs that target low-income and 

underserved market segments. 

As the requirements for a satisfactory program and 

portfolio are driven by jurisdictional policies, there is no 

single defi nition. However, as an example, we have listed 

the criteria that the Public Utilities Commission uses in 

evaluating utility and contractor energy effi ciency programs in California. 

Criteria from California 

The portfolio must adhere to available funding by utility territory and have a total resources cost (TRC) ratio 

greater than one, and we ask staff to compile a portfolio 

of programs that balances the following goals: 

• 	Maximized energy savings. 

• 	Strong cost effectiveness. 

• 	Equitable geographic distribution. 

• 	Diversity of target markets. 

• 	Equity by rate class. 

• 	Equity between gas and electric program offerings 

and energy savings. 

• 	Diversity of program offerings. 

• Multiple languages offered to program participants 

(CPUC, 2004) 

6.3 Resources for Developing 

Energy Effi ciency Programs 

and Portfolios 

Title/Description URL Address 

Electric and Gas Conservation Improvement Program Biennial Plan for 2005 and 2006. Docket No. E, G002/CIP-04. 

This plan was submitted to the Minnesota Department of 

Commerce by Xcel Energy, June 1, 2004. 

URL not available. 

Portfolio Management: How to Procure Electricity Resources to Provide Reliable, Low-Cost, and Effi cient 

Electricity Services to All Retail Customers. Biewald, B., T. 

Woolf, A. Roschelle, and W. Steinhurst (2003). Synapse Energy 

Economics. October 10. 

<www.synapse-energy.com/Downloads/ 

SynapseReport.2003-10.RAP.PortfolioManagement.03-24.pdf> 

Interim Opinion: Energy Efficiency Portfolio Plans and 

Program Funding Levels for 2006–2008—Phase 1 Issues. 

California Public Utilities Commission [CPUC] (2005). Decisions 

05-09-043. (See pp. 122-123 and Attachment 6.) September 22. 

<www.cpuc.ca.gov/PUBLISHED/FINAL_ 

DECISION/49859.htm> 

Energy Efficiency: Investing in Connecticut’s Future. <www.env-ne.org/Publications/ECMB%20 

Energy Conservation Management Board [ECMB] (2005). Annual%20Legislative%20Report%202005. 

Prepared for the Connecticut Legislature Energy & Technology pdf> 

Committee, Environment Committee. March 1. 

The Fifth Northwest Electric Power and Conservation 

Plan. The Northwest Power and Conservation Council (2005). 

Document 2005-7. May. 

<www.nwcouncil.org/energy/powerplan/ 

plan/Default.htm> 

6-4 Guide to Resource Planning with Energy Effi ciency 
6.4 Notes
 

1. 	 This key question is based on the National Action Plan for Energy 

Effi ciency recommendation to “make a strong, long-term commitment to implement cost-effective energy effi ciency as a resource” 

and options to consider. 

2. 	 A lost-opportunity program seeks to take advantage of the limited 

time-frame when some conservation measures can be cost-effectively implemented, due to physical or institutional limitations for 

implementing energy effi ciency. 

National Action Plan for Energy Effi ciency 6-5

Estimating Energy 

Efficiency Impacts for 7: Resource Planning 

Recognizing the demand and capacity impacts of energy efficiency in utility planning creates opportunities 

to capture additional value from the programs. This chapter provides a discussion of how to estimate and 

report on the impacts of energy efficiency programs for use in utility planning. In addition, a discussion of 

how to measure or estimate the greenhouse gas emission reductions is provided. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• The recognition of energy effi ciency’s kWh and kW 

impacts in utility planning provides opportunities to 

capture additional value from the energy effi ciency 

activities. More than cost-effectiveness should be 

considered when building up an energy effi ciency 

program: criteria include energy savings, costeffectiveness, continuity of programs, service for all 

customer classes, education, and other factors. 

• There are several methods for developing impact 

estimates, as well as information available from 

jurisdictions across the United States. 

• Do the estimates, especially of peak reductions, 

refl ect the unique characteristics of our region? 

There are several methods for developing impact 

estimates, as well as information available from 

jurisdictions across the United States. 

• Do the estimates refl ect expected or overly 

optimistic levels? 

7.1 Overview
 

Energy efficiency delivers value to the utility and its customers through reductions in energy usage and reductions 

in capacity requirements. Depending upon the regulatory 

structure and markets in which the utility operates, the 

value provided from energy and capacity reductions can 

vary widely. Generally, utilities have analysts that perform 

energy and capacity forecasts for planning or procurement 

purposes, and this Guide is not meant to replicate or supplant that work. Rather, the Guide focuses on forecasting 

energy efficiency reductions for use in resource planning. 

7.2 Estimation of Energy 

Effi ciency Reductions 

There are two main approaches for estimating energy 


effi ciency reductions: top-down or bottom-up. EM&V 


studies can also be used to refi ne estimates produced 

from either approach. 

The top-down approach is generally less time-consuming than the bottom-up approach that relies on detailed 

impact data by end-use. For estimating impacts, this 

approach commonly employs statistical comparison 

(e.g., regression techniques) of participant and nonparticipant billing data, or pre- and post-measure-installation billing data. Absent detailed information, data 

from other utilities or states can also be used at aggregate levels to develop estimates of energy effi ciency 

impacts. This type of analysis may be more applicable 

for jurisdictions that are newly entering or resurrecting 

energy effi ciency efforts. Potential sources of energy 

effi ciency impact information are listed in Chapter 4. Of 

course, for weather-sensitive measures, the validity of 

transferred information will depend upon the similarity 

of climate characteristics with the original data source. 

National Action Plan for Energy Effi ciency 7-1
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bottom-up models construct estimates of energy effi ­

ciency program reductions based on savings from specifi c 

types of energy effi ciency measures. Engineering models 

are often used in bottom-up analyses to estimate reductions in energy usage based on the performance characteristics of effi cient versus standard measures. The level 

of effort required to utilize engineering models varies 

widely. In some cases, the analysis can be based on single 

line engineering formulas such as the difference in wattage for equivalent lumen incandescent and CFLs. In other 

cases, it can be based on complex building simulation 

models1 or detailed industrial process simulations. The 

basic bottom-up energy formula is shown below. This 

calculation would be performed separately for each type 

of energy effi ciency measure. 

Energy effi ciency annual net energy savings: 

NetkWhm,TOU = ΔkWh x NTG x Installs m,TOU m m 

(eq. 7.1) 

Where: NetkWhm,TOU = energy effi ciency energy 

reductions, by TOU period 

for measure m, that are at 

tributable to the utility or 

third-party energy effi ciency 

programs under evaluation 

ΔkWhm,TOU = annual gross reduction in 

energy during the TOU 

period

 Installs = number of installations for m 

measure m

 NTGR = net-to-gross ratio of the m 

measure 

The program-specifi c NTGR converts the gross annual 

reductions in energy usage to a net value, thus excluding reductions that would have occurred absent the 

program. For example, in evaluating a rebate program, 

the NetkWh should exclude impacts associated with 

measures that would have been installed to meet building code compliance. NTGR is typically viewed as an 

adjustment to eliminate free rider2 effects, but should 

also account for free-driver effects.3 

Energy effi ciency lifecycle net energy savings: 

NetkWh_LCm,TOU = 	NetkWh x EUL (eq. 7.2) m,TOU m 

Where: NetkWh_LCm,TOU = lifecycle energy 

effi ciency energy 

reductions by TOU 

period measure for m

 EUL = expected useful life m 

of the measure 

(years) 

For jurisdictions with deep energy effi ciency experience, 

it is common for utilities to begin with engineering estimates and then refi ne the estimates as they gain experience and data on both measure performance and NTGR 

adjustments from actual measure installations. EM&V 

studies are primary sources of the information needed 

for these refi nements. 

Whichever method or methods are used to develop the 

energy reduction forecast, the forecast should be at a 

level of time granularity that matches the utility’s cost 

structure. For example, a utility may require forecasts 

of energy reductions by peak and off-peak periods to 

match procurement costs. 

7.3 Estimation of Peak Capacity 

Reductions 

The estimation of peak capacity uses the same methods 

discussed for energy estimates. However, the term “peak 

capacity” can have various meanings, even within the 

same utility. Following are some example defi nitions of 

peak capacity, with potential applications in parentheses. 

• 	System coincident peak. Maximum MW demand at 

the utility level for a single hour in the year. (Long-run 

generation planning.) 

• 	“Summer” peak. Average demand from 2 p.m. to 5 

p.m. during the three contiguous business days with 

the highest average maximum temperature. (Value of 

peak load reduction.) 

7-2 Guide to Resource Planning with Energy Effi ciency 
 

 

 

• 	Monthly peak. Average of the demands at the time 

of the single highest demand for each of the 12 

months. (Transmission reservation costs.) 

• 	Loss of load probability (LOLP)–weighted peak. 

LOLP is the probability that generation will be insuffi ­

cient to meet demand at some point over a specifi ed 

period of time. Demand weighted by relative LOLP 

values from the utility’s production cost models. The 

LOLPs are normalized so that they sum to 1.0. (Allocation of costs to customer classes using regulatory 

cost of service model.) 

• 	100-hour coincident peak. Average of demands 

during the utility’s 100 highest-load hours. (Regulatory cost of service model.) 

In addition to the various definitions of peak capacity, 

there are different ways to count the energy effi ciency 

impacts. The most straightforward method is to use the 

expected, or average, impact. However, in some cases, a 

more conservative measure may be required that de-rates 

the energy efficiency impacts for any uncertainty in how 

much load reduction might be provided (the “dependable” reductions). Successful integration of energy effi ciency into resource planning will require close coordination 

between the energy efficiency and planning group to 

ensure that the appropriate capacity values are estimated. 

To incorporate energy effi ciency into resource planning, 

the energy effi ciency peak demand reduction should 

use a defi nition that corresponds to how the resource 

planners value capacity. Care must be exercised, however, to ensure that other groups within the utility do 

not use those same estimates if they do not match 

that group’s application. It is common for numbers to 

become “set in stone” and misused in applications for 

which the numbers were not intended. For example, a 

peak value may be developed for a transmission study 

that is based on the energy effi ciency reduction during 

the 12 monthly peaks, but then misused in a generation 

planning application that is concerned only with the 

single annual peak. 

The analysts can use the same engineering or statistical 

models that they develop for producing energy reduction estimates (assuming that the models have suffi ­

cient hourly information to match the peak defi nitions). 

Bottom-up forecasts tend to overestimate reductions. A 

common pitfall is to assume that the largest kW reduction from an energy effi ciency measure is the same as 

that measure’s peak demand reduction. This largest kW 

reduction is the non-coincident peak reduction, and a 

value typically cited in measure databases. The coincident 

peak reduction is generally lower than the non-coincident peak reduction because, for example, the timing of 

the largest reduction does not match the timing of the 

utility peak, not all measures will be operating at the time 

of the peak (people are not home), or equipment is not 

installed or maintained properly. In addition, there are interactive effects that will increase or decrease the reductions depending upon other energy effi ciency measures 

that the customer may or may not have installed. 

Another pitfall is to assume that percentage energy 

savings is the same as percentage demand savings. For 

example, in California, SEER was used as the primary 

measure of air conditioning unit effi ciency. Codes and 

standards were written to promote high SEER units in 

the state, with the untested expectation that the more 

effi cient unit would also help reduce capacity needs. 

In reality, many manufacturers responded to the SEER 

metric with high SEER units that had two compressors 

and could actually cause higher peak demands. 

The SEER example also highlights the difference between end use shapes and impact shapes. Utilities often 

have end use shapes, which are hourly representations 

of the demand of various classes of equipment, such as 

indoor lighting, outdoor lighting, refrigeration, heating, 

air conditioning, and motors. For energy effi ciency planning and evaluation, however, the focus is the impact 

shape—the hourly demand reductions due to the energy effi ciency measure. 

ImpactkWm,h = EndUsekWh – EndUseEEkWm,h 

(eq. 7.3) 

Where: ImpactkWm,h = energy effi ciency 

impact shape for 

measure m in hour h 

National Action Plan for Energy Effi ciency 7-3
 

 

 

 

 

 

 

 

 EndUsekWh = hourly shape for the 

end use affected by 

energy effi ciency 

(prior to energy effi ciency)

 EndUseEEkWm,h = hourly shape for end use 

after energy effi ciency is 

installed 

A common way to produce a fi rst order estimate of the 

energy effi ciency reductions is to multiply the percentage energy reduction provided by the measure by the 

demand shape. 

ImpactkWm,h = EndUsekWh – %EEReductionm 

(eq. 7.4) 

Where: %EEReduction = reduction in usage due to m 

energy effi ciency ÷ total 

end use kWh prior to 

energy effi ciency 

This method is fi ne for measures such as high-effi ciency 

lighting, for which the energy effi ciency reduction occurs evenly across all hours. 

In other cases, the reduction shape may not follow the 

end use shape. For example, increased insulation may 

reduce usage during moderate times, but not affect 

usage during the hottest and coldest times. In that case, 

the impact shape will look less peaky than the end use 

shape, and Equation 7.3 should be used. 

Because of the variety of ways to measure and defi ne 

peak demand, as well as timing differences across utilities, peak information is generally less transferable than 

energy impacts. This caution applies to both bottom-up 

and top-down approaches. The analyst should exercise 

additional care when using peak demand impacts from 

other jurisdictions 

7.4 Energy Efficiency and Greenhouse Gas Emissions 

Growing concerns about climate change are leading 

many utilities and regulatory bodies to develop resource 

portfolios that reduce GHG emissions. An important 

question, then, is how to measure or estimate the reductions in GHG emissions from energy effi ciency programs. 

In the electricity sector, the most important GHG by 

far is carbon dioxide (CO2), although relatively small 

amounts of other GHGs such as methane (CH4), nitrous 

oxide (N2O), and sulfur hexafl uoride (SF6) are also emitted. To put all of these GHGs on a common footing in 

terms of their global warming potential, the unit “carbon dioxide equivalent” (CO2eq) is often used. In 2006, 

energy-related emissions from the United States as a 

whole were 5,940 million metric tons CO2eq, of which 

2,357 million metric tons, or about 40%, were from the 

electricity sector (DOE, 2007). 

Energy effi ciency indirectly reduces GHG emissions, 

since for each kWh not consumed the GHG emissions 

associated with the supply of that electricity are avoided. Energy effi ciency can be a highly cost-effective way 

to reduce GHG emissions, since the non-GHG-related 

benefi ts often exceed the costs; incorporating an additional benefi t of avoided GHG emissions improves 

energy effi ciency’s cost-effectiveness. The calculation of 

avoided GHG emissions requires two components: the 

amount of GHG emissions reduced by energy effi ciency 

and the related per unit value of GHG reductions. 

7.4.1 Calculating GHG Savings from Energy 

Effi ciency 

In general, the higher the GHG emissions associated 

with electricity supply, the greater the benefi t of energy effi ciency. For each kWh to be consumed, a larger 

amount of kWh (up to 110%) must be generated to 

account for transmission and distribution losses, causing a certain amount of GHG emissions. In addition, 

small amounts of additional GHGs are emitted in the 

transmission and distribution system (for example, SF6 is 

emitted from high-voltage circuit breakers). For generators that burn fossil fuels, the amount of GHGs emitted 

per kWh generated is the product of two factors: the 

carbon content of the fuel and the heat rate (thermal 

effi ciency) of the plant.4 The carbon content of fuel is 

primarily a function of the type of fuel, though among 

a given fuel type such as coal, there can also be some 

7-4 Guide to Resource Planning with Energy Effi ciency 
variation.5 Table 7-1 shows illustrative CO2 emission 

factors for different fuels and heat rates. For actual 

emissions reporting for a power plant, calculations must 

be based on actual plant heat rates and the correct 

emission factors for the specifi c fuel types used, if the 

plant does not have a continuous emissions monitoring 

system in place to measure CO2 emissions directly. 

In addition to the GHG emissions from fuel combustion, 

there are “upstream” emissions associated with the mining, cleaning, and transportation of fuels to the power 

plant. Table 7-2 shows estimates in one DOE study of 

average upstream emission factors for coal and natural 

gas. In this case, a total emission factor can be obtained 

by adding the upstream and combustion emission factors 

together (since both are given in units of lbs/MMBtu), 

then multiplying the combined factor by the heat rate. 

Both fossil fuel and non-fossil-fuel generators, including 

nuclear, hydroelectric, wind, biomass, and solar, have 

additional GHG emissions associated with plant construction and decommissioning, shipment of fuel, and the 

manufacturing and shipment of the generating equipment. These emissions, plus those from actual operation 

of the generator over its operating life, are considered 

the plant’s lifecycle emissions. At present, total lifecycle 

emissions are not generally included in resource planning, 

but the lifecycle emissions of different types of generators are often compared in policy discussions. 

The method for calculating emissions savings is to combine marginal emission rates with matching kWh savings 

from efficiency. (“Marginal emission rates” refers to the 

emissions associated with the marginal generating unit in 

each hour of the day. Since peaking units are typically less 

efficient than baseload units, they have higher emission 

factors if they use the same fuel, and the marginal emission rate will be higher during peak hours than during offpeak hours. See Section 3.3.4 for exceptions to this rule.) 

The fi rst step in the GHG savings calculation is to obtain 

the regional emissions profi le. Figure 7-1 shows the 

simulated marginal emission rate by hour for a twoweek period for California. 

The second step in the calculation is to obtain the 

hourly profi le of energy savings due to energy effi ciency. 

This should take into account the time- and location-dependent effect on energy consumption of the different 

Table 7-1. Illustrative CO2 Emissions Factors for Fossil Fuel Combustion 

Fuel Type Fuel Emissions Factor (lbs 

CO2/MMBtu) 

Heat Rate (Btu/ 

kWh) 

Generation Emissions Factor 

(lbs CO2/MWh) 

Coal 210 12,000 

9,500 

7,000 

2,519 

1,995 

1,470 

Natural gas 117 12,000 

9,500 

7,000 

1,403 

1,111 

819 

Note: Average values based on high heating value and 100% combustion. 

Source: DOE, 2006. 

Table 7-2. Illustrative Upstream CO2 Emission Factors for Fuels Used in 

Electricity Generation, from Mining, Cleaning, and Transportation in California 

Fuel Type Emissions Factor (lbs/MMBtu) % of Combustion Emissions 

Coal 4.6 2.7 

Natural gas 11.4 11.9 

Source: DOE, 2000. 

National Action Plan for Energy Effi ciency 7-5
 

 

kinds of energy effi ciency measures in the portfolio. For 

example, the hourly MWh savings from air conditioning, 

outdoor lighting, and refrigeration effi ciency measures 

have quite different profi les. An example of this is 

shown in Figure 7-2 for California, on the same days 

used in Figure 7-1. 

Figure 7-3 shows the three different kinds of effi ciency 

measures superimposed on each other and on the marginal emissions profi le for the same hours of the year. 

In this case, air conditioning effi ciency measures save 

kWh during peak hours, when marginal emission rates 

are highest, and therefore the CO2 savings per kWh are 

greatest. On the other hand, outdoor lighting measures 

save kWh during off-peak hours, when marginal emission rates are lowest. Refrigeration measures save kWh 

uniformly across peak and off-peak hours. 

The third step in calculating the avoided CO2 emissions 

is to multiply the marginal emissions rate (in tons CO2 

per MWh) for each hour by the MWh savings in that 

hour due to each energy effi ciency measure. This step is 

shown in Equation 7.5 

avoided tons of CO2 emissions = 

∑∑ (tons CO ÷ MWh ×(MWh 2 ) saved) hoursmeasures 

(e.q. 7.5) 

As an example, 100 kWh saved by each of the three 

energy effi ciency measures discussed above results in a 

different emissions saving for the California emissions 

profi le: the avoided CO2 emissions are 118 pounds for 

air conditioning effi ciency measures, 93 pounds for 

refrigeration effi ciency measures, and 86 pounds for 

outdoor lighting effi ciency measures. 

This calculation can be performed by TOU periods if 

hourly data are not available. The calculation can also 

be made more accurate by accounting for reductions 

in the marginal heat rate due to the energy effi ciency 

measures. However, this effect is likely to be small. 

Figure 7-1. Marginal CO2 Emissions Rate by Hour for California Over a 

Two-Week Period 

0 50 100 150 200 250 300 350 400 

Hour 

Marginal CO2 Emissions Rate

(tons CO2 /MWh) 

0.30 

0.40 

0.50 

0.60 

0.70 

0.80 

0.90 

Note: The minimum value represents the emissions from baseload generation, which in California consists predominantly of natural gas combined cycle 

plants. The maximum value represents emissions from peaking units, which consist mainly of natural gas combustion turbines. 

Source: California Energy Commission adopted simulation for Title 24 building standards. 

7-6 Guide to Resource Planning with Energy Effi ciency 
Figure 7-2. Hourly Shape of MWh Savings From Energy Effi ciency Measures 

in California 

Air Conditioning Lighting Refrigeration 

Energy Comsumptopm

by Hour (Normalized) 

Hour Hour Hour 

Note: Results shown for the same two-week period as in Figure 7-1.
 

Source: Energy & Environmental Economics, Inc. and Rocky Mountain Institute, 2004.
 

Figure 7-3. Hourly Shape of MWh Savings from Energy Effi ciency Measures Energy Consumption by Hour (Normalized) 

0.0 

0.1 

0.2 

0.3 

0.4 

0.5 

0.6 

0.7 

0.8 

0.9 

Marginal CO2 Emissions (tons CO2 /MWh) 

1 51 101 151 201 251 301 351
 401
 

Hour 

Air Conditioning Lighting Refrigeration Marginal Emissions

Source: Energy & Environmental Economics, Inc. and Rocky Mountain Institute, 2004. 

National Action Plan for Energy Effi ciency 7-7
7.5 Incorporating Energy Effi ciency
 

Forecasts into Integrated Planning
 

The previous section discusses the estimation of energy, 

capacity, and GHG reductions for energy effi ciency measures. The analyst, however, must take care in incorporating these results into the planning process, as there 

are two adjustments that need to be considered: 

1. 	 Reductions associated with installations that occur 

after the peak period (be that summer or winter) 

should not count for that year. 

2. 	 Reductions already included in the status quo load 

forecast should be explicitly identifi ed to avoid 

double counting. 

The fi rst adjustment is straightforward and easy to incorporate into the planning process; the key is to manage 

installation forecasts using a time period that ends prior 

to the peak period. For example, for a summer peaking 

utility, the second quarter of the year would be the ending period for counting installations for peak reduction 

purposes. 

The second adjustment requires the analyst to have a 

sound understanding of the data and methods used to 

develop the base planning forecast. While the details of 

load forecasting are beyond the scope of this document, 

double counting can be avoided by (1) removing energy effi ciency impacts from the base forecast prepared 

by the load forecast group or (2) removing energy and 

demand impacts from the forecast of energy effi ciency 

impacts. This “counting” issue is explored further in the 

next section. 

7.6 Building Codes and Standards
 

Building energy codes are an additional, signifi cant 

source of energy savings that should be integrated in 

load forecasting and reporting of energy effi ciency savings. The California Energy Commission estimates the 

cost savings from the Title 24 Building Standards begun 

in 1978 will total $41 billion by 2011. California is not 

alone—41 other states have building codes and standards. For residential buildings, most of the states apply 

the IECC model energy code or an equivalent or more 

stringent code. For commercial buildings, most states 

apply ASHRAE 90.1 or IECC. Still other states allow local 

municipal control of the building energy effi ciency standards.6 The Action Plan Building Codes and Standards 

Fact Sheet contains more details on benefi ts and implementation of building codes (National Action Plan for 

Energy Effi ciency, 2007a). 

The methodology described in Equation 7.1, above, can 

be used to produce a forecast of the energy savings associated with increased stringency in the building codes. 

These savings are additive to the forecasted savings 

of the energy effi ciency program and can be reported 

separately as described in Chapter 8, “Reporting Energy 

Effi ciency Impacts for Resource Planning.” 

As with the forecast of energy effi ciency program savings, savings from a change in building standards are 

computed relative to a baseline of energy usage that 

would occur without the change in the standard. In 

the case of improvements attributable to the building 

standards change, the term in Equation 7.1 represents 

the increased stringency in the building codes and the 

installs term represents the forecasted number of new m

buildings where the building code change applies. 

For example, if the building code changes the minimum 

energy effi ciency of a residential air conditioner from 

SEER 12 to SEER 13, then the ΔkWhm,TOU is the change 

in energy consumption between these two units and the 

installs term is the number of new and retrofi t residen­ m

tial buildings expected to comply. Once this code change 

is implemented, a new construction program to provide 

incentives for effi cient air conditioning would have a 

new baseline based on SEER 13 effi ciency. 

Increasing the effi ciency of the building standards is 

an effective way to reduce energy usage because the 

standards apply to all new and retrofi t buildings. Once 

the requirement is in place, there is no need to market a new construction program. Compliance with the 

standard leads to energy effi ciency improvements that 

are widespread and persistent. From a program cost 

standpoint, building standards impose low cost on the 

7-8 Guide to Resource Planning with Energy Effi ciency 
utility and ratepayers, because the additional costs of 

the buildings are mainly borne by the owner. In order 

to prevent onerous requirements on new construction, however, there are generally some controls on the 

standards that can be implemented. In the California 

Title 24 process, technical, economic, cost-effectiveness, 

and feasibility criteria are considered with stakeholders, 

including builders, architects, consumers, environmental 

advocates, and others, before any changes are adopted. 

7.7 Resources for Forecasting Load
 

Title/Description URL Address 

Building Codes for Energy Efficiency Fact Sheet. 

Describes the building codes adopted in each state, 

along with an estimate of potential benefi ts. 

<www.epa.gov/eeactionplan> 

ASHRAE 90.1 Standard. The basis of most states’ 

commercial building energy codes. 

<www.ashrae.org/technology/page/548> 

International Energy Conservation Code. A common basis of most states’ residential building energy 

standards. 

<www.energycodes.gov> 

California Title 24 Building Energy Effi ciency Standards. These develop the building standards in California in 3-year program cycles, beginning in 1978. <www.energy.ca.gov/title24/> 

Tools and Methods for Integrated Resource 

Planning: Improving Energy Effi ciency and 

Protecting the Environment. UNEP Collaborating 

Centre on Energy and Environment, Riso National 

Laboratory, 1997. 

<www.uneprisoe.org/IRPManual/IRPmanual.pdf> 

Inventory of Available Methods and Processes 

for Assessing the Benefits, Costs, and Impacts 

of Demand-Side Options: Volume 1—Overview 

of Methods Models and Techniques. 1996. 

<http://dsm.iea.org/Files/Tasks/Task%20IV%20-%20 

Development%20of%20Improved%20Methods%20 

for%20Integrating%20Demand-Side%20Options%20 

into%20Resource%20Planning/Reports/Vol1.doc> 

2004–2005 Database for Energy Effi ciency Resources (DEER) Updated Study. <http://eega.cpuc.ca.gov/deer/downloads/reports/ 

FinalReport_Jan2006-Pdf_Only.zip> 

National Action Plan for Energy Effi ciency 7-9
7.8 Notes 

1. Building simulation models include DOE-2, BLAST, ADM2, and 

Micropas. 

5. For example, carbon dioxide emission factors for U.S. coal range 

from an average of 227 lbs/MMBtu for anthracite to 204 lbs/ 

MMBtu for bituminous. See U.S. DOE, “Carbon Dioxide Emission 

Factors for Coal,” <www.eia.doe.gov/cneaf/coal/quarterly/co2_ 

article/co2.html>. 

2. 

3. 

A free rider is someone who would have installed a measure in the 

absence of the program. 

A free-driver effect refl ects that someone installs a measure but 

6. For status on residential and commercial building codes by state, 

see the DOE Energy Codes Web site: <www.energycodes.gov/ 

implement/state_codes/state_status_full.php>. 

does not participate in a program. 

4. For greater accuracy, incomplete combustion must be taken into 

account, because it leads to fugitive emissions of methane and 

nitrous oxide, which are potent GHGs. 

7-10 Guide to Resource Planning with Energy Effi ciency 
Reporting Energy 

Efficiency Impacts for 8: Resource Planning 

This chapter provides guidance on reporting energy efficiency impacts in resource plan documents, with 

the goal of making them transparent and useful to a broad audience, as well as improving the ability of 

utilities to demonstrate their progress toward energy efficiency goals or climate change targets. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• Resource plan documents are an increasingly im­ • Are energy effi ciency impacts reported clearly 

portant source of information on energy effi ciency enough that an outsider could easily distinguish 

impacts that can be used to measure progress energy effi ciency load impacts from load met with 

toward state, regional, or national energy effi ciency supply resources? What functions are most approgoals or GHG reduction targets.Program adminis­ priate for a program administrator and/or contrators typically procure various types of energy ef­ tractors? (Use this question to guide staffi ng and 

fi ciency services from contractors (e.g., consultants, contracting needs.) 

vendors, engineering fi rms, architects, academic • Does the resource plan provide enough information institutions, community-based organizations) as to determine my utility’s progress toward energy part of managing, implementing, and evaluating effi ciency or GHG goals or targets? their portfolio of energy effi ciency programs. 

• Does the resource plan provide energy effi ciency 

• Regardless of the methods used to forecast the impacts as share (%) of the growth in total re- energy and capacity impacts of energy effi ciency source requirements and as a share (%) of total programs, they should be reported clearly and resource requirements? consistently. 

• Two key concepts—total resource requirements 

and net resources for load—can help distinguish 

energy effi ciency impacts in load forecasts. 

• A spreadsheet tool to facilitate the reporting and 

accounting of loads and resources in the resource 

plan, with adaptable data reporting forms and 

tables, is available at <http://eetd.lbl.gov/ea/EMS/ 

rplan-pubs.html>. 

8.1 Reporting Energy Effi ciency 


Impacts for Resource Planning
 

Utility resource plan documents summarize the results of 

the resource planning process, typically including load and 

resource forecasts, the relative cost-effectiveness of a series 

of contending resource portfolios, results of any other 

tests that the portfolios underwent (e.g., risk analysis), and 

the preferred portfolio the utility intends to pursue. The 

resource plan document constitutes the public record of 

the utility’s planning process and is often the only publicly 

accessible information on projected energy effi ciency and 

other resources in a specific utility’s service territory. 

National Action Plan for Energy Effi ciency 8-1
Figure 8-1. Tracking Energy Efficiency Resources in Load Forecasts
 

Resource plan analysis period 

Plan Start Date Plan End Date 

Load Forecast 

Unadjusted load 

forecast: 

total resource 

requirements 

Net 

resources 

for load 

Source: Hopper, N. et al., 2006. 

Throughout the United States, there is increasingly 

broad interest in projecting and tracking energy effi ciency resources over time. For example, the Western 

Governors’ Association (WGA) has set a goal of meeting 20% of total electricity needs with energy effi ciency 

by 2020. Other states and regions are beginning to set 

similar goals, in many cases drawing from the National 

Action Plan for Energy Effi ciency’s recommendations. 

Additionally, as governments set mandatory targets for 

GHG emissions, the need for information on utility energy effi ciency program impacts will intensify. However, 

a study of recent resource plans in the western United 

States conducted by Lawrence Berkeley National Laboratory (LBNL) found that most did not report energy effi ciency impacts clearly enough to support such needs.1 

The LBNL study provided a series of recommendations 

for improving the reporting of energy effi ciency impacts in utility resource plans, and developed a series of 

spreadsheet forms for utilities to use and adapt for their 

resource plans. This tool provides a standardized approach for collecting, entering, and reporting forecasted 

loads and resources, including energy effi ciency. 

The focus is on standardizing and clarifying the contribution of energy efficiency resources to the load forecast, 

Plan-Period EE Program Impacts 

Status Quo EE Program Impacts 

Other EE Impacts (e.g., Codes, 

Standards) 

Load Met with Supply-Side 

Resources (Not to Scale) 

both in terms of energy (MWh) and capacity (MW) impacts (see Figure 8-1). Energy efficiency impacts from various sources (e.g., status quo energy effi ciency programs, 

new programs proposed for implementation, and other 

energy efficiency impacts such as codes and standards) are 

each shown as separate components of the load forecast, 

stacked on top of load met with supply-side resources. 

Once this has been accomplished, two load-forecast 

defi nitions can be defi ned: 

• 	Total resource requirements represents total expected 

(energy or capacity) demand in the absence of any 

energy effi ciency measures or strategies. It can also 

be thought of as the sum of all supply-side and 

demand-side resources in the utility’s portfolio. 

• 	Net resources for load is the load forecast net of all 

energy effi ciency impacts. It is the amount of load 

that is expected to be met with supply-side resources 

(i.e., the load that actually materializes). 

Utilities should report both of these concepts in their 

resource plans, as well as the relative contribution of 

each tracked energy effi ciency resource. Doing so clearly 

distinguishes energy effi ciency impacts from supply 

resources. The following additional considerations will 

8-2 Guide to Resource Planning with Energy Effi ciency 
ensure that the resource plan document can support 

long-term tracking of energy effi ciency program contributions toward state, regional, or federal goals, as well 

as their regulatory compliance: 

1. 	Provide information on all demand-side resources 

(energy effi ciency and other demand-side resources) 

included in the resource plan, by type of resource. 

Demand-side management (DSM) savings data 

should be reported separately for energy effi ciency, 

demand response, fuel conversion, load management, and any other resources counted among the 

broader family of DSM. 

2. 	Clearly identify the distinct types of energy effi ciency 

strategies that are included in the resource plan—i.e., 

ratepayer-funded energy effi ciency programs and 

other sources of energy effi ciency such as building 

energy codes and appliance effi ciency standards. 

3. 	Clearly and separately identify the effects of energy 

effi ciency measures to be installed during the resource plan forecast period, as well as the residual 

effects of status quo energy effi ciency measures. 

4. 	Provide both energy savings (MWh or GWh) and 

summer coincident peak demand reductions (MW) 

for energy effi ciency resources. 

5. 	Provide energy effi ciency savings data for all years of 

the resource plan analysis period. 

6. 	Include key metrics describing the relationship 

between energy effi ciency resources and key resource 

issues. Specifi cally, the following are recommended: 

–	 Energy efficiency impacts as a share (percentage) 

of the growth in total resource requirements—this 

provides a basis for evaluating the extent to which 

Table 8-1. Example Summary Table for Long-Term Energy Effi ciency Impacts 

Energy Efficiency Strategy Summary 

Cumulative Impacts of EE Strategies 

Implemented Starting in 2006 

2010 2015 2020 

GWh MW* GWh MW* GWh MW* 

EE Strategy Impacts 

Cumulative EE Strategy Impacts1 4,579 254 11,953 664 22,914 1,273 

Forecast Total Resource Requirements 

(TRR)2 

106,136 5,307 114,339 5,717 123,176 6,159 

EE Strategies as Percent of TRR 4% 5% 10% 12% 19% 21% 

EE Strategies as Percent of TRR Growth 

(since 2006) 

75% 83% 83% 93% 99% 110% 

Impact of EE Strategies on Forecast Load Growth 

Average Annual growth in TRR (Since 2006) 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 

Net Resources for Load (NRL)3 101,558 5,052 102,386 5,053 100,262 4,886 

Average Annual Growth in NRL 0.6% 0.5% 0.3% 0.2% 0.1% -0.1% 

Percentage Reduction in Growth Rate 62% 69% 77% 86% 95% 107% 

Notes: MW is the summer-peak capacity. (1) EE strategy savings include EE programs, EE standards, and building codes; are cumulative since 2006; and 

include losses. (2) Total resource requirements include system losses, but do not include demand reductions from energy effi ciency strategies or reserve 

margins. (3) Net resources for load includes demand reductions from all EE strategies. Reserve margins are not included. 

National Action Plan for Energy Effi ciency 8-3
the utility plans to meet projected load growth 

with energy efficiency resources in a given year or 

over a defined time period. 

–	 Energy efficiency impacts as a share (percentage) 

of total resource requirements—this measures how 

much load is projected to be met with energy 

efficiency in a given year. 

8.2. Resources for Reporting 

Energy Effi ciency Impacts 

Table 8-1 is an example summary table from the LBNL 

spreadsheet forms. It includes both of the above metrics, 

as well as information on load growth with and without 

energy effi ciency, and could be included in a resource 

plan as a high-level summary of state and utility energy 

effi ciency resources. 

Title/Description URL Address 

California Regulatory-Energy Effi ciency Filings: Monthly 

Program Reports. This Web site contains monthly 

program reports on energy effi ciency fi led by Southern California Edison. 

<www.sce.com/AboutSCE/ 

Regulatory/eefi lings/Monthly/ 

MonthlyReports.htm> 

Minnesota Electric and Gas Conservation Improvement Program Biennial Plan for 2005 and 2006. Docket No. 

E, G002/CIP-04. Submitted to the Minnesota Department of Commerce by Xcel Energy. June 1, 2004. 

URL not available. 

New York New York Energy $mart Program Cost-Effectiveness Assessment. This report is a benefi t-cost analysis to assess the cost-effectiveness of 18 individual 

New York Energy $mart public benefi ts programs. 

<www.nyserda.org/Energy_ 

Information/ContractorReports/ 

Cost-Effectiveness_Report_June05. 

pdf> 

Northwest The Fifth Northwest Electric Power and Conservation Plan. This plan is a blueprint for an 

adequate, low-cost, and low-risk energy future. 

Technical appendices include conservation costeffectiveness methodologies. 

<www.nwcouncil.org/energy/ 

powerplan/plan/Default.htm> 

Vermont Efficiency Vermont. 2005 Annual Report. The 

Power of Effi cient Ideas. This summary highlights the 

2005 accomplishments of Effi ciency Vermont. 

<www.effi ciencyvermont.com/stella/ 

fi lelib/2005%20 

SummaryREVISED.pdf> 

8.3 Notes
 

1. 	 Energy Effi ciency in Western Utility Resource Plans: Impacts on 

Regional Resource Assessment and Support for WGA Policies can 

be downloaded at http://eetd.lbl.gov/ea/EMS/rplan-pubs.html. 

8-4 Guide to Resource Planning with Energy Effi ciency 
Evaluation and 9: Measurement 

Program administrators typically procure various types of energy efficiency services from contractors as 

part of managing, implementing, and evaluating their energy efficiency program portfolio. This chapter 

provides an overview of considerations for the program administrator related to the scope of contractor 

responsibilities, methods to stimulate innovative new program concepts and designs, the types of performance risks borne by contractors, and alternative procurement methods. 

High-Level Summary Key Questions for Utilities and 

Regulators 

• The utility is the program administrator in many 

states; however, in some states, it is the state energy agency or a third party. 

• Program administrators typically procure various 

types of energy effi ciency services from contractors (e.g., consultants, vendors, engineering fi rms, 

architects, academic institutions, community-based 

organizations) as part of managing, implementing, 

and evaluating their portfolio of energy effi ciency 

programs. 

• In order to utilize contractors effectively, a program 

administrator should consider issues related to the 

scope of functional responsibilities of contractors, 

methods to stimulate innovative new program concepts and designs, the types of performance risks 

to be borne by contractors, and alternative procurement methods (e.g. competitive solicitations 

involving requests for qualifi cations or requests 

for proposals, or partnership arrangements with 

contractors). 

• Has the energy effi ciency program administrator 

been clearly designated?1 

• What functions are most appropriate for a program 

administrator and/or contractors? (Use this question to guide staffi ng and contracting needs.) 

• Does the approach used by a program administrator in procuring energy effi ciency services contribute to the longer term goal of creating a vibrant, 

private sector energy effi ciency services industry? 

9.1 Procurement of Energy 

Effi ciency Services 

Administrators of ratepayer-funded energy effi ciency 

programs, whether they be utilities or other types of 

entities (e.g., state agencies, private or nonprofi t fi rms), 

must undertake a number of functional activities to effectively administer, manage, and deliver a portfolio of 

energy effi ciency programs. Table 9-1 highlights these 

major functions, including a brief description of the 

types of activities under each function. 

The program administrator may be the utility, the state, 

or a third party; this Guide uses the term “program administrator” to encompass these different options. The 

program administrator is ultimately responsible and accountable for the proper use of ratepayer funds and for 

National Action Plan for Energy Effi ciency 9-1
Table 9-1. Functional Overview of Energy Efficiency Program Management 

and Delivery 

Function Descriptions 

General administration 

and coordination 

• Financial/budget management: develop/maintain fi nancial accounting systems; propose and manage budget for portfolio of programs 

• Contract management: maintain contracts with primary contractors 

• Reporting/information management systems: prepare annual reports, highlight accomplishments, maintain information technology system for reporting, tracking to PUC, advisory committees 

Program development, 

planning, and budgeting 

• Facilitate public planning process 

• Develop program designs: propose general program descriptions and budgets for regulatory approval 

• Program and measure screening: initial screening for cost-effectiveness 

Program administration • Manage and oversee individual programs (e.g., budgets, sub-contractors) 

and management • Provide detailed program design and propose changes based on experience 

and market response 

• Quality assurance: develop QA standards and tracking mechanisms to 

ensure effective program delivery (e.g., assuring and validating contractor 

performance quality) 

• Dispute resolution processes 

Program delivery and 

implementation 

• Program marketing/outreach: market individual programs; mass advertising 

• Provide program delivery services: energy effi ciency audits, technical/design 

assistance, fi nancial assistance/incentives, commissioning, contractor certifi ­

cation and training 

• Participate in and implement regional and/or national market transformation initiatives 

• EM&V of savings: develop EM&V procedures; focus on verifi cation to determine payments to contractors 

• Project development: develop individual energy effi ciency projects at customer facilities 

Market assessment and 

program evaluation 

• Market assessment: characterize specifi c energy effi ciency markets and opportunities 

• Assess program impacts 

• Process evaluation: review program processes and administration for purposes of improving program effectiveness 

9-2 Guide to Resource Planning with Energy Effi ciency 
achieving objectives and goals established by regulators. 

The program administrator must decide the most effective way to procure various types of energy effi ciency 

services, given the core competencies and capabilities of 

the program administrator and contractors and policy 

direction from regulators. For example, the program 

administrator typically takes sole or primary responsibility for general administration/coordination and program 

development, planning, and budgeting functions. For 

some functions and activities (e.g., program administration and management, program delivery and implementation, and market assessment and program evaluation), 

both the program administrator and contractors will be 

involved with some division of assigned roles or responsibility: primary, secondary, or shared. 

In thinking about how to utilize contractors effectively, 

regulators, program administrators and other stakeholders must resolve such issues as: 

• 	The scope of functional responsibilities of contractors 

(e.g., turnkey program design and delivery vs. implementation services only). 

• 	Procurement approaches that can stimulate innovative new program concepts. 

• 	The types of performance risks that should be borne 

by contractors (e.g. pay-for-performance based on 

verifi ed savings). 

• 	Alternative procurement methods (e.g., competitive 

solicitations involving requests for qualifi cations or 

requests for proposals, partnership arrangements 

with contractors). 

The decision to outsource should be balanced against the 

program administrator’s staff development and core competencies. Figure 9-1 provides an overview of these issues. 

In procuring energy effi ciency services, program administrators in a number of states have chosen or been 

directed by their regulators to issue either “broad-based” 

or “targeted” solicitation for program development/ 

design, management and delivery/implementation. In a 

“broad-based” solicitation, the program administrator 

issues a request for proposals with a broad scope in the 

sense that relatively few limits are placed on eligible markets, program areas, or preferred delivery mechanisms.2 

A “targeted” solicitation often focuses on specifi c 

program areas and/or under-served markets (e.g., multifamily buildings, small commercial, residential renovation 

and remodeling).3 Under both options, contractors have 

primary responsibility for design and implementation of 

their proposed program concept. 

The functional scope of these “broad-based” and targeted solicitations is larger than the traditional competitive solicitation for services approach in which the 

program administrator seeks and selects third-party contractors through a competitive procurement to deliver 

a well-specifi ed set of implementation services (e.g., 

energy audits, design assistance, training) for existing 

energy effi ciency programs.4 In some cases, these services may also include aspects of program administration and management (e.g., they may provide detailed 

program design or quality assurance), but usually the 

procurement is limited to various implementation services. Those program administrators that participate in 

regional and/or national market transformation initiatives often develop procurements targeted to “upstream” market players (e.g., lighting manufacturers, 

retailers) that involve procurement and bulk purchase 

of large volumes of high-effi ciency products in order 

to lower retail prices to consumers purchasing at retail 

stores (e.g., bulk purchase of CFLs). 

Energy effi ciency services can also be procured through 

various types of “partnership” arrangements. In this 

option, the program administrator develops a relationship with a third-party “partner” to deliver an element 

of an energy effi ciency program (or an entire program) 

whose design has been well-specifi ed by the program 

administrator.5 These partnering arrangements allow 

the program administrator to form a strategic alliance 

with an organization that is uniquely suited to manage and deliver energy effi ciency programs. Services 

for which partnering arrangements are most common 

include training, education/information, and certifi cation of contractors. 

Another approach to acquiring energy effi ciency 

resources is to use competitive processes to procure 

National Action Plan for Energy Effi ciency 9-3
Figure 9-1. Potential Roles of Third-Party Contractors in Providing Energy 

Efficiency Services and Savings 

Program 

Development 

Program 

Administration 

and Management 

Program 

Delivery and 

Implementation 

Market 

Assessment and 

Program 

Evaluation 

Procurement 

of EE Services 

B

(co

Targeted s

v

r

ol

Competitiv

oad-based solicitation 

ers all market segment

icitation for new prog

e

s) 

ram concepts 

 solicitation 

Partnership 

arrangement 

Competitive 

solicitation 

Procurement 

of EE Savings 

DSM

Standard perfor

 bidding 

mance contract 

energy savings rather than services from contractors, 

most of whom are performance contractors (i.e., ESCOs). The program administrator develops and issues 

an RFP that solicits bids for energy savings projects 

to be developed at customer facilities, and contractors (called “DSM bidders” in this context) propose a 

pay-for-performance incentive (e.g. cents/kWh payments over x years) for verifi able energy savings. The 

program administrator evaluates bids and then selects 

and negotiates long-term contracts with winning DSM 

bidders. This approach is referred to as “DSM bidding,” 

and was implemented by over 40 utilities in the 1990s, 

either as part of an “all-source” or integrated supply 

and demand auction, or “DSM bidding only” if limited 

only to ESCOs and customers offering energy savings 

projects. Based on experience, many utilities concluded 

that it was sub-optimal to procure supply and demand 

resources as part of an “integrated,” all-source RFP 

because poorly designed integrated bidding programs 

resulted in high prices for DSM resources.6 Since the 

late 1990s, those utilities that were mandated by PUCs 

or chose to procure “savings” through competitive 

processes gravitated toward DSM-only bidding procurements. 

In response to some of the limitations and problems with 

DSM bidding programs, program administrators in several states (New Jersey, California, New York, and Texas) 

worked with the ESCO industry to develop another approach to procure energy savings from third-party contractors (or large C/I customers), resulting in the Standard 

Performance Contract (SPC) program. In an SPC program, 

the program administrator posts a price per unit saved 

(e.g. $/kWh, $/therms) with standard program rules, 

contract, and EM&V protocols. Project sponsors (either 

contractors or customers) that meet the eligibility guidelines apply for the pre-specified incentive payments for 

projects under development on a fi rst-come, fi rst-served 

basis. If funds are available, they enter into a standard 

contract with the program administrator and then develop 

the project at a commercial or industrial customer’s facilities. Project sponsors are typically paid for delivered savings 

9-4 Guide to Resource Planning with Energy Effi ciency 
over the contract term, which is typically one to three years 

(Rufo, 1999; Schiller et al., 2000; WECC, 1998). 

In the market assessment and program evaluation area, it 

is quite common for the program administrator to issue 

a request for qualifi cations to pre-qualify a number of 

“independent” evaluation consultants that specialize in 

different aspects of program evaluation. In some states, 

other entities that are not the program administrator 

are responsible for managing and/or overseeing some 

or all of the market assessment and program evaluation 

activities (e.g., Vermont Department of Public Service; the 

California PUC manages impact evaluations). 

9.2 Resources for Procurement of 

Energy Efficiency Services 

Title/Description URL Address 

Role of Third Parties in Energy Effi ciency Programs: A Review of Alternative Approaches 

and Experiences. Goldman, C. (2000). Prepared for 

Connecticut Light and Power, December 2000. 

Financing for Assisted Home Performance with 

Energy Star Request for Proposals. NYSERDA 

(2006). RFQ 925, July 1. 

URL not available. 

<www.nyserda.org/Funding/funding.asp?i=2> 

Request for Proposals for a Vermont Energy 

Effi ciency Utility. Vermont Public Service Board 

(1999). October. 

<www.state.vt.us/psb/orders/document/EEURFPFINAL. 

pdf> 

Energy Efficiency Accomplishments of Texas 

Investor Owned Utilities: Calendar Year 2005. 

Frontier Associates LLC (2006). June 20. 

<www.texaseffi ciency.com/EUMMOT_REPORT_2005_ 

Final_062206.pdf> 

National Action Plan for Energy Effi ciency 9-5
9.3 Notes 4. NYSERDA is an example of an agency that frequently issues 

competitive solicitations for program delivery. For examples, see 

<www.nyserda.org/Funding/funding.asp?i=2>. 

1. This key question is based on the National Action Plan for Energy 

Effi ciency recommendation to “make a strong, long-term commit­ 5. Examples include Pacifi c Gas and Electric’s relationship with the 

ment to implement cost-effective energy effi ciency as a resource” Electric Gas Industries Association, Southern California Edison’s 

and options to consider. and San Diego Gas and Electric’s partnership with the League of 

California Homeowners, and NYSERDA’s relationship with the 

2. Examples include the California Utilities Summer Reliability Initia- Lighting Research Center. 

tive RFP for Cross-Cutting Demand Reduction Projects ($6.8 million statewide in 2000), the Third Party Initiatives program ($8.5 6. High DSM prices resulted from strategic bidding of DSM resources 

million in 1998), and the Southern California Edison Third Party to come in just below the cost of new supply resources. See GoldInitiative ($2.1 million in 2000). man and Kito, 1995. 

3. Examples include SDG&E RFPs issued in 2000 for Residential 

Renovation and Remodeling, Residential New Construction, 

and Local Government Commission, which were each for about 

$300,000–$400,000. 

9-6 Guide to Resource Planning with Energy Effi ciency 
Evaluation, 

Measurement, 10: and Verifi cation 

Evaluation, measurement, and verification (EM&V) is the process of determining the effectiveness and impacts of an energy efficiency program. This chapter provides an overview of EM&V for use in resource planning. The lessons learned from EM&V results provide the information needed to improve impact estimates 

in resource plans prior to implementation, as well as inform future resource plans. For a more detailed discussion of EM&V, see the Action Plan’s Model Energy Efficiency Program Impact Evaluation Guide (National 

Action Plan for Energy Effi ciency, 2007b). 

High-Level Summary Key Questions for Utilities and 

Regulators 

• EM&V is the process of determining and docu­ • Are our EM&V procedures robust? Do we have the 

menting the results, benefi ts, and lessons learned appropriate protocols for EM&V?1 What functions 

from an energy effi ciency program. This informa­ are most appropriate for a program administrator 

tion can be used for planning future programs and/or contractors? (Use this question to guide 

and determining the value and potential of energy staffi ng and contracting needs.) 

effi ciency in an IRP process. This information can • Is responsibility for conducting EM&V clearly as- also be used for retrospectively determining the signed, and is its independence assured? Have we performance (and payments, incentives, and/or ensured that the EM&V analysis and results will be penalties) of contractors and administrators (such transparent and robust? as utilities) that are responsible for implementing 

effi ciency programs. EM&V is an essential part of • Do we have the right level of resources allocated to 

energy effi ciency program design. EM&V? 

• A rough rule of thumb is to spend 2% to 5% of • Are retrospective EM&V results being used to imthe energy effi ciency budget on EM&V activities, prove programs and determine cost-effectiveness in 

though some entities spend outside this range. The the planning phase? 

specifi c funding level is a function of the scope and 

purpose of EM&V and the scale of the effi ciency 

program. It also depends on whether EM&V is 

conducted at the level of the individual utility or 

statewide. 

10.1 Overview
 

EM&V is the process of determining the effectiveness 

and impacts of an energy effi ciency program (i.e., a 

group of individual projects with similar characteristics that are installed in similar applications). The term 

“evaluation” refers to any real time and/or retrospective 

assessment of the performance and implementation of 

a program. “Measurement and verifi cation” is a subset 

of evaluation that includes activities undertaken in the 

calculation of energy and demand savings from individual sites or projects. Such activities include data collection, direct metering, computer modeling, and other 

techniques to verify project-level savings. Entities including utilities, third-party contractors, and private fi rms 

use EM&V to estimate energy effi ciency on an ex post 

National Action Plan for Energy Effi ciency 10-1
basis. The lessons learned from EM&V results provide 

the information needed to improve impact estimates in 

resource plans prior to implementation. 

In contrast to EM&V, which measures the performance 

of program installations, some program impacts are 

evaluated using the “deemed savings approach.” 

Deemed savings are based on stipulated values, which 

come from historical savings values of typical projects. 

As with the EM&V approach, the savings determined 

for a sample of projects is applied to all the projects in 

the program. However, with the use of deemed savings 

there are no, or very limited, measurement activities and 

only the installation and operation of measures is verifi ed. This approach is only valid for projects with fi xed 

operating conditions and well-known, documented 

stipulation values (e.g., energy-effi cient appliances such 

as washing machines, computer equipment and refrigerators, lighting retrofi t projects with well-understood 

operating hours). 

As states and regions turn to energy effi ciency as a planning resource, the establishment of robust, independent, 

and transparent EM&V is critical. A model approach for 

EM&V of energy effi ciency programs is provided in the 

Action Plan’s Model Energy Effi ciency Program Impact 

Evaluation Guide, or EM&V Guide (National Action Plan 

for Energy Effi ciency, 2007b). The objective of the EM&V 

Guide is to provide a framework which jurisdictions and 

organizations can use to defi ne their “institution-specific” or “program-/portfolio-specifi c” evaluation requirements. To this end, the EM&V Guide defi nes a standard 

evaluation planning and implementation process, 

describes several standard approaches that can used 

for calculating savings, defi nes terms, provides advice 

on key evaluation issues, and lists effi ciency evaluation 

resources. While each jurisdiction, or entity, will need 

to defi ne its own policy requirements, the EM&V Guide 

provides a structure for consistent approaches and defi ­

nitions which would, in particular, ease implementation 

of “cross-border” GHG energy effi ciency programs. The 

primary audiences for the EM&V Guide include program 

designers, evaluators, and policy-makers participating in 

the energy planning process. 

EM&V consists of three main types of activities: 

1. 	 Process evaluation: Used to verify whether the 

program was (or is being) correctly implemented, 

and to understand any problems or issues that arose 

(or may arise) in program implementation. Customer feedback and acceptance information can also 

be part of process evaluation. All energy effi ciency 

program categories can have process evaluations. 

2. 	 Impact evaluation: Used to determine the actual 

savings achieved by different programs and specifi c 

measures. Impact evaluation has several functions: 

• 	Evaluating whether a program is achieving its expected impacts (deemed savings). 

• 	Evaluating whether a utility is meeting its benchmarks or goals and paying shareholder incentives 

(if such incentives are in place). 

• 	Verifying that a contractor is performing well, with 

payments sometimes linked to verifi ed savings of a 

program. 

• 	Updating measure defi nitions used to design 


programs.
 

• 	Maintaining public confi dence in programs. 

3. 	 Market effects evaluation: Used to estimate a 

program’s infl uence on encouraging future energy 

effi ciency projects because of changes in the energy 

marketplace. Market effects evaluation can be used 

for all categories of programs, but it is primarily associated with market transformation programs that 

indirectly achieve impacts. 

Broadly speaking, the methodologies for measuring and 

verifying energy effi ciency projects at individual sites 

have been increasingly formalized over time through 

the development of detailed evaluation protocols. For 

example, the Federal Energy Management Program 

and ASHRAE have separately developed guidelines for 

evaluating energy and demand savings from energy 

effi ciency projects. Similarly, the Effi ciency Valuation 

Organization (EVO) recently updated their International 

10-2 Guide to Resource Planning with Energy Effi ciency 
Performance Measurement and Verifi cation Protocol 

(IPMVP), which is widely used for evaluating third-party 

ESCO projects.2 

At the program level, California utilities follow a detailed 

series of EM&V protocols offi cially adopted by CPUC.3 

Other states and regions investing in energy effi ciency 

have developed technical reference manuals describing 

how entities operating in their jurisdictions should evaluate savings from rate payer–funded programs. These 

state and regional manuals adopt many of the approaches previously established in project-level guidelines, but 

are increasingly being used to evaluate the overall portfolio of utility energy effi ciency programs.4 

10.2 EM&V Strategies 

A rough rule of thumb for spending on EM&V is 2% 

to 5% of total energy effi ciency program expenditures, 

although some entities and jurisdictions spend more 

than this. California is planning to allocate approximately 

$110 million to evaluate approximately 200 programs 

in the 2006–2008 cycle, out of a total $2 billion spent 

on utility energy effi ciency programs. Other jurisdictions 

spend a smaller fraction. For example, NYSERDA spends 

approximately 2%, choosing to allocate more of the 

energy effi ciency money on programs and less on EM&V. 

To minimize EM&V costs and focus on running programs, 

it is important to develop an EM&V strategy prior to 

program implementation. The key to cost-effective EM&V 

is focusing evaluation efforts and resources on the largest 

drivers of overall impacts in the effi ciency portfolio. 

Among EM&V approaches, the simplest technique is a 

commissioning process to verify that installations have 

been carried out properly in a site visit.5 Once the measure is verifi ed it may be appropriate to apply a “deemed 

savings” value for energy savings. At the next level, 

inspection can be supplemented by spot metering a 

sample of participants pre- and post-installation. In many 

cases, inspection requires more expensive techniques 

such as direct metering and computer modeling. Full metering and analysis of metering data can be valuable but 

typically adds considerably to the cost of EM&V. 

Where energy effi ciency strategies target whole buildings, the EM&V approach is typically done through 

billing analysis or a computer simulation. Both options 

capture effi ciency savings at the building level from an 

integrated set of measures while accounting for the 

“interactive effects” between measures. An example 

of a billing analysis measurement approach is ENERGY 

STAR’s Portfolio Manager software. It is an online tool 

that uses built-in regression models to analyze building 

performance over time compared to a baseline rating. 

Portfolio Manager has been used by approximately 

30,000 buildings to date. 

Overall, evaluators recommend that EM&V efforts 

achieve the highest degree of rigor that is consistent with 

the program or project budget and objectives. Experience 

with EM&V suggests that there are diminishing returns 

beyond some level of rigor, and it is best to follow a rule 

of thumb like “10% of the effort to achieve verifi cation within 90%.” Thus, one strategy for doing impact 

assessment is to reduce the propagation of estimation 

errors by verifying the important but uncertain drivers of 

the impact. For example, consider a lighting program in 

which the impact is equal to the number of hours the 

lighting is in operation multiplied by the change in watts 

due to more effi cient lamps. If the hours of operation 

are already well established, one would focus the EM&V 

effort on measuring the change in watts. 

Some common sources of error in developing evaluation impacts include: 

• 	Measurement error (meters are not accurate). 

• 	Non-response bias (systematic difference between 

people who talk to you and people who do not). 

• 	Model specifi cation error (since you cannot directly 

measure energy savings, calculation of savings from 

metering requires a statistical baseline, whose underlying regression model can be inaccurately specifi ed). 

• 	Invalid measures. 

• 	Internal validity (whether the program actually caused 

the savings to occur). 

National Action Plan for Energy Effi ciency 10-3
• 	Self-selection bias (systematic difference between 

participants and non-participants). 

10.3 Estimating the Net-to-Gross 

Ratio 

A key requirement for program-level EM&V is estimating the NTGR. The NTGR accounts for only those energy 

effi ciency gains that are attributed to, and the direct 

result of, the energy effi ciency program in question. It 

gives evaluators an estimate of savings that would have 

occurred even without program incentives. Establishing 

the NTGR correctly is critical to understanding overall program success and identifying ways to improve 

program performance. If the program is not achieving 

cost-effective impacts, money spent on the program 

can be re-allocated for other activities. Calculating the 

NTGR is facilitated by fi rst having an understanding of 

gross energy savings and net energy impacts (descriptions modifi ed from IEA, 2005): 

• 	Estimation of gross energy savings (more generally called impacts). “Gross energy impacts” refers 

to the change in energy consumption and/or demand 

that results directly from program-related actions 

taken by energy consumers that are exposed to the 

program. Estimates of gross energy impacts always 

involve a comparison of changes in energy use over 

time among customers who installed measures and 

some baseline level of usage. 

• 	Estimation of net energy impacts. Net energy 

impacts refer to the percentage of the gross energy 

impact that is attributable to the program. Estimating 

net energy impacts primarily involves the application 

of free ridership and/or spillover considerations. “Free 

ridership” refers to the portion of energy savings 

that participants would have achieved in the absence 

of the program through their own initiatives and 

expenditures. “Spillover” refers to the adoption of 

measures by (1) non-participants and (2) participants 

who did not claim fi nancial or technical assistance for 

additional installations of measures supported by the 

program. Other considerations that can be evaluated 

include the “rebound” effect, transmission and distribution losses (for grid-connected electricity projects) 

and other broader issues such as energy prices and 

economic conditions that affect production levels. 

It is important to note that gross energy savings can 

be determined and reported on a project-by-project 

or program-wide basis, whereas net savings (though 

they can also be determined on a project-by-project 

or program-wide basis) are almost always reported on 

a program-wide basis. This program-wide reporting is 

done in terms of an NTGR. For example, an NTGR of 

90% would indicate that, on average, 90% of the indicated gross savings could actually be attributed to the 

infl uences of the program. 

There are three main techniques for developing NTGRs6: 

• 	“Self-reporting” is an approach in which participants 

are asked whether or not they would have carried 

out the program anyway. Past program evaluations 

have shown that self-reporting, while simple, gives a 

low estimate of NTGR. In other words, participants 

report that they would have performed the measures 

more than they actually would have in real life. This 

bias has resulted in post-survey adjustment of some 

programs in California of about 10%. 

• 	Discrete choice analysis, which focuses on the determinants of consumer behavior, as a way to distinguish customers into three groups: (1) those who 

would not participate in the program, (2) those who 

would install the measure without the program, and 

(3) those who would install the measure because of 

the program. The customers in group 2 are “free 

riders,” and should be not counted as the program’s 

effect on participation. 

• 	Analysis of the pre- and post-measure bills of participants who would install the measure because of the 

program provides the net savings directly. 

If NTGRs are a way to capture free riders, market spillover 

captures the opposite effect (sometimes called the “free 

driver effect”). This refers to consumers who adopt effi ciency measures themselves because they are infl uenced 

by an effi ciency program, but without being participants 

10-4 Guide to Resource Planning with Energy Effi ciency 
in the program. In making adjustments to gross impacts, 

both NTGRs and market spillover should be included. 

10.4 Isolating Program Effects 

An important issue in EM&V is isolating the effects for a 

specific program so that not all programs take credit for 

the same savings. For example, an education and outreach 

program designed to teach retailers about energy-effi cient 

lighting might count the same benefits as the rebates for 

efficient lighting. For planning purposes, the best solution 

is often to focus attention on the combined impact, thus 

avoiding double counting. 

10.5 Resources on EM&V 

Title/Description URL Address 

Applications Team: Energy-Efficient Design Applications. This site provides numerous resources, ranging from 

implementation guidelines to checklists and other resources, 

to help organizations implement an EM&V program. 

http://ateam.lbl.gov/mv/ 

ASHRAE Guideline 14-2002. Measurement of Energy and 

Demand Savings. American Society of Heating, Refrigerating and Air Conditioning Engineers. June 2002. This guidance describes how to reliably measure energy savings of commercial equipment, using measured pre- and post-retrofi t data. 

<www.ashrae.org/pressroom/detail/13615> 

California’s 2003 Non-Residential Standard Performance 

Contract Program EM&V Procedures Manual. This manual 

provides general guidelines for preparing an EM&V plan, 

choosing an EM&V option and method, defi ning and adjusting baselines, and collecting and submitting EM&V data. 

<www.pge.com/docs/pdfs/biz/rebates/spc_ 

contracts/2000_on_peak_incentive/III-m&v. 

pdf> 

The California Evaluation Framework. Prepared for the 

California Public Utilities Commission and the Project Advisory Group, June 2004. 

<www.cee1.org/eval/CEF.pdf> 

California Measurement Advisory Council Web Site. 

California’s statewide CALMAC evaluation clearinghouse contains resources for deemed savings and project-specifi c EM&V 

techniques. Large searchable database of EM&V results for 

California. 

<www.calmac.org> 

<www.calmac.org/search.asp> 

The CEE Market Assessment and Program Evaluation 

(MAPE) Clearinghouse. This is a fully searchable Web-based 

database that contains more than 300 evaluation reports, 

market characterization studies, and market assessments. 

<www.cee1.org/eval/clearinghouse.php3> 

National Action Plan for Energy Effi ciency 10-5
Title/Description URL Address 

Creating an Energy Efficiency and Renewable Energy 

Set-Aside in the NOX Budget Trading Program: Measuring 

and Verifying Electricity Savings. This forthcoming EPA report 

describes key EM&V resources. 

Contact EPA; <www.epa.gov/ 

cleanenergy> 

EE/RE Measurement and Verification and Emissions Quantifi ca­ <http://epa.gov/cleanenergy/pdf/ 

tion: General Considerations. State Technical Forum on EE/RE: Call keystone/Overview_M_and_V_Dec_ 

#3—December 16, 2004. This is a PowerPoint presentation comparing 16.pdf> 

EM&V with emissions quantifi cation procedures. 

Evaluation, Measurement and Verifi cation Workshop. CPUC held 

several workshops on EM&V. The primary purpose of these workshops 

was to discuss the performance basis, metrics, and protocols for evaluating and measuring energy effi ciency programs, including incentive, 

training, education, marketing, and outreach programs. 

<www.cpuc.ca.gov/static/energy/electric/energy+effi ciency/ 

ee+policy/22b370bc-7b20-4360-aab0­

093245613a12.htm> 

The final decision can be found at: 

<www.cpuc.ca.gov/PUBLISHED/FINAL_ 

DECISION/45783.htm> 

California Energy Efficiency Evaluation Protocols: Technical, 

Methodological, and Reporting Requirements for Evaluation 

Professionals. Detailed description of CPUC’s adopted EM&V methods. 

<www.calmac.org/events/ 

EvaluatorsProtocols_Final_Adopted 

viaRuling_06-19-2006.pdf> 

Federal Energy Management Program EM&V Resources. <www1.eere.energy.gov/femp/ 

fi nancing/superespcs_mvresources. 

html> 

Highly Cost-Effective Savings—Appliance Effi ciency Standards 

and Utility Programs. Mahone, D. (2005). Heschong Mahone 

Group, Inc. This is a presentation made at the 2005 IEPEC Program 

Evaluation conference. 

<http://iepec.org/2005Sessions.pdf> 

International Energy Program Evaluation Conference Abstracts. This Web site provides abstracts of peer-reviewed evaluation 

research from past conferences. 

International Performance Measurement and Verifi cation Protocol Web Site. IPMVP Inc. is a nonprofi t organization that develops 

products and services to aid in the EM&V of energy and water savings resulting from energy/water effi ciency projects—both retrofi ts 

and new construction. The site contains the IPMVP, a series of documents for use in developing an EM&V strategy, monitoring indoor 

environmental quality, and quantifying emission reductions. 

<http://iepec.org/2005Sessions.pdf> 

<www.evo-world.org/> 

10-6 Guide to Resource Planning with Energy Effi ciency 
 

Title/Description URL Address 

New York State Energy Research and Development 

Authority (NYSERDA) Standard Performance Contracting Program Measurement and Verifi cation 

Guideline, 2003. This Web site presents NYSERDA’s New 

York Energy $mart program application and guidelines 

for contractors for performance-based incentives to implement cost-effective electrical effi ciency improvements 

or summer demand reduction for eligible customers. 

<www.nyserda.org/funding/855PON.html> 

The Need for and Approaches to Developing Common Protocols to Measure, Verify and Report Energy 

Efficiency Savings in the Northeast. Northeast Energy 

Efficiency Partnerships’ report on EM&V development in 

New England. 

Oncor Commercial & Industrial Standard Offer 

Program 2003. Measurement and Verifi cation Guidelines. These EM&V guidelines include retrofit and new 

construction and default savings values for lighting, motors, and air conditioning equipment. 

<www.neep.org/fi les/Protocols_report.pdf> 

Standardized Methods for Free-Ridership and Spill- Contact PA Consulting at: <www.paconsulting. 

over Evaluation—Task 5 Final Report. PA Knowledge com> 

Limited (2003). Sponsored by National Grid, NSTAR Electric, Northeast Utilities, Unitil, and Cape Light Compact. 

This report is used by Massachusetts utilities to estimate 

free ridership and spillover effects. 

Technical Reference User Manual (TRM) No. 4-19. 

Measure Savings Algorithms and Cost Assumptions Through Portfolio 19. Effi ciency Vermont provides a set of deemed-savings methods in this manual. 

<www.effi ciencyvermont.org> or Contact Effi ciency 

Vermont at 1-888-921-5990 

Measurement and Validation Guidelines. Texas Public 

Utilities Commission (2005). This report, conducted as 

part of the Texas PUC Energy Effi ciency Implementation 

project #30331, includes detailed information about the 

EM&V requirements of the Commercial and Industrial 

Standard Offer Program, as well as guidance for project 

sponsors on how to prepare and execute an EM&V plan. 

<www.puc.state.tx.us/ electric/ 

projects/30331/052505/ 

m%26v%5Fguide%5F052505.pdf> 

Evaluating Energy Efficiency Policy Measures and 

DSM Programmes. IEA (2005). Prepared by Harry Vreuls. 

<http://dsm.iea.org> 

EERE Program Analysis and Evaluation Management 

Guide. U.S. Department of Energy Office of Energy Efficiency and Renewable Energy [U.S. DOE EERE] (2003). 

<www1.eere.energy.gov/ba/pdfs/pm_guide_ 

chapter_7.pdf> 

National Action Plan for Energy Effi ciency 10-7
Table 10-1. EM&V Resources 

Report Section Includes Purpose in EM&V 

EM&V Guidelines • IPMVPs

• FEMP

• ASHRAE 14-2002

Provide EM&V standards based on accepted, proven 

strategies. 

Utility & State 

Program EM&V 

Guidelines, Including Lighting 

Wattage Tables 

• California SPC 

• NYSERDA

• State of Hawaii

• State of Texas Utility 

Programs 

• Texas Loan Star Program 

Provide EM&V standards based on accepted, proven strategies, which may be simplifi ed and specifi ed for certain 

applications. 

Case Studies • California SPC Program 

• FEMP

• NYSERDA

• Rebuild America

Example applications of EM&V strategies. 

Training Opportunities • Building energy simulation software 

• System performance

simulation software 

• Utility cost management software 

Upcoming training classes and tools in topics related to 

EM&V. 

Software Tools • Tools for data acquisition and management 

• Sources for guidance 

on tool selection 

Available tools that can be used to: model building and 

systems to estimate savings; track utility costs to verify 

savings. 

Hardware Tools • Tools for data acquisition and management 

• Sources for guidance 

on tool selection 

Many data logging and measurement equipment are 

available to measure and record operating parameters. 

Other Resources • Commissioning and

retro-commissioning 

resources 

• Other resources 

Other resources that could be utilized when preparing for 

and implementing the EM&V of energy savings. 

Source: Federal Energy Management Program, 2005. 

10-8 Guide to Resource Planning with Energy Effi ciency 
10.6 Notes
 

1. 	 This key question is based on the National Action Plan for 

Energy Effi ciency recommendation to “make a strong, long-term 

commitment to implement cost-effective energy effi ciency as a 

resource” and options to consider. 

2. 	 The EVO Web site can be found at <www.evo-world.org>. 

3. 	 The California EM&V protocols can be found at <www. 

calmac.org/events/EvaluatorsProtocols_Final_AdoptedviaRuling_06-19-2006.pdf>. 

4. 	 A special case for EM&V is developing in New England. ISO-NE 

will be managing a capacity market, and the ISO has determined 

that energy effi ciency will be a biddable resource in this market. 

Stakeholders are now writing rules governing EM&V that will 

meet the ISO’s standards for reliability and markets, while also 

being practical for prospective bidders, such as energy effi ciency 

program administrators and energy service companies. The fi rst 

bid will occur later in 2007. 

5. 	 Commissioning is discussed at http://epb1.lbl.gov/commissioning/ 

index.html for residential buildings and at http://imds.lbl.gov/ for 

commercial buildings. 

6. 	 For additional discussion of net-to-gross ratios, see the Action 

Plan’s Model Energy Effi ciency Program Impact Evaluation Guide 

(National Action Plan for Energy Effi ciency, 2007b). 

National Action Plan for Energy Effi ciency 10-9

11: Best Practices
 

This chapter summarizes the best practices for integrating energy efficiency into the utility planning process.
 

These best practices center on increased coordination between different energy efficiency planning functions.
 

High-Level Summary Key Questions for Utilities and 

Regulators 

• Coordination between different energy effi ciency 

planning functions can improve the accuracy and 

confi dence of energy effi ciency projections. Areas 

to improve coordination include: 

− Potential studies and utility energy effi ciency 

resource plans should be coordinated or, at a 

minimum, there should be an understanding 

of differences. 

− Supply-side resource investment decisions 

should made in coordination with forecasted 

energy effi ciency impacts. 

− EM&V results should be used to adjust expected future energy effi ciency measure and 

program impacts, with improved assumptions 

on program participation, NTGR, expected 

useful life and other factors. 

• Is each energy effi ciency function coordinated with 

other energy effi ciency planning processes to take 

advantage of available information? 

• Are EM&V results being used to improve program 

designs and accuracy of savings forecasts? 

• Are expected peak load savings incorporated into 

estimates of avoided capacity costs? 

11.1 Overview 


As energy effi ciency becomes integrated in resource 

planning, there are a number of areas where coordination of different activities can improve the accuracy of the 

energy effi ciency forecast and overall effectiveness of energy effi ciency in resource planning. Improved coordination can also increase the confi dence of energy effi ciency 

administrators, supply-side planners, and policy-makers 

that the projected impact of energy effi ciency contained 

in the resource plans will be achieved. 

The three main areas where coordination can improve 

are shown with arrows between different functions of 

the resource plan in Figure 11-1: 

1. 	Coordination between the development of the 

potential studies and the development of the actual 

energy effi ciency programs and portfolios. 

2. 	Linking the forecasted peak load reductions to account for deferral in supply-side requirements when 

developing avoided costs. 

National Action Plan for Energy Effi ciency 11-1
Figure 11-1. Areas to Increase Coordination to Improve Energy Effi ciency in 

Resource Planning 

1

2

3

Potential Studies 

(Chapter 2) 

Portfolio Development and 

Reporting (Chapters 3 to 8) 

Procurement, Measurement, and 

Verification (Chapters 9 and 10) 

Potential 

Studies 

Chapter 2 Chapter 3 Chapter 4 

Chapter 5 

Chapter 6 

Chapter 7 

Chapter 8 

Chapter 9 

Chapter 10 

Development 

of 

Avoided Costs 

Development 

of EE 

Measures 

Procurement 

of EE 

Services 

Determining 

CostEffectiveness Evaluation, 

Measurement, and 

Verification 

Development 

of EE 

Programs and 

Portfolios 

Estimating EE 

Impacts for 

Resource 

Planning 

Reporting EE 

Impacts for 

Resource 

Planning 

Best Practices 

(Chapter 11) 

Best Practices 

Chapter 11 

3. 	Incorporating results from the EM&V when developing 

measures and estimating penetration and impacts of 

energy efficiency programs and portfolios. 

11.2 Coordinate Potential Studies 

and Actual Energy Effi ciency 

Programs and Portfolios 

The process of developing potential studies can be 

removed from the actual implementation of energy 

effi ciency and the programs that are ultimately offered 

to customers, and vice versa. The Action Plan identifi es 

three types of potential studies; policy-level, planninglevel, and program-design studies (see Chapter 2 of this 

report, as well as the Action Plan’s Guuide for Conducting Energy Effi ciency Potential Studies [National Action 

Plan for Energy Effi ciency, 2007a]). Both policy-level and 

planning-level studies are typically done independently 

of the development of actual programs offered to 

customers. 

While there is value in estimating how much energy effi ciency is possible without many constraints, estimates 

of achievable potential can be improved by incorporating historical results of actual programs. For example, 

evaluating adoption rates and impacts achieved by programs in the fi eld can improve understanding of what 

is actually achievable, and what constraints are in place. 

Since potential studies should be informed by data from 

the fi eld, it is important that these studies be updated 

every few years to refl ect the most current understanding of consumer behavior and program impacts. 

11-2 Guide to Resource Planning with Energy Effi ciency 
At the same time, development of the energy effi ciency 

program actually offered to customers can be done 

without reference to prior policy- and planning-level 

potential studies. Thus, this kind of program development may not exploit the detailed information in these 

studies that evaluate a wide range of energy effi ciency 

options based on a “bottom-up” approach. Therefore, 

the broad scope of policy- and planning-level energy 

effi ciency studies can help bring new ideas to the development of the energy effi ciency program ultimately 

offered to customers. 

11.3 Adjust Capacity Value Based 

on Expected Load Reductions 

Another area where coordination can improve the 

resource planning process is integration of energy effi ciency and supply-side resource planning. Capacity 

savings are not captured unless the supply-side planner 

defers or eliminates an investment, either because energy effi ciency offsets growth or the planner has enough 

confi dence in the projections of energy effi ciency to 

delay an investment. At the same time, the energy effi ­

ciency planners may under-invest in energy effi ciency, if 

they do not know the kW impact required to defer the 

need for new investments. 

One example of integration of demand- and supply-side 

planning is BPA’s non-wires alternative studies. In these 

evaluations, non-wires alternatives including energy 

effi ciency are evaluated for new transmission projects 

to determine whether there is a feasible alternative. 

For example, in the BPA Kangley-Echo Lake Transmission Line non-wires study, transmission planning 

provided energy effi ciency planners with specifi c levels 

of load reductions that were required to keep within 

the system’s established limits (shown in Figure 11-2). 

Figure 11-2. Transmission Alternative Targets, 2004–2013 

800

2004

2005

700 2006

2007

2008

2009 600

2010

2011

2012 500

2013

400

300

200

100

MVA Overload 

0

1 26 51 76 101 126 151

Hours 

Source: Bonneville Power Administration [BPA] 2007. (In references section) 

National Action Plan for Energy Effi ciency 11-3
In 2004, approximately 10 hours were expected to be 

overloaded, with the peak hour expected to exceed 

ratings by approximately 120 MW, and the fi fth highest 

hour to exceed ratings by 60 MW. Therefore, in order 

to provide a reliable alternative, energy effi ciency had 

to provide suffi cient load reduction in these hours. Over 

time, as load in the Seattle/Tacoma area increased, more 

and more reductions were necessary to keep within 

reliability ratings. In this case, BPA moved ahead with 

the transmission line, which was energized in late 2003 

(BPA, 2007). 

11.4 Use EM&V Results in the 

Development of Measures and 

Energy Effi ciency Programs 

A fi nal area where coordination can improve the accuracy of energy effi ciency forecasts is in using the EM&V 

results to update assumptions in two main areas: 

• 	 Specifi c measure assumptions such as the achieved 

energy savings, the expected useful life of the 

measures, and the number of installations that are 

completed properly. Incorporating this information 

from the fi eld makes the forecasts of future energy 

effi ciency savings more accurate, and provides information to improve program delivery. 

• 	 Program-level EM&V results can provide information on 

how to market and target new programs. For example, 

discovery of poor NTGR in a program, which means 

that customers are not delivering much net savings, 

indicates that the program budget would be better 

spent in a different area. This information can be used 

to eliminate this program and allocate the budget to a 

better use when doing the program design. 

11-4 Guide to Resource Planning with Energy Effi ciency 
National Action Plan 

Appendix for Energy Effi ciency A: Leadership Group
 

Co-Chairs 

Marsha Smith 

Commissioner, Idaho Public 

Utilities Commission 

President, National Association of Regulatory Utility 

Commissioners 

James E. Rogers 

Chairman, President, and 

C.E.O.
 

Duke Energy
 

Leadership Group 

Barry Abramson 

Senior Vice President 

Servidyne Systems, LLC 

Tracy Babbidge 

Director, Air Planning 

Connecticut Department of 

Environmental Protection 

Angela S. Beehler 

Director of Energy 

Regulation 

Wal-Mart Stores, Inc. 

Jeff Bladen 

General Manager, Market 

Strategy 

PJM Interconnection 

Sheila Boeckman 

Manager of Business Operations and Development 

Waverly Light and Power 

Bruce Braine 

Vice President, Strategic 

Policy Analysis 

American Electric Power 

Cheryl Buley 

Commissioner 

New York State Public 

Service Commission 

Jeff Burks 

Director of Environmental 

Sustainability 

PNM Resources 

Kateri Callahan 

President 

Alliance to Save Energy 

Jorge Carrasco 

Superintendent 

Seattle City Light 

Lonnie Carter 

President and C.E.O. 

Santee Cooper 

Gary Connett 

Manager of Resource Planning and Member Services 

Great River Energy 

Larry Downes 

Chairman and C.E.O. 

New Jersey Natural Gas 

(New Jersey Resources 

Corporation) 

Roger Duncan 

Deputy General Manager, 

Distributed Energy Services 

Austin Energy 

Angelo Esposito 

Senior Vice President, Energy Services and Technology 

New York Power Authority 

Jeanne Fox 

President 

New Jersey Board of Public 

Utilities 

Anne George 

Commissioner 

Connecticut Department 

of Public Utility Control 

Dian Grueneich 

Commissioner 

California Public Utilities 

Commission 

Blair Hamilton 

Policy Director 

Vermont Energy Investment Corporation 

Leonard Haynes 

Executive Vice President, 

Supply Technologies, 

Renewables, and Demand 

Side Planning 

Southern Company 

Mary Healey 

Consumer Counsel for the 

State of Connecticut 

Connecticut Consumer 

Counsel 

Joe Hoagland 

Vice President, Energy 

Effi ciency and Demand 

Response 

Tennessee Valley Authority 

Sandy Hochstetter 

Vice President, Strategic 

Affairs 

Arkansas Electric 

Cooperative Corporation 

Helen Howes 

Vice President, Environment, Health and Safety 

Exelon 

Bruce Johnson 

Director, Energy 

Management 

Keyspan 

Mary Kenkel 

Consultant, Alliance One 

Duke Energy 

Ruth Kiselewich 

Director, Conservation 

Programs 

Baltimore Gas and Electric 

Rick Leuthauser 

Manager of Energy 

Effi ciency 

MidAmerican Energy 

Company 

Harris McDowell 

Senator 

Delaware General Assembly 

Mark McGahey 

Manager 

Tristate Generation 

and Transmission 

Association, Inc. 

Ed Melendreras 

Vice President, Sales and 

Marketing 

Entergy Corporation 

Janine Migden-Ostrander 

Consumers’ Counsel 

Offi ce of the Ohio 

Consumers’ Counsel 

Michael Moehn 

Vice President, Corporate 

Planning 

Ameren Services 

National Action Plan for Energy Effi ciency Appendix A-1 
Fred Moore 

Director Manufacturing & 

Technology, Energy 

The Dow Chemical 

Company 

Richard Morgan 

Commissioner 

District of Columbia Public 

Service Commission 

Brock Nicholson 

Deputy Director 

Division of Air Quality 

North Carolina Air Offi ce 

Pat Oshie 

Commissioner 

Washington Utilities and 

Transportation Commission 

Douglas Petitt 

Vice President, 

Government Affairs 

Vectren Corporation 

Bill Prindle 

Deputy Director 

American Council for an 

Energy-Effi cient Economy 

Phyllis Reha 

Commissioner 

Minnesota Public Utilities 

Commission 

Roland Risser 

Director, Customer Energy 

Effi ciency 

Pacifi c Gas and Electric 

Gene Rodrigues 

Director, Energy Effi ciency 

Southern California Edison 

Art Rosenfeld 

Commissioner 

California Energy 

Commission 

Gina Rye 

Energy Manager 

Food Lion 

Jan Schori 

General Manager 

Sacramento Municipal 

Utility District 

Ted Schultz 

Vice President, 

Energy Effi ciency 

Duke Energy 

Larry Shirley 

Division Director 

North Carolina Energy 

Offi ce 

Tim Stout 

Vice President, Energy 

Effi ciency 

National Grid 

Deb Sundin 

Director, Business Product 

Marketing 

Xcel Energy 

Paul Suskie 

Chairman 

Arkansas Public Service 

Commission 

Dub Taylor 

Director 

Texas State Energy Conservation Offi ce 

Paul von Paumgartten 

Director, Energy and Environmental Affairs 

Johnson Controls 

Brenna Walraven 

Executive Director, National Property Management 

USAA Realty Company 

Devra Wang 

Director, California Energy 

Program 

Natural Resources Defense 

Council 

J. Mack Wathen 

Vice President, Regulatory 

Affairs 

Pepco Holdings, Inc. 

Mike Weedall 

Vice President, Energy 

Effi ciency 

Bonneville Power 

Administration 

Zac Yanez 

Program Manager 

Puget Sound 

Henry Yoshimura 

Manager, Demand 

Response 

ISO New England Inc. 

Dan Zaweski 

Assistant Vice President 

of Energy Effi ciency and 

Distributed Generation 

Long Island Power Authority 

Observers 

Keith Bissell 

Attorney 

Gas Technology Institute 

Rex Boynton 

President 

North American Technician 

Excellence 

James W. (Jay) Brew 

Counsel 

Steel Manufacturers 

Association 

Roger Cooper 

Executive Vice President, 

Policy and Planning 

American Gas Association 

Dan Delurey 

Executive Director 

Demand Response Coordinating Committee 

Reid Detchon 

Executive Director 

Energy Future Coalition 

Roger Fragua 

Deputy Director 

Council of Energy 

Resource Tribes 

Jeff Genzer 

General Counsel 

National Association of 

State Energy Offi cials 

Donald Gilligan 

President 

National Association of 

Energy Service Companies 

Chuck Gray 

Executive Director 

National Association of 

Regulatory Utility Commissioners 

Steve Hauser 

President 

GridWise Alliance 

William Hederman 

Member, IEEE-USA Energy 

Policy Committee 

Institute of Electrical and 

Electronics Engineers 

Marc Hoffman 

Executive Director 

Consortium for Energy 

Effi ciency 

John Holt 

Senior Manager of 

Generation and Fuel 

National Rural Electric 

Cooperative Association 

Eric Hsieh 

Manager of Government 

Relations 

National Electrical Manufacturers Association 

Lisa Jacobson 

Executive Director 

Business Council for 

Sustainable Energy 

Kate Marks 

Energy Program Manager 

National Conference of 

State Legislatures 

Appendix A-2 Guide to Resource Planning with Energy Effi ciency 
Joseph Mattingly 

Vice President, Secretary 

and General Counsel 

Gas Appliance Manufacturers Association 

Kenneth Mentzer 

President and C.E.O. 

North American Insulation 

Manufacturers Association 

Diane Munns 

Executive Director, Retail 

Energy 

Edison Electric Institute 

Michelle New 

Director, Grants and 

Research 

National Association of 

State Energy Offi cials 

Ellen Petrill 

Director, Public/Private 

Partnerships 

Electric Power Research 

Institute 

Alan Richardson 

President and C.E.O. 

American Public Power 

Association 

Andrew Spahn 

Executive Director 

National Council on 

Electricity Policy 

Rick Tempchin 

Director, Retail Distribution 

Policy 

Edison Electric Institute 

Mark Wolfe 

Executive Director 

Energy Programs 

Consortium 

Facilitators 

U.S. Department of Energy 

U.S. Environmental 

Protection Agency 

National Action Plan for Energy Effi ciency Appendix A-3 

Appendix

B: Glossary

Achievable potential: The result of estimating how 

much market barriers and program uptake limits will 

reduce the economic potential. 

Avoided costs: The forecasted economic “benefi ts” of 

energy savings. These are the costs that would have been 

spent if the energy effi ciency had not been put in place. 

Carbon dioxide equivalent: A unit used to put all 

greenhouse gases on a common footing in terms of 

global warming potential. 

Discount rate: A measure of the time value of money. 

The choice of discount rate can have a large impact on 

the cost-effectiveness results for energy effi ciency. As 

each cost-effectiveness test compares the net present value of costs and benefi ts for a given stakeholder 

perspective, its computation requires a discount rate 

assumption. 

Economic potential: The result of reducing the technical potential by applying cost-effectiveness and program 

eligibility criteria. 

Energy effi ciency: The use of less energy to provide 

the same or an improved level of service to the energy 

consumer in an economically effi cient way. “Energy 

conservation” is a term that has also been used, but it 

has the connotation of doing without in order to save 

energy rather than using less energy to perform the 

same or better function. 

Evaluation, measurement, and verifi cation: The 

process of determining and documenting the results, 

benefi ts, and lessons learned from an energy effi ciency 

program. The term “evaluation” refers to any real time 

and/or retrospective assessment of the performance and 

implementation of a program. “Measurement and verifi cation” is a subset of evaluation that includes activities 

undertaken in the calculation of energy and demand 

savings from individual sites or projects. 

Free driver: A non-participant who has adopted a particular effi ciency measure or practice as a result of the 

evaluated program. 

Free rider: A program participant who would have 

implemented the program measure or practice in the 

absence of the program. 

Impact evaluation: Used to determine the actual savings 

achieved by different programs and specifi c measures. 

Marginal emission rates: The emissions associated with 

the marginal generating unit in each hour of the day. 

Market effects evaluation: Used to estimate a 

program’s infl uence on encouraging future energy 

effi ciency projects because of changes in the energy 

marketplace. All categories of programs can have market effects evaluations; however, these evaluations are 

primarily associated with market transformation programs that indirectly achieve impacts. 

Market transformation: A reduction in market barriers resulting from a market intervention, as evidenced 

by a set of market effects, that lasts after the intervention has been withdrawn, reduced, or changed. 

Measures: Installation of equipment, installation of 

subsystems or systems, or modifi cation of equipment, 

subsystems, systems, or operations on the customer 

side of the meter, in order to improve energy effi ciency. 

Net resources for load: The load forecast net of all energy effi ciency impacts. This is the amount of load that 

is expected to be met with supply-side resources (i.e., 

the load that actually materializes). 

Net-to-gross ratio: A key requirement for program-level 

evaluation, measurement, and verifi cation. This ratio accounts for only those energy effi ciency gains that are attributed to, and the direct result of, the energy effi ciency 

National Action Plan for Energy Effi ciency Appendix B-1 
program in question. It gives evaluators an estimate of 

savings that would have occurred even without program 

incentives. 

Participant cost test: A cost-effectiveness test that 

measures the economic impact to the participating customer of adopting an energy effi ciency measure. 

Planning study: A study of energy effi ciency potential 

used by demand-side planners within utilities to incorporate effi ciency into an integrated resource planning 

process. The objective of a planning study is to identify 

energy effi ciency opportunities that are cost-effective 

alternatives to supply-side resources in generation, 

transmission, or distribution. 

Policy study: A study commissioned by a utility regulator or legislative body that would like more information 

on the benefi ts of establishing a program, or by thirdparty energy effi ciency advocates who want to bring 

energy effi ciency benefi ts to the attention of regulators 

and policy-makers. 

Portfolio: Either (a) a collection of similar programs addressing the same market, technology, or mechanisms or 

(b) the set of all programs conducted by one organization. 

Potential study: A study conducted to assess market 

baselines and energy effi ciency savings potentials for 

different technologies and customer markets. Potential is typically defi ned in terms of technical, economic, 

achievable, and program potential. 

Process evaluation: Used to verify whether the energy 

effi ciency program was (or is being) correctly implemented, and to understand any problems or issues that arose 

(or may arise) in program implementation. All energy effi ciency program categories can have process evaluations. 

Program: A group of projects, with similar characteristics and installed in similar applications. 

Program administrators: Typically procure various types 

of energy effi ciency services from contractors (e.g., consultants, vendors, engineering fi rms, architects, academic 

institutions, community-based organizations), as part of 

managing, implementing, and evaluating their portfolio 

of energy effi ciency programs. Program administrators in 

many states are the utilities; in some states they are state 

energy agencies or third parties. 

Program design potential study: Can be undertaken 

by a utility or third party for the purpose of developing 

specifi c measures for the energy effi ciency portfolio. 

Program potential: The effi ciency savings that can be 

realistically realized from the achievable potential, given 

the budget, staffi ng, and time constraints for the effi ­

ciency program. Program potential establishes the total, 

or gross, savings expected from a program. 

Project: An activity or course of action involving one or 

more energy efficiency measures, at a single facility or site. 

Ratepayer impact measure: A cost-effectiveness test 

that measures the impact on utility operating margin 

and whether rates would have to increase to maintain 

the current levels of margin if a customer installed energy effi cient measures. 

Resource acquisition program: A program designed 

to directly achieve energy and or demand savings, and 

possibly avoided emissions. 

Societal cost test: A cost-effectiveness test that 

measures the net economic benefi t to the utility service territory, state, or region, as measured by the total 

resource cost test, plus indirect benefi ts such as environmental benefi ts. 

Technical potential: An estimate of what energy and 

capacity savings would be achieved if all technically 

feasible effi ciency measures were implemented for all 

customers. The technical potential is adjusted by applying a series of screens of real-world constraints. 

Total resource cost test: A cost-effectiveness test that 

measures the net direct economic impact to the utility 

service territory, state, or region. 

Total resource requirements: Represents total expected (energy or capacity) demand in the absence of any 

energy effi ciency measures or strategies. It can also be 

thought of as the sum of all supply-side and demandside resources in the utility’s portfolio. 

Appendix B-2 Guide to Resource Planning with Energy Effi ciency 
Utility cost test: A cost-effectiveness test that measures the change in the amount the utility must collect 

from the customers every year to meet earnings target, 

e.g. change in revenue requirement. In a number of 

states, this test is referred to as the program administrator’s cost test. In those cases, the defi nition of the 

“utility” is expanded to program administrators (utility 

or third party). 

National Action Plan for Energy Effi ciency Appendix B-3 

Appendix ISO New England’s C: Forward Capacity Market 

This appendix illustrates a new approach to integrating demand resources into the wholesale market as 

a capacity resource comparable to traditional generation resources. In 2007, ISO New England received 

approval to advance this approach in their forward capacity market (FCM). This appendix describes the 

market design features, how the FCM addresses all resource types, measurement and verifi cation for 

demand resources, and the strong initial response from demand resources. 

C.1 Overview
 

ISO New England, New England’s electricity system 

operator and wholesale market administrator, is implementing a forward capacity market (FCM) that will, for 

the fi rst time, permit all demand resources to participate 

in the wholesale capacity market on a comparable basis 

with traditional generation resources. “Demand resources,” as defi ned by ISO New England’s market rules, 

includes energy effi ciency, load management, real-time 

demand response, and distributed generation. Enabling 

demand resources to directly participate in the wholesale capacity market creates a predictable stream of 

revenue for the capacity savings produced by demand 

resources, gives demand resource providers access to 

capital to fi nance projects, and enables the implementation of “all-cost-effective” demand resources. The 

response to this path-breaking development will create 

many “lessons learned” opportunities for using demand 

resources as a capacity resource. 

Developed through industry and regulatory consensus, 

the FCM provides an auction structure—called the forward capacity auction (FCA)—through which capacity 

resources compete to obtain a market-priced capacity 

payment, in exchange for a commitment to be available 

in the years ahead to meet the region’s electricity needs. 

The Federal Energy Regulatory Commission (FERC) approved detailed market rules implementing the FCM in 

a series of Orders issued in April and June 2007. A pioneering element of the FCM is that demand resources 

can qualify as capacity resources along with conventional generation resources and be eligible to receive capacity payments. The time from December 2006 to May 

31, 2010, has been established as a transition period; 

the fi rst FCA will be conducted in February 2008, with 

the fi rst commitment period—the period within which 

capacity must be delivered to the New England electricity system—beginning June 1, 2010. 

C.2 Market Design Features 

The objective of the FCM is to purchase suffi cient capacity for reliable system operation over time. The FCM 

is designed to: 

• 	Procure enough capacity to meet New England’s installed capacity requirement (ICR)—i.e., forecasted demand and reserve requirements—3 years in advance. 

• 	Use a competitive FCA process to select the most 

cost-effective portfolio of generation and demand 

resources to meet the ICR. 

• 	Provide a long-term (up to 5-year) commitment to 

new generation and demand resources to encourage 

new investment. 

An annual FCA would be held to procure capacity 3 

years in advance of delivery.1 This 3-year window gives 

developers enough time to construct/complete auctionclearing projects and to reduce the risk of developing 

new capacity. All capacity providers receive payments 

during the annual commitment period based upon 

a single clearing price set in the FCA. In return, the 

providers commit to providing capacity for the duration of the commitment period by producing power 

(if a generator) or by reducing demand (if a demand 

resource) during specifi c performance hours (typically 

peak load hours and shortage hours—hours in which 

reserves needed for reliable system operation are being 

National Action Plan for Energy Effi ciency	 Appendix C-1 
depleted). The quantity of capacity purchased through 

the auction is the ICR, which consists of the ISO’s 

forecast of peak loads plus adjustments for reserves 

and other factors. Capacity projects that clear the auction, but are not constructed on time or are otherwise 

not available during performance hours, are subject to 

penalties. 

The fi rst commitment period begins June 1, 2010. 

Capacity prices and quantities for the fi rst commitment 

period will be based on the results of the fi rst FCA, 

expected to be held in February 2008. Prior to the 2010 

commitment period, a transition period (December 1, 

2006, through May 31, 2010) has been established to 

compensate capacity resources for meeting demand 

requirements. During the transition period, qualifi ed capacity in New England will receive negotiated payments 

that start at $3.05/kW-month and increase to $4.10/ 

kW-month. 

C.3 Leveling the Playing Field 

Among All Competing Resources 

To ensure that energy effi ciency and other demand resources are effectively integrated into the capacity market, rules were established to provide fair competition 

with generation resources. One way the FCM achieves 

this is by guaranteeing a set market price determined 

under auction. This means that energy effi ciency, load 

management, real-time demand response, and distributed generation resources receive the same price as fossil fuel, nuclear, hydropower, and renewable generation 

resources. The effect is to establish the economic value 

of demand-side initiatives and serve as an incentive for 

project developers. 

Demand resources can participate in the FCM during 

both the transition period and the FCAs. Because demand resources have not historically competed in wholesale markets, ISO New England convened a stakeholder 

group—the Demand Resources Group (DRG)—to discuss 

critical issues and to provide recommendations. The DRG 

consisted of 40 active participants representing: 

• 	State regulatory agencies (utility, environmental, 

energy policy). 

• 	Utility companies (investor-owned and public power). 

• 	Retail suppliers. 

• 	Generators. 

• 	Demand response providers. 

• 	Energy service companies. 

• 	Technology providers. 

• 	Large customers. 

• 	Advocacy groups (consumer, energy effi ciency, 

environmental). 

The DRG addressed: 

• 	The transition period rules for demand resources. 

• 	The treatment and integration of demand resources 

in the FCM. 

• 	The integration of the current ISO New England Load 

Response Program resources into the FCM. 

• 	Input to the ICR process, which sets the capacity 

resource needs for annual FCAs. 

• 	Measurement and verifi cation standards. 

C.4 Measurement and Verifi cation
 

To participate in the FCM (during the transition period 

or FCA), each demand resource project is required 

to demonstrate demand reduction performance during specifi c operating hours in a manner that provides 

electrical capacity to the New England Control Area. 

To demonstrate a demand resource’s demand reduction value, the demand resource project sponsor must 

have a measurement and verifi cation (M&V) plan that 

complies with ISO New England M&V standards. The 

measured and verifi ed electrical energy reductions during performance hours are the basis of FCA payments 

Appendix C-2	 Guide to Resource Planning with Energy Effi ciency 
to demand resource project sponsors participating in 

the FCM. 

To prepare for the fi rst FCA, ISO New England and 

stakeholders from the DRG developed the ISO New 

England Manual for Measurement and Verifi cation of 

Demand Reduction Value from Demand Resources. This 

document established the M&V standards on subjects 

including: 

• Project information and general assumptions. 

• Equipment, measure, and practice detail. 

• M&V approach. 

• Methodology for establishing baseline conditions. 

• Statistical sampling plan. 

• Demand reduction value calculations. 

• Monitoring parameters and variables. 

• Measurement equipment specifi cations. 

• Monitoring frequency and duration. 

• Data validation, retention, and management. 

• Performance reporting. 

• Independence and auditing. 

• M&V supporting documents. 

• Responsible parties. 

The development of common M&V standards applicable 

to all demand resources implemented throughout the 

multi-state New England region is a signifi cant accomplishment, and is one of the fi rst efforts in the country 

in which parties from different states worked together 

to develop a common set of M&V requirements. Formerly, individual states developed state-specifi c M&V 

standards for demand-side management programs 

implemented by state-regulated utility companies 

funded through retail rates. In New England, common 

M&V standards became necessary because of the creation of a multi-state capacity market in which demand 

resources implemented in any New England state were 

eligible to participate. As regional electricity markets 

and environmental policies such as carbon trading continue to develop, the need for common M&V standards 

applicable to all demand resources regardless of location will continue to grow. 

C.5 Strong Initial Response to the 

Forward Capacity Market from 

Demand Resources 

In order to participate in the competitive FCA process, 

capacity resources must fi rst complete a qualifi cation 

process, demonstrating that they can meet their commitment to provide capacity. The fi rst step for a new 

resource is to submit a Show of Interest Application 

(existing resources are automatically entered into the 

auction, unless they specifi cally opt out under certain 

conditions set forth in the FCM rules). From these 

applications, ISO New England staff will evaluate the 

information and analyze the projects to determine if 

upgrades are needed to the power grid to support the 

proposed resources and if they could be completed by 

the start of the commitment period. ISO New England 

will conduct further intensive studies later in the process. For power plant proposals, ISO will conduct studies to ensure that resources can connect to the power 

grid without negatively impacting reliability. For demand 

resource proposals, ISO New England will ensure that 

the applicant’s proposal for reducing electricity use and 

their M&V plan meet ISO New England’s M&V standards. 

As of the February 28, 2007, deadline, ISO New England has received over 250 Show of Interest Applications for new demand resource capacity, representing 

a total of 2,449 MW from resources such as energy 

effi ciency, load management, real-time demand response, and distributed generation. A diverse pool of 

applications was received from municipalities, government agencies, electric utilities, retail customers, and 

competitive energy suppliers. Approximately 80% of 

the new demand resource capacity was proposed by 

non-utility, “merchant” providers such as energy service 

National Action Plan for Energy Effi ciency Appendix C-3 
Figure C-1. Demand Resource Show of Interest
 

Demand Resource Type (Total MW) 

State 

Real-Time 

Demand 

Response 

Real-Time 

Emergency 

Response 

Critical Peak On Peak Seasonal 

Peak Grand Total 

Massachusetts 346 279 286 282 29 1,222 

Connecticutt 143 141 112 61 120 577 

Maine 122 33 27 34 2 217 

Rhode Island 68 74 9 36 4 192 

New 

Hampshire 

24 41 18 47 4 133 

Vermont 17 22 8 61 1 109 

Grand Total 720 590 460 521 159 2,449 

Source: ISO-New England, 2007 

Note: Demand resource type defi nitions: 

a. Real-time demand response resources—designed for measures that can be dispatched (e.g., load management or distributed generation) by the 

ISO as needed. 

b. Real-time emergency generation resources—designed for distributed generation measures whose state air quality permits limit their operation to 

limited “emergency” conditions. 

c. Critical peak demand resources—designed for measures that can be “dispatched” by the project sponsor (e.g., load management or distributed 

generation) as needed. 

d. On-peak demand resources—designed for non-weather-sensitive measures that reduce demand across a fi xed set of on-peak hours, such as 

energy-effi cient commercial lighting. 

e. Seasonal peak demand resources—designed for weather-sensitive measures that reduce load during high-demand conditions, such as energyeffi cient air conditioning. 

companies, equipment vendors, competitive energy the wholesale electricity markets in New England and 

suppliers, and end-use customers, many of which have may serve as a model for the rest of the country. 

limited or no access to government funding for demand 

resource projects. Several of the merchant providers C.6 Notes are planning to greatly expand their operations in New 

England. In order to serve New England with this new 1. During the initial years of FCM implementation, FCAs will be held

demand resource capacity, the interested providers still a little more frequently than once every 12 months and commitneed to qualify to compete in the FCM auction, offer ment periods for each FCA will commence in less than 3 years. 

However, once the process has matured, FCAs will occur once per the needed amount of capacity, be priced at a level year and commitment periods will start 3 years after the FCA. such that they will be selected in the auction, and actually perform as promised to fulfi ll their capacity supply obligation. If demand resources are selected in the 

auction, their contribution to meeting New England’s 

capacity needs will signal an important milestone for 

Appendix C-4 Guide to Resource Planning with Energy Effi ciency 
Appendix

D: References

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Appendix D-2 Guide to Resource Planning with Energy Effi ciency