Would The True Industrial Energy Efficiency Savings Please Stand Up ?

Industrial programs have the potential to provide large energy efficiency savings, but when they don’t deliver as expected, the impact on attainment of utility savings goals can be significant. A recent example surrounds the savings claimed through California’s IOU-sponsored industrial energy efficiency programs for 2006-2008. Though aggregate savings were still substantial, ex-post evaluation estimates of the program savings were significantly lower than the utility-claimed savings. This paper examines how to bridge this gap and improve programclaimed savings. Findings from a detailed analysis of many individual projects indicated that the savings gap was largely due to a number of factors: improper baseline specification, lack of production adjustments, modest program influence on project decisions, and limited information on certain technologies with involved system interactions. The importance of each of these factors is detailed, considering the achieved results as measured in the impact evaluation. The extent to which industry standards and common practices in an industry govern evolving baselines is highlighted, as is the importance of early and effective program influence. Useful life considerations, natural turnover, and the appropriateness of production level adjustments (particularly when enabled by newer industry-standard processes) are explored. The topic of industrial efficiency is especially relevant as utility energy efficiency goals increase and industries focus on reducing energy costs as a way to increase profits in a tough economic environment. Importance of Energy Evaluation in the Industrial Sector The industrial sector accounts for 30% of total annual national energy use (DOE, 2009). Energy use reductions in this sector have been the target of energy savings efforts and program offerings by governments and utilities. The evaluation of any program is important to ascertain the achieved results as compared to the claimed results, and the evaluation of energy programs targeted at the industrial sector is no exception. The diversity of programs across different industries and the variety of projects, along with multiple project drivers, contribute to making the evaluation efforts particularly important and instructive in shaping new programs and approaches as well as in verifying energy savings. The results and findings of the industrial energy evaluations of two IOU sponsored industrial energy efficiency programs in the program years 2006 – 2008 conducted for the CPUC (Itron et al., 2010; Itron et al., 2009) are examined to explain the approaches and address the areas for improvement in industrial energy savings estimation. Separate reports were generated for each contract group; these are publicly available at www.calmac.org. When we consider the program induced energy savings, it is important to realize that there are both gross impact and net impact components. These components lead to gross realization rates, net to gross ratios, and net realization rates combining those factors. The gross impact component of energy savings typically refers to the savings technically possible through the implementation of the measure. These are the savings that an energy end user, or program participant, most commonly associate with energy savings. 1-102 ©2011 ACEEE Summer Study on Energy Efficiency in Industry The net component of energy savings determination involves participant decision making and the likelihood of energy savings measures or actions being implemented in the absence of and without participation in the program. This can be caused by many factors, such as the desire to implement a measure for non-energy reasons (e.g., production changes, material management, quality improvements, labor productivity), corporate energy saving mandates, decisions to implement a technology corporate wide, a ‘green’ marketing campaign, etc. Energy savings can mean different things to different people. What do we mean by the ‘true’ industrial savings? The utility may claim a level of energy savings, the participant may realize a different level of energy savings, and the evaluator may determine yet another level of energy savings. For evaluators, the energy savings is the savings caused by program participation. The participant is not as concerned – or even may not be at all concerned – that the program caused the savings. They are concerned with the savings they realize and the costs they accrue to realize these savings. The use of only program induced savings is an important requirement to evaluate the effectiveness of the programs in causing or accelerating actions. Whenever there are utility, state or federal energy efficiency programs – anytime there is a subsidy or monetized (or nonmonetized) incentive such as a rebate or an audit – and anytime when transaction costs are borne by other parties, such as all ratepayers or all taxpayers, it is important to know the results of the programs. In these evaluations, then, the programs should claim only program induced savings for cost effectiveness and equity calculations.