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Assessing The Multiple Benefits of Clean Energy Full Report
Assessing The Multiple Benefits of Clean Energy Full Report
Multiple Benefits
of Clean Energy
A Resource For States
Denise Mulholland
U.S. Environmental Protection Agency
State and Local Climate and Energy Programs
Tel: (202) 343-9274
Email: mulholland.denise@epa.gov
Preface
State clean energy initiatives can Assessing the Multiple Benefits of Clean Energy: A
Resource for States helps state energy, environmental,
produce significant savings in fuel and economic policy makers identify and quantify
the many benefits of clean energy to support the de-
and electricity costs, as well as other velopment and implementation of cost-effective clean
energy initiatives.
benefits to the electric system, the
This Resource identifies the multiple benefits of clean
environment and public health, and
energy and explains why they should be quantified
the economy. and considered along with costs. It starts by presenting
clear, easy-to-understand background information on
each type of benefit to help non-specialists understand
how the benefits are generated and what can be done
to maximize them. Building on that foundation, the
Resource describes analytic options that states can
explore as they conduct and review analyses of clean
energy initiatives. It provides a framework for assess-
ing multiple benefits, presenting detailed information
on basic and more sophisticated approaches along
with descriptions of tools for quantifying each type of
benefit. It also includes many examples of how states
have used multiple benefits approaches, along with ad-
ditional resources for more information.
Introduction
• ChAPtER onE
DocUmEnt maP
Across the nation, states are considering and imple- introduction
menting a variety of clean energy (CE) policies and • ChAPtER two
programs using energy efficiency, renewable energy, Potential Energy impacts of clean Energy
combined heat and power (CHP) and clean distributed • ChAPtER thREE
generation (DG) to meet energy goals such as provid- Electric System benefits of clean Energy
ing affordable, clean, and reliable energy for their • ChAPtER FouR
citizens. These policies and programs offer multiple air Quality benefits of clean Energy
benefits through their ability to:
• ChAPtER FivE
■■Reduce demand for energy; Economic benefits of clean Energy
Clean energy includes demand- and supply-side resources States implement many policies and programs to advance
that meet energy demand with less pollution than that created clean energy, including:
by conventional, fossil-based generation. Clean energy ■■ “Lead By Example” programs where the state increases
resources include:
the use of clean energy in its own government operations,
Energy efficiency (EE) – refers to using less energy to provide fleets, and facilities;
the same or improved level of service to the energy consumer ■■ Regulatory approaches such as renewable or energy
in an economically efficient way. Energy efficiency measures
efficiency portfolio standards, appliance standards,
include a wide variety of technologies and processes, can be
building codes, interconnection standards; and
implemented across all major energy-consuming sectors, and
may affect all energy sources (e.g., natural gas, electricity, etc). ■■ Funding and incentive programs such as public benefits
funds, tax incentives, grants, and revolving loan funds.
Renewable energy (RE) – energy generated partially or
entirely from non-depleting energy sources for direct end For more information on clean energy polices and programs,
use or electricity generation. Renewable energy definitions go to:
vary by state, but usually include wind, solar, and geothermal ■■ EPA State & Local Climate Web site. www.epa.gov/
energy. Some states also consider low-impact or small hydro,
statelocalclimate/
biomass, biogas, and waste-to-energy to be renewable energy
sources. Renewable energy can be generated on site or at a ■■ Clean Energy-Environment Guide to Action: Policies, Best
central station. Practices, and Action Steps for States (U.S. EPA, 2006). www.
epa.gov/statelocalclimate/resources/action-guide.html
Combined heat and power (CHP) – also known as
cogeneration, CHP is a clean, efficient technology that ■■ State Clean Energy Lead by Example Guide (U.S. EPA, 2009).
improves the conversion efficiency of traditional energy www.epa.gov/statelocalclimate/resources/example.html
systems by using waste heat from electricity generation to
produce thermal energy for heating or cooling in commercial
or industrial facilities. CHP systems typically achieve 60% to
80% efficiencies, which is significantly higher than those of
conventional power plants and separate steam units (http://
■■Presents examples of how states are conducting
www.epa.gov/chp/).
multiple benefits analysis and using it to promote
Clean distributed generation (DG) – refers to small-scale
renewable energy and CHP at the customer or end-use site.
clean energy within their states; and
For more information, visit the U.S. Environmental Protection ■■Offers a wealth of resources, including links to
Agency’s (EPA’s) State & Local Climate Web site (www.epa.gov/ analytical tools, guidance, and studies.
statelocalclimate) and the ENERGY STAR® Web site (http://
www.energystar.gov/).
While clean energy resources are broad in source and
impact, this Resource focuses on guidance for estimat-
ing impacts on the electricity system from energy ef-
ficiency and other clean energy resources that affect the
Assessing the Multiple Benefits of Clean Energy: A power system. This focus is not meant to diminish the
Resource for States provides states with a framework importance of other clean energy resources—including
for evaluating the potential costs and benefits of their energy efficiency that reduces demand for both elec-
clean energy goals, policies, and programs. It shows tricity and fossil fuels, and energy supplies from renew-
state analysts how the prospective costs and benefits ables and more efficient use of fossil fuels—but reflects
are derived, enabling them to conduct and manage the more complex nature of the analysis required to
analyses, review cost and benefit estimates presented to estimate impacts on the electric system.
them, and make recommendations about the clean en-
ergy options the state should explore or the appropriate This chapter provides an introduction to assessing the
evaluation approaches and tools to use. This Resource: multiple benefits of clean energy, including:
■■Describes both simple and more sophisticated ■■A description of the multiple benefits of clean
methods for assessing these benefits; energy that are covered in this Resource, along with
examples of the findings from studies that have
■■Provides guidance on how to choose among estimated the actual and potential benefits of a
methods; variety of state and regional clean energy initiatives
(Section 1.1).
Supply-side initiatives usually change the fuel/generation 1 Patterns and Trends: New York State Energy profiles: 1992-2006. New
mix of energy supply resources. York State Energy Research Development Authority. January 2008. http://
www.nyserda.org/publications/Patterns%20&%20Trends%20Final%20
-%20web.pdf.
2 Demand response measures aim to reduce customer energy demand at times
States have significant experience quantifying the of peak electricity demand to help address system reliability issues; reduce the
actual and potential energy impact of clean energy need to dispatch higher-cost, less-efficient generating units to meet electricity
policies. For example: demand; and delay the need to construct costly new generating or transmission
and distribution capacity. Demand response programs can include dynamic
pricing/tariffs, price-responsive demand bidding, contractually obligated and
voluntary curtailment, and direct load control/cycling (DRAM, 2005).
1.1.3 Environmental and Health 4 In addition to being a major source of criteria air pollutants and green-
house gases, coal-burning power plants are the largest human-caused source
Benefits of mercury emissions to the air in the United States, accounting for over 50%
of all domestic human-caused mercury emissions (http://cfpub.epa.gov/eroe/
Fossil fuel-based electricity generation is a major index.cfm?fuseaction=detail.viewInd&lv=list.listByAlpha&r=188199&subt
source of air pollutants that pose serious risks to public op=341). This Resource, however, does not address methods to assess hazard-
health, such as increased respiratory illness from fine- ous air pollutants, like mercury.
particle pollution and ground-level ozone. Fossil fuel- 5 Improved air quality represents only one of a broad set of environmental
based generation is also a major source of greenhouse benefits that may accompany clean energy development. Other potential
benefits include improved water quality and improved aquatic habitat. This
gases (GHGs), such as CO2, which contribute to global Resource focuses on improved air quality and human health
Fewer studies have quantified the public health ben- ■■Employment. Clean energy initiatives create
efits of clean energy initiatives. Methods to translate temporary, short-term jobs as well as long-term
emissions reductions into changes in air quality and jobs—both directly from the clean energy activi-
associated health benefits can be complicated, and until ties and indirectly via economic multiplier ef-
recently they have not been as accessible to states as fects. Employment effects of clean energy can be
expressed by many different indicators, such as the
full-time equivalent (FTE) number of jobs or job-
6 For more information on the National Ambient Air Quality Standards years created. Because an initiative can generate
(NAAQS), see http://www.epa.gov/ttn/naaqs/.
7 Emission reductions were presented in pounds in the Wisconsin report but 8 Measures that reduce energy demand may also result in lost revenues for
converted to short tons to simplify comparisons in this document. energy suppliers, at least in the short term.
energy to meet ambient air quality standards (for more The Conference of New England Governors and Eastern
information about the TERP, see Case Studies in Chap- Canadian Premiers (NEG-ECP) seeks to cost-effectively
coordinate regional policies that reflect and benefit U.S.
ter 4, Assessing the Air Pollution, Greenhouse Gas, Air
states and Canadian provinces. In 2001, it developed a
Quality, and Health Benefits of Clean Energy Initiatives). comprehensive Climate Change Action Plan with the long-term
goal of reducing GHG emissions in the region by 75–85%. At
States are relying heavily upon clean energy measures the 30th annual conference held in May 2006, the Governors
in their climate change action plans to reduce CO2 and Premiers enacted Policy Resolution 30-2 to promote
energy efficiency and renewable energy in the region. Much
emissions from the electric power sector. Other states
of the resolution was based on a study that quantified the
or regions are using clean energy to advance reductions multiple benefits of existing and expected energy efficiency
under their SO2 and NOx cap and trade programs. For and renewable energy programs in New England.
example, set-asides or carve-outs reserve a portion The study, Electric Energy Efficiency and Renewable Energy In
of the total capped allowances to be distributed to New England: An Assessment of Existing Policies and Prospects
clean energy initiatives. Renewable energy and energy for the Future, estimates that by 2010, the combined effect of
efficiency programs are also being used as offsets in expected energy efficiency and renewable energy deployment
cap and trade programs focused on reducing GHG will provide a wide range of benefits that go beyond direct
energy savings, including:
emissions. For example, the Regional Greenhouse Gas
Initiative (RGGI) has developed an offset program in Energy System Benefits: the report finds significant benefits to
energy security including a stabilizing and reducing influence
which heating oil and natural gas efficiency improve-
on the wholesale price of, and demand for, natural gas;
ments, landfill gas projects, and projects that reduce reduced wholesale electricity prices in the regional market;
sulfur hexafluoride (SF6) can be used as emission re- reduced demand for new facilities in the electric market; and
ductions. Additional renewable energy and energy ef- increased resiliency of the grid.
ficiency programs are expected to qualify in the future. Environmental Benefits: estimated environmental benefits
include savings of 31.6 million tons of CO2 emissions, 22,000
Using Clean Energy to Achieve Energy tons of NOX emissions, and 34,000 tons of SO2 emissions
Planning Goals between 2000 and 2010.
The preceding sections described how states are States can take the following steps when planning and
advancing clean energy policies and programs and conducting an analysis of a clean energy policy, activ-
the importance of assessing the multiple benefits of ity, or program that examines some or all of these clean
these policies and programs. This section provides energy benefits:
an overview of how states conduct multiple benefits
analyses and key issues for states to consider as part of ■■Determine which clean energy goals, policies, activi-
the analyses. ties, and/or programs to evaluate. When estimating
the multiple benefits of their clean energy policies
Figure 1.3.1 illustrates the relationships among the and programs, states can choose to focus on the
multiple benefits of clean energy. As shown in the benefits of a single clean energy activity (e.g., ret-
figure, while energy savings may be a primary goal of rofitting a single state government building) or an
clean energy policies and programs, other benefits also entire program (e.g., the state’s portfolio of energy
accrue from these investments. These benefits are esti- efficiency activities, RPS, or green purchasing
mated based, in part, on the energy savings estimates, program). The clean energy activities selected for
assessment can be identified, for example, based on
the state’s overall energy policy and planning goals,
regulatory or legislative requirements, or findings tionale for conducting a benefits analysis. Issues to
from existing potential studies for energy efficiency consider include:
and/or renewable energy that provide important
information on which activities are most likely to ȇȇWhy is the analysis being conducted? As de-
result in energy savings and other benefits. scribed in Section 1.4, there are many reasons
to analyze the benefits of a state’s clean energy
■■Determine the goals and objectives of the multiple initiatives. For example, states can consider
benefits analysis. It is important to lay out the ra- whether the information will be used primar-
ily to gain support for their initiative; to help
design a clean energy program and select the emission reductions of other building retrofit
specific activities to include in the program, options and use this information to select
provide data for a regulatory purpose (e.g., a the likely candidate for retrofitting. When
SIP or cap and trade program); or to support developing a clean energy plan or assessing a
related environmental, planning, or economic more extensive clean energy initiative, it may
development policy and program decisions. be more appropriate to assess a broad range of
benefits and use this information to help build
ȇȇWhich benefits will be analyzed? States can widespread support for the program.
concentrate on estimating some or all of the
multiple benefits of their clean energy activ- ■■Determine how to conduct the analysis. Multiple
ity or program, depending on the purpose benefits analyses can employ a variety of ap-
and scope of the initiative. This decision will proaches, ranging from basic screening estimates
depend on the audience and their interests, and spreadsheet analyses to more sophisticated
available financial and staff resources, and the modeling approaches. States will consider a variety
type and scope of the clean energy initiative(s) of issues when determining the most appropriate
being assessed. For example, when decid- approach for their needs and circumstances, and
ing whether to conduct an energy efficiency will balance competing factors as necessary—for
retrofit of a single building, states may want example, the scope and rigor of the analysis may
to estimate the energy savings and GHG
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Document map
Amidst rising concerns about energy prices, the avail- Introduction
ability of reliable energy resources, air quality, and cli- • Chapter two
mate change, many states across the country are using potential energy Impacts of clean energy
clean energy policies to help meet their expanding elec- • Chapter three
tricity demand in a clean, low-cost, reliable manner. electric System Benefits of clean energy
1 For more information about which states have implemented these policies,
see: http://www.epa.gov/statelocalclimate/state/tracking/index.html
incentives, grants and rebates for efficiency.2 Through ■■ Select a representative sample of projects.
regulatory, market-based, and voluntary approaches, ■■ Determine the savings of each project in the sample,
these programs are designed to advance the deploy- based on deemed savings values (i.e., claimed savings) or
ment of energy efficient technologies. The outcome measured savings, energy bills, or calibrated computer
simulation.
of efficiency efforts is measured in terms of reduced
end-use consumption or energy savings (in kWhs or ■■ Apply the sample project’s savings to the entire population
(e.g., the clean energy program).
Btus) and peak demand (MW, or maximum Btu/hour),
which reduce the amount of energy demanded from More information about retrospective calculation of energy
generators or delivered from natural gas producers.3 savings from energy efficiency is available in the National Action
Plan for Energy Efficiency (NAPEE), Model Energy Efficiency
Program Impact Evaluation Guide, November 2007 (http://
Renewable energy initiatives include renewable elec- www.epa.gov/cleanenergy/documents/evaluation_guide.pdf)
tricity generation and energy goals; renewable energy and U.S. EPA Lead by Example Guide, June 2009 (http://www.
portfolio standards; public benefit funds for renewable epa.gov/statelocalclimate/resources/example.html).
energy; and revolving loan programs, incentives, and
grants and rebates for renewable energy investments.
Through regulatory, market-based, and voluntary ap-
proaches, these programs are designed to advance the
deployment of renewable energy fuels and technolo- These direct energy supply impact estimates are the
gies. Power produced by renewable energy generators foundation for calculating potential cost savings and
displaces supply from existing or planned fossil-fueled other benefits to the state economy, energy system ben-
electricity generation, sometimes described as “avoid- efits, and environmental and public health benefits.
ed energy.”4
2.2 How Can States Estimate the
2 These and other clean energy activities are described in the EPA Clean
Energy-Environment Guide to Action: Policies, Best Practices, and Action Potential Direct Energy Impacts
Steps for States (U.S. EPA, 2006).
of Clean Energy Policies?
3 As noted in Chapter 1, while clean energy resources include energy ef-
ficiency and energy resources that reduces demand for electricity and fossil There are four primary steps for estimating the poten-
fuels, the focus of this Resource is on those that affect electricity demand and/
or the electric system. tial direct energy impacts from clean energy policies
4
(see Figure 2.2.1). The first step is to establish a BAU
The actual impact of incremental renewable energy production on the
energy system as a whole is complex and depends on factors such as the timing forecast of energy supply and demand. This involves
of production and the baseload requirements of the power grid. These energy taking a look at the historical demand and supply
system impacts are discussed in Chapter 3.
5 Local energy baselines can focus on end-use sectors (i.e., residential, com-
mercial, industrial, and transportation) and allocate the fuel used to generate
Source: 2007 Wisconsin Energy Statistics, Wisconsin Office of Energy electricity across the sectors that consumed the electricity.
Independence, Achieving 25x25, page 6.
Table 2.2.1 Sample Energy Data Sources for Developing Baselines and BAU Forecasts
Natural Other
Electric Gas Fuels
Forecast
Forecast
Forecast
Historic
Historic
Historic
Sources Description
State Sources
State Energy, Utility X X X X X X Most states collect historical and forecast data for both supply and
Commissions, Transportation, demand information. Other agencies may have compiled similar
or other Offices energy information that could be used for this effort.
Utility-Related Sources
Utilities X X X X X X Most utilities collect historical and forecast data. Make sure
documentation is collected as well, so that limitations can be
understood—what’s in and what’s not, for example.
Consumer energy profiles X X X Most utilities conduct audits or EE evaluation studies as part of
(residential, commercial, energy efficiency programs’ regular reporting. Data are customer-
industrial) specific load profiles that can be used to build up total demand.
Public Utility Commissions X X X X X X Most PUCs collect historical and forecast data. Usually are supplied
from utilities and studies. Use to collect supply and demand data.
Independent System X X Supply and total demand information to be used for planning
Operators/ RTOs purposes. Available from the Midwest Independent System
Operator (ISO), ISO-New England, Pennsylvania-New Jersey
Maryland Interconnection, Southwest Power Pool, California ISO,
Electric Reliability Council of Texas, Florida Reliability Coordinating
Council, and New York Independent System Operator.
Natural Other
Electric Gas Fuels
Forecast
Forecast
Forecast
Historic
Historic
Historic
Sources Description
EIA Electric Power Annual X National, some regional and state level capacity and demand,
margin, energy retail sales (MWh), revenue, emissions, short term
plans, etc.
http://www.eia.doe.gov/cneaf/electricity/epa/epa_sprdshts.html
EIA State Energy Profile, State X X X Annual production, consumption, prices, and expenditures by
Energy Data (SEDS) energy source.
http://tonto.eia.doe.gov/state/
http://www.eia.doe.gov/cneaf/electricity/epm/table1_6_a.html
http://www.eia.doe.gov/emeu/states/_seds.html
EIA Electric Sales, Revenue, X Annual data, peak, generation, demand/consumption, revenues,
and Price tables or EIA Annual utility type, and state.
Electric Utility data—EIA-860, http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html
906, 861 data file http://www.eia.doe.gov/cneaf/electricity/page/eia861.html
http://www.eia.doe.gov/cneaf/electricity/page/eia906_920.html
EIA Manufacturing Energy X X X A national sample survey on the stock of U.S. buildings, their
Consumption Survey (MECS); energy-related building characteristics, consumption (by
Commercial (CBECS); appliance) and expenditures.
Residential (RECS) http://www.eia.doe.gov/emeu/mecs/contents.html
http://www.eia.doe.gov/emeu/cbecs/
http://www.eia.doe.gov/emeu/recs/contents.html
than the basic methods, and can capture the complex ■■They want to analyze the effects on energy demand
interactions within the electricity and/or energy and supply of significant changes that have oc-
system. Some states might want to consider a more curred or are expected to occur in economic pat-
sophisticated modeling approach for their demand and terns (e.g., a dramatic decrease in housing starts)
supply forecasts in cases where: or energy costs.
■■They want to better understand the effects of de- Sophisticated approaches are often data-, time-, and
mand growth on their required portfolio of supply labor-intensive; lack transparency; may involve model
resources in the future, or licensing and data fees; and require a significant com-
mitment of staff resources to develop expertise in the
Compilation Easy to gather Driven by different assumptions that may no longer apply; High level, preliminary and
of individual proprietary concerns; possible short horizons; may or may quick analysis.
forecasts by not provide information on construction requirements,
others fuel use, emissions, and costs; gaps in coverage.
Adoption of a Easiest method May not have the long-term outlook. High level, preliminary and
complete forecast quick analysis.
Assumptions may not comport with desired state/
used by others
regional outlook.
May be proprietary.
Nominal Group Consensus Time-consuming and relatively expensive. Adequate budget and
Techniques (NGT) building stakeholder interest.
Linear and/ Quick May not capture impact of significant changes (e.g., plant High level with simple
or Nonlinear retirements). escalation factors from history
Extrapolation of or from other sources.
Baseline
More robust data Possible errors in formulas, inaccurate representation of Knowledge of generation
analysis demand and supply. dispatch by type of plant.
model. Unless the tool is used for broader or multiple forecast; (2) adoption of a pre-existing forecast that
analyses (e.g., statewide energy planning), it may be someone else may have developed for the state; (3)
impractical for the state to build the capacity to run group consensus-building processes to develop as-
these models in-house. However, most models are sup- sumptions used within a forecast; and (4) extrapolation
ported by one or more consultants who have readily of historical rates of demand growth and electricity pro-
available supporting data and who may be retained for duction (or rates of growth from other forecasts) that
these types of specialized studies. are applied to the baseline. Table 2.2.2 summarizes the
advantages and disadvantages of each approach and de-
This section provides information about basic and scribes the most appropriate uses of these approaches.
sophisticated approaches, methods under each ap- Each approach is explained in greater detail below.
proach, data needs, and the respective advantages and
disadvantages of each of the methods. ■■Compilation of individual forecasts by others: Ener-
gy plans from utilities, ISOs, and regulatory agen-
Basic Forecast Methods: Demand and Supply cies often include a demand forecast that reflects
energy savings from energy efficiency programs.
States can use a range of basic methods to project Similarly, a corresponding supply plan is likely to
their BAU energy without using rigorous, complicated include data on existing and projected renewable
analyses and software models. These methods generally energy sources, including combined heat and
produce aggregate information about a state’s energy power plants, if significant. States can aggregate in-
future, perhaps with a larger margin of error than more dividual load forecasts, generation expansion plans,
sophisticated approaches. and energy efficiency programs and renewable en-
ergy evaluations from state agencies, utilities, ISOs,
Basic approaches for forecasting energy demand and local educational institutions, and special interest
supply include: (1) compilation of partial forecasts groups, such as interveners in rate cases. Compil-
(e.g., utility service territory) by others into one state ing forecasts created by different entities can be
6 For information about how utilities integrate energy efficiency into resource
Sophisticated methods involve data- and resource-
planning, see The Guide to Resource Planning with Energy Efficiency: A intensive computer-based models that generate
Resource of the National Action Plan for Energy Efficiency, November 2007. detailed forecasts that may reflect historical trends,
www.epa.gov/cleanenergy/documents/resource_planning.pdf
economic and/or engineering relationships, future
7 In Vermont, a similar approach was used through a public workshop pro- expectations about prices, technologies and technology
cess in which electric industry stakeholders provided their input on the state’s
energy plan. development, operating constraints, and regulatory
Electricity Dispatch
■■ PROSYM™ ■■ Can provide very detailed ■■ Often lacks transparency. ■■ Often used for evaluating:
■■ GE MAPS™ estimates of specific plant ■■ Labor- and time- intensive. ■■ Specific projects in small
and plant-type effects within geographic areas,
■■ PROMOD IV® ■■ Often high labor and
the electric sector.
■■ MIDASa software licensing costs. ■■ Short-term planning (0-5
■■ Provides highly detailed, years), and
■■ Requires establishment of
geographically specific,
specific operational profile of ■■ Regulatory proceedings.
hourly data.
the clean energy resource.
■■ NEMS ■■ Model selects optimal changes ■■ Requires assumptions that ■■ Long-term studies (5-
■■ IPM ® to the resource mix based on have large impact on outputs. 25 years) over large
energy system infrastructure. ■■ May require significant geographical areas. such as:
■■ ENERGY 2020
■■ May capture the complex technical experience. ■■ State Implementation Plans,
■■ LEAP
interactions and feedbacks ■■ Often lacks transparency. ■■ Late-stage resource planning,
■■ Strategist® that occur among demand,
■■ Labor- and time- intensive. ■■ Statewide energy plans, and
■■ Plexos® environmental, fuel, electric
markets. ■■ Often high labor and ■■ Greenhouse gas mitigation
■■ EGEAS
software licensing costs. plans.
■■ AURORAxmp ■■ Provides estimates of emission
reductions from changes to
■■ MARKAL-MACROb
the electricity production and/
■■ Ventyx System Optimizer or capacity mix.
■■ May provide unit-specific
detail (IPM).
a
Ventyx markets the MIDAS solution as a strategic planning tool since it incorporates Monte Carlo capabilities. This tool is included in the
list of electricity dispatch models, as it generally uses a pre-selected set of resource plans and the MIDAS model focuses on electricity
price forecasting and financial analyses (e.g., balance sheet analyses) of each resource plan.
b
MARKAL-MACRO model is represented as multipurpose energy planning model, http://www.etsap.org/Tools/MARKAL.htm.
After choosing the forecasting approach or model type, At this point in the process, it may also be necessary to
the next step is to determine or review assumptions clean the data and/or fill in any missing data gaps. If data
about population, energy, and economic variables, points are missing for particular years, it may be neces-
such as energy prices, productivity, gross state product, sary to interpolate the existing data or use judgment to
and the labor force upon which projections of energy fill in gaps. This will minimize the likelihood of generat-
demand and supply depend. ing results based on calculations that are skewed due to
missing or out-of-range data, producing a forecast that
It is also important to review possible data sources and would then not make sense. Some of the private data
collect the data required for the analysis. The following providers also provide data cleaning services. Practical
types of data are used in estimating energy consump- application of any of these data bases, however, requires
tion and supply baselines and forecasts: due diligence in looking for data outliers, missing values,
■■States can use population data to estimate the and screening for errors in data. It is a rare occurrence
for a user to obtain a fully clean data set, consistent with
amount and types of demand expected in the
their individual assumptions, from any one source.
future and to examine trends. The U.S. Census
Population Estimates Program provides historical
STEP 1.5: Apply Model or Approach
and projected population data (http://www.census.
gov/popest/estimates.php). States can apply the selected model or approach to the
historical baseline energy data based on the assump-
■■A forecast depends upon assumptions about the tions about future population, economic, and energy ex-
economy that the analyst projects into the future. pectations. It is important to revisit the assumptions and
States can examine economic variables as they data that will be required for the specific model require-
relate to energy in order to better understand the ments to assure that they are still valid. As mentioned
historical relationships between energy and the in earlier sections, many state agencies and stakeholders
economy, and to anticipate how these relationships work with utilities or consultants to actually perform
STEP 1.6: Evaluate Forecast Output While the energy implications of any goals should be
checked against existing energy efficiency or renewable
Once generated, it is important to evaluate the forecast
energy potential studies to make sure they are plau-
to ensure that it is reasonable and meets the original
sible, this type of estimate is not focused on estimating
objectives. If the state determines that some or the
what is cost-effective, what the market might adopt,
entire forecast does not seem realistic, it may need to
or when the specific technologies might be adopted; it
revisit assumptions and then re-apply the approach or
only estimates what the goal or target implies.
model to achieve an acceptable demand forecast.
Methods for these estimates can include both basic and
Issues and Considerations
sophisticated approaches, but these high-level estimates
When developing an energy baseline and BAU forecast, will most likely require only the most basic approaches
it is important to consider the following issues. as the focus is simply on quantifying the meaning of
the goal (e.g., a 2 percent reduction in demand per year
■■Typically the data available for a baseline and
implies a savings of x kWh). Basic approaches typically
BAU forecast lag several years. For this reason, start with a baseline forecast as developed under Step 1.
the current and most recent years may be part of This will be the primary determinant of energy savings
the forecast and not the history. It is important, or clean energy supply required. The exact methodol-
therefore, to ensure that the data derived for recent ogy chosen, however, will depend on how the goal or
years reflect the current energy supply and demand target is specified and a host of other factors, such as
as much as possible. whether the energy savings from efficiency are mea-
■■As with all analyses, transparency increases sured from the baseline forecast or from prior years’
sales. Also, the extent to which existing programs do or
credibility. All sources and assumptions require
do not count toward the target may affect the calcula-
documentation.
tions. It is important to read (to the extent they are
■■When documenting an energy forecast, it is available) the details of the goal, policy, or legislation,
important to clearly state what activities will take then think through the implications of these details for
place without any new clean energy initiatives (i.e. the methodology and calculations.
what is “in the baseline”). For example, many state
forecasts assume that some level of energy-efficient Suppose a state is determining the anticipated energy
actions or regulatory changes (e.g., GHG reduction savings or generation needed to achieve a clean energy
requirements) will be implemented over time. It is initiative in a target year (e.g., the target is to build 100
important to avoid double-counting when examin- MW of wind power capacity by 2020). If appropriate
ing future program potential or impacts. financial incentives are in place to encourage construc-
tion of the wind facility, the energy available in the year
after 100 MW of wind facilities are placed in service
2.2.2 STEP 2: Quantify Implications
can be estimated at a very basic level as:
of Targets and Goals
If a state has or is considering a broad clean energy 100 MW * 0.28 capacity factor9 * 8,760 hours/year =
goal, it is helpful to estimate the potential implications 245,280 MWh/year.
of the goal before evaluating specific clean energy
programs and implementation options. For example, The important element here would be to ensure that
the state may need to quantify—in terms of kWhs—the the 28 percent capacity factor is applicable to the
requirements of an energy efficiency goal or target.
Suppose the policy or goal is to have zero growth in en-
9 Capacity factor is defined as the ratio of the electrical energy produced by
ergy demand over the next 10-20 years; it would then
a generating unit for the period of time considered to the electrical energy that
be necessary to estimate how much energy efficiency could have been produced at continuous full power operation during the same
period. Typical capacity factors for wind range from 20 percent to 35 percent.
Table 2.2.4 Example of Estimation of Required EE Savings based on Long Term Savings
Goal or Performance Standard (kWh)
sions data to determine what portion of the state’s ■■ Energy Efficiency Portfolio Standards
emissions targets could be met with a specific percent- ■■ Renewable Portfolio Standards
age EEPS. Similar linkages could be made to economic ■■ Appliance Standards
or other impacts as well.
■■ Building Codes
3. Determine Assumptions and Review Available STEP 3.2: Choose Method to Estimate
Data, Potential Direct Energy Impacts: Energy
Savings and Renewable Energy Generation
4. Apply Model or Approach, and Several tools and methods are available to help states
estimate the potential direct energy impacts of clean
5. Evaluate Output. energy options. States can conduct their own surveys
or studies to estimate the direct energy impacts of clean
Each of the steps is described in greater detail below. energy policies and use sophisticated methods, such as
applying building simulation tools, vintaging models,
STEP 3.1: Define Objectives and Parameters and production costing models. Because new surveys
It is important to define the objectives and parameters and studies tend to be costly and time-consuming,
of the direct energy impacts a state plans to estimate. however, states often use those that have already been
If the objective is to quantify the required energy sav- done by utilities, trade groups, other states, or the
ings from a state’s clean energy initiatives or goals to federal government, and adapt them to reflect the cir-
the state legislature, for example, the parameters of cumstances of the state. It is likely that states will need
the analysis may already be dictated. For example, the to use a combination of both existing and new analy-
legislature has likely specified a due date, a time period ses, since existing data sources and studies must be
to be analyzed, and a reasonable level of rigor, and may supplemented with complete and up-to-date data for
even have required the state to spend a certain amount specific populations and measures that can be difficult
of money on the analysis. Other analyses, such as those to obtain without additional targeted research.
conducted to screen a range of clean energy options
based on their multiple benefits, may be less defined. Estimates typically factor in several considerations,
including:
It is necessary to consider each of the following param- ■■the characteristics of the customer base and the
eters before choosing an analysis method, model, or
existing equipment stock,
dataset(s) to use.
■■the economics of the clean energy options and
■■Time period for the direct energy impacts: Is it a
their alternatives, and
short-term or longer-term projection?
■■the behavior of the market.
■■Timeliness of the estimates: Is this due in a year or
next week?
For example, to understand the generation system im-
■■Level of rigor necessary to analyze policy impacts: Is pact of renewable energy resources, it is important to
this for a screening study or a regulatory analysis understand not only how much renewable energy is re-
that is likely to be heavily scrutinized? quired to meet the policy and therefore is coming into
the grid, but what type of renewable resource will be
available and that resource’s operating characteristics
10 For information to help a state decide if biomass is a viable renewable 11 EPA has developed guidance on conducting an energy efficiency potential
energy option to consider and, if so, the most promising options to pursue, study. See Guide for Conducting an Energy Efficiency Potential Study, A
see EPA’s State Bioenergy Primer http://www.epa.gov/statelocalclimate/ Resource of the National Action Plan for Energy Efficiency, November 2007.
resources/bioenergy-primer.html http://www.epa.gov/RDEE/documents/potential_guide.pdf
Market Assessment and Database developed by Consortium for Energy Efficiency (CEE) that http://www.cee1.org/eval/
Program Evaluation contains energy-efficiency program evaluation reports, potential clearinghouse.php3
(MAPE) Clearinghouse studies, and related documents that are publicly available.
Lawrence Berkeley Technical resource that tests and invents energy-efficient http://www.lbl.gov; http://eetd.
National Laboratory (LBL) technologies and provides publicly available research reports and case lbl.gov/ea/ems/cases/
studies on EE and RE.
Renewable Energy Policy Research papers, primarily on RE. Example reports are “Wind Energy http://www.repp.org/repp/
Project (REPA) For Electric Power” and “Powering the South: A Clean and Affordable
Energy Plan for Southern United States,” which includes EE and RE.
American Council on Consumer resources on appliances, policy, potential study workshops, http://www.aceee.org/
Energy Efficient Economy technical papers.
(ACEEE)
National Renewable Provides data on RE and EE technology, market, benefits, costs, and http://www.nrel.gov/analysis/
Energy Laboratory (NREL) other energy information.
California Database Provides documented estimates of energy and peak demand savings http://www.energy.ca.gov/
of Energy Efficiency values, costs, and effective useful life. In this California Energy deer/
Resources (DEER) Commission and California Public Utilities Commission sponsored
database, data are easy to research and could be used as input into
internally developed spreadsheets on appliances and other EE measures,
which can be adjusted for the circumstances of different states.
Regional Technical Forum Developed by the Northwest Planning Council staff, with input from http://www.nwcouncil.org/
(RTF) deemed savings other members of the regional technical forum, which includes energy/rtf/supportingdata/
database utilities in the four-state region of Oregon, Washington, Idaho, and default.htm
Montana. Both residential and commercial EE measures are included.
Entergy Texas Deemed Entergy, an investor-owned utility (IOU), provides deemed energy http://www.entergy-texas.com/
Savings savings for EE measures, much as the other IOUs in Texas do. It content/Energy_Efficiency/
accounts for the weather zone of the participants. These data could documents/HelperApplication_
be used as input into internally developed spreadsheet regarding HTR_Entergy_2006.xls
appliances and other EE measures for a bottom-up method. The data
may have to be adjusted for a different state.
A number of modeling and analytics tools are avail- ■■Performance data for renewable technologies are
able to help states estimate the potential direct energy available from the National Renewable Energy
impacts of clean energy measures. Table 2.2.6 provides Laboratory (NREL), as well as universities and oth-
examples of some simple analysis tools available when er organizations that promote or conduct research
employing non-integrated modeling approaches to on the applications of renewable energy. For ex-
estimating energy savings from EE and RE initia- ample the Massachusetts Institute of Technology’s
tives. The tools shown in the table are organized by Analysis Group for Regional Energy Alternatives
web-based, spreadsheet, and software tools. Some of and Laboratory For Energy and the Environment
these tools are designed to develop site-level savings conducted a 2004 report, Assessment of Emissions
estimates that can be aggregated up to the state. Reductions from Photovoltaic Power Systems
eCalc™ New /retrofit Web-based calculator that enables users to design and http://ecalc.tamu.edu/
buildings evaluate a wide range of clean energy projects for energy
savings and emissions reduction potential. In addition to
Renewable energy
buildings and renewable energy sources, eCalc calculates
sources (e.g., solar
energy savings for municipal wastewater projects, traffic
heating, solar PV,
lights, and street lighting projects.
wind power)
ENERGY Energy efficiency Series of tools that calculate energy savings and cost http://www.energystar.
STAR® Savings measures savings from ENERGY STAR-qualified equipment. Includes gov/purchasing
Calculators commercial and residential appliances, heating and cooling,
lighting, office products, and other equipment.
ENERGY Buildings Estimates energy and cost savings from installing an ENERGY http://www.roofcalc.com/
STAR Roofing STAR® labeled roof product in a home or building. default.aspx
Comparison
Calculator
ENERGY STAR New buildings Helps planners, architects, and building owners set http://www.energystar.
Target Finder aggressive, realistic energy targets and rate a building gov/targetfinder
design’s estimated energy use. Use the tool to determine:
■■ Energy performance rating (1–100),
■■ Energy reduction percentage (from an average building),
■■ Source and site energy use intensity (kBTU/sf/yr),
■■ Source and site total annual energy use (kBTU), and
■■ Total annual energy cost.
Can use to evaluate potential energy savings of new/planned
buildings by building type for a clean energy policy (e.g., a
building code policy) and apply savings across the population.
ENERGY STAR Existing buildings Online, interactive tool that benchmarks the performance https://www.energystar.
Portfolio of existing commercial buildings on a scale of 1-100 relative gov/benchmark
Portfolio of
Manager to similar buildings. Tracks energy and water consumption
buildings
for building or portfolio of buildings and calculates energy
consumption and average energy intensity.
PVWatts™ Grid-connected A solar technical analysis model available from NREL that http://rredc.nrel.gov/solar/
PV systems produces an estimate of monthly and annual photovoltaic codes_algs/PVWATTS/
production (kWh) and cost savings. Users can select version1/
geographic location and use either default system
parameters or specify parameters for their PV system. Data
can be used to accumulate project specific savings toward
renewable energy policy goals for solar-related technologies.
WindPro Wind turbines A Windows modular-based software suite for designing and EMD International,
planning single wind turbines and wind farms. WindPro: http://www.emd.
Wind farms
dk/WindPRO/Introduction/
RETScreen® Renewable energy Use to evaluate the energy production and savings, costs, http://www.retscreen.net/
Clean Energy and energy emission reductions, financial viability, and risk for various ang/home.php
Project Analysis efficiency projects types of clean energy technologies, including renewable
Software energy, cogeneration, district energy, clean power, heating
and cooling technologies, and energy efficiency measures.
DSMore™ DSM programs Designed to evaluate the costs, benefits, and risks of DSM Integral Analytics:
programs and services. Evaluates thousands of DSM scenarios
http://www.
over a range of weather and market price conditions. While
integralanalytics.com/
requiring detailed input data, the model uses these data to
dsmore.php
produce detailed outputs, including energy savings impacts
associated with the type of fuel that is being saved (gas or
electricity), and provides for expansive scenario analyses.
Software Methods
fChart and PV- Solar PV or solar fChart Software produces both fChart and PV-fChart for http://www.fchart.com/
fChart thermal systems the design of solar thermal and photovoltaic systems, index.shtml
respectively. Both programs provide estimates of
performance and economic evaluation of a specific design
using design methods based on monthly data.
ENERGY-10™ Buildings Small commercial and residential building simulation models. http://www.nrel.gov/
Can conduct a whole-building analysis, evaluating the energy buildings/energy10.html
and cost savings that can be achieved by applying energy-
efficient strategies such as daylighting, passive solar heating,
and high-performance windows and lighting systems.
DOE-2 Buildings A building energy analysis computer program that predicts http://www.doe2.com/
the hourly energy use and energy cost of a building given DOE2/index.html
hourly weather information and a description of the building
and its HVAC equipment and utility rate structure.
In using data from other states or regions, it is impor- Combined with some thoughtful analysis, these data
tant to choose states that have similar climate and cus- can help define the potential energy savings for the
tomer characteristics. Even so, the assumptions about proposed air conditioning measures without incurring
operating characteristics of different clean energy tech- the time and expense of collecting all new data. Mak-
nologies typically need to be adjusted for the specifics ing choices about which data to use and how to make
of the state that is the focus of the study. For example, adjustments to those data involves inherent trade-offs
for energy efficiency measures, adjustments for differ- between the expected accuracy and the level of effort
ences in weather are typically made, along with adjust- expended. For example, using other states’ existing
ments for state-specific population characteristics. studies and applying basic adjustments to account
for different conditions would require less effort than
STEP 3.4: Apply Model or Approach collecting region-specific data and developing savings
models for the local environment, but also would
In this step, states use the assumptions they develop
be expected to yield a lesser degree of accuracy than
and apply the selected model or approach to the clean
would the latter approach. Some analysis of the uncer-
energy initiative to estimate clean energy savings.
tainty surrounding each key variable is recommended
in order to understand the relative accuracy of the
Examples of simple, bottom-up analyses of policy
estimates obtained through these methods.
options are presented below for appliance efficiency
standards, renewable portfolio standards, and lead by
Renewable Portfolio Standard
example initiatives.
In a similar manner, an estimate of the potential
Air Conditioner Efficiency Standards energy savings associated with a renewable portfolio
standard (RPS) can use data from surrounding states
A state that is considering a new efficiency standard for
and/or those that have adopted similar rules regard-
air conditioning could estimate energy savings based on
ing the implementation of their RPS. For example, a
a variety of already-available data. The assessment could
state might look at adoption rates for roof-mounted
use measure-specific energy savings from a deemed
solar photovoltaics in other states that have similar net
savings database from another state (e.g., the California
metering rules for solar systems and have established
Database of Energy Efficiency Resources), and adjust
incentives for installation that reward end-users and
the measure-specific savings to account for the weather
developers in a similar manner financially.15
zones present in the state, especially for weather-
specific measures such as high-SEER air conditioning.
Assumptions regarding the energy production of
These adjustments might require the use of building
the system, financial discount rate, and other factors
simulation models (e.g., eQuest; see Table 2.2.6) to
must be reviewed and projected in order to estimate
get reasonably accurate estimates of energy savings at
the site level. These site-level savings would ideally be
15 If the comparison state’s financial incentives took the form of an upfront
rebate, and a future revenue stream based on RECs is assumed for the state
14 Deemed savings are validated estimates of energy savings associated with being analyzed, then a discounted cash flow analysis would be required to
specific energy efficiency measures that may be used in place of project-specific analyze the net present value (NPV) of each approach to the project owner
measurement and verification. and solar developer in order to compare the costs of the two approaches fairly.
16 When benchmarking facilities in this way, it is important to use bench- 17 Of course, other financing mechanisms for energy efficiency are available,
marks specific to that building type. For example, a hospital has a very including bidding out the services to Energy Service Companies (ESCOs). This
different energy profile than does an office building, so only hospital-specific chapter does not explore financing mechanisms, but focuses on energy savings
benchmarks would be useful for benchmarking a hospital. See ENERGY calculation methods and mentions the budget implications only as a consider-
STAR’s Portfolio Manager at http://www.energystar.gov/benchmark. ation for policy makers.
Commercial Buildings. The process to estimate energy The state assumed that the same amount of electricity
savings begins with estimating the number of buildings savings from the code-compliant construction would
and relative energy savings. The Dodge MarkeTrack be achieved for each year after 2007 through 2013.
database provides construction start data and is used
to gather the square footage of new commercial con- Results
struction in Texas. These data are merged with energy ■■The ESL 2008 annual report on the energy efficien-
savings calculations published by the Pacific Northwest
cy and renewable energy impacts of the TERP, sub-
National Laboratory (PNNL), along with the 1995
mitted to the Texas Commission on Environmental
and 2003 Commercial Building Energy Consumption
Quality in December 2008, describes prospective
database. The PNNL energy savings, which represent
energy savings resulting from implementing the
buildings built to ASHRAE Standard 90.1-1989 versus
International Residential Code (IRC) and the In-
Standard 90.1-1999, are applied to the published square
ternational Energy Conservation Code (IECC) in
feet of new construction.
residential and commercial buildings, respectively,
through 2020. According to the report, the cumu-
After residential and commercial building savings
lative annual energy savings from code-compliant
are estimated, these savings are projected to 2013 by
residential and commercial construction were
incorporating a variety of adjustment factors. These
estimated to be:
factors include:
■■1,440,885 megawatt hours (MWh) of electricity
■■Annual degradation factor: This factor was used
each year from 2001 through 2007, and
to account for an assumed decrease in the perfor-
mance of the measures installed as the equipment ■■approximately 2.9 million MWh by 2013, account-
wears down and degrades. An annual degradation ing for 10 percent of the cumulative total electricity
factor of 5 percent was used for all the programs. savings under all energy efficiency and renewable
This value was taken from a study by Kats et al. energy programs implemented under the TERP
(1996). between 2008 and 2013 (Texas A&M Energy Sys-
■■T&D loss: This factor adjusts the reported savings
tems Laboratory, 2007).
to account for the loss in energy resulting from
ESL divided the actual and projected energy savings
the transmission and distribution of the power
into the different Power Control Authorities and, using
from the electricity producers to the electricity
US EPA’s eGRID emission factors, calculated the cumu-
consumers. For this calculation, the energy savings
lative annual NOx emission reduction values as follows:
reported at the consumer level were increased
by 7 percent to give credit for the actual power ■■1,014 tons-NO /year in 2007, and
x
produced that is lost in the transmission and
distribution system on its way to the customer. In ■■2,047 tons/year by 2013.
the case of electricity generated by wind, it was
assumed there was no net increase or decrease in For More Information
T&D losses, since wind energy is displacing power ■■Energy Efficiency/Renewable Energy Impact in The
produced by conventional power plants. Texas Emissions Reduction Plan (TERP). Volume
■■Initial discount factor: This factor was used to
I—Summary Report: Annual Report to the Texas
Commission on Environmental Quality. Janu-
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08.pdf
Document map
Clean energy programs and policies can help states Introduction
achieve their goal of providing a less polluting, more • Chapter two
reliable and affordable electric system that addresses potential energy Impacts of clean energy
multiple challenges, including:
• Chapter three
electric System Benefits of clean energy
■■Lowering energy costs for customers and utilities
• Chapter Four
alike, particularly during periods of peak electricity
air Quality Benefits of clean energy
demand;1
• Chapter Five
■■Improving the reliability of the electricity system economic Benefits of clean energy
and averting blackouts at a lower cost;
■■Reducing the need for new construction of gener-
ating, transmission, and distribution capacity; and
Chapter three Contents
■■Providing targeted reductions in load (i.e., the
3.1 How clean energy can achieve electric System
amount of electric power or the amount of power Benefits
demanded by consumers at a given time) in grid- 3.2 How States can estimate the electric System
congested areas, such as southwestern Connecticut Benefits of clean energy
and San Francisco, California. 3.3 case Studies
Georgia conducted an assessment of the benefits of achieving Although quantifying electric system benefits can be
energy efficiency improvements in the state and found it could challenging—particularly when analyzing long-term
reduce demand for electricity by 3,339 GWh–12,547 GWh in effects in a complex, interconnected electricity grid—it
2010.
is important to consider these benefits when evaluating
In addition to these energy savings, the analysis showed that the clean energy resources. This chapter presents detailed
improvements could benefit the overall electricity system and:
information about the energy system, specifically elec-
■■ Avoid generation in Georgia of 1,207 GWh–4,749 GWh in tricity benefits of clean energy, to help policy makers
2010, understand how to identify and assess these benefits
■■ Reduce regional wholesale electricity cost by 0.5–3.9 based upon their needs and resources.
percent by 2015, and
■■ Lower peak demand by 1.7–6.1 percent by 2015 and
■■Section 3.1, How Clean Energy Can Achieve Electric
achieve a number of environmental and economic System Benefits, describes the energy system in the
benefits. United States and explains the multiple ways that
clean energy policies and programs can positively
(Jensen and Lounsbury, 2005).
affect the electric system and electricity markets,
thereby benefiting consumers, utilities, and society.
■■Section 3.2, How States Can Estimate the Electric
System Benefits of Clean Energy, presents an over-
of clean energy on the overall electric system, including
view of the methods for estimating the primary
effects on electricity generation, capacity, transmission,
and secondary electric system benefits of different
distribution, power costs, and peak demand.
types of clean energy resources.
State legislatures, energy and environmental agencies, ȇȇSection 3.2.1, How to Estimate the Primary
regulators, utilities, and other stakeholders (e.g., rate- Electric System Benefits of Clean Energy Re-
payer advocates, environmental groups) can quantify sources, describes the specific basic and sophis-
and compare the electric system benefits of clean ticated modeling approaches and associated
energy resources [e.g., energy efficiency, including tools that can be used to quantify a set of typi-
some demand response programs such as load control cally recognized (i.e., “primary”) benefits.
programs, renewable energy, combined heat and
power (CHP), and clean distributed generation (DG)] ȇȇSection 3.2.2, How to Estimate the Second-
to traditional grid electricity. This information can ary Electric System Benefits of Clean Energy
then be used in many planning and decision-making Resources, describes approaches and tools for
contexts, including: estimating other electric system benefits (i.e.,
“secondary” benefits) that are less frequently
■■Developing state energy plans and establishing
assessed and often more difficult to quantify.
clean energy goals;
■■Section 3.3, Case Studies, presents examples of how
■■Conducting resource planning (by PUCs or
two states, California and Massachusetts, are esti-
utilities); mating the electric system benefits of their clean
■■Developing demand-side management (DSM) energy programs.
programs;
■■Conducting electric system planning, including
new resource additions (e.g., power plants), trans-
mission and distribution capacity, and intercon-
nection policies;
these benefits and quantify them, when possible, in gy loss during delivery of electricity to consumers
order to most accurately reflect both the costs and ben- through the T&D system.2
efits of clean energy.
■■Deferred or avoided costs of T&D capacity. Clean
The primary electricity system benefits of clean energy energy resources that are located close to where
include: energy is consumed can delay or avoid the need
to build or upgrade T&D systems or reduce the
■■Avoided costs of electricity generation or wholesale size of needed additions. These savings can occur
electricity purchases. Clean energy policies and over the long run, the short run, or both. Typical
programs can displace electricity generated from components are similar to those for avoided power
fossil fuels (e.g., natural gas, oil, and coal-fired plant capacity.
power plants). Savings typically appear as avoided
fuel costs and reduced cost for purchased power or Examples of secondary benefits include:
transmission service.
■■Avoided ancillary service costs. Clean energy
■■Deferred or avoided costs of power plant capacity. resources that reduce load, that are located close
Clean energy policies and programs can delay or to where energy is consumed, or that can support
avoid the need to build or upgrade power plants smooth operation of the power grid can reduce
or reduce the size of needed additions. Typical some ancillary services requirements. Ancillary
components are the capital investments and annual services are those electric generator functions
fixed costs (e.g., labor, maintenance, taxes, and needed to ensure reliability, as opposed to provid-
insurance) not incurred as a result of clean energy ing power. Examples include operating reserves
initiatives. (e.g., generators that are up and running to take
over if a load-serving generator fails or load spikes)
■■Avoided electric loss in transmission and distribution and voltage support (e.g., generators that are
(T&D). The delivery of electricity results in some running and can tune their output to keep voltage
losses due to the resistance of wires, transformers, stable). Clean energy resources that reduce the
and other equipment. For every unit of energy need for ancillary services save fuel and reduce
consumption that a clean energy resource avoids at
the end-use site, it also avoids the associated ener-
2 It is important to note that clean central-station generation incurs the same
T&D losses as fossil-fueled sources.
Traditional PrimaryBenefits of
Costs Clean Energy Secondary Benefits of Clean Energy Description of Benefit Section
Generation
■■ Fuel ■■ Avoided costs ■■ Reduced risk from investment in ■■ Clean energy policies and 3.2.1a
■■ Variable operation of electricity traditional, centralized resources programs can displace
and maintenance generation or before environmental and climate traditional electric energy
wholesale electricity change policies take shape. generation.
■■ Emissions Allowances
purchases. ■■ Improved fuel and energy security.
■■ Capital and operating ■■ Avoided costs ■■ Clean energy policies and 3.2.1b
costs of upgrades of power plant programs can delay or avoid
■■ Fixed operation and capacity. the need to build or upgrade
maintenance power plants.
■■ New construction to
increase capacity
■■ Capital and operating ■■ Deferred or ■■ Increased reliability and power ■■ Clean energy policies and 3.2.1c
costs of maintenance avoided costs of quality. programs that are located close
■■ Upgrades transmission & to where energy is consumed
distribution (T&D) can delay or avoid the need to
■■ New construction
capacity. build or upgrade T&D systems.
A range of basic and sophisticated methods is available effects. These two approaches are not mutually exclu-
to allow analysts to estimate how the electric system sive, but may be used in a complementary way. Table
will be affected by clean energy measures, including 3.2.1 describes the advantages and disadvantages of
when and where electricity generation may be offset. each method and when they are appropriate to use.
Basic methods typically include spreadsheet-based
analyses or the adaptation of existing studies or infor- Selecting Benefits to Evaluate
mation. Sophisticated methods typically use dynamic
electric system models that (a) predict the response of Some states may not be interested in estimating all
energy generation to actions that influence the level of types of electric system benefits, or states may be
clean energy resources and (b) calculate the resulting considering programs that deliver benefits in only
some areas. It is generally common practice to evaluate
Basic Estimation
Sophisticated Simulation
■■ Robust representation of electric system ■■ Time- and resource-intensive. ■■ When a high degree of precision and
dispatch and, in some cases, capacity ■■ Relatively high cost. analytic rigor is required.
expansion. ■■ When sufficient data resources are
■■ Requires significant input data.
■■ Provides high level of analytic rigor and available.
■■ Complex.
detailed results.
■■ Not transparent in stakeholder process.
■■ May be available from utility resource
planners.
■■ May allow sensitivities to a wide range of
assumptions.
all the primary benefits for clean energy projects or market price effects. Similarly, quantification of
programs. For secondary benefits, however, the need ancillary service benefits can be difficult in areas
for detailed estimation can vary depending on several without regional transmission organizations (RTOs)
factors, including: that routinely report market prices, even if the clean
energy resource has the capability of delivering these
■■The type of clean energy resource being considered, ancillary service benefits. In this case, analysts may
■■Regulatory or system operator study requirements,
decide to devote their limited staff and computing
power to quantifying benefits that are likely to yield
■■Available resources (e.g., computers, staff, and data), the most reliable and meaningful results, and address
and other benefits qualitatively.
■■Whether certain needs or deficiencies have been There are a number of considerations in selecting
identified for the existing electric system. which benefits to estimate. As indicated earlier, prima-
ry electric system benefits tend to be easier to quantify
For example, suppose a state is considering demand and the methods to quantify them tend to be mature.
response resources such as direct load control (i.e., The methods to evaluate the secondary electric system
programs that enable electric providers to reduce the benefits are more limited and can be subject to debate.
demand of consumer sites at peak times, sometimes by
directly curtailing major energy-intensive equipment Tables 3.2.2 and 3.2.3 outline some of the factors that
such as air conditioners and water heaters). For these states can consider when deciding which electric sys-
types of measures, it is increasingly common to con- tem benefits to analyze, including available methods
sider wholesale market price effects because the benefit and examples, advantages, disadvantages, and purpose
to consumers from price reductions during peak hours of analysis. Section 3.2.1, How to Estimate the Primary
can be substantial. On the other hand, if a state energy Electric System Benefits of Clean Energy Resources, and
efficiency policy is expected to produce significant Section 3.2.2, How to Estimate the Secondary Electric
savings only during off-peak hours or seasons, which System Benefits of Clean Energy Resources, review each
would result in a smaller impact on the wholesale mar- type of benefit and explain the approaches generally
ket, it may not be worthwhile to estimate the wholesale used to analyze each benefit.
When is Analysis
Applicable Clean Considerations for Determining Usually Conducted or
Energy Resources Whether to Analyze Who Usually Conducts Analysis? Made Available?
■■ All resources. ■■ Traditionally analyzed in cost-benefit ■■ Utilities conduct in-depth ■■ Resource planning and
■■ Resources that analysis. modeling. released regulatory
operate during peak ■■ Widely accepted methods. ■■ PUCs and other stakeholders review proceedings.
hours. ■■ Data generally available but expensive. utility’s results and/or conduct own ■■ Area-specific DSM
analysis. program development.
■■ Models available but are complex, not
transparent, and are often expensive ■■ RTO/ISO and the Independent ■■ RTO/ISO avoided cost
to use. Market Monitor. estimates may be
■■ US EIA and private consultancies published on regular
■■ Many assumptions about technology,
provide electric dispatch and schedules.
costs, and operation needed.
capacity expansion forecasts.
■■ Long term fuel price forecasts must be
purchased or developed.
■■ All resources. ■■ Traditionally analyzed in cost-benefit ■■ Utilities conduct in-depth ■■ Resource planning and
■■ Resources that analysis. modeling. proceedings.
operate during peak ■■ Generally accepted methods for both ■■ PUCs and other stakeholders review ■■ Area-specific DSM
hours. estimation and simulation. utility’s results and/or conduct own program development.
■■ Some assumptions about technology, analysis. ■■ RTO/ISO avoided cost
costs and operation needed. ■■ In some regions, RTO/ISO publishes estimates may be
■■ Data generally available. capacity clearing prices. published on regular
schedules.
■■ Resources that ■■ Traditionally analyzed in cost-benefit ■■ Utilities conduct in-depth ■■ T&D build planning.
are close to load, analysis. modeling. ■■ Area-specific DSM
especially those that ■■ Load flow forecast availability. ■■ PUCs and other stakeholders review program development.
operate during peak utility’s results and/or conduct own
■■ Unit cost of T&D upgrades can be ■■ RTO/ISO costs
hours. analysis.
estimated but may be controversial. estimates may be
■■ T&D capacity savings reasonably ■■ RTO/ISO. published on regular
practical, but site-specific savings schedules.
difficult to generalize.
■■ Resources that ■■ Traditionally analyzed in cost-benefit ■■ Utilities collect loss data regularly ■■ Resource planning and
are close to load, analysis. and may conduct in-depth proceedings.
especially those that ■■ Straightforward; easy to estimate modeling. ■■ Area-specific DSM
operate during peak once avoided energy has been ■■ PUCs and other stakeholders review program development.
hours . calculated utility’s results and/or conduct own
■■ Loss factor for peak savings may analysis.
need to be estimated.
■■ Resources that can ■■ Usually smaller benefits than ■■ Utilities conduct in-depth modeling. ■■ Resource planning and
start during blackout, traditionally analyzed benefits . ■■ PUCs and other stakeholders review proceedings.
ramp up quickly, ■■ Market price data available for some utility’s results and/or conduct own ■■ Area-specific DSM
or provide reactive services in some markets (e.g., PJM). analysis. program development.
power.
■■ Ancillary service savings from clean
■■ Resources closer to resources often site-specific and
loads. difficult to estimate.
■■ Separating ancillary service value
from capacity value in long run
analysis may be difficult.
■■ All clean resources . ■■ Benefits depend on market/pricing ■■ ISOs and utilities conduct in-depth ■■ Resource planning and
■■ Resources that structure and peaking resources and modeling. proceedings.
operate during peak forecasted reserve margins. ■■ PUCs, other stakeholders review ■■ Area-specific DSM
hours. ■■ Actual market price data generally utility’s results and/or conduct own program development.
available. analysis. ■■ Policy studies.
■■ Studies to estimate benefits may be
complex.
■■ Distributed resources. ■■ Historical reliability data often ■■ Utilities conduct in-depth modeling ■■ Usually ad hoc studies.
■■ Resources close to available. .
load or with high ■■ Historical power quality data rare. ■■ PUCs and other stakeholders review
power quality. ■■ Studies for converting to dollar value utility’s results and/or conduct own
■■ All resources that complex and controversial. analysis.
operate as baseload ■■ Benefits are especially valuable
units. for manufacturing processes that
■■ All load reducing are sensitive to power quality or
resources that regions where reliability is significant
increase surplus concern.
generating and T&D
capacity in region.
BENEFIT: Avoided or reduced risks of overbuilding (associated with long lead-time investments, such as the risk of overbuilding the
electric system)
■■ Distributed resources ■■ Historical load and load variability ■■ Utilities conduct in-depth modeling. ■■ Resource planning and
with short lead times. data often available. ■■ PUCs and other stakeholders review regulatory review of
■■ Resources close to ■■ Modeling varies from simple to utility’s results and/or conduct own planning.
load complex. analysis. ■■ Policy studies.
■■ All clean resources. ■■ Policy and risk management
analysts.
BENEFIT: Avoided or reduced risks of stranded costs (from deferring investment in traditional, centralized resources until
environmental and climate change policies are implemented)
■■ All clean energy ■■ Modeling varies from simple to ■■ Policy and risk management ■■ Resource planning and
resources. complex. analysts. regulatory review of
■■ Studies to estimate benefits may be planning.
complex. ■■ Policy studies.
■■ Regulatory uncertainty adds to
complexity of analysis.
■■ All clean energy ■■ Diversity metrics computable from ■■ States. ■■ State energy plans.
resources. generally available data ■■ PUCs. ■■ Resource planning.
■■ Portfolio analysis of costs vs. risks ■■ Utilities.
adds complexity.
■■ Must consider existing supply
resources, not just incremental new
resources.
4 Sometimes the short-run and long-run effects of clean energy measures are
referred to as “operating margin” and “build margin,” respectively (Biewald, 2005).
Table 3.2.4 Comparison of Basic and Sophisticated Approaches for Quantifying Avoided
Cost of Electricity Generation or Wholesale Electricity Purchases
When to Use
Example Advantages Drawbacks This Method
Basic Method
■■ Proxy unit ■■ Simple. ■■ Combines energy & capacity. ■■ When time, budget and data are
■■ Futures prices ■■ May already be ■■ Not always relevant to a given policy limited.
the cost and operational characteristics of each unit. Oil Combustion Turbine, Old
Load (MW)
tom and highest on the top. A dispatch curve analysis 3,000
Oil Steam
Gas Combined Cycle, Typical
matches each load level with the corresponding mar- 2,000
Gas Combined Cycle, New
ginal supply (or type of marginal supply). Table 3.2.5, Coal, Typical
Coal, New
Hypothetical Load for One-Week Period, and Figure 1,000
Nuclear
Hours on
margin
Constructing a dispatch curve requires data on:
Unit
Unit name
■■Historical utilization of all generating units in the
1 Oil Combustion Turbine, Old 5
region of interest;
2 Gas Combustion Turbine 10
■■Operating costs and emission rates (to support
emissions estimation, as described in Chapter 4) of 3 Oil Combustion Turbine, New 9
the specific generating units, for the most disaggre- 4 Gas Steam 21
gate time frame available (e.g., seasonally, monthly);
5 Oil Steam 40
■■Energy transfers between the control areas of the
region and outside the region of interest (because 6 Gas Combined Cycle, Typical 32
the marginal resource may be coming from outside 7 Gas Combined Cycle, New 17
the region); and
8 Coal, Typical 34
■■Hourly regional loads.
9 Coal, New 0
5 Often these sources can also provide generator-specific emission rates for
estimating potential emission reductions from clean energy.
Step 1: The state estimates that the en- Winter Peak (1278 hours) 115,020 0.07 8,051,400
ergy efficiency program would reduce
electricity demand as shown in the Winter Shoulder (1917 hours) 143,775 0.06 8,195,175
Avoided Electricity column (based on
Winter Off-Peak (1917 hours) 19,170 0.03 479,250
an analysis of annual savings from the
typical system and a typical load shape). Total 575,505 35,245,125
Step 2: Using a load curve analysis,
the state estimates that natural gas
combustion turbines are typically on Step 3: The avoided costs associated with Step 4: The Total Avoided Energy Cost
the margin during peak periods for both each of these marginal generating tech- column shows the result of multiplying the
summer and winter, a mix of natural gas nologies are estimated based on typical Avoided Electricity column by the Avoided
combined cycle units and natural gas-fired variable operating and fuel costs for those Energy Cost for Time Period column. Sum-
steam units (about 50% of each) are on the types of units estimated to be on the mar- ming across all periods yields the expected
margin during shoulder periods, and exist- gin. The results are show in the Avoided avoided costs for one year.
ing coal-fired generators (pulverized coal) Energy Cost for Time Period column.
are typically on the margin during the off-
peak periods.
ȇȇEven without such fundamental changes, the especially for clean energy resources with more avail-
system changes over time as new units are ability at certain times and for projections of clean
added, existing units are retired, and units shift energy impacts in the future. Dispatch models can also
in dispatch order. Analyses based on histori- be employed to develop parameters that can be used
cal data do not capture these shifts, so to the to estimate the impacts of a large range of clean energy
extent that estimates are being developed for resources. For example, multiple model runs can be
the future these types of basic methods must performed estimating impacts of changes in genera-
be used with caution. tion requirements at certain seasons and times of day
(e.g., winter peak, summer peak, winter base, etc.).
■■These methods may not adequately address the is- These parameters, such as the marginal emission rate
sue of leakage—in which increases in clean energy and avoided costs, can be applied to estimates of the
result in reductions in generation outside the re- impacts of clean energy resources at those same times.
gion of interest (e.g., in another state or region)—if
these transactions are not explicitly accounted for Dispatch models simulate the dynamic operation of
in the analysis. the electric system given the characteristics of specific
generating units and system transmission constraints.
Sophisticated Methods for Estimating Short-Run They typically do not predict how the electric system
Avoided Costs: Dispatch Modeling will evolve but instead can indicate how the existing
Sophisticated simulation modeling, such as electric electric sector will respond to a particular clean energy
dispatch modeling, requires developing a detailed rep- policy or measure. This is appropriate in the short run
resentation of the electric system with many individual when the electric system is more likely to react than to
input assumptions. While developing a full input data evolve due to clean energy measures. Dispatch models
set for a dispatch simulation model can be a resource- specifically replicate least-cost system dispatch and can
intensive task, the output from a simulation model can be used to determine which generating units are dis-
provide more valid estimates than a basic approach,
Table 3.2.6. Comparison of Basic and Sophisticated Approaches for Quantifying Avoided
Costs of Power Plant Capacity
Basic approach
Sophisticated approach
Sophisticated simulation methods, such as capacity ex- 2. Create an alternate forecast that includes the clean energy
resources over the planning period to show how load is
pansion models (also called system planning models), expected to be met.
can be used to quantify the long-run avoided capacity
3. Calculate the avoided costs of power plant capacity.
costs that result from implementing clean energy
measures. Capacity expansion models predict how the
electric system will evolve over time, including what
capacity will be added through the construction of new
generating units and what units will be retired, in re- impact of energy efficiency resources, based on the
sponse to changes in demand and prices. This method program design and estimates of its energy and
involves allowing the model to predict what will likely capacity savings, or add renewable resources as an
happen to the resource mix based on costs of new available supply. This method would capture the
technology, growth, existing fleet of generating assets, unique load shape of the clean energy resource.
environmental regulations (current and planned), and
considering dispatch both with and without the new ■■For a less rigorous estimate (e.g., to use in screen-
clean energy resource. Capacity expansion models are ing candidate clean energy policies and programs
typically used for longer-term studies (e.g., five to 20 during program design), reduce the load forecast
years), where the impacts are dominated by long-term by a fixed amount in each year, proportionally
investment and retirement decisions. They are also to load level. This method does not capture the
typically used to evaluate large geographic areas. unique load shape or generation supply of the
clean energy resource.
Using capacity expansion models to estimate the
avoided costs of power plant capacity typically involves ■■For renewable resources, add the resource to
the steps described below. the supply mix (or for some models and non-
dispatchable resources, renewable energy could be
Step 1: Generate a business-as-usual forecast of load netted from load in the same manner as is done for
and how it will be met. Some capacity expansion mod- energy efficiency).
els use existing generating plants and purchase con-
tracts to serve the load over the forecast period, and the In both the precise and less rigorous methods de-
model (or the modeler) adds new generic plants when scribed above, the difference in the projected capital
those resources do not meet the load forecast. The type and operating cost over the planning period of the
of plants added depends on their capital and operating two cases is the avoided capacity cost to use in analyz-
costs, as well as the daily and seasonal time-pattern of ing the clean energy resource. If a per unit avoided
the need for power determined using discounted cash cost, such as the avoided cost per MWh, is needed for
flow analysis as described earlier. The model repeats screening clean energy resources or other purposes, it
this process until the load is served through the end of may be computed by taking the avoided cost (i.e., the
the forecast period and a least-cost solution is found. difference between the cost in the two cases) for the
This base case contains a detailed schedule of resource relevant time period (e.g., a given year) and dividing
additions that becomes the benchmark capital and that by the difference in load between the two cases.
operating costs over the planning period for later use
in the long-run avoided cost calculation. Step 3: Calculate the avoided costs of power plant
capacity. The difference between the costs in the two
Step 2: Include the clean energy resource over the plan- projections above represents the annualized or net
ning period and create an alternate forecast. The fol- present value costs that would be avoided by the clean
lowing two approaches can be used to incorporate the energy resource.
clean energy resource into the second projection:
Capacity expansion or system planning models can
■■For a more precise estimate of the savings from examine potential long-term impacts on the electric
a clean energy program, reduce the load forecast sector or upon the entire energy system—in contrast
year by year and hour by hour to capture the to the dispatch models used to assess the avoided costs
Tools
Operating reserve – Spinning: Generation synchronized to the Compared with other regional control areas, New England has
grid (i.e., “spinning”) and usually available within 10 minutes a small amount of quick-start capacity relative to the regional
to respond to a contingency event. For example, 50 MW of peak load. As such, a number of large oil- and gas-fired steam
spinning operating reserve means that a generation unit can units that do not have the ability to start quickly must run
increase its output by 50 MW within 10 minutes. constantly to provide reserve capacity. A study conducted for
the New England Demand Response Initiative (NEDRI) used a
Operating reserve – Supplemental: Generation that is
production costing model (PROSYM/MULTISYM) to evaluate
available within 30 minutes but is not necessarily synchronized
how hypothetical aggressive demand response programs
to the grid.
implemented during the summer of 2006 would affect power
Reactive Power/Voltage Support: The ability of a generator plant utilization and net emissions when such programs are
to “absorb” or “generate” reactive power to meet voltage used for reserve capacity. The study found that the demand
standards on the grid. response programs could result in more efficient plant
utilization, reducing operation of the steam units, and increasing
operation of efficient combined-cycle units in the region. If no
diesel generators participate in the demand response programs,
the study identified the additional potential for reductions in
NOx, SO2, and CO2 emissions during the summer.
methods are less mature than those for primary ben-
efits, and as such tend to rely more upon non-modeling Source: Synapse Energy Economics, 2003.
estimation approaches than more sophisticated simula-
tion modeling ones. Secondary electric system benefits,
and methods for estimating them, are described below.
3.2.2.a Avoided Ancillary Services Costs to estimate the price of voltage support benefits. The
reactive power provisions in Schedule 2 of the FERC
“Ancillary services” is a catch-all term for electric pro forma open access transmission tariff, or an RTO’s
generator functions needed to ensure reliability, as op- equivalent schedule for reactive support, can be used as
posed to providing power, and include services such as a proxy for the avoided cost of voltage support. How-
operating reserves and voltage support. ever, the Schedule 2 payments are often uniform across
a large region. As a result, they may not capture differ-
Operating Reserves ences in the value of these services in load pockets. Al-
Energy efficiency programs avoid the need for cor- ternately, the difference in reliability with and without
responding operating reserves (those generation the clean energy resource can also give some indication
resources available to meet loads quickly in the event a of voltage support benefits. (See the reliability metrics
generator goes down or some other supply disruption discussion in Section 3.2.2.c Increased Reliability and
occurs) and thus avoid the respective costs. Power Quality.)
RTOs routinely report market prices for ancillary ser- Some clean energy measures can have direct beneficial
vices. In those regions with ancillary service markets, effects on avoiding certain voltage support or reactive
such as PJM, NYISO, ISO-NE, ERCOT and the Cali- power requirements. Reactive power ancillary services
fornia RTO, services are provided at rates determined are local in nature, and clean energy policies and
by the markets and thus are easily valued.13 The market programs that reduce load in a load pocket area can
value of a given MW of clean energy short-term re- minimize the need for local reactive power require-
serve is equal to the operating reserve price, as posted ments. On the other hand, solar and wind resources
by the RTO or ISO on its Web site. may require backup voltage support due to their inter-
mittent nature.
Voltage Support
It is important to note that the avoided costs of reactive
Voltage support is important to ensure the reliable and power and other ancillary services are typically smaller
safe operation of electricity-consuming equipment than other costs, such as avoided energy, capacity, and
and the grid. There are few market metrics available T&D investment. For example, 2003 reactive power
payments were only 0.52 percent of the total costs of
13 There can be opportunity costs associated with provision of operating
serving load in PJM (Burkhart, 2005).
reserve. Some regions allow demand response and other clean energy resources
to bid directly into the energy market.
Reliability Benefits of Clean Energy The data needed to assess power quality benefits are
neither consistently measured nor comprehensively
Clean energy provides reliability benefits because when a
small clean energy unit fails, the result is less catastrophic
collected and reported. Specialized monitoring equip-
than when one large, traditional generating unit fails. For ment is typically necessary to measure power defects,
example, suppose a utility has the choice of installing one and acceptable standards for power quality have been
hundred kilowatts of clean DG around its system or installing a changing rapidly.
single 10 megawatt generator (100 units times 100 kW). In this
situation, there would likely be a greater probability of the 10
MW generator being out of service than of finding all 100 of the
Power quality improvements produce real economic
smaller units out of service. Such an effect can either reduce benefits for electricity consumers by avoiding damage
the reserve margin required (which benefits both the utility and to equipment and associated loss of business income
consumers) or, if the reserve margin is fixed, reduce the price of and product, and, in some cases, the need for redun-
reserve capacity (Lovins et al., 2002).
dant power supply. At the extreme, some commercial
and industrial processes, such as silicon chip fabrica-
tion and online credit card processing, are so sensitive
The Importance of Power Quality
to outages or power quality deviations that customers
It is important to maintain consistent power quality; otherwise, take proactive steps to avoid these concerns, including
electrical equipment can be damaged. For example, consumer
construction of redundant transmission lines or install-
and commercial electrical and electronic equipment is usually
designed to tolerate extended operation at any line voltage
ing diesel or battery backup power. The costs of such
within 5 percent nominal, but extended operation at voltages equipment could also be used to estimate the value of
far outside that band can damage equipment or cause it to increased reliability and power quality.
operate less efficiently.
All other things being equal, a resource or resource For example, a 2008 study looked at 10 utilities in
plan that offers more flexibility to respond to changing the western U.S. and examined how their respective
future conditions is more valuable than a less flexible resource plans accounted for future carbon regulations.
resource or plan. Techniques such as decision tree The study found that the majority of the 10 utilities
analysis or real option analysis provide a framework included aggressive levels of energy efficiency and
for assessing this flexibility. These approaches involve renewable energy to reduce carbon emissions. The
distinguishing between events within one’s control (i.e., study also found that in making these decisions the
decision nodes) and those outside of one’s control (i.e., utilities did not consider the indirect impacts of future
exogenous events) and developing a conceptual model carbon regulations, such as increased wholesale electric
for these events as they would occur over time. Specific market price, retirements of conventional generation
probabilities are generally assigned to the exogenous plants, and the impact on transmission and distribu-
events. The results of this type of analysis can include tion expansion (Barbose et al., 2008).
the identification of the best plan on an expected value
basis (i.e., incorporating the uncertainties and risks) or When comparing new generation options in the face
the identification of lower risk plans. of potential environmental regulations, some states
and utilities are reducing financial risk by placing a
Above and beyond the expected value of the plan, higher cost premium on traditional resources relative
certain resources may have some “option value” if they to clean energy. For example, California has adopted
allow (or don’t foreclose) other resource options in the an $8/ton carbon dioxide greenhouse gas adder to be
future. For example, a plan that involves implementing used in comparing resources (Johnston et al., 2005; CA
some DSM in the near term can have value above its PUC, 2004).
simple short-run avoided cost, in that it develops the
capability for expanded DSM deployment in the future 3.2.2.f Improved Fuel Diversity and Energy
if conditions call for it. Security
Portfolios that rely heavily on a few energy resources
are highly affected by the unique risks associated with
any single fuel source. In contrast, the costs of clean
14 Of course, clean energy resources carry their own risk of non-performance.
A large portion of New England’s electricity is generated from natural gas. Due to this high dependence on one fuel source, and because fuel
represents a large portion of the cost to produce electricity, natural gas and electricity prices are highly correlated.
140 25
120
Peak Period Electric Prices ($/MWh)
20
15
80
60
10
40
5
20 Peak Price
NG Price
0 0
2003 2004 2005 2006 2007 2008 2009
energy resources are not affected by fossil fuel prices data required for the indices (annual state electric-
and thus can hedge against fossil-fuel price spikes by ity generation by fuel type and producer type) are
reducing exposure to this volatility. readily available from the EIA Form 906 database.16
Use of these indices is appropriate for preliminary
Diversity in technology can also reduce the likelihood resource diversity assessment and as a state or
of supply interruptions and reliability problems. For regional benchmark. Annual state electricity
example, while geothermal plants can be expensive generation data by producer type and fuel type are
to construct, they offer an almost constant supply of available.
energy and are best suited for baseload generation. Gas
A limitation of these indices is that decisions on how
turbines, on the other hand, are relatively inexpensive
to classify resources (e.g., calculating the share of
to construct and can start quickly, but have a high
all coal rather than bituminous and subbituminous
operating cost and so are best suited for peaking gen-
coals separately) can have a large effect on the results.
eration. Figure 3.2.5 illustrates the relationship between
Another shortcoming is that the indices do not differ-
electricity and natural gas prices in New England.
entiate between resources that are correlated with each
other (e.g., coal and natural gas) and thus can under-
Two approaches for estimating the benefits of fuel and
estimate the portfolio risk when correlated resources
technology diversification include market share indices
are included.
and portfolio variance.
■■Portfolio Variance. The concept of portfolio theory
■■Market share indices. Market share indices, such as
suggests that portfolios should be assembled and
the Herfindahl-Hirschmann Index and Shannon-
evaluated based on the characteristics of the port-
Weiner index, identify the level of diversity as a
folio, rather than on a collection of individually
function of the market share of each resource.15
assessed resources. Portfolio theory and portfolio
These indices are computationally simple and the
variance measures account for risk and uncertainty
by incorporating correlations between resources
15 For more information about these indices, see U.S. Department of Justice
and the Federal Trade Commission, Issued April 1992; Shannon, C.E. "A
mathematical theory of communication." Bell System Technical Journal 27: 16 EIA Form 906 has been superseded by EIA Form 923. Both data sets are
379–423 and 623–656, July and October 1948. available at http://www.eia.doe.gov/cneaf/electricity/page/eia906_920.html
Reliability adder (Avoided ancillary services Annual value System-wide (uniform None None
costs) across state)
Price elasticity of demand adder (Reduced Time of use period (on- System-wide (uniform None None
wholesale market clearing prices) vs. off-peak) by month across state)
Table 3.3.2 Estimated Cost Effectiveness Test Results for the California Investor Owned
Utilities’ 2006–2008 Efficiency Programs
Method(s)
The analysis required the development of a reference
case to determine what the wholesale electric prices
and carbon dioxide emissions would be without the
additional clean energy resources. It assumed no rate-
Source: Impacts of Distributed Generation on Wholesale Electric
payer-funded investments in demand side management Prices and Air Emissions in Massachusetts, Synapse Energy
(DSM) programs beginning in 2007 and so it assumed Economics, March 31, 2008.
energy savings achieved through the end of 2006 remain
constant in the future. The reference case also assumed
no new policies to encourage distributed generation.
The analysis used the PROSYM simulation model to
determine the potential price and emissions impacts
18 As a result of the energy efficiency programs, California’s investor-owned
of the scenarios. The model was used to simulate the
utilities project savings of about 7,370 GWh of electricity, 1,500 MW of peak average hourly wholesale market clearing prices and
demand, and 122,000 megatherms of natural gas from 2006 to 2008. Relative the regional greenhouse gas emissions (apportioned to
to a base case without the programs, the utilities expect to reduce carbon
Massachusetts based on GWh load) in 2020 under a
dioxide emissions by about 6,600,000 tons — the equivalent of the emissions
of about 1.2 million cars over the same period. reference case and each of the following four scenarios:
Information Resources
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• Chapter one
Document map
Many states and localities are Introduction
• Chapter two
exploring or implementing potential energy Impacts of clean energy
• Chapter three
clean energy policies to achieve electric System Benefits of clean energy
humans and the environment, while other “secondary” Several states have quantified the emission reductions and
pollutants can affect human health after they form as air and health benefits from their clean energy measures and
determined that the measures are helping them reduce their air
a result of photochemical reactions in the atmosphere.
pollution and GHGs.
For example, nitrogen oxides (NOX) and volatile organic
compounds (VOCs) react under certain meteorological A recent evaluation of The Wisconsin Focus on Energy
Program’s energy efficiency and renewable energy projects
conditions to form ozone (O3), a principal component funded by the Utility Public Benefits fund, for example,
of photochemical smog. Estimating the impact of shows that during the period from program inception in July
changes in criteria air pollutant emissions on ambient 2001 through June 30, 2006, the state has displaced annual
air quality and the related environmental and health im- emissions from power plants and utility customers of about: a
pacts can enhance a state’s understanding of the poten- ■■ 5.8 million pounds of NO ,
x
tial benefits that can result from clean energy measures.2 ■■ 2.6 billion pounds of CO ,
2
health benefits from existing and proposed clean en- ■■ 46 pounds of mercury (Hg)
ergy measures can help state planners: In 2004, the Texas Commission on Environmental Quality
evaluated the Texas Emissions Reduction Plan and calculated
1. Identify opportunities where meeting today’s that it achieves an annual reduction of NOx emissions of 346
tons through energy efficiency and renewable energy. NOx
energy challenges can serve as an environmental
reductions over the period 2007–2012 are projected to range
improvement strategy, from 824 tons per year in 2007 to 1,416 tons per year in 2012.
2. Potentially reduce the compliance costs of meeting Sources: DOA, 2006; Haberl et al., 2007
sures result in reduced fossil-fuel-fired electricity EPA has developed a State Implementation Plan (SIP) guidance
generation) the cost of achieving the cap decreases, document that provides a step-by-step procedure for
quantifying the benefits. It describes the following two options
but the cap itself does not change. While cap and
for state and local governments to address the presence of a
trade programs ensure a certain reduced level cap and trade program when quantifying emission reductions
of emissions and can result in a more diversified from clean energy:
energy system, trading emission allowances means ■■ Retire commensurate amount of allowances, or
that it can be difficult to attribute emission reduc-
■■ Demonstrate that an emission or air quality benefit is
tions to specific clean energy measures, and that in
expected to occur even in the presence of such a cap and
some cases clean energy measures may not result trade program.
in net emission reductions at all.
Source: U.S. EPA, 2004.
Develop and Project a Quantify Air and GHG Quantify Air Quality Impacts Quantify Human Health and
Baseline Emissions Profile Emission Reductions from (if any) Related Economic Effects of
(Section 4.2.1) Clean Energy Measures (Section 4.2.3) Air Quality Impacts
(Section 4.2.2) (Section 4.2.4)
a. Select method. a. Develop criteria air pollutant Use criteria air pollutant data a. Use data on air quality
b. Compile criteria air reductions from clean energy to estimate changes in air changes and epidemiological
pollutants from available using: quality with an air quality and population information to
sources into inventory. ■■ energy savings estimates, model. estimate health effects.
facilitate a more comprehensive analysis of the emis- of clean energy measures. Developing a baseline that
sions benefits of clean energy and the value of clean includes both GHGs and criteria air pollutants serves
energy policies. This is important because many op- as a future point of reference for retrospective program
tions that reduce GHGs may, in fact, reduce criteria air evaluation as well as a basis for making well-informed
pollutants and indirectly yield health benefits. On the policy and planning decisions.
other hand, some measures that reduce GHG emissions
can actually increase emissions of criteria air pollutants. Typically, a state’s air agency creates the criteria air
pollutant inventory every three years as part of its
For example, a measure that encourages switching responsibility to meet National Ambient Air Quality
from electricity generated with natural gas to electric- Standards established under the Clean Air Act. GHG
ity generated by wind will result in both criteria air emissions inventories can be developed by state air
pollutant benefits and GHG emission reductions. The or other agencies, but since states are not required
impact on air pollution is less certain, however, if a by federal law to inventory their GHG emissions, the
state switches from natural gas to biomass-generated practice varies from state to state. State energy offices
energy. It is important to take these considerations into or universities sometimes develop GHG inventories
account when evaluating the air and health benefits on an annual basis or every few years. If inventories
Air emission sources are grouped into four categories: point, An emissions factor quantifies the amount of a pollutant
area, mobile (on-road and non-road), and biogenic sources. released to the atmosphere from a “unit” of an activity or
Each is described below. source (e.g., lbs CO2 per therm CH4 burned).The emissions
estimates are calculated by multiplying the emissions factor
Point Source: A stationary location or fixed facility from which
(e.g., pounds of NOx per kWh produced) by the activity level
pollutants are discharged, such as an electric power plant or a
(e.g., kWh produced). Emissions factors can be calculated
factory smokestack.
based on the chemical composition of the fuels burned or
Area Source: An air pollution source that is released over a determined by emissions monitors.
relatively small area but cannot be classified as a point source.
Emissions factors for CO2, NOx, SO2, and other pollutants are
Area sources include small businesses and household activities,
available from:
product storage and transport distribution (e.g., gasoline),
light industrial/commercial sources, agriculture sources (e.g., ■■ EPA’s Emissions Factors and Policy Applications Center
feedlots, crop burning), and waste management sources (e.g., http://www.epa.gov/ttn/chief/efpac/.html
landfills). Emissions from area sources are generally reported by
categories rather than by individual source. ■■ EPA’s Emissions & Generation Resource Integrated
Top-Down Inventory
■■ EPA’s State Inventory ■■ Intergovernmental panel ■■ Can capture all ■■ Does not provide ■■ State-wide estimates
Tool for GHGs. on Climate Change. emissions in a state. in-depth sectoral of emissions.
■■ National Association ■■ EPA’s Emissions ■■ Reliable data are emission detail. ■■ State-wide GHG
of Clean Air Inventory Improvement available for most ■■ Use of state average inventories.
Agencies (NACAA) Program. major sources. factors may lead to ■■ Area source emission
and International some uncertainty or estimates for criteria
Council for Local error in estimates. air pollutants.
Environmental ■■ Lacks spatial
Initiatives (ICLEI) resolution needed for
Clean Air and Climate air quality modeling.
Protection Software
(community- or state-
wide inventory).
Bottom-up Inventory
■■ NACAA and ICLEI’s ■■ EPA Climate Leaders ■■ Can provide more ■■ Requires highly ■■ Sector-specific GHG
Clean Air and GHG Inventory Protocol. detailed or nuanced disaggregated inventories.
Climate Protection ■■ The World Resources profile of emissions. data which may be ■■ Stationary source
Software (government Institute (WRI) and World ■■ Allows analysis of difficult to obtain. emission estimates
operations inventory). Business Council on Sus- indirect emissions ■■ May not capture all for criteria air
■■ Emission Reporting tainable Development sources (purchased emissions in a state. pollutants.
Data (e.g., Acid (WBCSD) GHG Protocol. electricity, etc). ■■ When data required
Rain Program Data, ■■ California Registry for top-down
or facility specific Protocols. inventory are not
emission reports). available.
■■ The Climate Registry.
eGRID x x x x x x x
■■State Agencies and Universities: Many state agencies and climate change.13 The degree to which any of these
and universities collect emissions and/or energy specific drivers is important is a function of the projec-
data within their state, which can be compiled into tion horizon. For example, climate change impacts may
an inventory. be negligible for a five- to ten-year projection.
Forecasting Future Emissions Several guidance documents and tools are available to
help states understand methodologies and data sources
To conduct a prospective analysis of potential emis-
for factors relevant to projections, including:
sion reductions from a future policy, it is necessary to
develop forecasts of both the new policy case and the ■■EPA EIIP Technical Report Series, Volume X: Emis-
“business as usual” (BAU) case that does not include the sions Projections. This document provides informa-
new policy.12 Emission projections provide a basis for: tion and procedures to state and local agencies
■■Developing control strategies for State Implemen- for projecting future air pollution emissions for
the point, area, and onroad and nonroad mobile
tation Plans (SIPs) or mitigation measures for
sectors. It describes data sources and tools states
Climate Change Action Plans;
might use for their projections. http://www.epa.
■■Conducting air quality attainment analyses; and gov/ttn/chief/eiip/techreport/volume10/x01.pdf
■■Tracking progress toward meeting air quality stan- ■■EPA State GHG Projection Tool. States can use this
dards or GHG reduction goals. EPA spreadsheet tool to create forecasts of BAU
GHG emissions through 2020. Future emissions
When developing emission projections, an attempt is are projected using a combination of linear extrap-
made to account for as many of the important variables olation of the results from the State Inventory Tool,
that affect future year emissions as possible. States can described above, combined with economic, energy,
project future emissions based on historic trends and population, and technology forecasts. The tool can
expectations about numerous factors, including projec- be customized, allowing states to enter their own
tions of population growth and migration, economic assumptions about future growth and consumption
growth and transformation, fuel availability and prices, patterns. http://www.epa.gov/climatechange/wycd/
technological progress, changing land-use patterns, stateandlocalgov/analyticaltools.html
12 When conducting a prospective analysis of clean energy policies that have 13 Some of these factors are closely related, and will rely on specific compo-
already been implemented, a forecast of emissions is not necessary although nents of these trends that may include electricity imports and exports, power
it could facilitate projecting the future benefits of existing programs. For a plant construction or retirement, domestic vs. imported agricultural produc-
retrospective analysis, the impacts of the existing clean energy program could tion, waste production, number of road vehicles, tons of freight transported,
be backed out of the forecast and reintroduced to estimate the impacts. vehicle miles traveled, and environmental regulations.
Basic Approaches
■■ CACPS technical expertise, and labor ■■ May have embedded ■■ Designing new programs and
required. assumptions that have large evaluating existing ones.
■■ Inexpensive. impacts on outputs. ■■ Regulatory compliance and
energy plans.
Sophisticated Approaches
■■ ENERGY 2020 ■■ More rigorous than basic ■■ Less transparent than ■■ State Implementation Plans.
■■ NEMS modeling methods. spreadsheet methods. ■■ Late-stage resource
■■ IPM ■■ May be perceived as more ■■ Labor- and time- intensive. planning.
credible than basic modeling ■■ Often high software licensing ■■ Rate cases.
■■ MARKAL
methods. costs.
■■ PROSYM ■■ Project financing.
■■ Allows for sensitivity analysis. ■■ Requires assumptions that
■■ GE MAPS ■■ Regulatory compliance and
■■ May explicitly account for have large impact on outputs. energy plans.
■■ PROMOD and quantify leakage. ■■ May require significant
technical experience.
a
The OTC workbook is a spreadsheet tool that was developed from specific results of the PROSYM model.
■■The Clean Air and Climate Protection Software Tool. a desirable exercise. Table 4.2.4 shows that states can use
As described above, states or localities can use this either basic or sophisticated approaches to quantify air
tool to project an emissions baseline of GHGs and emission reductions from clean energy measures.
criteria air pollutants into the future, and measure
the effects of different policies upon the forecast. Basic approaches typically include spreadsheet-based
http://www.icleiusa.org/cacp analyses that use emissions factor relationships or
other assumptions to estimate reductions. Sophisti-
States can also project future emissions based on their cated approaches are usually more complex and involve
energy baseline projections. More information about dynamic electricity or energy system representations
forecasting energy baselines is available in Chapter 2, that predict energy generation responses to policies
Assessing the Potential Energy Impacts of Clean Energy and calculate the effects on emissions. (For more spe-
Initiatives. cific information on these energy-related models, see
Chapters 2 and 3.)
4.2.2 Step 2: Quantify Air and GHG
Emission Reductions from Clean Key Considerations for Selecting an Approach
Energy Measures for Quantifying Emission Reductions from
Clean Energy
Once states have developed their baseline emission esti-
mate or business as usual forecast, they can estimate the As summarized in Table 4.2.4, there are advantages and
emissions that are avoided when implementing clean disadvantages to each approach for quantifying emis-
energy measures. Although an emission reduction esti- sion reductions. States can use this information as guid-
mation can be performed independently from a baseline ance in determining the most appropriate approach for
emissions forecast, aligning many of the assumptions in their particular goals. It is important for states to:
the baseline case and the clean energy measures case is
Step 2a: Establish Clean Energy Operating ■■What, if any, are the emissions characteristics of the
Characteristics (Load Profile) clean energy resource (e.g., emissions characteris-
tics of using renewable fuels such as digester gas)?
As previously discussed in Chapter 2, Assessing the
Potential Energy Impacts of Clean Energy Initiatives, the Step 2b: Identify the Marginal Generation Unit
first step when applying a basic modeling approach is and Develop Emissions Characteristics
to determine the specific ways that the clean energy
initiative will affect either demand for electricity or Next, identify the marginal generation source and its
available supply. This involves considering the follow- associated emissions characteristics. The marginal gen-
ing issues related to the operating characteristics, or erating source, as described earlier, is the last generating
load profile, of the clean energy measures: unit to be dispatched in any hour, based on least-cost
dispatch (thus it is the most expensive on a variable cost
■■How much energy will the clean energy mea- basis). The emissions characteristics of this unit can be
sure generate or save? (See Chapter 2 for more expressed as an emissions factor for each pollutant, and
information) are expressed in pounds per MWh. These factors rep-
resent the reduction in emissions per pound of energy
■■When and where will the electricity generation
generation avoided due to energy efficiency or due to
offset occur (e.g., season of year, time of day)? In clean energy resources supplied to the system.
the case of energy efficiency measure, load impact
profiles describe the hourly changes in end use There are several different approaches that can be used
to characterize the marginal generation source and its
14 The Model Energy Efficiency Program Impact Evaluation Guide, which associated emissions factor. As described in Chapter
was developed as part of the National Action Plan for Energy Efficiency
(NAPEE), provides further guidance on how to quantify emissions reductions
3, these include (1) system average, (2) factors based
(NAPEE, 2007). on unit type or other characteristic that correlates
Regional or system average ■■ Computationally simple. ■■ Insensitive to dispatch ■■ Rough estimates of clean
based on historical year ■■ Less labor and data required process. energy benefits for displacing
than for unit type or dispatch ■■ Neglects power transfers emissions.
curve analysis. between areas.
■■ History may not be good
indicator of future.
Based on unit type (capacity ■■ Simpler and less labor ■■ Somewhat insensitive to ■■ Preliminary planning and
factor rule) required than dispatch curve dispatch process. evaluation of clean energy
analysis. ■■ Inaccurate for baseload clean resources, especially those
■■ Considers generation energy resources. that operate during peak
resource characteristics. times.
Derived from dispatch curve ■■ More sensitive to dispatch ■■ Higher data requirements ■■ Planning and regulatory
analyses process than regional or than regional or system studies.
system average and unit type average and unit type
methods. methods.
with likelihood of displacement (e.g., capacity factor), What Energy Source is Displaced?
and (3) factors derived from dispatch curve analyses. It is important to note that only a small number of
Information about the advantages, disadvantages, and generating plants are affected by a clean energy measure.
when to use each method is summarized in Table 4.2.5, Power systems are generally dispatched based on
economics, with the lowest-cost resource dispatched first
Comparison of Methods to Identify Marginal Unit and
and the highest-cost resource dispatched last. The lowest-
Associated Emissions Factor. Each method is described cost units (known as baseload units) operate at all times
in more detail below. and are often fueled by coal. Higher-cost units such as
gas- and oil-fired units are brought online during peak use
■■Regional or system average emissions factors. This times. These are the units that will be displaced by a clean
approach typically involves taking an average of the energy measure. This helps identify where the GHG and air
annual emissions of all electricity generating units pollutant benefits are likely to occur (See Section 3.1, How
Clean Energy Can Achieve Electric System Benefits, and
in a region or system over the total energy output Section 3.2, How States Can Estimate the Electric System
of those units. Data on emission rates averaged by Benefits of Clean Energy, for a more detailed explanation
utility, state, and region are available from EPA’s of how generation resources are dispatched).
eGRID database. For example, using eGRID, states
can locate emissions factors by eGRID subregion,
state, or by specific boiler, generator, or plant.
Other methods for identifying the marginal unit
While easy to apply, this method ignores the fact and its emissions factors attempt to recognize that
that some units (such as baseload electricity gener- what is on the margin is a function of the time that
ating units) are extremely unlikely to be displaced clean energy load impacts (or energy generation)
by clean energy resources (see text box What occurs. The most complete of these time-depen-
Energy Source is Displaced?). Baseload units and dent methods would analyze the impact of changes
other units with low variable operating costs (e.g., in load for the 8,760 hours in a year using dispatch
hydro and renewables) can be excluded from the models. Basic methods try to approximate this us-
regional or system average to partially address this ing proxies, including unit type and capacity factor,
shortcoming. Some approaches, therefore, take a as described further below.
fossil-only average.
Hours on
emission
rate (lb/
margin
MWh)
3. Energy transfers between the control areas of
Unit
SO2
Unit name the region and outside the region of interest
1 Oil Combustion Turbine, Old 5 1.00 in order to address leakage issues (see text
box Clean Energy and Leakage earlier in this
2 Gas Combustion Turbine 10 0.00
chapter); and
3 Oil Combustion Turbine, New 9 1.00
4. Hourly regional electricity demand (or loads).
4 Gas Steam 21 0.10
4,000
Oil Combustion Turbine, New
authority within the state’s region.
Gas Steam
Load (MW)
Oil Steam
3,000
Gas Combined Cycle, Typical
Gas Combined Cycle, New
Load duration curve analysis is commonly used in
2,000
Coal, Typical planning and regulatory studies. It has the advan-
1,000
Coal, New
Nuclear
tage of incorporating elements of how generation
0
is actually dispatched while retaining the simplicity
1 13 25 37 49 61 73 85 97 109 121 133 145 157
and transparency associated with basic model-
Hour
ing methods. However, this method can become
Source: Developed by Synapse Energy, unpublished, 2007.
labor-intensive relative to other basic modeling
methods for estimating displaced emissions if data
for constructing the dispatch curve are not readily
available. Another disadvantage is that it is based
on the assumption that only one unit will be on the
In the final analysis of net emission impacts, it is also ■■The OTC Workbook: The OTC Workbook is a free
important to consider any GHG or criteria air pollution tool developed for the Ozone Transport Commis-
emissions that a clean energy initiative might produce sion to help local governments prioritize clean ener-
during the production or generation of renewable fuels gy actions. The Workbook uses a detailed Microsoft
(e.g., landfill gas, biomass generation). For example, Excel spreadsheet format based on electric power
biomass generation releases about the same amount of plant dispatch and on the energy savings of various
CO2 as burning fossil fuels. However, because biomass measures to determine the air quality benefits of
is a fuel derived from organic matter, including, but various actions taken in the OTC Region. This tool
not limited to, wood and paper products, agricultural is simple, quick, and appropriate for scenario analy-
waste, or methane (e.g., from landfills), these materials sis. It can calculate predicted emission reductions
are part of the natural carbon cycle and therefore do from energy efficiency, renewables, energy portfolio
not contribute to global warming. Thus, all biomass standards (EPSs), and multi-pollutant proposals.
CO2 emissions (including those from renewable meth- The tool contains two kinds of default emission rate:
ane) are assigned a value of zero because these organic system average (for assessing EPSs) and marginal
materials would otherwise release CO2 (or other green- (for assessing displacement policies). Users can also
house gases) through decomposition. input their own data. http://www.otcair.org
■■Power Profiler: The Power Profiler is a Web-based
Tools
tool that allows users to evaluate the air pollution
Several tools that take a basic modeling approach to and GHG impact of their electricity choices. The
estimating emissions reductions are available to states: tool is particularly useful with the advent of electric
Some capacity expansion models include dispatch 18 “Concentrations” versus “emissions:” Ambient—or surrounding—air
modeling capability, although typically on a more concentration levels are the key measure of air quality and are based on the
aggregate time scale than dedicated hourly dispatch monitored amount (e.g., in units of micrograms per cubic meter [µg/m3] or
parts per million [ppm]) of a pollutant in the air. Emission levels are based on
models. Models that address dispatch and capacity estimates and monitored measurements of the amount (e.g., in units of tons)
expansion handle both the short and long term. These of a pollutant released to the air from various sources, such as vehicles and
models are summarized in Table 4.2.7, Comparison of factories. Some emissions travel far from their source to be deposited on dis-
tant land and water; others dissipate over time and distance. The health-based
Sophisticated Modeling Approaches for Quantifying Air standards (National Ambient Air Quality Standards) for criteria pollutants
and GHG Emission Effects of Clean Energy Initiatives, are based on concentration levels. The pollutant concentration to which a
and are described in more detail in Chapters 2 and 3). person is exposed is just one of the factors that determines if health effects
occur—and their severity if they do occur (U.S. EPA, 2009).
Electric Dispatch
■■ PROSYM ■■ Provides very detailed ■■ Often lacks transparency. Often used for evaluating
■■ GE MAPS estimations about specific ■■ May require technical ■■ Specific projects in small
plant and plant-type effects experience to apply.
■■ PROMOD geographic areas,
within the electric sector.
■■ Labor- and time- intensive. ■■ Short-term planning (0-5
■■ Provides highly detailed, years), and Regulatory
■■ Often high labor and
geographically specific, proceedings.
software licensing costs.
hourly data.
■■ Requires establishment of
specific operational profile of
the clean energy resource.
■■ NEMS ■■ Model selects optimal ■■ Requires assumptions that Long-term studies (5–25
■■ IPM changes to the resource have large impact on outputs years) over large geographical
mix based on energy system (e.g., future fuel costs). areas such as:
■■ ENERGY 2020
infrastructure over the long ■■ May require significant ■■ State Implementation Plans,
■■ LEAP term (10–30 years). technical experience to
■■ Late-stage resource
■■ May capture the complex apply.
planning,
interactions and feedbacks ■■ Often lacks transparency
that occur within the entire ■■ Statewide energy plans, and
of spreadsheet due to
energy system. complexity. ■■ GHG mitigation Plans.
■■ Provides estimates of ■■ Labor- and time- intensive.
emission reductions from
■■ Often high labor and
changes to generation mix.
software licensing costs.
■■ May provide plant specific
detail and perform dispatch
simultaneously (IPM).
the AERMOD Modeling System or CALPUFF in Quality Model (CAMx). A range of photochemi-
SIP revisions analysis for existing sources and for cal-type air quality tools are also available for use
New Source Review. Numerous other dispersion in assessing control strategies. One example is the
models are available as alternatives or for use in a Modeled Attainment Test Software (MATS), a PC-
screening analysis. http://www.epa.gov/scram001/ based software tool for SIP attainment demonstra-
dispersionindex.htm tions recently developed by EPA. While MATS is
not an air quality model per se, it combines CMAQ
■■Photochemical Models. The second type of air or CAMx results with monitor data to calculate
quality models are photochemical models. Pho- design values. http://www.epa.gov/scram001/
tochemical models include many of the complex photochemicalindex.htm
physical and chemical processes that occur in
the atmosphere as gaseous emissions of different ■■Receptor Models. Receptor models can identify and
chemicals react and form PM2.5 and ozone. These quantify the sources of air pollutants at a receptor
models perform complex computer simulations, location. Unlike photochemical and dispersion air
and can be applied at a variety of scales from the quality models, receptor models do not use pol-
local to the global level. Photochemical models lutant emissions, meteorological data, and chemi-
include EPA’s Community Modeling and Analysis cal transformation mechanisms to estimate the
System (CMAQ) and the Comprehensive Air contribution of sources to receptor concentrations.
Dispersion Models
CALPUFF EPA-approved version of the Single source model with air chemistry for secondary formation. Can analyze
California Puff Model secondary formation of ozone and PM2.5.
AERMOD American Meteorological Recommended single source model for direct dispersion modeling (no air
Society/EPA Regulatory Model chemistry). Replaced Industrial Source Complex (ISC) family of models. Capable of
multiple and area source analysis.
Photochemical Models for both Ozone and PM2.5 (“One Atmosphere” models)
CAMx Comprehensive Air Quality For ozone, particulate matter, inorganic and organic PM2.5/PM10, mercury and
Model with eXtensions other toxics.
CMAQ Community Multi-Scale Air For ozone, fine particles, toxics, acid deposition, and visibility degradation.
Quality model
Receptor Models
CMB Chemical Mass Balance The EPA-CMB Version 8.2 uses source profiles and speciated ambient data to
quantify source contributions. Contributions are quantified from chemically
distinct source types rather than from individual emitters. Sources with similar
chemical and physical properties cannot be distinguished from each other by
CMB. Many of the source profiles, however, are outdated.
UNMIX N/A The EPA UNMIX model “unmixes” the concentrations of chemical species
measured in the ambient air to identify the contributing sources.
PMF Positive Matrix Factorization A form of factor analysis where the underlying co-variability of many variables
(e.g., sample to sample variation in PM species) is described by a smaller set of
factors (e.g., PM sources) to which the original variables are related. The structure
of PMF permits maximum use of available data and better treatment of missing
and below-detection-limit values.
Instead, receptor models use the chemical and types of models are available at SCRAM and are sum-
physical characteristics of gases and particles marized in Table 4.2.8, Air Quality Models Currently
measured at the source and receptor to identify Recommended by EPA and Available at EPA’s SCRAM.
the presence of, and to quantify source contribu- http://www.epa.gov/scram001/aqmindex.htm
tions to, receptor concentrations. These models are
therefore a natural complement to other air quality Some states have developed air quality models tailored
models and are used as part of SIPs for identifying to their specific region. These models are typically used
sources contributing to air quality problems. http:// for air quality policy development purposes, or for air
www.epa.gov/scram001/receptorindex.htm quality forecasting as part of an air quality index alert
system. Such local or regional models are suitable for
Additional models are available and may be suitable conducting clean energy benefits analysis, and the
for clean energy benefits analysis. EPA’s Support Cen- expertise and data needed by these models are often
ter for Regulatory Modeling (SCRAM) provides in- available within a state. An example of such a tool
formation about the latest versions of models, as well is the Assessment of Environmental Benefits (AEB)
as the status of current recommendations of models modeling system, described in the text box, which is
for regulatory purposes. Examples of all three of these currently configured for use by the southeastern states.
to create screening tools that can be used to quickly The Assessment of Environmental Benefits (AEB) modeling
evaluate expected responses to emissions changes. These system is a web-based tool designed for southeast states to
use in estimating the ozone and PM impacts of their energy
screening tools use information from a series of model
efficiency and renewable energy projects. This coupled energy-
simulations in which precursor emissions are reduced air quality modeling system was developed for use in the SIP
by specified amounts (e.g., 10 percent NOX, 20 percent development process.
NOX, 10 percent VOC, 20 percent VOC, etc.) and the AEB takes user-provided inputs of electricity impacts (efficiency
responses by various pollutants (e.g., ozone) are assessed gains or net generation) of location-specific energy efficiency
for each simulation to create a pollutant “response sur- and renewable energy projects and estimates the reduced
face” for a given area. Once the series of simulations has emissions and air quality improvements that will occur by the
been completed for a particular region, the users can avoided conventional electricity generation.
use the tool to more readily identify the emission reduc- Source: Imhoff, 2006
tion options or scenarios that seem most promising
relative to their goals. For those scenarios identified by
the screening tool as potentially effective, the user can
then re-run the full model for the identified scenarios
to more accurately evaluate the spatial and temporal as- Key Considerations When Selecting a Method
pects of the expected response. Although these screen- to Assess Air Quality Impacts
ing tools provide a quick way of evaluating the expected
Air quality impact analyses enable clean energy policy
response for a variety of scenarios, time and resources
analysts to quantify current and future changes in the
are required to develop the initial response surface for
concentration of ambient air pollutants that affect hu-
each pollutant and each given area of interest.
man health. When selecting an air quality model that
will comprehensively model either short- or long-term
Examples of air quality screening tools include:
changes in air quality, particularly in urban regions,
■■EPA Response Surface Modeling (RSM): RSM there are a number of modeling inputs and other fac-
is based on a new approach known as air qual- tors to consider.
ity metamodeling, which aggregates numerous ■■The Pollutants for Analysis. Deciding what pollut-
pre-specified individual air quality modeling
ants to model is a critical decision when selecting a
simulations into a multi-dimensional air quality
model. Directly emitted primary pollutants—such
“response surface.” RSM is a metamodel of an
as CO, SO2, direct PM, and many air toxics—
air quality model developed using the Commu-
require models capable of modeling dispersion and
nity Multi-Scale Air Quality (CMAQ) Modeling
transport (i.e., dispersion models). Secondarily
system—it is a reduced-form prediction model us-
formed pollutants such as O3 and most PM2.5 are
ing statistical correlation structures to approximate
formed by chemical reactions occurring in the
model functions through the design of complex
atmosphere with other pollutants. Secondary pol-
multi-dimension experiments. RSM has been suc-
lutants are considerably more difficult to model,
cessfully tested and evaluated for PM2.5 and ozone,
requiring a model capable of handling the complex
respectively (U.S. EPA, 2006a).
chemical transformations (i.e., photochemical
■■EPA’s Source-Receptor (S-R) matrix: The S-R matrix models), as well as short and long-range transport.
is a reduced-form model based on a regional disper- ■■Sources Affected. The number and types of sources
sion model, the Climatological Regional Dispersion
that result in emissions directly affect the selection
Model (CRDM), which provides the relationship
of an appropriate air quality model. A model that
between emissions of PM2.5 or particle precursors
is appropriate for modeling the impact of a single
and county-level PM2.5 concentrations. The S-R ma-
generating facility with a tall smokestack would be
trix is used to evaluate PM2.5 in the Co-Benefits Risk
inappropriate for analysis of an initiative that would
Assessment (COBRA) screening model described
affect electricity generation throughout the region.
later in this chapter (U.S. EPA, 2006b).
■■Timeframe. Pollutants are further distinguished
by the exposure timeframe that is most relevant
to human health impacts—e.g., long-term average
The role of BPT benefit estimates varies: some states Integrated Modeling
develop these estimates as a useful “rule of thumb” used
during screening analysis when formal air quality mod- Screening-level integrated models include emissions,
eling analyses are impractical due to time and resource air quality, health effects, and economic valuation
constraints, while other states use the estimates as a within a single software application that runs quickly
more formal part of the analysis of proposed projects. on a desktop computer.
The advantages of BPT estimates include: An integrated model typically allows the user to
enter potential emissions from one or more emis-
■■Simplicity. Users need only know the anticipated or sion categories, and then apply a series of methods
historical level of emission reductions. to estimate air quality changes, population exposure,
■■Resource efficiency. Generating benefits estimates
avoided health effects, and the economic values of
the quantified benefits. These models are not as rigor-
requires only a simple spreadsheet.
ous as the linked approach, but can quickly enable a
■■Speed. Results can be generated very quickly. less experienced analyst to prepare a screening-level
analysis of many different clean energy alternatives.
Disadvantages of the BPT estimates include: EPA’s COBRA model is an example of an integrated
screening-level model.
■■Limited ability to account for spatial heterogeneity.
The BPT estimates are best viewed as the average Integrated Modeling with COBRA
benefits of emission reductions within a specific EPA’s Co-Benefits Risk Assessment (COBRA) model is
spatial scale—either nationwide or within one of a a computer-based screening model that employs user-
few specific urban areas. In general, the BPT esti- specified emission reduction estimates to estimate air
mates are most appropriate for characterizing the quality changes and health effects. It is a stand-alone
benefits of broad-scale emission reductions. Windows application that enables users to:
■■Inflexible. Users are unable to modify any of the ■■Approximate the impact of emission changes on
assumptions within the BPT metrics, including the ambient air pollution,
selection of C-R functions, year of population expo-
sure, valuation functions, or air quality modeling. ■■Translate these ambient air pollution changes
into related health effect impacts,
■■Based on multiple assumptions. A series of model-
ing assumptions are embedded within the BPT ■■Monetize the value of those health effect
metrics. Consequently, the greater the divergence impacts, and
between these embedded assumptions and the
policy context to which the user applies the BPT ■■Present the results in various maps and tables.
metrics, the greater the uncertainty.
Using COBRA enables policy analysts to quickly and
A challenge with using BPT measures arises if a clean easily obtain a first-order approximation of the benefits
air project reduces emissions of multiple pollutants of different policy scenarios and to compare outcomes
simultaneously (e.g., SO2 and NOx). In order to reach in terms of air quality (i.e., changes in PM concentra-
a more accurate benefit-per-ton estimate, is important tions and pollutants associated with the secondary for-
to apportion the benefits among each of the multiple mation of PM, at the county, state, regional, or national
types of emission reductions. level) or health effects. COBRA is designed to allow
users to quickly and easily analyze the health effects of
Sophisticated Modeling Approaches changes in emissions of PM.
Two sophisticated modeling approaches, which vary The COBRA screening tool is based on the following
in terms of complexity, are used to quantify the hu- methodology.
■■ Requires air pollution emissions data, which the model ■■ Non-fatal heart attacks.
converts to air quality changes, as an input. ■■ Respiratory or cardiovascular hospital admissions.
■■ Includes health effects of PM.
■■ Upper and lower respiratory symptom episodes.
■■ Uses EPA-provided default concentration-response (C-R)
■■ Asthma effects, exacerbations, and emergency room visits.
functions and economic values.
■■ Shortness of breath, wheeze, and cough (in asthmatics).
BenMAP (a linked model)
■■ Minor restricted activity days.
■■ Suited to experienced modelers, although a new one-step
approach improves accessibility and training is available. ■■ Work loss days
■■ Uses EPA-provided C-R functions and economic values, air quality and health modeling experience. The default
and also allows user-specified functions. values in the model are updated to be consistent with
current EPA benefits methods. However, this strength
in ease of use is also a key limitation because COBRA
cannot incorporate more sophisticated air quality and
■■The model contains detailed emission estimates for health effect modeling techniques. http://epa.gov/state-
localclimate/resources/cobra.html
the years 2010 and 2015, developed by EPA. Before
running a scenario, users must select one of these
years as the baseline for their scenario. Linked Modeling
■■Users can then create their own scenarios by mak- Linked models are rigorous methods that combine
ing changes to the emission estimates specified by emission estimation, air quality estimates, population
the chosen baseline. Changes in PM2.5, SO2, NOx, data, baseline health data, and health concentration-
NH3, and VOC emissions can be specified at the response functions in a geographic-based analysis. This
county, state, or national level. approach uses a series of separate models in sequence:
a typical sequence of linked models begins with an
■■COBRA incorporates user-defined emission electricity generation model, followed by an emissions
changes into a reduced form air quality model, the model, an air quality model, a health effects model,
Source Receptor (S-R) Matrix, to estimate the ef- and finally an economic valuation model. The results of
fects of emission changes on PM concentrations. each major modeling step is used as an input into the
next, resulting in a rigorous overall analysis relying on
■■COBRA uses concentration-response (C-R) func-
a series of state-of-the-art modeling components.
tions to link the estimated changes in PM concen-
trations to a number of health endpoints, including While such approaches can be data- and resource-
premature mortality, chronic bronchitis, and asth- intensive, standard methods and models are available.
ma. The C-R functions are based on recent epide- Linked health effects modeling translates estimated
miological studies and are consistent with BenMAP changes in air quality into avoidable cases of a wide
and recent EPA regulatory impact analyses. range of health effects. EPA’s methods and models for
■■COBRA monetizes the health effects using eco- conducting health analysis have been reviewed by EPA’s
Science Advisory Board and the National Academy of
nomic value equations based on those approved in
Science, and are widely used by EPA, as well as state
recent EPA rulemakings.
and local governments, as a routine part of developing
air quality programs. An example of a linked model for
COBRA’s use of default C-R function and economic
health effects and valuation is EPA’s BenMAP.
values for health effects removes the burden of select-
ing these functions and values for users with limited
Economic Validation
Linked Modeling with BenMAP Costs Functions
BenMAP systematically analyzes the health and eco- ■■Air quality information for the baseline and
nomic benefits of air pollution control policy scenarios. scenario runs need to be generated exogenously,
It is designed to provide flexible and timely analysis, either from monitor-based air quality data, model-
ensure that users can understand the assumptions based air quality data, or both.19 BenMAP includes
underlying the analysis, and adequately characterize monitoring data for O3, PM, NO2, and SO2 for a
uncertainty and variability. As a first step, BenMAP number of years.
estimates impacts to populations from the year 1990
■■BenMAP then calculates the changes in health effect
to 2030 according to race, gender, age, and ethnicity.
These data are then used to estimate health impacts incidence associated with the change in population
according to sub-population. exposure by using concentration-response functions
(C-R) derived from the epidemiological literature
The BenMAP modeling approach is illustrated in Fig- and pooling methods specified by the user.20 Ben-
ure 4.2.4 and described below. MAP uses the estimate of statistical error associated
with each C-R function to generate distributions of
■■BenMAP applies the damage function approach,
a technique used to estimate the health impacts
19 BenMAP accepts air quality output from a variety of models, including
resulting from changes in air pollution. The damage
Regulatory Model System for Aerosols and Deposition (REMSAD), the Com-
function incorporates air pollution monitoring data, prehensive Air Quality Model with Extensions (CAMx), the Urban Airshed
air quality modeling data, Census data, population Monitoring-Variable grid model (UAM-V), the Community Multi-Scale Air
Quality Model (CMAQ) and EPA’s Response Surface Model (RSM). BenMAP
projections, and baseline health information to re-
can also accept other model results by changing the default input structure.
late a change in ambient concentration of a pollutant
20 Pooling is a method of combining multiple health effects estimates to gener-
ate a more robust single estimate of health impacts.
■■Texas Building Energy Performance Standards for ■■For code-compliant construction programs, the
residential and commercial building construction. ESL developed simulation models for residential
buildings using the DOE-2.1e simulation program.
■■An emissions reduction incentive grants program, ESL’s models were then linked to eGRID to auto-
which provides grants to offset costs associated matically convert energy savings into NOx emis-
with reducing NOx emissions. sion reductions.
■■A new technology research and development pro- ■■For green power programs, 15-minute metered
gram, which provides incentives to support R&D data, obtained from ERCOT, and average daily
that will reduce pollution in Texas. values for the Ozone Season Period were used to
represent the OSD electricity and NOx reductions
■■A small business program, which helps small busi-
using eGRID.
nesses and others participate in the TCEQ’s incen-
tive program.
■■Reductions of mercury
■■Energy bill savings
21 EPA Office of Air and Radiation. “Acid Rain/OTC Program Hourly Emis-
sions Data.” http://www.epa.gov/airmarkets/emissions/raw/index.html
for electricity, and it can vary over time (within a ■■11.4 million pounds of SO , and
X
day and across seasons) as demand changes. Using ■■46 pounds of mercury.
emissions factors to estimate avoided emissions
also assumes that reduced demand is perfectly cor-
With stable funding over the next ten years, the state
related with reduced emissions.22
projects that the Focus on Energy program will add
nearly $1 billion in value to Wisconsin’s gross state
Results
product (DOA, 2006).
The emission benefits for Focus on Energy’s business
and residential programs by peak/season and program Performing this comprehensive emissions factor deriva-
tion improved the accuracy of avoided emission esti-
22 This may not always be true. For example, even if demand is reduced in
mates from Focus on Energy efficiency programs and
Wisconsin, Wisconsin generators may continue operating as they did before allowed the program to take into account differences
and sell more power out of state.
Table 4.3.1 Emission Reductions from Focus on Energy Business and Residential
Programs by Peak and Season Periods (July 1, 2001 – September 30, 2003)
Pounds
Summer Off-peak 444,544 216,265 89,429,423 2.1 300,946 146,406 60,541,736 1.4
Summer Peak 473,349 222,184 86,362,026 1.7 311,951 146,426 56,915,134 1.1
Winter Off-peak 715,544 286,218 112,858,634 2.6 597,750 239,100 94,279,589 2.2
Winter Peak 863,768 366,635 125,961,032 2.7 681,608 289,316 99,397,104 2.1
DOE’s State Energy Consumption, Price, and Expenditure Estimates (SEDS) database. http://www.eia.doe.gov/emeu/states/_seds.html
The ICLEI Cities for Climate Protection program Web site has greenhouse gas http://www.icleiusa.org/action-center/learn-
emissions inventories and plans developed by many major cities in the United States. from-others/action-plans-inventories
State Energy Offices often have energy use data and projections. For example, the http://www.nyserda.org/energy_information/
New York State Energy Research and Development Authority (NYSERDA) published patterns%20&%20trends%201993-2007.pdf
such data in “Patterns and Trends: New York State Energy Profiles (1993-2007)” (2009).
The California Database for Energy Efficient Resources (DEER), sponsored by the http://www.energy.ca.gov/deer/
California Energy Commission and California Public Utilities Commission (CPUC),
provides estimates of energy and peak demand savings values, costs, and effective
useful life of efficiency measures.
NREL’s HOMER simplifies the task of evaluating the economic and technical feasibility http://www.nrel.gov/homer/
of design options for remote, stand-alone, and distributed generation applications
(both off-grid and on-grid).
Some states or regions have technology production profiles in efficiency and http://www.nyserda.org/Energy_Information/
renewable energy potential studies, e.g., Energy Efficiency and Renewable Energy energy_state_plan.asp
Resource Development Potential in New York State: Volume Four contains energy
production by costing period for some renewable resources (New York State Energy
Research and Development Authority, 2003).
NREL’s PV Watts calculates location-specific monthly energy production (kWh) from http://www.nrel.gov/rredc/pvwatts/
photovoltaic systems.
EPA’s eGRID database provides information on emissions by individual power plants, http://www.epa.gov/egrid
generating companies, states, and regions of the power grid.
The NEPOOL Marginal Emission Rate Analysis report provides marginal emission rates http://www.iso-ne.com/genrtion_resrcs/
during four time periods (ozone/one-ozone and peak/off-peak) for NOx, SOx, CO2 for reports/emission/index.html
the NEPOOL region.
The Emission Reduction Workbook (OTC Workbook) (Keith, G., D. White, and B. http://www.synapse-energy.com/Downloads/
Biewald, 2002) was developed for the Ozone Transport Commission in 2002. SynapseReport.2002-12.OTC.OTC-Emission-
Reduction-Workbook-v-2.1.02-34-Workbook.xls
EPA’s Acid Rain data (recently moved to the Clean Air Markets website) provides http://camddataandmaps.epa.gov/gdm/index.
hourly data on SO2, NOx, and CO2 emissions for Acid Rain and NOx SIP Call/OTC units cfm?fuseaction=prepackaged.select
since 1997 (since 1995 for coal-fired units).
Electric Energy Efficiency and Renewable Energy in New England: An Assessment of http://www.synapse-energy.com/Downloads/
Existing Policies and Prospects for the Future (the Regulatory Assistance Project and SynapseReport.2005-05.RAP-EPA.Efficiency-
Synapse Energy Economics, 2005) describes an analysis that used the OTC workbook and-Renewable-Energy-in-New-England.04-23.
to estimate emissions reductions from efficiency and renewables in New England. pdf
Emerging Tools for Assessing Air Pollutant Emission Reductions from Energy http://www.4cleanair.org/
Efficiency and Clean Energy: Phase II Final Report. Global Environment & Technology EmissionsModelingPhaseIIFinal.pdf
Foundation, January 31 2005.
Model Energy Efficiency Program Impact Evaluation Guide provides guidance on http://www.epa.gov/cleanrgy/documents/
model approaches for calculating energy, demand, and emissions savings resulting evaluation_guide.pdf
from energy efficiency programs. The Guide is provided to assist in the implementation
of the National Action Plan for Energy Efficiency’s five key policy recommendations
and its Vision of achieving all cost-effective energy efficiency by 2025.
Using Electric System Operating Margins and Build Margins: Quantification of Carbon http://www.synapse-energy.com/Downloads/
Emission Reductions Attributable to Grid Connected CDM Projects (Biewald, B. 2005), SynapseReport.2005-09.UNFCCC.Using-
prepared for the United Nations Framework Convention on Climate Change (UNFCC), Electric-System-Operating-Margins-and-Build-
analyzed the impact of reductions in electricity demand and renewable generation on Margins-.05-031.pdf
CO2 emissions.
Methods for Estimating Emissions Avoided by Renewable Energy and Energy http://www.synapse-energy.com/Downloads/
Efficiency (Keith, G. and B. Biewald, 2005), prepared for U.S. Environmental Protection SynapseReport.2005-07.PQA-EPA.Displaced-
Agency, evaluates several methods of estimating displaced emissions without using a Emissions-Renewables-and-Efficiency-
dispatch model. EPA.04-55.pdf
Modeling Demand Response and Air Emissions in New England (Keith, G., B. Biewald, http://www.synapse-energy.com/Downloads/
D. White, and M. Drunsic, 2003), prepared for the U.S. Environmental Protection SynapseReport.2003-09.US-EPA.NE-DR-and-
Agency, presents an analysis of the impact of reductions in electricity demand and AE-Modeling.03-01.pdf
renewable generation on air emissions.
Electric dispatch models that can be used to assess displaced emissions include: GE-MAPS
http://www.gepower.com/prod_serv/products/
■■ GE-MAPS (Multi-Area Production Simulation)
utility_software/en/ge_maps/index.htm
■■ Market Analytics (PROSYM)
Market Analytics
■■ PROMOD IV
http://www.ventyx.com/analytics/market-
analytics.asp
PROMOD IV
http://www.ventyx.com/analytics/promod.asp
Energy Portfolio Management: Tools and Practices for State Public Utility http://www.synapse-energy.com/Downloads/
Commissions (Steinhurst, W., D. White, A. Roschelle, A. Napoleon, R. Hornby, and B. SynapseReport.2006-07.NARUC.Portfolio-
Biewald, 2006) describes a sample of capacity expansion models. Management-Tools-and-Practices-for-
Regulators.05-042.pdf
The Hudson River Foundation financed the Clean Electricity Strategy for the Hudson http://www.synapse-energy.com/Downloads/
River Valley (Synapse Energy Economics and Pace Law School Energy Project, 2003). SynapseReport.2003-10.Pace.Hudson-River-
This report explores the air-emissions reductions that would likely result from the Clean-Energy-Strategy.02-23.pdf
implementation of a proposed clean energy plan, consisting of new energy efficiency
programs, renewable generation, combined heat and power, and retrofit projects.
Capacity expansion models that can be used to assess displaced emissions include: Integrated Planning Model (IPM)
http://www.icfi.com/Markets/Energy/energy-
■■ Integrated Planning Model (IPM) (ICF International)
modeling.asp#2
■■ National Energy Modeling System (NEMS) (U.S. DOE)
NEMS
■■ ENERGY 2020
http://www.eia.doe.gov/oiaf/aeo/overview/
index.html
ENERGY 2020
http://www.energy2020.com/
SCRAM http://www.epa.gov/ttn/scram/
REMSAD http://remsad.saintl.com
CAMx http://www.camx.com
UAM-V http://uamv.saintl.com
CMAQ http://www.epa.gov/AMD/CMAQ/
CMAQscienceDoc.html
COBRA http://epa.gov/statelocalclimate/resources/
cobra.html
BenMAP http://www.epa.gov/air/benmap/
ASAP http://www.epa.gov/ttn/ecas/asap.html
Estimating Seasonal and Peak Environmental Emission Factors – Final Report. http://www.doa.state.wi.us/docs_view2.
Prepared by PA Government Services for the Wisconsin DOA. May 2004. asp?docid=2404
New Jersey Clean Energy Program. 2007. Protocols to Measure Resource Savings, http://www.njcleanenergy.com/files/file/
December. Protocols_Final_12-20-07_%5B1%5D.pdf
EPA Office of Air and Radiation. “Acid Rain/OTC Program Hourly Emissions Data.” http://camddataandmaps.epa.gov/gdm/index.
cfm?fuseaction=prepackaged.select
Connecticut GSC on Climate Change. 2005. CCCAP. GSC on Climate Change. http://www.ctclimatechange.com/
Connecticut Climate Change Web site, State Action Plan. StateActionPlan.html
Davidson, K., A. Hallberg, D. McCubbin, and B. Hubbell. 2003. Analysis of PM2.5 Using http://www.informaworld.com/smpp/content~
the Environmental Benefits Mapping and Analysis Program (BenMAP). Presented at db=all?content=10.1080/15287390600884982
the 2nd AirNet Annual Conference/NERAM International Colloquium. November. (fee for full text)
Erickson et al. 2004. Erickson, J., C. Best, D. Sumi, B. Ward, B. Zent, and K. Hausker. http://www.doa.state.wi.us/docs_view2.
Estimating Seasonal and Peak Environmental Emission Factors – Final Report. asp?docid=2404
Prepared by PA Government Services for the Wisconsin DOA. May.
Excelsior Energy. 2005. Air Quality and Health Benefits Modeling: Relative Benefits http://mncoalgasplant.com/15%20Exhibit%20D.
Derived from Operation of the MEP-I/II IGCC Power Station. December. pdf
Fann, N, Fulcher, C, Hubbell, B. The Influence of Location, Source, and Emission Type in http://www.springerlink.com/content/
Estimates of the Human Health Benefits of Reducing a Ton of Air Pollution. Submitted b16jx57531877j31/fulltext.pdf
for publication October 2008, Journal of Air Quality, Atmosphere and Health.
IPCC. 2008. Intergovernmental Panel on Climate Change Web Site: Methodology http://www.ipcc.ch/publications_and_data/
Reports. publications_and_data_reports.htm#4
Keith, G. and B. Biewald. 2005. Methods for Estimating Emissions Avoided by http://www.synapse-energy.com/Downloads/
Renewable Energy and Energy Efficiency. July 8. SynapseReport.2005-07.PQA-EPA.Displaced-
Emissions-Renewables-and-Efficiency-
EPA.04-55.pdf
National Action Plan for Energy Efficiency. 2007. Model Energy Efficiency Program http://www.epa.gov/cleanrgy/documents/
Impact Evaluation Guide. Prepared by Steven R. Schiller, Schiller Consulting, Inc. evaluation_guide.pdf
November.
NERC. 2009. North American Electric Reliability Corporation Web Site: Key Players - http://www.nerc.com/page.php?cid=1|9|119
Regions.
New Mexico Climate Change Advisory Group. 2006. Climate Change Action Plan. http://www.nmclimatechange.us
Final Report. December.
NYSERDA. 2009. New York State Energy Research and Development Authority, http://www.nyserda.org/energy_information/
Patterns and Trends: New York State Energy Profiles (1993-2007). December. patterns%20&%20trends%201993-2007.pdf
Synapse. 2003. Synapse Energy Economics and Pace Law School Energy Project. http://www.synapse-energy.com/cgi-bin/
synapsePublications.pl?filter_type=Client&filter_
option=Pace+Law+School+Energy+Project&ad
vanced=false
U.S. DOE. 2008a. Energy Information Administration. Consumption, Price, and http://www.eia.doe.gov/emeu/states/_seds.html
Expenditure Estimates. State Energy Data System (SEDS). November.
U.S. EPA. 2003. BenMAP User’s Manual. Office of Air Quality Planning and Standards. http://www.epa.gov/air/benmap/
U.S. EPA. 2004. Guidance On State Implementation Plan (SIP) Credits For Emission http://www.epa.gov/ttn/oarpg/t1/memoranda/
Reductions From Electric-Sector Energy Efficiency And Renewable Energy Measures. ereseerem_gd.pdf
August.
U.S. EPA, 2006. Clean Energy-Environment Guide to Action: Policies, Best Practices, http://www.epa.gov/statelocalclimate/
and Action Steps for States. April. resources/action-guide.html
U.S. EPA. 2006a. Technical Support Document for the Proposed PM NAAQS Rule: http://www.epa.gov/scram001/reports/
Response Surface Modeling. Office of Air Quality Planning and Standards, Research pmnaaqs_tsd_rsm_all_021606.pdf
Triangle Park, NC. February.
U.S. EPA. 2006b. User's Manual for the Co-Benefits Risk Assessment (COBRA) Model. http://www.epa.gov/statelocalclimate/
Developed by Abt Associates for the Climate Protection Partnerships Division, Clean resources/cobra.html
Energy-Environment State Partnership Program. Washington, DC.
U.S. EPA, 2007. Technology Transfer Network Clearinghouse for Inventories & http://www.epa.gov/ttn/chief/eiip/techreport
Emissions Factors Web Site: Emission Inventory Improvement Program.
U.S. EPA. 2008b. Inventory Of U.S. Greenhouse Gas Emissions And Sinks: 1990-2006. http://www.epa.gov/climatechange/emissions/
April. USEPA #430-R-08-005 downloads/08_CR.pdf
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Document map
Given the strong link between economic performance Introduction
and energy use, it is important for states to account for • Chapter two
the macroeconomic effects of potential clean energy potential energy Impacts of clean energy
policies and programs during the process of selecting • Chapter three
and designing these policies. Many studies have shown electric System Benefits of clean energy
that when a state makes cost-effective investments • Chapter Four
in energy efficiency and renewable energy, the state’s air Quality Benefits of clean energy
entire economy will benefit. For example, Wisconsin’s
Focus on Energy Program was created to manage ris- • Chapter Five
economic Benefits of clean energy
ing energy costs, promote in-state economic develop-
ment, protect the environment, and control the state’s
growing demand for electricity. An analysis conducted
by the Wisconsin Department of Administration an-
ticipates that it will meet these objectives while creating Chapter Five Contents
more than 60,000 job years, generating more than 5.1 How clean energy Initiatives create
eight billion dollars in sales for Wisconsin businesses, macroeconomic Benefits
increasing value added or gross state product by more 5.2 How can States estimate the macroeconomic
than five billion dollars, and increasing disposable Benefits of clean energy Initiatives?
income for residents by more than four billion dollars 5.3 case Studies
between 2002 and 2026 (Wisconsin Department of
Administration, 2007; see text box States Quantify-
ing the Economic Benefits of Clean Energy Policies).
These results demonstrate that positive results from
clean energy investments have spread to the broader
community.
The Wisconsin Department of Administration conducted an 5.1 How Clean Energy Initiatives
evaluation of the economic impacts of the Focus on Energy Create Macroeconomic Benefits
Program from its inception in 2002 through 2026. The analysis
involved:
Clean energy initiatives can result in macroeconomic
1. Documentation and extrapolation of the net direct effects benefits through direct, indirect, and induced economic
of the program, such as program-related spending, energy effects. As implied by these terms, some of the macro-
cost savings and spending on new equipment;
economic benefits of clean energy investments accrue
2. Application of a regional economic model (in this case, the to those individuals, businesses, or institutions directly
REMI model); and
involved in the investment, while other benefits arise
3. Analysis of the implications. in related economic sectors and society as a whole via
The results indicate that the Focus on Energy Program provides indirect and induced “ripple” (or “multiplier”) effects.
net benefits to the State of Wisconsin. Specifically, the analysis
estimates that between 2002 and 2026, the Focus on Energy ■■The design and scope of the clean energy initiative
Program is expected to: typically determine the direct and indirect effects.
■■ create more than 60,000 job-years (see the text box Job
Years Versus Jobs);
■■The structure and composition of the state’s econ-
■■ generate sales for Wisconsin businesses of more than
omy determine the resulting indirect and induced
eight billion dollars; effects.
■■ increase value added or gross state product by more than
five billion dollars; and
The direct effects of policies or programs that affect
energy demand, such as those that stimulate invest-
■■ increase disposable income for residents by more than
ments in energy efficient equipment by the commercial
four billion dollars.
or residential sectors, will differ from the direct effects
Source: Wisconsin Department of Administration, 2007. of those that affect the supply of energy, such as renew-
able portfolio standards. The direct effects of these
demand and supply programs are key inputs to mac-
roeconomic analyses. The indirect and induced effects
are determined once the direct effects interact with
■■Build support for their clean energy initiatives
the overall state or regional economy. When exploring
among state and local decision-makers; and the direct, indirect, and induced costs and benefits of
■■Identify opportunities where meeting today’s clean energy programs, it is useful to consider how the
initiative affects other state economic policy objectives,
energy challenges can also serve as an economic
such as distributional equity, and to ensure that it both
development strategy.
affects the segments of the economy that were initially
targeted and minimizes negative ramifications (e.g., a
This chapter helps states understand the issues and
resulting loss in jobs in another sector, which would
methods for assessing the economic benefits of clean
have distributional effects).
energy options so that they may conduct and manage
analyses, review cost and benefit estimates presented to
Direct, indirect, and induced effects are described in
them, and make recommendations about the clean en-
greater detail below.
ergy options the state should explore or the appropriate
evaluation approaches and tools to use.
■■Operating costs: dollars spent to operate and main- In this case, the more robust quantification of macroeconomic
tain the equipment during its operating lifetime benefits, as opposed to simply quantifying direct benefits,
led to a substantially different appreciation of the economic
and the cost of production surcharges applied to significance of the program to the State of Illinois. (Bournakis
consumers. and Hewings et al., 2005.)
Assessing the state-level macroeconomic benefits of Consequently, it is useful for state policy makers to
clean energy initiatives involves measuring changes in understand the basic differences between the different
the flow of dollars to households and businesses at the models and approaches, their strengths and weakness,
state level. Changes in these flows can be estimated as and their underlying assumptions. The following sec-
gross impacts (changes without adjustment for what tions introduce the basic concepts associated with wide-
would have occurred anyway) or net impacts (changes ly accepted screening tools and more advanced models
over and above what would have occurred anyway). for macroeconomic analysis of clean energy initiatives.
The macroeconomic impacts of clean energy initiatives Table 5.2.1 describes the advantages and disadvantages
can also be evaluated for cost-effectiveness. Cost- of each method and when it is appropriate to use.
effectiveness refers to the benefits generated per dollar
of program costs.
Sample Tools or
Type of Method Resources Advantages Disadvantages When to Use this Method
Basic Approaches: ■■ Rule-of-thumb ■■ May be transparent ■■ Overly simplified ■■ When time and
Factors ■■ Requires minimal input assumptions resources are short
■■ Rule-of-thumb
estimates and ■■ Job and Economic data, time, technical ■■ Approximate results ■■ For high-level,
Development Impact expertise, and labor. ■■ May be inflexible. preliminary, analyses
■■ Screening models
(JEDI) Model ■■ Inexpensive, often free. ■■ To get quick estimates of
■■ RMI Community employment, output and
Energy Opportunity price changes
Finder ■■ When screening a
■■ Renewable Energy large number of policy
Policy Project Labor options to develop a
Calculator short list of options for
further analysis.
Sophisticated ■■ IMPLAN, ■■ More robust than basic ■■ May be less transparent ■■ When policy options are
Approaches: ■■ RIMS II modeling methods. than spreadsheet well defined
■■ May be perceived as methods. ■■ When a high degree of
■■ Input-Output; ■■ RAND econometric
model more credible than ■■ May require precision and analytic
■■ Econometric;
basic methods. extensive input rigor is desired
■■ Computable ■■ BEAR
■■ Provides detailed data, time, technical ■■ When sufficient data,
General ■■ REMI Policy Insight expertise, and labor
results time and financial
Equilibrium; and commitments.
■■ May model impacts resources are available.
■■ Hybrid Models ■■ Often high software
over a long period of
time licensing costs.
Basic Approaches for Energy Opportunity Finder, and REPP’s Labor Calcu-
Macroeconomic Impact Analysis lator), are described below.
At the simpler, less resource-intensive level, screening
Rule-of-Thumb Economic Factors
tools and approaches provide quick, low-cost analyses
of policies and require less precise data than needed States can apply rules of thumb or generic economic
for a rigorous, advanced analysis. These screening factors to their program results to estimate the eco-
methods provide rough estimates of impacts and give nomic impacts of clean energy measures in their states.
a sense of the direction (i.e., positive or negative) and These rules of thumb are typically drawn from more
magnitude of the impacts upon the economy. They rigorous analyses and can be used when time and re-
provide a useful screening device when many options sources are limited. However, they provide only rough
are under consideration and limited resources are approximations of clean energy program impacts and
available to conduct advanced analyses. For example, a so are most applicable for use as screening-level tools
state considering a lengthy list of climate change miti- for developing preliminary benefit estimates and for
gation options can use a screening tool to help rank the prioritizing potential clean energy activities. Table 5.2.2
candidates to create a short list of options that warrant lists several rules of thumb that states have used to
further analyses with more sophisticated tools. Screen- estimate the income, output, and employment impacts
ing approaches, such as rule-of-thumb job factors and of energy efficiency and renewable energy programs.
tools (e.g., NREL’s JEDI model, the RMI Community
$1 million invested in wind in Iowa produces 2.5 job- Weisbrod et al., 1995
years. http://www.edrgroup.com/library/energy-environment/iowa-energy.html
$1 million invested in wind or PV produces 5.7 job- Singh and Fehrs, 2001
years vs. 3.9 job-years for coal power. http://www.repp.org/articles/static/1/binaries/LABOR_FINAL_REV.pdf
As shown in Table 5.2.2, for example, the Renewable The New York State Energy Research and Develop-
Energy Policy Project (REPP) estimates that every $1 ment Authority (NYSERDA) has developed a similar
billion of investment in the components that make jobs factor for energy efficiency programs. It estimates
up wind generators creates 3,000 full-time equivalent that every GWh of electricity saved through energy
(FTE) jobs. REPP also finds that every megawatt (MW) efficiency programs yields 1.5 sustained jobs.5 This fac-
of wind requires a $1 billion investment in the genera- tor is derived from a more sophisticated analysis of the
tor components (REPP, 2005). If a state has estimated macroeconomic impacts of the New York Energy $mart
the amount of renewable (wind) electricity that will Program through 2007. This analysis estimated that the
be generated from its clean energy programs, it can program had created, on average, 4,700 net jobs each
use these factors to determine the amount of jobs that year between 1999 and 2007 while saving about 3,164
could be created. GWhs in electricity (NYSERDA, 2008). Dividing the
net sustained jobs, about 1.5, for each GWh saved. New Wind power has been proposed in Utah as a way to diversify the
York uses this number to generate rough estimates of state’s electricity generation. Utah State University used JEDI
to inform decision makers about the likely impact of five wind
the job impacts of new or expanded energy efficiency-
capacity scenarios: 5 MW, 10 MW, 14.7 MW, 20 MW, and 25 MW.
related programs under consideration. For example,
when New York announced its 15 by 15 initiative, which Economic and demographic information was obtained from
three sources: (1) the Economic Development Corporation of
set a goal of reducing energy demand by 15 percent or Utah (EDCU); (2) IMPLAN multipliers for Utah county supplied by
27,300 GWhs through energy efficiency, NYSERDA’s NREL; and (3) two local wind developers. These data allowed the
rule of thumb was used to estimate that the initiative study to dictate cost and other inputs specific to their scenarios.
was expected to create about 41,000 jobs in the state. The results of the JEDI analysis indicated promising economic
opportunities for wind power in Utah. For example, the
These rule-of-thumb factors can be handy when time proposed Spanish Fork project (14.7 MW) would produce 46
and resources for more rigorous analysis are limited. total new jobs, $1.2 million in wage earnings, and $4.2 million in
economic output during the construction phase of the project
As shown in Table 5.2.2, however, the range of values
(Mongha et al., 2006).
is wide. For this reason, it is very important to under-
stand any biases that may be inherent in the rule of
thumb before using them. For example, factors can be
based on outdated information and would be affected
by changes in construction and material costs that have ■■Does it include the opportunity costs (lost jobs,
occurred since the factor was derived. Alternatively, reduced earnings, spending or GSP) that occur
factors may not take into consideration that the funds because the money for the clean energy program
are likely to have come from elsewhere in the economy was taken from elsewhere in the economy?
and may result in negative impacts. For example, the
REPP wind-related factor described above may not ■■If the rule of thumb is related to employment, is
consider that the $1 billion investment could have been the estimate it generates given in jobs or job years
taken from another sector in the state or the United (for more information, see text box Job Years Ver-
States as a whole, which may now experience job losses. sus Jobs earlier in this chapter).
There is an opportunity cost—the value of the next best
■■Does the rule of thumb reflect any price increases
alternative forgone—that states should consider when
taking resources from one place in the economy and consumers may have to pay for the technology or
investing them in something different, in this case clean program?
energy. In addition, it is not clear if the 3,000 jobs are
net or gross. That is to say, it is not apparent whether Typically, these are the types of issues addressed in
the numbers reflect job losses that may occur in other more rigorous analysis but it is important to be aware
sectors. It also is not obvious whether any additional of any limitations associated with rule-of-thumb
price increases that the consumer would have to pay for factors. Because of these oversimplifications, rule-of-
renewable energy have been reflected in the analysis. thumb factors are best recognized as screening-level
tools that can provide preliminary estimates.
For energy efficiency programs, there are similar ques-
tions to consider when using a factor. When a state Screening Tools
implements a program for energy efficiency through Job and Economic Development Impact (JEDI)
surcharges to rate payers, it is taking money away Model for Wind Projects
from the consumers that it would have spent on other
goods, possibly creating job losses, and investing them The U.S. Department of Energy/National Renew-
into the energy efficiency program, possibly creating able Energy Laboratory (DOE/NREL) developed a
job increases. spreadsheet-based model, JEDI, for estimating the local
economic effects of the construction and operation of
Key questions to consider when using a rule-of-thumb wind power plants. JEDI is designed to be user-friendly
estimate include: and does not require experience with spreadsheets or
economic modeling. The model was originally devel-
■■How recent are the construction and material costs
oped with state-level parameters, but it can also be
used in the factor?
As part of its 1997 restructuring legislation, the Nevada Bottom-Up and Top-Down analyses are the two primary
legislature established an RPS that included a 5% renewable approaches for modeling energy-economy relationships. The
energy requirement in 2003 and a 15% requirement by 2013. The major differences between these approaches are the emphases
Nevada American Federation of Labor-Congress of Industrial placed on a detailed technologically based representation of the
Organizations (AFL-CIO) used the REPP Labor Calculator to energy system, and the representation of the general economy.
estimate the job diversification effects of the RPS (IREC, 2005).
Bottom-up models include a detailed representation of the
To use the calculator, AFL-CIO had to make a number of energy sector in the form of an energy technology matrix,
assumptions, including assumptions to estimate electricity where each technology is represented by engineering cost
sales by technology type, which were then used to estimate the and performance characteristics. These models are capable
installed capacity of each renewable technology. of capturing substitution among labor, capital, and fuel
inputs among technologies, and other structural changes in
The results of their analysis showed that, from 2003-2013, the
the energy sector in response to a given stimulus or policy
RPS would create 27,229 total, direct full-time-equivalent (FTE)
constraint (Loschel, 2002). These models, however, generally
jobs. Of these jobs, 19,138 are estimated to be manufacturing
do not assess how energy system changes spill over to other
jobs while 8,092 are installation and O&M jobs. These are
economic sectors and generate macroeconomic or general
direct jobs and do not account for any indirect or induced
equilibrium effects. Bottom-up models are also limited in
employment effects (AFL-CIO, 2002).
their ability to represent the influences of non-energy markets
on cost and performance dynamics of the energy system
technologies (Bohringer, 1998; Loschel, 2002).
Example of When to
State Tools Advantages Disadvantages Considerations Use
IMPLAN ■■ Quantifies the total economic ■■ Static; multipliers represent only ■■ Provides rich sectoral ■■ Short-
effects of a change in the demand a snapshot of the economy at a detail (NAICS-based). term
for a given product or service. given point in time. Could be appropriate if analysis.
■■ Can be inexpensive. ■■ Generally assumes fixed prices. the need is to analyze
detailed impacts by
■■ Typically does not account for
sector.
substitution effects, supply
constraints, and changes in
competitiveness or other
demographic factors.
RAND ■■ Usually dynamic, can estimate ■■ Historical patterns may not be ■■ Important to ■■ Short-
and/or track changes in policy best indicator or predictor of understand if model and
impacts over time. future relationships. is myopic or has long-
■■ Coefficients are based on ■■ Some econometric models do not foresight. term
historical data and relationships, allow foresight. analysis.
and statistical methods can be
used to assess model credibility.
BEAR ■■ Account for substitution effects, ■■ Not widely available at state level. ■■ Important to examine ■■ Long-
supply constraints, and price ■■ Most CGE models available at how the energy sector term
adjustments. state level are static, although a is treated within any analysis.
few are dynamic. specific CGE model.
METHOD: Hybrid
REMI ■■ Most sophisticated, combining ■■ Can be expensive, especially if ■■ Important to examine ■■ Short-
Policy aspects of all of the above. there is a need to analyze impacts how energy sector is and
Insight ■■ Dynamic, can be used to analyze on multiple sub-regions (e.g., treated. long-
both short- and long -term counties within a state). ■■ May need to update term
impacts. ■■ Can require a fair amount of default data to account analysis.
■■ Can be used to model regional massaging inputs, especially with for most recent energy
interactions. energy sector inputs. assumptions .
In 2004, Connecticut analyzed the eco- Oil & Natural Gas Oil Natural Gas
nomic impact of oil and natural gas con-
Employment (Average Annual Increase)* 2,092 430 1,668
servation policies in Connecticut. The
state wanted to explore the impacts of fully Output (Mil ‘96$) 3,094.90 82.80 3,020.64
funding a program between 2005 and 2020
to increase the efficiency of oil and natural GSP (Mil ‘96$) 2,033.01 266.21 1,773.82
gas for residential, commercial, and indus-
trial users. Population 3,604 717 2,894
Connecticut used a hybrid model, the REMI Real Disposable Personal Income (Mil ‘96$) 1,749.42 294.81 1,459.35
Policy Insight model, for their analysis.
REMI is a frequently used proprietary model State Revenues (Mil ‘01$) 382.13 66.75 314.97
in the US for analyzing state level policy ini-
tiatives. Because the model does not have
*
Employment is the average annual increase from the baseline. Employment is not
a detailed energy sector module to fully cumulative and is based on output growth. Source: REMI, 2004.
capture the fuel-switching that would oc-
cur within the electricity sector, Connecti-
cut used outputs from an energy analysis reduced consumption; and the investment state. The natural gas conservation ef-
using an electricity dispatch model—ICF in new equipment, construction, research, forts, however, contributed more than the
International’s IPM—to estimate the energy and other sectors. oil programs to the overall benefits of the
changes used as inputs to Policy Insight. program. Because the model contains very
The direct costs included cost increases These direct effects were used as inputs to
detailed sector-specific information, the
resulting from a 3% natural gas-use and oil- the REMI model to determine the indirect,
analysts were able to determine that “The
use surcharge on residential, commercial, induced, and overall effects of the program.
disproportionate ratio between the oil and
and industrial users to pay for the program; The model was able to break down the
natural gas policies is due to the higher loss
the savings to residential, commercial, and results to determine the contribution the
in demand for petroleum than for natural
industrial users due to reduced consump- oil conservation efforts and the natural gas
gas… the loss in demand of oil is almost 6
tion of natural gas and oil; the consumption conservation efforts made to the overall
times higher than the loss in demand for
reallocation of other consumer goods due economic impact. For example, as shown
natural gas” (REMI, 2004).
to an increase in personal income; the loss in the above table, the overall result of the
in sales to natural gas and oil firms due to analysis showed economic benefits to the
energy efficiency as a way to meet energy demand. In- impacts of state-level greenhouse gas mitigation poli-
dividual models will handle this differently depending cies in California. A recent analysis concluded that
upon the details (e.g., number of sectors) of the model. nearly 50 percent of California’s 2020 goal of reducing
emissions levels to 1990 levels could be achieved using
CGE models are more readily available at the national just a handful of options under consideration, while
level than at the state level, and most CGE models are increasing gross state product by 2.4 percent and creat-
highly aggregated. Some states, however, have devel- ing more than 20,000 jobs (Roland-Holst, 2006).
oped and/or used state-specific CGE models to analyze
the impacts of clean energy initiatives.6 In California, Hybrid Models
for example, the University of California at Berkeley
Hybrid models incorporate aspects of two or more of
developed a dynamic CGE model, the Berkeley Energy
the modeling approaches described above, with most
and Resources (BEAR) model. In addition to the core
models linking an I‑O model to an econometric model.
CGE model, it includes extensive detail about the
Most hybrid models used for energy-related analyses
energy sector and also estimates greenhouse gas emis-
are described as regional economic-forecasting and
sions. This model has been used to assess the potential
policy-analysis models. These models are the most
sophisticated—and expensive—of the four categories
6 RTI International developed a CGE model (the Applied Dynamic Analysis of models.
of the Global Economy (ADAGE) Model) that can be used to explore dynam-
ic effects of many types of energy, environmental, and trade policies, including
climate change mitigation policies. For more information on CGE models and These models include five analytic elements: (1) output,
their application for macroeconomic impact analysis, see Sue Wing (2004). (2) labor and capital demands, (3) population and
Of the general approaches described in this section, the policy analyses. State analysts can consider this model
hybrid modeling approach offers the most flexibility information in deciding upon an appropriate model
and detail in tailoring an analysis to estimate the effect for analyzing the macroeconomic benefits of clean en-
of a specific clean energy initiative on a state’s economy. ergy initiatives. No one model is perfect for any given
A user can specify and forecast numerous different analysis case, and the analyst may often choose a given
model inputs, including: industry output, industry model because it has been used previously for analyses
demand, government, investment and/or consumer within a state and certain individuals within the state
spending, employment, factor productivity, labor sup- analytic community are more familiar with run specifi-
ply, production costs, business taxes and credits, fuel cation and interpretation of model outputs.
and/or labor costs, wages, housing and consumer prices,
and market shares. The results of the complex, dynamic 5.2.2 Step 2: Quantify
simulations produced by hybrid models can be distilled Expenditures and Savings
into net impacts on key economic policy indicators, from the Clean Energy Initiative
such as employment, income, and overall economic
output. Hybrid models can be effective at estimating The second step in analyzing macroeconomic effects is
both the long- and short-term impacts of policies. to quantify the direct expenditures and savings from
implementing the clean energy initiative. The expen-
As with other models, it is useful to examine how the ditures and savings are the primary inputs to the sub-
energy sector and technological change are treated sequent analysis of macroeconomic effects on income,
within a hybrid model. Many states have found that employment, and output. As described in Sections
detailed energy-related analyses require energy model- 5.1.1 and 5.1.2, the specific expenditures and savings
ing to be done separately and used as inputs to a hybrid that states need to consider in this step are different for
model. This can be a limitation of some hybrid models. demand-side and supply-side initiatives. But generally
In addition, these models can be very complex, time- speaking, these expenditures and savings include esti-
consuming and expensive to run, and require signifi- mates of energy savings associated with the initiative
cant input data. and data on expenditures by participating entities and
the costs of administering the program.
Hybrid models used for policy analyses include REMI
Policy Insight® (see text box Analyzing Conserva- Key Considerations for Quantifying
tion Policies in Connecticut), those developed by the Expenditures and Savings
Regional Economics Applications Laboratory (REAL, States have found it useful to design a strategy to quan-
developed at the University of Illinois), the Illinois tify initiative expenditures and savings based on (1) the
Regional Econometric Input-Output Model (ILREIM), design and nature of the initiative, (2) the attributes of
and the Georgia Economic Modeling System (GEMS™, the state’s economy, and (3) the expected behavior of
developed at the University of Georgia). A list of ad- the initiative participants. Several factors contribute to
ditional state-level analyses conducted using hybrid the challenge of developing such a strategy. The analyst
models is provided at the end of this chapter. can consider the following factors when establishing
the necessary data to estimate expenditures and savings
Comparison of Models Commonly Used by States (DOA, 2001):
to Analyze Clean Energy Initiatives
■■Expected energy savings or costs (e.g., oil, natural
Table 5.2.4 summarizes key aspects of the four model
types—input-output, econometric, CGE and hybrid— gas, electricity) to consumers over time. To perform
that have been frequently used for energy-related an economic impact analysis, it is often important
Model Characteristics
State and County Level Modeling Yes Certain Models Varies Yes
Major Data Sources BEA, BLS, CBP, and Varies Varies BEA, BLS, CBP, EIA
Census and Census
Industry Characteristics
Other Features
Impacts Measured
*
Models names are included for illustrative purposes only, and do not imply an endorsement by EPA.
to translate any energy savings into dollars. This investments will result in energy cost savings. Both
monetization can be accomplished by applying will affect the economy. For more information on
projections of prices for different energy types calculating energy savings, see Chapter 2, Assess-
(e.g., coal, oil, gas, electricity) to the profile of ex- ing the Potential Energy Impacts of Clean Energy
pected energy savings. For example, a policy that is Initiatives.
funded by a surcharge on electricity bills imposes
a cost on consumers but the energy efficiency
8 RPCs can be estimated for specific products or services based on analysis of,
for example, the extent to which a state has a disproportionately large or small
7 As a corollary, in estimating the energy savings to be achieved by a base of manufacturers providing the relevant types of energy-saving equip-
program, it is also important to account for, and net out, the baseline energy ment (DOA 2001). Alternatively, many economic models contain default RPC
savings that would have occurred without the program. values.
Systems Impacts
Savings to All Customers Due to Lower Wholesale Energy Clearing Prices $19.4 million
Economic Impacts
Massachusetts Annual Report on Energy Efficiency further disaggregated into industry-specific measures
using Bill of Goods data developed by a contractor.
The Massachusetts Division of Energy Resources
(DOER) produces an annual report analyzing the
Using the expenditure and savings inputs, the DOER
impacts of ratepayer-based energy efficiency programs
modeled the macroeconomic effects of 2002 program
in the state. The 2004 report is a retrospective analysis
investments on employment, disposable income, and
of the macroeconomic effects of investments in energy
GSP using the REMI Policy Insight model. In addition,
efficiency made in 2002 (DOER, 2004).
the DOER used those same expenditure and savings
data in combination with the Energy 2020 model to
To perform the macroeconomic analysis, the DOER
project the lifetime energy savings of the 2002 program
first determined the expenditures and savings for
activities. Using these projected savings from Energy
the 2002 investments. Program expenditures in
2020 as inputs, the DOER used the Policy Insight mod-
2002 included administration, marketing, program
el to estimate the future economic benefits reflected in
implementation, program evaluation, performance
Table 5.2.5.
incentives paid to the distribution companies, and
direct participant costs (2002 investments totaled $138
million). Program administrators collect these data on 5.2.3 Step 3: Apply the Method to
a continuous basis. Savings included direct participant Quantify Macroeconomic Effects
energy savings and electricity bill reductions, which Once the direct expenditures and savings of a clean
were estimated using a combination of data from Mas- energy initiative have been quantified, the final step is to
sachusetts distribution companies, including participa- assess the aggregate macroeconomic effects of the initia-
tion rates, average energy use per participant, and elec- tive by applying the screening tool or modeling method
tricity rate impacts for each customer sector specific selected in Step 1. With regard to policy implementa-
to each electric distribution company service territory. tion, many states have found the rigorous modeling
The detailed expenditure and savings data were then methods outlined in Section 5.2.1 to be most effective
in generating support for clean energy actions when a
of their conservation program are described in the text were presented using the following indicators:
box Steps in a Macroeconomic Impact Analysis: Con- employment, output, GSP, real disposable income, state
revenues, and population changes.
necticut’s Oil and Natural Gas Conservation Policies.
The implementation of CT’s proposed oil and natural gas
conservation policy is pending legislative action.
5.3 Case Studies
■■a reduction in productivity costs for business cus- ■■Increase gross state product by $13.37 billion, and
tomers whose energy costs have been reduced as a ■■Increase total output by $20.59 billion (NYSERDA,
result of the programs, 2009).
■■a decrease in disposable income for residents from
paying the SBC,
In addition, the study also revealed other results: For More Information
■■The state would experience an economic adjust- ■■The Economic and Environmental Impacts of Clean
ment composed of the interplay between the Energy Development in Illinois. Bournakis, A., G.
reduced local production of fossil-fuel energy and Hewings, J. Cuttica, and S. Mueller. Submitted to
the increased production of efficiency equipment the Illinois Department of Commerce and Eco-
(it is likely that some portions of the efficiency nomic Opportunity. June, 2005. http://www.erc.uic.
equipment will be manufactured in Illinois). edu/PDF/Clean_Energy_Development.pdf.
■■Part of the saved energy will come from reduced
energy imports.
■■Non-local impacts will affect the economies of 10 ICC Resolution 05-0437, available at: http://www.dsireusa.org/documents/
other states. Incentives/IL04R.pdf
Grover, S. 2007. Economic Impacts of Oregon Energy Tax Credit Programs Oregon http://www.oregon.gov/
(BETC/RETC). Prepared by ECONorthwest for the Oregon Department of Energy. ENERGY/CONS/docs/EcoNW_
May. Study.pdf
Nayak, N. 2005. Redirecting America’s Energy: The Economic and Consumer U.S. http://newenergyfuture.
Benefits of Clean Energy Policies. Prepared by the U.S. PIRG Education Fund. com/newenergy.
February. asp?id2=15905&id3=energy
RAP. 2005. Electric Energy Efficiency and Renewable Energy in New England: An New England http://www.raponline.org/Pubs/
Assessment of Existing Policies and Prospects for the Future. Prepared by The RSWS-EEandREinNE.pdf
Regulatory Assistance Project and Synapse Energy Economics, Inc. May.
Stoddard, L., J. Abiecunas, and R. O’Connell. 2006. Economic, Energy, and California http://www.nrel.gov/docs/
Environmental Benefits of Concentrating Solar Power in California. Prepared by fy06osti/39291.pdf
Black & Veatch for U.S. DOE National Renewable Energy Laboratory. April.
U.S. DOC. 2003. Developing a Renewable Energy Based Economy for South Texas http://www.solarsanantonio.
Texas – A Blueprint for Development. U.S. Department of Commerce, Economic org/pdf/EDAReport.pdf
Development Administration, and the University of Texas at San Antonio.
SWEEP. 2002. The New Mother Lode: The Potential for More Efficient Electricity Southwest http://www.swenergy.org/nml
Use in the Southwest. Southwest Energy Efficiency Project, Report for the
Hewlett Foundation Energy Series. November.
Bernstein, M., C. Pernin, S. Loeb, and M. Hanson. 2000. The Public Benefit of California http://rand.org/pubs/
California’s Investments in Energy Efficiency. Prepared by RAND Science and monograph_reports/2005/
Technology for California Energy Commission. March. MR1212.0.pdf
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002a. The Public Benefit Massachusetts http://www.rand.org/pubs/
of Energy Efficiency to the State of Massachusetts. Prepared by RAND Science monograph_reports/2005/
and Technology. MR1588.pdf
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002b. The Public Benefit Minnesota http://www.rand.org/pubs/
of Energy Efficiency to the State of Minnesota. Prepared by RAND Science and monograph_reports/2005/
Technology. MR1587.pdf
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002c. The Public Benefit Washington http://www.rand.org/pubs/
of Energy Efficiency to the State of Washington. Prepared by RAND Science and monograph_reports/2005/
Technology for the Energy Foundation. February. MR1589.pdf
State-Level Clean Energy Analysis that Used Computable General Equilibrium Models
Bournakis, A., G. Hewings, J. Cuttica, and S. Mueller. 2005. The Economic and Illinois http://www.erc.uic.edu/PDF/
Environmental Impacts of Clean Energy Development in Illinois. Submitted to the Clean_Energy_Development.pdf
Illinois Department of Commerce and Economic Opportunity. June.
CT GSC. 2004. 2005 Climate Change Action Plan, Appendix 9: Economic Impact Connecticut http://www.ctclimatechange.
of Oil and Natural Gas Conservation Policies. Connecticut Governor’s Steering com/documents/
Committee, prepared by Regional Economic Models, Inc. November. Appendix9_REMI_HeatingOil
andNaturalGasConservation
Funds_CCCAP_2005_000.pdf
DOER. 2004. 2002 Energy Efficiency Activities. Massachusetts Division of Energy Massachusetts http://www.mass.gov/Eoca/
Resources. docs/doer/pub_info/ee02-long.
pdf
Hewings, G., and M. Yanai, 2002. Job Jolt: The Economic Impacts of Repowering Midwest http://www.issuelab.org/
the Midwest. Prepared by the Regional Economics Applications Laboratory. research/job_jolt_the_
economic_impacts_of_
repowering_the_midwest
Jensen, V., and E. Lounsbury. 2005. Assessment of Energy Efficiency Potential Georgia http://www.gefa.org/
in Georgia. Prepared for the Georgia Environmental Facilities Authority by ICF Modules/ShowDocument.
Consulting. May. aspx?documentid=46
NYSERDA. 2009. New York Energy $mart Program Evaluation and Status Report; New York http://www.nyserda.org/
Year Ending December 31, 2008, Report to the Systems Benefit Charge Advisory publications/SBC%20March%20
Group, Final Report, March. 2009%20Annual%20Report.pdf
Sumi, D., G. Weisbrod, B. Ward, and M. Goldberg. 2003. An Approach to Wisconsin http://edrgroup.com/pdf/sumi-
Quantifying Economic and Environmental Benefits for Wisconsin’s Focus on weisbrod-wis-energy-iepec.pdf
Energy. Presented at International Energy Program Evaluation Conference. August.
Weisbrod, G., K. Polenske, T. Lynch, and X. Lin. 1995. The Economic Impact Iowa http://www.edrgroup.com/
of Energy Efficiency Programs and Renewable Power for Iowa: Final Report. library/energy-environment/
Economic Development Research Group, Boston, MA. December. iowa-energy.html
U.S. DOE National Renewable Energy Laboratory Jobs and Economic http://www.nrel.gov/analysis/jedi/
Development Impact (JEDI) tool
Bernstein, M., C. Pernin, S. Loeb, and M. Hanson. 2000. The Public Benefit http://rand.org/pubs/monograph_reports/2005/
of California’s Investments in Energy Efficiency. Prepared by RAND Science MR1212.0.pdf
and Technology for California Energy Commission. March.
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002a. The Public http://www.rand.org/pubs/monograph_reports/2005/
Benefit of Energy Efficiency to the State of Massachusetts. Prepared by MR1588.pdf
RAND Science and Technology.
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002b. The Public http://www.rand.org/pubs/monograph_reports/2005/
Benefit of Energy Efficiency to the State of Minnesota. Prepared by RAND MR1587.pdf
Science and Technology.
Bernstein, M., R. Lempert, D. Loughram, and D. Ortiz. 2002c. The Public http://www.rand.org/pubs/monograph_reports/2005/
Benefit of Energy Efficiency to the State of Washington. Prepared by MR1589.pdf
RAND Science and Technology for the Energy Foundation. February.
Bournakis, A., G. Hewings, J. Cuttica, and S. Mueller. 2005. The Economic http://www.erc.uic.edu/PDF/Clean_Energy_Development.
and Environmental Impacts of Clean Energy Development in Illinois. pdf
Submitted to the Illinois Department of Commerce and Economic
Opportunity. June.
CT GSC. 2004. 2005 Climate Change Action Plan, Appendix 9: Economic http://www.ctclimatechange.com/documents/Appendix9_
Impact of Oil and Natural Gas Conservation Policies. Connecticut REMI_HeatingOilandNaturalGasConservationFunds_
Governor’s Steering Committee, prepared by Regional Economic Models, CCCAP_2005_000.pdf
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