Memorandum to CPUC

Memorandum to CPUC

November 24, 2014

Page 1 of 7

To: / Aaron Lu, Dina Mackin, CPUC
From: / Greg Wikler, Amul Sathe, Michael Noreika, Navigant
Date: / November 24, 2014
Re: / PG Baseline Definition Framework Methodology

This memorandum describes the methodology Navigant proposes to use to define the baseline energy use for applicable energy efficiency measures of the 2015 California Potential and Goals (PG) study. Baseline energy use is the starting point against which Unit Energy Savings (UES) for an energy efficient measure are calculated. The goal of this task is to evaluate secondary resources to determine the appropriate baseline for various commercial and residential technologies for use in the PG study.

Introduction

Over the past several years, the energy efficiency potential studies in California have usedcode baselineas the baseline technology. Code baseline refers to the energy efficiency required by codes or standards (such as Title 24, Title 20, or Federal appliance standards)in place at the time of measure installation. In cases where a code or standard does not exist or when the majority of industry practices are higher than code, thenIndustry Standard Practice (ISP) is used to define the baseline. Existing baseline refers to the actual energy efficiency level of the measure being replaced. Existing baseline represents the mix of technologies generally at or below current code that actually exists in commercial and industrial facilities and residential homes.

Ordering Paragraph 10 of Decision 14-10-046 states:“Commission Staff shall consult with the California Energy Commission and California Independent System Operator Corporation on what is involved in revisiting the choice of baseline. Commission Staff shall collect data from stakeholders, program evaluation studies, and market studies relating to, variously, the volume of deferred retrofits; the ability of program administrators to target and accelerate such upgrades cost-effectively; and, whether/how to address the moral hazard aspects of subsidizing inefficient market actors.”

For the 2015 PG study, in order to fulfill this directive, the CPUC has requested a thorough review of the current baseline approaches and methods and a comprehensive analysis of alternative baseline approaches,thus allowing policymakers to further address this issue.

Table 1provides the definitions of these different baseline terms.

Table 1.Definitions of Baseline Terminology

Term / Definition / Precedent
Code Baseline / Minimum level of efficiency required for new units that go into service / Set by the governing regulatory body or other industry standards (e.g., industry standard practice)
Existing Baseline / Level of efficiency of units going out of service (being replaced by new units) / Set by historical markets and is generally a mix of below and at code technologies

The definition of baseline energy useis a critical inputto the PG model, thus any changes to the definition requires a characterization of the markets for various technologies and consideration of relevant studies and policy decisions.

To illustrate the relationship between code baseline and existing baseline, consider an example using 15-ton rooftop packaged units. Current Title 24 code stipulates new units installed before 1/1/2015 must meet or exceed an efficiency level of 11.0 Energy Efficiency Ratio (EER). A hypothetical survey of five facilities revealed three had units installed prior to current Title 24 code at efficiency levels of 9.6 EER, 10.2 EER, and 10.4 EER; one had a unit installed at the code minimum 11.0 EER; and one had a unit installed through an energy efficiency program at 12.6 EER. Although the three below-code units have not been replaced recently, they are still operational and within their effective useful lives. In this example, 11.0 EER represents the code baseline, while the average efficiency of the five units, 10.76 EER, represents the existing baseline.

To further illustrate this issue, Navigant presents a hypothetical energy efficiency measure and savings calculation based on the code vs. existing baseline methodology:

Equipment Efficiency / Annual Energy use (KWh)
Existing Baseline / 3,200
Code Baseline / 3,000
Efficient Technology / 2,500

Under current practice, an IOU could claim 500 kWh of Unit Energy Savings (UES) for the hypothetical measure (3,000 – 2,500 = 500), referred to as “code to efficient” savings. However, the customer’s energy bill would decrease on average by 700 kWh (3,200 – 2,500 = 700), referred to as “existing base to efficient” savings. This analysis aims to help quantify the appropriate existing baseline for applicable technologies such that the appropriate “existing base to efficient” savings can be calculated.

Overview of Methodology

For this task, Navigant will rely on secondary sources supplemented with primary data collection as needed. Navigant has identified the following key questions to be addressed by the proposed methodology:

»What are the applicable technologies most affected by this issue?

»What is the existing baseline for the applicable technologies in the study?

»What are the potential savings using an existing baseline model?

Navigant has identified the following priorities to answer the key questions:

1.)Identify the key measures

Prior to examining the secondary literature, Navigant recommends a thorough discussion with CPUC and CEC stakeholders to determine the measures that may be most appropriate to apply an existing baseline methodology. Following the identification of key sectors and end uses, Navigant with input from the CPUC can work to prioritize the specific measures of concern.

Additionally, a holistic understanding of the existing baseline requires a characterization and projection for AB758[1] compliance. Navigant however recognizes that the CEC is still in the process of determining how to approach AB758 compliance. As such, it will not be possible as part of this effort to determine the magnitude of AB7458 compliance.

2.) Describe the policy background that establishes the baseline.

An understanding of the policy that sets the current baseline practice is an important step for this research. Navigant recommends reviewing the documentation concerning these decisions to understandhow code baseline emerged as the preferredmethod to calculate energy efficiency potential.

Key research questions include:

»What are the current baseline policies?

»How are the current baseline policies applied for varioussectors and end uses?

»How does California’s baseline policy compare to other states with strong energy efficiency policies?

• Massachusetts, New York, Oregon, Connecticut, Vermont, and others

To answer the first two questions, Navigant will first interview experts at the CPUC to understand the historic policy context and current practices. Navigant will interview additional relevant experts (including staff at the CEC); additional experts will be selected based on feedback from the CPUC.

3.)Coordinate with CEC Title 20 and 24, and AB 758 staff to identify potential opportunities in existing buildings.

Navigant will coordinate with Energy Division and CEC to determine how code updates should overlay on measures in existing building. Navigant anticipates relying on documentation of the relevant decisions, an investigation of code compliance estimates at the time of the decisions, and discussions with relevant CPUC and CEC experts.

Key research questions include:

»How are code baselines in the context of DEER determined and applied?

»What assumptions about technologies and markets went into the analysis of code changes?

4.)Coordinate with teams developing ex ante energy savings estimates and subject matter experts.

Ex ante energy savings from the Database of Energy Efficient Resources (DEER) and IOU work papers are key inputs to the PG model. Several groups are responsible for determining ex ante energy savings for specific technologies. These groups include the CPUC, CEC,DEER 2015 update team, IOU program management, and implementation contractors. Navigant willengage with these groups in order to understand the market assessments that prescribe ex ante calculations. Ultimately Navigant seeks understanding of the practicality and feasibility of the estimates.

Key research questions include:

»Which EE measures have saturation levels and historical turnover rates such that their replacement on burnout may not occur as anticipated?

»What data sources may give an indication of existing baseline conditions

»How is the ex ante baseline defined?

DEER and workpapers are the priority source for the data inputs, and Navigant understands DEER is currently undergoing an update. Navigant expects significant coordination between the DEER update team and the PG modeling team during this effort.

5.)Review and assess relevant data sources.

Several relevant market studies and saturation surveys are available for this research. Studies such as the California Lighting and Appliance Saturation Survey (CLASS), the Residential Appliance Saturation Survey (RASS), the Commercial End-Use Survey (CEUS) and the Commercial Saturation Survey (CSS) report the market states for various energy efficiency technologies. Navigant expects these studies to have a primary role in defining the existing baseline for this study.

Additionally, meaningful information may be found in the EM&V results from the 2006-08 and 2010-12 program years. Although IOUs do not track existing equipment specifications in an accessible database, EM&V results couldprovide substantial detail into baseline equipment and performance against code expectations.

Navigant anticipates interviewing several key subject matter experts from the CPUC, IOU program management and IOU account executives. Navigant suggests interviews withthe CPUC’s in-house and consultant experts to obtain their perspectives about the existing condition baseline based on their extensive knowledge and insights. Navigantalsointends to interview program managers and other energy efficiency program personnel to obtain their perspectives about the existing condition baseline based on their experiences in the field. Navigant will structure the interview questions so that the responses can allow for a more comprehensive determination about whether the data collected merely represents additional anecdotes or whether it will representsufficiently compelling evidence that these conditions currently exist in the marketplace.

The Appendix provides a more detailed list of anticipated sources.

Key research questions include:

»What is the energy efficiency saturation level for various technologies?

»How have saturation levels trend over time?

»Do IOU program EM&V findings align with ex ante baseline estimates?

»Do IOU C&S advocacy EM&V reports provide information on found baselines?

6.)Propose existing baseline estimates for selected measures.

Upon completion of the research, Navigant will identify the baseline condition associated with the measures under review. Navigant will prepare a comprehensive report detailing the research questions, methodology, data sources, and results for presentation to PG stakeholders.

7.)Incorporate into PG Model.

Navigant’s existing PG model has the capability to use the findings of the baseline study. The model can accommodate three inputs for energy use for each measure: Existing Baseline, Code Baseline, and Efficient Technology. The findings of this analysis will update the existing baseline energy consumption values in the model.

Subsequent to collecting this data, Navigant will make minor edits to the methodology of the model as needed. Navigant will include a switch in the model that allows the UES calculation to toggle to using existing baseline instead of code baseline energy use. The model calibration procedures will remain the same. Navigant will calibrate the model to the historic savings (which are reported using “code to efficient” savings) and then forecast future adoption. Future adoption will be multiplied by “existing base to efficient” UES tocalculate energy savings. Note that the timing of incorporating and running the existing baseline scenario within the PG modelling will be based on the CPUC’s direction regarding this issue.

Expected Schedule

Navigant proposes the following schedule for these activities. In this schedule, “findings” indicate the updated baseline conditions for the applicable measures. This schedule is subject to update based on the overall schedule and priorities of the 2015 PG study as well as feedback from the CPUC and CEC.

Table 2. Proposed Timeline

Action / Date Range
Submit memorandum to CPUC / October 1, 2014
Revise memorandum and submit revised memorandum to CPUC/CEC / October 24, 2014
Discuss issue, methodology and action plan with CPUC/CEC / October 2014
Conduct research / November 2014 to January 2015
Submit draft findings report to PG stakeholders / January 2015
Submit reviewed and revised findings report to
CPUC / February 2015
Incorporate findings into PG modeling framework / TBD. Schedule is dependent on CPUC prioritization regarding this topic

Appendix: Preliminary Sources

The following table presents a list of key sources Navigant intends to use for this task. This list is not meant to be exhaustive, but rather representative of the broader study.

Table 3. Sources from Preliminary Source Analysis

Source Type / Details
End Use and Market Studies Surveys / End use surveys provide background for expected energy use by sector and by end use. Market studies provide insight into the current (and future) states of energy efficiency technology deployment.

• California Commercial End Use Survey:
• California Lighting and Appliance Saturation Study:
• California Commercial Saturation Survey:
• California Statewide Residential Appliance Saturation Study:
• California Residential Appliance Saturation Study:
• California Commercial Market Share Tracking Study:

DEER, Workpapers / Navigant anticipates coordination with the DEER update group and work paper update group to ensure the existing baseline assumptions are consistent with this study.

EM&V Reports / EM&V reports are available online. Navigant may review key reports to assess the availability of existing equipment information from EM&V activities.

ACEEE Scorecards / ACEEE annually publishes state rankings of energy efficiency policies. Navigant intends to review the top performing states to compare California’s baseline policy.

Interviews / Both the CPUC and IOUs have staff with attentiveness toward and insight for existing baseline technologies.

• IOU program managers
• IOU account representatives
• CPUC subject matter experts and consultants

Intra-team Interviews / Several key team members have insight into existing baseline technologies. Navigant will leverage their experience and expertise to complement the secondary research.

• ASWB
• DNVGL (KEMA)

[1] Assembly Bill 758: Comprehensive Energy Efficiency Program for Existing Buildings. Full information available here: