Library: 2012, Regulatory Assistance Project

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Energy Efficiency Cost Effectiveness Screening: How to Properly Account for 'Other Program Impacts' and Environmental Compliance Costs

Date Published: November 1, 2012     Document Type: Report
Sectors: Research, Evaluation, & Behavior

Energy efficiency is widely recognized as a low-cost, readily available resource that offers a variety of benefits to utility customers and to society as a whole. Many states have established efficiency savings targets, some states require that energy efficiency be the first choice among resource options, and an increasing number of states require energy efficiency program administrators to pursue all cost-effective energy efficiency. As states continue to advance ratepayer-funded energy efficiency initiatives and establish increasingly aggressive savings goals, it is vitally important that effective practices be communicated and used in screening energy efficiency resources for cost-effectiveness.

There is a great amount of variation across the states in the ways that energy efficiency programs are screened for cost-effectiveness. Many states are applying methodologies and assumptions that do not capture the full value of efficiency resources, leading to under-investment in this low-cost resource, and thus higher costs to utility customers and society.

The purpose of this report is to address two elements of energy efficiency program screening that are frequently treated improperly: other program impacts (OPIs) and the costs of complying with environmental regulations. In some states, proper treatment of these two elements would likely result in a significantly larger amount of energy efficiency being deemed cost-effective relative to today’s practices.