August 24, 2018
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Public Comment Forum, General Notice at 2018 Virginia Energy Plan
Mr. Al Christopher
Director, Energy Division
Virginia Department of Mines, Minerals and Energy
Washington Building, 1100 Bank Street
Richmond, Virginia 23219
Re: 2018 Virginia Energy Plan
Dear Mr. Christopher:
Home Performance Coalition (HPC) appreciates the opportunity to provide suggestions and ideas for your consideration for the drafting the 2018 Virginia State Energy Plan. We are particularly interested in the Energy Efficiency sections of the Virginia State Energy Plan and related implementation efforts on Senate Bill 966. The Energy Division is in for an exciting year in 2018 and we salute you and your staff’s extraordinary efforts on these critical initiatives.
I. Introduction – Energy Efficiency and Jobs
According to the May 2018 U.S. Energy and Employment Report, by far and away - the market sector with the most energy jobs in the states is Energy Efficiency. Energy Efficiency employed 2.25 million Americans, in whole or in part, in the design, installation, and manufacture of Energy Efficiency products and services, adding 67,000 new jobs in 2017.
According to the Report, these 2.25 million energy efficiency jobs outranked the traditional coal, oil and natural gas sectors (1.1 million jobs), solar (350,000 jobs) and wind (107,000 jobs). Please note that these Energy Efficiency jobs do not compete with the jobs in these energy production sectors. Instead, Energy Efficiency jobs complement and support energy productions jobs. In addition, Energy Efficiency jobs in U.S. residential buildings cannot realistically be outsourced or exported to foreign countries.
The May 2018 Report adds to a growing body of research that puts energy efficiency at the top of the list of job creators in the clean energy business sector. For example, on January 13, 2017, the U.S. Department of Energy (DOE) released its 2nd Annual United States Energy and Employment Report (USEER) providing a comprehensive analysis of 2016 data on energy related U.S. jobs. The 2017 USEER Jobs Report indicated that 2.2 million Americans were employed, in whole or in part, in the design, installation, and manufacture of energy efficiency products and services in 2016; that more than 133,000 new energy efficiency jobs were created in the U.S. in 2016; and that U.S. Energy Efficiency employers projected the highest job growth rate (9%) in 2017-2018 in all energy sectors surveyed.
Properly designed and implemented energy efficiency and demand response programs have been demonstrated in numerous state and national studies to be the lowest cost, most predictable and most immediate method to reduce energy demand, create local jobs, provide opportunities for small business energy efficiency entrepreneurs while also providing health and comfort benefits to consumers and lower utility rates in the long term.
As Virginia develops its 2018 State Energy Plan, the economic and business development impact of the Energy Efficiency sector and its enormous potential for growth should be a top consideration. Many Virginia based home performance contractors and small businesses are eager to invest in and expand the Energy Efficiency sector in the state.
II. Two Critical Areas of Energy Policy to Incorporate into the State Energy Plan
HPC places its research and policy development focus on issue areas that have a high degree of likelihood of transforming the energy efficiency market place in states. Our long-term goal is to facilitate the growth of the private sector in energy efficiency and expansion of business opportunities for home performance contractors and entrepreneurs. Two policy areas of critical long-term impact and concern for home performance contractors and businesses in Virginia are data standards and cost effectiveness testing.
A. Modernizing Virginia’s Data Standards to Transform Programs and Markets
What’s a Data Standard?
In today’s existing homes market, the electronic exchange of information on energy performance, energy conservation measures, and the physical and operational attributes of a home is often characterized by a lack of common terms, definitions, and two-way feedback systems. This limits the ability of decision-makers to access, aggregate, share and use data for the design and implementation of residential energy efficiency programs. This also makes it difficult for market actors to understand the drivers of variation in performance (e.g., of measures, contractors, programs, and homes), identify investment opportunities, analyze market trends, and project savings from energy efficiency investments.
Home Performance XML or HPXML stands for home performance “extensible markup language.” Markup language is a way for computer software to share information. Open data standards, like HPXML, are a powerful solution to some of the most intractable problems facing the residential energy efficiency industry.
Data standards are crucial in enabling the consistent quantification of energy savings that result from energy efficiency upgrades that in turn allow for savings guarantees, low-cost consumer finance, and the sale of energy efficiency into energy, capacity, and carbon markets. Data standards are crucial for ensuring that energy efficiency improvements in homes are properly valued in real estate transactions. Finally, data standards are crucial for supporting ongoing research into the best methods for making homes energy efficient because the aggregation of standardized data supports comparability and comprehensive analysis of program and contractor performance. In short, data standards are necessary for promoting open and transparent energy efficiency markets.
Data that complies with a national data standard such as HPXML is consistent, exchangeable, and useful outside of the organization or person that created the data. As new technologies (e.g. connected devices) and services developed in the Virginia market that both generate and leverage a large amount of data, data standardization will play a greater role in helping build a self-sustaining home energy efficiency market.
Data Standards Help Reduce Transactional Costs for All Program Participants
The Local Energy Alliance Program (LEAP) in Northern Virginia was one of the first home performance programs in the country to adopt HPXML when it was published in 2013. LEAP recognized the importance of consistent, high-quality data for reducing costs associated with project review, incentive processing, reporting, and quality assurance (QA). Because HPXML enables access to the same well-understood terms and data structures that are used for data retrieval, Virginia can drive economies of scale in the administration, finance, and evaluation of energy efficiency programs by adopting data standards.
We recommend that the 2018 Virginia Energy Plan contain high level, policy guidance on open data standards to help streamline current and future program reporting for energy efficiency programs. We also recommend that Virginia work with the HPXML Working Group to standardize measure validation design so that its program is more closely aligned and/or consistent with other programs in the country.
Data Standards and Infrastructure Can Build Markets for Residential Energy Efficiency
There are now more than 15 software companies using HPXML, with an additional three companies expected to adopt the standard by 2020. Increased use of the standard is enabling the development of common data platforms and reporting tools that support market actors’ (e.g., contractors, homeowners, manufacturers, utility companies) access to data. For example, the Department of Energy’s (DOE) Standard Energy Efficiency Data Platform (SEED) can now import and export HPXML files. This platform is open-source and can be used to support data aggregation and increase the industry’s access to building data.
In addition, the National Association of State Energy Offices (NASEO) is leading a project known as EMPRESS to advance large-scale home energy labeling. The project is also harmonizing the calculations behind DOE’s Home Energy Score (HEScore) and the Home Energy Rating Systems (HERS) to better support the market valuation of energy efficient homes. The National Renewable Energy Laboratory (NREL) is developing an open-source common EnergyPlus-based modeling tool (online platform) that will support the centralized calculations for these scores and for the DOE’s Weatherization Assistance Program. This model will dramatically reduce the cost of generating standardized energy calculations, which will increase the number of scores in the market.
The 2018 Virginia Energy Plan should incorporate high level, policy guidance on open data standards such as HPXML and consider developing a statewide data repository that aggregates building and energy performance data. Virginia can leverage existing open source data platforms to create a repository that allows different market actors to access large datasets for business purposes. DOE’s SEED database is just one example of this application of aggregated data.
B. Reforming Cost Effectiveness Testing - the National Standard Practice Manual
We salute the amendments to cost effectiveness testing procedures enacted under Senate Bill 966, the Grid Transformation and Security Act. We hope these amendments (excerpts of which are attached as Appendix A) lay the groundwork for additional reforms to cost effectiveness testing of energy efficiency programs in Virginia. When Senate Bill 966 was enacted, Virginia became the last state in the U.S. to move away from its exclusive reliance on the Rate Impact Measure Test – a significant and positive development.
As we understand it, Virginia law now requires application of four of the original (1983) California Practice Manual tests: the Total Resource Cost Test, the Program Administrator Test (also referred to as the Utility Cost Test), the Participant Test, and the Ratepayer Impact Measure Test. Shifting away from an over-reliance on just one test is a positive development, but it also raises the question of whether any or all of these California tests truly reflect Virginia’s applicable and relevant policy, regulatory and legal goals and requirements related to energy, job creation, health, resiliency and economic development.
HPC respectfully requests that Virginia’s State Energy Plan calls for a review of its cost effectiveness testing approaches, consistent with Senate Bill 966, by incorporating the fundamental principles of the May 2017 National Standard Practices Manual (NSPM). We believe the NSPM framework could allow Virginia an opportunity to “test its tests” for cost effectiveness testing to see whether it reflects Virginia’s own energy efficiency policies and program goals. The NSPM framework can be applied to the individual tests required by Senate Bill 966 and/or used to evaluate the overall application of all four tests. One attractive feature of the NSPM is that it allows states to make all decisions on the best approach to “test its tests.”
The principles contained in the NSPM can inform and greatly enhance Virginia’s ability to target and highlight the most impactful innovations and reforms in energy efficiency as they are being implemented. Further refinements to Virginia’s cost effectiveness testing approaches could be assigned to a broad Virginia based technical workgroup’s examination of the guidance offered by the National Efficiency Screening Project (NESP) in their National Standard Practice Manual for Assessing Cost-Effectiveness of Energy Efficiency Resources (NSPM). These changes can be made to support and compliment any other efforts being made to implement Senate Bill 966.
Reforming and Modernizing Cost Effectiveness Testing in Virginia
The NSPM includes a step-by-step process to apply a valuation methodology to energy efficiency using the Resource Value Framework. The guide presents accounting procedures for applicable hard-to-monetize costs and benefits, with guidance on a wide range of fundamental aspects of cost-effectiveness analyses and the adequate consideration of all relevant costs and benefits for both the utility system and the non-utility system.
Attention to cost effectiveness testing reforms will be a critical component of Virginia’s ability to meet the goals of its 2018 State Energy Plan. The NSPM builds and expands upon the decades old California Standard Practice Manual and provides current experience and best practices with: 1) Guidance on how to develop a jurisdiction’s primary cost-effectiveness test that meets its applicable policy goals; and 2) Information on the inputs and considerations associated with selecting the appropriate costs and benefits to include in a cost-effectiveness test and accounting for applicable hard-to-monetize costs and benefits. These principles could be applied to each of the tests required under Senate Bill 966: the Total Resource Cost Test, the Program Administrator Test (also referred to as the Utility Cost Test), the Participant Test, and the Ratepayer Impact Measure Test. The NSPM sets forth broad principles for accomplishing these goals:
National Standard Practice Manual Principles
Efficiency as a Resource
EE is one of many resources that can be deployed to meet customers’ needs, and therefore should be compared with other energy resources (both supply-side and demand-side) in a consistent and comprehensive manner.
A jurisdiction’s primary cost-effectiveness test should account for its energy and other applicable policy goals and objectives. These goals and objectives may be articulated in legislation, commission orders, regulations, advisory board decisions, guidelines, etc., and are often dynamic and evolving.
Cost-effectiveness practices should account for all relevant, substantive impacts (as identified based on policy goals,) even those that are difficult to quantify and monetize. Using best-available information, proxies, alternative thresholds, or qualitative considerations to approximate hard-to-monetize impacts is preferable to assuming those costs and benefits do not exist or have no value.
Cost-effectiveness practices should be symmetrical, where both costs and benefits are included for each relevant type of impact.
Analysis of the impacts of resource investments should be forward- looking, capturing the difference between costs and benefits that would occur over the life of the subject resources as compared to the costs and benefits that would occur absent the resource investments.
Cost-effectiveness practices should be completely transparent, and should fully document all relevant inputs, assumptions, methodologies, and results.
Additional Considerations of the Rate Impact Measure Test in the NSPM
Given the amount of interest of energy efficiency program impacts on customer rates and bills among regulators and other stakeholders, the National Efficiency Screening Project devoted a significant amount of analysis and discussion to rate impacts in the NSPM. Appendix A to the NSPM provides a summary and overview of the five traditional California cost effectiveness tests. Appendix C to the NSPM describes accounting procedures for rate and bill impacts of energy efficiency programs. Virtually all states have moved away from the Rate Impact Measure (RIM) test as a measure to indicate whether an energy efficiency resource will increase or decrease electricity or gas rates (i.e., prices). Appendix C summarizes the reason for this shift in the states as “the RIM test should not be used for purpose of determining which efficiency resources are cost-effective - i.e., have benefits that exceed their costs - because, like the Participant test, it does not measure changes in net economic costs across a population; rather, it is a measure of distribution equity.” Instead, Appendix C contains a comprehensive discussion of approaches for assessing rate and bill impacts of energy efficiency resources through long-term independent assessments of rate impacts, bill impacts, and participation rates.
Incorporation of the NSPM in Other States
Since the release of the NSPM in May 2017, the National Efficiency Screening Project has worked with numerous states to provide briefings, host webinars and conduct workshops to examine ways to incorporate the NSPM principles and a related step by step planning process into existing state approaches towards cost effectiveness testing. Arkansas, Washington, Rhode Island and West Virginia are four examples of states that have incorporated, or are in the process of reviewing, aspects of the NSPM into their state planning and regulatory review processes on cost-effectiveness. Brief descriptions of those references and testimony submitted on the NSPM in state proceedings appear at: https://nationalefficiencyscreening.org/state-references/.
As Virginia continues its planning and implementation process for the State Energy Plan we would like to assist in any way with an NSPM briefing with the appropriate senior staff at the Virginia Department of Mines, Minerals and Energy or other state Agencies. This may assist Virginia energy efficiency policymakers to step back, reflect on the state’s own policy goals and objectives for energy efficiency investments as part of the 2018 Virginia State Energy Plan.
HPC hopes to work with the Virginia Department of Mines, Minerals and Energy and/or other state Agencies on: 1) the use of data standards to transform energy efficiency programs and markets; and 2) reforms of cost effectiveness testing approaches. Please feel free to contact us at JCaracino@homeperformance.org or JCullen@homeperformance.org should you have any questions about the policy issues described in these comments.
J. Joseph Cullen
Director of Policy and State Outreach
The Home Performance Coalition
Director of Research and Standards
The Home Performance Coalition
Cost Effectiveness Testing
References in Senate Bill 966
"Cost-effective conservation and energy efficiency program" means a program approved by the Commission that is designed to decrease the average customer's annual, weather-normalized consumption or total gas bill, for gas and nongas elements combined, or avoid energy costs or consumption the customer may otherwise have incurred, and is determined by the Commission to be cost-effective
upon consideration, among other factors, that if the net present value of the benefits exceeds the net present value of the costs under as determined by not less than any three of the following four tests: the Total Resource Cost Test, the Program Administrator Test (also referred to as the Utility Cost Test), the Participant Test, and the Ratepayer Impact Measure Test. Such determination shall include an analysis of all four tests, and a program or portfolio of programs shall not be rejected based solely on the results of a single test approved if the net present value of the benefits exceeds the net present value of the costs as determined by not less than any three of the four tests.