Methods to Incorporate Energy Efficiency in Electricity System Planning and Markets

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Electric utilities and independent system operators/regional transmission operators (ISOs/RTOs) have included energy efficiency in resource planning and centrally-organized wholesale electricity markets, respectively, for many decades, resulting in significant efficiency acquisitions. The predominant approach to consider energy efficiency in electricity system planning is to reduce electricity load forecasts over the forecast period to account for estimated impacts of existing and planned energy efficiency policies and programs. This report highlights how utilities and ISOs/RTOs consider energy efficiency as a potential resource for meeting additional energy needs, a less common practice. 

Increasing levels of wind and solar, growth in peak demand, and electrification of transportation and other new loads have increased the need for a more flexible and resilient electricity system. Modeling energy efficiency as a resource option can support many objectives, including reliability and resilience of the power grid, reduced electricity costs, energy efficiency targets, and lower air pollutant emissions.

This report discusses three principles to guide analysis of energy efficiency within a planning process. We explain how consistency with these principles impacts four elements of utility electricity resource planning: (1) load forecasting, (2) potential assessments, (3) capacity expansion modeling, and (4) risk and uncertainty analysis. The report also discusses how the principles impact ISO/RTOs load forecasting and capacity markets. To illustrate how consistency with these principles may alter current approaches, the report includes case studies that show how electricity system planning tools, methods, and practices and markets treat energy efficiency today. Specifically, the report examines integrated resource plans for two multi-state utilities and a regional planning organization and treatment of energy efficiency in capacity markets operated by two RTOs.

The October 2019 slides were presented at the American Council for an Energy Efficient Economy Energy Efficiency as a Resource conference and provide an overview of the forthcoming report, Methods to Incorporate Energy Efficiency in Electricity System Planning and Markets.

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