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Funding Support from the Northwest Energy Efficiency Alliance

CWEB.058/October.31.2000


1) Oregon PUC Endorses Creation of Non-Profit Public Purposes Administrator
2) WUTC Approves PacifiCorp Proposal for Washington System Benefits Charge
3) Implementation Details Remain Outstanding for BPA's Conservation/Renewables Discount
4) New Board Chair Brian Hedman Sees 'Interesting Year' Ahead for Alliance
5) Alliance Board Continues Funding for Three Projects, Elects New Officers, Approves Budget
6) Federal Agencies Have Reasons, Means to Support Green Power, Although Challenges Remain


Public Purposes

Landmark Organization

Oregon PUC Endorses Non-Profit Entity to
Oversee State Public-Purposes Funding

The Oregon Public Utility Commission has approved the creation of a landmark non-profit organization to administer most of the state's public-purposes funding beginning in 2001.

This as-yet-unnamed entity will oversee hundreds of millions of dollars earmarked for energy conservation and renewable energy initiatives through the 10-year public-purposes provisions of Oregon's electric industry restructuring law. As currently envisioned, competitive bidding would determine much of the money's distribution.

"This is a very important piece of [Senate Bill] 1149 and I think we here in Oregon have something that in a way is very helpful, very clear and very accountable," said OPUC commissioner Joan Smith at an Oct. 20 public meeting in Salem. The commission voted in favor of PUC staff's request to launch the non-profit organization--after hearing from a parade of supporters--and it also endorsed a framework and process to make it happen.

This public-purposes system will effectively replace ratepayer-funded conservation and renewables activities undertaken by the state's two big investor-owned utilities, Portland General Electric and PacifiCorp, although those utilities could seek funding from the new entity.

Shifting away from utility control will be one of the first orders of business as the new organization takes shape. Seating a board of directors, hiring an executive director and other staff, strategic planning, funding arrangements with the PUC, incorporation and other matters also highlight the near-term agenda.

The new entity is expected to be substantially ready by October 2001, when PGE and PacifiCorp will begin collecting from their customers the 3-percent public-purposes charge mandated in the state's 1999 restructuring legislation. Ten percent of these funds will go to schools, as specified in SB 1149. Of the remainder, 18 percent is set aside for low-income weatherization and housing, while 82 percent will flow through the non-profit group for new conservation and market transformation initiatives (63 percent) and defraying above-market costs of new renewable resources (19 percent).

The non-profit group would thus oversee a "conservative estimate" of at least $30 million annually, OPUC staffer Lynn Kittilson said later. This number will be subject to change, however, with any rises and/or falls in utility revenues.

Balancing Accountability, Flexibility

Oregon's electric regulators in February had already conceptually endorsed a non-profit public-purposes organization (see Con.WEB, Feb. 25, 2000). In the ensuing months, PUC staff and a committee of stakeholders drafted a more specific plan.

"Although alternatives to our recommendations exist," wrote Kittilson in an Oct. 11 memo, "we believe our proposal represents a reasonable starting point for beginning the process of establishing the nonprofit organization. The proposal attempts to balance the necessary accountability of the organization to the Commission and the public for its decisions on spending the public purpose funds with the necessity and desirability that the organization function as an independent nongovernmental organization."

As proposed, the non-profit group would be somewhat autonomous from the PUC. An initial seven-member board of directors would be appointed by the commission to govern the entity; board votes would determine subsequent membership. The board would hire an executive director to manage staff and put board directions into practice. Advisory committees would be created for both conservation and renewables. The PUC would formally authorize public-purposes funding to the non-profit group, including any specific directives; this authority could be revoked by the commission. The commission also would review and comment upon budgets. But the board of directors would ultimately approve budgets and decide strategic and policy matters.

Proposed guidelines for the non-profit organization include developing competitive markets for energy efficiency services and renewable resources, and competitive bidding for funding "except when circumstances warrant an alternative approach."

Many details of the new Oregon public-purposes entity remain to be sorted out--and many will be decided by the board of directors.

Supportive Comments

A procession of non-profit organization supporters appeared before the commission Oct. 20 in Salem, with only one of 14 speakers--Brad Van Cleve of Industrial Customers of Northwest Utilities--expressing reservations about the proposal.

Favorable comments came from representatives of energy efficiency businesses, the American Associated of Retired Persons, Renewable Northwest Project, Citizens' Utility Board of Oregon, Fair and Clean Energy Coalition, PacifiCorp, Oregon HEAT, city of Portland Energy Division, Oregon Municipal Electric Utilities, the Northwest Energy Efficiency Alliance and the Oregon Office of Energy. Many of the speakers also served on the committee that crafted the non-profit organization proposal.

"We think it's the most practical, fair and efficient means to distribute the energy efficiency and renewable energy funds collected under SB 1149," said Stan Price of the Northwest Energy Efficiency Council. "We think it's a good balance between practical accountability to the commission," and creating a "streamlined" organization. Margie Gardner of the Northwest Energy Efficiency Alliance and Charlie Grist of the Oregon Office of Energy also praised the equilibrium between opportunities for outside scrutiny and organizational flexibility.

"For me, the non-profit is one of the most exciting elements of electric restructuring," said Jason Eisdorfer of CUB. "The proposal before you is rather unique," he told the commission. "Rather than give the money to a government agency or a utility, Oregon would create a non-profit entity to decide how the money would be spent." He called this approach "superior in developing energy efficiency and renewable programs, unencumbered by conflicts of interest and agency politics."

Other speakers emphasized timing. "If you want to be ready by Oct. 1 [2001], you need to decide now," said Peter West of Renewable Northwest Project. "Given also the energy situation we face right now, there's an extraordinary urgency to be ready by day one when the money comes in." Consultant John Graham, who formerly headed Washington's Conservation and Renewable Energy System (CARES), told the commission it took nearly a year to form CARES and another year to begin running programs. "Starting today, a year ahead or so, is not too soon," he advised.

It's also timely to start discussing the changeover from utility programs, said PacifiCorp's Brian Hedman. "Large energy efficiency projects often have a lead time. We're already bumping up against that lead time in our own programs. We're not sure how we make commitments to customers beyond Oct. 1, 2001. I think the transition discussion needs to occur as soon as possible . . . so we don't have a gap."

ICNU's Van Cleve raised what he called "the lone cautionary voice" at the meeting, although he added the industrial customer group does not necessarily oppose a non-profit public-purposes entity. He suggested the PUC open a formal docket on the idea, given the "enormous amount of money" at issue. ICNU thinks the commission could authorize funding annually instead of over 10 years, allocate only some of the public-purpose funds to the non-profit, and/or allow a transition period for phasing out utility programs. "We suggest the commission not limit its options for considering alternatives," said Van Cleve. He also raised concerns on details in the proposal, including the purpose statement, board membership criteria, PUC guidelines, budget oversight and the organization's potential use of non-SB 1149 funds.

Commissioner Smith prefaced her comments by noting her 25 years working in the non-profit world. "I see along the way many opportunities to check on how accountable this new non-profit would be," she said--notable among them the funding agreement between the PUC and the public-purposes entity. "The fact we're going to have a non-governmental organization is something we've all agreed upon . . . There are many people who put accountability first. I think we all do. I'm not worried about accountability." A time-consuming formal docket wouldn't advance accountability any more than the public participation process, Smith said. And anyone who "feels we're not on the right track . . . can file a complaint."

There is enough time to handle substantive issues, but the non-profit needs to form, Smith concluded. "The key here is being ready to go. If we don't take the preliminary steps today, we won't be ready. Then we will have not kept faith with the people who supported 1149."--Mark Ohrenschall

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RENEWABLES/GREEN POWER

Energy Efficiency Program Expansion

WUTC Approves PacifiCorp Proposal
for Washington System Benefits Charge

The Washington Utilities and Transportation Commission has approved PacifiCorp's proposal to implement a system benefits charge to pay for expanded energy efficiency program offerings in Washington.

Under the plan approved Oct. 25, Pacific Power will collect about $2.8 million during the first 14 months to fund commercial and industrial programs, including an expansion of the existing Energy FinAnswer program, existing low-income weatherization, and part of the utility's membership fees for the Northwest Energy Efficiency Alliance. The utility will also set aside $250,000 of the funds collected to develop, market and implement a residential program in the first year.

This represents a near-doubling of Pacific's energy efficiency spending in Washington; the utility spent $1.4 million in 1999. The SBC collection amount equals about 1.6 percent of Pacific's Washington revenues, according to PacifiCorp DSM policy manager Brian Hedman.

DSM Expenditure Accounting, Sunset Date

In approving the proposal, commissioners adopted several revisions recommended by WUTC staff. PacifiCorp will defer DSM expenditures incurred after Oct. 26 for collection through the system benefits charge and will establish a balancing account for funds collected under the SBC. In its Sept. 25 filing, PacifiCorp had requested accruing 8.8-percent interest on both positive and negative balances to that account; staff suggested, and the commissioners agreed, interest should accrue only on a positive balance--that is, any collections in excess of actual program expenditures.

"The purpose of this funding is to enable the company timely recovery of its DSM costs, not to build up a balance--positive or negative," WUTC staff said. Requiring Pacific to bear the risk of undercollection creates an incentive for proper program planning and budgeting and for the investor-owned utility to "seek regulatory approval when program expansion, and ensuing increase in ratepayer burden, is necessary."

In addition, the commissioners agreed to set a tariff sunset date of Dec. 31, 2002--in staff's words, "to provide the Commission and the stakeholders an open door to address the company's efforts as well as to induce the company to refile the SBC at a level appropriate to its expenditures and to account for any outstanding balance."

Although PacifiCorp and the Northwest Energy Coalition opposed establishing a sunset date, the utility does not now see it as a problem, Hedman said. Collection of the system benefits charge technically sunsets after two years, but the utility will still be allowed to defer DSM expenditures, he pointed out. Those uncollected deferrals could then be recovered through a new SBC filing or more traditional rate recovery. NWEC, however, views the sunset date--along with the commission's disallowance of earning interest on undercollections in the SBC fund--as "potentially significant disincentives" to conservation, said policy analyst Danielle Dixon. Two years is not enough time to get the programs up and running, she said. "We're afraid we'll come in in two years saying we don't have enough data to evaluate the programs and that the programs are still ramping up."

Another concern, Dixon said, is that the two-year sunset will pose an additional barrier to PacifiCorp's pursuit of all cost-effective conservation in Washington. But Hedman said that's not an issue: "We'll still be planning for the long term."

Background

Pacific Power serves about 120,000 customers in Washington, primarily in and around the eastern Washington communities of Yakima and Walla Walla. About 26,000 commercial and small industrial customers would be eligible for the programs outlined in the filing, said Hedman.

Hedman noted the $2.8 million the utility will collect during the first 14 months is a "best guess" of the annual savings target and the cost of efficiency measures, based on research by the Northwest Power Planning Council. But the utility also predicts it will take $4.1 million annually--for the new programs and ongoing commitments--to achieve the targeted energy savings. Pacific will conduct a more detailed study of energy efficiency potential in its Washington service areas, and the results will be used in developing new programs and refining existing programs to achieve the target levels of energy efficiency.

The utility's proposal stemmed from a rate case settlement, reached in August, that did not address energy efficiency expenditures. PacifiCorp developed the proposal with the assistance of a stakeholders advisory group that met for the first time this summer. The group--which includes representatives of several state agencies, as well as the NWEC, Northwest Energy Efficiency Council, Avista Utilities, the Energy Project and the Yakima Valley Opportunities Industrialization Center--will continue to meet quarterly and provide input to the utility, Hedman said.

While the $2.8 million in initial funding includes $560,000 for existing low-income weatherization programs, Pacific will continue to work with stakeholders to develop a separate filing revising its low-income weatherization tariff. Hedman said some of the local agencies that deliver efficiency services to qualifying customers have raised questions about program administration. The filing is more likely to restructure program implementation than increase funding, he indicated.

As for the residential offerings, the advisory group believes cost-effective efficiency programs can be developed for the residential sector; Pacific first will conduct focus group research on customer opinions and needs related to energy efficiency.

Energy FinAnswer Expansion

Initially, the company will expand its current Energy FinAnswer program to allow customers to choose between an incentive payment or financing (which is already available). Larger companies can often find financing at better rates than what PacifiCorp can offer, Hedman said; and other potential participants, such as government agencies, cannot use the utility's financing. Incentives are simpler and more attractive for some companies. The incentives will be capped at the first year's energy savings multiplied by 12 cents per kilowatt-hour, or 50 percent of measure costs--whichever is less. PacifiCorp estimates the revised Energy FinAnswer program has the market potential to produce annual savings of 1.01 (average megawatts).

The utility also will offer two new commercial/industrial programs. One, for commercial facilities 20,000 square feet or larger, provides incentives for lighting retrofits and could produce annual energy savings of 0.30 aMW. The other, for commercial sites smaller than 20,000 square feet, is a retrofit incentive program that offers incentives for proven technologies, such as programmable thermostats and light-emitting diode traffic signals, and slightly higher incentives "for emerging technologies to encourage market penetration," according to the WUTC staff report. As in the program for larger facilities, total incentive payments cannot exceed 50 percent of measure costs. The market potential for the smaller commercial incentive program is 0.25 aMW in annual energy savings.

These Washington program offerings now mirror what the utility provides in Oregon, according to Hedman.

Although the new tariff took effect Oct. 26, Pacific won't begin collecting the SBC surcharge until January 2001. The expected increase on the average residential customer's bill will be about $1.03 per month, or about 1.6 percent. Doug Kilpatrick, energy industry coordinator for the WUTC, said the commission wanted the charge to take effect at the same time the increase associated with the rate case settlement was implemented and customers would also begin receiving ScottishPower merger rate credits and gains from the sale of the Centralia coal-fired plant. "We wanted as few changes to customers' bills as possible," he said.--Jude Noland

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Discount Details

BPA's Conservation/Renewables Discount Will Begin in 2001;
Some Important Implementation Details Remain Outstanding

Bonneville Power Administration will offer a wholesale rate discount for energy conservation and renewable energy initiatives beginning in October 2001. In the meantime, some important implementation details--including credit amounts for conservation measures--remain outstanding.

BPA is formally seeking opinions on the Regional Technical Forum's recommendations on proposed conservation and renewables activities eligible for the discount, as well as a draft implementation manual on the C&RD. "Now BPA would like to finalize this information so its power sales customers can being planning their approaches for receiving the C&RD credit," wrote BPA acting energy efficiency vice president John Pyrch in an Oct. 10 letter to customers and other interested parties.

Pyrch's letter also referenced a BPA document on the amount of credit available per conservation measure. BPA's Mark Johnson anticipates this topic will be a "hot one" as Bonneville holds six public meetings around the region on C&RD implementation issues and solicits written comments through Nov. 27. The agency plans to settle C&RD implementation details by February at the latest, according to Johnson.

RTF Recommendations, Implementation Manual

As requested by BPA in 1999, the Regional Technical Forum devised a "comprehensive list of energy efficiency measures and renewable resources actions that are predetermined to qualify for the discount." This list of recommendations and associated materials came to BPA Sept. 1.

The RTF has proposed specific measures and activities eligible for the C&RD, as well as "deemed" measurement approaches and protocols for estimating energy savings or energy production from non-deemed initiatives.

BPA agrees with virtually all the RTF's recommendations, according to an agency decision document. Bonneville would add net metering as an eligible renewables activity, and would limit customer spending on certain organizations and research/development/demonstration activities to 20 percent of the total discount. BPA shied away from decisions about RTF recommendations on local distribution system benefits and costs, environmental externalities and total societal benefits, saying they don't apply to the C&RD.

BPA's draft impementation manual for the C&RD will incorporate the RTF recommendations (after the public review process), and covers other issues considered by a stakeholders group in meetings earlier this year.

The manual begins with an overview of C&RD objectives and key features, and goes into discount decisions already made in the BPA rate case for fiscal years 2002-2006. The discount will be .05 cents per kilowatt-hour--expected to equal about $30 million annually. It will be available for qualifying conservation, new renewables, low-income weatherization and donations to certain organizations (money to the Bonneville Environmental Foundation, Northwest Energy Efficiency Alliance and federal low-income weatherization "subgrantees" would qualify for full dollar-for-dollar reimbursement). BPA also will require customers to certify that their discount-related spending is incremental, with exemptions for government-required investments and for publicly owned utilities that spend 3 percent or more of their retail revenues on conservation and renewables.

The manual also outlines the small customer option (available for utilities that buy 7.5 average megawatts or less from BPA), and options for dollar-for-dollar cost reimbursement (with restrictions) as well as discounts based on the value of energy savings. It also covers administrative matters, such as reporting requirements.

Discount credit amounts for renewable energy are proposed in the manual at the following levels: 2 cents per kilowatt-hour for new solar, 1.5 cents/KWh for new geothermal or wind, 1 cent/KWh for new biomass or hydro and expansions of existing geothermal, solar, wind, biomass or hydro facilities. Direct-application renewables and unmetered customer-side generating resources also would be eligible, as would renewables research and development.

Conservation Credits

On the issue of conservation credits, BPA has identified a potential problem in offering discounts based on the value of energy savings. "The $30 million could result in a lot of new benefits to the region, or it could result in a lot less," a BPA document states. It cites an example of a $6 compact fluorescent lamp that the RTF determined has a $36 total value. "Crediting of full value for many measures could exhaust the C&RD credits so short of optimization as to fail a test of common sense," according to Bonneville.

The agency outlines a number of approaches to address this issue, including its preferred option: crediting 80 percent of the energy savings value to the power system, except where this amount exceeds two times the capital cost of a conservation measure. In the case of the $6 CF lamp, this would result in a $12 discount credit. BPA thinks this formula would be easy to implement, prevent overpaying for conservation, lead to more installed measures, and ensure consistent treatment.--Mark Ohrenschall

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RENEWABLES/GREEN POWER

Transitional Times for Alliance

New Alliance Chair Brian Hedman Sees 'Interesting Year'
Ahead for Market Transformation Collaborative

The Northwest Energy Efficiency Alliance is entering a "transitional year," as it looks to funding prospects from Oregon public-purposes money and from publicly owned utilities in the region, according to the Alliance's new board chair.

"It'll be an interesting year to be chair, working through these issues and positioning the Alliance for long-term sustainability and effectiveness," said Brian Hedman, DSM policy manager for PacifiCorp, the region's largest utility.

Hedman was elected chair by his colleagues at the Alliance board's quarterly meeting in Spokane Oct. 12-13 (see related story). He succeeds Charlie Grist.
New Alliance chair Brian Hedman
(Photo courtesy of PacifiCorp)

Hedman doesn't anticipate major changes for the regional market transformation collaborative. "The Alliance is a very well-run organization and the board is functioning very well," he told Con.WEB. "I don't think there's anything but incremental value that I can bring as chair." Hedman promised to "continue to strive to form consensus on decisions the board makes," while sharing his own consumer-centered views on market transformation. "I don't see any revolutionary change for the Alliance I would be advocating as chair. It's more a matter of continuing the work the Alliance has previously established and has a track record of accomplishing."

He did cite an interest in the Alliance examining opportunities for demand-reduction market transformation approaches, as well as venture capital-type projects.

PacifiCorp Connection

Hedman has served on the Alliance board since the organization's inception in fall 1996, and decided to pursue the chair position after talking with PacifiCorp chief executive officer Alan Richardson. "He was very supportive of the [Alliance] and was impressed that the utilities in the region could get together to form such an organization to achieve conservation," he said. Seeking an Alliance leadership position fits with PacifiCorp parent ScottishPower's interest in increased community activism, while PacifiCorp's largely rural service territory affords a perspective from outside the Interstate 5 corridor, Hedman told his board colleagues in Spokane.

His chairmanship also raises the profile of the Alliance and energy efficiency within the utility, while "reinforcing the types of commitments entered into in the [ScottishPower/PacifiCorp] merger," such as doubling conservation spending in Oregon. It could additionally help in coordinating projects between PacifiCorp and the Alliance, he noted.

Hedman believes the Alliance has made a substantial positive mark in its four years of existence. "I think the Alliance took an idea that people had, but weren't sure whether it could work, and proved that it was a viable concept. Two aspects are particularly notable. One is the idea you could bring together the public and private utilities as well as other interested parties to guide and run such an organization. Second is that market transformation, as a process for achieving energy efficiency, is viable. I think the Alliance has clearly demonstrated that.

"My own philosophy on market transformation," he continued, "is that it means the consumer is making an energy-efficient decision of their own volition . . . Programs need to be structured that provide the correct price signals and the correct information to the consumer so that they can be the decision-makers." He distinguished between a "command and control approach" that disregards consumer choice, and initiatives--such as in refrigerators and washing machines--that demonstrate a market for energy-efficient products or services before a new efficiency mandate goes into place.

Hedman acknowledged his reputation for opposing some venture proposals brought before the Alliance board. "In my prior votes, I was very cautious about programs which I didn't feel either had a potential to succeed or the correct market transformation approach," he said.

The Alliance has been "very conscious" of distributing programs around the region, Hedman said, even though "by its nature, market transformation centers around markets and markets cluster around the major population areas."

Potential Alliance Funding Sources

Oregon's electric utility restructuring law includes a public-purposes funding provision for market transformation, although it does not specifically list a market transformation recipient. Hedman thinks the Alliance should work with the new non-profit public-purposes administrator (see related story) "to demonstrate its ability to effectively manage the market transformation aspect of its programs . . . I think it's highly likely the Alliance will succeed in demonstrating its effectiveness and will receive the market transformation funds." This would effectively replace monies now contributed to the Alliance from PacifiCorp and Portland General Electric.

Under Montana's electric industry restructuring, Montana Power administers Universal System Benefits Charge funding in its service territory, including market transformation dollars to the Alliance. "I don't see any change" in that scenario, said Hedman. He also doesn't anticipate electric restructuring occurring in Washington or Idaho this coming year that could affect Alliance funding from those states.

Publicly owned utilities represent another potential funding source for the Alliance. Bonneville Power Administration will reduce its proportional share of Alliance funding next October, and large publicly owned utilities that do not get all their power from BPA will be asked for contributions. BPA's conservation/renewables rate discount and its planned inclusion of Alliance funding as a qualifying activity "could lead to additional participation from the public utilities Bonneville serves," said Hedman.

He also offered a couple of ideas on prospective Alliance endeavors.

"One of the things the current energy market has brought to my attention is the need to take a look at energy efficiency from both a demand and an energy basis," he said. "There may be potential programs that address more the demand side and less the energy-saving side. I'm not an engineer; it's just more of an area of interest that deserves some exploration."

Another area of interest is venture capitalism. "I think projects which provide a return to the Alliance is an area we may pursue," Hedman said, noting several current ventures are designed as such. "That clearly, in my mind, fits within the definition of market transformation. You're seeding a new market player, getting that up and running." Properly structured, this arrangement doesn't pose any more risk to the Alliance than any other project aimed at long-term market transformation, he thinks. "We've done them, and I think they make a lot of sense."--Mark Ohrenschall

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Decisions, Decisions

Alliance Board Continues Funding for Three Projects,
Elects New Officers, Approves Budget

Financial decisions and internal elections highlighted the Northwest Energy Efficiency Alliance board of directors quarterly meeting Oct. 12 and 13 in Spokane.

The Alliance board approved continued funding for three projects, let two others lapse, renewed membership in two outside organizations, elected officers for the coming year--including new chairman Brian Hedman of PacifiCorp (see related story)--and passed a 2001 operating budget identical to the 2000 spending blueprint.

Project Approvals

The Drive Power Initiative, Sav-Air Master Plan for Compressed Air Systems and the Northwest Energy Education Institute all received more Alliance funding, as did the Consortium for Energy Efficiency and the Lighting Research Center.

By unanimous board vote, the Drive Power Initiative gained up to $1.9 million through 2003 to seek improved motor efficiency in the Northwest, primarily by promoting energy-efficient motor-management practices by industrial companies with large motor loads. Those practices include "optimized" decisions on repairing and replacing motors and using life-cycle cost analyses, according to Alliance project coordinator John Jennings. The project promotes quality motor reconditioning to avoid efficiency losses during repairs, and also promotes selection of high-efficiency motors.

The Alliance and contractor Electric League of the Pacific Northwest rely on field consultants, who in the past year visited 65 Northwest industrial customers--more than a quarter of which plan to initiate energy-efficient management of their motors. The market transformation strategy is to collaborate individually with a small number of customers, then document and publish resulting success stories that will spread these practices among industrial customers, who will see it as a competitive advantage in lowering costs and production downtime, and improving motor reliability. The project will also begin to explore motor systems efficiency.

"It has huge market potential, huge savings potential, broad geographic coverage," Jennings told the board. Drive Power promises cost-effective efficiencies--potentially 75 average megawatts regionwide by 2010--while linking with a number of other Alliance ventures, he noted.

By a 15-1 vote, another industrial project, Sav-Air, secured up to $1.07 million in additional Alliance dollars, about half of which is conditioned on contractor Century West Engineering finding matching non-utility funds.

Sav-Air provides remote monitoring and control for industrial compressed-air systems. The market is substantial: compressed air consumes more than 500 aMW regionally, according to Alliance project coordinator Blair Collins, and Sav-Air has consistently seen energy savings ranging from 25 percent to 50 percent. "There are a lot of opportunities and a lot of reasons for companies to look at" compressed-air efficiencies, he said. The Alliance is "seeing significant acceleration of the project into the market," with six demonstration sites completed and several others in process, predominantly in Oregon.

Alliance officials expressed some hesitancies about Sav-Air's business prospects, a notion expressed through staff's recommendation that $525,000 of funding be set aside through 2002 for release on condition the company acquires matching funding from other sources. "If Sav-Air makes it, we're going to see major competitors. That's really the market transformation," said Alliance executive director Margie Gardner. "The business of remote monitoring and control is what we're going after. We want [Sav-Air] to be successful."

A third ongoing venture, the Northwest Energy Education Institute, on a 13-2 board vote received an additional $65,000 for the first six months of 2001, while the Alliance develops a larger strategy for training and education. "We're really needing to put the Institute in some sort of a bigger context," said Alliance planning and implementation director Susan Hermenet. The six-month funding extension is "really keeping that bridge or that placeholder with the Institute."

Additionally, the board unanimously approved continued membership in two national organizations it believes benefit the Alliance and the Northwest. The Consortium for Energy Efficiency was allocated $240,000 spread over three years, and the Lighting Research Center and its National Lighting Product Information Program will get $50,000 apiece in 2001.

Lapsed Projects

The Alliance board followed staff recommendations in allowing the Silicon Crystal Growing Facilities venture and the Public Housing Efficiency project to end, without formal votes.

In Silicon Crystal Growing Facilities, the Alliance provided $1 million to Siemens Solar Industries to seek improved efficiencies in the energy-intensive process of making silicon crystals for use in solar photovoltaic and semiconductor applications.

Results were very positive, Alliance staffer Collins told the board. Siemens recorded 51-percent energy savings, 85-percent reduction in argon consumption, 30-percent increase in productivity and 10-percent increase in yield--all exceeding initial goals. And these types of efficiencies are beginning to make inroads in the crystal-growing industry, according to Collins. But instead of renewing the program, he said the Alliance should "declare victory and keep the conversation going with the manufacturers." Alliance chair Charlie Grist called this a "fabulously successful project, one we will ride the coattails of for a long time."

A less transformative venture in a challenging market also will come to an end. Public Housing Efficiency sought to promote life-cycle cost analyses and resource efficiency practices in public housing, and to influence state and federal energy efficiency guidelines. "Public housing is a pretty difficult sector," said Hermenet. "When you look at what's top-of-mind for them, it's not always energy efficiency." The Alliance may in the future work in this market with the National Association of Housing Redevelopment Officials.

Board Election, Budget

PacifiCorp's Hedman was chosen as the new Alliance board chair, outpolling Jake Fey of Tacoma Power. Hedman succeeds Grist in the leadership position. Steve Ottenbreit of Snohomish PUD was elected secretary, and Liz Klumpp of the Washington Office of Trade and Economic Development will be treasurer. Grist, Larry Bryant of Kootenai Electric Cooperative and Darlene Nemnich of Idaho Power will round out the Alliance board's executive committee. In other board changes, former board member Bryant takes over for Van Ashton of Idaho Falls Power, and Terry Kelly of Salem Electric succeeds Mat Northway of Eugene Water & Electric Board. Northway will remain on the board as a member-elect.

The Alliance board also approved a $3.09 million operating budget for 2001--identical to the 2000 spending blueprint. This budget encompasses money for Alliance operations costs, and represents about 15 percent of the organization's total anticipated 2001 spending of $20 million. About two-thirds of the budget is earmarked for salaries for Alliance employees, who now number 23 and will soon be joined by two additional staffers.--Mark Ohrenschall

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RENEWABLES/GREEN POWER

Green Power Influence

Federal Agencies Have Reasons, Means to
Support Green Power, Although Challenges Remain

As the nation's largest electricity consumer, the federal government can influence the emerging green power market.

Federal agencies have many reasons to support renewably generated electricity, including official directives and encouragement, the chance to show environmental leadership and the ability to foster clean energy development the taxpaying public seems to want. Assorted purchasing options, government programs and the increasing attractiveness of wind energy, in particular, offer green power opportunities. Some federal agencies have already gone green.

But challenges still remain, such as the higher costs of renewables and occasional bureaucratic resistance.

These were among the ideas shared at the Northwest Green Power Summit held Sept. 28-29 near Seattle, sponsored by the U.S. Department of Energy's Seattle Regional Office and Federal Energy Management Program.

Backdrop

The federal government spends $8 billion on energy each year and consumes 2 percent of the nation's electricity, noted FEMP director Beth Shearer.

"The federal government is a market creator and driver," she said, citing as examples rural electrification, the space program, personal computers and the Internet. "Working together, we can also create success in the renewables market in terms of purchasing and developing renewables."

Federal agencies have already made substantial progress in energy efficiency, reducing federal building energy use 21.1 percent since 1985 and saving $2.2 billion in 1999, according to Shearer. DOE Seattle office director Kathy Pierce called efficiency "probably the cheapest green power that we could use," and encouraged its continued pursuit along with renewables.

The feds are under executive order from President Bill Clinton to reduce facility energy use 35 percent by 2010 (from the 1985 baseline). On the renewables side, the same June 1999 executive order (No. 13123) states: "Each agency shall strive to expand the use of renewable energy within its facilities and in its activities by implementing renewable energy projects and by purchasing electricity from renewable energy sources." DOE is aiming for 3 percent of its power purchases to come from non-hydro renewables by 2005, and 7.5 percent by 2010, U.S. Secretary of Energy Bill Richardson told the conference via videotape.

With a "confluence of reasonably priced markets and growing demand, there's a real opportunity to say renewables are going to be a cost-effective solution," said Shearer. "The time is now; this is the right time to be buying renewables."

Curtis Framel of DOE-Seattle agreed. "Using the power of the government, we can move the market," he said. The federal government is an influential presence in the Western states, and, he added, the Northwest--despite its hydropower reputation--relies on fossil fuels and nuclear power for 43 percent of its electric generation.

"We're not here to put fossil fuels out of business," Framel said. "We're looking for opportunities to level the playing field and integrate renewables into the mainstream." He encouraged federal partnerships with other government entities and private businesses.

"Why is federal leadership in the energy marketplace critical to environmental protection?" asked Ron Kreizenbeck, acting deputy regional administrator for the Environmental Protection Agency. "The way Americans use energy is the single biggest, most intractable environmental problem we face today."

Clean energy carries a price premium, he acknowledged, but, "We have to take some risks and shoulder some criticism. The government's job is to tip the scale in favor of new technologies." Despite limited budgets, he concluded, federal agencies can "drive up the options, drive down the costs and be part of the solution for those who follow."

Federal Green Power Opportunities

Conference-goers heard about various ways to pursue clean energy.

"There are an overwhelming number of opportunities for federal customers to show support for renewable power," said Ryan Wiser of Lawrence Berkeley Laboratory. Green-pricing programs are available from at least one electric utility in two-thirds of the states, while 31 retail green power products are available from 16 marketers in seven states with restructured electric markets, he said. Renewable energy installations on federal facilities represent another option, as do "green tags" that deliver renewables to the grid somewhere while crediting purchasers for the environmentally friendly attributes.

"It's important to not forget that your customers, as American citizens . . . want this stuff," Wiser said. "Over 80 percent want to see renewables delivered to the grid.

"The biggest barrier to green power purchases is cost," he continued. "Yes, green power generally costs more, but it will not result in bankruptcy and it's not necessarily a major hit to budgets." Wiser said he and Ed Holt surveyed some 450 non-residential green power purchasers, and found that 30 percent reported paying the same or less for green power while the other 70 percent paid "a generally pretty modest" premium, ranging from an average of $140 per year for a small organization to $9,000 annually for a large organization. "These aren't negligible amounts of money, but this is . . . money you can find generally in an agency," he said.

Green power help can be found in a number of places. Federal programs supporting renewables include Wind Powering America, GeoPowering The West and Million Solar Roofs. The fledgling and volunteer Federal Network for Sustainability works collaboratively to advance efficiency and renewables initiatives. Bonneville Power Administration, meanwhile, assists federal agencies with renewables project development and technical support. "Direct-application renewables are in the same spectrum as energy efficiency," said BPA's Tim Scanlon. "It's another way to reduce the load we place on the power grid. Our mix of work is shifting more and more into the renewables arena. There are more and more opportunities and more interest and enthusiasm in federal agencies to actually implement renewable projects."

At the state level, Oregon's Business Energy Tax Credit is available to federal agencies with taxpaying partners, and the Small Scale Energy Loan Program also is accessible to the feds, according to David Stewart-Smith of the Oregon Office of Energy. "That can make a significant incentive package," he said.

Comparing Renewables

Wind energy was widely touted as a favored renewable resource, especially for its relatively competitive cost (conditionally 5 cents per kilowatt-hour and lower). "That sets us apart from other renewable generation options," said Karen Conover of Global Energy Concepts. "Wind is really the star of the green market right now." She also cited wind's environmental benefits and its value as a "hedge against rising fuel costs."

But other renewables also had proponents at the conference.

Geothermal energy plants create virtually constant and emission-free power, and the resource is abundantly available around the West. Steve Munson of Vulcan Power Co. listed promising undeveloped geothermal sites in Washington (around Mount Baker), Oregon ("Newberry Volcano is actually a success waiting to happen"), Idaho and northern California. "We think the industry is ready to really roll," he said. Geothermal could greatly benefit from federal production tax incentives of the kind now available to wind energy, suggested Jon Wellinghoff of Northwest Geothermal Co. "We believe there really should be a level green playing field."

Solar energy, meanwhile, can't compete on price, conceded Mike Nelson of Washington State University Cooperative Extension Energy Program. Solar photovoltaics cost 25 cents/KWh "if you've got a real, real sharp pencil," he said. But PV is "the least-cost option for generating green power on the consumer side of the meter." Nelson believes federal support is vital to help transform the solar manufacturing industry from the current "craft guild" conditions to a "modern factory" system with higher-volume production and lower costs. "The feds are the only people who can make it happen," he told government representatives. "You're in a position to drive the curve the next step."

Plugging into Green Power

A number of federal agencies have already plugged into green power.
These solar panels help power an Environmental
Protection Agency laboratory near Seattle.
(Photo courtesy of Western S.U.N. Cooperative/Mike Nelson)

BPA was lauded by DOE's Richardson as "the largest green power consumer in the region and one of the first federal agencies to buy significant amounts of green power." BPA headquarters in Portland are 5-percent powered by PacifiCorp's Blue Sky program. The federal power marketer also sells environmentally preferred power, with about 25 average megawatts committed to date, said BPA official Terry Esvelt. "Given the challenges we've got in marketing that resource with its relative cost disadvantage in the Pacific Northwest because of our hydro base, we are so encouraged because of the early response," he said. The agency hopes to sell 450 aMW of EPP by 2006, including 150 aMW of new renewables.

In Hawaii, nearly 2,000 solar photovoltaic systems are installed on military and other federal facilities, and nearly 1,000 more are planned, according to state energy official Maria Tome. "Federal agencies are real leaders in this area," she said. Hawaii has the nation's highest electric rates and is heavily dependent on imported petroleum, while tourism is its largest economic force, nurtured by the state's environment. "We have a lot of reasons aside from economics to look into clean types of energy," she said.

In the Northwest, a federal courthouse in Boise, ID, uses ground-source geothermal energy, according to Framel.

In Kitsap County, WA, the EPA's regional laboratory has 2 kilowatts of solar-electric capacity. "The real value of what we did had nothing to do with the solar energy," said EPA's Carolyn Gangmark. "It had everything to do with knocking down barrier so others could follow." She described the challenges of developing a net-metering agreement with the local utility, which has taken 18 months and counting.

The lab also bought $50,000 worth of "green tag" power from the Bonneville Environmental Foundation. "It was clear our administrator was very committed to doing this," she recalled. "He committed resources right there, in our conversation" with BEF executive director Angus Duncan. But not all EPA folks had the same positive reaction. "Our financing people came unglued, our grants people came unglued, the division director took me to the woodshed," Gangmark told the conference. "When you start out doing something like this, there are no vehicles in place to make it happen. We invented one. We're purchasing green tag under a grant authorized by the Clean Air Act. We're calling it a demonstration project, and we leveraged $475,000 from outer space on it."

Another example of innovation came from Colorado, where 30-plus federal agencies combined to buy 10 MW of wind power from Public Service Co. of Colorado's Windsource program. Ed Cannon of the National Renewable Energy Laboratory said he sold this idea to agency representatives as a chance to show environmental leadership and stewardship, and improve employee morale--"people like to work at a place that is doing something environmentally correct." This required "champions" within agencies to make it work, he noted, as well as a "critical mass" of participants. Declining budgets, particularly for energy, posed a challenge, but Cannon noted energy savings can be applied toward green power purchases.

The federal government has only a smattering of installed wind-powered capacity, less than 2-MW worth. "Clearly we'll not reach 1,000 MW of installed wind [the federal goal by 2010] if we put in 200 KW at a time stuck all over the countryside. Green energy purchases are likely the solution . . . There are significant opportunities with green tag purchases."--Mark Ohrenschall

 

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