, Advancing Energy Efficiency in Arkansas: Opportunities for a Clean Energy Economy March 2011 Report Number E104 © American Council for an Energy-Efficient Economy 529 14th Street, N.W., Suite 600, Washington, D.C. 20045 (202) 507-4000, (202) 507-429-2248 fax, aceee.org Prepared by: American Council for an Energy-Efficient Economy (Project Lead and Energy Efficiency Analysis) Max Neubauer, [email protected] Steven Nadel, [email protected] Jacob Talbot Amanda Lowenberger Dan Trombley Sarah Black Nate Kaufman Ben Foster Navigant Consulting, Inc. (Demand Response Analysis) Marca Hagenstad Dan Violette Stuart Schare Synapse Energy Economics, Inc. (Utility-Avoided Costs Estimates) David White Rick Hornby Macroeconomic Analysis Skip Laitner Disclaimer: While several organizations, including Navigant Consulting, ICF International, and Synapse Energy Economics assisted in the completion of this analysis and report, the ultimate viewpoints and recommendations expressed herein are those of ACEEE. Advancing Energy Efficiency in Arkansas, © ACEEE Contents Executive Summary ............................................................................................................................... iii Acknowledgments .................................................................................................................................. ix About the American Council for an Energy-Efficient Economy.............................................................. ix Chapter One: Introduction.......................................................................................................................1 Analysis Methodology and Report Outline ......................................................................................... 4 Analysis Methodology......................................................................................................................... 5 Chapter Two: Electricity and Natural Gas Markets.................................................................................7 Background ........................................................................................................................................ 7 Electricity ............................................................................................................................................ 7 Natural Gas ...................................................................................................................................... 10 Role of Energy Efficiency ................................................................................................................. 11 Reference Case................................................................................................................................13 Utility-Avoided Costs ........................................................................................................................ 16 Retail Price Forecast ........................................................................................................................ 17 Chapter Three: Energy Efficiency Cost-Effective Resource Assessment ............................................19 Residential........................................................................................................................................ 19 Commercial ...................................................................................................................................... 21 Industrial ........................................................................................................................................... 24 Chapter Four: Energy Efficiency Policy Analysis..................................................................................28 Discussion of Policies Analyzed....................................................................................................... 31 Discussion of Enabling Policies........................................................................................................ 55 Energy Efficiency Policy Scenario Results....................................................................................... 63 Policy Investments and Program Costs and Benefits in the Medium Case..................................... 69 Review of Existing Arkansas Potential Studies................................................................................ 71 Review of Policy Recommendations from the Governor’s Commission on Global Warming (2008)72 Assessment of Demand Response .................................................................................................. 73 Chapter Five: Transportation Efficiency................................................................................................78 Background ...................................................................................................................................... 78 Reference Case................................................................................................................................79 Energy Efficiency Policy Analysis..................................................................................................... 80 Chapter Six: Combined Macroeconomic and Emissions Impacts from Electricity, Natural Gas, and Transportation Efficiency.......................................................................................................................95 Methodology ..................................................................................................................................... 95 Illustrating the Methodology: Arkansas Jobs from Efficiency Gains ................................................ 96 Impacts of Recommended Energy Efficiency Policies ..................................................................... 98 Emissions Impacts.......................................................................................................................... 101 Chapter Seven: Discussion and Recommendations ..........................................................................102 Chapter Eight: Conclusions.................................................................................................................105 References..........................................................................................................................................107 Appendix A—Reference Case ............................................................................................................117 A.1. Projection of Energy Consumption ......................................................................................... 117 A.2. Projection of Reference Case Supply Prices and Electricity Avoided Costs.......................... 120 A.3. Electricity Planning and Costing Model................................................................................... 123 A.4. Reference Case Electricity Supply Prices and Avoided Costs ............................................... 127 A.5. Policy Case Electricity Supply Prices and Avoided Costs ...................................................... 129 Appendix B—Energy Efficiency Resource Assessment .....................................................................133 B.1. Residential Buildings Sector ................................................................................................... 133 B.2. Commercial Buildings Sector.................................................................................................. 144 B.3. Industrial Sector ...................................................................................................................... 168 Appendix C—Energy Efficiency Policy Analysis.................................................................................177 C.1. Energy Efficiency Policy Analysis Results and Assumptions ................................................. 177 C.2. Detailed Information on State Energy Efficiency Resource Standards .................................. 186 Appendix D—Demand Response Analysis.........................................................................................189 i Advancing Energy Efficiency in Arkansas, © ACEEE D.1. Introduction ............................................................................................................................. 199 D.2. Defining Demand Response................................................................................................... 200 D.3. Rationale for Demand Response............................................................................................ 201 D.4. Assessment Methods.............................................................................................................. 202 D.5. State of Arkansas—Background............................................................................................. 203 D.6. Assessment of DR Potential in Arkansas ............................................................................... 210 D.7. Commercial and Industrial Potential in Arkansas ................................................................... 215 D.8. Summary of DR Potential Estimates in Arkansas .................................................................. 222 D.9. Recommendations.................................................................................................................. 224 Appendix E—Transportation Efficiency ..............................................................................................227 Appendix F—Combined Heat and Power...........................................................................................235