European Benefit/Cost (EUBC) Analysis Methodology for Energy Efficiency Programs

Stíle E. Johansen, SRC International ApS, Denmark
David T. Hoog, SRC International Inc., USA

Keywords

Abstract

DSM programs have been implemented in several countries, under various regulatory, utility industry, and market structures, and they have been performed for very diverse reasons to achieve different goals. For this reason, one single cost-effectiveness methodology will not be relevant for all situations. Many attempts to establish benefit/cost (B/C) procedures -- or transfer procedures developed in other contexts -- have failed because these factors were not appropriately addressed. There are at least four critical issues regarding DSM programs that must be addressed initially.

These are:

Defining the major. characteristics of the environment in which the DSM program is being implemented. This includes describing the market type, utility structure, and regulation type,
Defining the role of government, utility industry and third party in performing DSM programs.
Defining main motivation fro implementing DSM and energy efficiency services programs. For example, are activities performed as a part of public policy to achieve a public policy goal, or as part of a utility strategic marketing program to increase market share and profitability,
What is the method for implementing the energy efficiency program? Rebates or information only? Bundled, as part of a kWh sales contract, or offered as a separate service?

This paper summarises an effort undertaken by the European Commission (DG 17) in co:operation with a cross-section of European utility experts. The principal objective is to develop methodology that is able to estimate the benefits and costs of DSM and energy efficiency services programs and to evaluate the cost-effectiveness.of such activities. The methodology must be able to compare the cost-effectiveness of individual activities and be robust over a variety European utility industry, market and regulatory structures. The paper establishes a framework for addressing the questions (l)-(4), it identifies the outcomes that can be measured as a part of the cost-effectiveness evaluation, it indicates the steps that must be performed in order to apply the framework and to perform the B/C evaluations. The paper also illustrates possible application of B/C methodology to specific utility industry structure, market structure and regulatory type.