Posted By Adeline Lui,
Monday, July 24, 2017
This article is republished from the July 2017 issue of Strategies, AESP’s exclusive magazine for members. To receive Strategies, please consider joining AESP.
PROSPECTIVES: David Jacot, Los Angeles Department of Water & Power's Director of Efficiency Solutions
John Hargrove: In a nutshell, what is the energy efficiency industry in California like right now?
David Jacot: We are very aggressive with new goals and targets under SB 350 which was passed last year. This law mandates doubling of energy efficiency by the year 2030. No one knows exactly what that means but it is going to be aggressive and the California Energy Commission is working mightily right now to figure it out.
John: At LADWP, you work with local government which often has very different priorities from the PUCs who oversee IOUs. What are some of the unique political challenges you see in communicating the value of energy efficiency to your decision makers?
David: Investor-owned utilities implement energy efficiency programs often at the mandate of the PUC. We are not regulated by the PUC but by the Los Angeles City Council. It is different in that there are multiple benefits that come from energy efficiency that may be of more interest to the council members. Energy efficiency is used as a component in our energy resource plan and delivers a very cost effective supply-side resource. But beyond that, there are a lot of non-energy benefits that factor in and accrue due to our investment in energy efficiency. Those non-energy benefits can often be more interesting to stakeholders than the energy benefits themselves – such as the creation of green job opportunities for our local work force; and equity of access across all customer segments and socio-economic categories. There is also a public policy mandate for low income energy efficiency, to help those constituents as well.
John: You mention that energy efficiency is considered a supply-side resource. Tell me more.
David: One of the things I am most proud of at LADWP is that we have quantitatively internalized the value of energy efficiency as a supply-side resource. We have been including it in our Integrated Resource Plan for six years as part of the supply mix to meet projected needs. To some extent, for many IOUs, energy efficiency is a regulatory mandate or a customer satisfaction play. But when it comes to getting counted as a hard resource, it is heavily discounted, if it is counted at all. At LADWP, we treat it as a dependable resource. In our loading order for resources, we rank energy efficiency as number one.
John: What is an example of a way you have overcome political challenges you see in communicating the value of energy efficiency to your decision makers?
David: We have a nation-leading partnership with Southern California Gas Company. They serve 20 million southern Californians, four million of whom are in our service territory. We have a joint agreement and 19 programs under that agreement where together we deliver gas, electric, and water efficiency programs. We just celebrated the fifth anniversary of that partnership. We coordinate with other utilities, especially on information sharing and the implementation of statewide programs with single administrators. With such broad collaboration and a diversified value proposition, efforts such as this tend to transcend political skirmishes and challenges and get everyone on board.
John: Has LADWP implemented customer-engagement programs, and what is your experience with them?
David: We presently have a number of customer engagement programs achieving broad recognition, such as our comprehensive home retrofit program performed free of charge and targeted to our lower income homeowners. We also attend to grassroots-level community capacity building through our Community Grants Program which enlists CBOs in each Council District as well as across the city to get out the energy and water efficiency message. We are in the process of building a more robust customer engagement strategy across all touch points through the process of journey mapping for our customer programs. We are also planning to deliver a city-wide peer-comparison-based behavioral conservation program.
John: What are some of the barriers to advancing energy efficiency in LADWP - and how have they been overcome?
David: The SoCal Gas partnership overcame many issues of resources. Hiring for the civil service process can be problematic. We were able to work with SoCal Gas and put together programs quickly that we did not have the internal resources or the contractual ability to do quickly on our own. There are things that a municipal utility can do quickly that an IOU can’t, like moving money from an unsuccessful program to one that is higher performing. IOUs can do things more quickly than we can, such as contracting for certain types of work. By working together we are able to implement several programs more effectively than either of us could do on our own, that at the same time bring additional benefits for our shared customers.
John: California is in the forefront of water conservation. What kind of future resource planning is LADWP doing to ensure its water future?
David: The drought which has been extreme for the last five years, was alleviated by this winter’s rains. But, we all know this being southern California, the water won’t stick around for long. We have managed to keep water consumption at the same total aggregate level over the last 30 years, even though Los Angeles has added a million people inside the city boundaries. We have brought down the per capita daily consumption to 104 gallons per person which is the lowest in the country for any city of over one million people. We have made long term efforts to reduce indoor usage and most of those opportunities are now saturated. The largest share of our customers’ use is outdoor irrigation and that also happens to be our largest opportunity to reduce water use going forward. In terms of resource planning, LADWP is also working to enhance our local water supplies, particularly storm water, recycled water and groundwater – all critical to increasing our water resilience and reducing our dependence on imported water.
John: How does LADWP view itself compared to other utilities?
David: LADWP is very unique. For a long time, we thought that we were as big as the IOUs but since we were not regulated by the PUC we didn’t really mesh with them. We knew that we were a POU, publically owned utility, but we were so much bigger than the rest that we didn’t feel we fit with them either. What we have done over the last few years is to say no, both of those perspectives are wrong. We are members of both groups and we need to be out there leading. We are an IOU-scale POU which gives us access to a lot of resources and the ability to lead, that a lot of the smaller POUs don’t have. At the same time, we are unrestrained by the bureaucracy of the IOU regulatory model, so we can really get out there and do aggressive things. Not only that, it is our responsibility, given our position, to do just that.
John: Looking to the future of EE in the next five and 10 years, what do you see in the way of technological advances and how will they impact the landscape of EE?
David: One big thing continues to be the full conversion of lighting to LED. The technology just gets better and better. There is tremendous energy savings which also drives cooling loads down. We expect to see total residential saturation very quickly. We are trying to accelerate that by doing giveaways. We did one last year and we will do another this year. Two LEDs for every household in Los Angeles; 1.4 million homes, 2.8 million LED lightbulbs. Utilizing a contractor, we delivered them door to door over the course of 13 weeks. At one point, over 80,000 homes per week. The average household has 30-40 light sockets. Conceivably we could run this program twice per year for 10 years or more. If people are putting the bulbs in when they get them, we could singlehandedly transform the market in a relatively short amount of time.
The other thing is, LEDs are so long lasting that we foresee a time, not too far away, where brick and mortar retailers are going to stock less and less product. We expect it to migrate to more of a web- based or Amazon type commodity. If the product lasts 15-20 years before burnout, retailers are not going to assign it that important shelf space.
John: What unique considerations should there be when integrating EE into DER and the Grid?
David: Traditionally they haven’t been coordinated that well in our programs or utilities in California, in general. The solar industry was pretty adamant about killing off any energy efficiency retrofit requirement as a condition of solar incentives. The compromise reached was quite watered down in terms of only requiring an energy efficiency audit. But even for that, there’s really no enforcement mechanism for it so we know that a lot of the solar is going into inefficient homes and the solar systems are often being sized bigger than they need to be if a comprehensive energy efficiency retrofit was undertaken before doing the solar project. That was a state law and years ago we weren’t able to get a tighter tie to the loading order in that. So, where does that leave us? To some extent we do have the oversizing of some of the solar systems, although they are technically right sized if they haven’t done any energy efficiency. If they do the energy efficiency work, then they will simply be feeding more energy in to the grid.
We look at distributed energy resources as five things: distributed solar, distributed battery storage, demand response, electric vehicle chargers, and energy efficiency. The first four are controllable and dispatchable. Energy efficiency is not. Energy efficiency is fundamental, or foundational to being able to optimize the grid and to accept the other four. It is baseload reduction and it can be targeted geographically. We are working with our power system to see how we can do an extra push in those grid-congested areas. Energy efficiency can be done any time and it will result in additional capacity on the system.
John: What do you see are the key trends disrupting the industry today?
David: One big one for us is California’s push towards 100 percent renewables. There is a bill that has been proposed to mandate this by 2045, which is less than 30 years away. There certainly is going to be support for California to do something bold like that, especially in light of the new national administration. I would not be surprised to see that pass. That will completely up-end the utility model in California. The utilities will survive it. There will always be a need for utilities to tie everything together but it will look a lot different than it does today. The big question for both IOUs and POUs is, what does that do for their revenue models, costs, rates, reliability, valuations (for IOUs), and bond ratings on Wall Street? That’s a big question for all of us.
John: Give me a description for the utility 25 years from now.
David: Twenty five years from now, continuing the trend of decentralization, we will probably be getting to the point where the utility connects everything and maybe doesn’t generate anything at all and manages the two-way and three-way power flows like a broker. The utility will still be needed, especially under a 100 percent renewable scenario. I do not envision a model in which everyone is off the grid. Were that to be the case, there would be serious reliability issues and cost issues as well, because not everyone can afford that. The infrastructure will be required to perform in a manner it wasn’t originally designed to do – to incorporate distributed generation and storage, plus massive electrification of passenger vehicles allowing the creation of a virtual, mobile battery. That infrastructure has to be maintained.
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