ENERGY
INCENTIVIZING ELECTRIFICATION: BEST PRACTICES FOR ADDRESSING CONSTRAINED LOAD GROWTH SAFER, SMARTER, GREENER
INTRODUCTION This paper contains the findings of DNV GL’s industry scan of incentivized utility electrification programs for the purpose of determining the optimal market segmentations in commercial and industrial (C&I) markets. The study identified strategies for incentivizing end-use customers and/ or trade allies by market segment and provides the pros and cons associated with each approach through a literature review of current utility offerings and interviews with key program staff. From these insights, the following three objectives were analyzed: Conduct research regarding best practices and outcomes from different incentive approaches Identify positive and negative consequences of each Make recommendations as to appropriate approaches for what equipment to include and how best to incentivize measures In order to meet these objectives, DNV GL: Developed a comprehensive list of “best practices� evidenced to date via recent proceedings from industry conferences. Conducted interviews with program staff to gain insight into how utilities are actively incentivizing these technologies. Gathered information on electrification equipment being promoted and the associated incentive amounts offered through a scan of publicly available materials on utility websites.
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EXECUTIVE SUMMARY As many utilities approach or have achieved their long-term goals in the energy efficiency sphere, they face a future of declining electricity sales and projections of constrained load growth. This issue has been identified by several studies and industry leaders and requires a calculated solution. For several utilities, this solution has taken the form of electrification programs, designed to electrify previously non-electrified end-uses. In fact, this solution has the potential to address several additional problems faced by the industry, although it presents unique challenges. One barrier to electrification is how can programs be designed to incentivize participation. What incentives work best? Are incentives effective at all? These are the questions that DNV GL has sought to answer with this research. In this three-part effort, DNV GL surveyed the published electrification incentives of seven utilities and compiled a database of the relevant incentives, interviewed key program staff at five of these utilities, and conducted a simple thematic analysis of the interview findings. With these findings and results, DNV GL has been able to draw conclusions on the state of the market for electrification programs and develop recommendations for utilities seeking to move forward with their own electrification program. In summary, this research has revealed the following market insights. Firstly, non-road electric vehicles (NREVs) are a common entry-point for electrification. The staff we interviewed specifically identified electric forklifts as being the easiest measure to incentivize to their customers due to their long use-cycle and relatively quick return on investment. Electrification programs should also focus their incentives on the end-use customer as utilities have seen the highest program success with this mode. However, interviews also identified that mid-stream markets were set to grow—especially for commercial kitchen equipment. Some utilities are even expanding this strategy to other end-uses. Utilities also predict a fleet electric vehicle (EV) future. As conversations of fleet electrification grow and mature, and as more vehicle manufacturers announce upcoming EV models, industry leaders must take advantage of the significant benefits presented by the technology. From EV busses to commercial fleets to passenger vehicles, EVs present a substantial opportunity for load shaping and battery storage that should not be ignored. Finally, this research has identified that municipalities must have an equal seat at the table regarding electrification as they may offer excellent opportunities to expand the electrification effort. This research gives a preliminary view of a nascent, but growing, type of program which presents a flexible opportunity for utility—and customer— participation. In light of decreasing loads and a call for greater system flexibility, incentivized electrification is a critical part of all future utility offerings.
Incentivizing Electrification Whitepaper ENERGY 03
OVERVIEW There are several reasons as to why many utilities are incentivizing electrification equipment: Replaces fossil-fueled equipment with electric Suitable for transportation, material handling, heating, commercial, industrial, agriculture, etc. Provides operational benefits and lower energy bills to customers Decreases emissions (i.e., decarbonization) Increased system utilization drives down rates There is currently a range of equipment being actively incentivized or planned1 under electric utility electrification initiatives. Table 1 lists the kinds of equipment currently being incentivized. TABLE 1 Incentivized C&I Electrification Measures On-Road Transportation
Non-Road Transportation
Building Equipment
Non-Road Transportation
Battery electric vehicles
Marine/port equipment
Heat pumps
Manufacturing
Plug-in hybrid vehicles
Industrial equipment
Electric space heating
Industrial processing
Fleet vehicles
Airport ground support equipment
Electric water heaters
Irrigation equipment
EV incentives EV charging equipment incentives EV rates
Material handling
Commercial food service
Recreational Vehicles Shore power/truck stop electrification
Although utility programs that incentivize technologies aimed at beneficial electrification objectives are multiplying, Figure 1 on the next page summarizes C&I electrification programs from around the U.S. as of late 20172.
Some utilities, such as APS, have filings currently under consideration by regulatory commissions. This table includes both these planned measures and those that are actively incentivized. 1
2
JEA. 2018. Presentation at AESP Southeast Annual Conference.
04 ENERGY Incentivizing Electrification Whitepaper
FIGURE 1
In order to better assess the spectrum of C&I electrification incentives currently being offered, DNV GL reviewed recent proceedings from industry conferences and literature available online to identify the status of electrification initiatives that include incentives and what best practices are in evidence from experience to date. Findings from this are presented in the Literature Review section starting below. To add to these findings, DNV GL interviewed representatives from six3 of the utilities currently active with electrification incentives for C&I customers: Tennessee Valley Authority (TVA), Jacksonville Electric Authority (JEA), Georgia Power (part of Southern Company), NV Energy, Entergy, and Salt River Project (SRP) discussing topics such as the electrification measures being incentivized or promoted, targeted C&I recipients, and insights gleaned from program evaluations. Findings from the interviews are presented in the Program Manager Interviews section. Finally, DNV GL gathered data on electrification equipment and their associated incentive amounts based on a recent scan of utility websites. A primary finding is that while utilities are promoting or considering promoting a wide range of electrification measures, there is little consistency in the way in which incentives are characterized – whether as a dollar amount by piece of equipment, size, on a per unit basis, or as a calculation based on usage. This result is characterized in Table 2, which shows a selection of incentivized measures from the top five end use categories.
Note that although Alliant Energy declined the interview and APS’ program is filed but yet to be approved, the list and totals of incentivized measures in the database includes the data from both of their respective programs. 3
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TABLE 2 Typical Incentive Amounts for Top Five End Use Categories End Use
Measure
Incentive
Food Service
Electric Fryer
$75/unit
Electric Oven - Standard
$1500/unit
Anti-Sweat Heat Controls
$15/linear foot
Electric Heat Pump
$175/ton
Air Source Heat Pump
$400/unit
Electronically Commutated Motors
$75/hp
Business EV Charger Station
$500/unit
Electric Forklift
$2000/unit
Electric Truck Refrigeration Units
$2000/unit
Air Compressor
$70/hp
Electric Clothes Washer
$200/unit
Condenser Water Pump
$40/hp
Electric Fan Conversion
$0.10/kWh
Livestock High Volume Fans
$750/unit
Refrigeration Fan
$70/hp
HVAC
NREVs
Industrial
Fans
Figure 2 below shows the overall composition of incentivized measures from the five interviewed utilities plus Alliant Energy. This was created from data pulled from the publicly available websites of each company and reflects the number of measures promoted collapsed into end use categories. The largest number of measures fall into the food service category, followed by types of HVAC equipment and then non-road electric vehicles.4 FIGURE 2 Composition of Incentivized Electrification Measures
4
Each chart section represents the proportion of the frequency at which each end use occurs in the total sample.
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LITERATURE REVIEW As electrification is a developing area of research, significant gaps exist in the literature surrounding how dedicated programs may directly benefit utilities. Consequently, studies focusing on the incentivization of electrification equipment are limited. As part of DNV GL’s research effort, a survey was assembled of the existing literature surrounding electrification incentivization and – when available – its outcomes. From a presentation made at the first Electric Power Research Institute (EPRI) Electrification Conference in 2018, the following best practices for electrification programs were noted: Leverage key account strategies and economic development activities Partner with trade allies and equipment manufacturers Review existing material handling equipment, operational habits, and available infrastructure Discuss benefits and advancements of electric alternatives Present cost-benefit and emissions reductions analysis Provide a customized recommendation report Assist with implementation of measures The following areas of concern that have surfaced with experienced programs were also noted: Programs need to be clear on what the customer should expect in terms of related investments needed and at what cost (e.g., upgrading the electrical panel, removal of gas equipment and infrastructure, reapplication of gas for other purposes) Utilities should consider distribution system impacts of increased electrification (Can the existing infrastructure handle the added load? Are there costs associated with upgrades to handle increased local loads?) Rates should be tailored to encourage consumption to take place at the most beneficial times of day In a general discussion on the applications of electrification, Farnsworth et. al (2018)5 offer a three-part criterion by which electrification can be considered directly beneficial: Its primary goal should be to save consumers money over the long run The installed equipment should enable better overall grid management Negative environmental impacts should be reduced due to its implementation One may note that this definition is outcome-centric, in that the definition of beneficial electrification is purely rooted in the results of its application. Hence, BE is not equivalent to electrification, but is a distinct outcome. These outcomes can be worthwhile for stakeholders in many ways. The authors write, “electrification can reduce consumers’ long-run costs because many forms of electrification are more efficient than their fossil-fueled counterparts. This decreases overall energy use and operating Farnsworth, D., Shipley, J., Lazar, J., and Seidman, N. 2018. Beneficial Electrification: Ensuring Electrification in the Public Interest. Montpelier, VT: Regulatory Assistance Project. 5
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costs,” thus helping to meet existing energy efficiency goals and provide a clear financial benefit. From a utility perspective, a direct benefit is the increased opportunity for more idealized load shaping. Expanding on criteria number two, Farnsworth adds, “due to the flexibility of many forms of electrification [technologies] – including water heating, electric vehicles, and some forms of space heating – these end uses can help facilitate and increase grid flexibility.” Finally, the authors address a societal perspective, discussing the third criteria. This study recognizes that many electrification technologies are more energy efficient and less carbon-intensive than their non-electrified counterparts. So, while presenting a significant opportunity for load building and shaping to electric utilities, electrification can also result in a net-decrease in carbon emissions, a rare double dividend policy. As such, Farnsworth et. al argue that incentivization and rate design are a natural stepping stone to electrification technology adoption. Through a specific focus on rate design as a crucial tool for electrification technology adoption, the authors state that “for electrification consumers to benefit from the value produced by their flexible electrified loads, the value of their actions must be communicated through the electricity prices they pay or avoid” and that utilities must “encourage smarter charging practices through rate designs” to reach their electrification measure adoption goals. A JEA case study prepared by ICF (2016)6 specifically identifies the recent declining trend in electricity sales as a common obstacle for many electric utilities. As a solution for JEA’s declining sales, they developed: A turnkey Non-Road Electrotechnology program that supports improved revenue generation. JEA is successfully promoting electrically powered equipment within its service area. In turn, JEA’s customers are realizing reduced operating costs and healthier and more efficient work environments.
After a thorough market review, the team isolated five non-road vehicle technologies that were best suited for electrification: forklifts, truck refrigeration units, airport ground support equipment, golf carts, and cranes. The incentives for these measures could be either prescriptive or custom and, by the end of the program period, JEA had converted a total of 856 pieces of equipment or "an estimated additional 257,000 MWh of consumption increase expected during the lifetime of the equipment”. A review of two high profile customers showed that each received $3,000 and $6,500, respectively, to purchase electric forklifts and cranes. For these two customers, non-road electric vehicles (NREVs) produced the highest expected lifetime savings. As exemplified in the JEA case study, NREVs and, more broadly, electric vehicles (EVs) offer great promise in their load shaping and carbon reducing abilities while also being a convincing business proposition. There is a clear business case for EVs as existing fleets age and expected lifetime savings for the technology remain high. For these reasons, much of the electrification potential discussion has focused on EVs as potential “low-hanging fruit” for utility programs. A 2014 report by the Edison Electric Institute (EEI)7 details policy and technical recommendations for future vehicle fleet electrification. As with the JEA case study, EEI identifies slowing growth in the electric power industry as a principal driver of electrification. Similarly, the solution offered in this report is to push for vehicle fleet electrification:
6
Dibella, B. 2016. Beneficial Electrification: A Custom Electrotechnology Program for JEA [PDF]. Fairfax, VA: ICF.
7
Kisch, N. 2014. Transportation Electrification: Utility Fleets Leading the Charge [PDF]. Washington DC: Edison Electric Institute.
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The transportation sector is the second largest consumer of energy in the U.S. (behind electric power generation) and yet 93% of the energy consumed in transportation today comes from petroleum. Electrifying the transportation sector is a proactive, positive strategy as it enables significant economic and environmental benefits and new opportunities for consumer engagement.
Regarding incentives, EEI notes that while a variety of strategies are legitimate for personal EV purchases (e.g. rebates, decreased rates, HOV lane access), these factors generally are not effective for large fleet purchases. For these commercial purchases, EEI suggests tax rebates as the preferred incentive. One logical extension of EV incentive programs is promoting electric school buses. Buses are a particularly good fit for electrification for technical reasons (low speed, frequent stopping, high torque requirements) as well as financial (long off-season allows batteries to be used to balance peak loads, batteries as storage in net-metering areas, lower O&M costs). A handful of pilot projects have emerged across the country including the Sacramento Municipal Utility District, which offered $7.5 million towards the purchase of 29 electric school buses. A report by Fitzgerald et. al (2016)8, discusses the growing opportunities for utilities to build load and rate bases, and utilize EV’s storage capabilities to shift peaks via bidirectional charging. The authors of this report, as in several of those previously mentioned, recommend offering rate-based incentives to promote this technology, especially in the use of EVs as distributed energy resources.
8
Fitzgerald, G., Nelder, C., & Newcomb, J. 2016. Electric Vehicles as Distributed Energy Resources. Boulder, CO: Rocky Mountain Institute.
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PROGRAM MANAGER INTERVIEW RESULTS DNV GL interviewed representatives from five of the utilities currently active with electrification incentives for C&I customers: Jacksonville Electric Authority (JEA), Georgia Power (part of Southern Company), NV Energy, Entergy, and Salt River Project (SRP). See Table 4 in the Appendix for a list of interviewed program managers. The following topics were discussed: What types of electrification measures and incentives are provided? Is each electrification initiative a filing (approved/pending) or is the program is already active (and, if so, since when)? Who are the best recipients of electrification incentives in C&I markets? Should program incentives be provided to consumers, trade allies, or some combination? Would recommendations vary by market segments (e.g., small business versus industrial)? What are the implications of each variant (positive and negative)? Should municipalities/local government be targeted also? What insights/outcomes have been achieved or measured? The following are highlights from the interviews on current utilities’ involvement with electrification technologies, incentives, and programs. What are the predominant electrification themes? Using notes and transcripts from these interviews, DNV GL categorized and identified five primary themes shared by the participating utilities: Forklifts are an entry point to greater electrification Incentives should be focused at the customer level Midstream sectors are set to grow Utilities are planning for an EV future Municipalities should be on equal footing These categories were the basis for a qualitative thematic analysis that recorded the frequency each of these themes were mentioned during the interviews. The results of this analysis are displayed in the intensity map in Figure 3 (on the next page), where darker green areas represent a higher frequency, and lighter green/blue areas a lower frequency.
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FIGURE 3 Heatmap of Primary Interview Themes
A more general representation of these themes is presented via a word cloud as show in Figure 4 on the following page. Here the semantic patterns are not binned into themes, but presented holistically, where the words with greater frequency have a larger font. The source data for this representation are also the notes and transcripts from the utility interviews. FIGURE 4 Word Cloud of Interview Responses by Frequency
equipment
dealer
rebates chargers municipal/local load new fleet incentive infrastructure pay electric
customers data
work
electrification
program drive
forklifts business
use
Incentivizing Electrification Whitepaper ENERGY 11
On-Road Transportation
On-road transportation is a key area of electrification activity as evidenced by a growing interest in both municipal buses and school buses as suitable targets for conversion. There are a few active programs or pilots in development to explore busing with electric fleets, specifically to address smart grid challenges and battery storage options. Moreover, there is significant interest in future fleet electrification efforts (see Figure 3). In these cases, the customer (municipality, transportation department, or school district) is the recipients of rebates, and the planning discussions are tied to grant applications. NV Energy acknowledged considering the concept of electrification of school bus fleets, however it is concept only with no pilot in place as yet. They are awaiting the outcome of a pilot being conducted in California before considering next steps. JEA is developing a ‘smart corridor’ stretching from one end of the city to the other where they will incorporate smart technologies such as electric buses and autonomous vehicles over time. NV Energy’s Electric Vehicle Infrastructure Demonstration programs target multi-family, fleet, and workplace charging units installed at commercial workplace locations and intended for use by the employees of that location. There are a number of players in the on-road landscape that could materially contribute to the decisions around investments in infrastructure. These include state and local governments, utilities, property developers, as well as fleet owners and retailers seeking to offer a competitive edge. With companies like Amazon, UPS, and FedEx growing their EV fleets, there is increasing opportunity for road electrification programs. JEA also noted a growth in commercial fleets with refrigerated truck units as well as from companies like Amazon, UPS, and FedEx. Although not formally interviewed for this study9, APS noted interest in developing a pilot for truck stops to serve refrigerated truck units and offer new “window air conditioning units” for parked trucks. They are investigating Flying J and other truck stop vendors to explore this opportunity. Automotive dealers also offer the opportunity to drive applications for electric vehicles. The highly competitive nature of vehicle sales means that auto dealers are always looking for ways to close a sale. And with incentives for both the vehicle and the charging system, retail auto dealer can be leveraged to generate both individual and fleet sales. Entergy notes they are now working with auto dealerships to promote the electrification program providing the customer with charger rebate options during the sales process. Industry research shows that lack of awareness, inadequate knowledge of the technology and lack of incentives for dealers represent barriers to increased adoption of EVs. NV Energy incentivizes the charging units and uses a customized approach to defining fleet incentives for larger organizations. Based on the needs of the organization and the scale of the deal, incentives are determined completely on an individual basis.
9
APS is awaiting regulatory approval for their electrification initiatives and declined a full interview.
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Non-Road Transportation
Non-road transportation electrification initiatives are fairly common and appear to act as a foundation for the development of electrification programs. Interviewees expressed that forklifts in particular are the initial entry point into electrification for the utilities (see Figure 3). This is due to active traffic in forklift sales and both primary and secondary markets providing opportunities. Forklift conversions from gas or propane also provide improved air quality where operated in closed spaces and have the advantage of not competing with natural gas thus avoiding fuel switching restrictions in some states. According to Modern Materials Handling (2017)10, global lift truck orders across all classes including electric grew by 18% with US sales increasing by 12.6%. Forklifts are the exception to the rule of incentivizing only the customer. Incentives for forklift dealers are being used by four of the five utilities we interviewed, with at least two of the utilities using them as the entry point to their electrification efforts. Salt River Project stated that it was important to start electrification efforts with forklifts, because it is easy to build momentum in the market with forklift dealer engagement using outreach staff. Port authorities, municipal bodies, airport authorities are eligible for participation and active participants. Municipal bodies are eligible to participate in all programs that we engaged with and are recognized as strong target for electrification opportunities. This includes both large and small municipal organizations. It should be noted that there is a secondary market for heavy equipment and vehicles, such as forklifts. These secondary markets often buy combustion engine equipment, making them a target for conversion rather than new purchases or new load. SRP is an example of a utility working both the primary and the secondary market for electrification opportunities with large airports selling their older forklifts to smaller entities when they purchase electrified forklifts. The smaller municipal airports in turn can upgrade the propane fueled forklifts and convert them to electrified forklifts. In both cases, the airports can receive rebates.
Commercial Equipment
Customers are the recipient of rebates for electrification purchases. However, there is active use of or consideration of mid-stream programs for commercial kitchen equipment. Some utilities are exploring how they can use the mid-stream model with more types of equipment. Three of the five utilities interviewed either incentivize electric commercial kitchen equipment or are considering it as part of their portfolio. Interestingly, JEA does a lot of work with foodbanks that are heavy users of forklifts, but they do not currently incentivize commercial kitchen equipment.
10
Bond, J. 2018. Top 20 Lift Truck Suppliers: Global market reaches new heights. Modern Materials Handling.
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Customer Directed Rebates
In discussions with the utility program managers, the biggest positive characteristic of customer directed rebates is that the customer can use the rebate directly towards the capital purchase of the equipment and that operating costs and ROI go down post-installation. While rebates can range from $25 for an on-road EV charging system, they can go as high as $70,000 for an electric crane (both incentive amounts are drawn from JEA). Many interviewees agreed that customer-focused rebates were most effective in electrification efforts (see Figure 3). Interviewees reported that participation in the electrification program drives awareness and participation in the wider energy efficiency programs managed by utilities. With easy to measure participation and market saturation for certain purchases like forklifts and non-road vehicles due to a limited and dedicated manufacturing and customer pool, it is easy for utilities to engage with and directly measure program participation. SRP noted that they purchase lists from dealers to better understand who is purchasing forklifts and that the best time to make the case for electrification to a customer is when they are buying a new one. As noted by Entergy, one of the negative issues that was associated with the rebates was that some customers still doubt the validity of the rebate offer, therefore there is a credibility issue and customers can be resistant to participate. Overcoming the credibility and trust constraints can take time and delay acceptance and applications. While not related to customer directed rebates, it should be noted that there can be challenges with incorporating new measures or new segments into a utility portfolio such as needing to establish/define measurement requirements and what data are necessary to track: this needs to be addressed prior to the launch of the program. Another negative perception is that the overall procurement process is slow – slow for the manufacturer to be able to produce the volume of electrified units, slow for the customer to acquire the units (sometimes in multiple phases), and slow for the utility to be able to accept and pay on the applications for rebates. It should be noted that there is wide inconsistency as to how utilities are incentivizing, with some using a percentage of BTUs, while others use fixed price or $ per horse power. There are others like JEA stipulating that all customers who receive rebates, regardless of technology, are required to charge their equipment at least 66% of the time at off peak times. For some utilities like APS, promotion of electrification measures needs to be coupled with rates to ensure that usage and demand are encouraged at times most favorable to the utility.
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Who are the best recipients of electrification incentives in C&I markets? Figure 5 on the following page presents a traditional 9-box graphic whereby the columns represent market segments expressed in terms of highest to moderate “value� or potential for delivering the desired impact. Note that the rows represent the recipient of the incentive or the market channel where the intervention is targeted. Highest Value market sections would include large industrials or customers with significant potential for load impacts, such as universities or hospitals High Value market segments would include non-residential customers with good potential in terms of numbers of measures that apply or the size of their building Moderate Value segment customers would include small businesses, one-off opportunities for installation of a measure Customers means the incentive is directed to end use customers as the point of market intervention for encouraging adoption of electrification measures Manufacturers, distributors, and retailers are next Influencers are groups like business associations, chambers of commerce, etc. (An example here would be realtors getting an incentive or using promotional material on behalf of a utility for promoting all electric smart homes.)
FIGURE 5 Nine-Box of Incentive Recipients by Market Segments
Highest Value
High Value
On-Road Transportation (fleet vehicles, heavy commercial)
On-Road Transportation (refrigerated truck units)
Non-Road Transportation (forklifts, cranes) Customer
Manufacturer Retailer
Non-Road Transportation (forklifts)
Moderate Value
Forklifts Commercial Equipment Buildings
Commercial Equipment
Commercial Equipment Buildings
Forklifts (with large fleets)
Forklifts
Forklifts (one off)
Commercial Equipment (kitchen)
Commercial Equipment (kitchen)
Commercial Equipment (kitchen)
Buildings (HVAC)
Buildings (HVAC)
Buildings (HVAC)
Not Applicable...yet
Not Applicable Market Influencer
(Being considered for Food Service equipment to overcome perception of gas as better than electric equipment)
Not Applicable
Incentivizing Electrification Whitepaper ENERGY 15
Typically, with energy efficiency programs, trade allies are the primary market channel used across market segments. This is because programs are mature, and utilities have sought lower cost ways of engagement coupled with strong avenues for maintaining quality control. With some energy efficiency programs, retailers are engaged in mid-stream programs as the preferred market channel and would be considered part of the middle row. In the case of electrification measures, however, interviews and the research conducted here shows that the primary trade allies being tapped for promotion are manufactures of forklifts and some distributors of kitchen equipment. For moderate segment customers, energy efficiency programs have shifted to heavy use of on line marketplaces as a way to directly engage with customers at lower cost. Georgia Power is an example of a utility that promotes its electrification measures to customers through its on line marketplace. According to the interviews, the majority of utilities are going directly to end use customers as the preferred market channel. Retailers are the second most frequently mentioned market channel for electrification measures. Note that this is in contrast to the trade ally approach that many utilities use for energy efficiency measure promotion. The electrification measures being incentivized are placed within the target market segment as aligned with the potential impact of the measures. A standard 9-box model usually shows differentiation between highest value measures targeted to the largest (and fewest) customers, and low value measures (i.e., LEDs) marketed directly to large numbers of customers via low cost market channels and methods such as midstream programs (via retailers) or on-line marketplaces. In the case of this study, there was little differentiation in evidence between the market channels used for high value versus moderate segments in which market channel is used. The research shows that regardless of segment or potential value, end customers are the primary recipients of electrification rebates and incentives. The rationale behind the customer-focused incentive approach is that customers are the only necessary party in terms of securing program participation. The manufacturers or distributors selling equipment are working in such competitive markets that the need to incentivize them is essentially negated. The motivation of securing a sale is deemed enough that a manufacturer or distributor specific rebate is not necessary at this time. It was noted by Georgia Power that they are still determining who is the best recipient of the rebate and Entergy stated that although they work through both the trade ally and the customer, only the customer receives the rebate. There is also the belief that once a utility commits to incentivizing the manufacturer or distributor, it creates an unnecessary expense and market obligation that complicates both cost effectiveness and customer relations, thereby creating a commitment to an incentive scheme that does not necessarily deliver cost effective value. Municipalities as a sector were included as eligible for any of the utility programs discussed according to the utilities interviewed. In fact, local government departments seem to be actively engaged as part of the end customer landscape. There is recognition that municipalities own and operate many types of facilities, which are therefore prime targets for electrification efforts. Airports, port facilities, public bus fleets, and school bus fleets are examples of such municipal organizations. While there is little to no discussion of a formal “sector� approach, it is apparent that the utilities are targeting by sectors. The uptake or planned use of mid-stream for commercial kitchens is an indication of a sector approach emerging. In addition, some programs lead with geographic targeting and then engage with a sector or technology-based approach, as demonstrated with JEA where they have initially targeted a decommissioned naval base for electrification opportunities. The naval base is being converted to small industrial parks and they see opportunity there for forklifts, logistics, and data centers — what started out as a geographic approach to a brownfield location is evolving into a broader electrification opportunity based on the types of businesses anticipated to be located there.
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Evidence from both the internet research and database above plus the interviews shows that Food Service and Non-Road Electric Vehicles are some of the leading measure categories. The analysis of measure data provided by the utilities correlates this, with Food Service accounting for 36.79% of unique measures and Non-Road Electric Vehicles accounting for 14.51% of measures. The segments that come up regularly in interviews were: Distribution/Transportation Warehousing/Storage Commercial Kitchens/Foodbanks Municipalities Infrastructure (airports/ports) Although there is no differentiation between large and small segment customers in terms of eligibility, it was noted by two of the utilities that targeting small customers is expensive with a relatively low return on investment. Programs are open to all that qualify regardless of size or segment, with only one utility stipulating that industrial customers ineligible for participation in the electrification program. What insights/outcomes have been achieved or measured?11 Electrification incentive programs have not been around long enough to have produced publicly available evaluations. However, some insights from interviews shed light on outcomes to date. In on-road program participation, JEA has paid incentives for non-road electrification for three electric cranes and is expecting another three cranes to be installed in the near future. The Electrical Vehicle Program rebates for the purchase or lease of a plug-in electric vehicle to date they have provided 156 rebates. Entergy has seen a ~150% increase year to date in 2019 over 2018 program participation. SRP initiated their forklift program in late 2017 and as of the end of March 2019 have paid out 350 rebates. Electrification runs the risk of causing ‘cannibalization’ of kWh savings targets without clearly defined definitions of where electrification and energy efficiency sit in the larger demand side management portfolio. There seems to be differing approaches to what qualifies as electrification or energy efficiency (an issue that clearly brings confusion internally among staff but is of little consequence to the marketplace or customers). An example of confusion is when purchases like an EV qualify under electrification for a rebate, but the corresponding charger may qualify under electrification or energy efficiency for its rebate. The question is of more concern to program evaluators as to how to treat the impacts – would this transaction be considered new load and electrification or efficiency due to the net energy savings from the displacement of gasoline? There is no consensus on treatment or evaluation methodology in evidence yet. The question of cannibalization may also have an impact of budgets and skillsets so is resulting in confusion internally as well as some anxiety among former EE staff. From the customer perspective, whether a rebated measure is credited as electrification versus efficiency is immaterial – it is effectively the same conversation - but the lack of clarity within the utility coupled with continued outward-facing emphasis on energy efficiency means that the messaging to the customer may not be as clear as it needs to be. This is demonstrated in terms of the equipment or vehicle electrification rebate for a new purchase, whereas the charger is rebated in energy efficiency program.
DNV GL is aware of only one formal evaluation conducted of an electrification program, this was conducted by ICF for JEA. While we have seen presentations from conferences, the full report was not provided. Each utility interviewed was asked twice for results and all have refused to share reports or not responded to the request, with the exception of JEA whose findings have already been made public in industry presentations. The reluctance to share is either due to the newness of the initiatives or the general competitive nature of these programs. 11
Incentivizing Electrification Whitepaper ENERGY 17
CONCLUSION This study found a wide range of electrification measures in play among utilities currently promoting or planning to promote such equipment. While food service measures dominate in terms of numbers of products being promoted, forklifts have been identified as the point of entry into electrification for a utility launching an electrification program. They are widely accepted as the best entry point as they are easy to market due to few manufacturers and dealers, there is a steady demand, have an overall easy to manage sales process, generate momentum quickly, and there is readily available industry sales data. They are also relatively non-controversial because the electric fuel sources are replacing gasoline or propane powered units rather than natural gas and thus avoid fuel switching restrictions in some states. Programs mostly focus on providing incentives to direct end use customers, with the exception of NREVs which also have manufacturer-directed rebates in some cases. In designing their program, APS is considering whether the explicitly name “electrification” as a portfolio or program name but rather to simply consider these measures within the family of efficient electric measures already being promoted (i.e., not confuse the market). This is similar to TVA’s approach of incorporating these measures into their portfolio of programs as just another solution rather than creating a separate program. In spite of this need for clarity when facing the market, it is clear form this research – not to mention the plethora of industry conference sessions and EPRI’s first annual conference devoted to the topic – that promotion of electrification measures in new applications and for replacement of fossil fuel-using equipment (i.e., in decarbonization situations) is on the rise among utilities. Utilities with significant and growing penetration of solar PV are also looking to fill the daytime valley (e.g., from 9 to 3pm) with increased usage via electrification and or favorable rates. Finally, based on the interview and conversations around the industry, Table 3 lists a range of electrification programs or projects being considered by the market that may be worth future consideration.
18 ENERGY Incentivizing Electrification Whitepaper
TABLE 3 Electrification Initiatives Program
Concept
Public Transport
School buses, city buses, electrification of fleets, help with project planning, grant applications.
Community Engagement Around EVs
To address concerns about buying EVs, charging options.
Auto Dealer Training
How to sell EVs, work with dealerships to help overcome disincentives.
Ride Share Programs
Install fast charging stations to support drivers, carpools.
Port Package
Measures specific to airports and cities with large ports, forklifts, electric cranes, heavy trucks.
Segment Approach
Targeted segment approach, packaging electrification measures to a specific market segment such as food services package or a hospital, health care, and clean rooms package.
RTU (Refrigerated Truck Units)
Growth area regarding food service, food manufacturing, medical, distribution; includes Window AC units for truck stops.
Smart Homes Programs
Smart appliances, EV charging, all electric smart homes, working with home builders.
Agricultural Program
Electric irrigation pumps to replace engines; use of electric line extension at no additional cost as an incentive.
Evaluation Methods To address the full value of electrification, non-energy benefits, set incentive levels and & Effectiveness Tests facilitate regulatory approval.
Incentivizing Electrification Whitepaper ENERGY 19
APPENDIX TABLE 4 Utility Program Manager Interview Contacts Utility
POC
Title
Jacksonville Electric Authority
Payson Tilden
Program Manager, Customer Solutions
Georgia Power
Eric Swann
Commercial Energy Efficiency Program Manager
NV Energy
Vincent Veilleux
Manager, Distributed Energy Resources
Entergy
Lana Lovick
Manager of Electric Technology
Salt River Project
Joseph DeGraft-Johnson
Strategy Energy Manager
TABLE 5 Electrification Measure Incentives Recipients Utility
Customer
Dealers
X
X
X
X
X
X
X
X
X
X
X
X
Customer Jacksonville Electric Authority Georgia Power
NV Energy
Entergy
Salt River Project
12
Per customer designation.
13
HVAC Midstream only.
Forklifts
Programs Trade Ally/Installer
X
X12
X
20 ENERGY Incentivizing Electrification Whitepaper
X
X13
SAFER, SMARTER, GREENER
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ŠDNV GL 10/2019