CASE STUDIES 2 of 3

Leading the Way: Putting Value on Energy Savings

Through the New England Forward Capacity Market

Client: all New England energy consumers
Location: New England

Challenge/Business Need

As homes and businesses require more and more electricity, the capacity of electricity grids seems destined to expand. But building new power plants is expensive and difficult. A more cost-effective approach is encouraging energy efficiency, distributed generation and demand response. To be competitive while contributing to grid reliability, energy efficiency companies need to be able to enter the capacity market, selling energy savings on a level playing field with power producers.

CSG’s ROLE

CSG devoted significant resources over many years to advocating for a Forward Capacity Market (FCM) at the policy level. In 2006, due in part to CSG’s involvement, the Federal Energy Regulatory Commission instituted new rules that would allow energy efficiency and onsite generation to receive payments for the value they bring to the grid. The FCM became a reality in New England the following year. Similar mechanisms are now being developed in other geographic areas.

CSG was instrumental in making the FCM available to energy efficiency providers. Now we are actively involved in helping these providers work within and leverage the market rules.

Strategy & goals

ISO-New England is the independent not-for-profit corporation that oversees New England’s bulk electric power system and forecasts future generation needs. Looking ahead to 2010 and 2011, ISO-NE leaders believed they would need about 1,800 new MW of capacity, enough to power 1.3 million homes.

As part of the Forward Capacity Market, an auction—the first of its kind in the country—gave bidders an opportunity to propose ways to cut electricity demand and increase efficiency, instead of increasing supply.

Impact

ISO-NE is using the market to create a more efficient power grid by making energy savings a valuable commodity on par with new energy generation. As a result of the first FCM auction, almost 1,200 MW of the 1,800 new MW needed will come from projects that reduce demand. For consumers, this means lower utility bills. For the environment, it means less pollution, particularly CO2 emissions.

One example of the FCM’s success is the nonprofit corporation the Vermont Energy Investment Corporation (VEIC), which administers the energy efficiency utility “Efficiency Vermont.” This corporation:

• Became an ISO-NE Market Participant in 2006, enabling participation in the FCM
  
• Filed monthly claims totaling 33 MW of installed capacity
  
• Received over $1.55 million in payments

By 2010, VEIC expects to have received $3.9 million for capacity reduction from measures installed since 2006 per the VEIC report.

The FCM has proven its potential to reduce energy usage and generate revenue for providers. CSG has been a leader in the FCM from the policy level to the companies suited to participating in this market and the consumers who stand to benefit.

CSG Contacts

Steve Cowell, Chairman and CEO
Pat Stanton, Vice President of Clean Energy Markets