Is the "duck curve" eroding the value of energy efficiency?

In recent years, utilities in the southwestern U.S. and California have experienced significant increases in the penetration of renewable resources – particularly solar PV. This has had a major effect on the operation and pricing of electricity in the wholesale markets in these regions. For example, the frequency of negative prices in the California ISO energy markets has increased in recent years, particularly during midday hours with low to moderate load (e.g. in April). This dynamic suggests a reduced energy savings value for efficiency measures during certain times of day. In response to these negative pricing events, several southwestern utilities have proposed major overhauls – including significant reductions – to their energy efficiency portfolios. Utility proposals have also included "reverse demand response" and other load building activities under the umbrella of demand-side management. Meanwhile, there is still a need to meet overall peak demand and evening ramps, which suggests continued value for efficiency measures.

In this paper we explore the impacts of recent changes and future projections of wholesale market prices on the value of energy efficiency. More specifically, we conduct a timebased analysis of wholesale market prices in conjunction with time-specific savings from efficiency measures to better understand how the energy value of efficiency is evolving as renewables reduce the marginal cost of generation. We find that while some measures are likely to become less cost-effective, there is still significant value in a diversified efficiency portfolio. As the resource mix evolves, it will be necessary to tailor energy efficiency portfolios accordingly. However, we do not find compelling evidence for major overhauls in efficiency portfolios based on current or near-future levels of renewable energy over the next decade.

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