Page 204 - Sustainable Cities and Communities Design Handbook

178 Sustainable Cities and Communities Design Handbook

Fuel substitution and load building programs share the common feature of
increasing annual consumption of either electricity or natural gas relative to
what would have happened in the absence of the program. This effect is
accomplished in significantly different ways, by inducing the choice of one
fuel over another (fuel substitution) or by increasing the sales of electricity,
gas, or electricity and gas (load building). Self-generation refers to distributed
generation (DG) installed on the customer’s side of the electric utility meter,
which serves some or all of the customer’s electric load, that otherwise would
have been provided by the central electric grid.
In some cases, self-generation products are applied in a combined heat and
power manner, in which case the heat produced by the self-generation product
is used on site to provide some or all of the customer’s thermal needs. Self-
generation technologies include, but are not limited to, photovoltaics, wind
turbines, fuel cells, microturbines, small gas-fired turbines, and gas-fired in-
ternal combustion engines.
Fuel substitution and load building programs were relatively new to DSM
in California in the late 1980s, born out of the convergence of several factors
that translated into average rates that substantially exceeded marginal costs.
Proposals by utilities to implement programs that increase sales had prompted
the need for additional procedures for estimating program cost effectiveness.
These procedures may be applicable in a new context. AB 970 amended
the Public Utilities Code and provided the motivation to develop a cost-
effectiveness method that can be used on a common basis to evaluate all
programs that will remove electric load from the centralized grid, including
energy efficiency, load control/demand-responsiveness programs, and self-
generation. Hence self-generation was also added to the list of DSM pro-
grams for cost-effectiveness evaluation. In some cases self-generation
programs installed with incremental load are also included since the defini-
tion of self-generation is not necessarily confined to projects that reduce
electric load on the grid. For example, suppose an industrial customer installs a
new facility with a peak consumption of 1.5 MW, with an integrated on-site
1.0-MW gas-fired DG unit. The combined impact of the new facility is load
building since the new facility can draw up to 0.5 MW from the grid, even
when the DG unit is running. The proper characterization of each type of DSM
program is essential to ensure the proper treatment of inputs and the appro-
priate interpretation of cost-effectiveness results.
Categorizing programs is important because in many cases the same spe-
cific device can and should be evaluated in more than one category. For
example, the promotion of an electric heat pump can and should be treated as
part of a conservation program if the device is installed in lieu of a less
efficient electric resistance heater. If the incentive induces the installation of an
electric heat pump instead of gas space heating, however, the program needs to
be considered and evaluated as a fuel substitution program. Similarly, natural
gasefired self-generation, as well as self-generation units using other