Economic analysis on energy efficiency certificate trading in Texas

Energy efficiency is the key to sustainable development; thus, decoupling economic growth from unsustainable energy demand is essential. The Public Utility Commission of Texas (PUCT) has mandated several utility companies' energy efficiency annual goals. While some utilities had been able to easily meet the goals, the other utility companies had struggled to meet the objectives. It is a certificate issued by independent certifying bodies confirming market actors' energy savings claims because of energy efficiency improvement measures. The certificate trading enables utilities buying certificates to meet their energy efficiency goal. If a utility company can implement more energy efficiency programs in terms of the number of kWh/kW with a relatively lower cost beyond their goal, they can sell their energy saving excess to other utility companies that have to implement more expensive energy efficiency measures. The simulation aims to minimize the cost of meeting the goal for energy reduction through energy programs by selecting the least-cost programs. This simulation will calculate the overall cost saving. There are two types of energy efficiency goals which are based on kW and kWh. Additional constraints are also implemented such as Mandatory low-income programs (MLIP) to ensure each utility implements low-income households' measures and 30% Within Service Area (WSA) to ensure 30% of their goal is achieved by their own program. This research suggested that enabling energy efficiency certificate trading minimizes the total cost for achieving the Texas energy efficiency goal. In almost all simulated cases, all utilities financially benefit from joining the trading system because the utility companies spend less to achieve their own energy efficiency goal. In all cases, adding MLIP and WSA constraints increases the total cost to achieve the goal. Furthermore, in terms of the policy, Stakeholder analysis suggested that policymakers consider each utility's different role. Utilities that are within the Electric Reliability Council of Texas (ERCOT) electricity market will have different business structures compared to the ones who are not. Furthermore, integrating Energy efficiency certificate and Renewable Energy Credit would also be more complicated, considering, not all utilities have an obligation to achieve the Renewable Energy Credit target.