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Cost-Effectiveness Testing Needs a Refresh. The "Minnesota Test" Could be Just the Thing.

Cost-effectiveness testing is an important part of energy efficiency planning, reporting and evaluation. Utilities use cost-effectiveness tests to demonstrate that their investments in energy efficiency are in the best interests of the utility, their customers and society in general. The traditional tests come from a California Public Utility Commission manual that was developed in the early 1980s and last updated in 2001.

Unsurprisingly, the way that utilities and states use the traditional tests demonstrates that the tests are not always performed consistent with their theoretical definitions – because of statutory requirements for what must be included or excluded, the asymmetrical inclusion of costs without including their associated benefits and similar policy-driven modifications. This means that, due to how the state applies the test, what is called a Total Resource Cost (TRC) test in one state may be a completely different test than the TRC in another state. The traditional tests also may not adequately value factors that the state may consider important such as water impacts or economic development.

A New Approach to Cost-Effectiveness Testing

A group of organizations and individuals known as the National Efficiency Screening Project (NESP) is attempting to create a new framework for cost-effectiveness testing that would help states fully value the costs and benefits that they consider important. NESP published a new manual drawing from decades of experience and the changing needs of jurisdictions that are investing in energy efficiency. This manual, the National Standard Practice Manual (NSPM) provides a framework for assessing the policy goals of a state and aligning cost-effectiveness testing for energy efficiency with those goals, and for accounting for all the relevant costs and benefits...continue reading at the MEEA blog

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