HomeMy WebLinkAboutStaff Report 2505-4611CITY OF PALO ALTO
CITY COUNCIL
Monday, June 09, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
5.Approval of Proposed 10 Year Energy Efficiency Goals for 2026-2035 as Recommended by
the Utilities Advisory Commission; CEQA Status – Not a Project.
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: June 9, 2025
Report #:2505-4611
TITLE
Approval of Proposed 10 Year Energy Efficiency Goals for 2026-2035 as Recommended by the
Utilities Advisory Commission; CEQA Status – Not a Project.
RECOMMENDATION
Staff and the Utilities Advisory Commission (UAC) recommend the City Council approve the
proposed annual and cumulative Electric Efficiency Goals for the period 2026 to 2035 as shown
in the summary table below.
EXECUTIVE SUMMARY
Palo Alto has long recognized cost-effective energy efficiency (EE) as the highest priority energy
resource, given that EE typically displaces relatively expensive electricity generation, lowers
energy bills for customers, and contributes to economic development and job creation. As
required by state legislation, the City adopted its first set of 10-year energy efficiency goals in
April 2007, and updated these goals in 2010, 2012, 2017, and 2021. The proposed 10-year EE
goals shown in the summary table below were presented to the UAC on May 7th, 2025. After
discussion of the purpose and methodology of developing these 10-year EE goals, the UAC
voted 5 to 2 in favor of recommending the proposed goals for Council approval.
EE savings that can be counted towards these goals are restricted to those savings directly
attributable to utility programs that are funded by a mandated public benefits charge (2.85% of
electric retail revenue). EE upgrades that customers undertake without participating in utility
programs as well as EE savings achieved through federal and state appliance and building
standards currently cannot be counted towards the City’s EE goals. The savings reported here
and targeted by these goals represent a subset of the actual energy efficiency upgrades taking
place in Palo Alto. Over the past decade, building and appliance efficiency standards have
become increasingly stringent. As federal and state efficiency standards increase, the energy
savings attributable to utility programs decline.
For this current EE goals update, staff proposes annual EE savings targets of 0.24% in 2026,
increasing to 0.55% in 2032 and holding stable through 2035, with a cumulative 10-year EE
savings of 2.8% of the City’s projected electric load. These targets reflect the continued
decrease in traditionally available EE savings as electrification projects become an increasing
focus for consumers as well as utility programs, and stricter state codes and regulations
shrinking the amount of claimable EE savings. Much of the upward trend between the 2028 and
2032 targets can be attributed to the expectation of a future conservation voltage reduction
(CVR) program once Advanced Metering Infrastructure is in place.
Summary Table: Annual Electric Energy Efficiency Goals
(% of total City customer usage)
Electric
(%)
Electric
MWh
2026 0.24%2,083
2027 0.24%2,105
2028 0.31%2,645
2029 0.36%3,105
2030 0.42%3,597
2031 0.48%4,082
2032 0.54%4,571
2033 0.55%4,558
2034 0.53%4,423
2035 0.53%4,426
Cumulative1
10-year EE
Goal
2.80%23,230
BACKGROUND
1 Cumulative EE savings are not equal to the sum of the annual incremental goals due to the differences in how long the electricity savings
persist for different measures and different types of EE savings. For example, new hardware upgrades contribute savings over their expected
lifetimes, perhaps 15 years, whereas electricity savings from changing thermostat set-points are assumed to contribute savings over a much
shorter period of time.
electric savings of 5.7% between 2018 and 2027. The most recent set of 10-year EE goals was
adopted by City Council in 2021, with cumulative 10-year electric savings of 4.4% between 2022
and 2031. AB 2227 (2012) changed the triennial energy efficiency target-setting schedule to a
quadrennial schedule, beginning March 15, 2013 and every fourth year thereafter. The
proposed 2026-2035 10-year EE goals have been provided to the California Energy Commission
as a placeholder, understanding that final goals will be confirmed pending City Council
approval.
Figure 1. Electric Efficiency Goals and Achievements for 2008-2024.
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Actual Savings
2008 - 2017 Goals
2011 - 2020 Goals
2014 - 2023 Goals
2018 - 2027 Goals
2022 - 2031 Goals
Percentages represent EE savings
by 2030. The statute lists a variety of programs to achieve the doubling of efficiency savings,
including: 1) appliance and building standards; 2) utility programs that offer financial incentives,
rebates, technical assistance and support to customers to increase EE; 3) programs that achieve
EE savings through operational, behavioral and retro-commissioning activities; and 4) programs
that save energy in final end uses through reducing distribution feeder voltage (i.e.
conservation voltage reduction).
ANALYSIS
enacted Assembly Bill 2208 (AB 2208) in 2022 mandating the phase-out of fluorescent lighting
starting in 2024. This bill will have a significant impact on CPAU EE program savings since
nonresidential lighting projects have made up as much as 60% of total reported EE savings in
recent years.
Proposed Electric Efficiency Goals
2. Figure 3.
Historic EE Savings and Proposed Annual Electric EE Goals on an Energy Basis shows the actual
historical EE savings and the proposed 2026 to 2035 EE goals.
3 This means
they do not include the energy savings that would have occurred in the absence of utility
incentives, and therefore most accurately reflect the EE savings attributable to CPAU’s
programs. CPAU also excludes savings attributable to the state’s building and appliance
2 EE savings attributed to state mandated codes and standards are excluded from the EE potential for CPAU, and therefore also cannot count
toward meeting its EE goals.
3 The 2026 – 2035 Goals assumes free-ridership at the measure level using an average net-to-gross (NTG) ratio of 0.85 except for low income
and conservation voltage reduction programs, where the assume is 1.0 (no free ridership). The NTG ratios are based on California statewide
evaluation studies and are documented in Database of Energy Efficiency Results (DEER). Generally, mature, low-cost technologies tend to have
higher free-ridership.
standards. In order to allow comparison with other utilities that set goals on a gross basis, the
proposed annual goals in Figure 2 are shown as proposed (on a net basis without including
codes and standards), as well as on a gross basis.
Figure 2. Comparison to Proposed 2021 Electric EE goals and 2017 Electric EE Goals.
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
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2026 - 2035 Goals (Gross)
2026 - 2035 Goals
2022 - 2031 Goals (Gross)
2022 - 2031 Goals
2018 - 2027 Goals
Percentages represent EE savings
relative to load
pursuing efficiency projects.
Figure 3. Historic EE Savings and Proposed Annual Electric EE Goals on an Energy Basis.
0
2,500
5,000
7,500
10,000
12,500
2008200920102011201220132014201520162017201820192020202120222023202420252026202720282029203020312032203320342035
MWh
Actual Savings
2026 to 2035 Goals
Figure 4. Proposed 2026-2035 Cumulative Electric EE Goals.
Achieving these EE goals will require the deployment of new innovative program designs,
increasing awareness of existing programs, and developing other program approaches to reach
previously stranded sections of the energy efficiency market potential.
While the proposed EE goals may appear lower than past goals and historical savings, the
proposed goals will require tremendous program execution and successful AMI implementation
prior to launching a conservation voltage reduction program.
Staff will need to carefully evaluate how the florescent lighting regulations will impact the
existing Business Customer Rebate and Commercial and Industrial Energy Efficiency programs.
These programs have historically generated the bulk of energy efficiency savings, so
understanding the future potential of lighting savings projects and exploring additional
opportunities will be critical to the success of reaching these targets.
0
5,000
10,000
15,000
20,000
25,000
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Res Cumulative Market Potential Non-Res Cumulative Market Potential
CVR Potential (If Claimed)Total Cumulative Potential as a % of Total Sales
Cumulative Net Market Potential by Sector
All Sectors Energy Potential (MWh) and % of Sales
MW
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In addition, once the City implements an Advanced Metering Infrastructure (AMI) backbone of
a smart-grid system, staff plans to launch a conservation voltage reduction program using the
AMI infrastructure on primary feeders. This program could generate savings of up to 1% of
city’s annual electricity load, with implementation expected to start in 2028. These plans are
subject to Council review and approval.
Projected Electric EE Program Costs
4 surcharge of 2.85% of the
electric utility bill for all customers. To meet the proposed EE goals, staff estimates an annual EE
budget of $1.5M to $1.7M per year from 2026 to 2035. This projected EE program budget is
anticipated to be fully funded by the annual PB collections.
4 Locally owned municipal utilities like CPAU must collect Public Benefits funds as required by section 385 of the
Public Utilities Code, to be used on cost-effective energy efficiency and conservation, low income programs,
investments in renewable energy resources and technologies, and research and development.
Figure 5. Actual and Projected Electric EE Program Costs.
EE programs impact retail rates in two ways. First, a lower electric load means that fixed costs
(capital investments and fixed operating costs to run the electric utility) must be distributed
over a lower electric sales volume, thereby increasing the average electric retail rate. Second,
the use of funds to support EE programs increases the revenue requirements for the electric
utility. Increased charging of electric vehicles, electrification of natural gas appliances, and
other electric load growth could mitigate the retail rate impact of the EE programs. While rates
increase, total bills are expected to be reduced over the lifetime of the EE savings.
This report contains preliminary estimates of the costs of achieving the proposed electric EE
goals. The detailed budget plan and staffing needs to meet the annual EE goals will be part of the
annual City budgeting process. The annual budget will present the costs for both internally
administered, as well as contractor supported, efficiency programs.
Adoption of the proposed electric 10-year EE goals will replace the 2021 10-year electric EE goals
and will inform the EE program planning and load forecasting for the next four years. These goals
$-
$0.5
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Millions
Actuals through 2024
Preliminary estimate 2025
will also be included in the Electric Utility Integrated Resource Plan, and the City’s Sustainability
Implementation Plan. The proposed 2026 - 2035 electric EE goals are consistent with the Utilities
Strategic Plan, and the City’s Sustainability and Climate Action Plan (S/CAP).
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY: