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August 13, 2019
Brattle Economists Develop Report with EPRI on the Total Value Test for Evaluating Electrification Opportunities

Brattle economists have developed a new report with the Electric Power Research Institute (EPRI) introducing the Total Value Test (TVT), which provides utilities and regulators with a more accurate, comprehensive framework for evaluating the cost-effectiveness of electrification opportunities.

The report, “The Total Value Test: A Framework for Evaluating the Cost-Effectiveness of Efficient Electrification,” is authored by Brattle Principals Ryan Hledik and Ahmad Faruqui, Senior Associate Michael Hagerty, and Research Analyst John Higham. The TVT refines current analytical approaches to evaluating cost-effectiveness of demand-side programs, and expands their application to include any type of electrification initiative, in any economic sector. The TVT takes a broad view of the potential costs and benefits, of electrification, which is necessary given its cross-sector impacts. The report identifies 26 different categories of potential costs and benefits and includes case studies that highlight practical applications of the TVT for three electrification initiatives: city bus electrification, indoor agriculture, and water heating.

The TVT is expected to play a key role in the evaluation of new electrification program proposals. The test was developed based on best practices for evaluating the cost-effectiveness of demand-side programs (which are codified in the California Standard Practice Manual), a review of the literature critiquing those methods, and interviews with 15 experts on electrification and cost-effectiveness frameworks.

Key considerations when applying the TVT include:

  • Developing defensible methods for quantifying “non-energy” costs and benefits.
  • Accounting for the ability of the proposed electrification initiatives to satisfy established policy objectives.
  • Defining the “boundary” of the test in a meaningful way (for example, does it take a utility-specific view, a state-level view, or a broader perspective?).

The report can be accessed using the link below.