Energy Equity and BCA

As jurisdictions increasingly center energy equity in their distributed energy resource (DER) programs, many are creating goals that address distributional, procedural, and structural equity in all aspects of their DER strategies. This requires affirming equity in decision-making tools and understanding the extent to which BCAs (benefit-cost analyses) address equity.

BCAs do not address procedural or structural equity, nor are they designed to fully account for distributional equity.* In accordance with NSPM Principle 8, BCAs cannot address rate, bill, and participation impacts (a key aspect of distributional equity).

As jurisdictions are grappling with this limitation, NESP developed a conceptual framework that shows the relationship of BCAs to distributional equity analyses (DEAs), and the importance of conducting both analyses to fully assess equity in DER investment decisions. This framework is explained in Chapter 9 of the MTR handbook.

DEAs are complementary to BCAs; they should be conducted in parallel, using consistent inputs and assumptions. Key differences between DEA and BCA include:

How results are presented
• BCAs: net benefits (or net costs) or benefit-cost ratios
• DEAs: metrics e.g., rate impacts, bill impacts, program participation, energy burden, arrearages, reliability, resilience, public health
Analysis of who DER programs affect
• BCAS: customers; perhaps society
• DEAs: specific target populations relative to other customers

Energy equity is a complex and evolving topic. Detailed guidance warrants further consideration and development. NESP is working with organizations to develop guidance on conducting DEA and to support jurisdictions as they seek to implement energy equity goals.

For more about energy equity and BCA, see Chapter 9 of the MTR handbook and our recent ACEEE Summer Study paper and presentation.

Visit our events page for upcoming presentations and other energy equity materials. For questions about our conceptual framework, or to collaborate on our DEA framework, contact NSPM@nationalenergyscreeningproject.org.

Other national efforts on energy equity include:

*One exception is with regard to intergenerational equity. The concept of fairness among current and future customers regarding the costs and benefits of energy resources is typically addressed by jurisdictions through the discount rate applied to the monetized costs and benefits of a DER. Discount rates reflect a particular “time preference” of the jurisdiction performing the BCA. A high discount rate gives more weight to short-term benefits and costs. A low discount rate more equally weighs short- and long-term impacts.