Guest Juice: The Role of Energy Efficiency in State Climate Change Policy

10 Mar 2017

By Cynthia Mitchell

Introduction

California is counting on energy efficiency to help meet state greenhouse gas reduction goals and as a meaningful distributed energy resource alongside rooftop solar, energy storage, and demand response. And, as California’s “first loading order resource,”[1] efficiency is to help with much needed utility rate relief.

There’s a growing number of state mandates[2] that call for efficiency to scale up significantly beyond the accomplishments of the past decade. The California Public Utilities Commission, Energy Commission, utilities, various other government agencies, institutions, organizations, and other stakeholders are in the trenches in several related regulatory proceedings and  working groups trying to figure out how to scale energy efficiency to meet state policy directives.[3] To say that this is all terribly complex does not begin to describe the spider’s web that currently tangles up California’s efficiency efforts. Couple that with a regulatory pace best described as “It’s an all happening now, no time to waste,” and it means it’s high time for a critical look under the existing energy efficiency hood to consider the strength and performance of the existing energy efficiency program framework.[4] From here, policy makers and regulators can more fully assess the road worthiness of relying on the existing energy efficiency engine, and what tune ups or overhauls are necessary to get California where it needs to go.

Through a series of columns published here periodically this spring, I with others will examine efficiency’s role as a greenhouse gas reduction strategy and as a distributed energy resource that is supposed to provide utility rate relief along the way.  Next we will discuss the existing efficiency program framework and share our research and findings as to what’s working and what’s not. From there we will share what it will take to scale up energy efficiency so it can fuel California’s expanding population and robust economy while greening the planet.

Meanwhile, here’s our premise: It’s possible to scale efficiency to achieve more significant, strategic and reliable savings, though not by relying on the existing program framework. That’s why California’s energy efficiency community needs to take a hard look at the very real economic and market limits of the current construct and embrace them as opportunities for real change rather than merely resorting to rearranging deck chairs at this time.  That means dropping old ways of thinking and stop trying to change the optics of how we value and measure efficiency to make it appear more successful without significant changes in approach. Instead, it’s time to break out, go non-linear and make efficiency attractive to the investment community thus shifting it to generation-equivalent status. Doing that will take new meter-based approaches that procure metered efficiency from suppliers analogous to how California obtains metered generation from generators.

Role of Energy Efficiency in CA Climate Change Policy

The Golden State is considered the country’s leading “Green State” for its growing commitment to reducing greenhouse gas emissions. At 1 percent of the world’s total emissions, and nearly 7 percent of U.S. emissions, what California does matters a great deal, particularly given the Trump Administration’s stance of climate change denial and its immediate withdrawal from the 2015 Paris Agreement.[5]

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California has adopted the most ambitious GHG reduction targets in North America.  Amendments to the state’s 2006 landmark law AB 32 in 2015 require the state to cut carbon emissions to 40 percent below 1990 levels by 2030 and by 80 percent below 1990 levels by 2050, a more ambitious target than the previous goal of hitting 1990 levels by 2020. In his Inaugural Address in January 2015, Gov. Jerry Brown identified key goals for reducing greenhouse gas emissions in California through 2030, including increasing renewable electricity to 50 percent, doubling energy efficiency savings in existing buildings and making fuels cleaner for heating, and reducing petroleum use in cars and trucks by up to 50 percent. Speaking months later on the passage of SB 350, Brown declared that decarbonizing the modern economy requires “heroic efforts and tireless struggle,” and that SB 350’s energy efficiency and higher renewable energy standard ratchet up “the California commitment.” [6]

To pursue AB 32 climate change policy goals and gauge progress toward achieving them it is necessary not only to understand the difference between energy efficiency savings and consumption reductions, but to recognize how limited and limiting the efficiency savings framework is in the context of climate change legislation and targets.

The terminology used to measure progress saving energy via efficiency—energy savings, energy intensity, increased energy efficiency, etc.—all refer to changes with no direct bearing on absolute consumption. Treating the efforts that are evaluated according to these scales is helpful in the pursuit of greenhouse gas reductions, but it also obstructs progress toward these goals by mixing relative with absolute scales and obscuring the difference between energy consumed (as metered) and energy saved through efficiency (generally a ratio of program effects divided by a hypothetical energy growth trajectory).[7]

For instance, absolute increases in energy consumption can (and are) occurring alongside efficiency savings. Figures 1 and 2 below show California’s total electricity consumption and per capita consumption from 1972 through 2014. Figure 1 shows 40-plus-year steady growth in overall consumption interrupted by periodic recessions. The data show that between the 2001 and 2008 recessions, statewide electricity consumption grew at an average annual rate of 2,914 GWhs. Since the 2008 recession, the rate of growth in consumption has slowed considerably to an average annual rate of 600 GWh (2009-2014). Figure 2 below shows California’s per capita electricity consumption in 1972 at 6,573 kWh; in 2014 it was 6,769 kWh.[8] The data show that since the high in 2008, per capita consumption has continued to trend downward, with 2014 now again on par with 2002 (6,745 kWh per capita in 2002 and 6,769 kWh per capita 2014). To achieve the greenhouse gas reductions SB 350 contemplates per capita consumption must go down because the state’s population continues to grow, causing the overall electricity use in the state to continue to rise, even if per capita consumption remains flat.[9]  AB32 emission reduction targets are permanent, so efficiency savings must translate into enduring consumption reductions.

That’s why it’s crucial, particularly with the California Air Resources Board banking on efficiency to meet greenhouse gas reduction requirements, for a paradigm shift in the state’s energy efficiency programs.

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Cynthia Mitchell is a 40-year veteran energy economist and utility consumer advocate and consultant for The Utility Reform Network. The views expressed herein are her own.

Footnotes:

[1] California 2003 Energy Action Plan, www.energy.ca.gov/energy_action_plan.  See Breaking News! California Electricity Prices are High”,California retail electricity prices are high, about 50% higher than the national average.” March 1, 2017, http://ei.haas.berkeley.edu/

[2] AB32 GHG 2006 and update 2015, SB350 Clean Energy and Pollution Reduction Act 2015, AB 802 Demand Forecast Baseline Conditions 2015, AB758 Comprehensive EE Existing Buildings 2009.

[3] EE and EE-related proceedings and processes at the CPUC include: Rulemaking R.13-11-005 EE Rolling Portfolios; Program Administrators’ Applications EE Business Plans 2018-2025; PG&E Application 16-08-006 Diablo Retirement Proposal; R. 14-10-003 Integrated Distribution Energy Resources; DRP 14-08-013 Distribution Resource Plans; R. 16-02-007 Electricity Integrated Resource Planning Framework; R13-12-011 Water-Energy Efficiency Nexus; ongoing EE measurement and verification (M&V) meetings; EE Shareholder Incentive Mechanism workbooks and updates.  EE and EE-related proceedings and processes at the CEC include: Appliance EE Program Title 20 and Building EE Program Title 24; Integrated Energy Policy Report (IEPR); California Energy Demand Forecast and Demand Analysis Working Group (DAWG); AB758 Comprehensive EE Program for Existing Buildings; Clean Energy Jobs Act (Proposition 39) EE in Schools K-12.

[4] “Existing EE framework” refers the CPUC’s forecast of EE potential that the utilities are tasked with obtaining through their EE programs, known as “market potential.” “Market Potential” is a subset of Economic Potential including “energy efficiency savings that could be expected in response to specific levels of incentives and assumptions about policies, market influences, and barriers.” See Navigant Consulting, Inc. EE Potential and Goals Study for 2015 and Beyond, Stage 1 Final Report (“Navigant”), September 25, 2015, pp. iii, iv-v. http://www.cpuc.ca.gov/General.aspx?id=2013.

[5] The Paris Agreement is an agreement within the United Nations Framework Convention on Climate Change dealing with greenhouse gas mitigation, adaptation, and finance starting in the year 2020. The language of the agreement was negotiated by representatives of 195 countries at the 21st Conference of the Parties of the UNFCCC in Paris and adopted by consensus on Dec. 12, 2015.

[6] With AB 32 in 2006, the Air Resources Board’s Climate Change Draft Scoping Plan envisioned that the electricity sector would contribute at least 40 percent of the total statewide GHG reductions, even though the sector created just 25 percent of California’s GHG emissions. AB32 2006 set an absolute emissions reduction of 174 MMT CO2e by 2020.  CARB Adopted Scoping Document (Dec 2008) assumed 15.2 MMT CO2e, equivalent to 32,000 GWh net cumulative by 2020—or 3,200 net annual average savings using the 2010 implementing legislative date—in emission reductions from utility energy efficiency programs and C&S. Calculations then (author) determined that those utility EE goals were about 25 percent short of the CARB 2008 electricity sector EE savings goals. The calculation did not consider the decay in savings over time from utility EE program reliance on short-lived savings such as fluorescent lamps. The 2015 AB32 update increases the shortfall.

[7] Energy consumption is a first order concept that bears on climate change, GHG emissions, and future reduction targets and dates. EE, the more common phrase in use today, is, by contrast, a second order concept, a ratio (kWh/cubic foot, miles per gallon, BTU output/BTU input, etc). Changes in this second order concept may correspond to absolute reductions in energy consumption—as is often assumed or asserted—or they may not.

[8] Data source for Figures 2 and 3 from the Energy Information Administration, SEDS (State Energy Data System), 1960-2014. The link is: https://www.eia.gov/state/seds/seds-data-complete.cfm.

[9] State of California, 2008 Update Energy Action Plan, February 2008, p. 7. http://www.energy.ca.gov/2008publications/CEC-100-2008-001/CEC-100-2008-001.PDF.

 

 

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