Guest Juice: California Energy Efficiency Dreamin’

30 Mar 2017

By Cynthia Mitchell

In the 1990s, California led the nation in deregulating its electric utility industry. The result was a disaster. The subsequent energy crisis during 2000 and 2001 was characterized by extraordinarily high prices and blackouts.

Re-regulation included proclaiming energy efficiency as the state’s highest priority[i]  “first loading order resource”[ii] based upon three decades of perception that state energy efficiency had accomplished what no other state or jurisdiction had been able to do: significantly reduce per capita electricity consumption.[iii]

Today, California’s decade-old greenhouse gas reduction policy is in large part premised on the state having achieved a direct and strong “cause and effect” between energy savings (utility programs and building and appliance standards) and declining per capita energy consumption.[iv]

That makes this is a good time to check-in on the veracity of this proclaimed success story given current lackluster energy efficiency results.

Over the past decade, California has spent billions in ratepayer dollars on an increasingly complex and complicated mix of utility energy efficiency programs and building and appliance standards.

The story goes that from 1975 to 2003, the state saved about 40,000 GWh, or the equivalent of 15 percent of annual electricity use, through a combination of utility energy efficiency programs and appliance and building standards.

Until the mid-1970s, per capita electricity use in California and the U.S. increased at about the same rate. After that, California’s usage leveled off, while nationwide usage continued to increase. The graphic representation of this tapering off of per capita consumption is known as the “Rosenfeld curve,” named after energy efficiency pioneer and former California Energy Commission member Arthur Rosenfeld.  The underlying phenomenon is called the “Rosenfeld effect,” and even has its own Wikipedia page.[v]

The CEC asserted that energy efficiency improvements were the cause of California’s declining per capita consumption.[vi] The commission continues to assert that “…energy efficiency efforts have saved California consumers billions of dollars since the 1970s and have held per capita energy use in the state relatively constant, while the rest of the United States has increased by roughly 40 percent.”[vii]

These assertions have not gone unchallenged.  When I controlled for the price of residential electricity, climate, household size, housing mix, conservation ethic, and long-term trends in the structure of the economy, my firm’s 2009 analysis showed that annual changes in state-level energy efficiency activities did not correlate highly with changes in per capita electricity consumption.[viii] Others have raised similar points.[ix]

Whatever one thinks about the causes of the Rosenfeld effect, it seems clear that more is needed to achieve the state’s carbon reduction goals, as set out in 2015’s Senate Bill (SB) 350. Flattening load growth isn’t enough–load needs to start going down. Assuming a flat or growing population, this means that per capita electricity use has to decline.

It is not doing that.

In fact, 40-years of data on both absolute and per capita consumption show that both were higher in 2014 than in 1972 (fluctuating over the 40-year period largely in response to economic conditions),[x] as set out in my March 10, 2017, Guest Juice.

The CEC seems to be aware of both the need for load to decline (though they couch this in terms of “savings increasing”), and of the inadequacy of current savings approaches: “The doubling of projected energy efficiency savings called for in SB 350 is beyond the significant savings that are projected to be achieved by 2030 through California’s existing suite of energy efficiency programs and activities.”[xi]

CEC staff is in the process of establishing the energy efficiency targets for SB 350 based on a doubling of the mid-case estimate of additional achievable energy efficiency [AAEE] savings, as contained in the CEC’s Demand Forecast. AAEE is the CEC’s method for extending current utility energy efficiency savings [i.e., existing “maxed out” programs] through the CEC demand forecast time period.[xii] CEC staff will temper the AAEE doubling projections based on what is “cost effective, feasible, and reliable”.[xiii]

California’s energy efficiency community needs to take a hard look at the very real economic and market limits of the current approaches to efficiency. When most savings are coming from command-and-control approaches (i.e., codes and standards) and generally short-lived savings from florescent lighting, something is amiss.

That’s why it’s far overdue to do the hard work required to simultaneously reduce ratepayer and utility risk, and make efficiency attractive to the investment community in ways analogous to generation-side resources, and other distributed energy resources. Doing that will take new meter-based approaches that procure metered efficiency from suppliers analogous to how California obtains metered generation from generators.

We will address this more in our next column.

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.

Notes:

[i] 2006 CPUC “Energy Efficiency: California’s Highest Priority Resource”.
http://chinauseealliance.org/wp-content/uploads/2012/02/calif_cleanenergy508.pdf

[ii] The loading order was adopted in the 2003 Energy Action Plan (EAP) prepared by the joint energy agencies and the Energy Commission’s 2003 Integrated Energy Policy Report (IEPR). The 2005 and 2008 EAP updates and subsequent IEPRs confirm the 2003 loading order. http://www.energy.ca.gov/energy_action_plan/2003-05-08_ACTION_PLAN.PDF

[iii] Ibid i and iii.

[iv] Ibid i and iii.

[v] https://en.wikipedia.org/wiki/Rosenfeld_Effect

[vi] Ibid i and iii.

[vii] CEC 2016 Final IEPR Update, Feb. 28, 2017, p. 23. http://www.energy.ca.gov/2016_energypolicy/

See also PG&E Testimony Retirement of Diablo Canyon Power Plant, Chapter 4 Energy Efficiency, p. 4-2, August 11, 2016, https://pgera.azurewebsites.net/Regulation/; PG&E Energy Efficiency 2018-2015 Business Plan, Executive Summary, p. 14, https://www.caeecc.org/business-plans-1; Natural Resources Defense Council, August 2015, “California’s Golden Energy Efficiency Opportunity,” https://www.nrdc.org/sites/default/files/caenergy-efficiency-opportunity-report.pdf.

[viii] Stabilizing California Demand: The Real Reasons Behind the State’s Energy Savings”, Public Utilities Fortnightly, March 2009. Regression results determined that California electricity prices, which are higher than the balance of the national average price, accounted for 40% of the decline in state per capita consumption, with energy efficiency accounting for at most 20%. Additional factors affecting state per capita consumption include fewer cooling degree days (CDD) than balance of U.S.; higher ratio occupancy per dwelling unit and more detached multifamily homes, and long-term structural changes in California’s economy marking a shift to to less energy intensive industries. https://www.fortnightly.com/fortnightly/2009/03/stabilizing-californias-demand

[ix] Sudarshan, Anant. “Deconstructing the Rosenfeld curve: Making sense of California’s low electricity intensity.” Energy Economics. Vol. 39, September 2013, pp. 197-207. “California energy efficiency: Lessons for the rest of the world, or not?” Arik Levinson, Journal of Economic Behavior & Organization 107 (2014) pp. 269–289, http://faculty.georgetown.edu/aml6/pdfs&zips/CaliforniaEnergy.pdf

Stanford and Levinson works backing up Mitchell analysis.

[x] http://cacurrent.com/subscriber/archives/29130

[xi] CEC Staff White Paper “Framework for Establishing the SB 350 Energy Efficiency Savings Doubling Targets”, January 2017, CEC-300-2017-045. IEPR Joint Agency Workshop on Energy Demand Forecast & Doubling of Energy Efficiency – Data & Analytical Needs, 1/31/2017, p. 2. http://docketpublic.energy.ca.gov/PublicDocuments/17-IEPR/TN215437_20170118T160001_Framework_for_Establishing_the_Senate_Bill_350_Energy_Efficienc.pdf

[xii] Ibid xii, p. 5; for AAEE see CEC California Energy Demand 2014–2024 Final Forecast, January 2014 CEC‐200‐2013‐004‐V1‐CMF, p. 88.

[xiii] Ibid xii, pp. 5, 7, 16.

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