Does Energy Efficiency Avoid the Need for Power Plants in California?
Posted January 24, 2013
California has a long and rightfully proud history of using energy efficiency to avoid the need for expensive new power plants that pollute our air. In fact, energy efficiency is now the second largest resource for meeting the state’s electric needs, according to the California Energy Commission’s estimates. But disconnects between the state’s energy agencies have recently called into question whether California will continue to rely on this cheaper, cleaner energy resource or build more plants instead.
On Monday, the California Senate Energy, Utilities and Communications Committee will hold an informational hearing on this issue, following on the heels of a Legislative Analyst’s Office report that called for better coordination on the state’s energy efficiency efforts. I hope the hearing will result in a renewed commitment from the California Energy Commission, Public Utilities Commission, Independent System Operator, and utilities to work together to take full advantage of energy efficiency.
The CEC estimates that California’s decades of progress on energy efficiency programs and standards are already saving us about 15,000 megawatts of electricity, avoiding the need for about 30 large power plants (equivalent to 30 Rosenfelds). This means the state’s past efficiency accomplishments are meeting roughly 20 percent of the state’s power needs today, and are expected to account for nearly 25 percent by 2022. In short, energy efficiency is already a huge resource!
As the Governor noted in his State of the State address this morning, energy efficiency has already saved Californians $65 billion, and there’s much more that California can do. Energy efficiency is the cheapest and cleanest way to meet our energy needs, which is why state law requires utilities to invest in all cost-effective energy savings first, before looking to alternatives.
How Do We Know If New Power Plants Are Needed?
Every two years, the California PUC conducts a public process to examine electricity needs over the coming decade and the investor-owned utilities’ resources to meet them. The CPUC then determines whether new power plants (or power contracts) are needed. That decision is based, in part, on the CEC’s forecast of energy demand.
In the past, utilities modeled the resources they had available to meet future demand, and the CPUC was clear that utilities had to include energy savings from both past and future energy efficiency efforts.
The Problem: Are We Accounting for Future Efficiency Efforts?
In recent years, disconnects between the CEC, ISO and CPUC have called into question whether California will continue to use energy savings from both past and future efficiency programs and standards to avoid new generation. Here’s the problem in a nut shell:
- The CEC reduces its demand forecast to account for the energy savings from the state’s past energy efficiency accomplishments, but not expected energy savings from future ones. The CEC publishes a separate forecast of energy savings expected from future programs and standards, which the CEC notes should be subtracted from its demand forecast for purposes of the CPUC’s analysis of the need for new power plants.
- However, the ISO, which has been doing much of the modeling for the CPUC’s public process in recent years, has taken the CEC’s demand forecast but omitted energy savings from future efficiency efforts in most of its modeling. The result is proposals to the CPUC to authorize new unnecessary power plants, that could result in billions of dollars in higher costs for customers and more pollution.
- The CPUC has inadequate information to determine the actual need for new generation, since the models don’t include all reasonably expected energy savings. (This is clear, for example, in the CPUC’s current proposed ruling on Southern California Edison’s need for new resources in the Big Creek/Ventura area, which attempts to use a variety of very rough adjustments to compensate for inadequate modeling.)
The net result is stakeholders and the CPUC are wasting lots of time and resources arguing whether energy efficiency efforts will really continue into the future (and should therefore be accounted for in determining the need for new power plants) when the law already requires it.
Are Future Energy Savings Big Enough to Make a Difference?
California can get about 5,500 megawatts of additional energy savings by 2022 (equivalent to avoiding about 11 large power plants or Rosenfelds). (This is a conservative estimate, since it excludes numerous reliable sources of savings, such as various federal appliance efficiency standards.) Properly accounting for the expected savings from future efficiency programs and standards can make a significant difference in determining the need to build new generation.
California Should Let Energy Efficiency Live Up to its Full Potential
Although we are optimistic that the CPUC will properly account for efficiency before authorizing new power plants despite the problems with the current process, it’s time for better coordination among the agencies so the process will be straightforward next time.
- The CEC reduce electricity demand forecasts by the expected energy savings from both past and future efficiency efforts;
- The Independent System Operator use the CEC’s forecasts in its modeling; and
- The CPUC should be clear that it will only consider requests for the need for new power plants based on models that include reasonable estimates of energy savings from both past and future efforts.
Efficiency has already proven to be a key resource to meet Californians’ energy needs. It is also a key strategy to meet the state’s air quality goals and AB 32’s greenhouse gas pollution reduction requirements. California should let efficiency live up to its full potential by continuing to rely on it to avoid new power plants.
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