Will California Continue to Use Energy Efficiency to Avoid Power Plants?
Just days after a California Senate committee hearing on how well the state is using energy efficiency to avoid new power plants, two Public Utilities Commission votes scheduled for Wednesday could signal whether the state continues on the clean energy path essential for the health of our state’s residents and economy.
California has a long and extremely successful history with efficiency, making it the second largest resource meeting our electric needs. But recent disconnects between the state’s energy agencies have called into question whether California will continue to rely on efficiency to avoid new electricity generation.
However, there were several positive signs at last week’s Senate Energy, Utilities and Communications Committee hearing, and we look forward to learning more about the agencies’ plans when they respond to the committee’s request for joint recommendations on how they can do better.
An early test of whether there remains an urgent need for progress (or if it has already begun) will come in Wednesday’s Public Utilities Commission votes on the need for new generation in southern California. Unfortunately, neither proposal under consideration fully accounts for expected energy savings and the Commission needs to improve them to ensure efficiency reaches its full potential to avoid building power plants.
Progress at the Senate Committee Hearing
Nearly every speaker at the January 28th hearing supported energy efficiency and the enormous benefits it provides California – from lowering utility bills to cleaning the air – and noted the tremendous opportunities to capture more savings, for example through investments under Proposition 39's “power boost” for efficiency.
But to take full advantage of efficiency’s benefits, California must continue to rely on it to avoid power plants that pollute our air and water. There were some signs of progress at the hearing, including a pledge from the Public Utilities Commission, California Energy Commission, and Independent System Operator to improve collaboration on using efficiency in their examination of the need for new plants.
The most important step may have been the ISO’s acknowledgement that California will continue to achieve energy savings from future efficiency efforts. While this may seem obvious since state law requires utilities to invest in all cost-effective energy savings, until now the ISO’s primary analyses and recommendations for new generation have assumed our energy efficiency efforts will abruptly cease. This has resulted in proposals for the Public Utilities Commission to authorize unnecessary plants, which could result in billions of dollars in higher costs for customers and more pollution. So getting the PUC, CEC and ISO to agree that efficiency efforts will continue and must be taken into account is a positive development.
Following the hearing, Committee Chairman Senator Padilla requested that the PUC, CEC and ISO submit joint recommendations by February 25, including:
- How will they improve the demand forecast and procurement processes to more effectively account for reduced demand resulting from energy efficiency?
- How can efficiency programs be improved to best match grid requirements?
- How to ensure efficiency investments will be cost-effective as the state increases focus on “market transformation” strategies?
I addressed many of these issues in my remarks at the hearing. First, I urged:
- The CEC to reduce its electricity demand forecasts by the expected energy savings from all efficiency efforts;
- The ISO to use the CEC’s forecasts in its modeling, and
- The PUC to be clear that it will only consider requests for new power plants based on analyses that include reasonable estimates of energy savings.
Second, I urged the utilities and PUC to emphasize local areas that face resource needs in targeting the energy efficiency programs.
Finally, the PUC has a stringent method of ensuring that energy efficiency investments are cost-effective. The programs have consistently delivered far more benefits than they cost. In fact, the PUC’s approach to date has been overly restrictive because it undervalues efficiency, so we urge the PUC to update its approach to better recognize efficiency’s full value (but that’s a topic for another day).
“Rubber Meets the Road” Wednesday
A first assessment of how well the state is relying on efficiency to avoid power plants will come in Public Utilities Commission votes Wednesday on the need for new generation in SCE (Southern California Edison) and SDG&E (San Diego Gas and Electric) territories. Currently, both proposals would appropriately recognize that energy savings must be taken into account, but significantly undercount them.
In the PUC’s proposed ruling on SDG&E’s need, only about a quarter of the expected energy savings is included while the proposed ruling on SCE’s need would arbitrarily cut the expected savings in half to determine the maximum procurement limit. NRDC has recommended the PUC make changes there and on other critical issues.
California needs the full benefits that efficiency can offer in order to keep utility bills affordable, improve public health, and curb pollution. We look forward to hearing more from both the PUC and the joint agencies on how they plan to ensure California takes full advantage of energy efficiency’s ability to avoid the need for power plants and other infrastructure.