How can decision makers determine the appropriate degree of ring-fencing for a utility holding company? The authors propose a systematic and objective method – recognizing business and financial...
Stabilizing California's Demand
The real reasons behind the state’s energy savings.
In 2005, California’s energy policymakers and regulators established energy efficiency (EE) as California’s highest priority resource for meeting future needs in a clean, reliable, and low-cost manner. 1 In 2006, the California legislature and governor positioned energy conservation and efficiency as the cornerstone of the state’s Global Warming Solutions Act. The Act mandates a 2020 statewide limit on greenhouse gas (GHG) emissions to 1990 levels. Compliance will be nothing short of Herculean: California will have to reduce per capita energy usage in a manner that accommodates continued brisk population growth and protects the state’s economy from economic dislocations and recessionary pressures.
The California Energy Commission (CEC) and California Public Utilities Commission (CPUC) point to California’s historical record in saving energy (see Figure 1) , coupled with its current stable per capita electricity use relative to the balance of the United States (see Figure 2) , as proof that it is up to this formidable challenge: “Because of its energy efficiency standards and program investments, electricity use per person in California has remained relatively stable over the past 30 years, while nationwide electricity use has increased by almost 50 percent.” 2
The CEC and CPUC take credit for saving, on a cumulative statewide basis from 1975 to 2003, about 40,000 GWh, or the equivalent of 15 percent of annual electricity use, through a combination of utility EE programs and appliance and building standards (see Figure 2) .3 Figure 2 illustrates the trend in average per capita total consumption in California and the U.S. between 1960 and 2005. 4 Until the mid-1970s, total electricity use in California and the United States increased at about the same rate. After that, California’s usage leveled off, while usage in the United States as a whole continued to increase. 5
California is Different
California’s GHG-reduction policy appears in large part premised on the state already having achieved a strong and direct “cause and effect” between energy savings (utility EE programs and building and appliance standards) and energy consumption. As noted above, several documents highlight the role of EE savings in accounting for the different consumption trends evident in California and the rest of the United States.