Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Frontiers of Efficiency
What conservation potential assessments tell us about ‘achievable’ efficiency.
measures in order of increasing costs, and shows how large the reserve of conservation resource is for each measure. As Meier (1982) explained, a supply-curve approach provides a consistent accounting framework for addressing conservation measures and predicting their impacts and costs. It also allows conservation options to be readily compared with new energy supply alternatives, as both can be uniformly expressed as the marginal cost of obtaining an energy unit—a critical and necessary step in IRP.
From here, successively smaller portions of this potential are designated as A) “economic,” B) “achievable,” and C) “program” potential. These potential levels can then be differentiated according to specific constraints (or barriers) preventing realization of the potential at each level.
Economic potential can be defined as the subset of technical potential expected to be cost-effective, according to one or another of various jurisdiction-specific criteria, often the total resource cost (TRC) test. In general, a measure is cost-effective if its per-unit cost of conserved energy is lower than the cost of the energy it saves. A measure’s cost of conserved energy varies, depending on the initial cost, quantity, and expected life of the resultant energy savings, relative to conventional technologies.
The economic potential likely to be realized depends on the many factors that help determine just how willing (and able) are consumers to embrace conservation. These factors include the energy prices, the cost of adopting conservation measures, the availability of adequate information, and a host of other barriers. Achievable potential represents conservation levels likely to be realized once these factors have been accounted for.
Compared to technical and economic potential, achievable potential is often described in less precise terms, with its value reported as a range of estimates, underscoring uncertainty not only in how it is defined, but also in methods used in quantifying it. Since levels of achievable potential depend on efforts necessary to capture the potential, the concept of “program” potential is often used to evaluate conservation quantities that may be achieved using varying investment levels in incentives and marketing efforts by conservation program administrators.
Estimating Conservation Potential
Methods for estimating technical potential fall into three broad categories. In the first category are integrated national or regional macroeconomic models, such as the U.S. Department of Energy’s National Energy Modeling System (NEMS) and Consolidated Impacts Modeling System (CIMS). In these models, energy efficiency typically is treated in terms of economic decisions involved in production, conversion, and consumption of energy products.
The second category consists of models with roots stretching back to the end-use forecasting models of the late 1970s. In these models, energy efficiency potential is determined through generating a baseline forecast at the end-use level, and comparing its results to a second forecast, incorporating marginal impacts of a broad range of efficiency measures.
Finally, accounting models estimate potential for individual measures based on their expected savings and projected market saturation. End-use forecasting and accounting methods belong to a “bottom-up” approach, in that they begin with individual measures, assess their impacts, and then aggregate results up to end-use, market segment, and sector levels.
Regardless of the