FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Frontiers of Efficiency
What conservation potential assessments tell us about ‘achievable’ efficiency.
show that estimates of economic potential are, on average, 72 percent of technical potential, and that only a few studies mention any qualitative screening of measures before estimating technical potential.
Policy Objective or Planning Imperative
Estimating conservation potential differs from forecasting. As the experience of the last three decades has shown, energy efficiency must be acquired. To achieve the potential, consumers must be encouraged through education and incentives, delivered by well-conceived programs. Understanding the achievable potential may be important, but the determination has to begin with an understanding of what is technically feasible and economic. Certainly, estimating technical and economic potential is a complex and expensive undertaking. It is, however, not just a step toward achievable potential, as the Guide suggests. Rather, these estimates provide the context and points of reference crucial to answering policy questions regarding achievable potential for establishing standards.
As for establishing performance standards, the right question for policy makers to ask ought to be not what is achievable, but what portion of technical and economic potential might be reasonably achievable. A large amount of reliable data on actual performance of conservation programs is available from multitudes of evaluation reports and best-practice studies. These studies are sufficiently informative if establishing performance standards is the only objective in an assessment.
Supply curves for energy efficiency don’t remain static. New end uses emerge regularly. And as more efficient technologies become available as well, new technical opportunities will arise for conservation. Over time, as energy supply costs increase, energy suppliers will be willing to invest in higher-cost conservation measures and, as energy prices rise, consumers will find conservation more attractive than purchasing more power. These changing consumer preferences, when coupled with shifts in macroeconomic conditions and new policies (such as adoption of more stringent energy codes and standards, or imposition of a carbon tax), will improve the prospects for economic and achievable potential. In their initial study of conservation supply curves, Meier, et. al . (1983) asked if eventually we will exhaust the apparently large supply of conservation. The answer was, and still remains, “probably not.” 8
In the early 1980s, the Bonneville Power Administration joined with Pacific Power & Light Co., one of Oregon’s two major investor-owned electric utilities, to implement the Hood River Conservation Project. A main goal of the project, proposed by the Natural Resources Defense Council, was to test the upper limits of achievable conservation. The project achieved a maximum market acceptance of 85 percent. Ever since, regional planners have assumed 85 percent of economic potential can be achieved in the long run. While the true figure may be debatable, the approach has decidedly worked: it shifted the debate from what is achievable to the more relevant questions of what is technically feasible and economic.
Endnotes: 1. Meier, Alan (1982), Supply Curves of Supplied Energy , LBL-14686, Lawrence Berkeley National Laboratory, Berkeley, Calif.
2. See http://www.Fortnightly.com/exclusive.cfm?o_id=619 for a complete list of conservation potential studies cited in this article.
3. Frisch, Carla, Electric Utility Demand-Side Management: Defining and Evaluating Achievable Potential , Duke University, 2008.