About four months ago, at a conference at Stanford University’s Center for International Development, the economist and utility industry expert Frank Wolak turned heads with a not-so-new but very...
Frontiers of Efficiency
What conservation potential assessments tell us about ‘achievable’ efficiency.
on their orientation. In most studies, potential estimates are broken down by market segment, but at times only aggregate figures are reported. Twenty years seems to be the norm for a planning horizon, but shorter-term perspectives of 5 to 10 years aren’t uncommon.
Research undertaken for this article identified nearly 100 electric CPAs completed since 2000, covering 37 states and three Canadian provinces. 2 (Actual numbers are probably higher, but not all studies were publicly available or readily accessible.) These studies also included several “meta” analyses, summarizing and comparing other study results, including an impressive effort by Carla Frisch (Frisch 2008) 3 and several reports by the American Council for an Energy Efficient Economy (ACEEE), 4 Georgia Institute of Technology, and others.
Not all the main classes of conservation potential are reported—or analyzed—in all studies. Nearly all planning-oriented studies begin with technical potential, and report all classes of potential by sector.
In fact, some studies supporting utility IRPs left out economic potential because both the calculation of avoided costs—a crucial ingredient in estimating economic potential—and also the optimal qualities of conservation, were products of, rather than inputs into, the modeling process. With a few exceptions, policy-oriented studies tended to skip technical and economic potential altogether, and only reported achievable potential. These studies offered 72 estimates of achievable potential, most frequently expressed as a “maximum.” Fifty-five estimates of technical and economic potential were available. A few studies with a regional scope provided estimates of potential in multiple states.
On average, technical potential is estimated at 27 percent of forecast consumption, a common measure for assessing relative magnitudes of conservation potential, across the 37 states. About 72 percent of these (21 percent of forecast consumption) is expected to be economic, on average. These studies also show achievable potential of 17 per percent, on average (Figure 1) . In many cases, achievable potential is large enough to offset projected load growth entirely, and, in several cases, lower loads to below their base-year levels.
The range of estimates seems to vary by a study’s scope. Studies at the national and state levels show the highest potentials in all classes, although there were only four national studies, and only one reported economic potential (Figure 2) .
The data suggest a weak correlation between technical potential and lengths of planning horizons—which is reasonable, given that much technical potential consists of discretionary retrofit opportunities presumably available immediately and, hence in theory, independent of time. Achievable potential levels also appear to be uncorrelated with planning horizons—and that is surprising, given that the amount of achievable conservation depends on effort levels and, crucially, time. Studies with shorter time horizons should estimate a more limited efficiency potential than those over longer timeframes. This result was so for a few studies specifically considering variable planning horizons and reporting significantly higher achievable potential levels for longer periods.
The average state-level values mask large variations in estimates for all three classes of potential, and particularly for achievable potential. Estimates range between 12 percent and 43 percent for technical, and between 11 and 36 percent for