Energy Efficiency Leadership in California

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Executive Summary

Californians are maintaining a strong commitment to energy conservation following the state's recent energy crisis. New data from the California Energy Commission show that instead of slipping back into old habits in 2002, Californians sustained much of the conservation seen during the crisis, even accounting for the dampening effect of a slower economy. Thanks to these efforts, California residents and businesses have demonstrated some of the best possible ways to protect the economy and the environment.

The first six months of demand reductions in 2001 alone saved Californians an estimated $660 million in spot market electricity purchases and helped avoid up to $20 billion in projected costs of summertime rolling blackouts. The conservation in 2001 and 2002 reduced pollution emissions by nearly 8 million tons of carbon dioxide and 2,700 tons of smog-forming nitrogen oxides relative to 2000. The carbon pollution savings are equivalent to taking 1.5 million passenger vehicles (one-third of Bay Area vehicles) off the road for an entire year.

Even more promising for California's continued economic and environmental health, Californians locked in about one-quarter of the demand reductions achieved during 2001, or about 1,000 MW (equivalent to two large power plants), through investments in energy efficiency. But soaring natural gas prices and warnings of another regional drought are continuing reminders that we must not be complacent.

Opportunities for California to take advantage of additional inexpensive energy efficiency improvements abound. New evidence shows that over the next decade, California could realistically and cost-effectively reduce its electricity needs by at least 5,900 MW -- the equivalent of 12 giant power plants -- while avoiding the environmental damage associated with electricity generation. This added investment in efficiency would return an estimated $12 billion to Californians' pocketbooks.

Smart investments and policies will help achieve these energy and cost savings. Our report highlights recent policy progress that has California poised to take advantage of these cost-effective resources. Policymakers and regulators have restored utilities' responsibility to manage a robust portfolio of long-term investments for the benefit of their customers, reversing one of the fundamental mistakes of electricity industry restructuring in California. Just as importantly, regulators are also aligning the utilities' financial incentives with the interests of their customers to ensure that the utilities are rewarded for providing reliable and affordable service rather than increases in electricity use.

These policy gains will stimulate investments in energy efficiency that can help:

• Keep California's economy strong by decreasing the cost of our energy services;
• Free up hundreds of MW of power each year without the environmental impacts that would accompany electricity generation;
• Avert supply shortfalls that can send prices soaring; and
• Reduce California's global warming emissions.

Our report's case studies of Silicon Valley companies provide concrete examples of energy efficiency improvements that can reduce energy costs for both companies themselves and their customers. These companies are getting more work out of less energy, boosting profits and productivity. If California continues to make sound policy and investment decisions, more residents and businesses will enjoy similar savings. California now has an unprecedented opportunity to channel the positive momentum of the past few years into a new wave of cost-effective investments in energy efficiency. Reinvigorating these investments will help stimulate the economy, protect our environment, and ensure that California never faces another energy crisis.

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