A Brighter View of CFLs

This week The Wall Street Journal published an unfortunate piece on the successful energy efficiency programs in California. The piece, The New Light Bulbs Lose a Little Shine (Jan. 19), focused on the ongoing controversy over exactly how much energy the California programs have saved, particularly with regard to the cost-effective compact fluorescent light (CFL) programs. While there is a controversy there, and both my colleague Peter Miller  and I have both blogged about it, what the article omitted was that the disagreement is only over whether the programs were hugely successful or just successful. In either case, the California efficiency programs provided enormous benefits to customers and saved Californians at least hundreds of millions of dollars. The California Public Utilities Commission ruled that the programs provided customers with $3 billion in net benefits (that is, the benefits after subtracting the costs). Even the most conservative estimate of savings showed about $350 million in net savings for customers. The CPUC ultimately authorized $212 million in earnings for 2006-08 as a reward for the energy savings programs. To put this in context, these profits comprise less than 2 percent of the utilities’ total profits during those three years, and if the utilities had not invested in efficiency programs and had procured more costly and polluting power instead, they would have earned, under PUC rules, roughly $700 million on those investments. So this is a great deal all around for customers. While the incentive mechanism isn’t perfect it is helping keep California on track as one of the most energy efficient states in the union

In addition, the article played into a number of “hot issues” that are hardly issues at all. For example, the article noted that CFLs are mostly made in China. True, but the vast majority of jobs from energy efficiency investments are created here at home. In fact, most come from consumers reinvesting their utility bill savings into the local economy. Since the CFL programs are among the most cost-effective that exist, and they yield enormous bill savings for consumers, the local job benefits are similarly large. A recent study concluded that California’s efficiency policies have created 1.5 million jobs with a total payroll of $45 billion. Furthermore, there is good news that manufacturers of the new generation of energy efficient light bulbs are locating their production in the US.

The article noted that there has been disagreement over when people install CFLs, and whether they last five or ten years. But it missed the point that whenever they are installed, they will save huge sums of money. For example, if they last only five years, they save about $25 per bulb, rather than $50. While I would rather save $50 than $25, for a bulb that costs a buck or two, it’s a pretty good deal either way. 

Lastly, the article mischaracterizes the new incentive mechanism that the CPUC is currently considering. While the policy is not final yet, it emphatically will judge utilities based on the amount of energy actually saved by their efforts. The difference is that the CPUC will develop savings estimates for each energy-saving product or project only once, rather than second guessing key assumptions years after the program ends. The CPUC plans to continue to conduct robust evaluation and measurement of energy savings. The approach is more in line with the approach that’s used in other leading states around the country. 

Environmentalists and consumer advocates should work even more closely together to maximize the savings the nation can achieve through energy efficiency.  These programs are by far the best investments utilities can make, and we should ensure they are maximizing all cost-effective energy savings before investing in costlier and dirtier alternatives like building new power plans.