Benefits of California Energy Efficiency Program are Underestimated

This week, I completed an analysis of a recent California energy efficiency program to promote energy-saving light bulbs that demonstrates the program was a huge success, providing customers with over $7 in benefits in energy savings and pollution reductions for every $1 invested.

 From 2006 to 2008, California residents purchased over 90 million heavily discounted compact fluorescent lamps, through an initiative administered by the state’s investor-owned electric utilities – SCE, PG&E, and SDG&E – and overseen by the California Public Utilities Commission (CPUC) known as the Upstream Lighting Program (ULP). As described in earlier blogs, some stakeholders have questioned whether the efficiency programs in California have been successful or whether the state would have achieved the savings even without the programs, based largely on perceptions about the impacts of this program.

The CPUC’s staff evaluation of the 2006-2008 Upstream Lighting Program (ULP Evaluation Report) concluded that the Upstream Lighting Program successfully provided over $50 million in net benefits to utility customers. However, as detailed in my report, errors and biases in estimates for incremental measure costs, net-to-gross ratio (NTGR), and installations in the ULP Evaluation Report resulted in an erroneously large estimate of program costs and an extremely low estimate of program benefits.  When corrections for these three areas are made, net benefits increase to over $1 billion. In total, the program provided customers with over $7 in benefits in energy savings and pollution reductions for every $1 invested.

This analysis highlights the fact that California’s efficiency programs have been an enormous success for consumers and that these savings would not have been achieved without these programs.  Using the revised estimates in this report provides a truer picture of past program impacts and a better guide to help California take full advantage of future opportunities to achieve cost-effective energy efficiency savings in the future.

This analysis also highlights the need for improvements to the measurement and evaluation process at the CPUC. Our recommendations include:

• Set clear guidelines up-front. The CPUC should ensure that independent evaluation, measurement and verification results provide clear guidance to utility administrators and third party implementers on the energy savings that are available from various measures prior to the start of program implementation.
• Resolve disputes in a timely manner. The CPUC should provide a dispute resolution process to resolve the legitimate technical disputes that experts may have over evaluation results, so that the CPUC can be sure it understands the full impact of the efficiency programs it oversees and to provide clear guidance for future programs.
• Make information publicly available. All evaluation results, data, and models should be made publicly available in a timely manner.
• Adopt accurate estimates of energy and bill savings. The CPUC should strive to adopt the most accurate estimates of savings from energy efficiency programs including the full range of benefits to customers rather than the lowest plausible estimates of program impacts. Excessive discounting of energy saving estimates leads to fewer energy efficiency projects and ultimately more power plants, pollution, and higher bills for California consumers.