California Sets a Bold Path for Energy Efficiency Innovation

Fighting the climate crisis requires new ideas to dramatically cut the dangerous pollution responsible for changing our environment and harming our health. The California Public Utilities Commission recently voted unanimously to do just that when it approved a decision to invest in a statewide initiative to fund innovative and early-stage solutions to reduce energy waste with the goal of them becoming widely available to all Californians.

This decision will create a path to explore how emerging technologies can more quickly save us even more energy, as well as how new energy efficiency programs can help build a strong workforce and reach all Californians, no matter where they live or how much they earn. This will not only reduce greenhouse gas emissions, but also improve our health, cut energy costs, and set up a path for ensuring high-quality careers that include family-sustaining wages, benefits, and a safe working environment.

NREL – Denis Schroeder

What’s new in this decision?

For the past 40 years, California has achieved incredible progress on “market transformation,” advancing technologies (like highly efficient lighting and windows) and establishing energy efficiency practices that become the norm through establishing a code or a standard. This has led to manufacturers developing ever-more efficient products to meet those codes and standards, which also leads to making their products available to more Californians.

iStock Photo

But the state’s policy rules haven’t been set up to do this on a large scale. The recent decision changes that by laying out a policy framework that sets up a phased approach to testing out new ideas. This is based in part on the successful model—interwoven throughout the adopted framework—of the Northwest Energy Efficiency Alliance, a market transformation entity that has decades of experience implementing these types of programs.

California Public Utilities Commission Decision on Market Transformation

In addition, the commission’s decision last week:

  1. Establishes an independent statewide market transformation administrator that will be responsible for assessing opportunities for new technologies and strategies to improve the efficiency of the state’s homes, buildings, and industrial sector;
  2. Authorizes a budget of $250 million over five years to invest in testing out new ideas;
  3. Creates an informal advisory board to help assess viable projects and progress over time; and
  4. Sets up a path to determine how best to value innovation in this new market transformation framework.

How did this decision come about?

Another great story is how we arrived at this decision. While California has been exploring energy efficiency best practices for market transformation for decades, it was not until the commission staff presented a proposed framework in response to direction by Senate Bill 350 that this effort was revived. Since there were many moving parts and stakeholders with different perspectives, the public process was shifted over to the California Energy Efficiency Coordinating Committee, a collaborative established in 2015 to increase transparency, advance ideas, and build consensus across the interested parties wherever feasible.

Through this facilitated effort, 20 stakeholders were able to come to consensus on almost all items. What was left (e.g., who should run the effort and how should we assess and value programs) was decided by the commission in this recent decision. This process highlighted the value of using a collaborative approach to reduce both the time and litigation needed to resolve critical policy issues.

What’s next?

Now, people or companies with ideas that do not currently fit into the existing commission process will have a different path to test out their ideas. The current rules to determine if a program should be funded tends to favor technologies that are already proven or require the program to get savings more quickly to pencil out as cost-effective. But this decision opens up another way to move innovative efficiency concepts forward under the umbrella of a market transformation initiative.

It will be exciting to see what types of projects are proposed. While it will take at least a year to find a new administrator and set up the process, once that is done, this approach will unlock new ideas to help achieve the state’s climate goals while also ensuring that all Californians are able to benefit from shifting to a clean energy economy.

About the Authors

Lara Ettenson

Director, Energy Efficiency Initiative, Climate & Clean Energy Program

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