California Efficiency Legislation Promises Changes, Creates Dilemmas

California efficiency legislation
David Reynolds for Zondits, December 17, 2015. Image credit: Brett Farmiloe

A recent blog post by ACEEE offers advice for California energy policymakers on how to implement certain aspects of recently enacted legislation. California Senate Bill 350 (SB350, De Leon) calls for doubling energy efficiency savings by the year 2030, and Assembly Bill 802 (AB802, Williams) revises California’s energy benchmarking efforts and directs state regulators to adjust the accounting practices used to report and forecast energy savings. The post offers some sound advice, but I believe that it miscasts key provisions of AB802 as merely an exercise in attribution. In fact, the issue is how to measure the true impact of utility energy efficiency programs on the electric grid. How it is handled by California is critical to the future of these state programs. Why is that, you ask? Well, allow me to elaborate just a bit.

State regulators have the obligation to assure that utility energy efficiency programs, as market interventions, are a viable and wise use of ratepayer funds. The benefit to ratepayers is derived from reducing the long-term usage of electricity on the grid, which leads to fewer power lines and fewer power plants. The effectiveness of the programs can only be measured by their true impact on that grid, which may not be the same as what appears on an individual customer’s meter. Currently, the benefits of the efficiency programs – primarily energy savings – can be calculated directly from a program’s reported energy savings. What AB802 may do, in effect, is to decouple reported savings from the true grid impact of the program. Say what? I know it’s convoluted, but stay with me for a little bit longer.

Energy efficiency accounting is difficult because you can’t directly measure savings. Energy savings is determined as the difference between the energy consumption after an efficiency action has been taken compared to the energy consumption of one of three baseline scenarios that define what could have happened or what would have happened without the intervention. The baseline scenarios typically used are: 1) existing conditions, which predicts that nothing would have changed without the intervention, 2) code baseline, which predicts that a certain level of efficiency would happen anyway due to appliance standards and building codes, and 3) current market conditions, which predicts that certain levels of efficiency would have happen due to evolving standard practices.

What AB802 advocates is using only the existing condition baseline for assessing energy savings. This is problematic in that the state already has accounts for savings on the grid due to codes and standards and standard practices. It also means that reported energy savings may no longer reflect the true grid impact of utility programs.