California is changing the way it values energy efficiency, calculating the “total system benefit” of conservation programs to include environmental and equity goals as well as economic savings on reduced energy use.
“Energy savings goals alone, while important, do not capture the full set of policy goals and benefits of energy efficiency,” the state’s Public Utilities Commission (CPUC) concluded in a new rule adopted late last month. The changes will take effect over a two-year period, Utility Dive reports.
In a statement, CPUC Commissioner Genevieve Shiroma said the new calculation would extend California’s leadership on energy efficiency “by reducing the conflict between cost-effectiveness and other equally or more important policy objectives that address equity and provide market support for our energy efficiency programs.”
Last year, Natural Resources Defense Council senior scientist Mohit Chhabra said the state was questioning the cost-effectiveness of its energy efficiency programs—not because they were underperforming, but because the CPUC had taken the wrong approach to measuring their impact.
“We need to view the value of energy efficiency programs based on how they meet our energy needs, environmental goals, and improve the well-being of utility customers,” he wrote. But instead, “we value efficiency programs for only a fraction of these objectives—and incorrectly at that. If we don’t move beyond these outdated policies, California’s electric utilities will end up investing in more expensive and carbon-intensive ways to meet our energy needs.”
A year later, CPUC has adopted “a new approach, segmenting the energy efficiency program portfolios into programs whose primary purposes are resource acquisition, market support, or equity,” Utility Dive explains. “A cost-effectiveness threshold will be applied to resource acquisition programs, and the budget amount devoted to the market support and equity programs will be limited to 30% of the total budgets, in most cases.”
Programs will still have to deliver at least a dollar in cost savings for every dollar spent—but by calculating those savings across “resource acquisition segments”, not for each individual program, the approach will allow more space for costlier programs that deliver community benefits.
Shiroma said the new approach will maximize energy efficiency measures “for longer-duration greenhouse gas reductions,” while delivering benefits across the state power grid.