The Contribution of Energy Efficiency to the Reliability of the U.S. Electric System

NedRaynolds, Alliance to Save Energy
Richard Cowart, Regulatory Assistance Project

Keywords

Abstract

This paper examines the role of energy efficiency in enhancing electric system reliability. In many states that have enacted utility restructuring legislation, and thus far in Congress, energy efficiency advocates have had trouble convincing legislators of the connection between end-use efficiency and system reliability, and thereby persuading them to include support for end-use efficiency programs in restructuring legislation. Most often the small “wires charge” proposed as a means of finding such programs has been labeled a “new tax.” Meanwhile, as retail restructuring looms, utilities have slashed spending on demand-side management programs, including energy efficiency. The foregone energy and demand savings have contributed to declining reserve generation capacity margins, a trend that NERC forecasts will continue over the next decade.

The authors contend that end-use energy efficiency programs can make a very substantial, cost-effective contribution to electric system reliability over the next decade by reducing both the national base load and regional and local peak loads less expensively than the same amount of generation capacity could be built. We do not contend that energy efficiency can completely obviate the need for any new generation capacity or enhancements to the transmission and distribution network, but that energy efficiency can cost-effectively and significantly reduce the need for both while providing a much-needed margin of insurance against the uncertainties inherent in the utility industry’s transition to competition. Since the most oft-cited reason for electric utility restructuring is to save consumers money, policymakers should not fail to include support for end-use efficiency programs in restructuring legislation.