Energy Efficiency's Impact on California's Renewable Energy Development

Panel: Visions of the Future: Big New Ideas for Energy Efficiency

Authors:
Amber Mahone, Energy and Environmental Economics, Inc.
Jack Moore, Energy and Environmental Economics, Inc.
Jim Williams, Energy and Environmental Economics, Inc.
C.K. Woo, Energy and Environmental Economics, Inc.

Abstract

California is entering uncharted territory in terms of scaling-up energy efficiency (EE) savings goals. In 2006, California's Assembly Bill 2021 tasked the California Energy Commission (CEC) with setting statewide savings targets, aiming to reduce total forecasted electrical consumption by 10% over the ten-year period of 2007 - 2016, or approximately 1% per year.

The state is also speeding up the development of renewable energy via legislated renewable portfolio standards (RPS). Specifically, California's Senate Bill 107 mandates that the investor-owned utilities obtain generation equivalent to 20% of their retail sales from renewable energy by 2010, while municipally-owned utilities must set their own corresponding RPS targets. The Governor has set an even more aggressive, non-binding goal for renewable energy to total 33% of retail sales by 2020.

This paper quantifies the effect of EE savings on the state's RPS compliance cost. The effect arises because reduced retail sales result in less renewable energy being required to meet the RPS. If California reduces electricity demand by an additional 1% per year between 2007 and 2010, the state will reduce its cumulative RPS compliance costs by approximately $98 million. If this 1% per year rate of energy efficiency savings is extended through 2020, and the state achieves the 33% RPS goal by 2020, the cumulative RPS compliance cost reduction due to energy efficiency will be as much as $770 million.

This analysis is based on renewable energy cost and potential data derived from a publicly available ‘Greenhouse Gas Calculator,' developed for the California Public Utilities Commission (CPUC) to model the state's electricity sector greenhouse gas emissions reduction potential by 2020.