Redirecting Energy Efficiency Policies for the Climate
Saving energy and saving the climate are not the same thing.
A couple years ago I took Severin’s advice and proactively replaced many of my still-working incandescent light bulbs with energy efficient LEDs. Now when I flip a light switch, I enjoy knowing that somewhere in the western US, a power plant is burning a little less natural gas or coal.
For decades, energy efficiency has been a tried-and-true way to help the environment. Electricity is generated by power plants that pollute the air and damage the climate. Using less electricity has meant reducing these upstream harms.
But the simple link between electricity consumption and environmental harms is changing. Wind and solar produce a growing share of electricity and coal is declining. This means producing a megawatt-hour of electricity isn’t as harmful to the environment as it once was. As energy production gets greener, my LED bulbs are incrementally less helpful. At some times of year I may even be causing a wind or solar power plant to be cut back!
Regulators in California are seizing the opportunity presented by renewable electricity to reorient energy efficiency policy away from saving energy just for the sake of saving energy, and instead focusing on climate change.
Is Renewable Energy Still Energy?
A decision just adopted by the California Public Utilities Commission (CPUC) allows utilities to use energy efficiency programs to encourage households and businesses to switch from natural gas to electricity. This change could open up new incentives for fuel switching to the seven to eight million California households that have natural gas-fueled space and water heating. Thousands of California businesses could get involved too.
Up to this point these types of programs have been prohibited. California regulators didn’t want households to install electric resistance space and water heaters powered by a fossil-fuel-powered electric grid. These technologies can use two to three times as much fossil-fuel energy to produce the same amount of heat as natural gas burned directly in homes.
But times have really changed. The California grid is rapidly becoming cleaner – 33% renewables in 2020, continuing to 60% in 2030 and 100% zero carbon by 2045. Heat pumps are also gaining traction as an energy efficient alternative to electric resistance space and water heaters.
But, note, the motivation for this policy change is to cut greenhouse gas emissions, not to save energy. Renewable energy is still energy, even if it is carbon-free. Enter some creative redefinitions. The CPUC has declared that renewable energy has no energy content when calculating whether a program increases energy efficiency. This upsets the engineer in me, but is consistent with the underlying rationale for energy efficiency policy—addressing the harms of energy use.
More Opportunities to Redirect Policy
This new policy is just one step in a broader redirection of energy efficiency policy toward addressing greenhouse gas emissions. For example, the City of Berkeley and dozens of other California cities are starting to use building codes, a traditional energy efficiency tool, to electrify buildings in order to tackle climate change.
Many other opportunities can and should be deployed for this same purpose. Since wind and solar generation vary so much across days, weeks and seasons, the timing of energy savings is becoming much more important. To address this, energy efficiency policy could encourage consumers to buy more sensors and controls for their appliances. Then appliances like electric water heaters and refrigerators could be programmed to draw more electricity when renewable power is abundant. The technologies to achieve this are being developed, but are not widely available in the market. The financial rationale for consumers to move this way is also lacking. A policy push would help.
Another major opportunity exists with retooling of the ENERGY STAR standards. Today a product earns an ENERGY STAR label based on energy savings. If the certification were based instead on greenhouse gas emissions, the results could be different. For one, the certification would vary by region to reflect the dramatic variability of the carbon content of local electricity supplies. The rules could also require that appliances have the ability to respond to the carbon intensity of electricity.
The electric grid is changing. It’s time to explicitly and intentionally start redirecting energy efficiency policy to focus on the climate. And if “energy efficiency” becomes less about saving energy then maybe it needs a new name. Ideas?
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.
Suggested citation: Campbell, Andrew. “Redirecting Energy Efficiency Policies for the Climate”, Energy Institute Blog, UC Berkeley, August 5, 2019, https://energyathaas.wordpress.com/2019/08/05/redirecting-energy-efficiency-policies-for-the-climate/
Andrew G Campbell View All
Andrew Campbell is the Executive Director of the Energy Institute at Haas. Andy has worked in the energy industry for his entire professional career. Prior to coming to the University of California, Andy worked for energy efficiency and demand response company, Tendril, and grid management technology provider, Sentient Energy. He helped both companies navigate the complex energy regulatory environment and tailor their sales and marketing approaches to meet the utility industry’s needs. Previously, he was Senior Energy Advisor to Commissioner Rachelle Chong and Commissioner Nancy Ryan at the California Public Utilities Commission (CPUC). While at the CPUC Andy was the lead advisor in areas including demand response, rate design, grid modernization, and electric vehicles. Andy led successful efforts to develop and adopt policies on Smart Grid investment and data access, regulatory authority over electric vehicle charging, demand response, dynamic pricing for utilities and natural gas quality standards for liquefied natural gas. Andy has also worked in Citigroup’s Global Energy Group and as a reservoir engineer with ExxonMobil. Andy earned a Master in Public Policy from the Kennedy School of Government at Harvard University and bachelors degrees in chemical engineering and economics from Rice University.
I think the final thought, or perhaps its phrasing, in your blog post today was a bit too flip.
It makes a lot of sense to think of a more all-encompassing term for the collection of policies that guides activity to reduce GHG emissions, but let’s not lose sight of the actual differences between energy efficiency, fuel substitution, and conservation measures. Each of these contribute to GHG emission reduction, but each has their own unique consequences for the actual engineering and financial systems that deliver energy to end-users.
You can easily imagine different combinations of each of these three “buckets” that have the same GHG emission consequences, but vastly different impacts for the engineering and financial systems that fund programs and the energy delivery mechanisms. It would be harmful to accurate planning to enable utilities to mix and match combinations of measures at their whim when the impacts of such different combinations are critical to planning for energy delivery systems.
As with most of the energy models, it is a certainty that the manufacturing, useful lifetime, and recycling/maintenance and other costs for the infrastructure (appliances and related installation) to fuel switch between gas and electricity are grossly incorrect. In addition, gas storage is relatively easy and more available than what will be necessary to address electric peak use and backup reliability. Then factor in the enormous customer and vendor education issues and what results is more cost, more waste, and less productive results. Why not start with a proven option that the state and utilities long ago proved effective – real time pricing. Providing prices that more realistically reflect supply and demand will eventually incentivize customers and industry to move to the most effective, most cost effective fuel sources, appliances, and behavior.
See the other discussion on a recent post about real time pricing on this blog site. The question is this: If the going forward generation costs are only one-third of electricity prices, with one half for T&D which are not effectively priced with real time prices (see the other post for more discussion of that) and one-sixth in stranded costs, how can a RTP have any real effect on consumer behaviors, You can see how TOU prices (which would be the precursor a RTP pricing system) are implemented differently between PG&E and SCE. PG&E included only the marginal cost differences so the peak/off peak ratio is fairly small, while SCE used EPMC/Ramsey pricing scaling for a bigger ratio difference.
I’m not sure what you think is incorrect. Most end-users – especially in the residential and commercial sectors — already have electricity and certainly electricity hookups are common – if not required – in new construction in these sectors. So ‘fuel switching’ doesn’t require new infrastructure or use of a new, unfamiliar energy source*. If you look at most typical end-uses for natural gas in these sectors, its space heating, water heating and cooking. I would argue that for most individual end-users, the first two are largely out-of-sight, out-of-mind and except for the coldest climates, there aren’t operational differences large enough to affect end-user behavior. Set the thermostat or open the hot water tap and most end users aren’t going to see any difference. Cooking is the exception, of course, in terms of gaining familiarity with the time-constants for cooking with electricity vs natural gas (the latter more responsive to changes in setting the control knob – but that is apparently mostly gone using induction coupling) – but I hardly think an ‘enormous’ re-education effort is required. Electric stoves/cooktops have been around for a long time.
Real-time pricing has largely been used – especially in CA – to try to move the timing of some end uses to off- peak — only to a lesser extent to effect greater energy efficiency – whether that has proved all that effective is a different argument for another time. I don’t see how real-time pricing is helpful in terms of getting end-use consumers to move away from natural gas to electricity – especially since we have no idea how to capture the benefits of de-carbonizing these end-use sectors into the pricing scheme(s). Even if we did, I’d argue that we have neither the political will nor the time to ‘get it right’ as a sole strategy.
*To first order, it seems to me the biggest infrastructure effect will be those cases where the residential service hookup is underpowered (my first home in the Bay Area had a 60 amp hookup…) and the sizing of the transmission and distribution lines. These latter issues are not insignificant, but the demand structure isn’t going to change so rapidly that these issues cannot be addressed in a timely way, for the most part.
I just read your comments and agree with you. Real time pricing based on short run marginal costs would provide customers the right price signals to make efficient consumption decisions. All this talk about the fixed costs of T&D and the sunk costs of stranded assets are an unnecessary diversion.
And how do we arrive at revenues equaling total utility costs when those short run generation costs are only a third of the total revenue requirements and “short run” T&D costs are near zero? Note in California that state law requires that all utility generation costs are the responsibility of ratepayers with no post procurement risk to shareholders, and that shareholders are assured full recovery of profits through decoupling. And saying “fixed monthly charges” is a non starter (and I believe illegal under California law). And also don’t say “change California law.” Both of those are fantasies.
“And how do we arrive at revenues equaling total utility costs when those short run generation costs are only a third of the total revenue requirements and “short run” T&D costs are near zero? … And saying “fixed monthly charges” is a non starter (and I believe illegal under California law).”
Why is using fixed monthly charges to make the utilities whole a nonstarter? Tell us what law prohibits this in California? Maybe there is one; that would not surprise me given how screwed up California politics are.
I love California. I lived in the Bay Area for 7 years and plan to move back soon. Wonderful weather, scenic beauty, great outdoor activities, great restaurants. What’s not to like? The crazy left-wing command-and-control approach to everything. They are inefficient and costing the state residents big time. Well developed market-based solutions are far better alternative.
Here’s where to start on the legal limits on fixed monthly charges in California. This is a political non starter. What is your politically and legally feasible solution to my question?
These metrics must be on a lifetime basis. Windmills typically entail special roadways to sites; use huge amounts of concrete in foundations, and metal in the tower – nacelle, power cables etc. The noise impact on wildlife nearby, etc. I expect that at end of life scavengers might recover the metals etc, but not foundation. Details different, but similar issues for solar.
I expect ‘clean coal’ and nuclear are better for the environment – except that red-swan event in the latter case.
Like many other aspects of our life in the US we treat symptoms, not underlying causes. REDUCE use first. Wear warm clothes rather than keep the whole house at 78deg. Use shades and trees for natural cooling effects.
The CPUC and other use complex systems and models, when simpler solutions can be more effective [but then what would PhDs do!]. I would even be OK with rolling power outages. [though that goes counter to MAGA].
Here’s a review of studies on the GHG emissions by generation technology. (Not sure if the nuclear emissions include decommissioning construction and fuel waste transportation if/when there is a central depository.) The emissions from fossil fuel overwhelms the construction emissions in all cases.
Here’s the link: https://www.world-nuclear.org/nuclear-basics/greenhouse-gas-emissions-avoided.aspx
Richard — I would like to see the review you mention, but you don’t provide a citation or link. thanks
Emissions efficiency? That captures the ultimate goal of reducing CO2 emitted.