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California Climate Law Details to Get Grand Unveiling

Answers to key questions about state's cap and trade and energy efficiency programs to come out of separate meetings tomorrow

By Robert Collier

Dec 15, 2010

As politicians around the nation become increasingly hesitant about taking action against global warming, California is pushing ahead this week with two much-awaited steps that will have broad implications for climate policies at home and elsewhere.

The decisions by state regulators in separate meetings Thursday amount to the grand unveiling of California's climate strategy after years of debate and exhaustive policy-crunching.

The is scheduled to answer the central question of the state's previously announced cap-and-trade emissions program – whether the largest polluting industries are to be given emissions credits for free, whether they must buy them at auction, or some combination of the two.

The will decide whether to grant large subsidies to the state’s utility companies for cutting their customers’ energy use even though those savings appear to have been far less than projected.

The details of these two decisions will have enormous impact, especially because many other states and foreign governments are modeling their climate policies on California's. Critics say that both decisions will determine whether these policies have enough teeth or are weakened by needless giveaways to large corporations.

Energy Efficiency Gains Less Than Expected

In many ways, what’s at stake can be seen in the compact florescent light bulb. For years, California pioneered the promotion of energy-saving CFLs. The state's landmark climate legislation in 2006, known as , created huge subsidies for CFLs, funded by a ratepayer surcharge. Yet a study released earlier this year by the Public Utilities Commission found that the subsidies, which totaled $265 million between 2006-08, were surprisingly ineffective even though the number of CFLs rose faster than expected.

The subsidies only resulted in 25 percent of the predicted level of energy savings. Other energy-efficiency programs, which spent another $1.8 billion during the same period, failed similarly. Ultra-efficient air conditioners and appliances were installed, air ducts were sealed and other worthy programs did their work, but energy use dropped by much less than had been predicted.

Last month, the PUC's embarrassment was doubled when its own called for the PUC to cancel bonus payments of as much as $221 million allotted to the utility companies.

These payments, through a plan known as "shared savings," are the new cornerstone of the PUC's "decoupling" policy. Under this system, utilities' profits are based on the cost of providing service rather than the amount of electricity and natural gas sold to consumers. The payments for shared savings were intended to provide an additional incentive for utilities to ignore the previous formula of "more energy consumption = greater profits."

"The shared savings program is not delivering what was promised," said Cheryl Cox, policy adviser for the Division of Ratepayer Advocates. "It’s pretending that everything is OK, and it’s creating the illusion of success."

This turnaround on energy efficiency is a bitter pill to swallow for many climate policy experts. For years, energy efficiency has received less political attention than the flashier, more ostensibly profitable sectors such as solar and wind energy. Yet numerous studies have shown that efficiency programs can bring more bang per buck than subsidies for renewable energy. California's programs of decoupling and shared savings have been held up worldwide as a prime example of best practices, and government officials from Canada to China are planning to adopt them full-scale.

"The results of [Thursday's] decision will have a huge impact on our understanding of what can be accomplished through energy efficiency," said Peter Miller, a staff attorney with the .

Judgment call?

Robert,


I'll just respond by noting that my referrence to the proposed NTGR as a "judgment call" was not rhetorical exaggeration. The authors of the report themselves state that the proposed NTGR was based on their "judgment" due to the fact that the four approaches they implemented produced wildly varying results. (see e.g. p. 53)


Given the importance of energy efficiency to California's energy future I think that something more than a superficial skim is warranted in this case.


Peter

responses

I am no expert in the methodology of energy efficiency evaluation, and I respect NRDC’s expertise and professionalism. However, the PUC staff analysis was carried out by the Energy Division, which is respected nationally. Its analysis was carried out under the “California Energy Efficiency Evaluation Protocols: Technical, Methodological, and Reporting Requirements for Evaluation Professionals.” Google it, and take a look. Many other states have adopted this protocol as the basis of their evaluation methodologies. It's deeply weedy stuff, all 292 pages of it, and I don’t claim to have done more than a superficial skim. But I don’t think one can fairly dismiss the Energy Division’s methodology or conclusions as a “simple judgment call,” as Peter suggests.

To Randy Udall and Patrick McCully -- the Energy Division found that despite the high numbers of CFLs sold, much of the sales would have taken place even without the subsidies. This is similar to the "additionality" question for offsets.

 

Final PUC decision

Robert,

The PUC just voted out the final decision on the 2006-08 incentives decision. My colleague Devra Wang provides details at: 

Peter

please elaborate

Robert:

 

Can you elaborate a bit on the CFL issue?

 

What we've seen in Colorado is that energy efficiency devices like CFLs certainly can save energy in individual fixtures, but that average household consumption continues its relentless increase. Is that what the concern is in California?

 

Or is, as one commentator notes, that the commission believes the CFL adoption rate would have been nearly as rapid without the incentives as it was with them?

 

Residential EE is a lot more difficult to implement than is sometimes believed, based on what I have learned and seen.

R

 

 

 

Call me skeptical

Robert,

Let me get this straight.

From 2006 to 2008, the utilities ran their upstream CFL rebate program and total CFL sales in California grew by 500%, substantially faster than the rest of the US.  Moreover, CFL sales continued to rise in California in 2008 supported by utility program spending despite the economic downturn, unlike the rest of US.

From 2006 to 2008, the California utilities provided rebates on 95 million CFLs, more than 50% above the stretch goal adopted by the CPUC.  Because the utilities provided the rebates directly to the CFL manufacturers (i.e. "upstream"), there were no rebate applications to fill out and mail in.  Even better, the upstream rebate leveraged manufacturer and retailer discounts.  An average rebate of about $1.60 per bulb lowered the price of a CFL sold in California by $2.70.  The price of a rebated CFL dropped from almost $4 to just over a buck, the same amount for the inefficient incandescents you would otherwise have to buy.  That's a great deal.

(Robert - I hope you bought some. They save a lot of energy.)

Now, the PUC staff report that you're citing looks at this data and concludes -- wait for it -- that sales would have risen almost as fast even without the program. The study concludes that the price cut from $4 to $1.30 along with the manufacturer and retailer agreements and the marketing and tracking programs had at best a modest impact. In effect, the study concludes that sales would have grown so fast even without the program that the rebate program accelerated market adoption of CFLs by just one year. (BTW -  It's worth noting that the study's conclusion is based on a simple judgment call and that not one of the four modeling approaches in the study produced useable results.)

Maybe you find that conclusion convincing but, frankly, I'm kind of skeptical.

Replacing the study's judgment call with the simple assumption that CFL sales would have grown at the same rate as they did in the rest of the U.S. would roughly double the net savings attributed to the program.

Given that, I think that the results of this study and some other questionable study conclusions deserve at least a little scrutiny, rather than being accepted blindly as some have argued and as you seem to have done in your article.  

Unfortunately, despite the quote of mine that you've pulled out of context, the PUC decision up for a vote today will not impact our understanding of what efficiency can accomplish. It notes the substantial controversy over this and other study results, but does not resolve it.  Instead, the PUC has already decided that it will proceed with a formal dispute resolution process -- a decision we heartily support -- to address the multiple questions with this (and other) study's results that have been raised.

Peter

 

re: "accepted blindly"

Disclaimer: I know Rob well.

He accepts nothing blindly. Nothing.

so why were the expected EE savings not realised??

what explanations have been put forward? rebound effect? unrealistic expectations?

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