Energy Efficiency and
Electric System Reliability:
A Look at Reliability-Focused Energy Efficiency Programs Used to
Help Address the Electricity Crisis of 2001
Martin
Kushler, Ed Vine, and Dan
York
May 2002
Executive Summary
The year 2001 was a remarkable
and memorable one for issues relating to the electric industry.
As the year began, California was experiencing an electric system
crisis, with rolling blackouts and soaring wholesale electricity
costs. The effects of this crisis were rippling throughout the western
states, and across the country electric systems were confronting
the prospect of growing demand and tight supply, amidst an aging
transmission and distribution infrastructure.
These circumstances
led to a strongly renewed interest in "demand-side" program
strategies as an important category of resources that could help
alleviate these electric system reliability problems. A number of
key states, including California and New York, announced major increases
in funding for energy efficiency program efforts. Policymakers,
regulators, utilities, and other stakeholders were looking for creative
approaches to help bring demand-side resources into play.
The Current
Study
Recognizing
the importance of those emerging events, in early 2001 ACEEE launched
a project to carry out a study of "reliability-focused energy
efficiency programs" implemented for the summer of 2001 (i.e.,
energy efficiency programs that were specifically designed, modified,
or ramped-up to address electric system reliability concerns). The
focus of the project was specifically on energy efficiency because
that niche of the demand-side portfolio of policies and programs
had been receiving relatively less attention than "peak demand"
oriented options such as load management and "demand response,"
and also because energy efficiency provides certain additional benefits
not encompassed by those other demand-side strategies.
As the year
unfolded, ACEEE conducted a comprehensive national search for reliability-focused
energy efficiency programs, ultimately culminating in a set of 22
case studies presented in Appendix C of this document.
This report
describes the methodologies and results of this research project,
including a discussion of various policy responses and programs
implemented in states across the country in response to electric
reliability concerns during 2001. Some preliminary impact estimates
obtained from program administrators are provided (see the table
in Appendix B), as well as a discussion of "lessons learned."
The following are some of the lessons cited by program administrators
in their interviews with research project staff:
1. Select programs
that are practical and realistic, and can be designed and implemented
quickly and easily.
2. Be realistic about estimated program impacts-don't over-promise;
rather, over-deliver.
3. Select programs that either are based on proven designs or otherwise
are highly certain of achieving goals. Some innovation and experimentation
can be useful, but not as the backbone of a menu of programs.
4. Initiate effective marketing and media campaigns, which are essential
to large-scale program success.
5. Establish and incorporate effective evaluation plans, including
protocols and provisions for measurement and verification.
6. Establish streamlined, "user-friendly" processes for
both participation in programs and selection of any program contractors.
7. Take advantage of the tremendous opportunities that arise during
times of public crisis and high visibility to expand the promotion
of energy efficiency to affect more long-term, sustainable changes
in the market for energy efficiency products and services (e.g.,
use the opportunity to leverage improved building codes).
8. Use as many tools as you can for promoting energy efficiency,
including rebates, other types of financial incentives, marketing,
rate levels and structures, education, and program outreach. Build
on and use existing program experience.
9. Coordinate efforts with key market participants-especially retailers
and manufacturers-in advance in order to help ensure an adequate
supply of energy efficiency equipment.
10. Try to provide a strong base of consistent support for energy
efficiency so that efforts don't have to begin from scratch when
reliability concerns arise. (In particular, California's extensive
experience and infrastructure in these areas helped provide the
necessary platform for obtaining the significant results achieved
in 2001.)
Policy Implications
In addition
to this program-focused information, the study also provided some
broader findings that may have policy-related implications. These
include the following observations:
- Electric
reliability concerns were fairly widespread. A total of 21 states,
representing most regions of the country, reported reliability
problems or "close calls" during 2001.
- While use
of load management programs was almost universal (45 out of 51
jurisdictions), the reported use of energy efficiency programs
as a deliberate strategy to help with electric reliability was
much more limited (7 states at most).
- There appears
to be a fairly widespread lack of conceptual differentiation between
energy efficiency and load management, even among the senior regulatory
staff (Electric Division Directors or their equivalent) targeted
in this study. When asked if utilities in their states had programs
"particularly designed to save energy to help with electric
system reliability this summer," respondents from 25 states
said yes-but three-fourths of those respondents only cited load
management programs as their examples.*
- The results
suggest that the potential for the use of energy efficiency programs
to help address electric reliability concerns may be greater than
is currently being realized. Although 21 different states indicated
that they had reliability problems or close calls during 2001,
only seven states reported that they were using energy efficiency
programs as a deliberate strategy to help improve electric system
reliability.
- In terms
of preparation and readiness, it appears that having an established
program infrastructure in place for pursuing energy efficiency
is extremely important in providing the ability to roll out accelerated
programs in an emergency. Existing institutions with authority
and experience are crucial to achieving a rapid ramp-up of activity
in the field.
Final Comments
One of the
key goals of this project was to provide information to policymakers,
regulators, utilities, and other interested parties regarding the
potential role of reliability-focused energy efficiency programs
in helping to address electric system reliability concerns. The
22 case study programs documented in this report provide concrete
illustrations of how such programs are being used in a number of
states around the nation.
In reviewing
these programs, it is useful to keep in mind that there are of course
multiple policy objectives for these programs, such as avoiding
blackouts, saving energy, reducing customer bills, providing environmental
benefits, reducing the market power of suppliers, etc. Different
technologies and programs from the case studies may be better suited
for different aspects of those objectives. However, the ability
to contribute to the reliability issue is a very salient underlying
theme that unites this collection. Hopefully the program examples
given in this report, and the lessons learned from their experience,
can help expand the effective use of energy efficiency as one strategy
to help enhance electric system reliability, while capturing many
of those other objectives in the process.
*This seems
to correspond with other recent research by ACEEE (Kushler &
Witte 2001), which found that load management appeared to be the
"default" choice for demand-side response by utility companies,
and that special policy emphasis was necessary to make energy efficiency
programs happen.
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entire report (except appendices) for free in PDF or order in hard
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147 pp., 2002, $35.00, U021
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