Conservation investments benefit participants and non-participants alike
Dr. Charles Cicchetti is co-founding partner with Pacific Economics Group and a professor of economics at the University of Southern California. He formerly was chairman of the Wisconsin Public Service Commission, and directed the Wisconsin Energy Office. Contact him at cicchett@usc.edu. Duke Energy provided some information and monetary support for this analysis. Only publicly available data are used. The conclusions reached are solely the responsibility of the author.
Americans once again are debating how to redirect consumers toward energy efficiency in the form of conservation, demand-side management (DSM) and renewables. In the past, such efforts mostly failed once high energy prices abated or Americans lost interest in conservation. Americans also seem unwilling to spend time and money on energy efficiency, despite no loss in quality and rather significant cost reductions.
Until recently, California was a notable exception to this declining interest in utility-sponsored conservation. California consumers use about 50 percent less electricity per person than the rest of the nation. The two political factors that make energy efficiency work for California are: 1) a political/consumer willingness to pay utilities to achieve strong energy-efficiency goals and targets (e.g., 20 percent renewables in utility supply portfolios before 2015); and 2) acceptance of a “wires and pipes” public-goods charge to finance California’s green efforts and to provide opportunities for utility companies to earn additional income from energy efficiency as a utility service.