Energy efficiency key to prevent another power crisis

California energy savings still reducing pollution and saving money, but potential savings are much larger

provided by Natural Resources Defense Council

alifornians are still saving energy, even without the threat of rolling blackouts, according to a new report by the Silicon Valley Manufacturing Group (SVMG) and the Natural Resources Defense Council (NRDC). The state has saved billions of dollars and avoided millions of tons of air pollution that causes global warming and smog, according to the business and conservation groups. The report says additional untapped energy savings are far greater than what has been achieved so far and may be critical to avoiding another power crisis.

“Californians learned a powerful lesson during the recent electricity crisis,” said Devra Bachrach, principal author of the report and a project scientist for NRDC. “It's faster, cheaper and cleaner to save energy than to produce it.”

The report, “Energy Efficiency Leadership in California: Preventing the Next Crisis,” analyzes new data from the California Energy Commission, which show that Californians have sustained 65 percent of the total electricity conservation that was seen during the height of the electricity crisis. (The total is still 50 percent when adjusted to account for the economic downturn.) The energy demand reductions over the past two years reduced pollution emissions by nearly 8 million tons of carbon dioxide and 2,700 tons of smog-forming nitrogen oxides. The carbon pollution savings are equivalent to taking 1.5 million passenger vehicles – representing one-third of all Bay Area cars and light trucks – off the road for an entire year.

Despite these achievements, the authors say other new evidence shows that California still is missing at least two-thirds of the potential for inexpensive energy savings. Over the next decade, the state could reduce its electricity needs by about 6,000 megawatts, equivalent to the output of 12 giant power plants. The report includes case studies of Silicon Valley companies, providing concrete examples of how energy efficiency improvements can reduce energy costs for both companies and their customers.

“When it comes to energy efficiency innovation, Silicon Valley again leads the way for California and the nation. Maximizing efficiencies is a Silicon Valley way of life – it's good for our economy and our working families,” said Justin Bradley, energy programs director for SVMG.

Efficiency often is the most cost-effective option to meet California's energy needs. A recent analysis commissioned by the California Measurement Advisory Council found that the energy savings achieved in 2001 cost only 3 cents per kilowatt hour (kWh). This is much less than the normal cost of electricity generation and significantly less than the average cost of the long-term contracts the state entered into during 2001 at 7 cents per kWh. The average California household uses about 500 kWh of electricity per month.

Underscoring the report's findings, a March Gallup poll found that most Americans prefer conservation over production to solve the nation's energy problems. (The poll results are available online at www .gallup.com.)

According to the NRDC-SVMG report, California is poised to take advantage of abundant untapped energy efficiency opportunities. Policy-makers and regulators have restored utilities' responsibility to manage a diverse portfolio of long-term energy investments for the benefit of their customers, reversing one of the fundamental mistakes of the electricity industry restructuring in California. For example, these investments include long-term contracts for electricity from renewable and natural gas generators and investments in energy efficiency programs. Regulatory policy changes are also realigning utilities' financial incentives to ensure that utilities are rewarded for providing customers with reliable and affordable service, rather than for selling more electricity. The report says policy gains will stimulate investments in energy efficiency that can help:

Keep California's economy strong by decreasing the cost of our energy services;
Free up hundreds of megawatts of power each year without the environmental impacts that would accompany electricity generation;
Avert energy supply shortfalls that can send prices soaring; and
Reduce California's global warming emissions.

The report was released at the “Power &amp;amp; Motion” event on Thursday, April 24, at the AMD Commons Event Center in Sunnyvale. The event was cosponsored by SVMG, NRDC, PG&amp;amp;E, Sustainable Silicon Valley, and the Silicon Valley Environmental Partnership. More information about the event is available at www.svmg.org. The report, “Energy Efficiency Leadership in California: Preventing the Next Crisis,” can be downloaded from the NRDC website.

California's Conservation Achievements in 2001 and 2002

In response to the energy crisis of 2000/2001, California launched an aggressive conservation campaign with impressive results:

2001 Achievements

Relative to 2000, energy use was down an average of 7.9% during the critical summer of 2001 and peak demand was down an average of 8.4%.
Contrary to widespread claims, weather during summer 2001 was not cooler than the previous year; and California's economy continued to see modest growth (the gross state product was 2.3% higher in 2001 than 2000). When adjusted for economic growth and weather conditions, the average reductions in energy use and peak demand during summer 2001 were 9% and 10.4%, respectively.
For the entire year, weather-adjusted energy consumption and average peak demand were down 6% and 7.7%, respectively. Adjusted for both weather and economic conditions, the energy consumption and average peak demand savings were 6.7% and 8.9%, respectively.
Conservation efforts were impressively widespread; a full one-third of residential customers reduced their demand by more than 20% in at least one month of the summer and qualified for the Governor's 20/20 program.
An analysis by Lawrence Berkeley National Laboratory estimates that Californians' conservation avoided between 50 and 160 hours of rolling blackouts during the summer of 2001, and that about 1,000 MW of the demand reductions were hard-wired through energy efficiency investments.
A study for the California Measurement Advisory Council found that the cost over the lifetime of the efficiency projects undertaken during 2001 will be an average of 3¢ per kWh.

2002 Achievements

Half of the conservation initiated during the crisis persisted in 2002, adjusted to account for weather and economic conditions; unadjusted, 65% of the conservation persisted.
Peak demand in the summer of 2002 increased somewhat over the summer of 2001, when adjusted for weather and economic growth, but remained 5.1% lower than the peak demand in the summer of 2000. Energy consumption remained 2.7% lower than in the summer of 2000, adjusted for weather and economic growth.
For 2002 as a whole, energy consumption and average peak demand remained 3.2% and 4.5% lower than in 2000, respectively, adjusted for weather and economic conditions.
One-third of residential customers reduced their demand in at least one of the summer months of 2002 by at least 20% relative to 2000 levels to qualify for the 20/20 program, matching the success of the program in 2001.

Note: CEC data is from the ISO and covers about 85 percent of statewide electricity use; summer is the months June through September.

The Natural Resources Defense Council is a national, nonprofit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 550,000 members nationwide, served from offices in New York, Washington, Los Angeles and San Francisco.

David Packard of Hewlett-Packard, founded the Silicon Valley Manufacturing Group (SVMG) in 1978. Today, the Group represents 180 of the Valley's most respected private sector employers, which collectively provide approximately 225,000 local jobs – or nearly one of every four in Silicon Valley. Energy is one of SVMG's five priority areas, which also include transportation, housing, environment, and education. David Packard's vision of the Manufacturing Group was an organization where members got involved directly in the business of policy. SVMG adheres to a collaborative and positive approach to solving problems and issue advocacy.