One Size Doesn’t Fit All.

California Public Utilities Commission (D. 21-05-031) recently made a significant change in organizing and prioritizing energy efficiency portfolios by creating more discrete categories for optimizing portfolio performance.

Instead of balancing the cost-effectiveness for all investments related to energy efficiency, including workforce development, emerging technologies, codes and standards, and equity goals, the Commission continued a trend toward segmentation by splitting the portfolio into three distinct channels: 

Resource Acquisition: Programs with a primary purpose of, and a short-term ability to, deliver cost-effective avoided cost benefits to the electricity and natural gas systems. Short-term is defined as during the approved budget period for the portfolio, which will be discussed further later in this decision. This segment should make up the bulk of savings to achieve TSB goals.

Market Support: Programs with a primary objective of supporting the long-term success of the energy efficiency market by educating customers, training contractors, building partnerships, or moving beneficial technologies towards greater cost-effectiveness.

Equity: Programs with a primary purpose of providing energy efficiency to hard-to-reach or underserved customers and disadvantaged communities in advancement of the Commission’s Environmental and Social Justice (ESJ) Action Plan;3 Improving access to energy efficiency for ESJ communities, as defined in the ESJ Action Plan, may provide corollary benefits such as increased comfort and safety, improved indoor air quality, and more affordable utility bills, consistent with Goals 1, 2, and 5 in the ESJ Action Plan.

The basic idea of segmentation was advanced in a proposal published last year by Mohit Chabra of NRDC and evolved through lengthy stakeholder conversations.  Throughout the process, we threw our strong support behind the proposal to segment the energy efficiency portfolio to allow each program to really home in on its primary purpose. By not anchoring all programs in the same costs test, program goals can still be complementary and additive without compromising policy objectives in futile attempts to balance budgets on the head of a pin.  

One of the key benefits of this new structure will be the opportunity to optimize resource acquisition programs like the Demand FlexMarket for their intended purpose of delivering energy resources when and where they are needed and create a clearer path for consideration in resource planning. 

This approach to portfolio segmentation is also intended to set up the portfolio for the option, advocated by a number of parties, to have the resource acquisition programs further optimized within the Commission’s IRP (Integrated Resource Planning) process in the future.

Resource acquisition programs are the best candidates for "silo-neutral" demand flexibility wherein efficiency and demand response, for example, could more favorably co-exist. A key element of the segmentation strategy will be ensuring that any incentives to make technologies available (market support) are not plagued by complicated layering schemes.  Ideally, it will also enable other programs to focus on their intended purpose of making technologies accessible and break down barriers of access and equity. 

We applaud the Commission for their thoughtful consideration of the issues, and the hard work that staff, stakeholders from all perspectives contributed to this proceeding. Segmenting the portfolio will allow all investments to drive toward their intended purpose. 

For more information:
Utility Dive: California Is Changing Energy Efficiency to Look Beyond Savings 

See the final Commission Decision D. 12-05-031

NRDC White Paper "Restructuring Portfolios to Bring Out the Best in Energy Efficiency” 

Recurve's Full Comments on the Proposed Decision 

Contact carmen@recurve.com to hear the back story and how it may work in your jurisdiction.

In our last blog we covered how the adoption of the Total System Benefit metric was a major milestone in California.