Less is More: Energy Efficiency Lessons from California

Lori Pottinger
Monday, March 2, 2009

California has one of the world’s largest and most efficient economies. The numbers are impressive: the state saved nearly $56 billion in energy costs between 1972 and 2006 through efficiency measures. It now uses 40% less electricity per person than the national average, and it generates 68% more gross domestic product for every unit of energy used than the rest of the nation. In addition to cutting pollution, this major efficiency rollout has helped the economy grow, and is credited for creating up to 1.5 million jobs. We talked to John Wilson, who has worked on reducing energy use in the state for more than 30 years – first with the California Energy Commission, and now with the nonprofit Energy Foundation – to learn more.

Are we approaching the limit of “how low we can go” or is there still plenty of room for efficiency in California’s economy?

JW: One of the most impressive things I’ve seen in all my years in the energy field is that the more we dig for new energy-efficiency potential, the more we find. For many years we’ve had analysts looking at the cost of efficiency measures, the amount of the savings, and every time we find the potential is growing – we’re not using it up.

One of the areas where we see a lot of opportunity for efficiency improvements is in home electronics – flat-screen TVs, DVD players, home gaming systems and the like. The typical California home-entertainment system uses more electricity than the average new home uses for air conditioning. Air conditioners used to be one of the bigger uses of electricity in the state, but today air conditioning uses one-third of the electricity compared to the 1970s, thanks to appliance standards and better buildings. The good news is that we are now finding ways to make home electronics more efficient. It’s a never-ending cycle, this efficiency business.

WRR: California is the world’s sixth largest economy today. How has its economy been affected by its reduction in energy use? Have our utilities suffered if they have less energy to sell? What about jobs in the energy sector – have they grown or shrunk?

JW: Global shifts in manufacturing have affected California’s use of energy, and the US more broadly, as heavy industry has moved elsewhere. But California has remained very prosperous, and has gained jobs in the high-tech sector, which also uses a lot of energy. Data centers are especially energy-intensive. Fortunately, the same people who brought us data centers are very good engineers, and they are continually looking for ways to improve their efficiency. Google, for example, has some of the biggest data centers on the planet, and they have a team dedicated to making their facilities more efficient.

John Wilson
John Wilson
Regulatory policies in California made sure that utilities aren’t punished for selling less energy. As for a jobs shift in the energy sector, as we’ve built fewer power plants it means fewer construction jobs, but as recent studies have shown, cutting energy bills let us spend money on other things, and created jobs in other areas.

WRR: What has been the most surprising thing in your years of monitoring energy efficiency?

JW: The biggest lesson was that it is possible to make big changes in how energy is used, but that it takes a long time, and a lot of separate programs and policies, to get it done. There are no quick fixes to solve this puzzle; it takes a lot of patience. But the consistent and aggressive application of efficiency measures over time can have a huge impact.

WRR: What are the key lessons of the California experience that can carry over to smaller economies in the global South? What are the first things you recommend developing countries do to improve efficiency?

JW: The two most important things any country can do are efficiency standards for buildings and for appliances. Both are easy to do, especially appliance standards. There’s a big temptation for poorer nations to look for the cheapest appliances rather than efficient ones, especially for people who are getting their first refrigerators and air conditioners, but it’s a false economy. A cheap inefficient refrigerator will cost more over the life of the product due to higher electricity bills, for example.

It’s also critical to involve the utilities in promoting efficiency. To do that their profits must be “decoupled” from sales, which is an easy ratemaking policy to implement, but runs contrary to most business practices that say greater sales equal greater profits. The next step is to have a “public goods charge” which is a small fee on the price of electricity, typically about two percent, that creates a fund to support efficiency programs and renewable energy.

I’ve visited developing countries where the majority of the staff in the energy ministry were hydropower engineers who knew how to build dams, but next to nothing about managing demand. You need both kinds of experts – demand and supply – to bring rational planning to the energy sector.

WRR: What are the most exciting advances coming up in the world of energy efficiency?

There is a lot attention to the growing problem of energy use from personal electronics, and I’m very impressed with how quickly the electricity use from flat screen TVs is coming down. And I’m also very excited about the serious enthusiasm we’re beginning to see for “zero net energy” buildings, which would be highly efficient and have integrated renewables such as solar PV. We were successful in making incremental improvements in building code over the past 30 years, but with the climate crisis people are now thinking much more expansively. That is, rather than thinking about how to use the most efficient heating and cooling equipment in a building, people start by thinking how to design a building with no heating or cooling system. This is a complete change in our approach to buildings. And it goes beyond a building’s energy use – there is growing interest in “green buildings” which are efficient users of water as well as energy, and use other sustainable materials as well.

WRR: Many parts of Africa have extremely low energy use for domestic use, but support energy-intensive industries that sap huge amounts of energy (often sold at discounted rates). In this scenario, it must seem to local energy planners that saving energy one air conditioner or one light bulb at a time is a low priority compared to securing new supply. Is there hope for such lopsided situations?

JW: That’s a huge problem, and a very tough one. There’s a sense in many developing countries that you have to have increasing energy consumption to feed economic growth. In the US our economy grew three times, but our energy use only grew by about a third. The extractive industries are not focused on efficiency, and at least until recently, high commodity prices reduced even further their incentive to save energy. But other businesses and residents in those countries are competing for this limited resource, and paying higher prices for energy. I think there is a strong role for public policy here – especially efficiency standards and utility efficiency programs. Efficiency programs can cushion consumers from the higher prices for energy, and well as reduce the total costs of the energy system, since new capacity inevitably costs more.

WRR: What are the biggest obstacles worldwide to improving efficiency? Are there promising developments that give you hope?

JW: I’m encouraged by the growing interest from the philanthropic community in climate and environmental issues. Last year I moved from government to the nonprofit world where I am working to build advocacy networks for good policies, and to facilitate a global information exchange of the best practices – what works and what doesn’t work. Developing environmental NGOs in countries without a culture of civil society offers great hope for improving public welfare and protecting natural resources. It’s a very exciting time – fraught with opportunity.