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Reaching our Energy Efficiency Potential and Our Greenhouse Gas Objectives - Are Changes to our Policies and Cost Effectiveness Tests Needed?

Date Published: January 1, 2009     Document Type: Report

The objectives of many energy efficiency programs are being expanded beyond capturing short-term "least-cost" energy resources, to achieving long-term climate change objectives. In some circles energy efficiency programs are seen as the primary way in which climate change objectives will be achieved over the short-term (next 15 to 30 years). However, our field’s current approaches for assessing program benefits and costs limits realization of the majority of the potential for both energy efficiency and carbon reduction. In addition, these same approaches practically assure that carbon based energy supplies will remain the fuel of choice, even when efficiency can meet energy needs more inexpensively. New cost effectiveness tests are needed that allow policy makers to set choice guidelines for when programs need to accomplish multiple and often competing objectives (least-cost vs. carbon reduction). What should these tests look like? This paper does not attempt to answer this question, although each of the authors have their ideas for what that test should look like and how it should perform. Instead, this paper examines four aspects of the way we currently compare the benefits and costs of energy efficiency programs. This paper is provided to help policy makers consider how they might adjust and apply future cost effectiveness tests. It should be noted that the authors of this paper do not always agree on how these four changes should be configured or how they should be structured to influence the results of the applied tests. But the authors do agree that the aspects discussed in this paper need to be carefully considered within our new policy environments that focus on using energy efficiency as an approach for carbon emission reductions.

Another purpose of this paper is to challenge the reader to think about energy efficiency and the way in which we compare the costs and benefits of carbon and non-carbon-based energy supplies. The paper asks the reader to consider current approaches, in which our benefit cost tests represent simple investment choices similar to how an individual would choose between personal investment opportunities or a business compares their corporate investment options. Alternatively, policy makers may structure their benefit cost assessments differently to better recognize the full value of energy efficiency relative to traditional energy supply choices, and to achieve overriding public climate change objectives. Enabling investment in all cost effective energy efficiency is important because it can achieve both least-cost short-term and long-term energy supplies and provide significant climate change benefits.