Regulation Reform in the Electricity Industry and its Effects
on Energy Efficiency
April Kinghorn, Tim Murphy, Stefan Piech, Leah Tivoli, Phelps Turner
Supervisor: Prof. George McCourtClient contact: Dr. Mounir Gouja
Overview
• Context • Research Question / Hypothesis• Case Studies: Argentina, California, Alberta
– Price– Demand– Nature of Programs– Expenditures– Savings
• Conclusions / Recommendations
Energy Efficiency: Definitions
• “An encompassment of all changes that result in decreasing the amount of energy used to produce one unit of economic activity or to meet the energy requirements for a given level of comfort”
• “Associated to economic efficiency and includes technological, behavioral and economic changes”
Context
ContextRegulation Reform:
A Synopsis from our Three Case Studies
Region of Interest
Deregulated Date Began
Argentina Generation
Transmission Distribution
1992
California Generation
Transmission
1998
Alberta Generation Distribution
2001
Research Question:
What is the impact of electricity regulation reform on energy efficiency in the residential sector?
Hypothesis:
Electricity regulation reform will lead to the decline of energy efficiency in the residential sector.
Case Studies: Argentina, California and Alberta
• Price
• Demand
• Nature of Programs
• Expenditures
• Savings
Price
40
50
60
70
80
90
100
J -
91
A-
91
J -
91
O-
91
J -
92
A-
92
J -
92
O-
92
J -
93
A-
93
J -
93
O-
93
J -
94
A-
94
J -
94
O-
94
J -
95
A-
95
J -
95
O-
95
J -
96
A-
96
J -
96
O-
96
J -
97
A-
97
J -
97
O-
97
J -
98
A-
98
J -
98
O-
98
1/ 1000 US $/ kw
Average Residential Prices in Greater Buenos Aires
(Pistonesi, 2000)
Demand
0.00
500.00
1000.00
1500.00
2000.00
2500.00
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Kwh per Capita
Electric Power Consumption (kwh per capita)
(Pistonesi, 2000)
Nature of Programs
• Only for past 3-4 years
• Aimed at improving or realigning incentives
• Short-lived/Ineffective
• Federal Level:
– National Entity for Electricity
Regulation
– Secretary of Energy
– National Office of Rational Energy
Nature of Programs
Nature of Programs
Donor, Multilateral, and Bilateral Assistance Programs:
• Involve institutions, companies, research organizations, technical assistance agencies and NGOs
Major players include: • The World Bank• Inter-American Development Bank (IADB)• U.S. Department of Energy (DOE)
Expenditures
• Governmental budgetary allocation to energy efficiency is unknown
• Total spending by International Donors on energy efficiency is unknown
Savings
• There are currently no programs that have resulted in measurable end-user savings
• These savings may be seen in the future as programs become more effective
•Price spikes prevented by caps and rate freezes
•Increased costs absorbed at the wholesale level, leading to utility bankruptcies
Average Residential Price
0
2
4
6
8
10
12
14
Year
Pri
ce
(c
en
ts/k
Wh
)
Price
(CEC, 2002)
Residential Consumption
50,000
60,000
70,000
80,000
90,000
100,000
Year
Co
ns
um
pti
on
(mill
ion
kW
h)
•Increases in demand after deregulation do not represent departures from the long-term trend
Demand
(CEC, 2002)
Nature of Programs
• Before regulation reform:
– 1974: creation of the California Energy Commission
– 1974-1998: energy efficiency programs in full swing• demand-side management
Nature of Programs
• After regulation reform:
Similarities:
– Utilities and non-profit organizations advance information on energy efficiency
• Energy Star™ appliances, electronics, etc.
• Educational/financial incentives and rebates
• Low-income weatherization programs
Nature of Programs
• After regulation reform:
Differences:
– New venue (Internet)
– Organized by governmental, independent bodies
– Funded by residential consumers
– Performance-based regulation affected
Expenditures
Energy Efficiency Expenditures1990-2001
$0
$100
$200
$300
$400
(mill
ions
$)
PGE SCE SDGE SCG* Note: 2001 expenditures include actual dollars spent through 9/30/01.
(CPUC, 2001)
Savings
•1998-2001: Residential and total savings (of MWh) have increased since deregulation
(CPUC, 2001)
Average Pool Price
0
50
100
150
200
250
300
April
June
August
Octo
ber
Decem
ber
Febru
ary
April
June
August
Octo
ber
Decem
ber
Febru
ary
Months (2000-2002)
$/M
wh
Price
(Ministry of Energy, 2002)
Customer Usage
6000
6500
7000
7500
8000
1998 1999 2000 2001
year
mil
lio
ns
of
kil
ow
att
ho
urs
Demand
(Ministry of Energy, 2002)
Nature of Programs
• 1995: privatization of the Energy Conservation Branch of the Department of Energy
• 1995-2002: few energy efficiency programs in existence, especially residential sector
• No discernable difference in quantity/quality of programs before and after regulation reform
Nature of Programs
Utility Programs
• Very little incentive to provide customers with options for energy conservation
• Information-based efficiency initiatives are part of marketing strategies
• Atco EnergySense
Nature of Programs
Government Programs
• Provincial: all programs are information-based
• Municipal: none for residential sector
EXCEPT “Energy Awareness Week”
October 19th-26th, 2002
City of Edmonton
Nature of Programs
Private Programs
• Several small, regionally focused programs do exist in the Province
• Destination Conservation– Founded 1987– 171 primary schools across Alberta
The Effects of Regulation ReformRegion of Interest
Price Demand Nature of Programs
Expenditures
Savings
Argentina Stable Up Fleeting n/a n/a
California Stable Up Good Temp.
Dip up
Alberta Up Up Scant n/a n/a
Conclusion 1:Conclusion 1: – NO universal model for regulation reform– Uncertain impacts on energy efficiency– Evidence non-transferable, place specific
Recommendation 1:Recommendation 1: – To governments:
• Use caution when considering regulation reform
• Develop endemic strategy
– To consumers:• Be wary of government promises• Explore options for improving home
efficiency
Conclusion 2:Conclusion 2:– Difficulties in quantifying energy
efficiency– Lack of data– Need for clearer categorization of data– Regulation reform too recent to draw
definite conclusions
Recommendation 2:Recommendation 2:–To client:
• advocate for more stringent reporting mechanisms
Conclusion 3:Conclusion 3:– Electricity sector is unique
– Countless uses for electricity
– Reform in regulation has widespread effects
Recommendation 3:Recommendation 3:– Avoid comparisons to other network
utilities, such as airlines and telecommunications
Conclusion 4:Conclusion 4:– Free market approach enjoying increased
popularity – Strong public policy remains equally important
Recommendation 4:Recommendation 4:– To government:
• Full deregulation optimal• Allow price to reach natural equilibrium• Public benefit requires explicit attention
– To client:• Advocate strong public policy regardless of
regulatory structure• Push for more practical energy efficiency programs• Advocate provisions for low income households
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