From unlikely beginnings under Governor Ronald Reagan in the 1970s, California’s energy efficiency policies have led the world. Fresh from appearing at the 2022 Energy Efficiency Conference, Commissioner Andrew McAllister breaks down what Australia can take from the California approach.
For jurisdictions like California and Australia that are embracing the transition to a carbon-free economy, now is a time of incredible opportunity.
In California, my job is helping to drive our state’s ambitious energy transition forward, and I’ve been in Australia to explore how we can work together to supercharge that effort. Collaboration is crucial, because the challenges we face are global.
We have much in common – our big investments in renewables, a modern grid and storage – all essential to ensure the grid is both reliable and clean. California’s “supply side” – the bulk energy produced by large generators – is now over 60 per cent carbon-free and will get to 100 per cent well before mid-century, and Australia is headed quickly in that direction as well.
A major difference in California is that we’ve been shaping how energy is used – behind the meter, on the “demand side” – for almost 50 years.
We adopted the first energy efficiency standards in the 1970s – beginning with refrigerators. This allowed us to avoid the need to build several new nuclear power plants along our beautiful coastline. Ever since, we’ve been hard at work to ensure we’re using energy as efficiently as possible. Since then, energy standards for buildings and appliances have saved California’s consumers more than USD$100 billion.
As we electrify buildings and transportation – shifting steadily away from fossil combustion – electricity consumption will grow, driving new investment in grid infrastructure. Smart energy efficiency – which involves using energy during times we have lots of cheap, clean renewable generation – enhances our ability to manage the grid, and can reduce the investment required.
We’re doubling down on energy efficiency and smart electrification, because we have to.
Energy costs are soaring worldwide. Like Australia, California has been hit hard by the downstream effects of the war in Ukraine.
Energy affordability is fundamental for a successful and inclusive energy transition. Smart energy efficiency is one of the few ways we can drive down bills. We know. We’ve been doing it for decades.
California’s efficiency-focused policies have also boosted energy productivity. In four decades from 1975, California’s economy more than tripled in size, but our fossil fuel consumption increased by just 23 per cent. The US National Resources Defense Council estimates that the emissions of the other 49 US states are 25 per cent higher than they would be if they had adopted similar energy efficiency standards to California. That’s an extra 1.2 million tonnes of annual emissions that don’t need to be in the atmosphere.
One important lesson I’d like to share with Australia is the importance of placing demand-side policies – energy efficiency and energy management – at the same level of importance as supply-side policies.
As we face the challenge of moving to a clean economy – replacing fossil fuel energy with clean energy – there are opportunities to learn from each other. Like Australia, California is grappling with the impact of natural disasters like bushfire on electricity networks, and working out how to run power grids with very high levels of inverter-based renewable energy.
One important lesson I’d like to share with Australia is the importance of placing demand-side policies – energy efficiency and energy management – at the same level of importance as supply-side policies.
As the state’s primary energy policy and planning body, the California Energy Commission is required both to ensure adequate energy supplies, and to do so in a way that minimises wasteful and uneconomic energy use. Smart energy efficiency is key to balancing those two goals.
We do this in several ways. First, we have an ambitious target for energy efficiency. In 2015 we legislated a goal of doubling energy efficiency savings by 2030 compared to 2015.
Second, California sets stringent energy efficiency standards for buildings and for appliances, reflecting the position of efficiency as a top-priority energy resource. Planning for a new system of energy supply without considering energy demand is like buying food for a party without knowing how many guests are invited or what their dietary preferences might be.
Third, California is actively using efficiency to make the zero-carbon transition easier. For example, we’re working hard on decarbonising building energy use. This is doing the obvious things – replacing gas heaters and boilers with heat pumps – not just standard heat pumps, but rather high-efficiency heat pumps. Emphasising high efficiency keeps customer bills manageable and increases the effective capacity of the grid itself – avoiding unnecessary capital investment.
Focusing on energy efficiency is the right thing to do from an equity perspective as well. Energy efficiency improvements reduce energy bills, increase indoor comfort, improve indoor air quality, and generally leads to healthier, quieter more productive indoor spaces.
Just last month the State of California budgeted almost $US1 billion for upgrading existing affordable housing across the state. The US government is now also leading in this arena: the recent Inflation Reduction Act includes roughly another $US1 billion for efficient home retrofits in California ($US9 billionnationwide), including incentives of up to $US4000 for upgrades that reduce energy use by 35 per cent, with greater incentives for low-income households.
It’s a great start, but one that only scratches the surface of the necessary changes. The future won’t be about simply swapping out technology – it’s going to be about using that technology flexibly. Energy efficiency is important, but energy management – what we call “active” efficiency – is crucial.
The grid is cleaner and cheaper at midday when the sun is shining
We used to say the cheapest energy is the energy we don’t need to use.
That’s still true. But today, the when and even the where of energy use matter. The grid is cleaner and cheaper at midday when the sun is shining; it’s dirtier and costlier in the late afternoon and evening. If we’re smart about how and when we use energy, we can not only reduce costs, but significantly reduce emissions and make the clean energy transition simpler, cheaper and quicker.
Australia has big plans for renewable energy, which is encouraging. Around half Australia’s large-scale generation will close, at the same time electricity demand will grow with widespread electrification of buildings and transportation.
This is a once-in-a-generation opportunity to co-evolve the new supply resources and new end uses: with energy efficiency and smart energy management. My hunch is that Australia will need all the efficiency it can find – and more besides – to achieve net zero by 2050.
…. In four decades from 1975, California’s economy more than tripled in size, ….GDP or per capita GDP ????