Friday, August 10, 2007

This Week's Solution...

California has found the latest solution to its energy problems: “nega-watts.” Essentially a market arbitrage strategy that inventivizes producers to create energy efficiencies instead of building new generation capacity—a MW saved is as good as a MW generated.

Todd Woody at the blog Green Wombat describes a ruling by utilities commissioner Dian Grueneich and administrative law Judge Meg Gottstein thusly:

"In a mind-numbingly complex 212-page ruling that has kept legions of lawyers and analysts employed, regulators laid out a formula for determining how PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric’s (SRE) energy efficiency programs will count toward meeting targets. If a utility meets 85 percent of the energy efficiency goals, for instance, it will earn a 9 percent rate of return on its investment, ratcheting up to 12 percent if all the targets are met. If the Big Three utilities' energy efficiency performance falls below 50 percent of the target, then they would be penalized a collective $238.5 million, according to the plan."

Woody goes on to conclude that by focusing on energy efficiency, “utilities could avoid financing and capital costs associated with constructing new power plants, and California consumers would save an estimated $2.7 billion between by 2008.”

I’m not sure where the $2.7 billion figure came from but, hey, at this point it’s as good as any other projection, right?

California's Green Energy Solution: "Nega-Watts" [Green Wombat]