California consumers kept lights on during electricity crisis by conserving and investing in efficient equipment

BERKELEY, CA, June 6, 2002 — It was California consumers – not mild weather or the cooling economy – who should get credit for avoiding blackouts and keeping the lights on in summer 2001 by embracing energy efficiency and conservation and reducing their peak demand by 3,000 to 5,500 megawatts (MW), according to research by scientists at the Department of Energy’s Lawrence Berkeley National Laboratory.

This is the conclusion reached in a new analysis of the consumer response to the California electricity crisis by Charles Goldman, Joe Eto and Galen Barbose, researchers in Berkeley Lab’s Environmental Energy Technologies Division.

“Many observers predicted that California would face widespread rolling blackouts in the summer of 2001,” says Goldman. “In April 2001, the North American Electric Reliability Council predicted that the state would have about 250 hours of rolling blackouts. Others predicted that the cost of these blackouts would range from $2 billion to $20 billion. But the blackouts never happened last summer. Our research addresses the question of what role customer load reductions played.”

The report analyzes the effects of six factors on the reduction in load: (1) role of the media in increasing public awareness of the crisis; (2) electricity and natural gas price increases; (3) utility energy efficiency programs; (4) the 20/20 rebate program; (5) utility and California Independent Systems Operator (ISO) load management/demand response programs; and (6) other state programs, such as energy use reduction by Federal, state, and local government facilities and partnerships with the private sector.

“Each of these factors contributed to customer load reductions to varying degrees,” says Goldman, “although separating the effects of one from another is difficult. For example, many customers may have qualified for a rebate through the 20/20 program by simultaneously taking advantage of an incentive for high efficiency appliances. The synergies between these various factors were an important reason that customer load reductions were as great as they were.”

In response to the state’s offer to rebate 20 percent on utility bills if consumers achieved a 20 percent use reduction – an offer that has been renewed for this summer — scientists in the Lab’s EET Division created the web site. It identifies energy-efficiency measures and their predicted percentage savings.

Goldman says customers responded to the electricity crisis through a variety of means: installing energy efficient equipment, installing onsite generation, and modifying their electricity consumption habits or patterns.

“We estimate that energy efficiency measures and clean distributed generation will save the state about 1,100 MW when all the installations are completed from projects initiated during 2001,” says Goldman.

Some amount of the conservation behavior and changes in energy management practices will persist, depending on the continued awareness of energy issues and the sensitivity of customers to the increases in their electricity rates, he adds.

A central conclusion of the study is that consumer actions to reduce their electricity consumption were the driving force behind the load reductions observed in summer 2001 (load reduction means reduced demand for electricity).

“Some analysts argued that cooler than normal temperatures in 2001 lowered electricity use and peak demand compared to 2000,” says Goldman.

“We analyzed hourly temperature data from 122 weather stations throughout California, aggregated by county, and weighted according to population of the county. The analysis indicates that summer temperatures in 2000 and 2001 were almost indistinguishable, suggesting that weather was not a factor.”

Other analysts have suggested that the downturn in the California economy, including the collapse of the “Internet economy,” contributed to decreasing electricity use in 2001.

“Economic indicators do not support this hypothesis,” says researcher Joe Eto. “Gross State Product is estimated to have grown 2.3% in 2001, and average employment during the summer months increased 0.8% compared to 2000.

The researchers estimated the potential impact that these load reductions had on avoiding rolling blackouts in the state by combining detailed information on customer load reductions (reduced demand for power compared to the previous year) with information from the state ISO on aggregate demand (total demand for power in the state at any moment) and generation capacity (the amount of power available to California at any given moment), including the approximately 2,000 MW of generation capacity added during summer 2001 . Rolling blackouts are usually ordered when the state’s excess power reserve to serve current demand falls below 1.5 percent. This is called a Stage 3 Emergency.

“We calculated the available operating reserve margin greater than 1.5 percent for every hour of the summer of 2001,” says Eto. “Our analysis showed that the customer load reductions maintained the operating reserve margin over 1.5 percent for between 50 and 160 hours, potentially avoiding rolling blackouts.”

An important lesson to take from this, according to the report, is that a pre-existing energy efficiency services infrastructure can help the state’s policymakers respond quickly to short-term power shortage emergencies. California was able to undertake massive energy-efficiency projects quickly because the underlying services were already there, due in part to the fact that the state’s policymakers and regulators have historically supported and funded energy efficiency programs.

“Another important lesson is that utility load management, demand response and retail pricing programs need to be re-designed well in advance of restructuring the electricity markets,” Goldman says. “California regulators and utilities essentially mothballed these programs during the transition to the restructured market.

“However, if a region does find itself facing a short-term crisis, the effectiveness of the load reduction programs in California demonstrates that such initiatives can contribute significantly to maintaining the reliability of the electric system,” he adds. “The $1.3 billion that California taxpayers and ratepayers invested in energy efficiency and demand response programs in 2001 was a good investment compared to the estimated $2-to-$20 billion in potential losses from rolling blackouts, not to mention the savings associated with avoided wholesale power purchases.”

This research will be published in the Journal of Industry, Trade and Competition. It is also available as an LBNL report 49733, “California Customer Load Reductions during the Electricity Crisis: Did They Help to Keep the Lights On?” by Charles Goldman, Joseph Eto and Galen Barbose.

Berkeley Lab is a U.S. Department of Energy national laboratory located in Berkeley, California. It conducts unclassified scientific research and is managed by the University of California.

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