Carrots and sticks: A comprehensive business model for the successful achievement of energy efficiency resource standards

摘要

Energy efficiency resource standards (EERS) are a prominentstrategy to potentially achieve rapid and aggressive energy savingsgoals in the U.S. As of December 2010, twenty-six U.S.states had some form of an EERS with savings goals applicableto energy efficiency (EE) programs paid for by utility customers.The European Union has initiated a similar type of savingsgoal, the Energy End-use Efficiency and Energy Services Directive,where it is being implemented in some countries throughdirect partnership with regulated electric utilities.U.S. utilities face significant financial disincentives undertraditional regulation which affects the interest of shareholdersand managers in aggressively pursuing cost-effective energyefficiency. Regulators are considering some combination ofmandated goals (“sticks”) and alternative utility business modelcomponents (“carrots” such as performance incentives) to alignthe utility’s business and financial interests with state and federalenergy efficiency public policy goals. European countriesthat have directed their utilities to administer EE programshave generally relied on non-binding mandates and targets; inthe U.S., most state regulators have increasingly viewed ”carrots”as a necessary condition for successful achievement ofenergy efficiency goals and targets.In this paper, we analyze the financial impacts of an EERS ona large electric utility in the State of Arizona using a pro-formautility financial model, including impacts on utility earnings,customer bills and rates. We demonstrate how a viable businessmodel can be designed to improve the business case whileretaining sizable ratepayer benefits. Quantifying these concernsand identifying ways they can be addressed are crucial steps ingaining the support of major stakeholder groups - lessons thatcan apply to other countries looking to significantly increasesavings targets that can be achieved from their own utilityadministeredEE programs.