1 Energy Efficiency : Why California Needs a Strategic Paradigm Shift August 2011

2 The Problem: IOU Administration is Not Achieving the State’s EE Goals  CPUC independent evaluation shows IOUs significantly missed their Energy Efficiency (EE) goals.  The IOUs endeavor to influence policies that create the illusion of energy savings that don’t off-set building power plants.  Programs promote short-lived energy savings, but long-lived subsidies.

3 The Solution: Market Transformation  A paradigm shift is required toward strategies that expand energy savings potential.  Energy savings potential is expanded in a continual cycle of breaking barriers and creating market sustainability without ratepayer subsidies.

4 What is Market Transformation?  Identifying market barriers impeding the adoption of an energy efficiency measure.  Introducing a market intervention to remove the market barrier.  Creating an exit strategy to stop funding the interventions when barriers are removed and the market takes over and becomes sustainable. Market Transformation is a strategy to influence a sustained consumer demand for an energy efficiency measure or strategy. Market Transformation is achieved by…

5 Barriers to Energy Efficiency  Market Barriers  Availability  Awareness  Accessibility  Acceptability  Affordability  Institutional Barriers  Financing  Tax Codes  Split Agency: Uneven distribution of cost and benefits  Owner-Renter, Old-Owner-New-Owner  Outdated Codes and Standards  Enforcement of Codes and Standards

6 Technology Adoption Curve Derived from:

7 Market Transformation Curve Source: NEEA

8 IOUs are Unsuitable to Manage Market Transformation  Core business is to ensure the availability of energy and to reliably deliver it on demand.  Accommodate growth in energy demand through investment in power plants.  Protected franchises with objectives to maximize shareholders returns.  No expertise in cultivating and transforming markets to facilitate voluntary adoption of innovative technologies, products, and services.  No expertise to manage a new Market Transformation paradigm that is necessary to shape strong, competitive markets that can influence customer choice and spur a robust green economy.

9 A New Administrative Paradigm is Required  A non-profit, third party administrator with expertise in Market Transformation.  Under the guidance and oversight of a coalition of relevant state agencies and progressive stakeholders.  Develop and implement strategies to yield real and long-lasting EE savings.  Avoid duplication of cost and efforts, lower product costs, and promote competition for green jobs.  Streamlining EE is essential at a time when customers are being asked to support myriad costly initiatives to upgrade the state’s infrastructure which could cost trillions.