LBNL Report Number
Market transformation has emerged as a central policy objective for future publicly funded energy-efficiency programs in California. California Public Utilities Commission (CPUC) Decision 95-12-063 calls for public spending to shift to activities designed to transform the energy market. However, there are numerous questions that must be answered before this objective can be pursued effectively. For example, how should market transformation be defined? Which current utility energy-efficiency programs, if any, have had market-transforming effects? To what extent do current regulatory policies and practices encourage or discourage utilities from running programs designed to transform energy-efficiency markets? Should the policies be modified to promote market transformation? If so, how? This scoping study, conducted at the request of the California Demand-Side Measurement Advisory Committee (CADMAC), under the Market Effects Subcommittee, seeks to answer these questions. In the study, the authors:
- Propose an operational definition of market transformation that is based on assessing the degree to which utility programs have had market effects and have overcome underlying market barriers to energy efficiency in a lasting fashion.
- Review selected recent California utility energy-efficiency programs to examine the market barriers they address, and tentatively identify market effects that might be studied to determine the success of the programs in reducing market barriers and transforming markets.
- Review California's DSM regulatory policies [including the DSM policy rules, shareholder incentive mechanisms, and measurement and evaluation (M&E) protocols] to assess how they encourage or discourage the utilities to use DSM programs to transform energy-efficiency markets.
- Examine the extent to which the M&E protocols encourage utilities to capture evidence on the market effects of utility energy-efficiency programs.
- Present recommendations intended to help align California's DSM regulatory policies with the objective of market transformation. Supporting information for the study came from three main sources. First, we reviewed the literature on market barriers and market transformation in order to develop a sound analytical foundation. Second, we reviewed extensive background materials on each utility's recent energy-efficiency program offerings. Finally, we interviewed senior utility program staff and selected program managers on the influence of current DSM regulatory policies on their energy-efficiency program design and implementation decisions.