Pursuing Energy Efficiency as a Hedge against Carbon Regulatory Risks: Current Resource Planning Practices in the West
Document Type Article
This paper draws upon a longer report addressing the treatment of carbon regulatory risk in Western utility resource plans (Barbose et al. 2008), which builds upon previous work by LBNL examining utility resource planning practices in the West (Bolinger & Wiser 2005; Hopper, Goldman & Schlegel 2006).
Uncertainty surrounding the nature and timing of future carbon regulations poses a fundamental and far-reaching financial risk for electric utilities and their ratepayers. Long-term resource planning provides a potential framework within which utilities can assess carbon regulatory risk and evaluate options for mitigating exposure to this risk through investments in energy efficiency and other low-carbon resources. In this paper, we examine current resource planning practices related to managing carbon regulatory risk, based on a comparative analysis of the most-recent long-term resource plans filed by fifteen major utilities in the Western U.S. First, we compare the assumptions and methods used by utilities to assess carbon regulatory risk and to evaluate energy efficiency as a risk mitigation option. Although most utilities have made important strides in beginning to address carbon regulatory risk within their resource plan, we also identify a number of opportunities for improvement and offer recommendations for resource planners and state regulators to consider. We also summarize the composition and carbon intensity of the preferred resource portfolios selected by the fifteen Western utilities, highlighting the contribution of energy efficiency and its impact on the carbon intensity of utilities’ proposed resource strategies. Energy efficiency and renewables are the dominant low-carbon resources included in utilities’ preferred portfolios. Across the fifteen utilities, energy efficiency constitutes anywhere from 6% to almost 50% of the preferred portfolio energy resources, and represents 22% of all incremental resources in aggregate.