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Study finds disincentives to energy efficiency can be fixed
Date:6/4/2013

CORVALLIS, Ore. A new study finds that utilities aren't rewarded for adopting energy efficiency programs, and that reforms are needed to make energy efficiency as attractive as renewables.

The article, just published in the current issue of Environmental Law, examines key differences between energy efficiency projects and renewable resources. Author Inara Scott, an assistant professor at Oregon State University, outlines ways to increase the amount of energy utilities save each year through efficiency programs.

"Right now, the system actually discourages utilities from building programs to increase efficiency," she said. "We need to start addressing efficiency as we do renewable energy by looking at it systemically and removing the barriers."

Scott spent a decade as a lawyer specializing in energy and regulatory law. Her research in the College of Business centers on the transformation of utility systems, clean energy, energy efficiency, and utility regulation.

Her study makes four key recommendations: redesigning rate structures, setting hard targets, streamlining cost-effective tests and addressing market barriers.

Cost-recovery systems for many investor-owned utilities in the United States are based on an old rate structure model the more energy that is produced, the higher return for shareholders. "You don't want to penalize utilities for selling less energy," Scott said.

Instead, she said, states can use ratemaking mechanisms to decouple the link between utility sales and revenues and establish performance incentives for the adoption of efficiency programs.

"Decoupling mechanisms may add complexity to utility rate structures, but they are essential to eliminating environmentally nonsensical ratemaking models that reward utilities for higher sales and penalize them for efficiency."

Setting hard targets is doable, she said. The state of Oregon has set a goal for 25 percent o
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Contact: Inara Scott
Inara.Scott@bus.oregonstate.edu
541-737-4102
Oregon State University
Source:Eurekalert

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