Utility energy efficiency schemes: savings obligations and trading

Utility financed and/or operated energy efficiency schemes have a long history going back to the first energy crisis in 1973. It is therefore appropriate to ask what is new about the recent raft of white certificate schemes and whether there is anything that makes them more effective than the older approaches. This paper attempts to answer these questions by reviewing the experience with earlier utility schemes and comparing them with the more recent schemes implemented on both sides of the Atlantic as well as Australia. Up-to-date results are reported on utility programme impact in all the regions, including a new indicator analysis of the collective, long-term impact of such schemes in the USA. From this it is clear that both the new and old schemes are highly effective in delivering substantial, sustained and cost effective energy savings and associated reductions in CO₂ emissions. A key component of programme impact, including cost-effectiveness, is the effective alignment of utility commercial incentives with the delivery of energy savings. There are essentially two new elements of the recent utility energy efficiency schemes: i) mandated energy savings obligations and ii) the flexibility to trade the obligations. The mandated savings obligation, when linked to a suitable non-compliance penalty structure, seems to be an especially effective means of ensuring that public policy objectives for energy efficiency are met. The importance of allowing obligations to be traded for programme success is not yet clear and will require more time before proper longitudinal evaluations can be attempted.