FIGURE 2-1 Past and projected trends in real residential electricity price in New York State relative to 1980. SOURCE: NYISO (2005a).

were built. Not all were, but no shortages occurred, and the demand for energy services was unfailingly met. The 1980s saga of Long Island’s Shoreham nuclear plant, which was eventually closed before it produced any electricity, is one example. It is no criticism of the NYISO forecasts to observe that they do not reflect the full range of possibilities that could come into being if circumstances so required (such as an emergency shutdown of the Indian Point Energy Center or of another large generating source) or if state policies emphasized energy efficiency on the same scale as in California, as discussed later in this chapter.

The range of policy options available to power system operators and regulators has grown wider in recent years. It now includes energy efficiency, load management, integrated resource planning, and performance-based rate making with incentives for cost-effective energy efficiency.

New York State’s spending on efficiency in the electric sector declined significantly in the mid-1990s, falling from a peak of some $300 million per year in the early 1990s to a low of some $50 million per year in 1996. The state’s only performance-based rate-making plan based on capping revenues2 lapsed in 1997. The New York State Energy Research and Development Authority (NYSERDA) now spends about $150 million annually on energy efficiency programs, discussed below (NYSERDA, 2005b). Comparing trends in consumption and peak load between 1993 and 1997 with those between 1997 and 2001 (Tables 2-1 and 2-2) suggests that the demand-side management (DSM) program cutbacks may have allowed demand to grow faster than it would have with stronger programs.

POTENTIAL OF DEMAND-SIDE OPTIONS

The impacts of current and planned programs for reducing electricity consumption and peak electrical loads could be among the most cost-effective replacements for the energy provided by the Indian Point Energy Center. This section describes promising demand-side control options, including estimates of their achievable potential and barriers to their implementation. The focus is on the ability of demand-side options to reduce on-peak requirements of consumers for electricity. While Indian Point is a baseload plant, the biggest challenge to replacing its capacity occurs during summer and winter peaks when regional generating resources and transmission capacity are most constrained— hence the focus on demand-side options that could displace peak loads. The ability of energy efficiency to reduce megawatt-hours of electricity consumption and levels of consumer bills in the residential and commercial sectors is highlighted in Appendix G-1 (“Demand Reduction”).

2

Revenue-cap plans are more compatible with energy efficiency than are the more common price-cap plans because they adjust revenues to avoid any loss in profitability arising from declining sales. Cost-effective energy efficiency can lower bills while raising prices (because the decline in consumption more than offsets the increase in prices).



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