Energy Efficiency Thrives in Competitive Market States

A new report by the Center for American Progress (CAP) identifies the top 10 states for energy efficiency and credits market forces for stimulating innovation and investment. According to the report, Connecticut, California, Maryland, Massachusetts, Pennsylvania, New York, Texas, North Carolina, New Jersey, and Ohio are the nation’s top energy efficiency markets – all but North Carolina have competitive retail electricity markets.
 
“Efficiency Works: Creating Good Jobs and New Markets Through Energy Efficiency” is just the latest example of competitive electricity markets leading the way in enabling energy efficiency, and provides a similar assessment to one by the American Council for an Energy-Efficient Economy, released in 2009, which found that eight of the top 10 most energy-efficient states were within the footprint of regional competitive markets for wholesale electricity. This latest report examined state regulations and incentives for energy efficiency, which CAP says accelerated demand for services, businesses, and ultimately jobs.   
 
“The key driver of these markets for efficiency is the presence of policies and market prices that allow businesses to profitably recover the cost of their investments in productive, innovative, and cost-effective energy efficiency measures,” said Bracken Hendricks, report author and Senior Fellow at CAP.
 
The states showcased in the report demonstrate that even in an uncertain economy, competitive markets provide consumers the benefits of clean energy innovation and offer an environment where business investment can thrive:
 
“A significant factor in determining the market potential for energy efficiency is energy prices, and it is important to realize that some of the most successful market structure innovations undertaken have been in states that rank relatively far down on our list, or even out of the top 10, because their retail energy prices are below the norm, slowing the recovery of investments in energy-saving measures. For other states that do not appear on this list, following this path of policy innovation could rapidly create the structures for energy efficiency as a growth business sector”.
 
In closing, the report recommends advancing the combination ofwell-structured regulatory policies and market forces, which has worked so well in these states, to a national level. This will promote competition and a marketplace that allows profits to increase when lower-cost resources are adopted.. As a result, energy market participants, including energy suppliers and utilities, can maximize economic effectiveness and energy efficiency.