WASHINGTON, D.C. — As the United States grapples with concerns about national security and the reliability and high cost of electricity, a new report suggests expanded national energy efficiency efforts would help solve these problems.

In Can We Just 'Rely on the Market' to Provide Energy Efficiency? An Examination of the Role of Private Market Actors in an Era of Electric Utility Restructuring, The American Council for an Energy-Efficient Economy says the government should provide greater energy-efficiency services.

"Some argue that the best solution is to simply deregulate energy markets and allow the market itself to deliver energy efficiency. The results of this new study strongly indicate that such an approach will fail," said Martin Kushler, Director of Utility Programs for ACEEE.

The study focused on nine states that were among the earliest to adopt a policy of deregulating their electric utilities (Arizona, California, Connecticut, Illinois, Massachusetts, Michigan, New York, Pennsylvania, and Rhode Island). Interviews were held with nearly 100 energy service companies, independent electricity providers, utility distribution companies, and expert national observers of the energy efficiency market. The report's findings that electric deregulation had not resulted in these private market entities stepping in to replace energy efficiency efforts previously conducted by regulated utility companies.

On the contrary, these private market actors tended to concentrate their energy efficiency activities in areas where there were still some legislative or regulatory support programs for energy efficiency efforts. More than 80% of energy service companies interviewed rated such public policy support as crucial for their energy efficiency delivery business.

According to Kushler, it is ironic that, according to the study, continuing government/regulatory policies and programs to support energy efficiency would actually play an important role in enhancing the ability of those private market firms to provide energy efficiency in the marketplace.

“It appears that the proper question is not, Can private market actors replace government/regulatory policies and programs? but rather, How can government/regulatory policies and programs help maximize the energy efficiency provided by these private firms?” Kushler said.

Can We Just 'Rely on the Market' to Provide Energy Efficiency? An Examination of the Role of Private Market Actors in an Era of Electric Utility Restructuring is available on ACEEE's Web site as a PDF.

The American Council for an Energy-Efficient Economy is an independent, nonprofit organization dedicated to advancing energy efficiency as a means of promoting both economic prosperity and environmental protection.