6.8.3.1 Utility demand-side management programmes

One of the most successful approaches to achieving energy efficiency in buildings in the USA has been utility-run demand-side management (DSM) programmes. However, there are important disincentives that need to be removed or lowered for utilities to be motivated in pursuing DSM programmes. The most important of these difficulties, (i.e., that utilities make profits from selling electricity, not from reducing sales) can be overcome by regulatory changes in which the utility will avoid revenue losses from reduced sales, and in some cases also receive profits from successful execution of DSM programmes.

The major large-scale experience with utility DSM has been in the United States primarily in the west coast and New England, but now spreading to other parts of the country. Spending on DSM was US$ 1.35 billion in 2003 (York and Kushler, 2005), and since California is more than doubling its expenditure to US$ 700 million/yr for the next three years, DSM spending in the United States will increase substantially.

These programmes have had a major impact. For the United States as a whole, where DSM investments have been 0.5% of revenues, savings are estimated to be 1.9% of revenues. For California, cumulative annual savings are estimated to be 7.5% of sales, while DSM investment has been less than 2% (1.2% in 2003). Overall, for each of the years 1996 through 2003, DSM has produced average annual savings of about 33.5 MtCO₂-eq annually for the USA, an annual net savings of more than US$ 3.7 billion (York and Kushler, 2005).

There are numerous opportunities to expand utility DSM programmes: in the United States, by having other states catch up with the leaders (especially California at present), much more so in Europe and other OECD countries, which have little experience with such programmes offered by utilities, and over time in developing countries, as well.