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BRUSSELS, Belgium, May 7 -- The Brattle Group has proposed guidelines for the sound economic regulation of energy suppliers and recommended incentives for suppliers to help encourage energy efficiency and cost savings throughout the industry. This issue has received increased attention over the past year, especially after last December's United Nations Climate Change Conference in Bali.
Brattle's discussion paper, authored by senior advisor David Robinson, explores why energy efficiency has not yet delivered on its promise, especially among smaller customers, and offers guidelines to help ensure future success. According to Robinson, the main problem is that most electricity and gas suppliers in both regulated and deregulated retail markets have a clear profit incentive to promote increased consumption of energy, as opposed to having an incentive to promote energy efficiency.
With the right incentives, however, energy supply companies would be able and willing to promote efficient energy use and conservation. The challenge, notes Robinson, is to design a regulatory framework that introduces those incentives.
The paper recommends several incentives for the industry, whether in a regulated or competitive market, and explains that policies must vary depending on the market. Guidelines include the importance of reflecting accurate underlying whole energy prices, ensuring that environmental benefits are explicitly included in any analyses, and providing incentives to keep economic costs as low as possible.
"New environmental challenges are a commercial opportunity for forward-looking energy supply companies in liberalized retail markets, and if companies are able to understand what customers truly value, and then price and sell services accordingly, they may likely find that it is profitable to promote energy efficiency," says Robinson.
The discussion paper, "Energy Efficiency: The Belle of the Ball in Bali," can be found at http://www.brattle.com.
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