"This is a strange state. We have a Republican governor who is a tree-hugging environmentalist," quipped Arthur Rosenfeld, Commissioner, California Energy Commission.

California Energy Commissioner Arthur Rosenfeld said energy efficiency is a good investment that continues to pay off in many ways.

Rosenfeld is a long-standing and outspoken member of the Energy Commission, appointed by Gray Davis and then re-appointed by Governor Schwarzenegger. The Commissioner is also a fervent supporter of energy efficiency.

Rosenfeld began by explaining that there are two ways to invest in clean tech. One is to invest in a clean technology, such as solar power. Optimists hope to see the cost of solar come down to be competitive with grid electricity.

"The best you can hope for, then, is that everyone continues to pay today's $2,500 a year for electricity," Rosenfeld said. "If on the other hand you reduce the energy requirements for everything in your house by half, you cut that electric bill in half. It's a sure-fire investment, reliable, saves carbon, and encourages economic growth."

How can every household reduce its energy consumption by half? Rosenfeld maintains that small but steady improvements in efficiency can yield surprising benefits in the long run:

"If economic growth continues at the current rate, without improving efficiencies, we'll need four new worlds worth of electricity by the year 2100, and they will be expensive supplies. By improving efficiency by a couple of percent a year, we need only to replace the present world of energy -- and that's a lot cheaper."

Early investments in efficiency programs continue to pay off
California consumes about 55 GW of electricity. Programs implemented since 1975 save the state 12 GW, or 30 percent, annually. Of that savings, one-fourth comes from appliance efficiency standards at state and federal levels, and another one-fourth comes from state building standards.

The state puts 1.5 percent of each electric bill into programs that give incentives to customers to beat efficiency standards. California pays US$80 million into a research program; the state also puts $10-20 million into a commercialization program and $300 million into incentive programs.

In the long run, the state's investments in energy efficiency in the 1970s helped it avoid building nuclear power plants, as was the practice back then, to keep up with rising energy demand. Electricity demand per Californian has held steady since then, and Rosenfeld credits the state's efficiency requirements, especially those for new buildings.

Other states are also serious about energy efficiency. New York has achieved similar efficiencies. Most states are missing the opportunity, even though they have access to the same information and options. Rosenfeld doesn't doubt efficiencies can be achieved nationwide, because he's seen it happen in refrigerators.

Secret is in the refrigerator
Energy consumption of a typical refrigerator had reached 1800kWh per year by the 1970s. Following the oil embargo, federal Energy Guide labels were mandated and California announced standards for refrigerator efficiency. Consumption has come down by three fourths, even though refrigerators today have much higher capacities.

"This is one of the most dramatic right-hand turns in microeconomic history," Rosenfeld observed.

California's 150 million refrigerators save energy comparable to the output of 200 base load power plants, or all the hydroelectric power generated in the United States. When compared on a cost per kW basis, the cost savings from efficient refrigerators rivals the total output of all U.S. nuclear plants. That's because the electricity saved in the kitchen is compared at retail prices that are more than triple the cost of producing the power at the plant.

"Two more updates in the refrigerator standards, and we pass nuclear power," Rosenfeld proclaimed.

Promoting efficiency and renewable energy
With the state's recently announced solar initiative, California is pushing efficiency and photovoltaics at the same time. The state has committed $300 million a year for ten years to its Million Solar Rooftops program. The commitment represents about a 1.5 percent fee on electricity used in the state.

"We've optimized home construction assuming that their electricity comes from the grid. With solar it's more expensive, so we want more efficient houses under the solar collectors. Therefore we want the rest of the roof to be white, to reduce air conditioning load.

California may accomplish this by offering Energy Star Home rebates, and offer solar rebates in addition -- but only after the efficiency requirements have been met for the home.

CalCEF strategy reflects focus on clean energy and efficiency
Rosenfeld said the $30 million California Clean Energy Fund is to split investments between clean energy and energy efficiency opportunities.

"We're planning to start an angel fund, because we think more help is needed upstream and earlier, rather than at the VC level, which seems to be in good shape."