California Institute for Energy and Environment (CIEE)

Information technology can increase energy efficiency by improving the control of energy using devices and systems. Awareness of this potential is not new—ideas for applications of information technology for energy efficiency have been promoted for more than 20 years. But much of the potential gain from the application of information technology has not yet been realized. Explanations for the slow penetration of information technologysolutions include the heterogeneity of energy users and uses, regulatory constraints, limitations of the technology, and market structure. In spite of these difficulties, there is reason for optimism going forward. This is because of a convergence of new requirements for operation of the electricity system—especially the need to make use of renewable generationthat depends on resources, like the wind and the sun, that are beyond the control of system operators—and improvements in technology—especially reductions in the costs of information technology. This creates the possibility that the old paradigm for system operation in which supply is continuously adjusted to meet demand will be replaced by a new paradigm in which supply and demand are adjusted together to optimize system performance. Implicit in this new paradigm is better control of end uses of energy, which seems certain to reduce energy consumption. In this paper I examine the evolution of the new paradigm, identifying reasons for the slowpace of adoption and obstacles that must still be overcome.AndI explain why adoption of the new paradigm is likely to lead to significant energy savings and other environmental benefits.