The incentives create a market in which the energy consumer and producer can trade in their existing inefficiencies. The market will decide where it is best to make the compromise, whereas before there were just wasteful externalities.

If you have an industrial process that can cope with intermittent power supply, it may be only slightly more expensive to design or build so that interruption of power won't result in interruption of production. If the overall cost increase is less than the decrease of energy costs due to incentives, there is no downside.

The energy producers likewise price the incentives so that their loss of revenue is lower than their cost savings.

Unless of course the market is created and operated by Enron, then we're all fucked.