Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Squeezing BTUs From Light Bulbs

Incandescent light bulbs create a cogeneration benefit by warming the indoor spaces they illuminate.

Fortnightly Magazine - August 2006

is high, the economics of incandescent light cogeneration (or resistance heating in general) improve. 

As an example of the societal perspective, an autumn 2005 price for firm off-peak electricity in the Pacific Northwest was about 8 cents/kWh; a corresponding winter 2006 price was about 4 cents. 12 Those prices produce the results shown in Table 7 for the winter bulb-switching approach.

Notably, at a four-cent winter marginal electricity cost, there is a distinct social cost advantage to customers practicing bulb switching under these assumptions, and that advantage persists even if compact fluorescent bulbs fall to a $5.00 purchase cost. 13 Under these conditions, using compact fluorescents in winter would be the wrong economic choice for society. 

A final sensitivity test involves a winter price for natural gas. At a January 2006 level of about $9, the winter bulb switch retains a present value advantage of $3.50 at a 4-cent winter marginal electricity cost. 14 However, these commodity prices have been especially volatile of late, a point also addressed below. 

Regulatory Policy

A finer look at electricity pricing can reveal unexpected energy efficiency opportunities. Some interesting results occur when we recognize incandescent bulbs as fairly efficient heaters that happen also to produce some light—for consumers who might be willing to use that heating selectively when it is needed. 

Based on national average retail electricity prices, these results do not suggest rethinking the use of compact fluorescents as a general matter, but they do suggest a niche opportunity for some consumers willing to change light bulbs seasonally—if those consumers could gain access to more time and seasonally sensitive retail electricity prices. 

At a minimum, a homeowner living in a cold climate with low-cost off-peak electricity may not be making a large mistake by hanging onto incandescent bulbs due to habit, or a preference for their aesthetics. Since using less of one energy source (electricity) can require using more of another energy source ( e.g., heating oil, natural gas, or propane), the best conservation choice is not necessarily to minimize electricity consumption. 

Consumers, and society in general, can lose when substitute energy sources are priced in ways that do not yield consistent price signals to customers. Many such distortions are in play here. Marking up variable electricity usage prices to recover fixed-distribution costs artificially discourages the use of electricity by raising its marginal price to the customer, possibly causing more fossil-fuel use for heating. By contrast, pricing based on embedded or average costs can give consumers a too-low price signal in economic terms, encouraging overuse of electricity for heating. 

Retail electricity rate averaging also occurs on a time-of-day and seasonal basis. Indeed, if hydroelectricity is truly on the margin, resistance heating probably is the most efficient approach and should be encouraged. 15 Likewise, marginal generation costs may be lower in evenings and at night when light and heat tend to be needed. But consumers never may receive those price signals if their electricity usage is priced at a fixed per-kilowatt-hour figure for all times of day. 

Time-Differentiated Pricing

While the selective use of incandescent