The electricity system in the United States received renewed attention after the August 2003 blackout that affected more than 50 million customers across the Northeast United States and caused...
Squeezing BTUs From Light Bulbs
Incandescent light bulbs create a cogeneration benefit by warming the indoor spaces they illuminate.
light bulbs may seem an odd possibility, customers never have the chance to explore any number of creative adaptations to the genuine cost of electricity (and, perhaps, gain savings on their electricity bills) until they are provided the opportunity by time-differentiated pricing.
Retail pricing distortions have implications for “green” energy policies. Where customers pay per-kilowatt-hour rates that include a large premium over marginal generation costs during the time lights tend to be used, they already are receiving a price signal that artificially encourages more conservation (and in this instance, bulb replacement) than is economically justified. Such conditions ought to make it more difficult to justify rebate programs, subsidies, or prescriptive new building codes to force bulb replacements that consumers won’t willingly perform on their own.
Another disjuncture concerns changes in commodity prices for home heating fuels versus retail electricity prices kept low or smoothed by embedded-cost rate setting (such as for federal preference hydroelectric power), or through a mix of generating resources, as is intended by regulatory policies emphasizing generation resource diversity. 16 However, if home-heating fuel quickly grows costly while electricity retail price increases are tempered by regulation or average-cost pricing, consumers artificially may be encouraged to substitute electricity for other home heating in a way that ultimately could consume more fossil fuel. 17 Recent increases in the market price of oil bring this possibility to mind.
A good energy policy should include economically efficient pricing. Whether the commodity is electricity, fossil fuel, or some other source, providing a marginal-cost-based price for at least some marginal usage can help promote economic decision making by consumers—even including the occasional counter-intuitive opportunity, such as helping to heat one’s home with light bulbs efficiently.
1. Lawrence Berkeley National Laboratory 2005; California Energy Commission 2005.
2. For example, incandescent bulbs can project light further and provide a more pleasing color rendition than do fluorescent bulbs (United States Department of Energy 2005a). Many fluorescent bulbs cannot be used with a dimmer (California Energy Commission 2005). Incandescent bulbs also reach full light output almost instantly, while fluorescents suffer a brief delay.
3. United States Department of Energy 2005a.
4. On a present value basis at a 10 percent discount rate, the compact fluorescent has a $46.28 advantage.
5. Lighting Design Lab.
6. Source: United States Department of Energy 2005b. Oil and gas efficiency figures are “typical,” electricity efficiency is for baseboard heat.
7. Home heating oil price is the national average delivered price. United States Department of Energy 2005c. Natural gas price is approximate spot price reported at Henry Hub for Oct. 13, 2005. United States Department of Energy 2005d.
8. EIA 2005, data for the first eight months of 2005. Average rates for customer segments were as follows: 9.3 cents/kWh for residential, 8.51 cents/kWh for commercial, and 5.47 cents/kWh for industrial.
9. Analyses of commercial building heating upgrades show that added summer air conditioning costs tend to offset winter heat savings for year-round incandescent bulb use. Energy Star 2004, p. 50; Lighting Design Lab.
10. To reach the full assumed lifespan of a compact