How can decision makers determine the appropriate degree of ring-fencing for a utility holding company? The authors propose a systematic and objective method – recognizing business and financial...
Making Efficiency Cool
A new business plan for capturing big saving.
From the president on down, America expects a virtual revolution in energy efficiency. When investment in efficiency increases, people assume we’ll see dramatic cuts in electricity consumption growth, ultimately to zero or perhaps negative growth.
Is a letdown imminent? Legacy efficiency programs have accomplished admirable savings in recent years, yet increasing evidence suggests these kinds of programs might not easily scale up to the much higher rates of performance that are expected. Their cost-effectiveness ( i.e., kilowatt-hours of consumption cut per dollar invested) might seriously suffer in the process.
Particularly troubling is the demand side of efficiency. The products and services to cut consumption are ample. But demand for efficiency, the desire of businesses and individual consumers en masse to spend their time and money to buy efficiency products and services, appears insufficiently robust.
Indeed, businesses and consumers can be remarkably blasé about efficiency, even when the prices of efficiency goods are heavily subsidized and discounted. For example, when Americans buy electrical devices every day, efficiency typically isn’t the decisive factor. Functionality, power, options and aesthetic appeal commonly drive purchases. Price also drives purchase decisions, but rarely is the efficient device the lowest priced.
Legacy efficiency programs interest and excite too few to action. The compact fluorescent light bulb is their lone killer app. Non-lighting efficiency products and services suffer buyer disinterest and resistance.
Sensing these problems with efficiency’s demand side, some utilities now are rethinking and recasting efficiency. The programs of the “Efficiency v.1” era had as their animus to broadly make available the supply of efficiency products and services. 1 This they have done, clearing the path for motivated businesses and consumers to become more efficient.
The central intent in the “Efficiency v.2” era will be to incite unprecedented numbers of businesses and consumers to seek out and actually go down that path. This means the value proposition of efficiency needs a serious makeover to engage and inspire people for the first time. Fresh branding, marketing and selling strategies will aim at making efficiency far more compelling. Customer science—intensively listening to the voice of the efficiency customer—will quantify what it might take to interest and excite real people.
What might be called the “Best Efficiency Business” (BEB) will employ these business essentials to drive up customers’ propensity to desire and buy efficiency. Once demand is turbo-charged, the BEB then has the potential to perform at the much higher levels that are expected ( i.e., cutting kilowatt hours of consumption at unprecedented rates, while maintaining acceptable per-dollar invested ratios).
But what exactly distinguishes a BEB? How can a BEB protect—and possibly increase—utility shareholder value while satisfying the stated aspirations of political and regulatory leaders? And how would a utility transform its legacy efficiency programs