Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Making Efficiency Cool
A new business plan for capturing big saving.
into a BEB? Answering those questions will allow efficiency to begin its new role as a primary energy resource for America’s future.
Enthusiasm, Meet Reality
Political and regulatory leaders have set unprecedented goals as to what can and should be accomplished in energy efficiency. U.S. Secretary of Energy Steven Chu aptly summed it up: “If I were emperor of the world, I would put the pedal to the floor on energy efficiency and conservation for the next decade.” 2 The pedal is now being floored. Several billion dollars of new funding is on the way via February’s economic stimulus legislation, more than doubling the country’s rate of investment in efficiency.
Scaling up performance so rapidly will be challenge enough. Adding tepid demand for efficiency among broad segments of the American people raises the question, can we truly be confident the Efficiency v.1 modus operandi is up to the task? Further, efficiency programs work uphill against persistent streams of electricity consumption growth, as each year population increases and penetration of new electricity applications increases too.
California frequently serves as a role model for efficiency. The state’s overall per capita consumption has indeed stabilized, though per capita industrial consumption has dropped dramatically. Per capita commercial and residential consumption has grown. 3 Nationally, legacy programs have engaged a small fraction of the total population and impacted but a fraction of these participants’ electricity usage. The result, a fraction of a fraction, can be unspectacular. 4 So, legacy programs encounter many headwinds. Another concern is price. Electricity prices strongly encourage consumption. Using a 100-watt device for an hour costs a lowly penny, hardly worth a moment’s thought. Then, when electrical devices are made more energy efficient, usage becomes cheaper still, potentially encouraging wasteful consumption. Using efficient devices can become a “free good,” in economists’ parlance, at which point businesses and consumers quite naturally become oblivious about turning them down or off.
A Washington Post writer’s experience with an advanced utility meter is telling:
“The message for me wasn‘t how expensive our appliances are to use, but how cheap. The third line of the monitor kept a running total: After about 1-1/2 hours of heavy use, we had spent all of 34 cents. When I told [the utility representative] that the power monitor made me want to use more electricity, not less, she ruefully agreed that in Virginia, it‘s hard to get people to conserve based on price alone, because our rates are below the national average. It seems arguable that Americans don’t pay enough for energy, even in more expensive states, and we‘d have to pay a lot more to curb our use.” 5
For all these reasons, it’s entirely plausible that Efficiency v.1 programs are no match for the unprecedented expectations about what efficiency is to achieve. If and when the ambitious goals for efficiency are not reached, difficult questions may arise. Did utilities drag their feet? Are they not creative enough? Or, are they just not capable, generally, to entrust with the efficiency mission?
Utilities may find themselves in the penalty box if adjudged