FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Beyond Green Hype
Getting realistic about energy efficiency.
upgrades can have an attractive payback, individual consumers tend to base decisions on a very short time horizon—especially during periods of financial strain.
Given these marketplace barriers, stimulating efficiency adoption will require programs and policies to address key constraints. Two key barriers to doing this effectively are customer diversity and coordination. Diversity is a barrier because customer needs, preferences, and behaviors vary significantly by segment. To drive real efficiency gains, one must understand these differences and develop programs that reflect them (addressed by Lesson #4) . Coordination is a barrier because developing a coherent set of programs and policies requires coordination across a diverse set of stakeholders with different agendas, budgets, and operating models. Utilities are critical actors in any conservation program, and they typically have an inherent conflict in energy efficiency gains that reduces their revenue, and consequently shareholder value. Federal, state, and local governments must design policies and incentives to address marketplace constraints, while coordinating with utilities and implementation facilitators. And a handful of additional actors are critical in implementing programs and policies—most notably non-profit organizations, local community groups, contractors, and educators ( e.g., energy efficiency vocational training).
Quite simply, the number of stakeholders that must be involved in developing a coherent set of programs and policies, combined with their often competing agendas, is a considerable barrier in itself (addressed by Lessons #6 and #7) .
By working to identify energy reduction opportunities with leading businesses, utilities, and municipalities—ultimately, critical actors in driving any real efficiency impact—a series of lessons has surfaced that can be used to drive efficiency improvements in a cost-effective way. Lessons 1 through 3 deal with driving such improvements for businesses, Lessons 4 and 5 outline a path for utilities to achieve energy efficiency mandates in a cost-effective manner, and Lessons 6 and 7 deal with driving efficiency improvements at a municipal level.
Lesson#1: Focus on operating and behavior changes, not structural improvements. Structural improvements can provide considerable energy savings, but are much less cost-effective than other more simple operating and behavior changes. This has been documented in several studies; however, the belief persists that serious savings requires serious investment. This simply isn’t the case (see Figure 1) .
Lesson #2: Behavioral change is difficult to realize, and even harder to sustain; automation and competition are keys to success. Automating energy-intensive appliances and devices ( e.g., lighting, HVAC) can provide much more sustainable change by removing the human element. For commercial and industrial facilities, an attractive payback period often can be achieved due to high energy costs. For residential customers, recent pilot results suggest that competition might be the key to realizing behavioral change at a minimal cost (see Figure 2) . By using monthly reports showing consumers their energy usage relative to peer groups, sent by mail separate from the electricity bill, energy savings of 1.5 to 3 percent have been realized and sustained for well over a year.
Lesson #3: There’s no one-size-fits-all solution to energy efficiency. What makes sense for one site won’t always make sense for another. However,