State-level support for encouraging utilities (and by association their rate payers) to become more energy-efficient continues to grow, reports Innovation Electricity Efficiency (IEE), part of the Edison Foundation.
Budgets for these programs rose 27% to $6.9 billion last year and could exceed $14 billion by 2025, reports IEE.
“Supportive regulatory frameworks are the key to expanding the electric power industry’s already large commitment to electric efficiency even further,” says IEE Executive Director Lisa Wood. “Through them, the power industry provides integrated programs to help customers manage energy use, more fully utilize flexible demand resources on the power grid making it more efficient, and serve as a consistent and comprehensive point of contact to support all customer energy needs.”
Three types of regulatory mechanisms are critical for supporting energy efficiency investments: direct cost recovery, fixed-cost recovery, and performance incentives, says IEE. Here’s a summary of their intent:
Direct Cost Recovery helps utilities recoup costs related to administration, marketing and the actual cost of product rebates.
Fixed Cost Recovery allows utilities to decouple their revenue models and expectations from the amount of electricity sold. Since the goal of efficiency programs is to reduce consumption, this allows them to recover fixed operating costs in a more timely manner.
Performance Incentives reward utilities for reaching certain efficiency goals, and, in some cases, impose a penalty for performance that falls below agreed-upon goals.
The IEE report, "State Electric Efficiency Regulatory Frameworks (July 2013)," finds that 32 states offer a fixed-cost recovery mechanism to align utility fixed costs with investments in energy efficiency programs, up from 27 states in last summer’s report.
Here are some other highlights.
- 28 states have performance incentives in place, up from 23. Mississippi, Montana and West Virginia are considering them.
- 18 states offer lost revenue adjustment mechanisms, including Missouri and Louisiana, and another two are awaiting regulatory approval, Mississippi and Virginia.
- 14 states support electric decoupling, including Washington; Delaware is awaiting a decision on its own legislation.
When it comes to the effectiveness of energy efficiency initiatives, Massachusetts has led for the past two years, edging out California for that distinction.
Both Massachusetts and California have established energy efficiency as the state’s ‘first-priority’ energy resource. Utilities must offer rebates and other incentives encouraging ratepayers to upgrade lighting, air conditioning, and industrial equipment to more efficient models whenever those incentives cost less than generating the electricity it would take to power their older, less-efficient equipment. Massachusetts was among the first states to support decoupling utility rates from sales volume.
Read the IEE report for more details on each state’s program:
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While utility-managed DSM has a place, the unfortunate truth is that accomplishing X% of energy efficiency through utiltity-managed DSM costs about 250% more than if private parties did it themselves, and that’s when and if it’s a program that actually works – a lot of them don’t.
Holy cow, look beyond the page – the people publishing the study cited in the article are utility companies – AEP, Southern Power, Dominion Power, PG&E, Duke.
All the “green” organizations are buying this propaganda hook line and sinker – and it’s propaganda.
The Edison Institue is not advocating any policy that is going to cut utility company profits – what they are trying to do is to ensure that they keep an unmerited and disproportionate piece of the pie as electric use goes down. They don’t want higher energy prices – they want higher flat monthly fees. They want DSM funded through flat fees. They are trying to keep revenues and profits rising in the face of realities and changing business models.
Given society’s scarce resources, utility-managed DSM cannot have a real future if what you are trying ot do is to cut consumption by 60% or more.
3% ? 2% ? 5% ? yes, perhaps
60 %? no.
There’s not enough money in the world and the utility companies don’t deserve the corporate welfare. It’s like granting a pension to the blacksmiths when Henry Ford invented cars.
Utility energy efficiency programs are a good thing. But what else is there? I encourage utilities to develop a sense of partnership with customers and avoid a growing tendency of customers to delay acting until they are “paid to do it” with incentives.
Secondly, these programs need to blend in the old-fashioned conservation ethic. Why? I’ll give an illustration: If you build an energy efficient house that is 1000 SF larger than what you really need, and the higher cost will be paid, in part, over time because your utility costs are lower, there is no advantage to other rate payers and the environment. Effectiveness must be coupled with efficiency. Otherwise, we end up owning and operating the proverbial “Sport utility SUV house.”
Again, efficiency, by itself, is not the whole story. We need to be realistic about “efficiency” alone, and acknowledge that citizens still need to take responsibility for their bottom-line consumption. What people do with energy savings is as important as achieving the savings in the first place.
The challenge is, we are adept at measuring and managing efficiency gains. Wise energy use is a little harder to evaluate. Again, watch customer bottom-line use. “Snap-back” (reversion to previous levels of usage despite efficiency gains) is real. We’re at the point now in our programming, after all these years, that we should not over-rely on theoretical savings estimates because they are the easiest to make.
While all we seem to hear is that we need to turn off water and electricity to save energy, there are many energy-intensive industries that bring these initiatives down to nothing. And the Government, if they are really interested in energy efficiency, should first and foremost support industries and commercial companies on this matter. This review I read recently lists several promising areas where the energy efficiency can be improved, such as data centers and power plant heat recovery, and it seems to me that it can be a profitable thing to do for business owners: http://dailyfusion.net/2013/07/less-obvious-ways-to-increase-energy-efficiency-a-review-of-recent-research-13810/ And it will save much more than the constant calls to “turn off your computer when you are leaving”.