Save-A-Watt Makes Sense in Energy

Thomas Friedman discusses a proposal by Jim Rogers, the chairman and chief executive of Duke Energy. "Save-a-watt" would reward utilities for the kilowatts they save customers by improving their energy efficiency rather than rewarding them for the kilowatts they sell customers by building more power plants. Excerpts below.

Link: The mother of all energy paradigm shifts by Thomas Friedman

Rogers’ proposal is based on three simple principles. The first is that the cheapest way to generate clean, emissions-free power is by improving energy efficiency. Or, as he puts it, "The most environmentally sound, inexpensive and reliable power plant is the one we don’t have to build because we’ve helped our customers save energy."

Second, we need to make energy efficiency something that is as "back of mind" as energy usage. If energy efficiency depends on people remembering to do 20 things on a checklist, it’s not going to happen at scale.

Third, the only institutions that have the infrastructure, capital and customer base to empower lots of people to become energy efficient are the utilities, so they are the ones who need to be incentivized to make big investments in efficiency that can be accessed by every customer.

"The way it would work is that the utility would spend the money and take the risk to make its customers as energy efficient as possible," he explained. That would include installing devices in your home that would allow the utility to adjust your air-conditioners or refrigerators at peak usage times. It would include plans to incentivize contractors to build more efficient homes with more efficient boilers, heaters, appliances and insulation. It could even include partnering with a factory to buy the most energy-efficient equipment or with a family to winterize their house.

"Energy efficiency is the `fifth fuel’ – after coal, gas, renewables and nuclear," said Rogers. "Today, it is the lowest-cost alternative and is emissions-free. It should be our first choice in meeting our growing demand for electricity, as well as in solving the climate challenge."

Because energy efficiency is, in effect, a resource, he added, in order for utilities to use more of it, "efficiency should be treated as a production cost in the regulatory arena." The utility would earn its money on the basis of the actual watts it saves through efficiency innovations. (California’s "decoupling" system goes partly in this direction.)

At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly.

That is how you produce a more efficient energy infrastructure at scale. "Universal access to electricity was a 20th century idea – now it has to be universal access to energy efficiency, which could make us the most energy productive country in the world," he added.

Pulling all this off will be very complicated. But if Rogers and North Carolina can do it, it would be the mother of all energy paradigm shifts.

Barriers to Clean Energy in the US

This article from Grist describes why we are not adapting to the new energy realities and recommends some solutions. Excerpts below.

Link: New energy rules could unleash an economic boom and help quash climate change | By Timothy E. Wirth, Vinod Khosla, John D. Podesta | Grist | Soapbox | 22 May 2007.

Why aren’t we moving faster toward a clean energy future?

Huge society-wide change comes only when millions of consumers change their habits, and consumers will not change their energy habits until we reach the "crossover point" at which clean energy beats coal and oil on the basis of price, convenience, and availability.

Right now, most drivers cannot pull into a gas station and fill up with domestically produced biofuels. Most homeowners cannot choose wind- or solar-generated electricity to power their appliances. Going green too often costs more — in time or money.

Change won’t come until the price is right. That price is set by the market, the market is shaped by rules, and the rules favor fossil fuels.

If we want to change the future, we have to change the rules.

Rules matter. Rules define the character — and shape the future — of the society that makes them. Democracy’s distinguishing excellence lies in its ability to write the rules in a way that serves the common interest.

Good rules align the interests of individuals and corporations with the public interest, so that business can profit in ways that also make society richer and safer. This is the foundation of sound public policy. When high purpose is combined with the profit motive, the results can be astonishing. Time and again market capitalism, bounded by smart rules designed to serve the public interest, has delivered the desired result more cheaply, quickly, and easily than anyone thought possible.

Unfortunately, rules that are passed to advance the public interest can come, over time, to harm the public interest.

The rules we have now encourage the use of energy — especially oil and electricity. For most of the 20th century, this was smart policy. Electrification of the U.S. economy produced huge gains in productivity and quality of life. The increased mobility of people, goods, and services had similar benefits. Using more energy did not make us dependent on foreign oil. As late as 1940, the U.S. produced 63 percent of the world’s oil, compared to the 5 percent that came from the Middle East.

But the world is very different today. Geologists estimate that the Middle East has over 60 percent of the world’s oil reserves, the U.S. just three. And carbon dioxide emissions from our power plants and vehicles are wrecking the world’s climate. The rules need to change.

The rules today give oil and gas companies — the most profitable industry in the history of the world — billions of dollars in tax breaks and research subsidies. The rules do not factor in the indirect costs of oil — the cost of protecting oil supply lines to the Middle East, the cost of oil price shocks that lead to recessions, and the cost of intensified storms that make coastal property uninsurable. Insurers have priced insurance in Florida so high that the state has stepped in and pledged tens of billions of dollars in public money if a major hurricane strikes — despite the fact that neither the state’s catastrophe fund nor the state-chartered insurance company has anywhere near enough money to pay the claims.

The rules perpetuate our energy habits. Auto companies sell cars that get as little as 13 miles per gallon — something they could never do in Europe, Japan, or even China. Utility companies make more money when their customers waste energy and less when they save it. Developers build with energy-inefficient materials because they don’t have to pay the utility bills. And power plants use the atmosphere as a free garbage dump for their global-warming emissions.

We need new rules that will make the best choice for the country also the best choice for consumers.

Here are five more rule changes that would reduce emissions, give consumers new choices, launch new businesses, and accelerate the profitable transition to new energy technologies:

  • Put a price on carbon.
  • Set "carbon efficiency" standards for vehicles.
  • Make energy efficiency the business of utilities.
  • Modernize the electric power grid to be more efficient and better deliver clean energy.
  • Increase government support for clean energy.

via Clean Break