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.