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Wednesday, March 02, 2011

Energy Efficiency: Being on the Losing End

If you've been practicing energy efficient for years, are you going to be penalized?

I found a slightly boring article about energy efficiency and 'demand response' (the links lead to Wikipedia pages that define these topics in greater depth).

Definition time:
Energy efficiency is simply using what we have as productively and as cost-efficiently as possible, for whatever benefit you value -- such as lower utility bills or faster economic growth. Demand response involves managing your energy use (not necessarily reducing it, however) in direct response to market conditions, such as price or availability of supply).

Utilities have invested in both for decades. And for years they've been giving away money to businesses and homeowners (usually not renters) as a way of encouraging users to modify their energy use behaviors. Typically in the 1980s, the goal was to avoid building expensive generation facilities -- studies in California showed that the cost of a conserved kilowatthour was less than the cost of building a power plant to generate a new kilowatthour.

By the 1990s, everyone got slap-happy around deregulation -- the notion being that we'd all happily pay more of our hard-earned money to 'entrepreneurs' who would find some magical and innovative way to encourage us to lower usage.

That didn't happen. Nearly everyone stuck to their utility companies rather than switch to some untested and untried and usually more expensive unregulated free marketeers. Which in the end was probably a good thing, because Enron was often held out as a shining example of the type of company we should want to buy our therms and kilowatthours from.

This article (found here) included a lament from a senior citizen (do people our age really want to be labeled as such?): Since he'd already been actively and voluntarily reducing his energy usage through conservation techniques, he will 'lose' because utilities will now start handing out more dollars to aggressively encourage those people who have not made any effort to change.

I think he is only partly right. I know that utilities have been offering these various cash incentives since the 1980s, when I got into the business.

In addition, in the 1970s the US and State governments started providing tax credits for numerous energy efficiency investments.

So the opportunities to take advantage of these types of programs -- such as refrigerator rebates, time-of-use electric rates, voluntary group load curtailment programs, and so on -- have been there for a long time.

Sadly, during the 1990s some of these programs were reduced because the 'experts' (many allied with investment bankers) convinced regulators that 'free market' principles could be applied to electricity and natural gas utility services, magically driving down the price of energy while simultaneously producing financial incentives to conserve energy or use renewable energy. [Now where is the logic in that? If prices go down (they didn't), what would be the 'incentive' to spend more money than you have to on a more expensive and more energy efficient air-conditioner?]

I think the best recourse is to advantage of whatever program you can now. If you apply for a program, and you qualify, then you get a double benefit -- you lower the amount of money you give to your utility, and you get some of it back.

And if you don't qualify, you are still lowering the amount of money you give to your utility. That's important. There seems to be less and less money to go around; I see no reason to pay more for something you value -- lighting, warmth, computers -- than is absolutely necessary.

And for people who tell you to not conserve because rates will go up if you do: rates are going to go up no matter what. (As an example of why they're going to go up, think about how old the power lines or gas lines are leading up to your home; 60 years? 40 years? 20 years?) These are all going to be replaced -- and the cost of replacing them is going to be greater than the cost of installing them originally. Those replacement costs are going into your bills.)

So you are better off conserving now. Your utility bill will be lower than it otherwise would be.

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