Don’t Build Wires, Use Energy Efficiency

Am running around today like the proverbial headless chicken … so must rely on tempting tidbits, such as this article from Live Power News entitled “Don’t Build Transmission Lines Near My Home Use Energy Efficient Technologies Instead.”

The author, Albert Thumann, thinks that energy efficiency adoption is a marketing problem. I disagree; I think it’s a regulatory barriers problem. Between the ability of utilities to leverage their relationships with state regulators and block a lot of the interconnection of distributed generation systems and the federal site-specific energy efficiency regulations, energy efficiency is not as economical an option as it could be if unencumbered by this regulatory baggage.

One thought on “Don’t Build Wires, Use Energy Efficiency

  1. The use of more efficient appliances, equipment, motors and building components certainly has the potential to reduce energy consumption and demand. These devices and components are available in the market and are marketed by their manufacturers, which have a significant incentive to aggressively promote them because they have already invested in development and testing and because profit margins in these more efficient devices and components are higher than in their minimum efficiency products, which are essentially commodities.

    While high efficiency devices and components are achieving an increasing share of market, they are typically doing so among intense energy users, customers in high energy cost areas and early adopters for whom payback is less of a concern. For example, the market share for very high efficiency air conditioners in the northern tier of states is relatively limited because the air conditioners do not operate enough hours to achieve significant operating cost savings. The same is true of very high efficiency furnaces in the southern tier of states, for the same reason. Many residential customers assume that they will only live in a particular house for ~ 5 years, and that any efficiency improvement with a longer payback is not worth making. Many commercial and industrial customers have opportunities to invest available funds in ways which produce far greater returns than the value of the savings available from efficiency improvements. In each case, these energy consumers are making economic decisions based on the best information available to them. While these decisions may not appear optimal to those along routes of electric transmission lines, they are none the less good economic decisions.

    There are also a variety of approaches available to reduce on-peak demand for energy. Some customers have adopted some of these approaches for a variety of reasons. However, in general, the price signals customers receive regarding the value of demand reduction are not economically compelling. Real time pricing may send adequate signals, but on-peak/off-peak rate schedules typically do not and flat rates certainly do not.

    The examples in the referenced article are projects conducted by government or public interest groups, which likely included some co-funding or incentives to offset all or a portion of the increased costs of the higher efficiency devices and components. This is demonstration or market development, not marketing; and, it is based on factors other than customer economics.

    Energy regulation in the US shifts and masks costs, making it difficult for customers to make good economic decisions. Exposing consumers at all levels to the real costs of the energy they consume would assist in the market penetration of higher efficiency devices and components. However, there is a continuing reluctance to expose residential and small commercial customers to the real costs of serving them, both from the standpoint of infrastructure cost and commodity cost.

    In the absence of good economic information and compelling economic advantage, legislation and regulation are all that is available to cause efficiency investments.

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