Rewarding utilities for saving electricity

Thomas Friedman has an interesting column in the Times called “Go Green And Save Money” (8/22/07).

Reminiscent of the upside-down thinking of perspicacious Charles Handy in the Age of Unreason [1989] (where for example, he proposed paying doctors an annual fixed amount per patient of theirs so they had an incentive to keep them well since it necessitated fewer office visits and less investment on their part, thus making them more money. By aligning the doctors’ interests and the patients, one could better encourage wellness.).  Description of such thinking here.

Friedman discusses a proposal by Jim Rogers, CEO of Duke Energy (in Charlotte, NC) called ”save-a-watt.”

The program is based on the fact that saving energy (conservation) is a cheaper and greener way of increasing energy capacity than building more power plants. 

Thus Save-A-Watt would get Duke Power to invest heavily in ways to save energy consumption among customers; their efforts would be evaluated by an independent commission, and rates would increase by their savings.  Although rates per kilowatt would increase, they would increase more slowly than if new power plants were built, and given that most customers would be using less energy through Duke Power’s efforts, their actual utility bills should decrease.

Rogers says ‘”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.”

Friedman writes:

“[T]he 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.”  But the utilites will only invest in this efficiency if they are financially rewarded for it.

“”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 Mr. 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.”  Since creating more capacity through conservation in essence is a new energy resource, Rogers advocates treating it like a production cost of energy (in the same way as building new power plants).

“‘Once such a system is in place’, Mr. Rogers added, ‘our engineers would wake up every day thinking about how to squeeze more productivity gains out of new technology for energy efficiency — rather than just how to build a bigger transmission or distribution network to meet the growing demands of customers.’ (Why don’t we think about incentivizing U.S. automakers the same way — give them tax rebates for save-a-miles?)”

Full article available here.

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One response to “Rewarding utilities for saving electricity

  1. Thanks for your post! I linked it as a resource in a blog post on our site. We’ve just launched a project to map some of these energy efficiency rebates from utilities.

    Our post: http://earthaidkit.com/blog/2007/11/30/your-power-company-might-pay-you-for-paying-them-less/

    Our program:

    http://earthaidkit.com/rebates.php

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