Energy Efficiency: The Challenge of Making it Work

Making it work is one of the industry’s toughest challenges.

by Robert Zabors

Several powerful forces have combined to create one of the electric utility industry’s most complex challenges: responding to the rapidly growing societal mandate for action on energy efficiency.

The mandate comes from the consumer. Consumers today are concerned with the environment and sustainability, energy security and energy independence. They expect higher reliability performance—from an aging grid that was designed for a previous generation of end-use applications. People want more control over rising electric costs and environmental impact, and the lower bills that could result from wiser or decreased use.

For their part, utilities know that energy efficiency can help address a variety of their concerns such as carbon mitigation, asset-based growth and infrastructure renewal. In an era of rising commodity costs and right-of-way and NIMBY restriction, energy efficiency also presents the utility with a way to improve asset utilization. Energy efficiency can create incremental capacity, energy and ancillary resources, particularly as new fossil generation faces higher costs and permitting risk. Energy efficiency presents an opportunity to upgrade information and telecommunications technology to enable programs and system controls, and economic development and retention through reliability and customized programs. Importantly, energy efficiency can also generate regulatory and community support for eventual rate increases for core operations.

During the past few years, we’ve noticed a shift in tone from the executives we’ve spoken with about energy efficiency. They’ve rapidly gone from “What’s the potential?” to “Show me who’s doing it,” and now, “How do we get started?”

News of successful pilots utilizing existing and emerging technologies comes out on a weekly basis. Legislative “innovation” also continues on a state and federal basis in response to societal and political pressure and of course, the 2008 election cycle.

In particular, the sense of urgency is highest when addressing climate change concerns and when finding resources to support continued load growth at a time when prices of generation are rising quickly.

With this level of support, why is making energy efficiency work a challenge at all?

For one thing, in most cases this is still a concept in its infancy. It doesn’t even have a consistent name. Energy efficiency is referred to as either part of, or interchangeably with, the “Delivery System of the Future,” demand-side management, the Smart Grid, Dynamic Energy Response, and other names. Nobody has the complete answer, although the pieces are falling in place.

For another, one size will not fit all. Implementation needs to be specific to a region and a utility because of the fragmentation of industry business models and where each company and region is relative to its installed base and applicable supply and infrastructure technology options. Some utilities own generation and some don’t, and the benefits of efficiency depend upon which supply resources are avoided (e.g., gas peakers or coal-fired baseload) and the availability of renewable options.

There there’s the issue of the capabilities of existing IT and communications systems to support data collection. Decision support functions and customer interaction depend on what each utility has in place. Existing infrastructure and design standards need to be addressed at the individual operating company level and ultimately at the circuit level.

To meet potential legislative mandates, a utility could simply file an Integrated Resource Plan, design some programs and outsource fulfillment. Hopefully the company can recover expenses. But this strategy would miss most of the potential and benefits of this rare opportunity. The full potential leads to solutions customized to the needs of customers, utility infrastructure, regulatory structure and applicable technologies.

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And the toughest part: it is not a challenge the industry can solve on its own.

What changes are needed?

Unlike traditional operational challenges, effectively capturing the potential of energy efficiency will require coordinated change along multiple dimensions, building on a base of customer support.

Programs and applications that help customers shape their usage need to be supported by infrastructure that enables communication, programs and higher levels, which requires IT and communications technologies that support the volume and speed of information exchange.

Managing information, programs and applications will require significant changes in staffing, skill requirements and core “utility” processes such as resource planning, system operations, and distribution engineering.

Stronger relationships between consumers, utilities and the channel partners who support them are necessary.

Legislation and regulation should remove barriers for utility participation and provide a strong framework for incremental investment. And that’s only possible with a shift in consumer behavior, based on more information and options, and trust-based relationships with utilities and other partners, reinforced by community interaction.

With this amount of parallel activity and the scope of entities involved, solutions cannot come entirely from utilities, although they are necessary components of any solution and ideally positioned for leadership roles.

Each utility, community and regulatory group will need to reach consensus on what can be done and how fast. Structuring that dialog is an effort in itself, but the discussion has fundamentally shifted from “why” to “how.” With a structured approach, involvement by many parties, and leadership from utilities, the potential of efficiency will be realized more quickly than currently imagined. (Visit www.elp.com for more on energy efficiency.)

Author

Robert Zabors is a partner with Bridge Strategy Group, an experience-led general management consultancy committed to helping clients rapidly improve their business performance. For more information, visit www.bridgestrategy.com.

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