by Lisa Wood, Institute for Electric Efficiency
With energy efficiency growing more important every day, U.S. electric utilities are working with their state regulators to develop new business models to turn energy efficiency into a growing and sustainable business. They also are creating partnerships with technology leaders to give their customers more effective ways to control their energy use. Both efforts have begun turning the promise of energy efficiency into reality.
In 28 states and the District of Columbia, electric utilities now have a regulatory framework in place that addresses compensating a utility for the revenues it loses as a result of its efficiency programs. They do so either by decoupling sales from revenues or by creating a lost revenue adjustment mechanism, which adjusts customer rates up or down depending on how successful a utility’s efficiency programs are.
Electric utilities and regulators in many states also have created an incentive to make energy efficiency an investment by creating a return for such investments that is on par with their return on supply-side investments such as new power plants.
These new regulatory models already are stimulating greater investment in energy efficiency. A 2011 report by the Institute for Electric Efficiency (IEE) found that in the U.S., customer-funded electric efficiency reached $5.4 billion in 2010—twice as much as in 2007. The report also found that electric utilities accounted for 85 to 89 percent of the total customer dollars spent in the U.S. for energy efficiency programs (including load management) between 2007 and 2010, with states or regional efficiency organizations managing the remaining energy efficiency program budgets.
As more electric utilities work with state regulators and legislators, industry spending on energy efficiency will continue to expand, quadrupling in size by 2020 to reach or exceed $12 billion annually.
Most important, the growing amount of utility dollars behind energy efficiency measures has begun to produce impressive energy savings. In 2008, the IEE report found that electric utility energy efficiency programs saved more than 85 terawatt-hours (TWh) of electricity—enough to power some 7.4 million U.S. homes for one year—and avoided 61 million metric tons of carbon dioxide. In 2009, the savings grew to more than 92 TWh—enough to power more than 8 million homes for one year. And total savings from ratepayer-funded electric efficiency programs, once calculated, likely will exceed 100 TWh in 2010.
Along with developing these new regulatory compacts, electric utilities also are creating partnerships with high-tech firms to better engage their customers and empower them to gain even more control over their energy use. One example is CenterPoint Energy and its Energy InSight program.
Like other U.S. utilities, CenterPoint Energy is installing digital smart meters to improve service for its customers. Beyond its operational benefits, which include automated reader reading and faster outage detection and response, smart meters open the door for consumers to better understand and control their homes’ electricity use.
CenterPoint Energy has created a partnership with industry-leading technology companies including IBM, Itron Inc., General Electric Co., eMeter Corp., Quanta Services Inc. and ABB to enable the new meters to work with in-home displays or screens that give consumers daily updates about their homes’ electricity use. In addition, consumers may log onto a Web portal that provides daily updates of their electricity use. Studies show that just making consumers aware of their electricity use encourages them to save energy by making small changes such as adjusting their thermostats, switching to compact fluorescent light bulbs or unplugging appliances when not in use. Savings are typically about 5 percent of their monthly bills.
CenterPoint Energy predicts that the energy savings soon will increase further as consumers connect their smart meters to smart thermostats and smart appliances through home area networks. Consumers then will be able to see how much energy their appliances use and to program the appliances to respond to low- and high-price signals from the meters for more energy savings.
Energy InSight is funded in part by a $200 million Smart Grid Investment Grant from the U.S. Department of Energy. In addition to the customer benefits, the program has created or retained more than 500 U.S. jobs and is building a more intelligent grid to improve electric reliability and power restoration in Houston. CenterPoint Energy is sharing the knowledge gained from its smart grid experience by conducting nearly 700 tours to date of the Energy InSight Technology Center, the first in the world of its type to demonstrate how the smart grid works to utility representatives from six continents, state and national regulators, public officials, news media and local consumers.
Another partnership is underway among Duke Energy Corp., Cisco Systems Inc. and Verizon Communications Inc. to launch the Smart Energy Now program as part of Envision: Charlotte, the most environmentally sustainable urban core in the United States.
At no cost to participants, Duke Energy is using Verizon Wireless’ network to gather and aggregate energy-usage data from some 70 office buildings in downtown Charlotte, N.C. The participating buildings will represent some 17 million square feet of real estate—more than 90 percent of the city’s total commercial space.
The energy information then will be streamed to large, interactive, lobby-level screens that Cisco is providing for the buildings’ lobbies. Building tenants will get to see nearly real-time energy consumption data for the commercial community. Building occupants will receive tips or suggested actions to use energy more efficiently in their office spaces. The program’s overall goal is to reduce downtown Charlotte’s energy use up to 20 percent by 2016. Duke expects that once participants start seeing the results of their actions, they will look for other opportunities to increase their energy efficiency efforts and lower their carbon footprints.
Duke Energy is using social media to better engage its customers in the program. A Twitter feed and a Facebook page will be set up later this year. Among other things, this will give building occupants the ability to tweet about what they did that day to contribute to the cause.
To date, business and local government leaders controlling more than 12 million square feet of space have expressed a commitment to participate. These organizations include the Bank of America, with approximately 7 million square feet; Wells Fargo, which controls approximately 3 million square feet; the city of Charlotte and Mecklenburg County, which control approximately 1.4 million square feet; and Duke Energy, which controls 1.3 million square feet.
Electric utilities have the relationship with customers—residential to commercial to industrial—and all income groups. They also have the scope and scale needed to make a difference in promoting efficient technologies and customer energy management. Because of their size, they can do it cost-effectively as well.
Now, with supportive regulatory policies and innovative partnerships, U.S. electric utilities have the power to move the nation to being more energy efficient.
CenterPoint Energy’s Energy InSight website: http://centerpointenergy.com/energyinsight
Envision: Charlotte website: http://envisioncharlotte.com
Lisa Wood is executive director of the Institute for Electric Efficiency. For more information, visit htt://www.edisonfoundations.net/iee
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