Energy Efficiency Movement Balances Both Sides of the Meter
BY ROD WALTON, SENIOR EDITOR
Energy efficiency lost a champion earlier this year when Arthur Rosenfeld died at the age of 90. Rosenfeld was a physicist who put aside work on subatomic particles to focus on the use of energy in the here and now of the mid-1970s oil crisis.
He wanted to “wring the most out of every kilowatt,” as the Los Angeles Times reported in a 2010 story. He had geopolitical and environmental reasons for his passion, two motivating factors which, combined with financial incentives, can still drive energy efficiency today.
So how is it going 40 years down the road that Mr. Rosenfeld first traveled? Whole companies have formed and grown out of the demand for energy efficiency, while utilities are seeking some of these partners to help them figure this out both in the technological and customer realms.
Much of the world, whether it’s global or your climate-conscious neighbor next door, is fearful about the environmental dangers of fossil-fueled electric power, but do they know that renewables alone won’t do the trick? For the true believers, logic dictates we need energy efficiency to bridge the gap and make the most out of our resources without a single drop wasted.
One problem: Few also believe that energy efficiency is the silver bullet which solves all the villains that customers and companies face, whether it’s macroeconomic like global warming or micro like the monthly electric bill.
“We have four barriers to energy efficiency,” said Suzanne Shelton, president and CEO of sustainability marketing firm Shelton Group. “The first is that people flat out don’t think they need energy efficiency. Eighty percent of us think we don’t use more energy today than we did five years ago.”
The second barrier is that customers, if they spend extra money on their home, would rather make it prettier and easier to resale than upgrade insulation and appliances. The third is that many believe they were sold a bill of goods on energy efficiency, that it really hasn’t saved them enough money to justify the upfront expense. Fourth and finally, customers do increasingly believe in climate change, as they have seen the weird weather lately. But it’s not their fault.
“Only six percent connect their home energy consumption to our environmental footprint,” Shelton said.
Targeted marketing and incentives can work, as utilities have found both on the residential and business levels. Behind-the-meter solutions can move the needle if the case is made clearly and realistically.
“There’s no silver bullet; there’s only best practices,” said Bill Brewer, vice president of global energy and sustainability services with Schneider Electric. Customers who adopt or plan to embrace energy efficiency programs must develop goals, key performance indicators and benchmarking. “I still come back to key things: It’s around education, promotion and engagement with their user base.”
The best energy efficiency programs must strike a chord with customers to be effective. Efforts like Duke Energy’s HoM Energy Manager and smart thermostats like Nest offer cutting-edge connectedness, but also a sense of control over consumption. And who doesn’t like control?
“We have some leaders or vanguards, like Duke Energy, Pacific Gas & Electric and northeastern utilities,” Brewer said. “ComEd is another one doing a lot in the Midwest.”
A central U.S. utility, Kansas City Power & Light, partnered with Nest and CLEAResult to design and implement a program last year called Self-Installed Smart Thermostats. The trio, with no prior experience working together, collaborated on replacing about 23,000 old thermostats with programmable models that also have demand response capabilities. They installed 4,000 in the first year and plan to intall another 10,500 this year and 8,500 next year. Each peak-energy event produced up to 1.2 kW load reduction per device, resulting in several megawatts overall.
Only a month ago, Austin, Texas-based CLEAResult was touted by the U.S. Department of Energy with two awards regarding its rooftop unit (RTU) projects. It worked with Southern California Edison to retrofit some 867 units, saving about 6 million kWh and helping SCE save close to $5.6 million in utility costs, according to reports.
Colin Gibbs, CLEAResult’s director of business analytics, contended that there remains an information gap on the benefits of energy efficiency for both residential and business customers. The good news is that contractors now have numerous business cases to strengthen their points for energy efficiency efforts.
“Program incentives don’t always do an effective job of addressing the split-incentive issue,” Gibbs said, referring to where the building owner pays for an upgrade, for example, but the tenant benefits from the energy savings. (Read more about this on page 16.) There’s also the challenge surrounding balance sheets such as “capital expenditures vs. operational expenditures.”
He pointed to emerging and innovative financing options such as commercial and industrial (C&I) customers amortizing costs of a retrofit over a longer period of time.
“There’s performance contracting options out there,” Gibbs said. “Instead of treating it as a capital project, it can be built into the long-term operational budget”That’s friendlier to the balance sheet.”
Schneider Electric’s Brewer sees the energy efficiency market converging from three different domains: supply and the long-term cost of energy; efficiency and flexibility as derived from predictive analytics, control management and other technological advances; and sustainability, including clean energy options such as on-site solar and offsite power purchase agreement for renewables.
“The convergence of these three domains with new technologies is creating new opportunities called active energy management,” Brewer said. “It enables facility leaders, engineers to plant managers, to become the hero who is transforming energy into an asset.”
|Courtesy of CLEAResult|
Utilities are still working on their customer engagements in this new age of communication technology. All platforms and all media are on the table. Satisfaction surveys show that the electric power sector still lags behind retailers and banking when it comes to customer-facing services. Shelton sees opportunities beyond the divisive issue of rates and paybacks.
“The utility is not at all trusted when it comes to the monthly bill, but the utility is trusted when it comes to energy efficiency and generation options,” she said. “This is why utilities are working more on behind-the-meter solutions.”
The Shelton Group’s surveys show that once a customer buys a smart thermostat, his or her interest in leaving the utility goes through the roof, she added. Nearly half of those who buy smart thermostats begin to think of departing the utility connection, especially if those darned rates keep going up. (This makes Kansas City Power & Light’s joint venture with Nest and a CLEAResult a possible case of “if you can’t beat ’em join ’em.)
Shelton said that utilities should offer energy audits, then follow up that up by completing the projects suggested by the audit. Build those charges into the bill. Give the customer a locked-in monthly payback for, say, five years to smooth out the financial impact.
“Sign me up,” Shelton quipped, because it decreases the unpredictability all customers fear the most. “When I tell (utilities) this, they say regulators won’t let us do that. I don’t know how much I believe it.”
This goes back to Brewer’s point about education, for the utility, its customers and regulators. For utilities, the combination of possible software services will allow for such energy-efficient initiatives as real-time pricing, load shed and other control mechanisms.
“Know your footprint and understand your data,” Brewer said. “Strike the right goals for the future and understand the why behind that.”
At CLEAResult’s Energy Forum last fall in Austin, Texas, Wired UK’s Editor-in-Chief David Rowan talked about “friction” as the enemy of customer engagement with energy efficiency. Automation can help cut down on the participatory friction required of customers, CLEAResult’s Gibbs pointed out. The utilities and their partners can smooth out the customer’s role in adopting services that truly help them realize energy savings objectives.
“In the long run, I’m excited about a future where electric vehicles, home appliances and mobile applications are all working in concert with each other with the singular objective of making customers’ lives easier,” he said.
Arthur Rosenfeld might even put security above convenience in the benefits of energy efficiency. But either way he might be impressed by how far it’s come and where it’s going.