The NYT has done itself proud with not one but two op-eds this week pushing for energy efficiency -- first Nic Kristof's, and now the The Mustache of Understanding. I guess the idea is gaining traction.
The Mustache references a potentially revolutionary change being pushed by Duke Energy's Jim Rogers. (On Rogers, the cynical should note this.) The idea, now before the North Carolina Utilities Commission, is as follows:
Because energy efficiency is, in effect, a resource ... in order for utilities to use more of it, "efficiency should be treated as a production cost in the regulatory arena." The utility would earn its money on the basis of the actual watts it saves through efficiency innovations. (California's "decoupling" system goes partly in this direction.)
At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly.
"Over time," said Rogers, "the price of electricity per unit will go up, because there would be an incremental cost in adding efficiency equipment - although that cost would be less than the incremental cost of adding a new power plant. But your overall bills should go down, because your home will be more efficient and you will use less electricity."
Once such a system is in place, 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."
As Friedman says, "that is how you produce a more efficient energy infrastructure at scale." You've got to get the utilities in play. Utility sector regulations are vestigial, remnants of a time when the central imperative was to electrify the country. Now it's electrified. We need the utilities to get in the demand reduction game.
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Comments
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Matt G Posted 3:08 am
23 Aug 2007
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JMG Posted 3:49 am
23 Aug 2007
People have a hard time remembering that it makes no more sense to personify a corporation than it does to personify a toaster. Environmentalists like to learn about corporate leaders and they thrill to their many statements in favor of environmental sanity--while failing to notice that the personal qualities that make a CEO attractive or repellent have essentially zip to do with what the corporation does.
An investor-owned utility does not have a conscience, morals, or ethics; in every respect they are like sharks: unintelligent beings perfectly evolved for their role, relentless in pursuit of their goals, and extremely destructive if not carefully constrained.
Save the world: Reduce greenhouse gas emissions 5% annually.
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pbearden47 Posted 4:15 am
23 Aug 2007
I live in Georgia which has had 4 weeks with temperatures hovering around and above 100 F. Today we're breaking the record for 100 degree days in a summer season, and this is what our state officials spend time doing and concluding.
I need someone like dear old Dave to send me a letter to the editor, short and sweet, with a few salient bullet points. Then send me something to send to my incredibly stupid state government.
We can't even walk outside, and they still think it's all hysterical hooha.
Aunt Phyllis
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GreenMom Posted 4:53 am
23 Aug 2007
If you really study the utility sector and the climate crisis long enough, you wind up thinking "Well, I guess we have to make the bastards rich for doing the right thing, or we'll just watch them get rich while they destroy the world."
JMG, you are exactly right about that. The North Carolina legislature will do the right thing environmentally, but only if Duke Energy and Progress Energy agree -- and the way they get them to agree is of course to allow them to pass the costs on to us, the ratepayers. This is what happened with the Clean Smokestacks law in 2002 (SO2 and NOx controls on power plants), and this is what's happening again here with the renewable portfolio standard that'll hit the governor's desk this fall.
It's a price I'm resigned to paying as a Duke Energy ratepayer, because environmentally there's really no other choice. It's a darn sight better than what's going on down there in Georgia, apparently.
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Sean Casten Posted 4:59 am
23 Aug 2007
I should clarify that decoupling is a good thing - but only because it is politically easier than doing a really good thing & modernizing our electric regulatory paradigm. We have to take Jim Rogers' recommendations with a grain of salt in that light, because decoupling - while good for efficiency - is also a cementing of the status quo in a way that insulates utilities from earnings volatility. Nice to have, but let's not saint the guy for asking for it.
Consider that we could get to the same point by simply saying "what societal benefit is possibly created by a for-profit monopoly?" An investor owned utility isn't a business in any normal sense - it's a civil servant with the right to charge a markup for their service. And while they've done a fine job at providing reliable power (and delivering returns to their shareholders), they have done a disastrous job at doing so in an environmental or economically responsible manner - they burn twice as much fuel today to make a unit of useful energy as they did in 1910, meaning that we massively overpay for electricity simply so that we can massively over-emit carbon.
So yes, let's consider decoupling - but even if the band-aid stops the bleeding, let's not lose sight of the underlying disease.
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justlou Posted 5:05 am
23 Aug 2007
"At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly."
Some of this sounds OK but some of it sounds really messy. What if you have already done a lot of efficiency improvement on your own dime? Are you going to be reimbursed by the utility for what you already spent? Or are you going to be subsidizing efficiency improvements for others who have not been as frugal? Seems like everyone is going to be paying higher rates. And if you have installed high efficiency equipment or built a really super efficient home, do you want the utility getting any more of their hooks into you? So, even if you have a choice of opting out it sounds like you are still going to be paying for other users. Kind of like paying taxes.
Also there seems to be a bit of the utilities having the customer over the barrel -- do it this way or we'll build another dirty power plant. This stop us before we kill again logic seems to be getting more common among our corporate benefactors. This may also an attempt by industry to preempt government (us) from doing the same things. And they'll use these arguments that they are helping to improve efficiency as ammo to justify new power plant construction, no matter what they say. This will be part of their future bargaining position for new coal plants. So, I am still searching for the pony here.
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JMG Posted 5:28 am
23 Aug 2007
Ultimately--and by that I mean, toot sweet, we need to start paying utilities only for services actually delivered to the user (comfort, light, warmth, food cooked, refrigeration, etc.), rather than paying them based on the return on investment model that propels them to endlessly lust after new monster coal burners.
It's going to be tough to do at first because we're conditioned, practically from birth, to pursue discounts for buying in bulk and for enjoying our gains as we pay less per unit the more we buy --- a decoupled service system is about forcing prices to tell the environmental truth despite the fact that, by our autistic economic models, people who use more pay less to do so.
Your concern about people who've already taken efficiency steps is likely overblown. Right now you are punished for consuming less by having to pay a higher per-unit cost for anything you buy from a utility -- your wasteful neighbor has a positive incentive to use more. In a service model, where the utility is only paid for services you take (rather than by units of power it took to provide those services), the less you take, the less it costs you.
Essentially, what we need is to get the capitation model OUT of health care (HMOs) and INTO utiity services. That is, we need USPs -- utility service providers -- firms that get a fixed rate for services (perhaps based on sq. footage of the residence) and then have to provide all services to that address for that fixed fee.
It gets sticky when you realize how much consumer behavior change this will require--right now, Americans treat fixed utility bills (such as rent that includes utilities) as a license to waste. So it requires some clever thinking about how to make sure the residents share in the savings from using less---that's why we need competition among the USPs.
Save the world: Reduce greenhouse gas emissions 5% annually.
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JMG Posted 5:34 am
23 Aug 2007
Save the world: Reduce greenhouse gas emissions 5% annually.
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Sean Casten Posted 6:09 am
23 Aug 2007
Apropos of your point, this has made gas utilities much more receptive to the idea of decoupling than electric utilities, since gas use has been falling - as you cite - but electric use keeps growing. For integrated utilities that have both gas and electric arms, you can more or less predict their opinion of decoupling based on the proportion of their profits that are derived from their gas & electric units. This is not a southern utility issue though, or even a global warming issue (at least directly) as much a gas/electric one.
(As an interesting aside, the model that Regulatory Assistance Project has developed includes a provision that would correct for this by still allowing electrics' returns to increase by a factor with rising sales. Which, while mathematically accurate, has the awkward impact of formally acknowledging a reality that both the utility executives and utility regulators would prefer to keep private, and their model has therefore not been as fully embraced as it might otherwise be...)
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justlou Posted 6:19 am
23 Aug 2007
I don't get your concept of utility service providers. All services for a fixed fee?
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odograph Posted 6:23 am
23 Aug 2007
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JMG Posted 7:30 am
23 Aug 2007
A while back, while watching large utilities resist conservation and doing anything to respond to the climate crisis, I had a sudden inspiration--until we can get rid of cost-based regulation entirely (paying utilities to be inefficient is what it amounts to), we should at least reward what we DO WANT preferentially over what we do NOT want (coal). So I proposed that we should just bite the bullet and come up with a scheduled allowed-rate-of-return that varied according to power source, rather than a single, overall utility ROR.
In other words, I proposed that if we had been giving Megalithic Utilities Inc. X% per year allowed return, we simply reschedule it so that the rate of return is on a curve according to gms of carbon released per kWh (with an equivalent factor so that the electric utility could do combined heat and power and get credit for replacing natural gas usage as well). Quite simple: the utility's rate of return depends on its carbon profile, whether that be from power it makes or buys; the lower the carbon profile, the higher their allowed rate of return.
Save the world: Reduce greenhouse gas emissions 5% annually.
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sunflower Posted 7:40 am
23 Aug 2007
It is simple. Shut down coal.
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odograph Posted 7:50 am
23 Aug 2007
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