Thursday, June 26, 2008

CHP Gains Stature as Efficiency Measure


By Elisa Wood

June 19, 2008

Combined heat and power is a form of alternative energy that has been available for many decades. Yet it’s remained below the radar screen in policy discussion about our energy future.

However, it appears to be gaining new stature as lawmakers and regulators seek ways to make energy use more efficient.

Also called cogeneration, the technology creates both electricity and heat in one unit. Most power plants throw away two-thirds of the energy consumed in production. But CHP plants use the excess energy to heat, cool or humidify the building. As a result CHP reclaims one-third of the energy that would otherwise be lost.

In addition, CHP plants are usually built very close the factory, hospital, college or office building they serve. So electricity is not lost as it travels long distances over transmission lines, as is often the case with large, central power plants that serve many consumers and businesses.

Taking notice of CHP’s virtues, some states have created portfolio standards that encourage its development. The standards require that utilities use a certain amount of alternative energy to meet efficient or clean energy targets. This approach has been highly successful over the last several years in spurring development of wind, solar and other green energy sources in the US.

Now eight states allow part of the requirement to be met through installation of CHP. In Connecticut, for example, a factory, school other large energy user can install CHP to meet its heat and power needs and receive a kind of tradable credit for doing so. The energy user then can sell the credit to a utility that needs to meet state requirements.

In addition to Connecticut, the eight states are Colorado, Hawaii, Nevada, North Carolina, North Dakota, Pennsylvania, and Washington. These states should serve as interesting testing ground to see if portfolio standards accelerate use of CHP as they have wind and solar energy. We encourage those interested in CHP to check out the Environmental Protection Agency’s CHP partnership, an agency that is playing a strong role in encouraging use of the resource. See http://www.epa.gov/chp/

How Long Will Efficiency Be the Favored Choice?


By Elisa Wood

June 26, 2008

Energy efficiency creates an odd sort of market. Nothing (lack of energy use) competes for customers against something (energy generation).

There is no free lunch and even nothing, energy efficiency, costs something. But for now it is cheaper than its main competitor, the power plant.

In fact, it is often three times less costly to install efficient light bulbs, better insulate buildings or pursue other forms of efficiency than to buy power. Specifically, energy efficiency costs about 3 cents/kWh compared with the 9 cents/kWh it takes just to cover fuel costs from a baseload gas-fired generator, according to a June 19 presentation on power prices by the staff of the Federal Energy Regulatory Commission http://www.ferc.gov/legal/staff-reports/06-19-08-cost-electric.pdf.

Given its cost competitiveness, efficiency is increasingly called upon as a “first fuel.” A growing number of states require that utilities use as much efficiency as possible – reduce consumption as much as possible — before building new plants or signing power deals.

As a result, the energy efficiency business is booming. And it is beating power plants as the favored alternative not just because it is cheaper; it also is cleaner, and consumers like it better. As Suedeen Kelly, FERC commissioner, said: “There is decreasing enthusiasm for building and an increased enthusiasm for demand-side resources.”

Indeed, since January 2007, 50 coal plants have been canceled or postponed; only 26 remain under construction. Meanwhile, state after state revamps energy policy to make efficiency a priority. The potential exists for the US to have an economy by 2030 that is 70% larger than today’s, but uses no more energy than it did in the mid-1990s, according to the American Council for an Energy-Efficient Economy http://www.aceee.org/tstimony/Laitner%20Senate%20Testimony%20June%2025%202008.pdf.

Of course, at some point the nation must build new power plants to meet growing demand. Nothing cannot replace something forever. A growing economy needs energy.

So, how long will the efficiency industry boom? How long will efficiency hold this favored position in the marketplace? That’s not easy to answer. But one thing seems apparent. Energy prices are not going down any time soon. The FERC report warned that we appear to be at “the beginning of significantly higher power prices that will last for years.” If this proves true, energy efficiency’s run as the favored fuel has just begun.

Thursday, June 12, 2008

Overcoming the dirty secret of clean energy

By Elisa Wood

June 12, 2008

A dirty secret of clean energy is that being green can be an expensive pursuit. The cost of solar panels and hybrid cars is declining, but they remain too expensive for many people. As a result, the green energy movement is often viewed as an upper-income trend in the United States.

But a recent survey indicates energy efficiency may be a more egalitarian product.

The intent of “The 2008 Energy Costs Survey,” released this week by the Energy Programs Consortium and the National Energy Assistance Directors’ Association, is to show the sacrifices made by low, moderate, and middle-income households because of rising energy costs. Households are cutting back on food, medicine, clothing, heating and cooling, education and eating out. And they are paying their bills later, according to survey of more than 500 households in May. http://www.neada.org/

But, the data also reveals an interesting phenomenon about energy efficiency. Even low-income earners invest in appliances and home improvements that reduce energy costs.

In fact, those in the lowest income bracket were most likely to purchase an efficient air conditioner. Eighteen percent of the lowest income households made such purchases compared to 13-14% of those with middle and moderate incomes. Poor households edged close to wealthier ones when it came to installing efficient heating (11% compared with 15% of those richer). In purchasing efficiency appliances, 15% of low-income households reported doing so.

Having 11% to 18% of low-income households invest in EE may not sound like a lot. But compare it to how much solar energy we consume. Only 1% of the electric power used last year in the United States came from solar energy, according to the federal Energy Information Administration -- and that includes business use http://www.eia.doe.gov/fuelrenewable.html.

If 11% of households installed solar panels, renewable energy advocates would be ecstatic and many of our energy woes would ease. Clean energy advocates often lament how hard it is to bring renewable energy to the mass market. This is a problem efficiency products do not appear to face. It is easy and not overly expensive to become an EE consumer. This is one reason why EE advocates may be right when they say the efficiency explosion ramping up in the US will easily dwarf any other energy trend.

Visit energy writer Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets newsletter and podcast.

Thursday, June 5, 2008

Are the Number Crunchers Forgetting About Energy Efficiency?

By Elisa Wood

What is good news for the environment is often bad news for the economy. Or least that’s the conventional wisdom.

The thinking is bolstered by government findings that industrial activity and Gross Domestic Product will drop if the nation adopts a leading proposal before Congress to reduce greenhouse gases. http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html

But the number crunchers may be forgetting an important input: Energy efficiency. So says a report released this week by the American Council for an Energy-Efficient Economy.

Many states are aggressively pushing energy efficiency as a way to reduce consumption of fossil fuels, which in return leads to greenhouse gas reductions. Energy efficiency also can cut back energy costs, create jobs and grow the GDP, says the ACEEE report. http://www.aceee.org/press/e084pr.htm.

So far national policymakers are failing to recognize the role energy efficiency plays, as they discuss rising energy costs and climate change.

“As it becomes more apparent that climate change legislation must be enacted, it is critically important for policymakers to be informed about energy efficiency's contribution to the solution," says Vanessa McKinney, co-author of the report with John A. “Skip” Laitner. "It is very clear that policymakers are not getting the full picture when energy efficiency's potential is omitted from policy assessments."

The report looks at what will happen if the nation reduces energy consumption 20% to 30% through more efficient products and practices. The energy efficiency industry will likely add 500,000 to 1.5 million jobs by 2030. The GDP would grow, not decline, by 0.1%.

If energy efficiency is so good, why not add even more? Interestingly, the report also warns, by way of footnote, that there can be too much of a good thing. “Presumably one can push the savings too hard and too fast so that negative impacts will, indeed, begin to emerge.” Hence the report authors offer a “cautionary note about appropriate choice of the timing, technologies and policy instruments.”

It’s unclear at what point efficiency becomes a cost burden, says the report, but a 20% to 30% goal seems to still produce economic benefit.

So the challenge for state policymakers is to find the proper pacing. Adding efficiency incentives can increase electricity rates. That’s why in many states, like New York, regulators are undertaking careful study before offering new subsidies. Too much too fast will create ratepayer backlash. But carefully planned efficiency programs offer benefits that are hard to dispute, an alignment of the unlikely bedfellows, economy and environment.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free Energy Efficiency Markets newsletter and podcast.