Thursday, March 13, 2008

Is Today's Interest in Efficiency a Blip?

By Elisa Wood


Political leaders push energy efficiency when electricity rates spike, then drop it like a hot potato when prices fall. So how long will the current interest last?

Three reports out this week indicate power prices will not ease any time soon. Indeed, forces are in place to only push costs higher.

One force is the renewable portfolio standard, according to Standard & Poor's Ratings Services in “The Race for the Green: How Renewable Portfolio Standards Could Affect U.S. Utility Credit Quality.” Half of the states, representing 40% of electric load, now require that a percentage of power come from green energy. S&P warns that the requirement is moving “squarely away from least-cost procurement and toward acquiring often above-market renewable generation in unprecedented quantities.” The standards are in their infancy, so the price impact is still to come in most states, says S&P.

Meanwhile, the Natural Gas Council sent a report to Congress warning that expected restrictions on carbon emissions are likely to drive up demand for clean-burning natural gas by 20%. This is not good news for electricity prices. Most new power plants in the US are built to burn gas. Higher demand for gas could easily mean higher prices for electricity. http://www.ngsa.org

And finally, Oak Ridge National Laboratory found in a study that plug-in hybrid cars may put more pressure on the electric grid than previously thought. The nation may have to build as many as 160 new power plants – a costly endeavor – if everyone plugs in their cars for recharge right when they get home from work. http://www.ornl.gov/info/press_releases/get_press_release.cfm?ReleaseNumber=mr20080312-02

These price pressures, combined with the growing treatment of efficiency as a market commodity--not a subsidy-driven service -- indicate efficiency may have finally found a solid foothold. It may be a blip no more.

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

Sunday, March 9, 2008

Negawatts Beat Megawatts in New England

By Lisa Cohn

Energy efficiency advocates have argued for years that a negawatt is cheaper than a megawatt. That is, it is less costly to install energy efficiency equipment and reduce consumption than to build new power plants.

In New England, the premise was recently tested, and the results should hearten anyone in the efficiency business.

ISO New England invited demand-side resources, like energy efficiency or demand response projects, to compete on equal terms against power generation projects to fill the region’s need for electric capacity in 2010/2011. The test took place during the wholesale market manager’s first forward capacity auction. After three days of bidding, demand-resources stood up handily to generation. In fact, ISO-NE announced at the close of bidding in mid-February that it had selected new efficiency-related measures that will create 1,188 MW of energy savings, but only 626 MW of proposed power generation.

What does this mean for the efficiency industry? First, it says that ISO-NE, charged with keeping the lights on in the six-state region, trusts demand-side resources to help with the job. Second, efficiency measures can compete on price with generation. (Both will receive the minimum bid price of $4.50 per kW-month for serving the grid.) Third, the auction created a new status for efficiency in the region. For years, efficiency has been treated as a subsidy-driven pubic service. In the ISO-NE auction it became a commodity.

Of course, an electric grid cannot run on efficiency alone. Power plants must be built at some point. But how many power plants can efficiency supplant? The Alliance to Save Energy says that efficiency could cut growth in energy demand by half over the next 15 years. To accomplish that goal, other regions need to follow New England’s lead and give efficiency the same financial status as power supply. Only then can the negawatt prove its true worth against the megawatt.

Lisa Cohn is a freelance writer who specializes in energy. Subscribe to her free Energy Efficiency Markets Newsletter by visiting www.realenergywriters.com