Efficiency is cheap, but will it sell?

By Elisa Wood

September 24, 2009

Expect to see this number a lot in energy discussions over the next few years: 2.5 cents/kWh. It is the average cost of energy efficiency, a figure pegged this week in a new report by the American Council for an Energy Efficient Economy. http://www.aceee.org/press/u092pr.htm.

This number is big news because it is so small. As a resource, energy efficiency beats out all conventional power sources on price. (See chart below.) Moreover, it’s a price that has been dropping. Five years ago energy efficiency cost 3 cents/kWh.

But just because something is cheap, doesn’t mean people will buy it. How much energy efficiency will make it into the nation’s energy shopping cart?

Efficiency boomed in the early 1990s, but then busted later in the decade when deregulation allowed many utilities to shed their efficiency programs. It is resurging now, part of push by state and federal policy makers to green and ‘smarten’ energy supply.

Most utilities do not make money on efficiency, and this is part of the reason it busted in the late 1990s. Perhaps as important, efficiency’s branding was off. It was seen as an extra, a nicety to pursue out of goodwill when a utility or state had some extra money.

ACEEE and other efficiency advocates are trying to reshape the image. They refer to efficiency as a fuel – just like wind, sun, coal, natural gas, oil. And they want efficiency to be the ‘first fuel.’ This means that when a utility is planning its energy supply, it first applies as much efficiency as is cost effective and plausible, before it builds more expensive new power. Some eastern states are already using this planning concept. In addition, many states have set specific energy efficiency goals, some very aggressive.

That is why ACEEE’s 2.5 cents/kWh becomes so important. It is a kind of marker against which other resources will find themselves competing more and more in policy planning.

Meanwhile, an increasing number of states are decoupling utility profits from kilowatthour sales or instituting other financial incentives that inspire utility support for efficiency.

Of course, our economy cannot prosper on efficiency alone, but many studies indicate we still have a lot of waste in the system. So as an energy planner, if you were confronted with increased demand – and are not dealing with policy or system issues that require generation or transmission as a solution – which of these would you pursue first?

Resource	Cost
Energy Efficiency	1.6 cents/kWh to 3.3 cents/kWh
Pulverized coal	7 cents/kWh to 14 cents/kWh
Combined cycle natural gas	7 cents/kWh to 10 cents/kWh
Wind energy	4 cents/kWh to 9 cents/kWh

Credit: Cost figures from ACEEE, “Saving Energy Cost Effectively: A National Review of the Cost of Energy Saved through Utility Sector Energy Efficiency Programs,” September 2009, http://www.aceee.org/press/u092pr.htm.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter

Now where did I put that energy efficiency?

By Elisa Wood

September 17, 2009

Sort of like my car keys, “the forgotten memory doesn’t disappear – we just can’t remember where we put it.” So says Jonah Lehrer, one of my favorite bloggers and contributing editor at Wired.

What’s memory got to do with electric power? It appears we keep misplacing energy efficiency. When critics – even sometimes supporters – talk about reducing greenhouse gases, they forget to calculate whether or not energy efficiency can lower the price tag.

Could it be, then, that carbon dioxide reductions will cost society less than we forecast?

The American Council for an Energy Efficient Economy contends that is the case. “Much of the debate on federal cap and trade legislation is focusing on the cost of compliance. Prior studies either do not account for energy efficiency provisions in the legislation, or due to a shortage of time and other resources, address only a few of the energy efficiency provisions,” says ACEEE in a new report, "Energy Efficiency in the American Clean Energy and Security Act of 2009: Impacts of Current Provisions and Opportunities to Enhance the Legislation."

The findings run contrary to conventional thinking about climate change costs. The climate bill passed by the US House in June won’t cost us money; it will save us money, according to ACEEE.

The legislation would require that 20% of our energy supply come from green energy — 8% of the 20% can come specifically from energy efficiency. It also ramps up buildings codes and appliance standards, and takes other action to decrease energy use.

These efficiency measures would save the average household $220 by 2020 and $486 by 2030 – more than cap and trade costs.

Even more savings are to be had – as much as $832 per household by 2030 — if the Senate makes some changes in the bill, according to ACEEE. Specifically, the organization says Congress should:

• Mandate that 10% of our energy come from efficiency
• Direct one-third of electric utility allowances to energy efficiency
• Extend to 2030 the 9.5% allowance revenue allotted to state energy and environmental development funds.

Exactly how much energy would we save? If the Senate makes these changes to the bill, we’ll save as much energy by 2030 as US households now consume in a year, says ACEEE. The energy savings are equivalent to what 512 power plants produce at their peak production. A big number, a kind of elephant in the room, one would think. But we’ll see if it gets lost as Congress works on climate change in the coming months.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter

Are you eligible for a manufacturing tax credit?

By Elisa Wood

September 10, 2009

The United States has been generous with tax credits for energy production. But until now, it’s been somewhat miserly about giving breaks to those who make the equipment that makes the energy – or saves it.

That’s changed with creation of the Advanced Energy Manufacturing Credit (MTC), part of the federal stimulus package. The 30% tax credit makes $2.3 billion available for new, expanded, or re-equipped domestic manufacturing facilities that produce clean energy equipment.

But with the deadline for applications right around the corner – September 16 – manufacturers are perplexed by eligibility requirements and wondering if they qualify.

Bridget Hust, partner with the law firm Faegre & Benson, who has been pouring over the rules on behalf of clients, says application requirements are “all over the map.” She suggests that if you think you might be eligible, then apply. It may not be clear exactly who will qualify until mid-January when the Internal Revenue Service accepts or rejects applications. And even those that are rejected may have a shot at revising and resubmitting their proposals, she said. The Feds plan to keep giving out money until the $2.3 billion is exhausted.

The credit seems particularly wide open for technologies that reduce carbon dioxide emissions – even the more obscure approaches. Hust says she is particularly eager to see how the tax credit affects manufacturing of advanced transmission, smart grid and energy storage products, since they may be key to integrating more wind power into the system.

The DOE says the credit is available for:

• Technologies that create energy from renewable resources (sun, wind, geothermal and other renewable resources)
• Energy storage technologies (fuel cells, microturbines or other energy storage systems used in electric vehicles)
• Advanced transmission technologies that support renewable generation (including storage)
• Renewable fuel refining or blending technologies
• Energy conservation technologies (advanced lighting, smart grid)
• Plug-in electric vehicles & vehicle components (motors, generators)
• Property to capture and sequester carbon dioxide
• Other property designed to reduce greenhouse gas emissions

The manufacturer may not need the credit, particularly in a down economy where many lack taxable income. But like the solar and wind production tax credits, it could draw third-party investors in need of a tax break who will partner with the manufacturer.

See Hust’s white paper for more details http://www.faegre.com/showarticle.aspx?Show=10112, or go to http://www.energy.gov/recovery/48C.htm

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter

Energy sprawl: The next worry?

By Elisa Wood

September 3, 2009

Energy facilities take up space. Some, like wind farms, take up a lot of space. In fact, new energy production will consume more land than can be found in all of Nebraska by 2030, according to a recent report by The Nature Conservancy.

This will create what the report describes as “energy sprawl,” a term I’m guessing we will start to see more in the legal briefs by NIMBYists. It’s a flashpoint phrase. Americans don’t like sprawl of any kind — although we appreciate the convenience it affords. Nice that the super store is only five minutes away; not so nice to give up the paradise that became the parking lot.

Unfortunately, cleaner energy often means greater energy sprawl, the report says. The more aggressively we pursue greenhouse gas reduction, the more acreage we are likely to use. Biofuels, in particular, gobble up a lot of land because they use farm crops.

The report is not suggesting we give up on green energy. On the contrary, it appears to be more a matter of choosing energy sites with care. Chief among the report’s recommendations is pursuit of more energy efficiency. Of all energy choices, efficiency has the lowest impact on land use. For every terawatt hour of electricity use avoided, we avoid sacrificing 4.7 to 17.8 square miles, says the report.

After efficiency, the next three best ways to achieve emissions reductions, but limit energy sprawl, are to:

*Build power plants on brownfield sites as much as possible

*Create flexible cap and trade rules, which allow for emissions reductions with certain low-land impact technologies, such as nuclear power.

*Site plants carefully, in areas where they have minimum impact on habitat

The report also suggests that we make energy sprawl a new metric in energy policy, another issue to weigh when debating which resources to build. Is this a good idea? I’d be interested in hearing what readers think. On the one hand, clearly it’s important to protect habitat. On the other hand, siting power plants already is difficult. And if we don’t produce enough electricity, the consequences are serious. Power shortages drive up prices, undermine our economy and disrupt our well-being.

I’m looking forward to hearing your thoughts. And I’m guessing they may depend, at least in part, on how close you live to that piece of ‘Nebraska’ likely to disappear.

See the full report at http://www.plosone.org/article/info:doi/10.1371/journal.pone.0006802

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter