On-bill financing: Why isn’t everybody doing it?

By Elisa Wood
December 15, 2011

If someone told me they could improve the efficiency of my computer so that it operates quicker, at no extra cost to me, I can’t imagine I’d turn them away. Yet, the energy efficiency industry offers a similar option for homes and businesses and at least so far, consumers aren’t flocking to the programs.

On-bill financing gives customers the ability to finance energy efficiency improvements made to their homes and businesses at no upfront cost. Customers pay for the insulation, lighting, new heating system or other efficiency measure over extended terms on their monthly utility bills. Typically, the savings from the efficiency improvement offset the cost, so the customer sees no increase in the monthly utility bill. You get a building that uses less energy and yet experience no financial pain in doing so.

There is no catch here. It sounds like a good deal for the consumer and early reports indicate it is. So why aren’t consumers interested?

A new report by the American Council for an Energy-Efficient Economy takes a close look at 19 on-bill financing programs offered in 15 states. In many cases, less than 1 percent of eligible customers choose to participate in these programs.

The concept is just beginning to take hold, so the problem may simply be lack of awareness, says Casey Bell, lead author of the report.

“The growth of these programs depends on a number of factors. We are seeing a trend where they are emerging in more states. While I profiled 19 programs, we found 31 in 20 different states. A lot of these programs are still new, and many are still in the pilot phase,” Bell said.

Indeed, when it comes to energy, it’s not easy convincing consumers to accept new ideas, even those that directly benefit them, as behavioral scientists made clear at an ACEEE-sponsored conference on energy use and behavior in Washington, DC earlier this month. Even if they read the brochure from their utility, watch a TV commercial and spot a sign on the bus, they still are slow to respond. What does convince them? A chat with a neighbor who tried the program, a push by their church, community or social group, a direct knock on the door by a real live person.

So to improve participation levels, it may be matter of more utilities offering more on-bill financing programs and then being patient; it may take some time for participation to snowball.

Will this happen? Can you expect to see your utility offer on-bill financing any time soon? The ACEEE report points out various reasons utilities are hesitating. Not surprisingly, money is a big issue. Utilities see less opportunity to finance an on-bill program, especially now that government funds are dwindling.

Some of this pressure can be relieved by attracting more third-party capital to programs, according to the ACEEE report. This approach has potential because investors perceive utility revenue as low risk; consumers tend to prioritize paying their utility bills, since non-payment leads to shutoff of service. So, some utilities are exploring the possibility of bundling program loans with other financial products and creating a secondary market for capital.

“There is a lot of opportunity to learn from experience, and tapping into private sector sources of funding is likely critical for scalability,” Bell said.

In other instances, utilities finance on-bill programs through Community Development Financial Institutions or by leveraging government loan through agencies like the USDA’s Rural Utility Service.

So it’s going to take some experiment and innovation for on-bill financing to achieve scale. As if often the case, financial innovation is as game changing as technological advancement. We may have the smart boxes to revolutionize the way we use energy, but if utilities and consumers can’t pay for them, they offer little good.

The solar energy sector provides a good example. For years we saw little installation of solar panels on commercial buildings, despite enormous information produced by the industry about solar’s value. Then, entrepreneurs in the last decade came up with the idea of solar leasing and solar power purchase agreements. As a direct result, solar panels began sprouting on the roof tops of stores, car dealerships, office buildings and other commercial enterprises. The lesson? In our contemporary energy economy, promise finally leads to practice – when the financing is right.

Elisa Wood is a long-time energy writer. Follow her on Facebook at Energy Efficiency Insights.

Fixing people, not just buildings

By Elisa Wood
December 7, 2011

Electric utilities operated under a rarified business model for decades. Their customers were captive so they rarely had to think about what motivated them to buy. New government energy efficiency mandates have changed that, and done so with an ironic twist. Now utilities must figure how to get their customers to refrain from buying.

It’s not easy persuading people to stop using something they like as much as electricity. But behavioral science is coming to the rescue – or at least trying to – as was apparent at theBehavior, Energy & Climate Change conference held in Washington, DC, November 29 through December 2. About 650 people attended, many of them scientists, university researchers and college students, ready to tackle energy efficiency’s biggest hurdle: human nature.

“The challenge that we have is not just to fix the buildings; we have to fix the people who live work and play in those buildings. We have to fix us,” said Brian Keane, of SmartPower.

While behavioral scientists and economists have only begun their work, it’s already clear that utilities and government programs approach energy efficiency wrongheaded. They tend to talk about why energy efficiency is good for them, not the customer, why it makes the electricity grid function better or achieves government’s environmental goals.

The makers of Tide laundry detergent don’t tell customers they should buy the product because it makes the company lots of money, pointed out Lisa Skumatz, a Colorado-based economist. If the energy industry continues to sell energy efficiency as good for utilities, good for the environment, good for government, it will reach only a very narrow audience.

Utilities also must stop listening to what people say and instead focus on what they mean. But how do you do that? Jane Hummer of Navigant Consulting demonstrated how to analyze comments people post online to get at what they really think. “Consumers are increasingly narrating all aspects of their lives online,” creating “a free focus group that you can analyze at your leisure,” she said.

Don’t take what they say online at face value – after all many hide behind anonymity and therefore tend to speak in extremes – but “get at the underlying sentiment,” she said.

Using a spreadsheet and key word search, she analyzed comments posted from articles about smart meters in the Wall Street Journal and New York Times. In some states, consumers oppose smart meters, fearing they harm health and impinge on a homeowner’s privacy. Funny thing about the privacy concerns…some of the people who write that they are worried about privacy in the same post reveal details of their lives on line: their political affiliation, where they live, what they do. So is privacy really their concern?

Hummer pointed out that utilities can use the information gleaned from analyzing online comments to hone media campaigns and pre-empt hyperbolic hysteria. If consumers say they worry that smart meters may subject their children to radiation, a utility might launch a campaign about the health dangers of coal-fired plants and explain how smart meters lead to plant retirements.

Sometimes achieving better energy efficiency is just a matter of explaining to people what they should do – in good, clear language. Alan Meier, of the Lawrence Berkeley National Laboratory, analyzes what he calls “folk labels,” instructions on how to operate lighting and appliances, sometimes provided by the manufacturer and other times scribbled by well-meaning building occupants trying to explain light switches. What he has found is a mass of confusion. “We need to come up with some standardization soon,” he said.

Will the behavioral scientists succeed in a world where consumers rarely think about electricity? They are optimistic. Some point to the decline in cigarette smoking as an analogy; it’s no coincidence that smoking fell 20% from 1998 to 2005. The behavioral scientists were at work.

For more information on the frontier of energy and behavioral science, listen to Energy Efficiency Market’s free podcast, “What motivates consumers to use less energy,” with Susan Mazur-Stommen, director of the Behavior and Human Dimensions Program for the American Council for an Energy Efficient Economy, which sponsored last week’s conference along with the California Institute for Energy and Environment at the University of California and the Precourt Energy Efficiency Center at Stanford University.

Elisa Wood is a long-time energy writer whose work can be found atwww.RealEnergyWriters.com

Know true costs; Save real energy

By Guest Blogger Kara Saul Rinaldi

November 30, 2011

More than half of the states in the nation have created programs to increase the energy efficiency of homes through a comprehensive approach that looks at all opportunities to save energy, from insulation to upgrading heating and cooling systems. When taxpayer and ratepayer dollars are used, it is essential that these programs are reviewed with a cost-effectiveness test that provides policymakers with adequate knowledge about the programs’ effectiveness. Unfortunately, in many states, the testing system is deeply flawed. The way cost-effectiveness tests are currently applied frequently hinders the design and implementation of residential energy efficiency programs, particularly programs intended to support comprehensive energy efficiency upgrades.

For three decades, the Total Resource Cost (TRC) test has been the principle screening tool that regulators have used to assess the cost-effectiveness of energy efficiency programs and make decisions regarding the use of ratepayer dollars to support the programs. Unfortunately, the way the TRC test is applied often leads to support for single-measure programs rather than whole-house retrofits – despite the fact that the whole-house approachactually delivers deeper and more cost-effective energy savings. Because of this, the TRC test, when poorly applied, impedes the realization of significant, cost-effective energy savings through state-run energy efficiency programs.

In general, whole-house programs do not tend to score as well in the TRC test as single-measure programs that encourage highly cost-effective measures, such as lighting. This is due in part to the different ways in which the TRC test is implemented, some of which cause particular difficulties for whole-house programs. The TRC test typically includes participant contributions to the cost of an energy efficiency upgrade, resulting in a poor score for a highly leveraged whole-house program – even if leveraging public dollars with private investment is generally seen as desirable in other contexts. On the flip side, the TRC test fails to capture the full benefits of energy efficiency, such as increased comfort, which are frequently significant, although difficult to quantify. To make matters worse, the TRC is sometimes used to screen each individual measure or project, which might sound cost-effective in practice, but creates confusion about what jobs are eligible, decreases customer interest, and adds to a program’s administrative costs.

New York, which for years has been a leader in home performance programs, recently implemented a rule requiring application of the TRC at the measure-level. As a result, the program’s output is declining after years of steady growth. Elsewhere, the application of the TRC has discouraged the creation of strong whole-house energy efficiency programs, or has forced program administrators to develop create programs designed to pass cost-effectiveness tests, rather than to deliver real energy savings to homeowners.

So what should be done to ensure the cost-effectiveness of energy efficiency programs across the country is more accurately evaluated?

Policy-makers and commissioners should adopt a different tool, the Program Administrator Cost (PAC) test, which compares the cost of reducing energy consumption to the cost of supplying an equivalent amount of energy. The Program Administrator Cost test makes sense as the primary screening tool for energy efficiency programs because it is relatively simple to administer, and provides a good measure of whether an energy efficient program delivers savings at a cost comparable to the cost of generating and supplying energy.

If the PAC test is not adopted as the primary test, a set of “best practices” should be used to administer the TRC test. Examples of best practices include testing cost-effectiveness on a program-wide or portfolio basis (not at the level of individual projects or measures), and including all benefits as well as all costs.

It is clear that the current process of evaluating the cost-effectiveness of energy efficiency programs needs fundamental change. The existing cost-effectiveness tests, as currently implemented, frequently undermine important public policy goals, such as job creation, carbon reduction, and energy independence. We need to stop undermining these important policy goals and ensure that policymakers have the right information, thanks to the right testing, to help homeowners save energy.

For a more detailed report on these issues, please see the National Home Performance Council’s new report entitled, Getting to Fair Cost-Effectiveness Testing: Using the PAC Test, Best Practices for the TRC Test, and Beyond.

Kara Saul Rinaldi is the Executive Director of the National Home Performance Council, a 501-c3 dedicated to encouraging improved home energy performance using a whole-house approach. For more information on NHPC, please call (202)463-2005, or visitwww.nhpci.org. She is a guest blogger for Energy Efficiency Markets newsletter. Pick up the free newsletter at www.RealEnergyWriters.com

New direction for that federal agency whose name I can’t remember

By Elisa Wood
November 17, 2011

The US Department of Energy’s reputation is now enshrined as the agency that Republican presidential contender Rick Perry wants to dismantle – if only he could remember its name. But a recent report by the American Academy of Arts and Sciences offers a different direction for the federal agency, one that may not make it more memorable, but a bit more people-centered.

The academy tackles a problem that beguiles the energy industry. Now that we have the technology that lets householders take more control of their energy destiny, how do we inspire them to do so?

The question is central to energy efficiency efforts because smart technologies, such as home energy displays and cell-phone controlled thermostats, offer new ways to save energy. A lot of energy – and therefore money – is at stake. Homes account for about 30–40 percent of US energy consumption. So cutting household energy use by just 20 percent would reduce total national energy use 7.5 percent, according to the report.

We can blame the energy industry for our lack of interest in home energy management, or credit the industry, depending on how you look at it. Utilities have done their job too well. Energy flows invisibly into our homes. Or as Steven Koonin, DOE undersecretary for science, says in the report: “One of the great triumphs of modern society is that we’ve hidden the infrastructure. Nobody really understands where electricity, gas, or water come from.”

Now that we want people to be aware, how do we make energy infrastructure visible, at least psychologically?

The academy says it’s time for the energy industry to seek answers within the social sciences, a realm it’s rarely delved into. Drawing from a two-day workshop the academy held in May, the report highlights several places were human nature and energy realities collide.

• People don’t trust government or institutions. In fact, trust in almost every major American institution has declined since the 1960s. But our trust can be re-won, albeit not easily, if we’re invited to participate in the creation of policy and programs.
• Humans are not rational. We make decisions based on incomplete information or the advice of trusted acquaintances who may not know much. Arguments by industry experts won’t win us over, but we may start saving energy if we think it will enhance our social status.
• An energy efficiency paradox exists. Even if people can save money, they may not pursue energy savings. Part of the problem is a perception that energy savings technologies lack quality, as in misconceptions that efficient lighting must be hard on the eyes.
• Making our homes more energy efficient needs to be easy, and is often not. “Poor marketing, delayed incentives, burdensome paperwork, and uncertain product quality” characterize too many home retrofit programs, says the report.
• Even if energy efficiency produces long-term savings, people often will avoid spending the money on retrofits or new appliances if upfront costs are high.

There are no easy answers here. The report recommends that the DOE’s number crunching arm, the Energy Information Administration, begin gathering data that will help social scientists figure out why and how we consume energy. The report acknowledges, though, that any attempt to expand the DOE to do this work may be met with political resistance at this time.

For those interested in the topic of energy and human behavior, look to more information likely to emerge later this month from the annual Behavior, Energy and Climate Changeconference that will be held in Washington, DC.

Elisa Wood is a long-time energy writer whose work can be found at RealEnergyWriters.com.

Zero touch energy audit: Will it change the game?

By Elisa Wood
November 2, 2011

What new energy efficiency technologies will change the game? I’d like to use this space on occasion to explore that question and get your feedback on companies that I profile.

This week’s company is FirstFuel Software, which it appears could make the conventional energy building audit go the way of the buggy whip.

FirstFuel ‘audits’commercial buildings from afar. No human ever needs to set foot in the building and no monitoring or measurement devices are installed on the premises, hence the audit is “zero touch.”

The Massachusetts-based company relies on a Geographic Information Systems (GIS), the Internet, and a proprietary algorithm to remotely analyze a building’s energy use. The program requires some data from the utility, but not a lot: the address of the building and one year of hourly interval electric and gas billing information. It combines this information with building characteristics mapped through GIS and high frequency weather and climate data.

After running all of the information through its algorithm, FirstFuel comes up with a series of specific recommendations to improve the buildings efficiency, the cost and the expected savings.

FirstFuel, which has financial backing from Battery Ventures and Nth Power, describes its work not so much as auditing, but as mining useful data to make sense of a building’s energy profile.

“We sell information. We provide the intelligence about the performance of buildings,” saidSwapnil Shah, co-founder and CEO, in an interview. Shah is the veteran of three software startups that have gone to IPO or acquisition: Open Environment, WebSpective Software and mValent.

FirstFuel’s work doesn’t end with the audit; the platform continues monitoring and measuring the building to see if the energy efficiency upgrades are working and how the building stacks up against other like structures. The information flows via a portal that serves as home to a relationship the platform attempts to cultivate between the utility and customer. The goal is to get the customer engaged and motivated about energy efficiency.

What’s interesting is the scale FirstFuel appears to offer. Many states have energy efficiency targets, some with financial penalties if utilities fail to make the grade. Meanwhile, the Obama administration has set a goal to reduce energy use in commercial buildings by 20 percent over the next decade. Given that commercial buildings consume 20% of our energy, and there about five million commercial buildings in the US, how does a utility get to all of them in its territory with an on-site energy audit? How does it even decide which buildings should get priority because they offer the most bang for the buck?

Shah thinks FirstFuel’s platform offers the solution: “We can do hundreds of buildings in the time it takes to do one energy audit” Shah said.

The software is being tested in about 50 buildings. A Department of Energy-funded project earlier this year evaluated the accuracy of the system against data from 50 submeters at a 312,000 square-foot LEED Platinum National Grid building in Waltham, Massachusetts. FirstFuel took about 19 hours to complete its zero touch analysis of the building and came up with results close to that of the submeters, according to the study, conducted by Fraunhofer CSE.

In another case study, FirstFuel analyzed the energy usage of five municipal buildings in Lexington, Massachusetts, and found ways to save 7.3% of the buildings $1.6 million budget with no investment required by the building owner. FirstFuel identified operational problems that if fixed could save energy without installation of any new equipment in the building. For example, lights were on in the building when no one was there and thermometers were not set at best temperatures.

So is FirstFuel a game changer? How will this technology affect the conventional energy auditing business? Please post your thoughts here. Thanks!

Elisa Wood is a long-time energy writer whose work is available atwww.RealEnergyWriters.com

Is Occupy Wall St. Occupying the Wrong Street?

By Elisa Wood
October 26, 2011

My Dad and I have a running joke when we’re in the car together. “Look,” he’ll say. “Gas is cheap. It’s down to $3.39.” Cheap, he means, compared with the month before when it was $3.79 per gallon.

The joke illustrates a good point. A few years ago we were flabbergasted by gasoline prices that exceeded $3 per gallon. Now we’re really happy when it doesn’t hit $4 per gallon.

When it comes to energy, we’re like frogs in water coming to a slow boil. We’ve gotten so accustomed to high oil prices, we don’t notice anymore that we’re cooked.

In my two decades writing about energy, this is one of the most poignant facts I’ve run across: Oil price spikes preceded 10 of our 11 last recessions. This statistic portrays in a nutshell the grip that petroleum holds on us.

Don’t get me wrong, I’m not letting the banks off the hook. But by focusing so much passion on the banks in casting blame for today’s economic downturn, is Occupy Wall Street letting a major culprit slink off unnoticed down the alley?

The Econbowser.com, source of the 10 out of 11 stat, says that in 2008 high oil prices caused a drop in overall spending, which served as “the knockout punch for an economy that was already wobbly.” The article goes on to say that “there’s no question that more favorable fundamentals are exactly what we would have had if the price of oil had never gone over $100 a barrel.”

But there’s good news too. When oil prices are high, the innovators emerge. And that’s what is happening today. Over the last few months I’ve run into some pretty intriguing – possibly game changing – new energy technologies. Here are a few.

This week I interviewed Riggs Eckleberry, CEO or OriginOil, a company that has found a highly efficient way to harvest algae and extract its oil, a process that takes advantage of algae’s sensitivity to electrical fields. The approach promises to save both energy and water in processing algae. As Eckleberry puts it, algae is a renewable “petroleum that is being made fresh instead of fossilized.” He sees algae becoming an important part of the energy mix in the short-term and a serious competitor to petroleum in the long term.

In working on an article for an upcoming issue of Renewable Energy World magazine, I learned about Dyesol, an Australian company that uses dye sensitive solar products to generate electricity. Dyesol describes the process as ‘artificial photosynthesis.’ It uses an electrolyte, in this case a layer of titania (a pigment used in white paints and tooth paste) and ruthenium dye sandwiched between glass in a window. Light strikes the dye and excites electrons that are absorbed by the titania to become an electric current many times stronger than that found in plant photosynthesis. The window creates electricity using both the artificial light in the building and the sunshine outdoors.

Meanwhile, Swapnil Shah, CEO of FirstFuel, described to me how his company conducts in-depth energy audits on commercial buildings without ever setting foot in the building. FirstFuel’s analytics software offers a “zero touch” alternative to cumbersome building energy audits. Already being used by several utilities, the software program also provides specific recommendations for efficiency improvements. To run its analytics, FirstFuel only requires easily accessible information about the building, such as its billing history and address. The program relies on the Web and GPS to obtain the rest of the data it needs. (More on FirstFuel in next week’s blog.)

Innovators like these folks worry that when oil prices drop, investors and policymakers will lose interest in finding energy alternatives. It’s a pattern we’ve fallen into before. Just as high oil prices precede recessions, low oil prices precede periods of apathy. Maybe we’ve been cooked enough this time to reverse the pattern.

Time to 'like' the energy internet

By Elisa Wood
October 19, 2011

We hear a lot about the upcoming democratization of energy. But with the average consumer thinking about energy only six minutes per year, it’s fair to wonder if anyone will show up to ‘vote.’

But this week an alliance that includes the intriguing combination of Opower and Facebook offers promise that this futuristic concept may not be so far off into the future.

The democratization of energy gives consumers the ability to take charge of their electricity production and use via new technologies, much the way they’ve gained control over information flow via the Internet. Think rooftop solar panels and plug-in electric vehicles, which together give you the ability to not only make your own energy, but also store it and sell it. Combine these technologies with smart meters, dynamic pricing, virtual net metering, solar gardens, home energy displays and Internet-enabled appliances and you have an electricity system that looks far different than today’s. Large energy producers and operators now control the electric grid, but a democratized grid distributes this control to the rest of us. You and I, in essence, become the power plant.

The democratization of energy, also called the energy internet, holds a lot of appeal in a world where we feel like victims of larger forces that control our economic fate. When oil prices spike, we helplessly take another financial hit.

The energy internet promises to help us be more energy efficient, save money, in some cases make money, and enjoy more comfort and automation in our homes.

However, so far, consumers haven’t shown much interest in taking charge of their energy use, even in fundamental ways. Perhaps this is because the concept of energy democratization seems remote and speculative – to those who think about it at all. I’m reminded of the nascent days of the Internet, when futurists made lofty claims that it would change banking, shopping and the workplace, and even revolutionize politics worldwide through an inexorable flow of information. At the time, most of us still saw the computer as little more than a difficult-to-use word processing machine.

Apple Computer changed that by making the computer more user-friendly. Opower (andsimilar companies) is the Apple of the energy internet, in that it’s figuring out ways to give energy efficiency technologies consumer appeal. Opower does this by tapping into oursocial instincts and playing on our sense of community, camaraderie and even competition to incite us to pursue energy efficiency in our homes.

But the work is being done community by community, so it’s slow going. So far Opower has sent its home energy report – a key ingredient of its method – to 3 million households. How to speed it up? That’s where Facebook comes into play, with its 800 million worldwide users all meeting and socializing in one big virtual spot.

Opower intends to use Facebook to set up friendly competitions among households. If yours is one of the 60 US utilities that already partners with Opower, you’ll be able to download your home’s actual energy use from Facebook, compare it against similar households and chart your progress with regular updates from your utility. The Natural Resources Defense Council, the third leg of the partnership, will provide environmental information.

Opower envisions social networking groups and communities forming around their new energy knowledge. These groups could have a significant impact on the success or defeat of energy efficiency products and businesses. Think about how fast video gets passed around Facebook of cats doing cute things. That could instead be word of a hot, new energy product. Or conversely news could go viral of the light bulb that burns out too quickly or the appliance that fails to live up to its promise. Energy efficiency companies will need to be on their toes.

The partnership plans to launch the new venture early next year in the Chicago area through Commonwealth Edison. It’s fair to assume that many will ‘like’ it.

Elisa Wood’s Facebook page is Energy Efficiency Insights. Please ‘like’ it.

Innovators 'home' in on energy

By Elisa Wood
October 12, 2011

Fortunately for the rest of us, some people missed the message, the one that says we’re in an economic slide so slippery there is no climbing back up.

I had a chance to speak to several of these optimists recently. No, they are not members of the Pollyanna Club; they are green energy entrepreneurs, those who are innovating and growing companies as the rest of the world downsizes. (See Energy Entrepreneurs Flock to Renewables Bonanza in Renewable Energy World magazine.)

These are folks that can’t stop creating no matter how mucky our outlook. In fact, problems seem to incite their inventiveness.

Their inventions are diverse; as are they, but their activities are converging into some trends.

• Silicon Valley and the energy industry are teaming up more and more. “You can’t throw a softball around here without hitting another solar company,” said Dan Shugar, Solaria’s chief operating officer, from Silicon Valley.
• Energy is producing its own crop of rising Mark Zuckerbergs and Steve Jobs, who I suspect will be the next generation of business legends.
• Perhaps most significant, a lot of today’s innovation focuses on bringing consumers and businesses greater efficiency and control over energy in their homes and businesses, whether through cell phone apps that let you adjust your thermostat while miles away, financing mechanism that make solar affordable to the rest of us, or windows that generate electricity on two sides, using a form of artificial photosynthesis that takes advantage of both the sun outside and the electric lights indoors.

These are just a few of the new energy innovations that focus on what’s right here in my home or even in the palm of my hand. Getty Images, which studies how energy companies speak to consumers through pictures, calls this new trend “Homing in on Green.”

“While pictures of wind turbines and oil rigs remain popular, Getty Images has seen a marked 40 percent increase in images that showcase efforts to ‘go green’ on a smaller scale – for example, images of people swapping old light bulbs for energy efficient counterparts, neighborhoods with solar paneled roofs, families drying laundry outside, rather than relying on technology,” said Getty Images in announcing the third edition of its research report, The Curve.

Are these images actually getting through to people? Do consumers have any sense of the magnitude of change occurring in energy and how it will affect their day-to-day lives? It seems not. Most people are not even aware of federal and state financial incentives they can receive if they integrate new energy technologies into their lives, according to a survey sponsored manufacturer Emerson. Among the 1,007 US adults who participated in the September 2011 poll, 61% were unaware of the financial assistance available.

So, while big things are happening in energy; consumers by-in-large don’t know it yet. But the changes are coming, this time right to our doorsteps – and even if we’re not at home, we’ll be able to let them in, using probably just our cell phones.

Elisa Wood is co-author of the report, “Energy Efficient Lighting Explained: A guide for business people who aren’t lighting techies.”

Energy Efficiency Economics: Beyond 101

By Elisa Wood
October 5, 2011

At first blush, the economics of energy efficiency seem straightforward.

A business installs lighting controls or some other improvement. The business then sees its energy costs drop. From the savings, the business repays the investment over weeks, months or years, and then turns a profit on the asset.

While that equation holds true, analysts increasingly value the worth of energy efficiency in other more complex ways as well. The energy efficiency industry, for example, is creating new jobs. Energy efficiency also improves US energy intensity, the amount of energy it takes to support each dollar of economic activity.

And now a report by PwC links a business’ sustainability story with its success undertaking an initial public offering (IPO) before the US Securities and Exchange Commission (SEC).

“It literally can pay to ask: if the company files its registration statement with the SEC tomorrow, what sustainability and corporate responsibility story would it tell to prospective shareholders?” says ‘Factoring Sustainability into IPO Planning: Disclosure trends reveal a changing landscape,’ by PwC Transaction Services.

The report looked at 120 IPO-related filings before the SEC from 2010 and early 2011 across eight industries sectors. PwC found that companies are increasingly addressing energy efficiency and other sustainability issues as part of a larger corporate accountability trend.

In fact, over 84% of IPO filings had some level of disclosure related to sustainability – and not just because they were required to do so by regulators. About 68% of sustainability disclosures came about for other reasons, such as in discussions about weather-related risk or to showcase corporate accomplishment. A full one-third of companies in the consumer sector reported either energy efficiency or emissions reductions programs.

Moreover, the report found public companies, in general, now focus more dollars on sustainability efforts. Roughly $1 of $8 under professional management in the U.S. today involves a strategy of socially responsible investing. In addition, such investments are trending upward. While the universe of professionally managed assets rose only 1% during 2007-2010, assets related to sustainable and socially responsible investing grew 13%.

The report says that companies can increase value when going public by capitalizing on sustainability efforts. PwC recommends that before undertaking an IPO companies develop a clear understanding of how their sustainability story positions them against competition and enhances their appeal to investors. Companies also should consider how sustainability programs can increase revenue and decrease expenses for their goods and services.

This advice comes at a time when IPOs appear to be on the rise after losing steam following the 2008 collapse in financial markets. While there has been some recent volatility, a “robust pipeline” of companies remains in the process of going public as of third quarter 2011, according to a separate PwC report. And as they do so, their energy efficiency becomes an increasingly important part of the economic story they present to the investment world.

CHP: Not the Brad and Jen of energy, but….

By Elisa Wood
September 28, 2011

I hesitate to start this blog with the words “combined heat and power.” You might stop reading.

Okay, so it’s not the Brad and Jen of energy. (That would be solar and wind.) But what it lacks in glamor, it makes up for in constancy and results. It’s an old guy, been around for about a century. And while its name might not sound green, it offers an extraordinarily efficient way to energize buildings.

About once a year, the American Council for an Energy Efficient Economyissues findings that raise the profile of combined heat and power, or CHP, for at least a couple of days.

Why bother? Because despite its ponderous name, CHP is a “Wow” approach to energy, one that people should talk about at parties as much as they do solar these days.

CHP units, often used at universities, hospitals and factories, put to good use the waste heat created in producing electricity. Usually, we just let this heat vanish into the sky. But CHP, a form of distributed generation, reuses the byproduct to heat and cool buildings or assist in industrial processes. CHP can produce energy twice as efficiently as a typical centralized power plant because it provides two energy sources from one fuel. We know it works because, as ACEEE points out, CHP “has been cleanly and quietly providing over 12% of U.S. electricity.”

If it’s so good, why don’t we use more of it? The US is trying – at least some areas of the country.

“CHP markets differ considerably among states,” said Anna Chittum, ACEEE senior policy analyst and lead author of ACEEE’s September 28 report ‘Challenges Facing Combined Heat and Power Today: A State-by-State Assessment.’

Do you live in a pro-CHP state? Not if you’re in Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia and Wyoming.

You do, if you’re in California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Pennsylvania South Dakota, Texas, Washington and Wisconsin.

(You can find an analysis of your state’s CHP markets and policies here.)

CHP’s woes are not simply a result of bad public policy. Local market factors, utility electricity prices and other influences come into play, not the least of which is today’s stalled economy.

Utilities sometimes discourage CHP development because CHP reduces their sales by letting utility customers produce all or part of their own energy. In addition, CHP tends to be “homeless” in the world of energy regulation and advocacy, according to ACEEE. No big, powerful organization devotes itself to CHP. It has no equivalent to the American Wind Energy Association or the Solar Energy Industries Association. (But you can find information on CHP here and here.)

“CHP is not well understood by regulators, not well-suited for renewable energy programs – because it often is fueled by non-renewable fuels – and too expensive for most short-term energy efficiency programs – because its payback period is long and its upfront costs high compared to many other efficiency measures,” said ACEEE. “Consequently, few state administrations or lawmakers have taken up the cause of CHP.”

So CHP has a public relations problem. It’s not only no Brad and Jen, but it also is downright homeless. Let’s start a trend to get CHP off the street. Open up a conversation at a party with, “Hey, how about that combined heat and power…”

And thank you for reading this blog.

Energy Efficiency and the Solydra Effect

By Elisa Wood
September 21, 2011

Not so long ago the green energy movement celebrated because President Obama used words like ‘renewable energy’ and ‘climate change’ in his inaugural speech. It was a first for a US president.

Now comes the downside of being a political darling.

Opponents of green energy – or rather opponents of its proponents – are using the collapse of California solar manufacturer Solyndra as weaponry. As Scott Sklar of The Stella Group said in his recent blog, “With politicians throwing brickbats at each other, the green industries are right in the middle dodging these projectiles.”

Sure, Solyndra doesn’t embody the state of the green energy industry – it’s just one company. But the average person rushing to work hears only the thud of the brickbats… something about solar and financial collapse, scandal, expensive green energy and wasteful government spending. They are left with the impression that something is amiss with the world of green energy.

How will this affect the energy efficiency industry?

Energy insiders are quick to point out that in the scope of energy failings, the Solyndra collapse is small. And, of course, solar and energy efficiency are two different industries, even if both are ‘green.’ But those are fine points that most people miss, as they pick up only the background noise about the Solyndra collapse.

That’s the bad news for energy efficiency; the good news is that the industry has been getting a tremendous amount of positive press lately, and it may counter the Solyndra effect. Those reports leave the busy person rushing to work hearing something about energy efficiency jumpstarting a national market, creating jobs, and lowering electric bills. Consider some of this week’s news.

• The New York Times reported Tuesday that Lockheed Martin and Barclays plan to invest up to $650 million over the next few years to retrofit buildings in Sacramento and Miami using Property Assessed Clean Energy financing. The Carbon War Room put together the consortium, which the article said represents “the most ambitious effort yet to jump-start a national market for energy upgrades that many people believe could eventually be worth billions.” Interestingly, the deal also includes an insurance plan that backs the energy savings. Offered by Energi, such insurance is a relatively new product for the energy efficiency industry and one that could help projects secure financing.
• Conservation Services Group, a national energy services firm, has signed more than $100 million in new, expanded and renewed contracts, much of it retrofit and weatherization work. The company says it is bucking the ailing economy. Since 2008 CSG’s employment has grown 68 percent, and its revenue has increased from $62 million to more than $100 million.
• The American Council for an Energy-Efficient Economy found an “extremely” low default rate among energy efficiency loans in a report issued this week. The default rate hovered around 0-3% throughout the life of 24 loan programs studied. It remained that low even during the near collapse of the real estate market. Small commercial banks and credit unions do most of the lending, but bigger banks are now moving into the market. The loan market has barely begun to show its full potential, according to ACEEE.
• And there is this quote from the New York Times review about Daniel Yergin’s new book, “The Quest: Energy, Security, and the Remaking of the Modern World.” The Pulitzer Prize-winner spends 800-pages exploring the energy industry, and in his conclusion “focuses on the importance of thinking seriously about one energy source that ‘has the potential to have the biggest impact of all.’ That source is efficiency.” The Times goes on to say: “It’s a simple idea, he points out, but one that is oddly ‘the hardest to wrap one’s mind around.’ More efficient buildings, cars, airplanes, computers and other products have the potential to change our world.”

We will soon know whether Solyndra has any lasting influence on public perception or is a news cycle blip. If 10 percent of the population holds an unshakeable belief, a tipping point occurs, and the “idea spreads like flame,” according to a study by scientists at Rensselaer Polytechnic Institute reported by Intelligent Utility. The green energy industry has worked hard in recent years to capture public sentiment. Has it achieved the tipping point? Solyndra will be a test.

Squinting toward retirement: A boon for the lighting industry

By Elisa Wood
September 14, 2011

Americans report in surveys that they are likely to retire later than expected as a result of this economic downturn that doesn’t seem to want to quit. While that’s bad news for golf courses and Florida real estate, it helps one industry: energy efficient lighting.

We are squinting, rather than sprinting toward retirement these days. As part of the post-50 crowd, I very much appreciate good lighting in my work space, and I discovered that I am not alone in researching a recent report on lighting.

Why do we geezers need better lighting? A 60-year-old employee’s eyes receive only 40 percent as much light as a worker who is 30 to 40 years younger, according to a paper by Leviton. These older employees tend to dislike the one-size-fits-all lighting of most commercial buildings; in fact, find it stressful.

Lighting is best when tailored to the needs of the individual. This can be done by giving employees manual override of automated lighting, so that they can adjust brightness and color depending on what they are doing in their work station at any given moment. And of course that is one of the features touted by lighting control manufacturers – the ability of consumers to customize lighting preferences.

Why worry so much about worker comfort? Happy workers tend to stay in their jobs, and that saves employers money, says a white paper “Personal Control: Boosting Productivity, Energy Savings” by the Lighting Controls Association. New employees need about 13.5 months on the job to achieve maximum work performance. As a result, worker turnover costs a business about 1.2 to 2 times the salary allotted for the position. Research indicates that workplace design plays a significant role in employee satisfaction. And right now many people dislike the lighting, heat and acoustics of their workplace, even young folk.

Improving lighting doesn’t necessarily mean giving employees their own remotely control light bulbs – although it helps. The Light Right Consortium looked at six different lighting options in a typical office space in Albany, New York. Between 81 percent and 85 percent of employees said they were comfortable with a lighting design that provided direct/indirect lighting and wallwashing. By comparison, designs that provided light only from above received a ‘comfortable rating’ from only 69 to 71 percent of study participants. But the combination that the employees liked most included direct/indirect lighting, wallwashing and dimming controls that allowed workers to customize their lighting. This design won a ‘comfortable’ rating from 91 percent of employees.

Lighting is a booming industry. The use of LED lighting, alone, is expected to grow by 30 percent in 2011 and become a $1 billion market by 2014, according to a study, “Enterprise LED Lighting Research Report,” by Groom Energy and Greentech Media. The study targets the market for commercial and industrial LED lighting. Similar growth is occurring in the lighting controls market. Pike Research sees global revenue for lighting controls rising from $1.3 billion to $2.6 billion by 2016. Businesses, not households, are driving this growth.

Many factors account for the lighting industry’s enviable boom. But one, I think, is that it enjoys a feature most green energy products do not. Efficient and well-planned lighting provides immediate and concrete satisfaction. In contrast, I may really like the idea of my employer installing solar panels, but my senses won’t register a difference in the building’s electricity. In that regard, efficient lighting may be the “cell phone” of energy that the industry has sought for so many years – a product that can attract the mass market and turn conventional technology on its ear.

See Elisa Wood’s report “Energy Efficient Lighting Explained: A guide for business people who aren’t lighting techies”