What’s undermining energy efficiency?

By Elisa Wood

April 25, 2012

Exhilaration swept through the energy efficiency industry as city after city, state after state and nation after nation set aggressive energy saving goals over the last several years. But with target dates nearing in certain jurisdictions, a more sober attitude now  permeates. Some governments are asking: Are we reaching too high?

A global report issued this week by PwC, which looks into the minds of power industry executives, suggests the worry may be justified. Called ‘The shape of power to come,’ the annual  report emerged from interviews with senior executives at 72 power companies in 43 countries. It found that a good number (45%) of executives are dubious that we will reach energy efficiency targets by 2030.

Meanwhile, PwC also says North America and Europe may be heading for a  blackout watch. Remember those? Such warnings sprang up during the pre-recession era of heady economic growth. With economic recovery, the risk of power shortages again rises, as worldwide energy demand expands from 17,200 TWh in 2009 to over 31,700 TWh in 2035.

Energy efficiency is widely seen as the cheapest way to meet at least some of the new demand.  But the report cites two significant problems that hinder efficiency efforts. The first is fossil fuel subsidies; the second is human nature.

Fossil fuel subsides create artificial price signals that encourage us to consume rather than develop more efficient technologies. Several government leaders, including President Obama, have pledged to reduce fossil fuel subsides, but change is slow to come. And time is of the essence according to PwC: “If a phasing-out of fossil fuels is to have an impact on energy efficiency in the period to 2030, it needs to be well underway by 2020. Our survey asked about the probability of fossil fuel subsidies being largely phased-out by 2020? Less than a fifth (18%) see this as highly probable. The overwhelming industry sentiment in our survey is that this is improbable and that such subsidies will persist. If this is the case, it will be a major factor undermining energy efficiency.”

The other issue, human behavior, is a dilemma that arises out of smart grid technology. Smart meters, energy displays, and other technologies offer a way for consumers to better manage their energy use. But early pilot studies indicate most of us have neither the time nor the interest. Or better put, the technologies and programs offered so far, have not captured our attention. It’s the old ‘you can lead a horse to water’ adage.

However, reason exists to believe we can solve the human behavior issue, perhaps more easily than the fossil fuel subsidy hindrance.  Take a look at the kind of research on behavior and energy being done by organizations like the American Council for an Energy Efficient Economy or the work underway by innovators like Energy Points.  We may find that making the horse drink is easier than getting the world to give up on its fossil fuel subsides.

One thing is clear though. The all-of-the-above energy strategies touted by many US political candidates (from both parties) seem somewhat nonsensical. We do not have unlimited dollars to invest in infrastructure, so can’t possibly proceed without setting priorities. And as PwC points out, one resource can displace another – continuing to push fossil fuels, by way of subsidies, undercuts efficiency. All-of-the-above leads to just some-of-the-above, and the winners are not necessarily the most cost-effective or environmentally benign. To reach our energy efficiency goals, we may need some hard decision-making – a scarce commodity in an election year.

Elisa Wood is a long-time energy writer. See her work at RealEnergyWriters.com.

How do we create an ethical grid?

By Housley Carr

Guest Blogger, Energy Efficiency Markets

April 18, 2012

So much of what’s discussed in offices these days – and forever really – focuses on this: What’s best for the company? How do we increase profits?

That’s totally understandable, given that a primary responsibility of any for-profit enterprise is to benefit its owners and investors. Still, as individuals, and I would argue, as part of the capitalist system, we have responsibilities that go beyond improving the financial bottom line. Most of all, we have a duty to be ethical.

The initial thought of almost everyone in business or government when the issue of ethics comes up is, “Oh, I’m ethical in everything I do. I follow the letter of the law.” But there is much more to it than that, and the energy efficiency sector of the US electric industry provides a perfect example.

When it comes to ethics, there are three ways of doing business: immorally, amorally and morally. The immoral approach is based on pure selfishness; the goal of immoral managers is profitability and organizational success at any price.

The amoral approach, which is unfortunately a dominant one in US business, focuses on what can be done legally to maximize profits. Amoral managers may be well-intentioned, but they don’t give a lot of thought to what their decisions mean to others. They lack empathy.

Moral managers are different. They run their thoughts and plans through another filter before making a decision. They ask, “Is what I’m doing fair to others? Is it just?”

My definition of an ethical grid flows from that. To me, an ethical grid is an electric industry in which the rights and responsibilities of utilities are carefully and properly balanced with legitimate interests of power consumers, the environment and society at large.

What does that mean when it comes to energy efficiency? You might think it would be hard to argue against EE. After all, it helps customers reduce their electric bills, and it trims both the use of fossil fuels and the emissions that result from using them.

Still, assessing from an ethical perspective the degree to which utilities should help their customers become more energy efficient is no easy task. There’s a lot to consider.

From the customer’s perspective, the benefits of aggressive utility-sponsored efficiency programs are clear and significant. Most homes and many businesses are pretty inefficient, and would gain quite a bit if a utility provided incentives to insulate, to change out old lighting for new, and to replace energy-hog appliances and equipment.

Society as a whole would also appear to gain if utility customers took a big leap forward in their efficiency. After all, a customer base that was more miserly in its energy use would demand less power, and utilities could get by burning a lot less fossil fuel.

That wouldn’t just reduce emissions. It would reduce the need for mountaintop coal mining and natural gas fracking, and save more of the nation’s fossil fuels for future generations. Businesses that are more energy efficient also would likely be more competitive and successful, thereby protecting existing jobs and maybe creating new ones.

But utilities – particularly ones that are investor-owned – are regulated, and are authorized by their regulators to earn a rate of return on equity, or profit. And, after all, electric utilities were created to provide electricity. Is there really any justification for them to help their customers use less and less of what historically has been their primary product?

A simple way to help resolve ethical issues is to use a Venn diagram, with three partially overlapping circles labeled “legal responsibility,” “economic responsibility” and “ethical responsibility.” The sweet spot in the middle, where all three circles overlap, is where utilities, regulators and EE advocates should find themselves every day.

There’s no perfect model yet for providing utilities with just the right financial incentives to help residential and business customers optimize their energy efficiency and minimize their use of electricity. But it’s clear that the ethical thing to do is to pursue that model with abandon by learning what others are doing, measuring the success of different approaches, and fine-tuning until we get it right.

Housley Carr is the founder and editor of www.ethicalgrid.com, a new web-based publication that focuses on ethical issues challenging the US electric industry.

Debunking efficiency misconceptions

By Scott Schnelle

Guest Blogger, Energy Efficiency Markets

April 11, 2012

Your clients may hold some common misconceptions about how to begin conserving energy in their homes. In this article, I hope to debunk a few of those misconceptions. An audit from a company like EnergyLink is a good place to begin; it shows homeowners where to concentrate.

A report called Driving Demand for Home Energy Improvements looked at successful and unsuccessful energy efficient programs across the country. Here are a few common illusions that prevented programs from being as effective as possible.

Misconception 1: People get energy efficient improvements just to save money.

There are a number of reasons that people cite as to why they want to improve the efficiency of their homes. These reasons include cutting down on waste, stimulating the economy, achieving tax incentives and just plain being kinder to the earth.

Misconception 2: Solar panels and expensive installations are the only way to improve efficiency.

There are many things your clients can do to cut back on the amount of energy they use: air seal their windows and doors, install insulation or energy efficient lighting and replace windows and seal ducts. They might also replace air conditioners, hot water heaters and washers and dryers that are past their prime with more energy efficient models.

Misconception 3: Incentive programs don’t work.

It hasn’t always been easy for many regions, towns, states and cities that have received funds through the American Reinvestment and Recovery Act to develop effective energy efficiency programs. However, some tactics have been successful. For example, appeals to health, comfort, energy security, competition and community engagement all increase participation in these types of programs. It is important to speak to consumers on their level about why their home needs to be improved.

Misconception 4: Improvements are the same all over the country.

Driving Demand for Home Energy Improvements also found that programs tailored to their geographic region are most effective. Customers are more inclined to participate in program tailored to them. For example, if you live in a community where the average homeowner has a large amount of disposable income, it may be beneficial to talk about large-scale improvements that will save more energy in the long run. Energy auditors near you will know what kinds of improvements are typical for your geographic region.

Scott Schnelle works with EnergyLink in Columbia, MO. EnergyLink helps mid-Missouri homes achieve peak performance through energy efficient installations.

Pink on Green: How to ignite the second electrical revolution

By Elisa Wood

April 4, 2012

The electric industry is good at building things. That’s how it solves problems. Is there a threat of blackouts? Develop a new natural gas-fired plant. Worried about climate change? Build wind and solar power. Does electricity cost too much? Install a transmission line to import cheaper power.

But build-to-solve represents only half of the equation in the new world of smart grid. The other half, the part that stumps the industry, is solve-without-building.

Rather than adding more energy, smart grid tries to wring maximum efficiency out of the system by changing the way we consume electricity. But it turns out, trying to direct human energy behavior makes cat herding look easy. To get people to pay attention to their energy use, utilities and private companies are experimenting with alluring gadgets and social motivators. So far, success has been minimal. Thomas Edison’s light bulb has been such a smashing success for the last 100 years, none of us want to turn it off.

So what will it take?

The Edison Foundation recently looked outside the industry for some answers, inviting Dan Pink, best-selling author of “DRIVE: The Surprising Truth About What Motivates Us” to speak at last month’s Power the People 2.0 conference in Washington D.C.

Consumer motivation has become a common conference topic. But Pink’s talk was different. He stepped back and took a broader view and asked: How do we motivate the people who are trying motivate the consumer? Pink calls this “the science of how people do extraordinary things.”

The power industry’s creative thinkers need to bust out of their intellectual silos to ignite the “second electrical revolution,” according to Pink. But smart grid represents a particularly difficult problem for them because the industry is trying to invent gadgets consumers are not demanding. The electric grid needs the gadgets and needs consumers to use them. But consumers would rather think about their next iTunes download or where to buy the tastiest strawberry. How do you get consumers to want a smart plug or home energy display just as much? Some in the industry say smart grid is doomed because it not born of household demand but of the power industry’s need.

Pink has another view. He asked members of the audience to raise their hands if they own an iPad. Half did. Then he asked how many of them knew they needed one two years ago. Only one hand went up.

Therein lines Apple’s genius; its ability to give the world something it didn’t know it was missing. Can the power industry do the same with smart grid? It must first recognize that this is a skill more likely to be found in artists than engineers. “I think the cognitive skills of artists today are the most important cognitive skills in the economy,” Pink said. “We need scientist that think like artists and artists that think like scientists.”

The electric industry also needs to reconsider the way it motivates creative employees. “It turns out a lot our intuitions about motivation are not quite right,” according to Pink. In fact, it’s downright “Newtonian” to assume that “when you reward behavior you get more of it, and when you punish behavior you get less of it.”

So forget the big bonus for the genius idea. While people need to be paid reasonably to perform well, big bonuses only motivate them to achieve short-term goals, like making a sales quota. “Igniting the second electrical revolution is not simple, is not short-term, but is complex and long term,” he said.

So what gets creative thinkers moving? Free time, as Pink tells it. He cited studies and examples of artists doing their best work without a commission and inventors achieving Nobel Prize-winning work off the clock. The business community is beginning to catch on to this idea, and some are offering a regular day when their inventors and problem solvers are encouraged to stop their required tasks and just work on anything that intrigues them. Many of these free hours have produced astonishing findings, some that the companies have been unable to achieve any other way.

“Complex industries, likes yours, complex ecosystems demand this kind of complex, silo-busting thinking. You’re going to get it, not through an elaborate system of incentives, but by hiring talented people and getting out of their way,” he said.

Perhaps, if Pink is right, and the electric industry listens, he’ll be able ask audiences in a few years how many own some amazing energy-saving device that no one has yet conceived, and many hands will fly into the air. Perhaps then the light bulb, as we know it, will finally be replaced.

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