Would Gordon Gekko go green?

By Elisa Wood

July 17, 2012

Energy books tend to be either jargon-filled tomes or hand-wringing, end-of-the-world, please-just-shoot-me-now reprimands. So it was a relief to see that Brian Keane avoids both of these worn-out roads in his new book, “Green is Good: Save Money, Make Money, and Help Your Community Profit from Clean Energy.”

Keane expertly tells the clean energy story with humor and anecdotes likely to capture readers who want to learn more about energy efficiency and renewables, but have found few credible, consumer-friendly vehicles that teach them. I’ve never before seen solar power compared to Tony Bennett: not a rock star, like say, micro-hydropower, but “older, more reliable and almost certain to give a top notch performance every time.”

For those who know Keane, this engaging writing comes as little surprise. As president of SmartPower, a non-profit marketing firm, he’s the guy at energy conferences who can hold people’s attention – even during the low-blood sugar late-afternoon sessions – with his insight into how we think and behave as energy consumers.

Keane’s been in the thick of it for several years, working to sell the idea of green to sometimes skeptical politicians and an often snoring public. He takes us inside some of his intrepid efforts. The book provides an account, for example, of how he convinced two very different Connecticut mayors (think blue blood versus blue collar) to engage in a competition to see which city could get the most people to sign up for renewable energy. The mayors agreed to participate in the duel even under the terms that the loser would wear a t-shirt saying, “I wish I were the mayor of [name of losing city.]”

We get a clear picture of where we are today as energy consumers versus where we were 40 years ago in Keane’s comparison of his drafty 12-member childhood home in Massachusetts to his present energy efficient six-member Virginia house. You would think the smaller family, alone, would mean less energy use (“fewer bodies mean fewer eyeballs staring into the open refrigerator”). But no. Even with better insulation and Energy Star appliances, our homes now consume a lot more juice.  Or here is another factoid from the book that puts our electricity appetite in perspective: College dorm rooms have more plug-in potential than the entire White House during Woodrow Wilson’s World War I presidency.

The book does not preach environmental religion; quite the contrary. Keane focuses on the relationship between green energy and capitalism. He advocates bringing “basic marketing principles to what often seems a holy cause.” In fact, Keane says “true believers” actually deter acceptance of clean energy by perpetuating the notion that going green requires adopting an alternative lifestyle (“wear hemp, eat only organic…”)

The title plays to the infamous line “Greed is Good” made by Gordon Gekko, the Michael Douglas character in the movie Wall Street. Keane portrays green as the flip side of Gekko’s destructive manipulation of capitalism; he takes us to a place where economic advantage and public good align. Rather than destroying the planet, here is where energy improves the environment using the good old-fashion profit motive. “Green is Good” offers an economic message that even Gekko might buy.

Published by Lyons Press, “Green is Good” is set for release in early October, and is now available for pre-purchase.

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

Too good to fail: What’s wrong with the electric grid?

By Elisa WoodJuly 5, 2012

The temperature is 100 degrees and we have no air conditioning, no running water, no telephone and no Internet. It’s been 60 hours since our household lost electricity because of the super derecho, a rare surprise storm that swept ten US states and the nation’s capital on June 29.

About 5 million of us suddenly are living in conditions of a century earlier. And as we fumble in the dark, it’s easy to see how vulnerable our profound reliance on electricity makes us.

The notion of grid reliability is embedded deeply in the American psyche. We are so accustomed to electricity flowing, we can barely comprehend its absence. By habit, we still flip on the light switch when entering a room, even after the power has been out for hours.

We have good reason to trust. After all, behind the switch is the world’s largest machine, the North American power grid. With 211,000 miles of high-voltage transmission lines and 5,800 power plants feeding electricity to our homes and businesses, the grid is an engineering wonder.

A wonder – until a storm, or a heat wave, or even a squirrel chewing the right wire in the right place knocks out power to large swaths of customers.

It is the grid’s size and interconnectivity that makes it remarkable and efficient, but also susceptible to widespread mishap. We saw that most clearly in the Northeast Blackout of 2003, when a cascading event caused failures that tumbled quickly from neighborhood to neighborhood, state to state, finally leaving 50 million without power.

But the American consumer generally does not view a blackout as a sign of an inherent problem with our electric grid. Following the June 9 derecho, about 30,000 workers, some borrowed from utilities as far away as Texas and Oklahoma, went to work restoring power in the Mid-Atlantic and nearby states. Still, consumers will be angry at the length of time it takes. And if the acrimony is as great as it was in New England last year following the freakHalloween nor’easter, politicians will take up the cause, regulators will investigate and some utility executives may find their jobs threatened.

If our lights fail and aren’t fixed quickly, we believe someone must be to blame. The problem can’t possibly be the nature of the interconnected grid itself. In the consumer’s mind, electricity is like air; it’s just there for us. If it’s not, someone messed up.

The energy industry refers to this as electricity’s invisibility. In many ways it speaks to the product’s success. Who in America ponders whether or not to buy electricity? It’s a given that we will connect our homes to the grid, pay the monthly bill and the power will flow.

But, this invisibility, this success, is a failing too.

Power companies throughout much of the nation are striving to make the grid less vulnerable by smartening it, and some of this smartening relies on consumer interaction, taking control over our electricity consumption through new digital technologies.  It includes installing smart meters and energy displays, building  microgrids and developing more solar energy and other forms of distributed generation, which decentralize the grid, and therefore takeaway at least some of the exposure that comes with size. (Think the Death Star in the movie Star Wars.).

Suddenly we need to pay attention to electricity, and we’d rather let it stay invisible.

So to make smart grid work, the energy industry needs to figure out what makes the consumer work. A great deal of study is now underway on human behavior and energy. The goal is to encourage us to embrace smart energy technologies, so that we will use electricity more efficiently. It’s been tough going. Most consumers see no underlying problem with the electric grid. If it’s not broke, why fix it?

I can’t say I like being without air conditioning and water. But maybe the occasional loss of comfort is a good thing, an eye opener, a reminder that we need to contemplate our electric system’s inherent weakness and work to strengthen it. The grid can break. It is not too good to fail.

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

Energy efficiency without trying (and with)

By Elisa Wood

July 27, 2012

John Lennon wrote that life is what happens to you while you’re busy making other plans.  Apparently, the same is true of energy efficiency. Energy savings happen when we’re busy doing other things – Internet-based things specifically.

We use email, bank online and download music not to save energy, but to make life easier and more interesting.  Energy efficiency is a happy byproduct.

What online pursuits serve up the most energy savings in day-to-day life?

The Global e-Sustainability Initiative, or GeSI, recently commissioned the American Council for an Energy-Efficient Economy (ACEEE) and the Yankee Group to answer this question. The study,  “Measuring the Energy Reduction Impact of Selected Broadband-Enabled Activities within Households.” looked at eight broadband-related activities in the US, UK, Spain, Italy, Germany and France:  telecommuting, Internet news, online banking, e-commerce, music and video downloads or streaming, e-education, digital photography, and e-mail.

Telecommuting provides the greatest energy savings among the activities (83 to 86 percent). From an energy efficiency perspective, it’s better to log-on to the office than drive there. Reading the news online and participating in e-education offered the least energy savings.  Consumers tend to undertake these activities to complement, not replace, the old-fashion way of doing things. They still read the newspaper and travel to classes, so offset the savings gained by the online activity.

As telecommuting expands, and more of our daily routine takes place online, these eight activities could cut energy use by about two percent or the equivalent of 500 million barrels of oil annually. Not bad, but still small compared with the savings offered by a series of ‘scale’ activities: smart grid, manufacturing and building upgrades, electric cars, combined heat and power.

So while it’s nice that we inadvertently save energy, say by banking online, it won’t revolutionize our energy picture.  But another recent report by the ACEEE shows what might: Intelligent efficiency.

Think systems or cities instead of light bulbs or refrigerators. That’s intelligent efficiency. The US could reduce its energy use by as much as 22 percent by focusing more on system rather than gadget efficiency, says the report “A Defining Framework for Intelligent Efficiency.”

 “This is not your father’s device-driven approach to energy efficiency,” said R. Neal Elliott, ACEEE associate director for research.  “A large portion of our past efficiency gains came from improvements in individual products, appliances, and equipment, such as light bulbs, electric motors, or cars and trucks. And while device-level technology improvements will continue to play an important role, looking ahead we must take a systems-based approach to dramatically scale up energy efficiency to meet our future energy challenges. Through intelligent efficiency, utility systems, interconnected cities, transportation systems, and communications networks can become the new normal across the United States and will undergird national and regional economies that, even in the face of increasingly scarce resources, grow and thrive.”

ACEEE cites several examples of intelligent efficiency already in the works. Among them is Envision Charlotte, an attempt to reduce energy use in city buildings through a partnership of Duke Energy, Cisco, and Verizon. Interactive video monitors in the lobbies of downtown office buildings display the collective energy used, in near real time, by buildings in the core of the North Carolina city. People pass by the monitors and see the easily readable data, learn energy efficiency ideas, and hear about success stories. They become more conscious of energy through this repeated exposure and their behavior changes – that’s the theory. Duke Energy expects the project to reduce electricity usage 20 percent by 2016 in uptown Charlotte’s business community.

One important point here. None of this – our online household activities or intelligent efficiency – excludes a tried-and-true approach to save energy: utility sponsored programs. A third recent study by ACEEE (Yes, this is a productive organization.) finds that utilities increased energy efficiency budgets four fold in a decade, from $1.1 billion in 2000 to $4.6 billion in  2010. Often when utilities save energy rather than buy it, it turns out to be the cheapest approach.

“The concept of energy efficiency as a utility resource is really very simple,” said Marty Kushler, ACEEE senior fellow and co-author of the report, ‘Three Decades and Counting: A Historical Review and Current Assessment of Electric Utility Energy Efficiency Activity in the States.’ “To keep an electric system in balance, you can either add supply resources or reduce customer demand.  Utilities, regulators, and policymakers have increasingly come to realize that it is far cheaper to reduce demand through energy efficiency programs than it is to construct, fuel, and operate additional electric generating plants.”      

The report found that energy efficiency remains the lowest cost energy resource available to utilities by a wide margin. Saving electricity through efficiency is about one-third the cost of generating it from a power plant.

It’s not surprising, therefore, that states have set aggressive energy efficiency goals; no states are scaling back. Instead, “the momentum is toward growth across the map,” says the utility report.

Sometimes we save energy inadvertently, and sometimes by design. Whichever, it is clear that our digital economy, combined with our increasing understanding of the programs and behaviors that lead to energy savings, create a clear path for growth in energy efficiency.

Read more articles by Elisa Wood at RealEnergyWriters.com.

How to grow a solar energy garden

By Elisa Wood

June 21, 2012

Getting energy from the sun is a great idea. However, installing solar panels house-by-house is slow, costly and cumbersome, and downright inefficient if the goal is to bring solar to the masses.

This problem troubled Paul Spencer after he built his own uber-efficient, custom solar home near Aspen, Colorado in 2004.  The engineer and serial entrepreneur wondered how he could replicate his home many times over across the United States.

Out of this problem came the community-owned solar garden – or at least a version pioneered by the Clean Energy Collective, a Colorado company founded by Spencer in 2009. What is a solar garden? Think community vegetable garden, where everyone in the neighborhood tends a common plot and then shares the harvest. Except here the crop is solar energy, often produced by ground-mounted photovoltaic panels on an open piece of land or large rooftop.

Variations on the solar garden idea are catching on in California, Colorado, Massachusetts, New Mexico and other states.

Some models rely on virtual net metering – where utility customers  receive retail power credits as though their solar panels were on their home or business.  However, only a small number of states allow virtual net metering.

In another variation, the utility owns the solar panels and customers who decide to join the garden pay a premium on their bill in return for membership.

Neither of these models offer a good way to grow residential solar quickly across the country, says Spencer. Convincing lawmakers to adopt virtual net metering takes too much time and is often controversial. And under the utility-ownership model, customers don’t receive direct financial benefits from the solar panels.

His company has developed solar gardens in New Mexico and Colorado that avoid these problems. CEC’s approach foregoes virtual net metering, but allows customers to own solar panels with a good payback.

It works like this. CEC develops the solar facility and invites community members to join in the ownership, which starts at about $500-$800 per panel. 

CEC sells the power from the facility to the local utility under a solar power purchase agreement, a model that attracts third-party investors because it creates certain tax benefits.  A management entity, akin to a homeowners association, maintains the garden with set aside escrow monies, which is expected to produce power for 40-50 years, Spencer says.

The community garden approach gives members a chance to lower their electricity costs – they  receive monthly bill credits for the energy produced by the panels. When members move, or just no longer want to participate, they can sell their panels. 

This approach makes solar available to households who would otherwise be ineligible – and there are many. About 80 percent of metered utility customers in the United States cannot install rooftop solar for various reasons, according to Spencer. Their roofs are too shady or they live in apartments.

CEC’s model also helps remove utility resistance toward solar gardens, according to Spencer.  A proprietary remote meter system, developed by the company, tracks the solar garden’s energy production and directly credits members’ utility bills. This removes a headache for utilities that sometimes resist the idea of solar gardens because of the tracking and crediting burden placed upon them. CEC also partners with utilities to establish fair solar power pricing for both the utility and its customers. 

Will this model work? So far the company has seven facilities built or in development, with a typical capacity of one-half to one MW each. Now in talks with several utilities nationwide, CEC expects to build 5 to 10 MW of capacity this year, and six to seven times that amount in 2013.

“It is easily conceivable that community solar can contribute hundreds of megawatts of new capacity to the grid per year,” Spencer says.

Hundreds of megawatts may not sound like a lot in a country where one nuclear plant in California produces nearly 4,000 MW. But, all of the photovoltaic solar in America amounts to only about 4,400 MW. Most of that comes from large utility-scale plants. The US solar residential market added only 94 MW in the first quarter of 2012, according to the Solar Energy Industries Association.

Is the solar garden the secret to bringing efficiency and scale to residential solar?  The idea has been planted. Let’s see if it takes.

Elisa Wood is a long-time energy writer and co-publisher of Energy Efficiency Markets newsletter. 

Energy innovation: Snails and Griddies

By Elisa Wood

May 31, 2012

Ask most people to describe vanguard energy technology, and they’ll name LED lights, certain forms of solar energy and new electric storage methods. But how about this – generating energy from a living body?

The Journal of the American Chemical Society is reporting a “real-life scientific tail of the first electrified snail.” Researchers have placed a fuel cell in a snail that generates energy using sugar naturally produced by the snail’s body.

Consider it the ultimate in distributed generation. The AMC sees potential for the tiny electrical devices “perhaps for future spy cameras, eavesdropping microphones and other electronics.”

The researchers induced a current in the living snail by inserting into its shell two electrodes made of carbon nanotubes. They coated the electrodes with enzymes to foster a chemical reaction. One pulled electrons from glucose in the snail’s body and another used those electrons to turn oxygen molecules into water. Researchers found that the enzymes generated electricity again and again in the snail, which lived for months with the implanted fuel cell.

Others have implanted electricity-producing biofuels in various animals, such as rats and rabbits, but only partially. This was the first time researchers generated electricity for an extended period of time without harming the animal, according to the journal.

“The snail with the implanted biofuel cell will be able to operate in a natural environment, producing sustainable electrical micropower for activating various bioelectronic devices,” the authors were quoted as saying.

At this point, it’s hard to say where this research will lead – whether it will prove quirky or profound. But it does underscore the diverse innovation that surrounds electric power, an industry that for its first 100 years saw little technological change. Industry insiders used to say Thomas Edison would find the electric light bulb virtually unchanged if he were reborn. That’s getting more difficult to assert.

Griddie Awards

With all this change, comes the need to educate consumers, especially if they must modify their behavior in some way. What good are electric snails if no one wants to use them?

That gets to the second topic of this week’s blog: Griddies. These are awards to be issued by the Association of Demand Response and Smart Grid at its annual meeting in Washington, DC, June 26-28, 2012.  The association started the contest this year in recognition of the need by the power industry to engage consumers in the new smart grid technologies. Rather than issuing a call for papers, it sent out a “Call for Creative,” seeking inspiring examples of work by marketing and communications departments, non-profit advocacy groups, technology companies, creative agencies, public relations firms, and professionals

The finalists are on the organization’s website and there is some truly consumer-catching work. In one of my favorites, this one from Reliant Energy, a rapper named Mega Watt shows us all of the smart energy devices in his mansion digs. He tells us he’s keeping it “real time” and sings part of his song “Power Strip.” In another that I liked, Green Mountain Power offers line-drawn cartoon that explains the significance of smart grid in a clear, appealing and succinct way.  Another by Reliant Energy has an amusing talking plug that asks questions online about energy and provides rewards to those that get them right.

These are just as few of the finalists. Take a look through at the list on the ADS website if you want to be amused and impressed at how far the once dull electric power industry has come.  The ADS plans to put the finalists up for a “town meeting vote’ at its gathering in June. Check back. We’ll list the winners at RealEnergyWriters.com.

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

Changing the energy game with the ‘power of one’

By Elisa Wood

May 23, 2012

Who among us has not eagerly described the smart meter to a non-energy person only to be greeted by a blank stare, or worse the retort: “Why would I want to track my electricity costs all day?”

You try to explain the profound applications: smart appliances that talk to the power grid, consumer clubs that sell energy savings, your car serving as a power plant. But the conversation then becomes one about fascinating toys, not a world change.

A new paper by Joseph Stanislaw, independent senior energy advisor at Deloitte, eloquently gets to the real meaning of smart grid. Moving beyond the gadget talk, he describes the bigger picture, how new energy efficiency and smart technologies will democratize energy.

Energy efficiency could have “a greater impact on the global energy picture than any other development,” according to the paper, titled Energy’s next frontiers: How technology is radically reshaping supply, demand and the energy of geopolitics.

“The breakthroughs have been stunning, and often elegant in their simplicity. Among the least appreciated technologies are those that empower companies and individuals to understand and manage—and thus significantly reduce—their energy consumption. Last year, venture capitalists invested $275 million—up 75% from 2010—in start-ups that make software and other technologies to manage energy use,” the paper says.

Stanislaw explains how smart technologies are bringing about ‘the Power of One’ in the energy game.  No longer passive receivers, consumers and businesses become active choosers; hence they influence the kind of generation plants we build – or if we build them at all – simply by the way they use electricity. Our market signals, not central planning, shape the infrastructure we build.

The Power of One idea often gets lost in political discourse about energy. Debate tends to focus on wind power tax incentives, solar trade wars, the pros and cons of hydraulic fracturing and access to public lands to drill oil.

But when it comes to electricity, it will be the Power of One that changes the playing field most by giving the individual control over energy, much the way the Internet gave us control over information. As a result, even if governments fail to act effectively, corporations and individuals now have the ability to “make a radical difference in their own consumption—and thus to materially influence the broader energy game,” the paper says.

More specifically Stanislaw explains: “The new energy-related software and hardware on the market and in development—smart meters, smart appliances, demand management programs, and so forth—liberate individual actors from being at the mercy of broader forces.” This liberation, or shifting of control over energy decisions from nations to individuals, transforms what has come to be known as ‘the Great Game’ – the wrangling of nations over energy supply.

While the Great Game previously focused on oil, technology is the new prize.

“The ‘Great Game of the 21st Century’ is the technology continuum driving along the development curve from 1.0 to 2.0 to 3.0—with each version coming faster than the one before. The future is one of continuous research and development, informed investment job creation, and greater energy security—without sacrificing the environment,” the paper says.

Rapid-fire technology change heightens the need for sustainability planning by businesses, he adds. And the ability to collect and understand data  about energy becomes increasingly important. Whether the company makes shoes or semi- conductors, energy is part of its business. All companies become energy companies in a smart grid world.

Stanislaw describes a “virtuous energy cycle” that occurs for households and companies that pursue efficiency: They save money and protect the environment. Moreover, “the consumption of energy is no longer just an economic act—this is becoming a conscious act and an act of conscience. This will likely intensify in the coming years.”

Stanislaw’s paper is a good read. See it here.

Energy efficiency: What are the laggards thinking?

By Elisa Wood

May 17, 2012

Why do some states avoid creating policies that encourage consumers and businesses to save energy? What’s the psychology of the laggards?

A new report by the American Council for an Energy Efficiency Economy sheds some insight as it examines the states that consistently fall behind in the organization’s annual energy efficiency ranking.

The bottom states are: Alabama, Kansas, Mississippi, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, West Virginia, and Wyoming. The good news is that even these laggards are beginning to adopt policies to save energy, according to the report, “Opportunity Knocks: Examining Low-Ranking States in the State Energy Efficiency Scorecard.”

But they still have a lot of catching up to do. And why did they fall behind in the first place?

The report authors, who interviewed 55 stakeholders, found  one reason is a general  lack of awareness about energy efficiency’s benefits. Another is an aversion to government mandates. But one of the most fascinating barriers is a misperception about energy costs.

Industry folklore says that consumers in states with low electric rates have no motivation to save energy. This folklore discourages policymakers from putting time and money into energy efficiency programs. In truth, these states have good economic reasons to  encourage consumers to insulate, install better lighting, and undertake other energy savings measures.  It turns out that even though electric rates are low in these states, consumers are paying high monthly bills.

This may sound counterintuitive. But consider these numbers. In Alabama electric utilities charge 10.67 cents/kWh and households pay an average $147.69/month for electricity. Similarly, in South Carolina rates are 10.5 cents/kWh and monthly bills are $137.59/month. Compare Alabama and South Carolina to  Massachusetts and California, two states with aggressive energy efficiency efforts. Massachusetts’ electric rates are high, averaging $14.59 cents/kWh, but monthly bills  are low, only $97.34. California, too, has high rates of 14.75 cents/kWh and low monthly bills of $82.85. 

So electric rates are higher in Massachusetts and California, yet households in those two states pay less per month for power than households in Alabama and South Carolina. This is because they consume less power. Households in the efficient states have an edge; they need less electricity each month to secure the same level of comfort and service in their homes as those in Alabama and South Carolina. So there should be plenty of good motivation for households in the low-rate states to pursue efficiency measures.

Another point of confusion involves the cost to society of investing in energy efficiency.  Because it’s generally categorized with other ‘green’ initiatives, energy efficiency is perceived as boutique and expensive.  To the contrary, it is cheaper to avoid energy use than to make new electricity, according to ACEEE.  Energy efficiency measures cost an average 2.5 cents/kWh while building a new power plant cost 6 to 15 cents/kWh. Because of this cost differential several states now mandate that utilities institute cost-effective energy efficiency before building new generation.

These are arguments, unfortunately, that might get lost in the din of an election year, one in which energy is shaping up to be a major issue. However, as is often the case, the states are leading the way and not relying on federal policy. Even the laggard states are picking up their pace when it comes to energy efficiency, as the ACEEE report describes. More here.

Elisa Wood is a long-time energy writer whose work appears in many top industry publications. See her articles at RealEnergyWriters.com

How to become energy efficiency’s #1

By Elisa Wood
May 10, 2012

It’s easy to get the impression that technology game-changers happen in a near flash. And the stories of Facebook, Google, Microsoft and Apple leave us thinking that genius pops right out of the dorm room.

But in the energy industry it’s not that easy. The innovation we see today often stems from years of late nights, deep discussion and hard negotiation.

Take, for example, the Massachusetts story. The American Council for an Energy Efficient Economy named it number one for energy efficiency in October. You may wonder, how did that happen? Why not California –  isn’t it the greenest of states?

But for Steve Cowell, chairman and CEO of Conservation Services Group,  it was no surprise to see Massachusetts rise to the top. Cowell has been on the inside of the state’s energy efficiency scene for decades, going back to when he worked for former Governor Michael Dukakis in the late 1970s. He was there when the groundwork was laid to bring Massachusetts where it is today.

Cowell cites a pivotal event in the mid-1980s A group of influential activists, thinkers and utility leaders converged in the state, ready to bring efficiency to the forefront.  Their names weren’t necessarily recognizable then, but today several are national leaders in the energy arena: Jon Wellinghoff, Steve Nadel, Rick Sergel, Peter Flynn, Doug Foy, Armond Cohen, Alan Nogee, Ralph Cavanaugh, Mary Beth Gentleman, Clare Moorhead, Timothy Stout, Bob King, Joseph M. Chaisson, Rachel Greenberg, Brad Steele.

And then there was John Rowe, CEO of Exelon, now arguably one of the power industry’s most influential figures. Back then, he headed a smaller utility called  New England Electric System (later absorbed by National Grid.) Rowe directed a legendary challenge to the group that would frame the region’s direction. “I’m the rat, show me cheese.” In other words, give utilities a financial incentive to pursue energy efficiency, and they will do it.

Cowell and the others found the cheese and they convinced utilities to direct large sums of money toward efficiency. The group spent three years creating a guiding document for New England called “Power to Spare.” This year marks the 25^th anniversary of its publication. Cowell described how the report led to today’s efficiency gains at Raab Associates’ monthly Restructuring Roundtable in Boston last month.

“Power to Spare” brought forward the then relatively novel idea of efficiency as a kind of power plant, a way to meet power demand by injecting efficiency rather than more megawatts into the grid.

The report also envisioned a day when New England would actually “bend the curve,” meaning those charts that show power demand forever rising would instead someday show it falling.

Cowell had his doubts that the bend would ever occur. After all, demand for power has been on the rise since Thomas Edison invented it. But in fact, the “Power to Spare” group saw its vision realized this year, on the report’s 25^th anniversary. The curve has bent downward, and analysts say the slow economy, alone, did not cause the reversal. They attribute as much as half to the LED lights, better motors, smart appliances and other efficient equipment that is decreasing demand for energy.

Bending the curve wasn’t easy; it took a lot of mental muscle, a host of innovations that sprang up in New England over the years. Some of the most significant innovation centered around the idea that efficiency is a true energy resource. It can be used instead of building new power plants.

In that vein, New England became known as the first place to let energy efficiency resources compete in a forward capacity market auctions. The region also pushed forward with mandates that utilities use all cost effective efficiency before building adding generation. In addition, New England instituted white tags, the system benefits charge, and the Regional Greenhouse Gas Initiative, a source of revenue for efficiency programs.

Power to Spare aimed to increase New England’s economic competitiveness. That, too, has happened, Cowell said. The region is emerging twice as fast from the economic downturn as the rest of the nation, while at the same decreasing its total energy consumption. “That is historic,” he said.

So now that the curve is bent, energy consumption is down and the economy on the rise, is the work done? Hardly. Next Cowell would like to see ISO New England incorporate efficiency into its energy markets. And longer term, he envisions the region relying on self-contained microgrids that use locally generated renewable energy and combined heat and power. He admitted that it will take some doing, perhaps another 25 years of work. So we set up an appointment for a follow-up interview on May 1, 2037.  Check back in – I’ll let you know how it went.

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

Critical need for energy savings and loan performance data remains unmet

By Kat Friedrich

Guest Blogger, Energy Efficiency Markets

A vast gap exists between the detailed information financial institutions need to support energy efficiency financing and the limited data they currently have. Several examples suggest these loan programs can succeed, but there are no large datasets supporting investment in energy efficiency.

Providing energy efficiency loans could give financial institutions new market opportunities. Unfortunately, their underwriters don’t have enough loan performance information to finance large volumes of energy efficiency projects yet. This lack of information inhibits the scaling up of energy efficiency retrofits in the residential and commercial sectors.

The small size of the market for energy efficiency loans inhibits market growth, said John Joshi, Managing Director and Business Strategist at Capital Fusion Partners. Investors seek liquidity; they want to be able to move their assets within a market. As the energy efficiency loan market grows, this lack of liquidity will no longer be an issue. Right now, “it’s a Catch-22,” Joshi said.

“We need strong political and regulatory support to make the market more viable,” Joshi said. “If it’s left to capital markets’ intervention, it will be a much slower process.” He said government financial support for renewable energy programs is key to opening this market.

“Investors want to compare apples to apples within transactions,” Joshi said. “They also want analytics so they can do scenario modeling.” Investors also ask third parties to participate in the analysis, so data needs to be accessible to a range of stakeholders.

When approving loans, underwriters need reliable data on the expected energy savings from energy improvements so they can factor this into their credit risk analysis. To consider an energy efficiency loan a safe investment, investors and rating agencies need reliable data on expected energy savings from efficiency installations in similar buildings in similar locations. They also need statistics on loan repayment. Much of this information is currently missing.

Kerry O’Neill, Senior Advisor at the Clean Energy Finance Center, said we need a national database where energy programs can share performance information for energy improvements in buildings. Many programs have done small evaluation, measurement and verification studies, but these are hard to generalize. The energy data needs to be combined with performance data on efficiency loans to provide a complete picture.  O’Neill suggested that a third-party nonprofit or nonprofit co-op model might work well, with foundation support.

O’Neill said that a recent study commissioned by the Deutsche Bank Americas Foundation compared energy savings estimates to actual savings in 21,000 multi-family rental units in New York City.  The results showed that the savings estimates were overstated by 40 percent. These findings suggest that underwriters can expect a large difference between estimated and actual savings. Because this study covered multifamily buildings in New York City, its numbers aren’t transferable to single-family homes or commercial properties.

John Byrne, Director of the Center for Energy and Environmental Policy at the University of Delaware, said a bond initiated by the Delaware Sustainable Energy Utility earned an AA+  rating from Standard and Poor’s (S&P) in large part because the program developers collected data from a variety of buildings. They used these data to develop financial savings estimates for the energy efficiency projects. As a result, energy service companies (ESCOs) were able to guarantee financial savings – not just energy savings. This financial guarantee changed the underwriters’ perspectives.

Byrne said the S&P underwriters asked for very specific data. They were interested in variables such as climate, the local economy, building type, and energy savings over time.

O’Neill said data from Pennsylvania’s Keystone Home Energy Loan Program shows energy efficiency loans are outperforming other unsecured debt. However, some investors raise the question of whether program participants are a self-selected group and are skeptical about generalizing these numbers. With larger data sets and analytics on performance, programs can address these investor concerns.

Byrne recommended organizing “education days” to bring the financial industry and the energy efficiency industry together. He has organized events like this before in Delaware and believes they are a successful way to explain the importance of collaboration and encourage organizations to share data.

“Until the industry addresses this issue of scarce data on energy savings and financial performance, it will continue to meet resistance from the financial community,” said O’Neill. “This will impact the rates and terms that can be secured, as well as the size of investment.”

Reposted with permission of the Clean Energy Finance Center, which works with stakeholders to develop policies and programs that drive investment in energy efficiency and small-scale renewable energy.