CHP Gains Stature as Efficiency Measure

By Elisa Wood

June 19, 2008

Combined heat and power is a form of alternative energy that has been available for many decades. Yet it’s remained below the radar screen in policy discussion about our energy future.

However, it appears to be gaining new stature as lawmakers and regulators seek ways to make energy use more efficient.

Also called cogeneration, the technology creates both electricity and heat in one unit. Most power plants throw away two-thirds of the energy consumed in production. But CHP plants use the excess energy to heat, cool or humidify the building. As a result CHP reclaims one-third of the energy that would otherwise be lost.

In addition, CHP plants are usually built very close the factory, hospital, college or office building they serve. So electricity is not lost as it travels long distances over transmission lines, as is often the case with large, central power plants that serve many consumers and businesses.

Taking notice of CHP’s virtues, some states have created portfolio standards that encourage its development. The standards require that utilities use a certain amount of alternative energy to meet efficient or clean energy targets. This approach has been highly successful over the last several years in spurring development of wind, solar and other green energy sources in the US.

Now eight states allow part of the requirement to be met through installation of CHP. In Connecticut, for example, a factory, school other large energy user can install CHP to meet its heat and power needs and receive a kind of tradable credit for doing so. The energy user then can sell the credit to a utility that needs to meet state requirements.

In addition to Connecticut, the eight states are Colorado, Hawaii, Nevada, North Carolina, North Dakota, Pennsylvania, and Washington. These states should serve as interesting testing ground to see if portfolio standards accelerate use of CHP as they have wind and solar energy. We encourage those interested in CHP to check out the Environmental Protection Agency’s CHP partnership, an agency that is playing a strong role in encouraging use of the resource. See http://www.epa.gov/chp/

How Long Will Efficiency Be the Favored Choice?

By Elisa Wood

June 26, 2008

Energy efficiency creates an odd sort of market. Nothing (lack of energy use) competes for customers against something (energy generation).

There is no free lunch and even nothing, energy efficiency, costs something. But for now it is cheaper than its main competitor, the power plant.

In fact, it is often three times less costly to install efficient light bulbs, better insulate buildings or pursue other forms of efficiency than to buy power. Specifically, energy efficiency costs about 3 cents/kWh compared with the 9 cents/kWh it takes just to cover fuel costs from a baseload gas-fired generator, according to a June 19 presentation on power prices by the staff of the Federal Energy Regulatory Commission http://www.ferc.gov/legal/staff-reports/06-19-08-cost-electric.pdf.

Given its cost competitiveness, efficiency is increasingly called upon as a “first fuel.” A growing number of states require that utilities use as much efficiency as possible – reduce consumption as much as possible — before building new plants or signing power deals.

As a result, the energy efficiency business is booming. And it is beating power plants as the favored alternative not just because it is cheaper; it also is cleaner, and consumers like it better. As Suedeen Kelly, FERC commissioner, said: “There is decreasing enthusiasm for building and an increased enthusiasm for demand-side resources.”

Indeed, since January 2007, 50 coal plants have been canceled or postponed; only 26 remain under construction. Meanwhile, state after state revamps energy policy to make efficiency a priority. The potential exists for the US to have an economy by 2030 that is 70% larger than today’s, but uses no more energy than it did in the mid-1990s, according to the American Council for an Energy-Efficient Economy http://www.aceee.org/tstimony/Laitner%20Senate%20Testimony%20June%2025%202008.pdf.

Of course, at some point the nation must build new power plants to meet growing demand. Nothing cannot replace something forever. A growing economy needs energy.

So, how long will the efficiency industry boom? How long will efficiency hold this favored position in the marketplace? That’s not easy to answer. But one thing seems apparent. Energy prices are not going down any time soon. The FERC report warned that we appear to be at “the beginning of significantly higher power prices that will last for years.” If this proves true, energy efficiency’s run as the favored fuel has just begun.

Overcoming the dirty secret of clean energy

By Elisa Wood

June 12, 2008

A dirty secret of clean energy is that being green can be an expensive pursuit. The cost of solar panels and hybrid cars is declining, but they remain too expensive for many people. As a result, the green energy movement is often viewed as an upper-income trend in the United States.

But a recent survey indicates energy efficiency may be a more egalitarian product.

The intent of “The 2008 Energy Costs Survey,” released this week by the Energy Programs Consortium and the National Energy Assistance Directors’ Association, is to show the sacrifices made by low, moderate, and middle-income households because of rising energy costs. Households are cutting back on food, medicine, clothing, heating and cooling, education and eating out. And they are paying their bills later, according to survey of more than 500 households in May. http://www.neada.org/

But, the data also reveals an interesting phenomenon about energy efficiency. Even low-income earners invest in appliances and home improvements that reduce energy costs.

In fact, those in the lowest income bracket were most likely to purchase an efficient air conditioner. Eighteen percent of the lowest income households made such purchases compared to 13-14% of those with middle and moderate incomes. Poor households edged close to wealthier ones when it came to installing efficient heating (11% compared with 15% of those richer). In purchasing efficiency appliances, 15% of low-income households reported doing so.

Having 11% to 18% of low-income households invest in EE may not sound like a lot. But compare it to how much solar energy we consume. Only 1% of the electric power used last year in the United States came from solar energy, according to the federal Energy Information Administration -- and that includes business use http://www.eia.doe.gov/fuelrenewable.html.

If 11% of households installed solar panels, renewable energy advocates would be ecstatic and many of our energy woes would ease. Clean energy advocates often lament how hard it is to bring renewable energy to the mass market. This is a problem efficiency products do not appear to face. It is easy and not overly expensive to become an EE consumer. This is one reason why EE advocates may be right when they say the efficiency explosion ramping up in the US will easily dwarf any other energy trend.

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

Are the Number Crunchers Forgetting About Energy Efficiency?

By Elisa Wood

What is good news for the environment is often bad news for the economy. Or least that’s the conventional wisdom.

The thinking is bolstered by government findings that industrial activity and Gross Domestic Product will drop if the nation adopts a leading proposal before Congress to reduce greenhouse gases. http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html

But the number crunchers may be forgetting an important input: Energy efficiency. So says a report released this week by the American Council for an Energy-Efficient Economy.

Many states are aggressively pushing energy efficiency as a way to reduce consumption of fossil fuels, which in return leads to greenhouse gas reductions. Energy efficiency also can cut back energy costs, create jobs and grow the GDP, says the ACEEE report. http://www.aceee.org/press/e084pr.htm.

So far national policymakers are failing to recognize the role energy efficiency plays, as they discuss rising energy costs and climate change.

“As it becomes more apparent that climate change legislation must be enacted, it is critically important for policymakers to be informed about energy efficiency's contribution to the solution," says Vanessa McKinney, co-author of the report with John A. “Skip” Laitner. "It is very clear that policymakers are not getting the full picture when energy efficiency's potential is omitted from policy assessments."

The report looks at what will happen if the nation reduces energy consumption 20% to 30% through more efficient products and practices. The energy efficiency industry will likely add 500,000 to 1.5 million jobs by 2030. The GDP would grow, not decline, by 0.1%.

If energy efficiency is so good, why not add even more? Interestingly, the report also warns, by way of footnote, that there can be too much of a good thing. “Presumably one can push the savings too hard and too fast so that negative impacts will, indeed, begin to emerge.” Hence the report authors offer a “cautionary note about appropriate choice of the timing, technologies and policy instruments.”

It’s unclear at what point efficiency becomes a cost burden, says the report, but a 20% to 30% goal seems to still produce economic benefit.

So the challenge for state policymakers is to find the proper pacing. Adding efficiency incentives can increase electricity rates. That’s why in many states, like New York, regulators are undertaking careful study before offering new subsidies. Too much too fast will create ratepayer backlash. But carefully planned efficiency programs offer benefits that are hard to dispute, an alignment of the unlikely bedfellows, economy and environment.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free Energy Efficiency Markets newsletter and podcast.

What price motivates customers to save energy?

By Elisa Wood

May 29, 2008

“Are we there yet?” We’ve heard that refrain often over the last couple of years. No, not from our kids in the backseat of the car, but from energy observers wondering exactly how much price pain the consumer will take before cutting back significantly on use.

Two reports circulating this week indicate that we have arrived – or at least we are close.

Americans drove their cars 4.3% fewer miles in March 2008 than they did a year earlier, according to the Federal Highway Administration. This is the first time since 1979 that we took to the road less in March. While a 4.3% drop may not sound like much, it amounts to 11 billion miles, and represents the largest decline since the FHWA began reporting monthly statistics in 1942. http://www.fhwa.dot.gov/pressroom/fhwa0811.htm

It appears the specter of $4/gallon keeps the key out of the ignition. AAA reports that average unleaded gasoline prices hit $3.952/gallon on May 29, up from $3.197 a year ago. Prices already have topped $4 in several states, among them California, Connecticut, District of Columbia, Hawaii, Illinois, Michigan, Rhode Island, Washington, Wisconsin and West Virginia. http://www.fuelgaugereport.com/sbsavg.asp

Meanwhile, on the electricity front, a recent study by Carnegie Mellon University researchers found that charging power generators even a modest price for carbon dioxide emissions would motivate changes in consumer behavior and power plant operations. The study comes as several states in the Mid-Atlantic and Northeast prepare for a carbon cap-and-trade program set to begin next year. Congress is eying similar national rules.

The report, published by Environmental Science & Technology, says that consumers would likely reduce consumption of electricity at a price as low as $35 per metric ton for CO2. This is lower than prices posted by Point Carbon for European trading May 28, which was €26.20 per metric ton or about $40. http://int.pointcarbon.com/Home/Market%20prices/Methodology/category745.html).

In addition, at $35 per ton for carbon, we may see changes in the way that grid operators dispatch power plants. They may start giving preference to lower emissions generators. While power prices would rise, “consumers would pay more attention to their energy consumption or switch to more energy efficient appliances,” said M. Granger Morgan, Lord Chair Professor in Engineering in the Department of Engineering and Public Policy at Carnegie Mellon. http://www.tepper.cmu.edu/news-multimedia/tepper-multimedia/tepper-stories/co2-pricing-study-reveals-consumption-efficiencies/index.aspx

No one wants to see high energy prices – the economic ramifications are enormous. But the good news is consumers appear to finally be saying “Ouch,” opening more doors for plug-in hybrids, energy efficient appliances, green construction and other energy savings approaches.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free Energy Efficiency Markets Newsletter and podcast.

Report Reveals Unusual EE Market Pattern

By Elisa Wood

“Big dogs eat first” is a phrase often used to describe energy markets. That is, expect large energy consumers – usually manufacturers -- to be the first at the plate to take advantage of any economic benefits. But a recent report suggests that when it comes to energy efficiency, householders may nudge the Mastiffs out of the way.

The American Council for an Energy-Efficient Economy found that in divvying up EE investment dollars, the US home makes up a disproportionate share. Specifically, appliances and electronics made up 48% of the $178 billion spent on buildings in 2004. Yet these devices represented only 8% of the energy consumed by buildings. Meanwhile, the industrial sector received only 25% of EE investment dollars even though these businesses use up 34% of our energy.

The report “The Size of the U.S. Energy Efficiency Market: Generating a More Complete Picture,” noted that this phenomenon is curious. We agreed, and contacted the authors for their insight into the cause.

Karen Ehrhardt-Martinez, co-author with John A. “Skip” Laitner, attributed the unusual pattern to the fact that homeowners now change out their appliances and electronics more frequently. They are not necessarily looking for greater efficiency, but more likely better performance or aesthetics. She cited computers as an example. Large advancements occurred in a relatively short period of time, resulting in out-of-date equipment over the short-run that people seek to replace. New appliances and electronics also happen to be more efficient, in line with government and industry standards.

So without trying, the average person contributed significantly to EE, avoiding the need for about 40 mid-sized coal-fired power plants during the one year the report analyzed. This “invisible” nature of EE, discussed in the report, may be one of its largest benefits. Consumers can take advantage of EE with little effort on their part.

Much hoopla is made about windmills and solar panels these days. While they are clearly a valuable part of the energy supply, they have not met 75% of our new energy demand since 1970, as EE has. Given its silent clout, EE may deserve its own new energy market catch-phrase: Big dog barks quietest.

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

Big Energy Efficiency Vote Due From Small Commission

By Reid Smith

The European Union (EU) isn’t shy about implementing aggressive energy policy. In January, for example, the EU passed a proposal for Climate Action that includes an overall binding target of 20% renewable energy by 2020, according to the European Commission.

The US, on the other hand continues to shy away from aggressive energy policy. However, one of the more influential energy votes of the year will be decided by a small council in Minnesota, the International Codes Council (ICC). The ICC will vote in September on an energy efficiency policy that could influence energy in the US over the next 20 years, according to the ICC.

What is the International Codes Council and why is it that it has such an influence over national energy use? The ICC is a membership association that develops the codes used to construct residential and commercial buildings. Most U.S. cities, counties and states adopt codes that follow the standards developed by the ICC. For more information, see http://www.iccsafe.org/.

One non-profit, the Energy Efficiency Codes Coalition (EECC) has developed a comprehensive proposal called the "30% Solution," which is estimated to achieve a 30% overall improvement in energy efficiency for all US homes. It mandates more aggressive standards in space heating and cooling, thermal envelope, air sealing, hot water heating and lighting. See http://ase.org/extensions/eecc/ for more information on the EECC and its proposal.

According to the National Association of Home Builders, half of the homes that the US will need in 2030 have yet to be constructed. Homes and other buildings use 75% of US electricity and 40% of its energy, and are big emitters of greenhouse gases. If buildings are built more efficiently today, they’ll have an important impact before 2030. By that time, world market energy consumption is expected to increase by 57% according to the US Department of Energy.

As energy costs continue to spike, energy efficiency is becoming increasingly important, especially for low-income homebuyers. According to Global Green, a non-profit focusing on low-income homeowners, homeowners’ inability to pay utility bills is the number two reason for foreclosure of first homes. Because it costs much more to renovate an existing structure, it is critical to build all new homes with a strict energy efficiency code.

Given the potential for the ICC to dramatically cut energy use, it’s a good idea to keep an eye on this proposal.

Visit Reid Smith and pick up his free Energy Efficiency Markets Newsletter at www.realenergywriters.com