Figuring out how to go green without going crazy

By Elisa Wood
January 11, 2012

Utilities worry about a lot of things, such as keeping the lights on, earning a return for investors, and making regulators and customers happy with their service.

Now there is a new worry: How can they protect customers from what one utility refers to as “mental fatigue?”

In this particular case, the utility raises the issue as it prepares to invite homeowners and small businesses to select from among new and possibly complicated rate options made available because of smart meters. The new rates should lead to greater energy efficiency. But that won’t happen if customers become overwhelmed by their complexity, throw the bill insert into the trash, and turn to the next thing demanding their attention.

Mental fatigue is a big problem not only when it comes to homeowners, but also businesses and organizations faced with technical decisions required to green their facilities. Start with the basics. Do you pursue energy efficiency or renewable energy or both? And then, do you choose to make actual physical changes, such as installing combined heat and power systems or solar panels, or do you buy from among the more virtual products such as energy efficiency certificates or renewable energy credits (RECs). And to make it even more difficult there are now a growing number of RECs to choose from: solar RECs, zero emissions RECs, low emissions RECs and more. (See my article on US RECs in the December issue of Platts Energy Economist.)

Analysts Patrick Costello and Roshni Rathi recently prepared a report for RealEnergyWriters.com that sorts through the many options presented to companies trying to go green. The detailed analysis attempts to give direction to organizations by using examples drawn, interestingly, from information technology and telecommunication companies. These industries are known for their progressive, game-changing strategies and many have led the way in reducing energy usage and emissions in their data centers, according to Costello.

The report, “Data Center Energy Efficiency, Renewable Energy, and Carbon Offset Investment Best Practices,” points out that seven of the top ten organizations inNewsweek’s Green Rankings were IT or telecom companies with IBM, HP and Sprint Nextel in the lead. IBM won further kudos this week from the European Union, which bestowed its code of conduct recognition on 27 IBM data centers for their energy efficiency. IBM met a 2007 goal to double the IT capacity of its data centers within three years without increasing its electricity usage.

But not all data centers are run by firms the size of IBM. Many are small and don’t have the kind of resources of a large IT firm, so don’t even know where to begin when installing or purchasing energy efficiency or renewable energy. REC purchases, in particular, can confound the uninitiated. Two markets exist for RECs, one voluntary and the other regulated by states, and each state has its own way of defining what constitutes a legitimate REC. “It is really important to be careful about what you purchase and where you purchase it. People often don’t have an understanding of what they are buying,” Costello said.

They don’t understand and sometimes they wish they didn’t have to. Mental fatigue may be a new occupational hazard for the energy-consuming public.

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

US beats expectations saving energy

By Elisa Wood

January 4, 2012

Americans tend to beat themselves up over their imperfections. We eat too much, watch too much TV and owe China too much money. Despite all of our sloth, we can feel good about one area: our progress saving energy.

A report issued this week by the Institute for Electric Efficiency found that we saved enough electricity to power almost 10 million homes in 2010 (about 112 MWh). That’s 21 percent better than we did the previous year. And it looks like when 2011 data comes out, we’ll have done even better.

You’re saying, “Who me? Not possible. I forget to shut off the lights, my computer stays on all the time and my kids won’t get off the Xbox.”

Therein lies the beauty of energy efficiency today; it requires no huge effort on our part. New appliances, light bulbs, thermostats, heating and cooling systems and electric gadgets are increasingly designed with energy efficiency in mind. Those with an energy conscience don’t have to fumble in the dark and cold.

The report studied programs offered by utilities, which spent $4.8 billion in 2010 on energy efficiency, about 28 percent more than the previous year, and $6.8 billion in 2011, a 25 percent increase. Utilities are expanding their energy efficiency efforts so quickly that IEE expects them to surpass optimistic forecasts that they will dedicate $12 billion annually to efficiency by 2020.

“This steady increase in electricity savings is really impressive. And the growth in electric utility expenditures for energy efficiency is the major reason behind it,” said Lisa Wood, IEE Executive director. (No relationship to me.)

Efficiency is considered a good investment because it’s cheaper to save energy then make energy. The report pegs the cost of saving energy at 3.5 to 4.3 cents/kWh. Check your utility bill – chances are buying electricity costs you a great deal more.

Our success stems from energy efficiency resource standards, which are savings requirements set by state governments. Typically, the requirements mandate that utilities save a set percentage of energy annually. About half of the states, representing two-thirds of the US’ population, now have these standards, according to IEE.

Some states and regions are doing better than others when it comes to energy efficiency. California continues to be the top state when it comes to spending on energy efficiency, with a budget of $1.5 billion, well above second place state, New York, with $1 billion. The Pacific Northwest follows with about $559 million, and then comes Massachusetts, Florida, New Jersey, Pennsylvania, Maryland, Ohio and Arizona.

California’s effort is particularly impressive in light of its demographics. While its electric efficiency budget represents 22.6% of total U.S. utility electric efficiency budgets, it uses only 6.9 percent of US electricity and its share of the population is only 12.1 percent, according to IEE.

Several states that did not make the top 10 are quickly improving their programs. The IEE report found that five states have doubled their energy efficiency budgets for 2011. These states are Indiana, North Dakota, South Dakota, Virginia, and West Virginia. Washington, DC also doubled its budget.

For the full report, see http://www.edisonfoundation.net/iee/issueBriefs/IEE_CEE2011_FINAL.pdf

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

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