How many negawatts do I need before I retire?

By Elisa Wood

December 3, 2009

A candy shop owner on Cape Cod offers a new approach to build a retirement portfolio: put solar panels on your roof.

“We looked at the stock market last year and it didn’t look too good so we decided to invest in electricity,” said Ray Hebert, owner of Stage Stop Candy in Dennisport, in an article on wickedlocal.com by Nicole Muller. http://www.wickedlocal.com/dennis/news/business/x1792920283/PHOTO-GALLERY-Solar-energy-to-power-chocolate-production-at-Dennisport-shop

Thanks to today’s generous state and federal subsidies, Hebert expects to recover costs in five years and then begin collecting a return on investment of 13.8%. “What investment can guarantee that?” he asks. “And since electricity costs are expected to climb, my profit will go up, up, up over time.” He plans to channel the savings into his retirement account.

I’m not a financial planner, so won’t pretend to know if Hebert’s numbers are correct. But his reasoning points out a new and growing way consumers and businesses have begun to think about electricity. Efficiency allows them to not only save money, but also to earn it.

In Hebert’s case, he is saving money by using a generation source that has no fuel costs – sunshine is free – and by taking advantage of Massachusetts net metering laws, which allow consumers to sell back to the local utility any excess power generated by their solar panels.

But there are other ways, as well, that consumers can earn a return on electricity savings. Neighboring Connecticut, for example, has become the king of monetizing energy savings through its innovative energy efficiency certificates. The certificates represent energy savings (negawatts) businesses achieve when they install efficient technologies. Each megawatt-hour of savings equates to one certificate. The businesses then sell the certificates to utilities or retail electricity suppliers who use them to prove to regulators that they’ve achieved state-mandated levels of energy savings.

So far, the Connecticut program is largely confined to businesses, although homeowners are eligible. Private companies have been trying to come up with ways the householder can easily participate, but are having trouble convincing state regulators that their programs can work. One company proposed a green stamps approach, where customers could buy lights, appliances and other efficiency equipment through certificate savings. (See the CPower case before the Connecticut Department of Public Utility Control: http://www.dpuc.state.ct.us/DOCKCURR.NSF/4ad307989ca5ed2a85257523004e0191/d122623c2e5eab5c8525767400500afc?OpenDocument&scrollTop=545)

Programs that monetize electricity savings are likely to grow as more utilities install smart meters in homes and businesses. Smart meters let consumers see when and how they use electricity, so that they can better control costs. Connecticut Light & Power found that consumers who participated in a smart meter pilot program liked using the devices, although those who did so for environmental reasons were more satisfied than those who participated to save money. This isn’t surprising since residential customers only saved $24.69 on average from June 1 to August 31, 2009. http://nuwnotes1.nu.com/apps/mediarelease/clp-pr.nsf/0/0E66EBF11810786085257673004EA13B?OpenDocument

Would the savings be more meaningful if packaged into an investment that increases the value of the money — the Cape Cod candy shop owner’s approach? The possibilities are many: Pairing energy efficiency companies with financial firms to offer energy savings retirement accounts or college funds, or perhaps channeling the money into tax deductible donations. Whatever the case, translating kilowatt-hour savings into concrete financial products for consumers offers intriguing market possibilities for the electricity industry.

http://www.wickedlocal.com/dennis/news/business/x1792920283/PHOTO-GALLERY-Solar-energy-to-power-chocolate-production-at-Dennisport-shop

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Where is energy’s cell phone?

By Elisa Wood

June 4, 2009

Electric industry restructuring often gets criticized for failing to deliver the goods. It was supposed to not only drive down rates, but also spark innovative new technologies.  After all, deregulation of the telecommunications industry gave us the cell phone. Where is energy’s nifty gadget?

Initiated more than a decade ago, electric deregulation has produced no such consumer hit. But it has led to innovation, albeit more complex and less tangible than the cell phone. For an example, listen to Lisa Cohn’s podcast: “How states can best use energy efficiency stimulus money” with Mark Sinclair of the Clean Energy States Alliance (CESA) http://www.realwriters.net/rew/rtlnkmr.htm.

Sinclair describes how a dozen or more states have served as laboratories over the last decade, laying the groundwork for today’s federal push to advance clean energy as a jobs builder. What got these states started? It turns out it was restructuring. CESA’s founder, Lew Milford, was an early advocate of restructuring and instrumental in the creation of rules in key states. He saw restructuring as an opportunity to open the door for development of clean energy, then largely a fringe resource. Milford pushed for a special utility rate structure, a systems benefit charge, that would channel funds into laboratory-like exploration at the state level.

Much of clean energy’s progress in the marketplace is due to these state programs:  “People tend to think somehow that these projects have appeared magically and that’s not the case… states have spent a significant amount of money putting dollars on the ground and then leveraging private capital to make those projects,” Milford says in an interview with E&E TV http://www.cleanenergystates.org/press/Milford_OnPoint-1.14.09_text.pdf.

Those states now offer specific templates for building clean energy economies that others can follow as they receive federal stimulus dollars. The clean energy states have tested rebates, grants and loans to stimulate markets. They’ve seen where poor regulation slows installations. They know what attracts clean energy companies and what drives them away.

By studying the work of experienced states, those new to clean energy can bypass years of experimentation.  So there lies an example of innovation from electric industry restructuring. Restructuring provided a mechanism for states to experiment with clean energy. Now, these pioneering efforts will save a lot of time and money for the states that are new to clean energy and find themselves with little time to ramp up the industry and attract jobs. True, electric restructuring did not produce a gadget that you can hold in your hand; instead it produced a clean energy roadmap, one that by many accounts could help create a lot of economic activity at time when it is most needed.

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

The 14 best states for energy efficiency

By Elisa Wood and Reid Smith

April 16, 2009

Once a “token gesture,” energy efficiency is now increasingly becoming a “first fuel” — the resource utilities seek before any other, even before renewable energy or other in-favor generation sources.

So says the report, “Meeting Aggressive New State Goals for Utility-Sector Energy Efficiency: Examining Key Factors Associated with High Savings,” issued today by the American Council for an Energy-Efficient Economy.

Chances are you are experiencing the benefits of efficiency – or are about to do so – if you live in one of 14 states the report identifies as leaders: California, Massachusetts, Connecticut, Vermont, Wisconsin, New York, Oregon, Minnesota, New Jersey, Washington, Texas, Iowa, Rhode Island, and Nevada.

These states show the biggest gains from efficiency. They also spend the most on programs and have the greatest legislative support.

What else makes the states stand out?

*Almost all offer direct financial incentives for delivering utility energy efficiency programs well.

*Eight of the top 14 states have an energy efficiency resource standard (EERS), which requires they meet a certain percentage of energy demand through efficiency. Typically, the requirement ramps up gradually over several years. Such standards do not deliver a lot of savings yet, but will in later years as requirements increase.

The report also looked at which efficiency measures generate the most savings. Lighting retrofits top the list, accounting for 63% to 92% of all residential energy savings and 55% to 69% of commercial and industrial savings.

The winning states still have a long way to go. Few report energy efficiency savings of 1.5% to 2.0% per year or more – the amount targeted by many state policies. Vermont is an exception with energy savings close to 2.0% of total electricity sales. What can speed delivery of results? There is no magic bullet, but the report recommends shareholder incentives, decoupling and support from top utility management.

The report is available for free download at http://www.aceee.org/

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

$3.1 billion for state energy efficiency programs – Just one catch

By Patrick Costello, guest contributor

March 19, 2009

The American Recovery and Reinvestment Act promises to advance the U.S. energy efficiency movement with an unprecedented $26 billion infusion of funds. Of that, $3.1 billion goes to state energy efficiency programs through the Department of Energy’s State Energy Program.

Great news, right? Maybe not, says the Electricity Consumers Resource Council (ELCON) and the National Association of Regulatory Utility Commissioners (NARUC).

To receive the federal stimulus money, states must agree to set up financial incentives that encourage utilities to pursue energy efficiency programs. ELCON and NARUC fear that this promotes a “one-size-fits-all” approach to the administration of energy efficiency programs. In particular, they are concerned that these stimulus funds will sway states to implement revenue decoupling at the expense of developing a more unbiased energy efficiency program plan.

Revenue decoupling is a ratemaking mechanism that breaks the link between a utility’s revenues and energy sales. Since utilities normally profit from selling energy, it’s not in their best interest to push efficiency. Doing so reduces demand for their product. Revenue decoupling counters this problem by allowing utilities to earn a fair rate of return, and sometimes additional financial incentives, on energy efficiency programs. Decoupling has become a common way to align utility financial interests with state efforts to achieve greater energy efficiency.

The debate over revenue decoupling is central to discussion over what makes an energy efficiency program effective. Ratepayers measure success based on how much money they save. And how much money they save may depend on who runs the program.

Utilities, state agencies, third party non-profit organizations, or some combination of the three typically administer efficiency initiatives. Each state shapes its own approach. No one program design seems to be the most effective. Many highly regarded programs differ greatly from one another. But the best programs share one commonality: They are tailored to the unique policies and economic profile of the state and are based on input from a variety of stakeholders.

Critics of the stimulus bill argue that ‘the catch’ – the condition placed upon states before they can receive stimulus money – may stifle such tailoring, hinder development of a state’s full energy efficiency potential, and diminish cost savings. Decoupling creates the foundation for utilities to serve as the primary administrators of efficiency programs. By pushing for revenue decoupling, a state is arguably saying it wants utilities, not a third party non-profit or state agency, to take the lead in developing and administering energy efficiency programs. Therefore, the stimulus bill walks a fine line between encouraging states to implement only utility-administered programs and encouraging them to reform their ratemaking policy so that utilities can, on some level, contribute to the development of a sound energy efficiency program.

Decoupling is somewhat arcane, but ratepayers should be aware of how it may influence their rates as energy efficiency programs evolve.

This is the House Energy and Commerce Committee’s report where the controversial provision can be found on page 26:

http://www.rules.house.gov/111/CommJurRpt/111_hr1_encrpt.pdf

To see a breakdown of the stimulus package’s energy efficiency measures, visit:

http://ase.org/content/article/detail/5388

To learn about and obtain forms for stimulus package energy efficiency tax incentives, visit:

http://www.energytaxincentives.org/

To see how your state’s energy efficiency efforts rank nationally, visit:

http://www.aceee.org/pubs/e086.htm

Visit us at www.realenergywriters.com and pick up our free Energy Efficiency Markets podcast and newsletter.

Profile of a White Tag Project

By Lisa Cohn

September 18, 2008

Few topics we write about here draw as much attention as energy efficiency certificates. After we mention the certificates, we inevitably receive inquiries from data centers or other large energy users, who want more information.

The certificates also are called “white tags,” a term trademarked by marketer Sterling Planet. Interest in the certificates likely stems from the increasing use nationwide of a more established sister product, renewable energy certificates or green tags. Green tags come from renewable energy projects, while the newer white tags are generated by efficiency measures, like lighting retrofits, combined heat and power, and demand response.

Both white and green tags can be bought and sold. Utilities and other electricity retailers need them to meet mandates in certain states that they provide a set amount of their supply from clean or efficiency energy sources. Voluntary markets also exist for the tags throughout the country. In this case, companies or institutions buy the tags not to meet a law, but as an environmental gesture.

Connecticut has led the way in creating a white tag market. The state requires that utilities and electric retailers make efficiency 2% of their power portfolios this year. The requirement grows to 4% by 2010.

Here we provide a profile of a recent white tag project we unearthed in the files of the Connecticut Department of Public Utility Control. An IBM data center in the town of Southbury created the white tags and won approval September 12 of their validity under Connecticut rules.

IBM created the tags by installing 1,200 efficient lighting fixtures in October 2007 in its 846,000 square foot, three story building. The facility operates 8,760 hours per year. Specifically, IBM retrofitted 3-lamp, T-12 lamps and magnetic ballasts with more efficient T-8 lamps (two per fixture) and electronic ballasts. The fixtures will save the facility 829 megawatthours. IBM determined the savings by subtracting the energy it consumed after installing the new lighting from the energy it consumed before the installation.

The certificates are viable through March 31, 2018. The ending date is based on a state determination that the life of such efficiency projects is typically up to ten years. The facility must measure and verify savings each quarter and submit the results to the state.

Each MWh equals one certificate. The state does not set the price for the certificates – what IBM receives will depend on the market.

The company that helped IBM convert the efficiency savings into certificates was Neuwing Energy Ventures, 6 Evergreen Lane, East Haddam, Connecticut 06423.

For detailed information on the state’s conversion rules we suggest reviewing the Connecticut DPUC’s order setting up the program, DOCKET NO. 05-07-19. This can be found at the ‘in-active dockets database’ http://www.ct.gov/dpuc/cwp/view.asp?a=3364&q=413272.

Visit energy writer Lisa Cohn at www.realenergywriters.com and subscribe to his free EE Markets newsletter and podcast.

Eastern States Ready for Big EE Boost

By Lisa Cohn

August 21, 2008

Several eastern states will see a large injection of cash for energy efficiency after the nation’s first mandatory auction of carbon dioxide allowances September 25.

The auction marks the United States entry into the world of capping and trading carbon dioxide emissions. Ten states are participating in the program, known as the Regional Greenhouse Gas Initiative (RGGI), or more commonly called “Reggie.”

To comply with RGGI, power generators must purchase carbon allowances, or permits. The September auction marks the first open sale of the allowances.

Why is this good for energy efficiency? Because the states will earn significant revenue from the sale of allowances, and many plan to put the money into efficiency programs.

By some estimates the first auction could earn the states as much as $63 million. That is with only six states participating: Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont. The other four states, Delaware, New Hampshire, New Jersey and New York did not have time to finalize their auction rules. However, those states have an opportunity to participate in a second auction in December.

How does it all work? Together, the states must cap carbon dioxide emissions at 188 million tons/year from 2009 to 2014. The cap drops by 2.5% for each of the next four years.

Power plants must secure one allowance for each ton of carbon dioxide they emit. The September 25 auction will offer 12,565,387 allowances.

State policymakers spent a lot of time hashing over RGGI details, and they came up with a program that makes a lot of sense. By spending auction revenue on efficiency, the states reduce power use, which further cuts back on carbon dioxide emissions.

A good source for more information on RGGI and state policy is Environment Northeast http://www.env-ne.org/. Auction details are available at http://www.rggi.org/

Visit energy writer Lisa Cohn at www.realenergywriters.com and subscribe to her free EE Markets newsletter and podcast.

Rhode Island: Little State, Big Energy Efficiency Opportunity

By Lisa Cohn

Rhode Island is often the butt of jokes about its size, a lot of them having to do with an inability among residents to screw in electric light bulbs. But when it comes to energy policy, the state has often loomed large, even if few people notice.

For example, it was Rhode Island that led the way with electric industry restructuring in the 1990s. California and Massachusetts usually get the credit.

And more recently, the smallest state in the nation became a big innovator in energy efficiency policy. Rhode Island in 2006 passed a law that requires National Grid https://www.nationalgridus.com/narragansett/, its major electric utility, to eke out all cost-effective energy efficiency before turning to power plants for generation.

The law was slow to ramp up, but is now getting under way. The state Public Utilities Commission is putting together rules to make it work. http://www.ripuc.org/eventsactions/docket/3931page.html

A few other states have made similar attempts, but eventually “settled” for less efficiency than was available, according to Andrew Dzykewicz, state energy czar, in a recent letter updating state regulators on the plan. Rhode Island, on the other hand, intends to go after energy, capacity and system cost savings to assist all customers: residents, institutions and commercial & industrial operations.

Rhode Island also is unusual in that it links the need for efficiency with the requirement to maintain a reliable electricity delivery system. Along with coming up with a comprehensive efficiency plan, National Grid must seek out ways it can integrate into its transmission and distribution system alternative technologies, like combined heat & power, distributed generation, renewable energy, demand response and efficiency.

State regulators continue to work out details, but look to July 15, 2008 as a major milestone. On that date the Rhode Island Energy Efficiency and Resource Management Council will file an energy efficiency “opportunity report “ with the Public Utilities Commission. The report will help determine how National Grid proceeds.

Once the program gets going, maybe the jokes will be more flattering, as in: How many Rhode Islanders does it take to screw in a light bulb? Not very many, since they hardly ever need to change their light bulbs, given how highly efficient they are.

Visit writer Lisa Cohn at www.realenergywriters.com, pick up her free Energy Efficiency Markets newsletter and listen to her Energy Efficiency Markets podcast.