New ACEEE Analysis – Why Is Electricity Use No Longer Growing?

The dynamics of electricity use are complicated. But with the ongoing muddlings regarding U.S. energy policy and the looming specter of climate change, it becomes critical that we do understand electricity usage. A new ACEEE (American Council for an Energy-Efficient Economy) analysis by Steven Nadel and Rachel Young proposes that energy efficiency has become an important factor in U.S. electricity use. As noted by the authors:

Prior to the 1970s energy crises, electricity sales in the United States were growing by more than 5% per year, and as recently as the early 1990s, electricity sales were growing more than 2% per year. In the past few years, growth has essentially stopped: retail electricity sales in 2012 were 1.9% lower than sales in 2007, the peak year. Some observers have attributed this stalled growth to the 2008 economic recession, while others have suggested a variety of other factors. In this paper, we undertake several analyses to consider which factors best explain changes in electricity use in recent years. Our hypothesis is that the recession alone cannot explain the recent stagnation in electricity consumption. We instead hypothesize that electricity savings from energy efficiency programs and from other efficiency efforts such as appliance standards and building codes are having a broad national impact on electricity consumption in the United States, possibly contributing significantly to the recent decline in electricity consumption.

The white paper for this analysis is available at: Why Is Electricity Use No Longer Growing

Top Five 2014 Energy/Environmental Priorities of the EU

I thought that it’s instructive for anyone interested in US energy/environmental policy to look at what the EU has on its 2014 agenda. Environmental journalist Sonja van Renssen outlines the top 5 EU energy/environmental issues. The issue priorities are:

  • The biggest issue on the agenda will be the climate and energy package to be unveiled by the European Commission on January 22nd.

  • ETS and how to include emissions from international aviation will also be high on the agenda, with  the European Parliament and the biggest Member States disagreeing on the way forward.

  • Shale gas will be back on the agenda with a long-awaited proposal to be tabled by the European Commission also on January 22nd.

  • In 2014, DG Environment’s priority will be waste and resource efficiency with a ‘circular economy’ package expected to be presented by environment Commissioner Potočnik in spring.

  • The alternative fuel strategy with difficult trialogue negotiations between the Council, European Parliament and Commission lying ahead.

View environmental journalist Sonja van Renssen talk about the energy/environment priorities:


 

The Continuing Saga of the Utilities’ Death Spiral

For those of you who are fighting numerous proposed high-voltage (HV) transmission projects, take some solace in the idea that “time is on our side”. There are lots of reasons for that, but one of them has always been that technology and the market would unfold and develop in ways that would, and should, make HV transmission largely unnecessary. As I’ve said before in other Geopostings’ blogs, I think that is exactly what’s currently happening with the disruptive challenge and the death spiral related to on-site solar and energy efficiency. Every day that passes increases the chances that more HV transmission will never be built. To elaborate on this, I’ve included a soon-to-be published op-ed in the Bozeman (Montana) Daily Chronicle by John Vincent (a frequent contributing author to Geopostings):

The Continuing Saga of the Utilities’ Death Spiral

– by John Vincent,  former Montana state legislator, Bozeman mayor,Gallatin County Commissioner and Montana Public Service Commissioner

Recently two opinion pieces published by the Bozeman Chronicle have addressed energy issues from a single perspective; increasing the supply of electricity. One article advocated for more power from wind. Another, while not dismissing wind power, made the case for coal fired generation.

Certainly reliable energy supply is important, the cleaner and cheaper the better.  But increasing supply isn’t what’s getting the most attention or generating the greatest concern in the utility industry today.

Here’s what is:  The industry is becoming more than a little troubled by the fact that energy efficiency and on-site and locally generated and distributed energy (which reduces demand for the power they sell) is beginning to threaten the way they’ve done business for over 100 years. They see this trend starting to cut into their profits, (profits made possible primarily by building large, centralized power plants and long distance transmission lines at handsome rates of return guaranteed by government regulation of electricity rates).

Consultants for the private utilities’ owned trade group, the Edison Electric Institute, recently acknowledged this threat. They call it a “disruptive challenge.” Others have dubbed it a “death spiral” for the utility industry.

What is “disruptive challenge” or the “death spiral”?

As more and more people and businesses use less and less energy and generate more of what they do use on their own, utilities will sell less power. Rates will have to go up in order to keep profits healthy and stockholders happy.

Customers who haven’t become more energy efficient, or who’ve been unable to find ways to utilize on-site or distributed energy systems, will bear the brunt of these higher rates. But because the cost of distributed energy and improved efficiency will continue to drop, increasing numbers of these customers will become empowered, motivated
and enabled to significantly reduce the amount of power they purchase from their traditional utilities.

The customer base for traditional utilities will shrink, profits will decline, expensive (and previously profitable) power plants and long distance transmission projects will no longer be needed and investors will look elsewhere for the kind of safe, profitable investments
government regulation of utility rates has guaranteed them for decades.  Utilities, as we know them, will no longer exist.

Because one key component of the “disruptive challenge/death spiral” is on-site solar, some may counter that what’s going on in the broader utility industry won’t apply to Montana.

Don’t bet the farm on it. New Jersey, under Republican Governor Chris Christie, trails only California in on-site solar installations; state of the art energy efficient office buildings using on-site solar are going up in Seattle; the chairman of the Federal Energy Regulatory
Commission said last week that on-site “solar will overtake everything” and so the cost of on-site solar will continue to drop. The utility industry’s Edison Electric Institute has warned its own constituency that they have a big problem on their hands; In Georgia, the Tea Party is going to bat for more on-site solar to reduce dependence on the grid; and Bloomberg BusinessWeek just  published an especially timely article, “Why The U.S. Power Grid’s Days Are Numbered”.

On top of all that, and of even more immediate concern for Montana, is the fact that substantial amounts of our state’s electric generation are exported to markets where, for decades to come,  85 to 100 percent of new energy demand is expected to be met through conservation and efficiency.

The grid isn’t going to disappear altogether and technology will make what remains of it smarter and more efficient.  But our reliance on the grid (the world’s largest machine but also a vast, interconnected system highly vulnerable to cyber attack and terrorism) will become a small fraction of what it is today. The signs are there for all to see and more than a few  industry leaders have started to adapt in order to survive and remain profitable in the coming decades.

We’ve seen this kind of paradigm change before, most recently in the phone industry. Land lines out, wireless in. A quantum leap. We are about to see it again in the utility industry. You can bet the farm on it.

Energy Conservation And Efficiency….. Good For People, Business, And The Environment

– By John Vincent, Former Montana Public Service Commissioner

It’s recently become all too clear that “big power” is “waging war” on energy efficiency and conservation because it reduces the amount of power they sell and cuts into their profits. But for others (residential consumers, private businesses – both large and small, and corporations), energy efficiency is saving energy, saving money, and improving bottom lines. And it’s good for the environment, too. Less generation, especially, but not exclusively, coal fired generation, reduces CO2 emissions (natural gas produces about half the CO2 of coal but also emits high quantities of methane,  a “green house” gas 20 times more potent than CO2).

IDAHO’S J.R. SIMPLOT COMPANY LEADS THE WAY ON ENERGY EFFICIENCY

The J.R. Simplot Company shows the way to energy conservation and efficiency. This is a great example of the conservation/efficiency ethic being taken to heart by a major American business. With more than 10,000 employees, the J.R. Simplot Company is one of the nation’s largest privately owned companies. And, it’s no secret that the Simplots are a politically conservative family and business. They have fully embraced (dare it be said) a good, old fashioned conservative ethic; saving money……….. by using less energy and consequently also cutting costs.

Here’s what they’ve accomplished through energy efficiency and conservation since 2009:

–  saved 1.3 trillion btu’s of natural gas (enough to take 29,929 cars off the road and keep 95,056 tons of co2 out of the air),

–  reduced electrical use by 390,821,028 kilowatt hours (enough to take 35,400 homes off the grid),

– saved millions of dollars*.

Of course, when individuals and businesses save energy it also reduces the need for new and extremely costly centralized electrical generation plants and long distance, high voltage transmission lines – both of which would cost (not save) electric customers billions of dollars, pose a threat to the loss of private property rights through eminent domain, and harm the environment. When asked recently by the Idaho Statesman newspaper why they undertook their energy saving efforts, the Simplot family fell back on the words of the company’s founder, J.R. Simplot: “do well by doing good.”

Good advice.

*actual dollar amount of savings to be posted soon

Energy Efficiency and Small-Scale Solar Power Threaten Utilities’ Bottom Lines

Power company revenue is under siege by energy efficiency and small-scale solar power, says a Fitch ratings analyst.

Rooftop solar power and energy-efficiency programs will eat into utility revenue and profit margins and discourage investment in new transmission projects within five years, a Fitch Ratings analyst said.

Utilities in stagnant or low-growth markets in the Midwest and Northeast face the biggest losses as more businesses and homeowners install their own generation systems and upgrade to more efficient appliances, said Glen Grabelsky, Fitch’s managing director of utilities, power & gas. Retirees flocking to southern states may offset some losses for local utilities.

This is serious business for utilities as Bill Howley of The Power Line notes:

Fitch is issuing this report as a warning of downgrades to come if power companies don’t step and squash rooftop solar power soon.

The demand loss for grid electricity will be significant as further remarked by Grabelsky of Fitch Ratings:

Loss of demand from customers that go solar or reduce consumption in other ways will shift more and more grid costs onto customers that do nothing. As there are more and more successful Off Grid Solar Projects, traditional grid companies will have to change with the new developments or be left behind. Power supplied by U.S. utilities declined 3.4 percent last year, largely from energy efficiency and on-site solar generation, which reduces demand for electricity from the grid, Grabelsky said.

Unless utility rate structures change, that will reduce utilities’ abilities to invest in major new projects and upgrade their transmission systems, Grabelsky said.

“It will have a negative impact on their ability to raise capital,” Grabelsky said. “Regulators will ask, ‘Do you really need all that new transmission when there’s no demand growth?’ There’s the potential for stranded assets.”

A recent study by the Edison Electric Institute (EEI), “Disruptive Challenges – Financial Implications and Strategic Responses to a Changing Retail Electric Business”, basically reiterates Grabelsky’s view of the threat to utilities by energy efficiency and distributed energy generation. The report details corporate utilities’ angst regarding their customers’ shift to go solar and reduce demand for grid electricity. Many are switching over to prepaid energy plans for their grid electricity, which is a greener option and more cost-effective to manage. With fewer people deciding to have a look for certain types of grid electricity, they are less likely to be overcharged by their utility company, which is good news for the customer.

How will utilities compensate for the loss of demand? Howley, in his “The Power Line” blog, gives a good response:

This translates into: do away with net metering and charge higher rates to people who install solar panels and invest in efficiency.

John Vincent, a former Montana Public Service Commissioner (PSC), in a recent op-ed in the Bozeman Daily Chronicle, calls the shift away from using corporate grid electricity the “new energy paradigm”. As Vincent explains:

A new paradigm is grabbing hold in the residential, commercial and public sectors of our economy. That is: local distributed or “on site” electrical generation and consumption (wind, solar, small scale hydro, biomas, geothermal, micro turbines, combined heat and power systems etc.) conservation, efficiency and smart-grid technologies (to increase the efficiency and capacity of existing electrical transmission systems rather than of building costly new ones at rate payer expense).

But, as Vincent cautions us:

The new energy paradigm is, for obvious reasons, being met with strong resistance by those who benefit from the status quo. Unfortunately, these self interests still carry a lot of political clout, witness recent Montana legislative sessions.

The “new energy paradigm” is a model that we must embrace. We need to get people and politicians to move on this.

Blog Postscript – Former PSC Commissioner Vincent adds the following clarification on the EEI study mentioned above:

The Edison Electric Institute is Big Power’s number one ally and voice (funded and supported by Big Power) and so their own consultant has: 1. Clearly identified Big Power’s dilemma and, 2. Recommended ways to beat back the new paradigm and maintain the status quo…… at rate payers expense. I think the recommendations cited in the consultant’s report can be boiled down to raising rates (one way or another) to offset the loss of revenue brought about by on site, distributed generation and improved efficiency.

In other words, Big Power will do everything they can to make us (rate payers) pay for distributed energy and efficiency……..the new paradigm, not their stockholders.

Energy Efficiency Can Save Big Money And Greenhouse-Gas Emissions In Urban Transport Systems

The International Energy Agency just released a new report that shows how energy efficiency of urban transport systems could facilitate savings of up to USD 70 trillion that would be spent on vehicles, fuel and transportation infrastructure from now until 2050.

The report,  A Tale of Renewed Cities, draws on examples from more than 30 cities across the globe to show how to improve transport efficiency through better urban planning and travel demand management. Extra benefits include lower greenhouse-gas emissions and higher quality of life.

The report comes at a critical time: More than half of the world’s population already lives in cities, many of which suffer from traffic jams and overcrowded roads that cost hundreds of billions of dollars in lost fuel and time and that harm environmental quality, health and safety.

“As the share of the world’s population living in cities grows to nearly 70 percent by 2050 and energy consumption for transport in cities is expected to double, the need for efficient, affordable, safe and high-capacity transport solutions will become more acute,” said IEA Executive Director Maria van der Hoeven as she presented the report. “Urgent steps to improve the efficiency of urban transport systems are needed not only for energy security reasons, but also to mitigate the numerous negative climate, noise, air pollution, congestion and economic impacts of rising urban transport volumes.”

The IEA report, A Tale of Renewed Cities, is available for download at: http://www.iea.org/publications/freepublications/publication/name,39940,en.html

Or – check out the slideshare: