Pioneering Energy Efficiency


Published In: EnergyBiz Magazine May/June 2012


ENERGY EFFICIENCY isn't just compact fluorescent light bulbs, stingy appliances or deeper insulation. They still matter, but the industry is looking more to better home heating systems as well.

A few initiatives are under way to squeeze more juice out of existing power plants or to use generation more wisely. And as the programs come at a cost, an equally valuable part of the effort is finding ways to leverage private money into the initiatives as utilities and state programs can't bear the cost of more expenditures.

The imperative now is gaining efficiencies in an era of declining government support and when utilities are pulled in numerous other directions, to fund transmission, the smart grid, renewable energy and other competing interests.

At the current rate of utility demand side management, programs are saving about 112 million kilowatt-hours or equivalent to the usage of 10 million homes. Energy efficiency saw a 21 percent jump in kilowatt-hours in 2010 over 2009. It doesn't come for free. Utilities in 2010 spent about $4.8 billion, or a 28 percent increase from the previous year, in part due to the Obama economic stimulus programs.

On a smaller scale, the cost savings aren't trivial either. At CPS Energy in San Antonio, the municipal utility has embarked on an efficiency program that will shed 771 megawatts of load. "That's like us decommissioning an old coal plant without having to build one to replace it," said Michael Kotara, CPS' senior vice president of power generation.

While high consumption states like Texas, California and those in the East seem the likeliest places for energy efficiency to find a home, the interest has spread coast to coast.

"The biggest growth is in the Midwest, and that's notable as the Midwest always seemed to lag behind," said Clark

Gellings, a fellow and former vice president at the Electric Power Research Institute.

This comes at an opportune time when EPRI has reengaged in national programs demonstrating cutting-edge technology, Gellings said. The research organization went around the world to view promising technologies that could be adapted to the U.S. market and had demonstrated viability in the marketplace. More than 40 U.S. utilities from coast to coast are participating.

"We have to get the electric utilities involved because of the typical uncertainty about the performance of these devices," he said. "And if they have to get public utility commission approval, they're not likely to get it without pretty rigorous data."

Heat pump water heaters were in vogue for a time about 30 years ago, but high failure rates soured utilities on the technology. Japan has developed high-coefficient models with several hundred installations that have cut energy use for water heating at least by half.

Research has demonstrated that it is more efficient to transfer heat from the air and into a water tank via a heat pump than it is to heat water with an electrical heating element.

Testing of a direct current power system at a Duke Energy data center in Charlotte, N.C., showed preliminary results that the system uses 15 percent less energy than an alternating current power system.

Through this demonstration, it is expected that the Duke Energy data center should yield anywhere from 7 to 20 percent energy savings, depending on the vintage of the equipment compared. These figures could be doubled if you take into account the added energy savings realized by the decrease in cooling load.

Utilities and their energy efficiency partners have to find more creative ways to finance improvements, as budgets are stretched and support may be waning.

Thus, the tried-and-true investment strategy is to use other people's money to fund projects. The Environmental Defense Fund is championing a program in California to get private capital into energy efficiency projects, to open up market forces to help solve the funding issues in as many creative ways as possible.

"Other people have a lot more money than the states and utilities do. And that means we won't have as much pressure as we do now to do only the very, very best projects," said Brad Copithorne, an energy and financial policy specialist with the Environmental Defense Fund.

The concept is simple. Building owners and renters would be allowed to fund energy efficiency upgrades and renewable electricity generation projects with bank or other private loans that are repaid through their energy bills.

The program can work for single-family, multifamily and commercial buildings. The on-bill repayment can be structured for a variety of financing techniques, including loans, leases, energy service agreements and power purchase agreements.

There are several advantages to such a model. In work financed by ratepayers, properties owned by wealthier individuals or companies, like commercial real estate, would most likely be ineligible. But the elements for an effective program, large energy savings and a motivated owner, still exist.

"Utility programs may not get the market penetration that you'd want. We want to make this as open as possible and make it available to as many different types of vendors as can participate," Copithorne said.

Experience in several states showed that prior models - energy audits and retrofits - weren't as effective as first thought. What really moved efficiency forward was empowering smaller contractors who were performing emergency repairs or piggybacking existing sales.

Similar programs are already in development in New York and Pennsylvania. In North Carolina, Self-Help, based in Durham, will use a $5.5 million loan and grant from Bank of America, combined with other resources, to offer $15 million in energy loans in Charlotte, Atlanta and six other cities.

In Charlotte, the money will be targeted at retrofits of commercial, community and multifamily buildings, especially those in economically distressed areas. The energy loans will range from small microloans, such as loans made to day care centers in need of low-flow toilets and more efficient lighting, to multimillion-dollar deals to renovate charter schools.

The economic slowdown and falling power prices due to cheaper natural gas have weakened the short-term financial case for efficiency.

That means it's not all smooth sailing for efficiency, even with innovative financing programs. Some states are seeing the effort as an unnecessary expense and utilities in some cases are scaling back newer programs.

The Nevada Public Utilities Commission is considering elimination or reduction of energy efficiency programs offered by NV Energy because of their high cost.



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