By Winston Adams
Our American neighbours do a good job of reducing wholesale prices for electricity and keeping retail prices stable. Cheap gas for electricity generation is not the only tool they use. The American Council for an Energy Efficient Economy (ACEEE) advises power utilities and governments throughout the U.S. on energy issues.
According to the ACEEE, “energy efficiency remains the lowest cost energy resource available to utilities by a wide margin. It is about one-third the cost of new generation resources.” And their research report U123, released June 27, says, “Utilities across the country are increasingly turning to energy efficiency as the lowest cost energy resource.”
Utilities “are defining efficiency as a energy resource capable of yielding energy and demand savings that can displace electrical generation from coal, natural gas, nuclear, wind and other supply-side resources. Defining it as a resource and integrating it into utility decisions makes it especially critical because of the clear resource cost advantage of energy efficiency. ”
Efficiency is not conservation or deprivation. In terms of fuel and other energy resources, efficiency means getting more for less.
Locally, for the supply side, we see Nalcor procure testing for hydro turbine models for optimum energy efficiency and replacing aged transformers at the Churchill Falls power plant with new and higher efficient units, whereby a couple of percentage points in efficiency is significant. So too, on the consumer side, according to ACEEE, “energy savings from customer energy efficiency programs are typically achieved at one-third the cost of new generation resources. … It can also offset the need to add new peak generation capacity, and therefore fossil fuel use.”
Vermont is the leader in this. Vermont currently uses 4.4 per cent of the revenue from electricity sales for their energy efficiency rebate program.
Vermont, whose electricity use is a bit less than Newfoundland’s, pumped $30 million into the program in 2008 and saved 2.5 per cent in energy use.
A study for non-transportation energy in the U.S. in 2008 by the international consulting firm
McKinsey & Co. found that energy efficiency, by 2030, could save hundreds of power plants from being built, and found “a holistic approach, executed to scale, would yield energy savings worth more than $1.2 trillion and reduce end-use energy consumption by 2020, roughly 23 per cent of demand.”
The study found that “the compelling benefits of energy efficiency warrants this energy resource being a national priority.” This study is based on the residential sector accounting for 35 per cent of the end-use efficiency potential, commercial 25 per cent and industrial 40 per cent.
Upfront costs to capture energy efficiency could be recovered through a system-benefit charge of 0.6 cents per kWh over 10 years. This represents an increase in average customer energy costs of eight per cent, which would be more than offset by the average bill savings of 24 per cent.
A study by the Electric Power Research Institute showed similar results.
In recent years, following Vermont’s example and the data from these studies, 44 states and several Canadian provinces now have embraced this energy efficiency model. Massachusetts embraced energy efficiency with one per cent energy saving in 2009, 1.4 per cent in 2010, two per cent in 2011, 2.4 per cent planned for 2012 and 2.5 for 2013-2015.
Massachusetts uses about one-quarter of a cent per kWh for funding their program. Customer rebates for energy efficiency are usually 40 to 60 per cent of the cost. Their verified savings are posted on their websites: Efficiency Vermont, Efficiency Massachusetts, etc.
Here in Newfoundland, in forecasting our future electricity needs, Nalcor considers energy efficiency referred to as “technology change” factor. Unfortunately, we have no mandated efficiency targets with yearly goals. Nalcor’s “plan,” as shown in its submission to the PUB, is to have energy efficiency savings of 178 gigawatt hours total over 20 years, (about 8.9 gWh per year). This is about two-tenths of one per cent a year.
Vermont is already exceeding this tenfold, with verified efficiency savings averaging 2.1 per cent per year over the last four years. Nalcor, for the Muskrat Falls project, forecasts a demand increase on the island of about one per cent a year.
If we were to match Vermont in efficiency savings, it would make the Muskrat Falls power for the island unnecessary well into the future, likely a decade and more, as well as reduce oil consumption and pollution at Holyrood.
It appears we could match and possibly exceed what Vermont has achieved, at comparative very low cost to new generation.
How have those other jurisdictions achieved such significant efficiency savings?
For a program to be effective, one necessity is to decouple the present disincentive whereby a power company’s profits are tied to sales.
The government achieves this by enacting a separate efficiency corporation with a specific mandate to achieve efficiency savings.
Power companies are rewarded, not punished, when savings by efficiency are realized.
The solutions for efficiency savings can vary for different geographic locations, as the type of electrical loads and climate may favour some solutions over others. Some technologies are climate sensitive. And the need to verify the expected savings is essential.
Another necessary requirement is awareness: that the public understand that efficiency savings doesn’t mean that electricity rates will drop, but that the consumer’s power bill will certainly drop because less electricity is used for the same benefits and comfort levels.
In addition, electricity rates can be stabilized at or near present levels when new generating capacity is avoided.
I’ll explain how it can work in this province in a future letter.
Winston Adams is a engineer living in Logy Bay, with experience in electrical power generation and distribution and heating systems.