Do Utilities Really Want to Promote Energy Efficiency and Demand Response?

July 21, 2009 at 4:21 pm

Commentators say that some, perhaps many, utilities are not genuinely interested in EE and DR.

I agree but see that rapidly changing.  The key, of course, is incentives, and federal policy is driving signficant changes.  Most utilities still make more money selling more kWh, though 10 states have changed that already, including California, the Northwest, New York, and Mid-Atlantic.  The Obama Administration required the governors of the states receiving Stimulus Bill funds for EE to sign a pledge to at least consider decoupling of sales and profits; this mild incentive won’t do a lot by itself, but it makes the point that utilities need to be able to make money by selling fewer kWh.

The Energy Bill just passed by the House goes further, with additional EE incentives, notably the cap and trade provision.  This provision, if adopted in the final Energy Bill, would provide a constant economic incentive for utilities to consider options and compare the cost of emissions reductions from EE with that of sequestration or differing energy sources.  Another provision, the renewables portfolio standard, includes EE as an option to provide renewables, again providing a direct economic incentive for EE.

Finally, the Energy Bill includes an explicit provision for peak demand reduction.  Section 144 requires load-serving entities or states—not later than one year after enactment—to determine and publish peak demand reduction goals. Each LSE or state would be required to prepare a peak load reduction plan including EE, DR, Smart Grid technology, energy storage, and distributed generation. The Federal Energy Regulatory Commission is permitted, “for good cause,” to grant relief to LSEs from these requirements.

While we don’t expect utilities to jump on board over night, these policies will provide the direct economic incentives that utilities have been looking for.

Chris King

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Entry filed under: Smart Grid.

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