Energy Efficiency

Towards the End of Demand Growth

Fereidoon Sioshansi, Fereidoon P. Sioshansi

• Publisher: Academic Press
• Year: 2013
• Print ISBN: 9780123978790
• eBook ISBN: 9780123978875
• Topic: Business
• Subtopic: Energy Industry
• Index: Business

Energy Efficiency: Towards the End of Demand Growth is a detailed guide to new energy efficiency technologies and policy frameworks affecting the profitability of efficiency projects. The contributions drawn together by F.P. Sioshansi feature insights from recognized thought leaders, detailed examinations of evolving technologies, and practical case studies yielding best practices for project planners, implementers and financiers. This volume challenges the "more is better" paradigm in energy production, examining efficiency technologies and measurement across the supply chain. - Comparative financial analysis of efficiency vs. increased generation - Case studies from four continents highlight the examples of successful technologies and projects - Explains how existing and developing regulatory frameworks impact cost and implementation

Part I

End of Demand Growth is within Reach

Chapter 1 Will Energy Efficiency make a Difference?

Chapter 2 Utility Energy Efficiency Programs

Chapter 3 A Global Perspective on the Long-term Impact of Increased Energy Efficiency

Chapter 4 Carpe Diem – Why Retail Electricity Pricing must Change Now

Chapter 5 Is There an Energy Efficiency Gap?

Chapter 1

Will Energy Efficiency make a Difference?

Fereidoon P. Sioshansi, Menlo Energy Economics. With contributions from Ahmad Faruqui, The Brattle Group, and, Gregory Wikler, EnerNOC

1 Introduction

Interest in energy efficiency got a significant boost following the 1973 Arab oil embargo when rich economies collectively got a wake-up call on just how vulnerable they were to the whims of the oil exporting countries or potential disruptions in the flow of oil – whether through the Strait of Hormuz or Malacca – or broader conflicts in the Middle East and beyond. The Iranian Revolution of 1979 provided a second wake-up call.¹ Surprisingly, the vulnerability persists, despite four decades of efforts to address it.²

The initial response of the oil-importing countries was entirely supply-side focused. The knee-jerk reaction was to decide how best to ration limited supplies of oil among the needy and who should stockpile how much to cushion a sudden disruption of future supplies.³ A minority decided to address the demand, rather than the supply-side of the equation.⁴ President Jimmy Carter, to his credit, gave a famous TV address from the White House, sitting by the fireplace wearing a sweater and encouraging the American public to turn down their thermostats. He called energy conservation “the moral equivalent to war.⁵”

Mr. Carter was ridiculed at the time by many who saw the problem as not having sufficient domestic supplies of oil or sufficient stockpiles to withstand through a prolonged embargo. Others identified the need for a bigger Navy to keep the bad guys at bay and keep oil tankers flowing.⁶

Carter was also ridiculed for wearing a sweater and encouraging his fellow citizens to conserve energy. Conservation, after all, has a negative connotation – it suggests deprivation, sacrifice, hardship, doing without, lowering one’s standard of comfort and so on. Decades later, during another debate about U.S. energy policy, then Vice President Dick Cheney said, “Conservation may be considered a personal virtue, but should not be part of a country’s energy policy.”

This book, of course, is not about oil or broad energy policy issues, but the preceding discussion is important because:

First, most observers agree, that the 1973 Arab oil embargo was a game changer because, for the first time, it signified the importance of energy supplies and energy security on a global scale;

Second, the ensuing debate about how best to respond to energy insecurity, supply vulnerabilities and rising prices – also for the first time – raised the significance of energy efficiency and/or conservation;

Third, it led to new awareness of the importance of the demand-side, not just wasting less, but using energy more efficiently, more frugally, and more wisely – topics further explored in this book.

The electric power sector, a prominent consumer of energy,⁷ has been debating the virtues of energy efficiency ever since.⁸ As further explained in Box 1.1, the issues have evolved and the debate about energy efficiency has matured over the years. Likewise a lot has been learned from what works and what does not, yet many perplexing questions still remain.

Box 1.1

The Evolution of Energy Efficiency

Ahmad Faruqui, The Brattle Group

Gregory Wikler, EnerNOC

Efficiency pessimists contend that there is little potential for further improvements in energy efficiency, since all the low-hanging fruit has been harvested. Ergo, the solution to meeting the nation’s future energy needs in a carbon-constrained future, is to build more power plants (preferably those that don’t burn coal), transmission lines, and distribution systems.

Efficiency optimists, on the other hand, contend that energy efficiency is essentially an inexhaustible well and we have a long way to go before the bottom is reached. Their viewpoint suggests that enhancements in energy efficiency may eliminate the need to make investments in the power supply system, except for routine maintenance and upgrades.

The truth is probably somewhere in between. The question of how much energy efficiency is available continues to come up, since we in the United States have been encouraging energy efficiency in one form or another ever since the first oil shock of 1973. The first wave of programs involved moral exhortations – as in the famous call to put on a sweater by President Jimmy Carter¹ – information dissemination, and energy audits. The actors were government agencies and community organizations and the slogan was “energy conservation.” Federal legislation was passed in 1978 to give an impetus to conservation. National efforts at cutting back use were redoubled when the second oil shock hit in 1979.

The second wave was led by the utilities and gifted the somewhat clunky term demand-side management (DSM) to future generations. The focus of DSM was on improving energy efficiency and not on asking consumers to make do with less (i.e., energy conservation). Conservation was frowned upon because it meant that consumers would have to change their behavior, which might be perceived as an unwelcome intrusion into their lives and even considered un-American by some. Incentives in the form of rebates and low-interest financing were used to encourage consumers to buy more efficient equipment and buildings. Utility spending on DSM programs peaked in 1993 as the industry prepared for restructuring, which arrived in the mid-to-late 1990s.

The energy crisis that plagued California’s energy markets in the years 2000 and 2001 set in motion a third wave of programs that revolved around the concept of demand response. Customers would be provided incentives either through dynamic pricing or cash payments to curtail their usage during times when the power system was stressed, typically because of a shortage of capacity caused by natural conditions such as prolonged heat storms and droughts. Some of these programs could be instituted with existing meters while others required the deployment of smart meters. As of this writing, some 22 million smart meters have been deployed in the United States, and there is an evolving consensus that the number will rise three-fold in the next five years. Demand response programs represented a major change in the industry’s conception of customers as a resource.

Changing consumer behavior, along with behavioral economics, is now in vogue and appealing to an increasingly widening circle of folks who are active in the energy domain. A fourth wave of programs, sometimes called integrated DSM (iDSM), is upon us.

This new wave of iDSM programs include those that inform consumers about how their energy spending compares with a group of peers and helps them to establish targets for optimizing use. These types of consumer-focused programs are finding widespread acceptance, saving one or two percent of energy consumption simply by inducing consumers to change behavior. Consumer-focused programs may save even more by enhancing consumers’ awareness about where their energy dollar goes and by directing consumers toward rebates and low-interest financing that may be available from utility DSM programs.

As a result of iDSM programs, Energy Star labels on appliances are almost ubiquitous in “big box” stores, steering consumers toward efficient purchases. Zero-energy homes are being constructed that produce enough energy through renewable sources to meet their own needs.

Aggressive codes and standards are making an impact on the building construction and appliance manufacturing industries, especially in states such as California, which have their own supplemental codes and standards that push the envelope beyond federal requirements.

Nowhere is this transformation in consumer buying habits more visible than in the imminent phase out of incandescent bulbs, called upon by the Energy Independence and Security Act of 2007. Compact fluorescent lamps are expected to get a substantial boost from this legislation, but light-emitting diode (LED) lamps may lead to even greater savings. A recent issue of Wired magazine features them on the cover.² They are expensive, but prices are expected to come down as scale grows.

And this fourth wave, iDSM, is not confined to the residential sector. It is not uncommon to see full page ads in the mainstream media by companies such as Johnson Controls and Schneider Electric touting projects in which they helped large commercial and industrial facilities reduce their energy bills by up to 30 percent.

Finally, it is important to note that electric rates are now being redesigned to incentivize efficient energy use, with inclining block rates and time-varying rates being two concepts that are receiving increasing interest by utilities and policymakers. So the fourth wave, more comprehensive than the first three, is built around five policy instruments: (a) information, (b) codes and standards, (c) technological change, (d) rebates and low-interest financing, and (e) rate design.

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¹Felder describes Carter’s famous fireside speech and also talks about the 5-waves of DSM in his chapter.

²http://www.wired.com/magazine/2011/08/ff_lightbulbs/

This chapter is rather narrowly focused on answering the question, “will energy efficiency make a difference?” It is organized into three sections: Section 2 provides a brief historical perspective on prior studies on the scope of energy efficiency potential and the debate on its cost-effectiveness with references to relevant chapters in the book. Section 3 provides a range of estimates offered by several prominent recent studies and surveys that offer alternative scenarios or visions of the future scope of energy efficiency, also making references to relevant chapters. Section 4 is focused on a number of measures and policies, which taken together, can make a difference in the future course of demand g...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• About the Authors
• Foreword. Is Zero Energy Growth in Our Future?
• Preface
• Introduction
• Part I: End of Demand Growth is within Reach
• Part II: The – Frustratingly Slow – Evolution of Energy Efficiency
• Part III: Case Studies of Low-Energy Communities and Projects
• Part IV: Opportunities and Remaining Obstacles
• Epilogue. How Do We Get There From Here?
• Index