Energy efficiency has become a buzzword, especially among politicians who vow to increase efficiency alongside renewable resources. But what does it mean for energy utilities and their consumers?
For consumers, the benefits are clear – a lower electric bill with cost fluctuations having less of an impact, and a reduction in their carbon footprint, something that’s particularly important to younger ratepayers, including Millennials.
Trust and Energy Efficiency
As Daniel Fisher writes for Ecosphere+ in “The Millennial Consumer: A Driving Force for Corporate Sustainability,” “This has all led to a world where trust has become a form of currency. Alongside this new currency and this generation’s collective concern and desire to act, leaning more heavily towards environmental initiatives than ever before, businesses are feeling the pressure to adapt their social and environmental practices.
For example, recent studies show that ‘more than 9 in 10 millennials would switch brands to one associated with a cause,’ and that millennials are ‘prepared to make personal sacrifices to make an impact on issues they care about, whether that’s paying more for a product, sharing products rather than buying, or taking a pay cut to work for a responsible company.’”
For energy utilities, the benefits may not seem as obvious, but energy efficiency allows utilities to step away from large investments on the supply-side, including building new plants.
“The Cost of Saving Electricity Through Energy Efficiency Programs Funded by Utility Customers,” another Berkeley report, notes that the cost to the utility per saved kilowatt-hour ranged from 5 cents to less than 2 cents, while the levelized cost to generate a kilowatt-hour for a gas-fired plant is 5 to 8 cents, and up to 15 cents for a coal-fired plant. The greatest savings were seen in residential programs, especially lighting programs.
“The continued cost-effectiveness of the aggregate portfolio of efficiency programs—and thus the magnitude of the efficiency resource and where those savings can be acquired—depends to a significant degree on continued low cost and substantial savings from residential consumer products. Technological changes can enhance lifetime savings on a per measure basis.”
The decoupling of profits from usage and performance incentives isn’t new, but it does allow utilities to pursue efficiency programs without cutting into their own profits.
Energy efficiency addresses construction costs, uncertain cost recovery for new plants, public opposition to building new generation and transmission facilities and growing concerns about the environment. They acknowledge that the traditional model of profits reaped from kilowatt hours sold is the opposite of energy efficiency, so decoupling and incentives allows more frequent rate changes to meet necessary financial goals.
The authors of, “Aligning Utility Interests with Energy Efficiency Objectives,” explain that, “Experience to date suggests that the results from enacting either of these regulatory mechanisms has generally been very positive, with the utilities or other program providers governed by such mechanisms often demonstrating strong commitment to meet or exceed established goals for their energy efficiency programs. With the rapidly increasing interest in expanding energy efficiency as a utility system resource, we expect, and recommend, further adoption of regulatory mechanisms to address the utility financial concerns regarding energy efficiency.”
Utilities are looking for opportunities to connect more deeply with consumers through the promotion of energy efficiency and other beneficial programs. HomeServe helps to improve consumer engagement for our utility partners through the integration of complementary home protection programs with efficiency initiatives, offering customers greater access and choice. Partnership allows the utility to leverage our marketing and communications expertise to educate their residents on important utility programs through a variety of channels. For more information on our work with utilities, contact us.