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Putting Our Utilities on an Energy Diet

In the past, we made assumptions about our economy and our society that fit with the spirit of those times. The spirit of conquest and manifest destiny rushed through our American veins and led us toward the grand ambition of building a "modern" electricity and interstate highway system. We used our creativity to make energy from fossilized sunshine to power consumables and move people and products, generating electrons in abundance to ensure access to energy. Fast forward to the 21st century, and we still are using a fire hose to water a flower.

We are only 13% energy efficient in this country, which means we are blasting energy towards our needs in such a way that 87% streams right by us. Obviously, we need energy to create systems that ensure our quality of life. But in order to create an infrastructure for the 21st century, we cannot be hindered by the ways in which we thought in the 20th century.

Last century, electricity regulation was geared towards access, affordability and reliability, with no thought to the source of the power in question. The only strategy for access was to create as many electrons as we could as quickly as we could. Energy was a commodity, and the electricity we used as a society was largely invisible. Even now, most of us are served by on utilities whose mission is firmly rooted in the goal of access, affordability and reliability.

Trimming the Fat

We use a power system that delivers an overabundance of electrons and we do it because we were asking the wrong questions in our dialogue between electron creators and electron consumers.  Instead of focusing on access, affordability and reliability, we need to discern just how much energy is necessary to meet our daily needs and how should we provide just that much.

Like our obesity problem, we now create an overproduction of electricity "carbs," that feed our needs like someone who is not paying any attention to the nutrition content of what we are eating, not to mention the number of calories we are ingesting. To be competitive in a global economy, we need make smarter energy choices.

In order for our economy to get back in shape, the first thing we should do is cut calories: let's tackle the energy efficiency problem. There needs to be a basket of reform measures based on the needs of those that are starting this diet. The basic premise is that in order for a utility to have any utility in a competitive economy, it needs to fundamentally change from a McDonald's franchise to a Weight Watchers corporation.

Imagine if our utilities were in the business of providing services to help us manage our energy in the most efficient way possible and when necessary, provide us with "healthy" energy choices? Instead of slopping electron gruel from a trough that is brimming over, let's start reading the label about where our electrons are coming from and how many we are using. "Energy intelligence" is the first step on our path toward a cleaner energy infrastructure.  When utilities have started to provide this type of information to their customers, they have seen very interesting results.

According to Thor Hinckley, who manages the renewable power programs at Portland General Electric

PGE has started a dialogue about where energy comes from. We can tell the story of how much comes from coal (a surprising 23% in a state where there is so much hydropower) and we give our customers the option of 100% renewable. When we have this conversation [with customers], they have a couple of different reactions: 1) Now they have new information (so it's NOT all hydropower), 2) the climate issue and concerns are now understood within the context of how our energy practice is driving some of the negative factors associated with the climate issue and 3) they have the choice to choose a clean energy option.

When it comes to the nexus between energy consumption and energy choices, it is fair to say that a utility has almost "perfect reach" into this demographic as the arbiter of electrons themselves.

So what if new business models were introduced? For example, imagine the GMAC model where in this case, energy service companies get into the business of offering consumer financial products to help finance retrofits.

Now, if you are McDonald's and you want to sell Big Macs, of course you don't broadcast the calories and triglycerides in the burgers.  And to be completely fair, if you are a conglomerate utility functioning in service areas that traverse multiple state lines, and whose regulatory agency only focuses on affordability, access and reliability, you are in a somewhat constrained position. It is much easier to some extent to have a municipal utility where the citizens collectively own the service and the regulatory body is represented by the city council. At least within that arena one can implement a Weight Watchers plan to help move away from the McDonald's model.

That said, just because a utility is local does not mean that it is interested in enhancing the energy literacy of its service area.

Julia Hamm, president and CEO of the Solar Electric Power Association, has told me her organization believes that utilities have to be 100% integrated into the process of creating a clean energy infrastructure. "A lot of the answer has to point back to changes in the regulatory context where utilities do business," she says. "In the case of solar, I really believe those utilities that are not as far along on the learning curve have to be given the right rules which remove the disincentive and add incentives."

Two powerful policy mechanisms are decoupling for the carrot side of the conversation and renewable portfolio standards for the stick persuasion. Indeed, where the carrots and sticks are in place, a clean energy infrastructure is possible.

A big issue in terms of the haunting spirit of the 20th century is that our whole electric grid was designed for centralized, controlled power plants running on a continually available feedstock, not for intermittent renewable energy distributed widely across service territories, and certainly not to be able to help the end user understand where the power was coming from.

So if Julia Hamm is right about the need for 100% buy-in by utilities, we will have to create the right regulatory environment in which they can profitably do business while providing customers with the energy intelligence they need to make informed decisions about their own energy use. This means that regulators, consumers, and utilities themselves will have to be fully engaged in the challenge.

Even though I am an optimist, I have to say that scenario seems ambitious even to me. I think it is going to be easier to put in place replicable models that demonstrate the new conversation, which includes some or all of the following:

  • a robust campaign to help our citizens become energy literate;
  • a federal decoupling policy for all domestic utilities;
  • an accelerated national energy efficiency portfolio standard; and
  • a way to un-grandfather long-term contracts so that our infrastructure is not weighed down by the 20th century.

If in the global arena, the ultimate "sport" is the alignment of resources with energy use, we don't want to be weighed down as the lumbering competitor; we want to be lean and fierce. Ultimately, the utility of a utility is focusing first and foremost on delivering negawattage while transitioning to clean megawattage in the most cost effective way possible.

Hold the cheese.  Where’s the treadmill?

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