Jeff Perkins, ERS, for Zondits
Energy efficiency has been an evolutionary and incremental effort: evolutionary in how and why we do it, and incremental in terms of the technology and the economics to achieve it, as the state-of-the-art has continuously advanced over the years. In this article I am going to take a step back and walk through the history of energy efficiency, concluding with where we are today.
40 Years Ago
Forty years ago we were in the era of Efficiency as an Objective. At that time we were facing the threat of serious scarcity. In the preceding decade, electricity generation in this country was done with a whole lot of oil, some coal, and a huge promise that the future was going to be built on nuclear power “too cheap to meter.” And then, almost all at once, we had OPEC-induced oil shocks in sync with the colossal failure of the nuclear promise. Suddenly, we were faced with the fear of “Will there be enough capacity?” and “Will there be enough energy to meet demand?” This shook us all to our very core and launched the effort to educate consumers about energy and, more importantly, saving energy. A new industry was born to deliver energy audits and create bill stuffers all aimed at teaching Americans about energy. Using today’s parlance, perhaps this was Behavior Programs 1.0. Some people talked about conserving energy, but in the farthest corners there were others who raised the notion of doing more with less.
30 Years Ago
As those conversations evolved and everyone (including utilities) got comfortable with the idea, we fast-forward 10 years and find ourselves firmly in the era of Efficiency as a Resource. Demand side management (DSM) was the term of art. No longer was it taken for granted that the demand curve was up and to the right, forever on an upward trajectory. DSM programs sprouted up all over the country. The focus was squarely on making an impact on kW and KWh. The energy service company (ESCO) business model was born, and it flourished. Incentives of all kinds emerged and were successful. Dozens of states from the Northwest to the Northeast and everywhere in between were highly active and creative, and programs got large and very, very interesting. Most interesting of all, investor-owned utilities found ways to make money by NOT selling electricity. States that were the most progressive worked to find ways for the utilities to make a profit from DSM activities. This was no small feat because at the time this was a rate of a return-regulated monopoly market, where only the supply side of the meter was considered in the return-on-investment calculation. Allowing demand-side expenditures to enter the equation was a giant breakthrough that gave a boost to energy efficiency. Things might have continued this way for a long time, but for happenings in a small country far, far away.
20 Years Ago
It was around this time that New Zealand deregulated their electric industry. The UK quickly followed suit. In the US, we had already deregulated airlines, trucking, and telecoms, and so quite naturally, deregulation of the utility sector began to happen here, too. For the core energy efficiency industry this became The Dark Days of Efficiency as everyone worried about survival in a sea of new business models. Programs were cut, budgets were slashed, and the cottage industry that supported energy efficiency shrank as spending dried to a trickle. In the late 1990s, total spending on energy efficiency programs across the county diminished to less than what Massachusetts alone spends on programs today.
15 Years Ago
In a story filled with the tenacity of high-spirited, die-hard professionals, together with prior years of proof of the value that energy efficiency had delivered, efficiency reemerged: this time into the era of Efficiency as a Public Good. States that had energy efficiency portfolio standards grew in number. The question was no longer about why we should do these things, but how to fund them and how best to deliver them. System benefits charges and decoupling emerged, utilities were still able to address their shareholders with proper profits, and efficiency trusts came into being. The result has been more programs, more savings, and more credible evaluations.
Drivers and goals continue to change over time, and today we have entered the era of Efficiency and Sustainability. With more than 7x growth since 2000, the efficiency industry has topped $9.0 billion in program spending. Meanwhile, the sustainability movement has grown up in parallel, and even independent from, energy efficiency. Looking at forecasts for natural gas and oil reserves and PV and wind installations, it is clear that the days of scarcity are gone. Instead, we face serious issues of climate change and the need for greenhouse gas mitigation. In parallel, we are concerned about whether there will be too much capacity, too much variability, too much vulnerability, and how we would deal with that. Some think markets and finance will provide lift for the industry, and clean energy funds are emerging, but we have yet to learn if they will drive or compete with the efficiency industry. Zero net energy, zero net carbon, and codes and standards also need to be considered for their impacts on programs. Programs across the country face increasing goals and decreasing potential amidst rising baselines. California is attempting to recover from the unintended consequences of codes and to capture the “stranded efficiency” left hanging because of well-intentioned rules and regulations. Terms like reliability, smart grid, DER, resiliency, and microgrid are all becoming commonplace, but we have yet to determine the definition, let alone the impact, of these concepts. And we go on.
Change over time is something we’ve always lived with in energy efficiency. Efficiency continues to move forward, to advance, to get better and smarter. We are continually in a state of change, and energy efficiency continues to be one of the great untold success stories in America’s energy sector: literally dozens of power plants do not exist because of our collective efforts, and that is a wonderful thing. So, after all of this time one might ask: Are we “there” yet? And after all these years, I would say we certainly can get there from here, but the journey continues, and I am very glad that I am part of it!