Study finds disincentives to energy efficiency can be fixed

Jun 04, 2013

A new study finds that utilities aren't rewarded for adopting energy efficiency programs, and that reforms are needed to make energy efficiency as attractive as renewables.

The article, just published in the current issue of Environmental Law, examines key differences between energy efficiency projects and . Author Inara Scott, an assistant professor at Oregon State University, outlines ways to increase the amount of energy utilities save each year through efficiency programs.

"Right now, the system actually discourages utilities from building programs to increase efficiency," she said. "We need to start addressing efficiency as we do – by looking at it systemically and removing the barriers."

Scott spent a decade as a lawyer specializing in energy and regulatory law. Her research in the College of Business centers on the transformation of utility systems, , energy efficiency, and utility regulation.

Her study makes four key recommendations: redesigning rate structures, setting hard targets, streamlining cost-effective tests and addressing market barriers.

Cost-recovery systems for many investor-owned utilities in the United States are based on an old rate structure model – the more energy that is produced, the higher return for shareholders. "You don't want to penalize utilities for selling less energy," Scott said.

Instead, she said, states can use ratemaking mechanisms to decouple the link between utility sales and revenues and establish for the adoption of efficiency programs.

"Decoupling mechanisms may add complexity to utility rate structures, but they are essential to eliminating environmentally nonsensical ratemaking models that reward utilities for higher sales and penalize them for efficiency."

Setting hard targets is doable, she said. The state of Oregon has set a goal for 25 percent of its energy to be consumed through renewables by 2025. Scott said other states also could set aspirational goals for energy efficiency.

"If states are committed to reducing the strain on the electric grid, diversifying utility resource portfolios, reducing dependence on foreign markets, and reducing carbon emissions through the adoption of renewable resources, they should be just as willing to do so through the adoption of energy efficiency as they are through the purchase of renewable resources."

Streamlining cost-effectiveness tests will be difficult, Scott said, because a simple, accurate way to measure energy efficiency does not exist. "The difficulty is that you're trying to measure energy you didn't use. So really, you're measuring something that doesn't exist."

Many of the tests that do exist are so complicated that they may discourage utilities from adopting energy efficiency. Issues with cost-effectiveness testing will be difficult to fully remedy, Scott said, but these steps —conducting assessments at a programmatic level, streamlining the precision of tests, and considering the development of national standards—will move the bar forward.

Market barriers, Scott said, can be addressed through incentives. Some states, including Colorado and Michigan, have increased the size of incentives for consumers to take on energy efficiency programs (including, in some cases, reimbursing consumers 100 percent of their investment) and finding ways to make incentives more attractive to customers through advertising and education.

"There needs to be better marketing around efficiency," Scott said. "We need to make increasing as attractive as opting for 'green' or 'salmon-friendly' renewables."

Explore further: Study evaluates strategies for generating electricity from hog waste

More information: law.lclark.edu/live/files/14248-432scott

add to favorites email to friend print save as pdf

Related Stories

Doubling down on energy efficiency

Jan 17, 2013

Spending on energy efficiency programs funded by electric and natural gas utility customers will double by 2025 to about $9.5 billion per year, according to projections published today by researchers at Lawrence ...

Recommended for you

Obama launches measures to support solar energy in US

Apr 17, 2014

The White House Thursday announced a series of measures aimed at increasing solar energy production in the United States, particularly by encouraging the installation of solar panels in public spaces.

Tailored approach key to cookstove uptake

Apr 17, 2014

Worldwide, programs aiming to give safe, efficient cooking stoves to people in developing countries haven't had complete success—and local research has looked into why.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

ODesign
not rated yet Jun 04, 2013
They should mention the source of the funding for this research paper. The conclusions are to support legislation to subsidize non-renewable energy producers and to lower requirements for proving a public good needed to earn a subsidy. I wonder if they're the ones who paid for it and where is the incentive in funding this research?

The article and research has some elements of truth especially about the incentives currently in place that make it more profitable for these companies to engage in wasteful practice. It would be more credible if it weren't making only arguments for subsidizing only non-renewable electricity generation. It calls for reducing accountability of the subsidizing decision and claims verifying efficiency improvements might not be possible. There is no discussion of penalties to enforce the legal and moral requirement public utilities have to act in the public good.

More news stories

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

A homemade solar lamp for developing countries

(Phys.org) —The solar lamp developed by the start-up LEDsafari is a more effective, safer, and less expensive form of illumination than the traditional oil lamp currently used by more than one billion people ...

UAE reports 12 new cases of MERS

Health authorities in the United Arab Emirates have announced 12 new cases of infection by the MERS coronavirus, but insisted the patients would be cured within two weeks.

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...