Jonathan Kleinman, vice president of policy, design and evaluation at CLEAResult, writes an important article on the Intelligentutility website about five trends that will have an impact on both consumers and utilities.
2015: the year of the energy efficiency economic balancing act
Adoption of energy efficiency programs provided by electric power utilities has seen a steady increase since the turn of the century. In turn, this increase is having a material impact on energy demand. Fueled by advances in technology like energy management software and virtual audits as well as legislative agendas, energy efficiency initiatives have offset the growth of electricity demand, which has only increased by 0.7 percent per year since 2000 according to the U.S. Energy Information Administration’s “Annual Energy Outlook 2014.”
While consumers are realizing the benefits from scaling back energy demand, utilities are not reaping the same reward. Consumers have a strong desire to save money but also expect a consistent power supply for everything from phone charging to simply staying out of the dark. To meet these expectations, utilities still have to build and operate power plants, transmission lines, and smaller poles and wires—all while consumers are using less energy to keep them out of the red. Consumer economics aren’t the same as utility economics, making today’s energy environment an economic balancing act.
Energy efficiency will continue to be a major lever to pull for residential, commercial, and industrial consumers who want to reduce costs in 2015. It will also continue to be a go-to method for utilities to meet carbon emission targets and save money for consumers. In a climate of balancing fiscal rewards, the following five trends will have an impact on both consumers’ and utilities’ implementation of energy efficiency measures this year:
1. Energy efficiency teeters after oil prices fall
In early January, the price for crude oil dipped to its lowest price in nearly five years—below $49 a barrel. This plunge in oil prices could accelerate a decline in utilities’ desire for energy efficiency despite consumer enthusiasm for it. Falling oil prices could also result in lower clearing prices for on-peak energy. This can reduce revenues for generators; however it could also stem some of the bleeding for retailers.
2. Illusion of privacy
As the Internet of Things continues to proliferate, consumers expect connectivity in every part of their lives—from wearables such as Google Glass and smartwatches to smart home devices such as Nest. While these devices are incredibly beneficial and are changing everything from how we work out to how we consume energy, they collect sensitive data from millions of consumers. Will the benefits of energy-efficient smart home devices continue to outweigh the potential concerns? Or will sales of these devices decrease as consumer privacy issues escalate this year? With the recent surge in large-scale attacks on companies like Home Depot and Sony, as well as research stating that cyber attacks will only continue to increase, 2015 may tip the scales away from growing demand for these devices.
3. Smart city surge
According to research firm IHS, 88 smart cities will exist worldwide by 2025. In order to get there, cities will accelerate their smart infrastructure capabilities to include energy, Internet, transit, roads and more. This year, we’ll start seeing more cities heavily market their smart capabilities in order to lure businesses and residents alike. Smart buildings and infrastructure form more than 30 percent of the smart city market according to Research and Markets. While North America already leads the intelligent building automation technologies market, older structures will need to be retrofitted and city planners, along with building owners, will need to ensure energy efficiency measures are being employed across both old and new buildings in order to continue advancing in the smart city era.
4. CHP is not too hot to handle
Combined heat and power (CHP) captures energy that would normally be lost in power generation and uses it to provide heating and cooling. According to the U.S. Department of Energy, every year more energy is lost as wasted heat in power generation in the U.S. than the total energy use of Japan. CHP cuts this amount of wasted energy nearly in half by leveraging fossil fuels approximately 75–80 percent more efficiently. When paired with other electric and gas energy efficiency measures, this significantly reduces overall energy costs. In 2015, interest in CHP technologies will heat up as fuel and systems become cheaper, smaller and more effective than present-day.
5. Off the grid, off the table
Diane Cardwell of the New York Times recently reported that renewable generation is now actually less costly than coal and natural gas in some parts of the U.S. While this is unlikely to become the case nationwide by this year, renewable energy costs will continue to decrease as the cost to install utility-scale projects declines due to new technologies, as well as unique approaches to financing and operations. As this trend grows, more commercial and industrial customers will move off the grid in 2015, meaning utilities will be forced to develop new service offerings to better compete or risk losing that space. Providing energy efficiency services is one way for utilities to keep engaged with their customers. A recent study by J.D. Power showed that customer satisfaction is at least 200 points higher, on a 1,000 point scale, among customers who say they are “very” familiar with their utility’s energy efficiency programs than among those who say they are “not at all” familiar.
With falling prices (for both oil and renewable energy), the continued improvement of technologies such as CHP and smart city infrastructure; and growing consumer concern for privacy and data security, 2015 is shaping up to be an interesting year. Utilities will continue to look to energy efficiency as a means for curbing carbon emissions and slashing energy costs but these trends and their economic impact may dampen their enthusiasm to do so.
The long-term economic advantages of energy efficiency, driven by the trends outlined here, position energy efficiency to have a powerful 2015 despite the economic balancing act required.
Energy in Demand - Sustainable Energy - Rod Janssen 