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Energy efficiency and the pitch to consumers

Three items crossed my radar yesterday, each worthy of note. Particularly as they came a day after we reported on the expansion of a dynamic pricing pilot in Illinois, where motivation has been based on price elasticity. 

The front page of the online The New York Times offered two items, which may be examined as a reflection of mainstream media coverage of power industry issues. It's important to understand how those issues are presented to the public. 

"Save Kilowatts, Win a Prize" focused on the quest to change customers' behavior around their electricity use due to state mandates on energy efficiency (EE). (We'd touched on that subject on Monday in "Distribution Efficiencies `versus' Customer Engagement.") 

The article notes the earnest use of social media by utilities, with the meager results a wallflower might expect. (Nobody is hanging out on their utility's Facebook page, though that could change with incentives. iTunes credits for EE actions, anyone?) Utilities are using games and data analysis to get the EE mantra across in a summer marked by record high temperatures across the country. Having succeeded at playing wallflower with cheap rates for so long, how does a utility inspire customers to cut their use just when they need air conditioning? 

If electricity bills account for about 2 percent of household income and "energy savings" might cut that amount by 10 percent, you've got a real yawner, the article suggests. OPower's co-founder Alex Laskey is quoted: electricity is boring and cheap. 

The article identifies consumer behavior as the lynchpin for energy efficiency efforts. Further, it explores how emotional factors apply to behavioral change. So far, so good.

Programs that compare a customer's energy use to his/her own history as well as neighbors or the power of a community-wide effort are cited in the article. It does not mention the notion of collective environmental stewardship as a motivator—that incremental actions in aggregate have greater value to society than the individual—though I suspect that's going to be one of the most powerful drivers of energy efficiency in the United States. 

The notion of making do with what you need, rather than wallowing in excess and its attendant waste, will come slowly to what is, historically, an adolescent nation once blessed with abundant, if non-renewable or slow-to-renew natural resources. Freeze in the dark? No one has ever suggested that infantile canard.

Despite the noise created by Astroturf organizations (i.e., faux grassroots) sponsored by fossil fuel interests and their unwitting stooges, common sense measures such as turning up one's thermostat by a few degrees to avoid the siting and capital expense of costly, polluting peaker plants or involuntary brownouts isn't a bad trade. Yet I'd venture that a message such as "cut your peak use or else you'll face rotating brownouts!" won't go far. That's where positive motivations for consumer behavioral change comes in. Yet, I'd predict that if not coupled with transparency, good efforts won't go far.

What's interesting about the current zeitgeist is the degree to which collective action has been disparaged, perhaps due to the supposed taint of institutional involvement. I.e., if the government or your utility is involved, collective action to meet system constraints essentially levied by society is somehow suspect. That's where the "rights come with responsibilities" piece comes into play. It'll be a long haul, folks, but if we don't start now, an economic recovery in, say, five years, is going upend the supply-load equation.

The Times' article adds that small monetary rewards such as discounts at nearby businesses are also being explored by various companies.

Perhaps the persuasive proposal is one that combines, say, a community's goal to achieve X level of energy efficiency with those small retail rewards. Or, with town or city as aggregator, a community's financial shortfall could be met in part by collective action on EE. 

In any case, the national media has connected the dots between extreme high temperatures, grid constraints and end-user behavior. That's a foot in the door to the public consciousness that utilities should be (and are) exploiting. But I don't see a unified message.  

"Will Drought Cause the Next Blackout?" raises the profile of the long-discussed connection between energy and water. Producing energy requires huge amounts of water. Treating water for human consumption requires energy. Water diverted for power production, particularly in the arid West—whether that's to pull oil and gas out of the ground or to cool a power plant—means less water for agriculture, other industries (in turn, of course, dependent on inexpensive power) and human consumption. 

According to the Times' op-ed article: 

"About half of the nation's water withdrawals every day are just for cooling power plants. In addition, the oil and gas industries use tens of millions of gallons a day, injecting water into aging oil fields to improve production, and to free natural gas in shale formations through hydraulic fracturing. Those numbers are not large from a national perspective, but they can be significant locally. 

"All told, we withdraw more water for the energy sector than for agriculture. Unfortunately, this relationship means that water problems become energy problems that are serious enough to warrant high-level attention."

If we're really thinking in a sustainable, forward-looking, manner, then make that: energy + water + food = one issue. And there's urgency boiling out of these statistics: 

"The United States Energy Information Administration recently issued an alert that the drought was likely to exacerbate challenges to California's electric power market this summer, with higher risks of reliability problems and scarcity-driven price increases. In the Midwest, power plants are competing for water that farmers want for their devastated corn crops."

Finally, Ahmad Faruqui, a principal at The Brattle Group—a seemingly ubiquitous presence in pricing discussions—yesterday addressed the National Association of Regulatory Utility Commissioners (NARUC) summer meeting in Portland on the subject of dynamic pricing. That brings us full circle to yesterday's piece on that topic. Faruqui, well-known for his work on price elasticity—at what price spread will consumers take action?—is involved in the Illinois program. But price elasticity as motivator for consumer behavior change is a topic for another day. Trust me, we'll get to it soon.

Phil Carson 
Intelligent Utility Daily 


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