GEED 2009 - Panel One: Incentives to Drive EE in the Utility Sector: Will One Approach Win the Day?

It is a question that concerns anyone vested in the future of energy efficiency: "How do we incentivize companies that make money off selling energy to be more efficient – and what is the best path forward?"

Offering a window into the workings of the electricity industry, Vice President for Power Delivery at the Electric Power Research Institute (EPRI) Arshad Mansoor said we first need to address the substantial amount of wasted energy that arises from the generation, transmission and distribution of power by the electricity industry – currently the single largest user of electricity. EPRI is developing a framework to address this waste; but the real answer, he argued, is the development of a smart grid that could save the industry up to 15 percent of its current output.

Having worked with many utility companies on the issue, Ralph Cavanagh, senior attorney with the Natural Resources Defense Council asserted that "utilities can be a critical partner in energy efficiency." He raised what he sees is a fundamental issue regarding the relationship between utilities and their profits: the "through-put" addiction that keeps gas and electricity utilities wedded to their sales in order to recover their costs. Part of the answer, Cavanaugh argued, is to create earnings opportunities through which the utilities can recover their costs; the challenge is to do this without reducing customers' incentives to save energy.

Insight to the supply-side management of the utility equation came from Angela Beehler, director of Energy Regulation at Wal-Mart Stores, Inc. Beehler spoke of the connection between saving the company money and saving its customers money through corporate initiatives that support, among other things, energy-efficiency. Wal-Mart's sustainability commitments – namely, to be supplied by 100 percent renewable energy; to supply products that sustain the environment; and to eliminate company waste – require collaborative efforts on the part of the local and national utilities that serve its thousands of stores nationwide.

Newly appointed President of the New York State Energy Research & Development Authority Francis Murray argued that for energy efficiency to succeed, it must be "an explicit corporate priority," one supported by commitment and leadership. And while incentives can motivate utilities toward energy-efficient practices, it is market transformation that "should be the end game toward which we all aspire." Disseminating R&D and technology development in energy efficiency will activate the use of this fuel, while a certain measure of flexibility will enable utilities from all states to customize these mechanisms in a manner that best serves their operations and their customers.

Representing the interests of state utility consumers, David Springe, president of the National Association of State Utility Consumer Advocates (NASUCA), gave a thought-provoking analysis of decoupling, starting with the premise that decoupling is a "revenue mechanism, first and foremost." He pointed out the inherent difference between household energy savings and utility energy savings: "Should the utility get credit in a decoupling mechanism for the savings that's occurring in my house when they had nothing to do with it?...It's a very important and contentious issue."

So, is there just one approach that will "win the day" when it comes to incentivizing utilities? Despite the multifarious perspectives represented by the panelists, all agreed that no one single approach will do.