"Historically, the industry looks back. It was easier to repair, rebuild and replace than it was to take a chance on new technology because of the way utilities are compensated," said Mark Gabriel, senior vice president and principal for RW Beck, a technically based business consultant. "We are ... encumbered by an industry model that has not yet recognized the pace of change."
But that era is about to end.
"Everything will be changed by, driven by climate change," Owens said.
Electric utilities account for 40 percent of the nation's emissions of carbon dioxide, the principal greenhouse gas. To reduce CO2, Democratic climate change bills would cap utility emissions, forcing companies to produce less electricity and change to cleaner fuels.
'Fistfight'
Lawmakers, utility CEOs and many experts agree that ramping up the nation's energy efficiency is the fastest and cheapest way to cut emissions.
Congress is weighing proposals to toughen energy codes for building and appliance efficiency. And the Energy Department has already provided loans and grants to improve the efficiency of the grid itself through digital technology, known as the "smart grid."
Climate change, technology and the new push for efficiency are transforming utilities' strategy from the "generation end" to the "customer end," the Rocky Mountain Institute's Lovins explained.
"That is a wrenching cultural change," he said.
To some extent, reducing electricity demand can save utilities money, as they are spared the expense of building new power plants. But that incentive can only go so far.
"It's clear that they ought to be able to choose between supply-and-demand side investments at least neutrally," Lovins said. "They shouldn't be biased toward supply-side investment."
The new utility business model, he said, should follow this rule: "Whatever is least cost to the customer should be most profitable for the utility, so the utility's choices emulate the proper outcome."
Fourteen states are experimenting with rate structures to encourage efficiency.
California, for one, has "decoupled" utilities' revenues from the amount of electricity they sell -- meeting revenue requirements based on customer growth, productivity, weather and inflation and providing additional incentives or penalties to meet efficiency targets.
Meanwhile, Kentucky, Ohio and other states provide "lost revenue" mechanisms for utilities using a formula based on marginal rates, variable costs and estimated kilowatt savings. There are also several pilot programs that allow utilities to "true up" revenue depending on whether original cost estimates were accurate.
But mechanisms that forecast efficiency targets and then penalize or reward a utility based on them are poor models, as efficiency is difficult to validate and measure, CERA's Makovich said.
"In order to compensate people whether they have achieved the goal or not, everyone has to agree what power use would have been but for these actions," Makovich said. "What if a recession happens and demand is down -- under these programs, are you going to reward a company because demand is lower because you haven't anticipated the depth and length of recession? Or technology, for instance, something like the plug-in electric vehicle creates more demand; will they be penalized for it?"
He added, "The key going forward is to give power companies the incentive to do the efficiency investments that people didn't do because they didn't get the right price signal."
Makovich points to Duke Energy Corp.'s "Save-A-Watt" effort in Ohio as an effective program that could be copied in regulated markets. Duke is able to build into its rates a part of what it would have invested if it had built additional supply instead of investing in efficiency. Regulators in North Carolina and South Carolina are reviewing the program, as well.
See what we're tweeting about
6 Comments
Add Comment
Reply | Report Abuse | Link to thisThere are plenty of ways for utilities to do the future. Those who won't change will die, sold to someone who can.
Facts are much home RE will soon be cheaper than utility power as one will pay under $10k for a lifetime of energy costs and will come standard on many new homes.
The tech is easy and already here. Ev's will be a big part of it by charging at night on cheap power and supplying it to the grid in the day, peak loads.
Generation will be far more eff. Instead of the 35% eff today in many plants, it will go to 55-70% eff cutting ever increasing fuel costs.
This transformation has been going on for some time. It's not as dramatic as the article suggests. More like incremental change. They will still be operating large centralized plants and selling kwh well into the future. Things wont' change that much. Economics will dictate.
Reply | Report Abuse | Link to thisJerryd
Reply | Report Abuse | Link to thisI'd like to know where you get the efficiency values of 55 - 70% for home generation. Wind power's maximum efficiency is the Betz coefficient (most energy that can be extracted from wind), and is 59.3%. Solar cells have a "maximum" efficiency of 20%.
The centralized plant efficiencies of 35% that you state pertain only to coal fired plants. Combined cycle gas turbine plants can have efficiencies in the 60% range; hydroelectric plants have efficiencies in the 85 to 90% range.
So, once again, what sources can you reference that state residential efficiencies will be in the 55 - 70% range.
GRAVITY, not CO2, causes Global Warming and Cooling.
Reply | Report Abuse | Link to thisThe air has EXCESS CO2. When the sun/solar insolation goes down at night then the amount of the GreenHouse Effect (CO2's delay by catch AND release, not trapping, of photons transported to space,) goes down, thus leaving EXCESS CO2 in the air. When the sun comes up, then more energy transport happens, the GreenHouse Effect (GHE) increases, more CO2 gets used., the temperature goes up. BUT it is the amount of outgoing energy that dictates how much of a GHE there is. The amount of CO2 is irrelevant as long as there is excess. Given that ALL the available (CO2 specific wavelength) energy is already transported by the CO2, then there is NO more available for the so called feedback processes in the global warming models. The excess CO2 must be there to transport energy when it is very hot ,such as summer, or the 49C/120F temperatures during the 2009 Australian bushfires (@385ppm CO2), or the world record 58C (Libya in 1922 -@280 ppm CO2).. So if hypothetically all the CO2 is used up at 58C then there is at least 40% excess today at the world average temperature of 16C/67F according to the Stefan-Boltzmann Law of Physics. Contrary to the IPCC CO2 models, adding more excess CO2 to the air can't cause warming unless you add extra energy. Limiting CO2 emissions by Cap & Trade just removes excess CO2. It will NOT change the temperature.
The real cause of global warming and cooling is the variable gravity/energy from planetary eccentricity as shown in "John Dodds Wobble Theory of Global Warming" (free summary, & full copy available at www.scribd.com).. The forces of gravity cause Earth rotation and winds and tides (moon or lunar gravity) and ocean and liquid core currents and friction and heat. The energy from Gravity is NOT addressed in the GCMs. Gravity also causes the magnetic field by the rotation of liquid core ions through a gravity field. Wind & tide power IS gravity power- where else does the energy come from? The variations in gravity are shown to correlate to the measured ice core temperatures for thousands of years, and to the 60 year cooling/warming cycles from 1880 to 1940 to 1998/9 and to the future 2028 temperature bottom and the 2058 temperature peak. Gravity explains warming AND cooling and is predictable. There will be a gravity spike on Earth in Oct 2010, due to the proximity of Venus and Jupiter. Adding the variable forces and energy of gravity to the Milankovitch Eccentricity (Timing) Theory allows it to overcome it's major deficiency of insufficient solar energy variation to explain ice ages. Gravity explains why the temperature can go up from 1970 through 1998, when the sole source of energy in IPCC models, solar insolation, was essentially constant. Gravity, which is much stronger than sunlight, supplies variable energy to drive warming and cooling. CO2 doesn't.
John Dodds
thanks for that 911 on the gravity involvement...I thought the article would broach the Cap & Trade issue, which seems to me to be a Hook & Crook way to allow utilities to raise their rates with that convenient excuse for a tax, which i'm sure if inacted, the market would provide some means to lever themselves against their own position by some sort of 'CO2 Credit' derivatives, which the big players would use to squash the little utilities and take them over. What a LOAD!
Reply | Report Abuse | Link to thisAnd if CO2 was the culprate, they've already gone past the tipping point...so why create additional fiscal hardship on the common folk with a new tax??
Hard to imagine this whole Cap & Trade wasn't cooked up with the help of the Fat Cats of Wallstreet.
I kept womdering when I was going to learn something new on SciAm. Thanks Dodds.
Reply | Report Abuse | Link to this