Oodles of electrons still going to waste
About half of the electricity generated in the U.S. is lost to inefficiency and waste, presenting both an opportunity for those of us who buy it and a problem for those who sell it.
Most of us have tried to lower our electricity bills by installing energy-efficient appliances, LED bulbs and programmable thermostats. Americans slashed lighting and air-conditioning consumption in half between 2003 and 2012, according to the Department of Energy.
That’s good news for our pocketbooks, and it’s helped keep U.S. demand for electricity flat. For most of human history, economic growth and energy consumption have risen in lockstep, but now it’s possible to expand the economy
“We need to move toward a system over the next couple of decades that is much more economically efficient.” Mary Powell, CEO of Vermont’s Green Mountain Energ y
without using more energy or producing the pollution that goes with it.
And there is still so much more we can do.
“There are a lot of electrons that are being used now that don’t need to be produced,” said Jim Steffes, executive vice president for corporate affairs at Direct Energy, a retail electricity provider in Texas and across the country.
Steffes said his company tries to set itself apart by helping customers increase efficiency through detailed analysis of consumption patterns. Selling those services and ways to boost efficiency is as important as selling kilowatthours.
“To be really customer-centric, you’re not just pushing a product,” Steffes said. “Our tagline is: ‘Helping you use less of what we sell.’ ”
Utilities and grids can also improve efficiency. Mary Powell, CEO of Vermont’s Green Mountain Energy, told the Energy Thought Summit in Austin that the bulk electricity delivery sys-
tem is only 42 percent economically efficient and that 58 percent of the electricity’s value is lost.
“We need to move toward a system over the next couple of decades that is much more economically efficient,” she said.
To help encourage better electric grids, the U.S. Green Building Council, which developed the LEED standards for buildings, has a new set of standards for the electricity sector called PEER, or Performance Excellence in Electricity Renewal.
“We think there is a huge amount of work that needs to be done,” said Jamie Statter, the organization’s vice president for strategic relationships. “On the generation and distribution side, there is up to 50 percent of electricity that could be lost in those processes.”
Boosting energy efficiency, though, is basically reducing the number of kilowatt-hours sold, and that requires new business plans. Rather than sell volumes of electricity, chief executives talk about becoming more like software or telecommunications companies.
Just as phone companies offer a variety of individualized services and packages rather than charging by the minute, energy companies could soon offer energy services that focus primarily on efficiency instead of selling electricity.
“That was a model that worked very well 30 or 40 years ago and actually served poor customers better, but fast-forward to where we are today and where we’ll be tomorrow, and that model will hold us back and hurt the poor,” said Ben Fowke, president and CEO of Xcel Energy, which supplies electricity to Texas and seven other states. “I see a future where we’re going to get more efficient, where rates will be even more stable, and we will do even more for the consumer.”
Today’s digital controls could slash U.S. home energy consumption by 50 percent and commercial consumption by 42 percent if they were widely adopted, according to the Energy Department. The digital hardware company Oracle is developing tools that will allow electric companies to manage their customers’ electricity usage in return for a share of the savings.
“This concept of the meter is real constraint on innovation,” said Rodger Smith, general manager of Oracle’s utilities business. “Once we get past that concept, what utilities will be allowed to do in this industry for customers will be phenomenal.”
Energy executives and experts have identified where the energy business is going, but the two biggest challenges will be persuading regulators to allow new business models and then convincing customers to embrace them, even when they save money.
For example, 37 percent of homes have programmable thermostats, but only 53 percent use them to lower energy consumption during the day. Only 61 percent automatically adjust them at night. And only a tiny number of customers with thermostats that allow utilities to turn down the power down during peak periods will allow their electricity providers to do it.
Other countries, meanwhile, have scored big. In the Gulf emirate of Abu Dhabi, the power company managed to raise the average home temperature by a single degree during summer months and was able to eliminate the need for a new 200-megawatt power plant.
Sadly, most Americans take their electricity for granted, particularly when prices are at the historic lows we enjoy today. But we need to remember that greater efficiency helped bring prices down, and we could lower them further.
Adopting technology and allowing new business models could transform the energy business and divert hundreds of billions of dollars from consuming electricity to producing more goods and jobs. What’s needed first, though, is an open mind to change.