The Energy-Efficiency Option
When Virginians contemplate their energy future, they have two broad options for accommodating a growing population and economy: generate more electricity (increase supply) and conserve electricity (reduce demand). The debate over the supply side of the equation gets most of the attention — what’s the best mix of nuclear, gas, coal and renewable energy sources? Energy efficiency gets less ink. But investments in energy efficiency, say environmentalists, can not only reduce the pollution and carbon-dioxide emissions associated with electricity generation, they can effectively pay for themselves by obviating the need to build expensive power plants in the future.
That’s a great theory. How’s it working out?
From a public policy perspective, Virginia has lots of leeway to become more energy efficient. The American Council for an Energy-Efficient Economy ranks Virginia only 29th nationally in an energy policy scorecard that takes into account utility programs and policies, transportation policies, building energy codes, Combined Heat and Power (CHP) policies, state-led energy-efficiency initiatives, and appliance and equipment standards. (Virginia did move up three notches in 2017, however, by adopting the 2015 IECC building energy code and partnering in an initiative to conduct a residential energy code field study.)
The McAuliffe administration has set a goal of reducing electricity consumption by 10% by 2020, according to the Richmond Times-Dispatch. The main tools for achieving that reduction are programs managed by Dominion Energy and Appalachian Power to foster conservation by businesses and homeowners. Trouble is, those programs don’t always pass muster with the State Corporation Commission.
“Utility programs make up about 90 percent of the progress toward our 10 percent reduction,” says Chelsea Harnish, executive director of the Virginia Energy Efficiency Council.
Here’s the hitch. When Dominion subsidizes, say, weatherization of a poor person’s house or a homeowner’s purchase of a new, energy-efficient heat pump, all Dominion payers chip in for a program that benefits only those customers who get the new heat pumps or the insulation in their attics. “A lot of utility programs are not passing, not able to get approval from the State Corporation Commission, says Harnish. The SCC, she explains, is “concerned about nonparticipant costs.”
Writes the Times-Dispatch:
In an order this year that rejected Dominion home-energy assessment and residential heat-pump upgrade programs, the commissioners said they could not find that the so-called demand-side management programs were in the public interest.
“We are sensitive to the impact of the proposed DSM (demand-side management) programs on customers’ bills, particularly the bills of customers not participating in the programs,” they wrote.
Part of the problem, Harnish said, is the challenge of calculating the value of such programs.
“What we hear from the SCC time and time again is they’re skeptical of deemed savings,” said Harnish, referring to industry-standard formulas that predict a certain benefit, such as the amount of energy use cut by installing LED light bulbs, for example. The SCC is currently receiving input on uniform standards for what the energy-efficiency industry calls evaluation, measurement and verification should look like, she said.
Another barrier to energy conservation is a price of electricity in Virginia that is below the national average. Explains Dominion spokesman David Botkins: “The costs of energy avoided for a given program is less than would be avoided in some other parts of the country, due to the higher cost of electricity elsewhere. This causes the economic value and cost-effectiveness of energy-efficiency programs in Virginia to be lower than in some other regions.”
By most peoples’ standards, lower electric rates are a good thing. Likewise, many electricity customers undoubtedly are pleased that the SCC is protecting their interests as rate payers from programs generating an uncertain payback. But there may be ways to promote energy efficiency that don’t go through the SCC. The Virginia Energy Efficiency Council is pushing stricter building codes and performance-based contracting for state-owned buildings. Under performance-based contracting, government agencies repay energy service companies out of the savings generated through lower utility bills.
Bacon’s bottom line: In my observation, the biggest obstacle to energy-efficiency is that the state and local government budgets have time horizons too short to allow investing in conservation. A high-return energy-efficiency project might pay itself back in three to four years — a handsome return. But the Commonwealth operates on two-year budgets, while most local governments go year-to-year. If a project doesn’t recover its costs within the current fiscal year, it can’t be justified. That’s just crazy. Surely there is a work-around.