by Brian T. Lynch, MSW
If you asked most forward thinking Americans to name a disruptive challenge we face today, global warming would be high on the list. Climate changing levels of carbon dioxide have been released into the air and the impacts on weather, on raising ocean levels and melting glacier are underway. The most socially responsible among us are already reducing their carbon footprint by recycling, buying more efficient cars, better insulating their homes, buying Energy Star appliances, using florescent or LED lighting. More and more people are also taking advantage of incentive programs to install rooftop solar or wind power generation systems.
The impact from these early pioneers of change is still quite small relative to the problem, but it is significant. So significant, in fact, that the industries which release carbon dioxide to produce the energy we buy are feeling threatened. After all, every time you replace an incandescent light bulb with an LED bulb you reduce their revenue.
Our power generation and distribution companies can adapt by getting into the LED lighting business for example, or they can maladapt by killing government regulations and initiatives to reduce carbon emissions. It appears they have chosen to do both. Some energy companies are investing in wind, solar or other renewable energy technologies while others are busy hatching plans to manipulate the democratic process in order to scuttle government incentives and regulations that threaten their bottom line.
When the power generation utilities think about the disruptive challenges we face as a nation they quite literally see a mirror image of what the rest of us see. The threats they see include “demand side management” (DSM) which refers to consumer energy conservation measures, and “distributed energy resources” (DER) meaning residential power generation such as rooftop solar systems. This is explained in an national industry report released this past January by the Edison Electric Institute. Entitled, “Disruptive Challenges, Financial Implications and Strategic Responses to a Changing Retail Electric Business,” the report describes how disruptive consumer conservation and residential energy generation can be to their business. To help electric utility executives better understand the disruptive forces of socially responsible citizens it offers this useful flow chart: [http://tinyurl.com/m5py4rg]
Edison Electric Institute, Washington, D.C. – www.eei.org
Another study conducted for PacifCorp was released in March of 2013 by The Cadmus Group, Inc., another D.C. based firm. This industry study looks at the potential impact of consumer conservation on corporate energy sales over the next 20 years in states served by the Pacific Power and Rocky Mountain Power Companies. The Cadmus Group defined DSM this way:
Demand-side management involves reducing electricity use through activities or programs that promote electric energy efficiency or conservation, or more efficient management of electric energy loads. These efforts may:
- Promote high efficiency building practices
- Promote the purchase of energy-efficient ENERGY STAR® products
- Encourage the transition from incandescent lighting to more efficient compact fluorescent lighting
- Encourage customers to shift non-critical usage of electricity from high-use periods to after 7 p.m. or before 11 a.m.
- Consist of programs providing limited utility control of customer equipment such as air conditioners
- Promote energy awareness and education
This report suggests that energy conservation efforts and residential power generation over the next twenty years will reduce these energy company sales by up to 15%. About 76% of this reduction will come from residential customers, mostly from conservation measures. Numbers like these are causing energy companies everywhere to start defending their business model. The Arizona Public Service Company, for example, recently funded non-profit agencies to start what looks like a grass roots attempt to turn public opinion against both rooftop solar and the states’ publically elected Arizona Corporation Commission, which has final authority over utility rates. Rooftop solar initiatives are a prime target for utility companies both because of its rapid growth and the direct way these installations impact utility company profits. The reason why conservation efforts and residential power generation may be scary to utility companies from a business perspective becomes clear when you look at the bigger picture.
The history of U.S. energy use is one of annually increasing demand. Population growth and consumer purchases of more energy reliant products guarantee increased electric demand well into the future. It remains a growing market, but the rate of growth is slowing. This has been true since the 1950’s. According to the U.S. Energy Information Administration, “The growth of electricity demand (including retail sales and direct use) has slowed in each decade since the 1950s, from a 9.8-percent annual rate of growth from 1949 to 1959 to only 0.7 percent per year in the first decade of the 21st century.” The following chart shows how the increase in electric demand is declining in this country.
US. Energy Information Agency http://tinyurl.com/nnz9rgg
Meanwhile coal continues to be the biggest fuel source for power plants. The use of coal accounts for about 42% of the electricity we generate. Coal is expected to remain predominate though 2040, although its share of the energy generation mix will fall to around 35% of the total as natural gas and renewable energy soruces grow. This means that for the foreseeable future carbon emissions and growing electricity demand will still be with us if nothing changes. Of course nothing ever stays the same. The real question is whether the energy utilities, reacting to market forces, will dominate the direction we take in producing carbon based energy or whether pressure to save the planet will rise to a point where we can achieve meaningful reductions in green house gas emissions.