May 15, 2009

Energy Efficiency, vol. 4: Leaders Wanted...

From the online edition of the State comes a editorial from a former South Carolina utility regulator on the role energy efficiency should be playing in the Palmetto State.
Congress must act on energy efficiency
Guest Columnist

In recent weeks, The State has published two guest columns focused on the true (negative) costs to South Carolina of ignoring climate change in a carbon-constrained world, and of constructing a new coal-burning plant in Florence County. In addition, a number of news articles have reported on the hearing at the Public Service Commission this summer regarding SCE&G’s demand-side management and energy-efficiency programs.

These articles point to an ever-increasing awareness in South Carolina that we must begin to formulate a sustainable energy future and protect the environmental quality that is the foundation of our largest economic driver (tourism) while also maintaining reliable and affordable electric service. So are these goals realistic and achievable? Or is it asking too much to have affordable electricity while also addressing climate change and protecting our beautiful state? My conclusion is yes — we can achieve both — and the quickest and least-costly vehicle to get us there is energy efficiency.

South Carolina wastes too much energy. A 2008 report by the State Regulation of Public Utilities Review Committee found that S.C. residents have the fifth highest annual electric consumption in the United States, but rank only 40th in median household income. The report found that we must become more “energy conscious” and reduce our electricity use through conservation and utility-sponsored energy efficiency and demand-side management programs. But the authors concluded that these efforts alone would not be enough to meet our future demand.

While additional generation will indeed be needed in the future, this simplistic conclusion ignores the reality of achievable energy efficiency and the broad public benefits to residents and businesses of expanding energy-efficiency programs. Consider:

• Since the early 1990s, South Carolina has had an extremely generous cost recovery law (S.C. Code 58-37-20) enabling utilities not only to recover the costs of any demand-side management and energy-efficiency programs, but also to earn their approved rate of return on those investments, and to recover any lost revenues associated with reduced electricity sales resulting from efficiency. In effect, the utility is held harmless. Still, investor-owned utilities’ demand-side management and energy-efficiency efforts have been virtually non-existent.

• Recent studies by the Edison Foundation and the Electric Power Research Institute, both funded by utilities, found that energy-efficiency programs could reduce future energy demand in the United States by 38 percent to 65 percent by 2030. The analysis found that the savings would be even greater with improved energy codes and efficiency standards. McKinsey and Co., a global energy consulting firm, found that energy efficiency can offset more than 80 percent of increased electricity demand by 2030.

• Energy-efficiency programs provide electricity for an average cost of 3 or 4 cents compared with 7 to 10 (or more) cents per kilowatt-hour to build new generation and transmission facilities. The Edison Foundation reports that even with the added expense of demand-side management programs, including advanced metering infrastructure, customers would realize a 7-15 percent reduction in costs compared to just building new generation facilities to meet demand.

• Based on a recent analysis by the American Council for an Energy Efficient Economy, implementing an energy-efficiency resource standard during the next decade could save enough energy to meet the needs of more than 1.3 million homes in South Carolina, result in $3.1 billion in net energy savings to residents and businesses and produce nearly 4,500 net jobs in our state.

In short, energy efficiency is the quickest way to meet future demand and mitigate environmental and climate-change impacts. No waiting for construction of new clean power plants, transmission lines or the effects of a carbon trading-program to take effect.

Congress had been working on an energy-efficiency standard that would reduce electricity usage 15 percent and natural gas usage 10 percent by 2020, but opponents have managed to defeat the standard and require only a 5 percent to 8 percent energy-efficiency gain by 2020 — for all practical terms, business as usual.

Based on the limited demand-side management and energy-efficiency offers from S.C. utilities in recent years, it is past time to get serious about meeting our energy needs at a minimum cost to residents. It’s up to Congress to pass this critical legislation. And if Congress cannot get the job done, we need the General Assembly and the Public Service Commission to protect the pocketbooks of residents and business interests here in South Carolina by requiring meaningful energy-efficiency programs.

Dr. Atkins is the owner of Regulatory Heuristics, an energy-policy consulting business in Columbia, and formerly served on the S.C. Public Service Commission.
Note that Senators Leventis, Land, Malloy and Reese introduced S.547 this year, which would establish state performance targets for retail electricity and natural gas savings and reduce businesses and households’ electricity bills. S.547 could reduce electricity demand by approximately 10 million megawatt hours, or nearly 10% – equivalent to about 4 power plants with a 600 megawatt capacity, or enough energy to power over 650,000 homes. Natural gas usage could be reduced as much as 9%. Savings to the state’s economy could approach $1.5 billion and carbon dioxide emission reductions could accumulate to 43 million metric tons – equivalent to taking more than 900,000 automobiles off the road. Several recent studies have also indicated the potential to create thousands of jobs in implementing the goals of the EERS and saving South Carolina businesses and households’ substantial sums on their monthly energy bills.

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