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Save-a-what?
Imagine this: an energy-efficiency program that "encourages" consumers to conserve energy by charging them higher rates to make up for any lost profits the power company may lose for not needing to produce as much energy. Because if consumers DON'T conserve, new power plants will have to be built; but if these "virtual power plants" don't have to be built, consumers will get a fabulous 10% savings on the cost of the power plants...that don't exist.
I'm sorry, what?
This rather confusing and underhanded strategy describes Duke Energy's proposed Save-a-Watt program, which has been the subject of much debate this week. From the News & Observer:
"What makes Duke's proposal different from other energy efficiency plans is that the company would not be paid for the actual cost of running Save-a-Watt. Instead, Duke says it should be paid 90 percent of the cost of building new power plants. Duke officials describe Save-a-Watt as a 10 percent savings for customers on the cost of new power plants that would otherwise have to be constructed to meet energy demand."
And from the News and Record:
"Duke would recoup the cost of programs that help consumers save energy by recouping 90 percent of what it would cost to build a power plant to meet the energy needs offset by the conservation effort."
The plan's many critics (including consumer and environmental groups and, uh, Wal-mart...) fail to see this plan as any sort of incentive to save energy because it would price-gouge consumers, only provide modest power savings, and allow Duke to rake in huge profits—literally charging consumers for the lack of using power. [As a side note, I think many groups understand the charges that would be associated with starting an energy efficiency program, but I think it's the exorbitant profit margin of 61% that's causing the real debate.]
The program is currently before review of the Public Utilities Commission, and is being discussed this week.
In the meantime, I encourage Duke Power consumers to start conserving energy now—while it's still affordable.
I'm not an economist
I wanted to make that clear from the get-go. But I have had studied a little economics and a little policy. And a good amount of ecology/natural resources.
Imagine this: an energy-efficiency program that forces consumers to conserve energy by charging them higher rates to make up for any lost profits the power company may lose for not needing to produce as much energy. Because if consumers DON'T conserve, new power plants will have to be built; but if these "virtual power plants" don't have to be built, consumers will get a 10% savings on the cost of the power plants...that don't create more pollution.
Where is the problem?
More than half the population wants to continue their inefficient use of energy, and would prefer to keep the prices as low as possible. So, shouldn't environmentalists be expected to pay for their desire for others to conserve? Basically, what we'd be paying for is cleaner air, cleaner water, cleaner soil... And since environmentalists should, in theory, already be spending less on their own energy consumption, then what do we have to lose. We are at the forefront of energy efficiency, so the transition should be easy for us. Everyone else will feel the pinch of the purse and follow suit. Just look at what happened when gas prices reached $4.
Citing critics as being consumers and, uh, Wal-mart... Of course they don't want to see prices increase! Wal-Mart has huge warehouses and stores open 24 hours - that's a lot of lights and air-conditioning.
For too long, we have been free-riding off the environment and subsidizing energy inefficiency. Our massive consumption habits are only possible because we do not (and here I'll throw in some economics) "internalize the externality of environmental pollution." Now, the energy companies want to try to do that. Maybe this is not the best strategy, or maybe they are not publicizing it in the best way. But I think it's a step in the right direction. The increase is going to hurt a bit. We will be a little less comfortable - have to make due with less A/C at home and fewer milkshakes from the all-night restaurant down the street.
Now, imagine that the 61% profit margin is divided into not only the pockets of whatever analysts came up with this idea and the execs who are taking the heat for their proposal, but also for R&D for new energy technology, and community support programs (Progress Energy is noted for both), and gasp taxes to be appropriated for local infrastructure - say better roads, greenways, buses, etc.
And by all means, "start conserving energy now—while it's still affordable." It will certainly hurt less later.
Good chance to learn more...
... at the Crucial Conversation lunch tomorrow, Thursday, July 31 at noon, at Marbles Children's Museum in downtown Raleigh. Box lunches are $10. That's just a little more than half the price of a Save-A-Watt lightbulb, AND it comes with a cookie...