Thomas Friedman Discovers Efficiency

Mr. "World is Flat" is late to the party again, discovering that the best new source of energy is efficiency. He quotes Jim Rogers of Duke Energy (the third largest emitter of CO2 in the country) saying ""The most environmentally sound, inexpensive and reliable power plant is the one we don't have to build because we've helped our customers save energy." Duke is proposing a "save-a-watt" system which rewards utilities for helping their customers conserve and increase energy efficiency."Energy efficiency is the 'fifth fuel' — after coal, gas, renewables and nuclear," said Mr. Rogers. "Today, it is the lowest-cost alternative and is emissions-free. It should be our first choice in meeting our growing demand for electricity, as well as in solving the climate challenge."

Nice thought but perhaps he has the order wrong.The Duke Proposal is interesting:

Because energy efficiency is, in effect, a resource, in order for utilities to use more of it, "efficiency should be treated as a production cost in the regulatory arena." The utility would earn its money on the basis of the actual watts it saves through efficiency innovations. (California's "decoupling" systems goes partly in this direction.)

At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly.

"Over time," said Mr. Rogers, "the price of electricity per unit will go up, because there would be an incremental cost in adding efficiency equipment — although that cost would be less than the incremental cost of adding a new power plant. But your overall bills should go down, because your home will be more efficient and you will use less electricity."

So customers let Duke spend money on increasing their efficiency, and charge it back through higher rates. Where they previously were in the business of selling electricity, they now sell hardware and caulking. It all seems somehow unAmerican: a corporation selling less of its product, or a customer taking all of the inconvenience of his air conditioner being controlled by the utility while paying more for the privilege. What is the incentive?

Behind the subscription fence at ::New York Times

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