Much of the action is happening on the state level where industry players are hammering out ways to lower costs by reducing energy consumption. In most cases, the goals are aggressive and could increase efficiency investments by 2.5 to 3 times what we have today, says Cowell. Industry insiders often talk about efficiency as the invisible power plant. If you need 50 MW of new power, you can build a new generating facility. Or you can find ways to reduce energy use by 50 MW. That’s like building a virtual power plant.
The virtual power plant saves ratepayers money because a 1% reduction in load during high peak periods can reduce wholesale electricity prices by 10%, according to the Electric Power Research Institute. Cowell sees three ground-breaking efforts in the works to increase the use of efficiency: portfolio standards, procurement, and demand resources in forward-capacity markets. Energy efficient portfolio standards require electricity providers to meet a set amount of their annual demand through efficiency measures. In other words, the state decides to cut back on energy use by say 15% by 2015 -- the goal set by New York.
State officials then work out a regulatory or legislative strategy to reach the goal. This isn’t always easy. What programs should the state push to encourage more use of efficient light bulbs by homeowners, better refrigeration in supermarkets, smart meters by businesses? And who should be in charge of the programs: utilities, a state authority, cities? A second way to implement energy efficiency is to use the so-called procurement approach. Some people describe this as making energy efficiency the “first fuel.”
When a utility needs more power, it must look first at increasing efficiency. “If there’s something cheaper on the efficiency side, you’d have to buy that first,” Cowell explains. The third approach involves using energy efficiency—such as demand resources—in a forward capacity market. The objective of the forward capacity market is to purchase sufficient capacity to operate a reliable system for the next year at competitive prices. Traditionally, only power generators were allowed to bid in such markets. But ISO New England recently allowed demand resources to compete head-to-head in its auction.
Two-thirds of the selected resources were demand resources. This was a huge “win” for energy efficiency in New England, says Cowell. Whatever method states choose to bring more efficiency to the power grid, the goal is the same. “At the end of the day, when a customer is looking for help to lower their energy use, they will see a unified plan, easy to use, with known technologies,” Cowell says. For businesses and consumers who are seeing their electric bills skyrocket, we hope that day will come sooner rather than later.