Asset Management / Optimization

Who Needs Energy Incentives?

Do You See Any Value in Requiring Utilities to Prioritize Energy Efficiency in Their Business Plans, Programs and Communications With Ratepayers?

By Paul Studebaker

Many of you know that I live in beautiful Northwest Indiana and that our offices are in the Chicago suburb of Schaumburg. Having had one foot in Illinois and the other in Indiana for my entire life, I can say that the populations are not all that much different —it's hard to tell a rural Hoosier from a rural Sucker, or most of Chicago from much of Indianapolis, or a Boilermaker (my brother) from an Illini (me). Both states have run successful programs to incentivize industrial, commercial and residential energy efficiency.

Under Indiana's program, called "Energizing Indiana," utilities collect a fee from ratepayers to fund an outreach and incentive program that encourages and subsidizes customers to use less energy. The program was put in place in 2009 by the state utility board in cooperation with the state government, and is intended to recognize the equivalence of saving energy to increasing generating capacity—since building more power plants would have to be funded by ratepayers, they should instead pay into a program to reduce consumption. Large manufacturers like steel mills have paid millions of dollars into the program, while typical households pay an extra $2 or $3 a month.

The program tasks utilities to make a good-faith effort to reduce electric power consumption 2% by 2019. The program includes free energy audits, weatherization for low-income households, subsidies for residential lighting products, heating and cooling retrofits at schools, education about energy efficiency, and rebates for commercial and industrial retrofits. Six utilities are covered by the program, which resulted in a savings of more than 416 million kWh in 2012. A 2013 study showed $2 in energy savings for each $1 spent on the program.

Also Read "Virtually Simulating the Next Generation of Clean Energy Technologies"

Now the state legislature has put a bill on the governor's desk that would end the program this year. The bill, SB340, started as a provision that would have allowed large industrial users to opt out, but was modified as it passed through the legislature to end the entire program.

Energy managers are well-advised to look beyond incentives for the best ways and reasons to implement a long-term energy strategy.

Industrial energy managers are well-advised to look beyond incentives for the best ways and reasons to implement a long-term energy strategy. Government and utility energy programs come and go, and may not incentivize the projects or equipment that ultimately will have the highest long-term impact on a company's bottom line. So you might expect industry to support SB340 and encourage governor Mike Pence to sign it. But that has not been the case.

A host of major companies, including Johnson Controls, Honeywell, Siemens, Ingersoll Rand and United Technologies sent a letter to Pence opposing the bill. The American Heating and Refrigeration Institute, a trade association representing makers of air conditioners and chillers, also wrote to legislators opposing the bill. "Ending this initiative would eliminate approximately 381 direct program jobs, over 1,200 indirect jobs and over $500 million of economic investment each year that the programs are not operating," said the letter from Johnson Controls and other companies.

Well, those folks just want to sell energy efficiency stuff. What about the large industries—the original intended beneficiaries—that would be allowed to opt out? These are your plants, whose energy efficiency depends in no small part on the effectiveness of your control systems. Does it make sense to you to pay millions of dollars toward reducing consumption instead of building more capacity?

Do you see any value in requiring utilities to prioritize energy efficiency in their business plans, programs and communications with ratepayers? Or is it enough to simply build costs into the rate structure and let industry act accordingly?

If you've been exposed to "good-faith efforts" to improve your plant's (or your home's) efficiency, what do you think about them?