Efficiency, Politics, Policy, and Economy
Recently, the American Council for an Energy Efficient Economy (ACEEE) released its annual state rankings for energy efficiency. We noticed Wisconsin slipped a few pegs to 16 while Iowa remains near the top at 11. The top states for EE programs include the usual suspects: California, Massachusetts, Vermont, and New York.
As we discussed the rankings in house, my comment was, you probably don’t want to be in the top 10 on this list because those states are on the business-unfriendly end of the spectrum. They have big EE spending congruent with heavy regulation.
So you guessed it; this rant analyzes economic performance, politics, and business friendliness along with the ACEEE rankings.
I did some digging to see what sort of correlations there were between state energy policy, political leanings, and economic growth. One can make all sorts of arguments; my favorite including “if it weren’t for xyz, it would be much worse.” But I never buy that bologna. Likewise, I don’t buy excuses for why savings aren’t being accrued as estimated, unless something radical has changed – like half the occupants left the building and turned out the lights. This is why we look at savings on energy bills and don’t bother with weather normalization or other excuses. Nobody can argue with meter reads from billing data.
I used growth in gross state product for the past 10 years as a metric for economic vibrancy. I used the average percentage of votes for Democratic candidates for president over the past four elections as a measure of state political leanings and simply ranked those from low to high. Finally, ChiefExecutive.net ranks states for business friendliness with a survey of about 550 CEOs. The CEO rankings include considerations of tax and regulation, workforce quality, and living environment.
The rankings for all categories are shown in the data at the bottom of this blog so you can peel it off and do whatever you want with it. FYI – I left out District of Columbia because that is a whacked out, in more than one way, “state”. Therefore, you will see some 51s in the scatter plots.
Plots are worth a thousand words so I plotted ACEEE ranking against political leanings and ACEEE ranking against economic vibrancy. There is a strong correlation between energy efficiency policy and the states politics. Liberal states dominate the high end of the ACEEE rankings as shown in the chart below. Bear in mind that low numbers are high rankings. For example, see the first dot in the lower left corner of the plot. That represents Massachusetts, which was ranked number one by ACEEE and the state has the most liberal record in presidential elections.
It is interesting to point out the outliers. The most conservative state is Utah and they have an ACEEE ranking of 17. Idaho, the third most conservative state is ranked in the middle at 26 by ACEEE. On the other end is Delaware, the 10th most liberal state with an ACEEE ranking of 31. Delaware, however is the size of my back yard and has almost no Interstate highway so anything is possible there.
To my surprise, there is a very weak correlation between energy efficiency and economic growth. It’s actually better than I thought because big states like California and Michigan have good EE rankings and horrible economies. Generally speaking however, higher EE rankings have less economic growth. This is what I was referring to regarding not making excuses. But..but…but… I don’t care. It is what it is and you can send your excuses to your senator where it can be ignored with the rest of the correspondence he/she gets.
See the first point on the left in the chart below? That’s Massachusetts, which had the third worst economic growth over the 2000-2010 period. Yeow! That crappy growth was a bit of a surprise to me. California was 34th in economic growth – actually considerably better than I would have guessed. Subtract Apple from the state’s GSP and it would probably be 45th place. Subtract the rest of Silicon Valley and it would be 50th I would bet.
Washington (the state) has the best combination of energy efficiency and economy. Missouri appears to be a convincing dead last in this combination.
Actually, when I said the second quintile is probably where you want to be from an EE perspective, I was correct, somewhat. The second quintile of states for high EE ranking have the second worst economies, but better than the first quintile, bogged down by rust belt states of Michigan, Wisconsin, Illinois, and New Jersey. Actually, the states with the worst EE rankings have the best economies, so I was right in that sense, unfortunately.
Finally, I roll it all together: energy efficiency, CEO business friendliness, economic growth, and political leanings. Once again, I remind you that large numbers are low rankings.
First a few comments on business friendliness. Texas is top ranked by CEOs as the best place to do business. California is dead last. In a post a few months ago, I pointed out the hilarious fact that Gavin Newsom, California’s Lieutenant Governor, with several legislators in tow visited Texas to see why Texas was sucking jobs out of California like a Hoover vacuum cleaner. What a dope. Maybe he should discover this thing called the internet.
When considering workforce quality and living environment have to be sky high for California, you know their tax and regulatory climate is hell on earth. Steve Jobs apparently alluded to this in his recent biography by Walter Isaacson, saying “it is almost impossible to do so [build a factory] these days in America, largely because of regulations and unnecessary costs.” For examples, Google “delta smelt” to see how “saving” this minnow ruined farmers in California, or check out this recent article to “save” a sucker (a fish that is) in Southern California. There are a plethora of states that would be happy to export some Asian carp to replace this bottom feeder if that’s what they want.
But on with the comprehensive results shown in the chart below – Based on trailing economic performance and current energy efficiency and CEO rankings representing future potential, it appears that the fourth quintile of states ranked by ACEEE is the optimal place to be. These states include Indiana, Texas, Virginia, Montana, Georgia, Kentucky, Alaska, Arkansas, Louisiana, and Nebraska. These states are ramping up EE programs. The average CEO rank for future business development of top EE states is almost 40. That is terrible! These states include Massachusetts, California, New York, Oregon, Rhode Island, Vermont, Washington, Connecticut, Minnesota, and Maryland.
But…but…but – I don’t care. As my basketball coach used to say, “If ifs and buts were candy and nuts what a wonderful world it would be.”
State by state data are provided below.
GSP Rank = ranking in growth of gross state product from 2000 to 2010, constant dollars.
CEO Rank = ChiefExecutive.net survey results of 550 chief executives for business friendly states considering taxes, regulation, workforce, and livability.
Democrat Rank = Ranking of states by percent of votes for the democratic candidates in general presidential elections for the trailing four cycles.
Obviously, many states have tied scores for ACEEE. However, I have no idea how they have four tied for 17th place, a 19th and a 21st. You can probably find out in the full report.
Tidbits
Hey, if you are a highly ranked energy efficiency individual, and if you still take showers, you might consider one of these LED shower-powered lights for your shower. Does two things: saves lighting energy and water flow. Good luck! I came across this on the Sylvania website where I was visiting to vociferously complain about the expensive headlights on my car that simultaneously burned out after a measly 8 months surrounding summer use (very little). This was the second pair (the other a different brand) of high output headlights that failed early. Avoid them, especially if changing the head lamp is like threading a needle in a soda can – sharp edges and all.
What Are They Thinking?
Montana, Theisman, McMahan, Simms, Aiken, Young, Favre, Elway, Brady, Johnson, Rothleshamburglar, Manning, Manning, Brees, Rodgers. Connection? If you know anything about football, you know these guys are quarterbacks, and probably know they all won a Super Bowl or three. If you don’t know anything about football, I commend you and I’ll get this prelude out of the way quickly.
Virtually no team has won the Super Bowl with a mediocre quarterback. The only one I can think of is the Baltimore Ravens, somewhere around 2000. After looking it up: Trent Dilfer. How did this miracle occur? They played the Giants. Quarterback: Kerry Collins. Who the?
I conclude with 19:1 odds, at least, if an NFL team has a crappy quarterback, they have no chance of winning the Super Bowl and if you have no chance at the Super Bowl, what’s the point? Enter, the Minnesota Vikings, or as I’ve referred to them for 20 years, the Vi-Queens. They haven’t had a “franchise” quarterback since Tarkington and he was washed up (like Favre for the past 10 years – yes, going back deep into the Packer days) when I first knew anything about football.
This year I learned the Queenies acquired Donavan McNabb, who was at best mediocre in his prime but that was eight years ago. For a few more laughs see a more complete list of buffoons that have directed the Queenie offense to failure, see Wikipedia.
I’m just a schmo, having rather loosely watched 30 years of the NFL and I’m thinking, who are the idiots running the Queenies organization and why bring on a nag like McNabb? Unless a team has a very good quarterback or a youngin with potential to become one, and they want to win a championship, just forfeit the season and go fishing, hunting, or make some rap music.
But this isn’t a rant about football only. It’s a rant about decision making. Decision making has long been one of my great interests and one that anyone marketing energy efficient products and efficiency services should obsess over.
I haven’t yet read any books on the subject but I can speak from experience and maybe some other media nuggets packed away in the attic of my brain.
Decisions may more often be irrational than rational. In order to sell, if one only targets the rational they are leaving at least 50% of the market go. Consider fans of iPhone, which was one of the great tech breakthroughs of my life, but they are now relying on the irrational. The iPhone has pretty well matured and Apple needs to think of some other platform because they only have about another irrational iPhone release, maybe two before cult status wears out. This time they added the Siri gimmick, a Hal 9000 wannabe. This reminds me of Merlin from 1978 or the magic eight ball. Imagine iPhone 4S users sitting in a closet in their home getting their kicks out of asking, “Siri, how many gallons of water are in the Pacific Ocean?” “Siri, who was the MVP of last year’s World Series?” “Siri, what is the name of my spouse?”
Here are some examples and reasons people make irrational decisions:
- Knowingly having more tax withholding than necessary so they get a check from the Treasury in the spring. News: you are getting your own money back. Why not just stuff an Andrew Jackson in the back of your T-Shirt drawer so in 12 years when you move, you are pleasantly surprised to “find” $10? Think of the thrill!
- Which brings me to the next one, people will take an immediate pittance in money in lieu of good odds of getting much more money later. This is a big barrier for EE, except free riders. Does the customer see a prebate as buying down the extra cost (I don’t think so) or, surprise (!) you have just found an Andrew Jackson?
- Buying insurance you don’t need. Insurance is for a loss you could not afford, period. My mother finally surrendered at getting me to buy life insurance. Why do I need that? If I die, nobody is going to be in dire straights. I should get it because it’s cheap when I’m 25, single, young, and healthy, and did I mention free, as in no commitments, like say, offspring. People also buy accidental life insurance or flight insurance; as if you are killed in a plane crash is more harmful to survivors than a slow death by leukemia. In fact, it’s actually LESS financially draining than a slow death. Think about it – even though most people don’t like to.
- One more on insurance and I’ll quit. People pay dearly for lower risk than they need. Take shipped goods. You always have to ask yourself, what is the worst that could happen? Lose it all, obviously. The physical content is almost never worth insurance, even if it’s worth thousands of dollars. However, the cost to replace it may be much greater than cost of the physical stuff. How so? Information that goes missing with the lost equipment – data.
- And then there are casinos. Going to a casino to make money is like buying insurance to make money. Over time and on the whole, you will lose, guaranteed. Fuggetabahdit.
- Then there is the irrational status quo – using the turd you know rather than the possibility of something much better. For example, there is a competing engineering firm in town (not EE firm) that is always used by a local architect. The architect can be assured of delays, missed deadlines and all kinds of crap. Why do they put up with this?
- Which brings me to the next one, conflict aversion. Are you staying with the turd because the pain of the next project or year is easier to handle than “firing” the guy/firm? As I’ve mentioned before on this blog, I can’t stand things that don’t work well, and if I decide something will eventually need to be taken care of, eventually equals NOW.
- The irrational fear of having been duped for a long time. This is a version of the irrational status quo. Is there a possibility that an alternative may be much better but the decision maker doesn’t want to know because they may look bad for using schmucks for years? In some cases, definitely. They don’t want to hear about alternatives. “Lalalalalalalalalalala. Did you say something?”
- Fear of failure or trying things. You have to ask yourself the same question as for insurance. What is the worst thing that can happen if this fails? The answer is typically, not much, financially speaking. Egos hold up progress and success; egos that cannot afford failure that is. I have no problem spending money on things that may fail. For example, being an EE freak, I tried LED task lighting when we moved into our office three years ago. It sucked because it was old, dim, blue-appearing technology. That lamp is now at home adding one foot-candle to my workbench. Later, I bought a Z-Bar LED task light. This one is fantastic. Everyone should have one. There are four light levels and a projected useful life of 6,500 years. The light is white and bright and I always use it on the low setting which consumes a whopping two Watts. Summarizing this point: One of the best lines I found in a book called Selling the Invisible was, “You need to start failing to start succeeding”.
- The low price sucker. Recently, I reminded a buyer that choosing a professional services provider is like choosing a doctor, not like buying pencils and paperclips. The products can be far from similar.
- Then there is simple ee-aw, ee-aw stubbornness. When I was a kid in the Midwest farm belt, farmers had Fords or Chevys; International Harvester or John Deere. Period. It was always all red (International) or all green (Deere) and the reds knew they had the best and the greens knew they had the best but they never, EVER tried the other out of complete stubbornness. Ditto for cars. I first drove a Honda Accord – first ever drive in an import in about 1984. Wow. The 80s were the peak of the gap between Japanese and American cars. Having owned Japanese for 20 years with the worst thing to happen to include two refrigerant leaks that blew a hole in the ozone layer and crumbling brake lines from 13 years of driving in salty slush, I’m not moving. Meanwhile, “American car” owners have no problems. But what about the mirror that fell off costing you $400 to fix or the water pump that craps out? Unless the engine falls out of the car or the steering wheel comes off while cruising down the Interstate 80 mph, it’s been a trouble-free vehicle. Geez man, you need a new baseline I would say.
Tidbits
Rothleshamburgler – The sloven name matches the guy. He could use an image consultant.
Water-Boarding Over Picasso, Any Day
I had a really bad week last week – nothing significant occurred to me in the world of EE, and nothing really enraged me or even made me snicker, although I could always rant about federal spending on EE and renewable energy. Actually, if you are so inclined, Kim Strassel from The Wall Street Journal takes it to Rick Perry and Mitt Romney, if you are interested. Who would name their kid “Mitt”? What kind of a name is that? Is that short for Mitchell? Mitt for short, with two ts? Or is it short for Mitten? Why are there baseball “gloves” and a catcher’s “mitt”? Because gloves have fingers and mitts, short for mittens, have none. Wow. I think I figured something out today, although Romney is still confusing as hell in more than one way.
In the end, I did come stumble onto this article regarding SAIC’s programs for Ameren Illinois. Specifically, I was looking at the photo, thinking, this isn’t where the savings are! The vegetables are pretty and attractive, although beware of listeria and e-coli. Who’s your farmer?
But the EE-buying public doesn’t know the bok choi and asparagus are harmless passive loads for the refrigeration system. The engineering nerd wants to see the guys standing in a room full of hunks of iron on steel racks with pipes and conduits perfectly aligned in harmonious symmetry and parallelism.
BTW, engineers cannot handle any abnormalities, curves, interesting angles, or asymmetry – in a word: art. If you want to get an engineer to sing like a canary, put them on a stool in an empty room lined with Picassos, Kandinskys, and Miros. This would be harsh psychological torture. Why are so many engineers obsessed with woodworking? In another word: square. I’m easy. If I were chemically influenced enough to create, say an entertainment center, I would purposely skip the squares, rulers, pencils and all that crap. Does the end result look like crap? No. It’s art.
Come to think of it, this could be why it is difficult for new graduates to transition into energy efficiency. We don’t solve problems like, “How much work does it take to empty a 16 gallon keg of beer with a hand pump?” (Wisconsin is the only state in the union that refers to this thing as a “half barrel”) That keg question was on my final exam for my first semester thermodynamics course, and that is no joke.
We never have complete information to analyze an energy project, even when we can get everything we can think of. One has to learn what matters and what doesn’t really matter. We are not solving problems like a 1000 Btu of heat is added to a cylinder with water blah blah, this, that, and the other. How far does the piston move?
Unlike design, and possibly any other profession engineers delve into, when calculating energy use/savings, we want it to be as accurate as possible with no safety factor. Most building design, especially new construction, is performed using cookbook methods and then multiplying by 4 because this building will be warm and it will be cool – dammit! Well, this may be fine but it costs the owner, in many cases, a fortune because stuff is grossly oversized to begin with and oversize isn’t like a quad artery bypass burger from Carl’s Junior. Come to think of it, it probably is. You pay more now and you will really pay the rest of its life.
Not all oversizing is created equal. Belt and suspenders design is especially costly as entire systems are virtually redundant with EXTRA equipment. For example, you DO NOT want belt and suspenders for an earthen heat exchanger for a heat pump system. That is costly. Installing an air conditioner or boiler that is 50% larger than it should be isn’t ideal but at least in most cases it isn’t going to proportionally increase the cost, like a couple dozen extra bores for heat pump well field would.
How do people think about EE for decision making and what did the designer have in mind when he designed this behemoth? These are the things that interest me most about EE and they are encapsulated in program evaluation and retrocommissioning. In program evaluation, we are asking, what good is this program anyway? That is a big question to be answered with responses and answers to a thousand other questions. Most of our work for evaluation includes determining gross savings – actual savings. Attributes of a good evaluator include those of a good referee, judge, investigator, interrogator, psychiatrist, dog trainer, social scientist, mathematician, philosopher, priest and engineer. To the square engineer, this seems boring, stupid, and frivolous. To the artful or person who can’t stand wasted money, unrealized or fake savings, it is great stuff.
In retrocommissioning, it helps enormously to figure out the profile of the designer or firm that designed the systems. Descriptions include:
- This must have been the first of this type of system these guys designed. It is designed with backup for everything, which for a nuclear power plant is good, but not for your building.
- These guys paint by numbers. There is no thought or creativity whatsoever. E.g., they put an equipment room on a central air handling system, which will waste energy like crazy.
- I have no idea what the hell this guy was thinking. This is the most bizarre thing I have ever seen.
- These guys actually did a pretty good job.
With retrocommissioning, like evaluation, one has to work with incomplete information and sometimes it requires psychoanalyst skills as well. Being a genius and having tons of experience to recognize the fingerprints of an energy hog are both highly valued, but one also needs the social skills required to act like a schmo or a fan of whatever football, baseball, hockey team, sport, politician or car the customer wants to yap about. Don’t worry about golf. If the guy wants to talk golf, it’s the wrong guy.
Tidbits
Japan, with its devastated tourism industry since the tsunami and Fukushima meltdown, may offer 10,000 free flights to revive tourism. Fukushima is keeping people away? It would be an attraction to me – like seeing a volcano spouting lava.
In the OMG department this week, Bernie Sanders, self-described socialist senator from Vermont, espouses on-bill financing of energy efficiency projects consistent with a key part of my plan a couple weeks ago. This could be described as a broken clock being right twice a day but Sanders has a digital clock. A better allegory would be, even the Minnesota Vikings franchise will win the Super Bowl at some point if the league survives a long time, maybe 10,000 years would do it?
Lastly, in the home improvement department, last week I took on a chore for which I am capable – running a drill and grinding paint and rust down to bare metal. Pictured nearby is the front door to our house. It was manufactured by Pella Windows and is probably 12 years old. It was rusting as shown around the fru fra plastic frame, which is removed as shown in the picture. Upon removing the fru fra, it was obvious why this was happening. Look at the gaping cavity with no insulation. Jeez man, I think they could use some better engineering, or possibly the assembly line guy was in the restroom when this one passed his station. For extra credit, why did this happen and why did it rust where it did?
The Super Genius Grid
The barrier to having a decent energy policy is very similar to the barriers of solving illegal immigration. Both the left and the right have their own vested interests in not fixing the problem. I see the political spectrum as a circle, not a line from far left to far right. It is a circle because when views get so extreme, they are supported by both the far left (e.g. Dennis Kucinich) and far right (e.g. Ron Paul). Personally, I respect both of these guys and I have no doubt they are sincere in their beliefs and want the best for the country. An example on which they agree is pulling out of Afghanistan, yesterday. Very few on the right agree and few on the left, including the President, agree.
The same dynamic is at work blocking decent energy policy. The left wants to stop the use of any fuel with a “C” in the molecular makeup but they also object to all realistic alternatives, including nukes and hydro. The right opposes any sort of standards whatsoever on the demand side – mileage standards, CFLs for a couple examples. The good folks in western Minnesota and Iowa are fine with building massive wind farms but neither left nor right want a transmission line from the La Crosse area to Madison to improve reliability by having more access to generation AND getting the renewable energy to where it can be used.
The Afghanistan equivalent in EE: smart meters. The far left doesn’t want them because they cause cancer. But then again, this is coming from California where organic vegan mother’s breast milk causes cancer. Everything causes cancer in CA. On the far right are the Glen Becks who think the government is going to spy to find out when you leave for work and commandoes will swoop in and secretly log the contents of your underwear drawer for blackmail material.
Nough said.
Last week I attended the Association of Energy Service Professionals (AESP) conference in Dallas that featured an overarching theme of consumer behavior and smart grid. First off, what is smart grid? If I polled 1,000 people I’d get 997 different answers. It is entirely nebulous. The other three wouldn’t have any idea.
I took a pre-conference class on evaluating programs that include elements of smart grid and behavior and my definition of a smart grid is two way communication with customers via the electric meter. That is the bare bones definition I think – but there is also grid design for reliability, so like if the Christmas, er I mean holiday light burns out they don’t all go out. But I know little about the grid reliability stuff.
As I was sitting there in the class, I developed my own framework for the energy future.
WHEREAS, consumers want reliable power at negligible cost.
WHEREAS, the hard left abhors any form of reasonable energy supply.
WHEREAS, the hard right abhors any form of restraint on consumption.
NOW, THEREFORE, A SOLUTION is offered by Jeff Ihnen that delivers the framework for the genius grid that everyone must agree with.
Electricity prices can skyrocket during peak periods as shown in the chart in this article, which is actual quasi-deregulated Texas pricing. Prices rise sharply the minute supply starts eating into the required spinning reserves, but it is capped at $3 per kWh right now – thus quasi deregulated in my book. They are talking about raising that to maybe $6 per kWh.
Genius grid solutions should be developed on both demand and supply for power. On the demand side, the genius grid would include a home area network with amperage meters and relays (cutout switches) on major appliances – central air conditioning, clothes dryer, maybe refrigerators and freezers, and water heaters. Over a year’s time the genius grid logs and builds a model for energy consumption based on time of day, weather conditions and day of the week for each meter. Now the utility has something to work with because they know exactly how much power the AC unit is pulling on Tuesday afternoon at 2:00 PM just before July 4 when it’s 96 degrees outside.
The genius grid, rather than giving price signals to consumers, e.g., it is going to cost you $26,000 to keep your house at 68 degrees the rest of the day, it would instead BUY your agreement to shut down your AC. This would come on your i-Phone/Android/Blackberry. “Shut down your AC for $20 this afternoon?” Accept? Decline? Hit accept and you get $20 credited to your bank account instantly. And so on. Homes become a source for increasing power available on the grid.
BTW, I see residential end users as the best applications for genius grid. Homes have many unneeded loads that can be shed during the day and loads that can easily be shifted to eight from six o’clock. I don’t mind my house at 80F but I couldn’t stand working with full garb in the office at 80F.
On the supply side, customers can put power on the grid for some of these high peak costs from renewable and other sources. Take photo-voltaic panels installed on houses. The panels are generating peak electricity while powering a number of things in the home and maybe selling the excess back to the grid at some ridiculously low price. (But I really don’t know how the current pricing works.) Why not have the utility send a buy message to your iPhone to shut down all major appliances for the afternoon and buy the 2kW from the PV for four hours at $3 per kWh? That’s $24 in the bank account for doing practically nothing. And you could do this while you are daydreaming in a sensitivity training session.
Readers of this blog know I’ve bashed all-electric vehicles numerous times because it is a plain stupendously idiotic idea. However – hybrids and plug-in hybrids even are great ideas. You drive to work and park your plug-in hybrid in the preferred spots next to the handicapped section and plug it into the charging station installed by General Electric with the assistance of obscene federal subsidies. Now the iPhone buzzes while you are nodding off in the sensitivity session and says, “Hey Bozo. We will buy from your car’s generator for $2 per kWh for three hours.” Let’s see… say 50 hp motor can generate 25 kW for three hours, that’s a $150! – enough for five fills of gasoline, or better yet, 20 fills of natural gas. It can start remotely. It can automatically shut down so you don’t go to leave work with a dead battery and empty tank.
Making money, I believe, is sexier and more attractive to consumers (versus saving) and everyone likes to mess with their phones 200 times a day. Just watch people when their hands aren’t on a computer keyboard. They are fiddling with their phones.
Tidbits
Everyone has a bad story or 20 about air travel but there are some things that are really bizarre to me. Have you ever seen passengers sit in an airplane after most everyone else has deplaned? I haven’t either. Yet it is a “privilege” to board first, as in first class. If I had my druthers, I’d like to sit in a recliner sipping a martini in the skyhigh club until the last second before entering the aluminum tube. The only reason I want to get in the tube as soon as I can is so I can fit my carry-on in the overhead compartment in cattle class – and get the hell out of the airport as fast as I can when it lands. If I were in first class, there’d be all kinds of space for my carry on, so what’s the rush?
Can first class customers not swill enough booze in three hours? Are they trying to get their money’s worth of “free stuff” in exchange for the $1,000 extra they paid? I almost forgot, first class customers get to board on the left aisle in the terminal past the ticket counter. They get a special blue rug to walk on – like the red carpet at the Oscars I guess. Oooooh. (I stepped on it once myself) A fellow passenger was snickering and throwing barbs at the blue carpet and staff as we boarded.
It seems my flights are served by smaller and smaller planes. On three hour rides I always had at least a six-across Airbus A-320 or a Boeing 757. Then it was crappy little MD-80s and DC-9s, and more recently four-across jets made by companies with names I forget or cannot pronounce. On these little planes, those in cattle class get to stumble over the first class passengers who had the privilege of sitting in the plane as long as possible. I don’t know about you, but I’d rather not have 80 people running over my toes, spilling my drink and watching what I’m doing, thinking, “What does that guy do? He must be the CEO’s nephew. He doesn’t look smart enough to manage a hotdog cart.” First class passengers never look at second class passengers (at all for that matter) and wonder, “What does that serf do for a living? That may have been the guy trying to wash my windshield when I was trapped by the red light. That one looks like a day-laborer. That one looks like a cab driver and that one probably washes dishes at a diner.”
TGTBT You Can Believe In
In 1984 was not like 1984, I talked about greeting change with gusto to win the future but with few specifics. This post will cover one such “innovative” way for all stakeholders to benefit from energy efficiency.
The typical utility-sponsored energy efficiency portfolio works like this:
- A small percentage of billed energy consumption, aka a rider is paid by customers to fund EE programs.
- Programs provide incentives for energy efficient equipment and in some cases services such as studies.
- Evaluators determine impacts attributable to programs and make recommendations for improvement.
- Regulators oversee it all to help ensure consumers aren’t being ripped off – a primary role of government.
- Consumer advocacy groups, some of which are in business solely to bash utilities and add no constructive value whatsoever, object to everything. Other advocacy groups can be great as they understand the utility business and that it is not a charity like The Salvation Army.
Many utilities have, at some point, added financing to their portfolios with dismal results and no wonder. Customers can typically get lower interest rates on the market or with banks and other lending institutions. Why waste time with the utility or program?
The chair of New Jersey’s Board of Public Utilities wants to “look into cutting the subsidized rebates, saving the average residential customer more than $2 a month”. (don’t spend that all on one place) He wants to look at creating a revolving loan program over time, rather than collecting money from everyone on their energy bills and paying it out to some customers in the form of rebates or other services described above.
Of course, as described in the 1984 post, this was met with angst and resistance by a variety of stakeholders. A chump from the Sierra Club says residential customers won’t use the program for purchasing an efficient furnace, for example. And this is based on???? It would probably take care of some free riders for people like me who would buy the efficient thing anyway and why not take the $100 rebate from the program I have been paying into? I wouldn’t do the financing because I hate monthly payments and it’s more hassle than the 39 cents saved. Other people, it seems, will finance a new 16 oz claw hammer from The Home Depot if given a chance. They are probably the same people who write a check at the convenience store for a soda and two hot dogs.
The American Council for an Energy Efficient Economy declares finance programs are used by only 1% of consumers and that for one program, when given the choice between financing and incentives, 90% of respondents choose incentives. This is grapes and cantaloupes. The time-strapped reader like me would read 1% of respondents like financing and 90% like incentives. Nice try.
What’s the problem with financing programs and lousy participation? They suck. They generally offer nothing a person can’t get from the bank or selling bonds for large end users. They provide no other services, such as cost/benefit analysis for customers. How to make financing attractive: lose the rigidness, forget the no-benefit program that ran for five years with three participants, and break with the status quo that most utilities cling to at all cost.
Stakeholders need to change their mindset and actually consider EE as a resource – a replacement for power plants and infrastructure. From the customer perspective it is a replacement for paying for therms and kWh. Combine this with the usual demand side management funds and utilities could create a vibrant and active financing program. It could be marketed by something jazzy like TGTBT – to good to be true. Looks like a bridge doesn’t it? I can see it now.
Gimmicks aside, the first thing that would help a ton is adding the payments to the monthly bill. Energy efficiency is a resource delivered to customers so why not pay for it rather than paying for kWh and therms? I have heard from more than one utility that their software, SAP or similar, cannot handle on-bill financing. You have got to be kidding me. That’s like saying a smart phone can’t make phone calls. The answer to any question involving ability for computation on a computer is, yes it can.
On-bill financing makes it easier for customers to make projects happen. Depending on the corporate bean counter, this may allow for treating the project as a lease rather than a capital purchase that requires approval from God. Once the credit risk has been cleared, customers with more than one facility can implement projects in multiple facilities.
From a utility perspective, why not earn the same return on capital as is used for power plants and infrastructure? This is blasphemous to some regulators but especially consumer advocacy groups because this means utilities would make profit on EE projects. Egad. Well heeyaah!
Having watched utilities for years, I have to wonder whether some really want to reduce their customers’ energy consumption through EE programs. Many, for sure those running programs, do but it seems some are given instructions from the board room to just make it look good. Thoughtful executives and boards know what is good for their customers is good for the utility because prosperity results in expansion and … more consumption! And vibrant programs are good for public relations making it easier get what is wanted through rate cases, and they surely are good for the Eco Devo department for luring new big customers.
Returning from that digression, wouldn’t it be a good thing to grant the same profit on selling EE as utilities make selling energy? This should make the executives and the board much happier than collecting money from their customers and distributing it to others driving down consumption, presumably. Regulatory and consumer advocacy agencies need to get on board with profit driven EE programs. As long as the program is as cost effective for the customer, what’s wrong with making money on it?
Another pillar in TGTBT is a savings or cash flow guarantee. This typically triggers a stampede for the exits among utility folks. I have not seen a study on this but guarantees are definitely a critical piece of doing an EE project for some customers. Transparency is something desirable for these contracts as well. Customers see how much the project actually costs and what the finance charges and fees are. They could even competitively bid the project to help ensure good pricing. This all allows for a much more desirable proposition than the typical performance contract which essentially is a contract that says, “trust us, we are not ripping you off.”
Putting all these elements together isn’t absent challenges, including credit ratings of customers. Such a program may not work well for residential customers, particularly those who don’t own their residence. The administrative costs may be prohibitive. Default rates would be higher among residential customers because people move from residence to residence, and out of utility territory, much more easily than businesses, schools, factories, and institutional buildings can. Indeed, for C&I customers such programs have been very successful with negligible savings challenges and puny default rates.
Recapping, key elements include: granting normal return on capital for utilities, very low finance rates for customers, and guaranteed performance. On-bill financing makes things easier for customers but isn’t absolutely essential. The other three pieces are.
Tidbits
I read more hype regarding the Fukushima nuclear plants last week in The Wall Street Journal. It was a bit like the ACEEE statement above. Paraphrasing, “trace amounts of dangerous plutonium was found within a 30 mile radius of the plant.” I’m sure I have trace amounts of some fried cheese balls I ate in high school – plated out on an artery somewhere too. They also detect strontium, iodine, cesium, this, that and the other – some with half lives of 30 to 90 years. OMG! We’re all going to die.
I would say that 99% of the population has no idea what a half life even is. It is the point at which half a particular isotope has decayed to a lower energy state – I.e. half the gammas, alphas, neutrons have been puked out. So all else equal, the longer the half life, the less intense the radiation, but 99% probably think it will be lethal for that long.
How many people have died from the reactor accidents? I haven’t heard of any yet. Zero.
