OGE Lighting the Path Forward
Oklahoma Gas & Electric, winner of Electric Light & Power’s Utility of the Year award last year, is deploying 1,500 smart meters a day as part of their ongoing smart grid efforts. Targeting the Oklahoma City metro area, OGE hopes the smart meter technology will encourage their customers to smooth the peaks in demand by giving them greater insight into their energy usage.
Smart meters have obvious benefits for the customer. During a pilot program, Norman Public Schools saved approximately $7,300 per month in energy costs. For OGE though, they are a longer-term investment in their business and are instrumental to helping OGE meet their longer term goals, including avoiding the capital expenditure of a new, incremental fossil fuel power plant before 2020. Overall, energy efficiency programs have added 2 cents per share to OGE’s bottom line.
Energy efficiency in agriculture sector
Two reasons for inefficient power use in the farm sector are the heavily subsidised or free power available to farmers and the reluctance of the loss-ridden State utilities to intervene.
Agricultural power use stands at about 20 per cent of India’s national consumption and is the third highest, after industry and household, as per the Power Ministry’s statistics for 2009-10. The proportion of the farm sector’s energy consumption has doubled since the 1970s while revenue realisation to the electricity utilities has declined, as the tariff for agriculture is well below the economic cost.
The average agricultural tariff has remained stagnant (or declined) over the last two decades whereas industrial and household tariffs have increased at an average 11 per cent per annum, forcing States to provide farmers with subsidies of about Rs 42,000 crore annually, considering that the average agriculture tariff is around Rs 0.50 per unit and the average cost of power to the utilities is around Rs 3.50 per unit. While a part of the subsidy burden is met by cross-subsidies from the high tariffs charged to commercial and industrial consumers, a large proportion is met out of State government Budgets, which, for 2009-was about Rs 35,000 crore. The annual losses of all the utilities for 2009-10 were Rs 34,0000 crore, after accounting for subsidy realised as per the PFC report, which is less than the actual subsidy bill raised.
Moreover, the farm sector also lags in terms of efficient use of groundwater internationally with the average extraction of water in India less than half that of China and about 1.8 per cent that of the US. In comparison with the countries in the Table, the inefficiencies lead to the highest numbers of ground water extraction pumps, estimated at around 20 million in India.No incentives for efficiency
Two major causes for the continued use of inefficient pumps is the absence of incentives for efficiency due to heavily subsidised or free power being made available to farmers, unlike commercial and industrial consumers where high power tariffs make investments in efficiency attractive to reduce operational costs.
The second reason is the reluctance of state utilities, saddled with mounting financial losses and power shortages, to intervene, given the high transaction cost of service and low revenue realisation. Political expediency adds to the vicious cycle by preventing economic pricing of power — a situation unlikely to change in the near future.
However, identifying incentives for stakeholders other than farmers and applying innovative business models could stimulate large-scale investments in efficient pumps. It could attract private investments in pump replacement given that studies conducted by several agencies, including BEE, reveal a potential enhancement of efficiency by 100 per cent.
These studies show that the average efficiency levels of agricultural pumps is 20-30 per cent whereas the BEE STAR labelled agricultural pumps at the higher end provide efficiency levels of over 55 per cent. The net impact could be saving of subsidy by about Rs 21,000 crore with a positive impact on the overall losses of the State utilities, which at present are at Rs 40,000 crore annually. Such savings in consumption could help utilities service the needs of commercial and industrial consumers better and improving their financial position further.
The potential savings in subsidy could compensate the investment of replacing 20 million agricultural pumps estimated at Rs 50,000-60,000 crore — a simple payback over three years, given that the efficient pumps are priced at Rs 25,000 to Rs 30,000 per unit, depending on capacity. However, the poor finances of utilities prevents them from taking up such massive investments.ROBUST BUSINESS MODEL
In order that a robust business model is developed and sustained, it is necessary that the benefits of energy savings are monitored and evaluated. In physical terms it requires dedicated electrical feeders that have adequate metering capabilities. Therefore, a gradual approach is needed by selecting States with very high agricultural consumption and which have the lead in segregation and bulk metering of agricultural feeders.
Some of the States in this category are Haryana, Punjab, Andhra Pradesh, Madhya Pradesh, Maharashtra and Gujarat.
A scheme under the oversight of the State Electricity Regulatory Commission (SERC), acting as an independent entity, that transparently apportions savings of subsidy in a manner that enables servicing of investments, could promote private investments in the sector.
An innovative project based on the above principles is under implementation in Solapur district of Maharashtra. The project, conceived by BEE, is replacing almost 3,000 agricultural pumps free of cost, on a PPP model. The private investor has been selected by a transparent competitive bidding process under the oversight of MERC and BEE. The project includes free maintenance of pumps for five years and the savings from using efficient pumps are being used to provide the return on investments.
The pilot project, though relatively small, in terms of investment of Rs 7 crore, has demonstrated the efficacy of the model in attracting private investment to a hitherto avoided sector. Similar pilots are underway in Gujarat, Punjab, Madhya Pradesh and Haryana. The need is now to evolve a national programme that could provide much-needed solutions to the issue of the financial ill-health of State power utilities.
Energy Efficiency Policy at the Federal, State, and Local Levels: Transportation (Fuel Efficiency Standards, Labeling and Consumer Education, Incentives, Technical Assistance, Urban Planning and Behavior Change); Industry (Incentives, Technical Assistance, R&D)
This is the second post summarizing a late 2009 paper by the National Renewable Energy Lab titled “Energy Efficiency Policy in the United States: Overview of Trends at Different Levels of Government” that details various federal, state, and local policies for promoting energy efficiency across a variety of sectors. Part one on buildings is here. Part three on power is here.
These policies focus primarily on developing and deploying new technology to increase fuel efficiency and incentivize changes in transportation patterns, shipping strategies, and consumer behavior. Transportation accounts for 28% of primary U.S. energy consumption.
3.1 Fuel Efficiency Standards
Corporate Average Fuel Economy (CAFE) standards, the federal government’s main tool for increasing the national fleet’s fuel efficiency (FE), were instituted in 1975 in response to the Arab oil embargo. Two weeks ago, the Obama Administration reaffirmed its goal of ratcheting up CAFE standards over the long term:
While efficiency and fuel use requirements are in place for the federal fleet, DOE determined in 2008 that mandating private and local fleet compliance was not necessary to achieve the Replacement Fuel Goal by 2030.
States can also be key players in the FE conversation, as evidenced by California’s impact on the country’s near-term fuel economy strategy. This is in addition to fleet procurement, through which states can lead by example while expanding the market for FE vehicles. Other state strategies include requiring X number of vehicles sold to be low-emission, establishing standards for tires (both California), and restricting idling. Regional collaboratives are also turning to questions of FE; the Western Climate Initiative plans to include transportation fuel under its cap-and-trade program.
Local government can implement similar policies. In 1993, Denver set out to reduce GHG emissions from its municipal fleet by 1% each year over 10 years. The city achieved that goal ahead of schedule in early 2000 and continues re-up its efforts.
The direct impact of FE policy is difficult to isolate owing to mitigating factors like fluctuating gas prices, changes in consumer behavior, and technological advancement, but it does maintain a basement for fuel economy when prices drop while reducing vehicle-related pollution in accordance with the Clean Air Act.
3.2 Labeling and Consumer Education
The federal government requires that all new vehicles are labeled with city and highway FE estimates and class comparisons. Consumers can also find this information and do car-by-car comparisons at fueleconomy.gov. Though no reports have drawn a direct correlation between these labels and energy savings, sociological research generally supports this strategy. (Like the Energy Guide program, labeling could still be made more effective.)
There is obviously a lot to absorb when it comes to federal and state-level FE incentives, and a lot has developed since this report was published in December 2009, so I’m going to save the topic of incentives for a more comprehensive post at a later date. At the local level, incentives can be financial (tax rebates on FE vehicle purchases) or non-financial (preferred parking).
3.4 Technical Assistance
Technical assistance programs strive to make the expertise of various federal agencies available to states, municipalities, and private businesses. They include:
The study looks at Clean Cities in particular. The program was created in 1993 to help provide informational, technical, and financial resources as mandated fleets pursued compliance with the Energy Policy Act of 1992. The program has since led to a cumulative reduction in petroleum consumption of 3.1B gallons while leveraging $357M in project awards for twice as much in public and private contributions and spurring the establishment of 90+ local coalitions. These local Clean Cities coalitions exemplify the successful marriage of local, state, and federal efforts advocated by this report.
3.5 Urban Planning and Behavior Change
Zoning and forward-thinking transportation planning can have huge impacts on fuel consumption. State strategies vary as they are developed according to corresponding stakeholder input. Locally, these policies focus on transportation infrastructure, public transportation, population density, land use planning, and limited vehicle miles traveled. Berkeley’s goal of reducing transportation emissions by 30% below 2000 levels by 2020 and 80% by 2050 is a great example.
4. Industrial Sector
This sector accounts for 31% of primary U.S. energy consumption and includes a number of subsectors, each of which has its own unique energy needs and constraints.
Industrial incentives typically aim to A) help with the upfront costs of adopting EE technology and/or B) attract green industries to a particular jurisdiction with an eye towards job creation.
At the federal level, this includes tax credits for appliance manufacturers and home builders and a loan guarantee program run by DOE. State-level incentives range from reduced-rate loans to tax credits to R&D grants. General state funding programs — PBFs, SBCs, and the like — can also be tapped to fund EE incentives. Locally, municipalities are paying greater attention to (and occasionally working with?) utilities as efficiency-related programs can have a direct impact on economic development and job creation.
4.2 Technical Assistance
This category includes energy audits and information campaigns with the goal of incorporating EE thinking into industry’s systematic decision-making process, helping industry to “learn by doing.”
Much of this occurs at plant level, typified by DOE’s Industrial Assessment Centers. The program pairs teams of engineering faculty and students from 24 participating universities with small and medium-sized manufacturing plants that might not otherwise have the resources to perform an efficiency assessment that examines “potential savings from EE improvements, waste minimization and pollution prevention, and productivity improvement.” This instance of a successful public/private partnership increases EE in the industrial sector, educates university students and faculty, and aggregates data that can illustrate current conditions while informing future strategies.
The study includes some cool macro and anecdotal evidence re: IACs:
The IAC program has made a total of 105,656 energy-efficiency recommendations since 1981. Leveraging federal IAC funds, companies invested $461M in implementing 47% (49,602) of the recommendations, with a resulting savings of $554M.
Investments in energy efficiency have also achieved benefits that extend beyond energy and financial savings. For example, in the plastics subsector, an IAC audit led to the implementation of energy savings equivalent to over $340,000 dollars annually ($100,000 over the original estimate). These investments had the ancillary benefit of reducing water consumption by over 1.5 million gallons annually. companies invested $461 million in implementing 47% (49,602) of the recommendations, with a resulting savings of $554 million. (34)
Technical assistance programs at the state level frequently draw from general state funding sources, as well.
4.3 Research and Development
The federal government
is will hopefully continue to be a major proponent of R&D. Fun examples include energy conservation and utilization (gasification, high-efficiency boilers, waste recovery heat exchangers, cogeneration), energy-intensive and high CO2-emitting processes (producing high-quality iron without using metallurgical coke*), and resource recovery and utilization (improved use of recycled materials, waste, and byproducts).
Update: More on the new fuel efficiency standards from Earth2Tech.
Update II: And a good op-ed by Thomas Friedman.
How to Kick the Coal Habit
Low interest loans for solar could break the country’s dependency on coal.
By Ezra Drissman
Getting off coal won’t be easy. Many states are dependent on coal-produced electricity, which means real problems in moving away from this dependency. Identifying the problems will clarify the solutions.
This is not meant to be an attack on carbon taxing, or a defense of the use of coal. But the question remains, how do we transition away from coal without severely crippling our economy?