As an expert witness in an energy efficiency ("Demand
Side Management" or DSM in utility-speak) docket
before the Colorado Public Utilities Commission, I have been making the case
that non-energy benefits of energy efficiency measures such as the increased
safety and comfort of an efficiently operating home need to be included in
evaluating the cost-effectiveness of energy efficiency programs. There has
been much resistance to the inclusion of these benefits, mainly because they can
be difficult to quantify. Yet we omit them at our peril.
Why Energy Efficiency and Health Matter
Last summer, I explored why the economic
benefits of energy efficiency measures had little relation to their actual
market acceptance. I concluded that businesses need strategies beyond
touting financial savings to overcome barriers to acceptance. One strategy
I highlighted was making energy efficiency measures an emblem of social status
(something I believe is behind the success of the Toyota Prius.)
In this docket, I have been working with the Energy
Efficiency Business Coalition, which brings together manufacturers, distributors,
and Retail providers of energy efficiency products and services in order to
support energy efficiency-friendly legislation and regulation. For those
who sell to the retail public, their primary messages have little to do with
either financial rewards or social status. Their marketing emphasizes the
increased health, safety, and comfort of energy efficient homes.
A home with properly sealed ducts will not only use much
less energy, but it will not pull toxins from the garage or crawlspace into the
living area of the home. Properly functioning furnaces and water heaters
save energy, but they also do not emit carbon monoxide. A well insulated
house lacks hot and cold spots, allowing the occupants to be comfortable
everywhere in the home.
All of these facts are effective marketing tools for
energy efficiency. They're so effective, that a Google
search for "insulation comfort" returns 597,000 hits, of which the
first six are companies with something to sell. In contrast, a
search for "insulation savings" returns a slightly lower 540,000
hits, but of the first 10, only one (#6)
has anything to sell. The rest are information sites from government,
nonprofits,
or for DIY'ers.
Survival of The Fittest (In Competitive Markets Only)
Those businesses which stay in business by successfully selling
insulation do so by selling the comfort benefits, not the energy savings.
The energy savings are instead pushed by organizations (such as government)
which will remain in business regardless of who buys what they are
selling.
I find it quite telling that Xcel
Energy (NYSE:XEL), the
utility we have been dealing with in the DSM docket, markets
their energy efficiency programs almost entirely on financial savings.
But then, Xcel is not going to go out of business if they don't sell as much
energy efficiency as possible: their main business is selling energy, not energy
savings. I don't mean this as a condemnation of Xcel; the company is quite
progressive, as public utilities go.
Because public utilities are regulated, it falls on the
regulator to ensure that the utilities incentive includes those factors
which will actually increase the adoption of energy efficiency. Normal
businesses have found that the factors to emphasize are non energy benefits such
as comfort, health, and safety. These factors are out of favor in
regulatory circles, because they are difficult to value in dollars and
cents.
Difficult to value does not mean without value.
People buy things they value, and when it comes to home energy efficiency, they
are buying health and comfort, with a dash of energy savings... not the other
way around. DSM programs which take this into account are likely to be
much more successful than those which do not.
Regulators take note.
People In the Denver Area
On Monday, April 14th, 5-8pm, the Colorado
Public Utilities Commission is holding a public comment session on this
docket (07A-420E) and the larger Colorado
Resource Plan (07A-447E) which will decide which supply side resources (Coal,
Gas, Wind, Solar) are likely to be built. I encourage anyone who can take
the time to go ant tell them how important energy efficiency and renewable
energy are to you, and why. You can also print out any material you have
to emphasize your points (including this article.) See the Clean
Energy Action website, and the PUC
press release for more details.
DISCLOSURE: Tom Konrad and/or his clients have positions in
all the stocks mentioned here: XEL.
DISCLAIMER: The information and trades provided here are for
informational purposes only and are not a solicitation to buy or sell any of
these securities. Investing involves substantial risk and you should evaluate
your own risk levels before you make any investment. Past results are not an
indication of future performance. Please take the time to read the full
disclaimer here.
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