(Photo by Bennett Honson via Creative Commons)

(Photo by Bennett Honson via Creative Commons)

As utility efficiency programs grow, some industries want out

Utility-run efficiency programs have led to reduced energy use by homeowners and other energy customers — as well as lower rates — but some industries want out of the programs.

In Ohio, at the behest of a large number of the state’s industries, lawmakers are considering a bill that would, among other provisions, allow industries to stop participating in efficiency programs of any kind.

In Illinois, a group of large industries has asked Commonwealth Edison to create a pilot program that would allow certain industrial customers to put their efficiency payments into an escrow account, and to use the funds to pay for their own, self-directed efficiency initiatives. Typically, utility customers are required to pay into a fund that finances efficiency improvements throughout the utility’s service area.

And in October, a group of a half-dozen industries failed to persuade the Iowa Utilities Board to exempt them from the efficiency program run by Interstate Power & Light.

The Iowa industries sought an “opt out,” meaning they wouldn’t have to pay for the utility’s efficiency program, and wouldn’t be required to invest in any efficiency efforts on their own, either.

The board told them if they wish to do an end-run around the utility efficiency program, they’ll have to get the legislature’s permission, according to Nathaniel Baer, energy program director for the Iowa Environmental Council, which objected to the industries’ request.

“The question now is whether these industries will go to the legislature with a proposal,” Baer said. “We’ll be watching closely.”

Industries a key source of revenue

The industries also pursued an opt-out in 2007, according to Baer, and the utilities board at that time told them to bring it before the legislature. Thus far, he said, they haven’t.

The industries’ goal is to cut costs. All utility customers pay a small surcharge on their bill, typically about 1 percent, to support utility efficiency programs. And since industrial customers purchase about 31 percent of electricity nationwide, according to the State & Local Energy Efficiency Action Network, their contribution to utility-run efficiency programs is substantial.

Industrial “opt-out,” as it’s known, “really threatens these (utility-run efficiency) programs because they take a lot of revenue with them,” Baer explained.

Of the 41 states that now require utility customers to pay a small fee to support energy efficiency programs, 24 of them are willing to exempt at least some industries from having to pay the fee. They generally allow them to design and manage their own efficiency programs, or in some cases, don’t require the industries to make any efforts at energy efficiency.

In Illinois, the state’s commerce commission now is considering a proposal by a group calling itself Illinois Industrial Energy Consumers.

“We’re in the middle of responding to their proposal,” said Rebecca Stanfield, the Chicago-based deputy director for policy for the Natural Resources Defense Council. Ensuring that energy actually is being saved in a self-directed efficiency program is “essential to us,” she said.

Baer, of the Iowa Environmental Council, echoed Stanfield’s concerns.

“There’s no guarantee whatsoever that they’ll do any energy efficiency,” he said.

Opt-out programs have mixed results

A study by the American Council for an Energy-Efficient Economy bears out that skepticism. In a 2011 paper, Follow the Leaders: Improving Large Customer Self-Direct Programs, author Anna Chittum reviewed opt-out and self-direct programs in 22 of the 24 states that now have them.

“Unfortunately, running a successful self-direct program is a challenge, and many programs fail to adequately track, measure, verify, and evaluate the savings claimed by their self-directing customers,” she wrote. “Many self-direct programs also do not encourage the optimization of cost-effective energy efficiency, thus failing to maximize the public and system benefits that energy efficiency offers.

“Some have emerged as highly effective resource acquisition programs, while others have not captured any measureable energy efficiency.”

Seven states do not require industries to make any efficiency efforts at all. The NRDC’s Stanfield says Missouri’s policy is especially troubling. The state’s renewable energy mandate, known as the Missouri Energy Efficiency Investment Act, was passed in 2009 and allows industries meeting certain thresholds to opt not to make efficiency payments to their utilities, thereby depriving those efficiency programs of much revenue.

The law essentially permits many of the state’s industries “to do whatever they want” where energy efficiency is concerned, according to Stanfield.

In 2009, Ohio began to permit its larger industries to make self-directed efficiency improvements, rather than participating in utility-run programs. The programs have worked well, garnering approval even from a number of industries, according to Nolan Moser, director of air and energy programs for the Ohio Environmental Council.

He’s concerned about the changes a bill currently under consideration could bring.

“We could go from a working self-direct program to one that is really bad,” he said. Although many industries in the state support and take part in energy saving, another group of industries, along with the utility FirstEnergy, is working hard to get out from under and efficiency mandates.

“First they got the self-direct,” Moser said. “Now they want to go the free-rider route.”

Moser and others claim that all utility customers should participate in, and financially support, utility-run energy efficiency programs because all utility customers benefit from efficiency.

“Energy efficiency produces benefits that go way beyond the program particulars,” Moser said. “It’s reduced wholesale electricity prices.”

‘Free riders’

The wholesale cost of electricity is what a utility has to pay for power. It accounts for roughly 60 percent of a customer’s bill, with the remaining 40 percent reflecting the costs of administration, transmission, distribution, taxes and other expenses.

Most utilities draw power from a wide range of sources, at a wide variety of prices. That mix is constantly changing, depending on how much power a utility must deliver, and where power is available. Lower demand means a utility can forego purchasing more costly power, bringing down the wholesale price for all of its customers.

A reduction in the cost of wholesale power “is a huge benefit to all customers,” Moser said. And a customer that doesn’t try to reduce energy use “shouldn’t benefit from the program. They’re free riders. The thing to watch out for is when industrials take the benefits of energy efficiency, like lower prices, but don’t pay for them. You don’t get something for nothing.”

But industries that object to being part of utility-sponsored efficiency programs have their reasons, including that:

  • Utility-run programs don’t fit well with the particular needs of industries
  • Industries don’t get out what they pay in, and so they end up subsidizing efficiency benefits for residential and commercial customers
  • The time frames of efficiency programs don’t always jibe well with the capital planning and budgeting cycles of their industrial customers
  • Utilities and industrial customers often don’t communicate or coordinate well

And yet, many industries are on board with energy efficiency, and see it as serving their own interests.

Stanfield said, “The smarter industries are waking up to the fact that that this benefits them more than it costs them.”

The Iowa Environmental Council, ACEEE, NRDC and Ohio Environmental Council are members of RE-AMP, which also publishes Midwest Energy News.

One thought on “As utility efficiency programs grow, some industries want out

  1. Goodness gracious. Energy efficiency is the low hanging fruit on reducing co² emmissions.
    Capital upgrading a production line results in 60% savings on power for industry. New Siemens production lines using power management systems and A+++ rated motors use 60% less power than older lines. Upgrading an older line with power management and replacing motor also achieves the same amount of energy svings, which is a fairly fast amortizing measure inside of less than 4 years.

    Industries that use thermodynamic heat processes such as steel, silicon, and food processing can also opt for coupled co-generation, combined power and heat systems to further reduce overall energy consumptíon.

    Take a food processing plant for example. Upgrading the production lines lowers power consumptionby 60%. And then, instead of just buring natural gas to heat the ovens of a commercial bakery for example, you add fuel cells to generate power – with no loss of heat efficiency on the ovens, i.e. fuel cell ovens genrate power while heating, which means a large reduction of overall power consumption.
    Then there are the emerging systems of aqueous fuel technologies – i.e. syn gas hho systems- which gnerate .0.9 cubic meters of syngas for every input kWh of power.. and a new, revolutionary technology- MRISI – magnetic resonance ionized steam ignition which works in open hearth p.g. and industrial applications, fuel cells, gas turbines, (gas and steam p.g.). and internal combustion engines.
    Coupled co-generation can also be aplied to industrial factory heating systems. Replace oil fired actory building heat systems- with big Internal combjustion engines- running off magnetic resonance steam igniton – for combined heat power- (using mineral free, collected rooftop runoff rainwater. )
    That is, ultra efficiency measures in industry- .i.e.: coupled co-generation using MRISI wherever possible, plus the Siemens upgrades to production lines can slash heat and power costs by over 90%- which mean MARGINs

    Magnetic Resonance Ionoized Steam Ignition aided combined heat power systems in industrial applications slash fossil fuel /combined with production line upgrades- slah fossil fuel and power consumptin by 90%.

    Coupled co-generation is mandated on all new buildings in Germany, and theere are programs for retrofitting that to old buildings. German Renewable energy laws are also extending coupled co-generation to food processing and industrial heat processes as well. If you use a lot of heat, you can also genrate power ith it as well. as the example of the fuel cell aided bakery oven illustrates- a fuel cell that not only heats- the line, it steams water- which when run through an MRISI system, actually powers the fuel cell displacing 90% of the natural gas.

    Or take energy intensive silicon refining. We lower the costs of producing silicon by attaching heating steam over the 1st phase refining kilns- driving turbines generating power, for second phase refining power.

    Thee are many variations of applying MRISI CHPin conjunction with production line up in industrial applications. Cement production is another example where we can achieve 90% savings on nat gas, coal or oil for – cement plants.
    The combined heat powe revolution in Germany is also positively impacting on the food proceessing and heavy industry sectors as the above examples demonstrate.
    ThinkING efficiency – means MARGINS: