We need to decouple (No, not that)

Studies have widely and consistently shown that the cheapest, quickest and most cost-effective way to have more available energy as a society is to simply use less energy through conservation and energy efficiency programs.  This makes perfect sense when you think about it.

If, for example, every homeowner and business programmed their thermostats 2 or 3 degrees higher in summer and 2 or 3 degrees lower in the winter, it would cost nothing, it could be started today and it would save tremendous amounts of energy and money.  Sounds like the type of reasonable idea everyone could support, right?  Well, not exactly.

Most energy companies operate under the business model of: more electricity demand = good, less electricity demand = bad.  Their thinking is understandable.   Selling less of a product has not been a recipe for success for any company, let alone an entire industry.  What happens to the energy companies’ investments in generating facilities and other infrastructure, their employees, profits and dividends if electricity demand by homeowners and businesses dropped by, say, 30% through a combination of conservation and energy efficiency measures and on-site generation of electricity from renewable sources?

In fact, for that reason, some energy companies view any wide-spread program to materially reduce energy demand as an existential threat.  But energy efficiency programs need to be supported by the energy companies for those programs to have much chance of success – especially with budget woes reducing the amount of money governments at all levels can allocate to those programs.

So how do we move energy efficiency programs forward?  One promising method is through what is known in the energy industry as decoupling.  Decoupling disassociates energy company profits from electricity sales.  Instead, industry regulators would tie their revenues and profits to certain performance measures like reliability and service quality – you know, the things that are important to their customers (the general public).

But, despite the clear and numerous benefits of decoupling to consumers, regulators and the industry remain skeptical of the benefits of energy efficiency programs and decoupling; or how to break the sales-revenue link.  There are some high-level industry regulators who remain unconvinced that savings from energy efficiency programs are even real.  (Makes me wonder how they got their jobs).

To move decoupling and large scale energy efficiency programs forward, the energy industry and the regulators must get their minds around several issues:

  • What are the anticipated benefits of decoupling to consumers vs. the possible disruption to the energy companies and industry?
  • Would the energy companies be adequately and appropriately compensated after decoupling?
  • How would energy companies establish budgets, calculate risks and plan for new generation facilities after decoupling?
  • How will the industry change as it adapts to a revenue model without a sales – revenue link?

Answering those questions may be difficult, but a more responsive and more customer oriented energy industry that would work with customers to save energy and save money would be well worth the effort.

About the Author

Mark H. Witte is a strong proponent for energy efficiency and renewable energy, and believes individuals should have more control over how the energy for their homes is produced.