Go green and save money

If so, you need to listen to a proposal being aired by Jim Rogers, the chairman and chief executive of Duke Energy, and recently filed with the North Carolina Utilities Commission. (Duke Energy is headquartered in Charlotte.) It's called "save-a-watt," and it aims to turn the electricity/utility industry upside down by rewarding utilities for the kilowatts they save customers by improving their energy efficiency rather than rewarding them for the kilowatts they sell customers by building more power plants.

Rogers' proposal is based on three simple principles. The first is that the cheapest way to generate clean, emissions-free power is by improving energy efficiency. Or, as he puts it, "The most environmentally sound, inexpensive and reliable power plant is the one we don't have to build because we've helped our customers save energy."

The only problem is that, historically, utilities made their money by making large-scale investments in new power plants, whether coal or gas or nuclear. As long as a utility could prove to its regulators that the demand for that new plant was there, the utility got to pass along the cost, and then some, to its customers. Rogers' save-a-watt concept proposes to change all of that.

"The way it would work is that the utility would spend the money and take the risk to make its customers as energy efficient as possible," he explained. That would include installing devices in your home that would allow the utility to adjust your air-conditioners or refrigerators at peak usage times. It would include plans to incentivize contractors to build more efficient homes with more efficient boilers, heaters, appliances and insulation. It could even include partnering with a factory to buy the most energy-efficient equipment or with a family to winterize their house.

"Energy efficiency is the 'fifth fuel' - after coal, gas, renewables, and nuclear," said Rogers. "Today, it is the lowest-cost alternative and is emissions-free. It should be our first choice in meeting our growing demand for electricity, as well as in solving the climate challenge."

Because energy efficiency is, in effect, a resource, he added, in order for utilities to use more of it, "efficiency should be treated as a production cost in the regulatory arena." The utility would earn its money on the basis of the actual watts it saves through efficiency innovations. (California's "decoupling" system goes partly in this direction.)

At the end of the year, an independent body would determine how many watts of energy the utility has saved over a predetermined baseline and the utility would then be compensated by its customers accordingly.

"Over time," said Rogers, "the price of electricity per unit will go up, because there would be an incremental cost in adding efficiency equipment - although that cost would be less than the incremental cost of adding a new power plant. But your overall bills should go down, because your home will be more efficient and you will use less electricity."

Once such a system is in place, Rogers added, "our engineers would wake up every day thinking about how to squeeze more productivity gains out of new technology for energy efficiency - rather than just how to build a bigger transmission or distribution network to meet the growing demands of customers." (Why don't we think about incentivizing automakers the same way - give them tax rebates for save-a-miles?)

That is how you produce a more efficient energy infrastructure at scale. "Universal access to electricity was a 20th century idea - now it has to be universal access to energy efficiency, which could make us the most energy productive country in the world," he added.