Originally posted by Energy Central


November 15, 2005 | By Stephen Heins

We applaud the very positive features of the new Energy Bill proposed by Representative Phil Montgomery and Senator Rob Cowles. With the upward pressure on energy costs for both oil and electricity, the timing of the new bill could not be better. This is especially true now that the costs for building three new power plants, transmission lines and the escalating costs of natural gas and coal will begin showing up in ratepayer’s monthly bills. According to the joint Cowles and Montgomery news release, “Comprehensive legislation is necessary to mitigate rising electricity and natural gas costs over the long-term.”

Some of the real positives from the newly proposed legislation are as follows:

  1. Increasing utilities generation of renewable energy to 10% by 2015;
  2. Assigning the responsibility for setting targets and funding levels for energy efficiency spending back to the Public Services Commission;
  3. Upgrading Wisconsin building codes to require higher energy efficiency standards;
  4. Creating a third-party agent to secure a steady flow of state energy efficiency funds;
  5. Providing greater regulatory certainty for utilities, customers, energy efficiency providers and regulators so that important long-term planning can be done.

In fact, the overall bill has much to recommend it. This is especially true because of the broad-based involvement by all stakeholders including customer groups, utilities, environmentalists, businesses and labor. This bill represents a well discussed and compromised solution. In many ways, the bill represents an enlightened approach to energy, both efficiency and renewables.

However, there is one glaring exception, which could totally undermine the bill’s effectiveness. In fact, it is an out-dated phrase taken from the previous energy legislation that threatens to separate good intentions from good results. The two words are found in the following sentence: “In directing the awarding of grants under this subdivision, the department shall give priority to proposals directed at the sectors of energy conservation or efficiency markets that are least competitive (italics and underline mine) and at promoting environmental protection, electric system reliability or rural economic development.”

How can the “least competitive” solutions do anything to reduce significant amount energy consumption in the state? Put another way, how can the “least competitive” of anything be efficient?

Moreover, the manufacturing sector in Wisconsin is highly dependent on inexpensive and abundant electricity. Can Wisconsin really afford to subsidize and unload the least competitive technology, which is by definition the worst return-on-investment option, on the manufacturing community at a time when it is fighting for its very survival?

Senator Cowles is right when he says, “energy conservation is several times cheaper than financing new power plants.” In a recent news release from California’s Flex Your Power, they stated that properly done energy efficiency is one/fifth the cost of building new power plants. In a more recent study implemented for the Northeast Energy Efficiency Partnership, Inc. (NEEP), investments in energy efficiency was 67% cheaper than the avoided cost of electric supply. In other words, the cost/benefit analysis of the two approaches to new sources of electricity suggests that energy efficiency programs are 20% to 33% of the cost of the new power plants and infrastructure.

Then, there is the matter of public and political perception. In a previous era, “energy efficiency programs” were just a fancy way of describing a social program or corporate welfare. These prejudices are slowly disappearing, thanks in part to better measurement technology and an understanding of the relationship between the cost of building new power plants and employing energy efficiency programs as a new source of energy.

In the business world, the decision-making process for capital expenditures is much different from what some energy efficiency program directors think. Energy efficiency projects have to compete with all other capital initiatives, including investments in new production assets or processes, which are usually given first priority.

Under this scenario, incentives are often required for energy efficiency products and services, even those with significant benefits, to be chosen by businesses. As Anna Bernasek put it in yesterday’s New York Times Business Section, “In the end, the most effective energy policy won’t be the one that fights against market forces. It will be one that helps them work better.”

Ultimately, if we do not devise a fair and cost-effective energy efficiency plan for Wisconsin and its industrial sector, our manufacturing community will be stuck with one of three choices: downsizing, closing down operations or moving to another state with lower electrical rates and/or better energy efficiency programs.