Originally posted by Energy Central

November 25, 2002 | By Stephen Heins

To begin with, it is essential to dispel the myth that the energy crisis is over. In fact, the United States is likely to continue to face an electricity capacity shortfall and a transmission crisis in the coming years because of the following reasons:

1. Escalating demand growth (forecasted to increase 43% over the next 20 years);
2. Increasing demand for digital quality power from commercial/industrial sectors as well as from the residential sector;
3. Minimal generating supply improvements;
4. Inadequate, over-stressed and deteriorating transmission/distribution network and infrastructure;
5. Public sentiment (not-in-my-back-yard or NIMBY) and environmental group opposition to even minimal efforts to cite, improve and expand the existing transmission and generation infrastructure.
6. The power industry’s litany of troubles make any further deregulation highly unlikely.
7. The intense financial pressure on the power industry caused by the recent down-grading of credit for most companies in the utility and energy sectors.

Therefore, the United States and its business community need to develop a balanced energy plan that employs good economics and practical decision-making rather than just marketing programs or exotic power initiatives to make the U.S. electricity markets work efficiently. This is especially true because we have only two possible solutions to the growing electricity capacity crisis: (1) increase generating supply through new power plants or renewable energy sources; or (2) decrease electricity consumption by reducing demand through energy efficiency, also know as displacing capacity.

In a speech to the 13th Annual Energy Efficiency Forum on June 12, 2002, Department of Energy Secretary Spencer Abraham stated that two-thirds of all energy gains must be made by reducing our electricity consumption. He went on to say that “if we can’t get those conservation and efficiency gains, it won’t make any difference how much oil we recover in Alaska or how many new power plants are built.”

Consequently, energy efficiency is the cornerstone of such a practicable plan. It will provide additional available electrical capacity without the reliability, transmission or environmental concerns usually associated with traditional conservation and new power plant initiatives. As Wisconsin’s Governor Scott McCallum has said, “Energy efficiency is the bridge between a strong economy and a clean environment.”

For the sake of clarity, there should be a current and accurate definition of “conservation” and “energy efficiency.” Conservation has come to mean cutting consumption by stopping usage; on the other hand, energy efficiency connotes maximizing the energy used without compromising on the qualities provided by the energy. As it relates to business and economics, America and the media should replace the word “conservation” with “energy efficiency.” According to Secretary Abraham, “We are talking about banishing the notion that conservation means huddling by the fireplace in a favorite sweater.”

First, the Facts
While America represents less than 5% of the world’s population, we use 30% of all the energy consumed worldwide. This same 5% of the world population generates 23% of the world’s goods and services. These facts reveal just how energy dependent and wasteful the U.S. economy has become. Without energy efficiency, our long-term economic development could slow or stop altogether.

In particular, electricity has become the sleeping giant of the U.S. economy: American homes and businesses consumed $228 billion worth of electricity in 2000. At a minimum, we need to reduce our energy consumption to more properly align with our goods and services output. In other words, if we produce 23% of the world’s goods and services, we should consume closer to 23% of the world’s energy.

According to recent projections provided by the American Council for an Energy-Efficient Economy, it has been estimated that energy efficiency initiatives could deliver $30 billion per year in energy savings to US consumers and businesses. This forecast is considered conservative by most current estimates.

With the recent experiments in electricity de-regulation symbolized by the state of California and Enron, the arguments in favor of competitive electricity markets have suffered a serious setback. In fact, most states including my home state of Wisconsin have slowed or stopped their efforts to increase supply side competition. This however does not mean that the business community in America cannot actively pursue what is called “Demand Side Management.”

Then, the Solution
Demand Side Management (DSM) can be defined as the planning, implementation, and monitoring of a company’s energy consumption in order to foster energy efficiency and thereby create energy savings. This is especially important for U.S. businesses, because they consume 70% of the entire electricity supply.

Such savings are generally achieved by substituting technologically more advanced equipment to produce the same or higher level of end-use services (e.g. lighting, heating, motor drive) with less electricity. Examples include high-efficiency lighting systems, high-efficiency heating, ventilation, and air-conditioning (HVAC) systems, energy control modifications, efficient building design, electric motor drives, and heat recovery systems.

While there are some state and national programs to encourage energy efficiency, the single best incentive for businesses is the practical economics of a “return on investment,” or ROI on energy efficient solutions. In other words, the payback on energy efficiency must be quick enough to justify the investment. In most cases, a two or three year payback period is considered good enough to support a company’s energy efficient efforts.

Although state and national governments have discovered that “spending more on these programs is a relatively easy and politically popular thing to do. Getting more from them is the real challenge,” Secretary Abraham reminds us.

This has become increasingly important as electricity rates in a regulated environment are expected to rise with future demand expectations and high-interest capital expenditures for new power plants. Arguably, demand side management is a company’s hedge or insurance policy against the impact of any future electric rate increase.

A key ingredient for proving that a company has reduced its electricity consumption is the ability to measure and verify the electricity usage before and after any energy efficient initiative. Through the application of real-time, utility-grade measurement and verification technologies, a company can document the monetary value of displacing capacity to their bottom line.

Of all the examples mentioned above for energy savings and energy efficiency, Secretary Abraham points out that lighting is probably the single best place to start a Demand Side Management program for most companies. According to the U.S. Department of Energy, lighting on average consumes 40% of all electricity used by businesses. In the case of warehouses and distribution centers, the percentage is significantly higher.

Anecdotal examples of U.S.-based facilities, which have been able to reduce energy costs, would include the following: the Toro Company’s Plymouth, WI and Tomah, WI plants are expected to save a combined $140,000 per year in electricity costs at today’s rates. Bemis Manufacturing of Sheboygan Falls is projected to save between $320,000 to $400,000 per year along with displacing of .75 MW of electricity. In a multiple facility lighting retro-fit, Quad/Graphics- the largest privately-held printer of magazines, catalogs, books, and other commercial products in the Western Hemisphere – expects to save in excess of $1 million per year and 2.5 MW of base load electrical capacity.

In addition, Secretary Abraham avers that “we want to pursue cutting edge technologies that deliver energy services in a more efficient manner, so that the consumer of those services is not doing without, but actually getting more while using less.” In the case of Bemis Manufacturing, they were also able to increase their light levels overall by 94.9% on average.

Thanks to measurement and verification methods approved by many government energy conservation programs including Wisconsin’s Focus on Energy Program, each company can document their savings. As Jon Scott, Operations Manager of The Toro Company of Plymouth, WI facility put it, “Preserving our work environment was more important than energy savings. By proving the quality and quantity of the new lighting through light and usage metering, we are satisfied that we aren’t compromising to achieve energy savings.”

Finally, the Economic and Environmental Impact of Energy Efficiency Through the extensive use of market studies, we have conservatively estimated the size of the displaced capacity in the United States, if state-of-the-art T-8 fluorescent technology replaced all commercial and industrial lighting fixtures (HID, High Pressure Sodium (HPS), old fluorescents and other technologies as follows:

The emission/pollution reductions associated with replacing all existing HID fixtures in the commercial and industrial markets with proven energy efficient lighting over ten years is estimated according to EPA guidelines as follows:

These emission reductions over ten years are equivalent to the following:

By retro-fitting its entire industrial and commercial sector with energy efficient lighting, the United States could displace over 21,000 Megawatts (MW) of electricity, or the equivalent of forty-three 500MW coal-burning power plants. Additionally, U.S. businesses also would save hundreds of billions of dollars over ten years in electricity cost while having the environmental effect of planting over 320 million acres of trees annually. Ultimately, the United States business community can derive major economic, financial, and public relations benefits by incorporating demand side management and energy efficiency into their overall strategic plan. By doing so, they can also exhibit a sense of corporate citizenship, civic responsibility, and environmental stewardship.
Displacing capacity now, the national business community will allow all of the states’ utilities, the Public Service Commissions, FERC, and the Department of Energy to more accurately determine the United States’ future electricity generating needs while keeping electric rates and pollution levels down. In addition, thanks to the substantial cost savings, energy efficiency will help make U.S. businesses remain globally competitive.