Energy efficiency: What are the laggards thinking?

Elisa Wood

Why do some states avoid creating policies that encourage consumers and businesses to save energy? What’s the psychology of the laggards?

A  report by the American Council for an Energy Efficiency Economy sheds some insight as it examines the states that consistently fall behind in the organization’s annual energy efficiency ranking.

The bottom states are: Alabama, Kansas, Mississippi, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, West Virginia, and Wyoming. The good news is that even these laggards are beginning to adopt policies to save energy, according to the May 2012 report, “Opportunity Knocks: Examining Low-Ranking States in the State Energy Efficiency Scorecard.”

But they still have a lot of catching up to do. And why did they fall behind in the first place?

The report authors, who interviewed 55 stakeholders, found one reason is a general lack of awareness about energy efficiency’s benefits. Another is an aversion to government mandates. But one of the most fascinating barriers is a misperception about energy costs.

Industry folklore says that consumers in states with low electric rates have no motivation to save energy. This folklore discourages policymakers from putting time and money into energy efficiency programs. In truth, these states have good economic reasons to  encourage consumers to insulate, install better lighting, and undertake other energy savings measures.  It turns out that even though electric rates are low in these states, consumers are paying high monthly bills.

This may sound counterintuitive. But consider these numbers. In Alabama electric utilities charge 10.67 cents/kWh and households pay an average $147.69/month for electricity. Similarly, in South Carolina rates are 10.5 cents/kWh and monthly bills are $137.59/month. Compare Alabama and South Carolina to  Massachusetts and California, two states with aggressive energy efficiency efforts. Massachusetts’ electric rates are high, averaging $14.59 cents/kWh, but monthly bills  are low, only $97.34. California, too, has high rates of 14.75 cents/kWh and low monthly bills of $82.85.

So electric rates are higher in Massachusetts and California, yet households in those two states pay less per month for power than households in Alabama and South Carolina. This is because they consume less power. Households in the efficient states have an edge; they need less electricity each month to secure the same level of comfort and service in their homes as those in Alabama and South Carolina. So there should be plenty of good motivation for households in the low-rate states to pursue efficiency measures.

Another point of confusion involves the cost to society of investing in energy efficiency.  Because it’s generally categorized with other ‘green’ initiatives, energy efficiency is perceived as boutique and expensive.  To the contrary, it is cheaper to avoid energy use than to make new electricity, according to ACEEE.  Energy efficiency measures cost an average 2.5 cents/kWh while building a new power plant cost 6 to 15 cents/kWh. Because of this cost differential several states now mandate that utilities institute cost-effective energy efficiency before building new generation.

These are arguments, unfortunately, that might get lost in the din of an election year, one in which energy is shaping up to be a major issue. However, as is often the case, the states are leading the way and not relying on federal policy. Even the laggard states are picking up their pace when it comes to energy efficiency, as the ACEEE report describes. More here.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. Being an energy efficiency professional in Michigan (I believe we were ranked most improved in regards to EE efforts recently?), this issue is of utmost importance to me currently. MI legislators are attempting to sunset our EE mandates early – despite the hard numbers on cost savings for consumers and utilities and job creation they’ve piqued. It is said that the legislators leading this effort are doing so because of big commercial and industrial interests in their regions are peeved about rate-payer funded EE costs. They currently are able to opt to self-direct EE programs within their companies but still fight because it costs them money one way or another. Due to this year being an election year for said legislators, they are introducing bills over and over again in attempt to shut EE programs down systematically.

    It is a terrible shame that businesses and politicians alike are so myopic. If our programs sunset early, thousands of jobs will lost and a budding industry will be stunted all in the name of short-sighted business models.

  2. Nice summary. Thanks. I also have noticed a backlash to the green movement – spurred by the premium price some manufacturers put on their green products and the yuppie/fad connotation. This dynamic is unfortunate and costs us dearly in the misconception by many the EE programs are costly, when In reality, efficiency is our lowest cost resource.

  3. Beautimusol says:

    Nice thoughts on this. I am a renewable energy professional in the solar industry for now over 14 years. At the university, my two loves were EE and solar energy. It is true when it comes to solar, the perception is that this is a ‘botique’ technology, and historically been quite expensive. That of course it changing, but to lump EE in with this seems to be a media/political thing. We are a country of sound bites and black and white thinking, fueled by politicians and lobbyists that are playing on cultural differences.
    The argument for EE should be a no brainer. Energy efficiency has always been the best economic energy choice, and best environmental one as well. The concept of ‘Negawatts’ of energy savings should be taught at all levels. The only question is the type of energy savings and the payback period. Even on this thought, we used to think at a longer term level than we do now, so we should be interested in investing in the future.

    A good example of this is the solar industry. Even at today’s prices solar is most likely cheaper than the projected energy costs of even natural gas over 25 years based on the expected rise of energy costs. It is akin to locking in gasoline prices at 1987 levels by investing in solar now. Gas was about $1.00 in 1987. It would it have made loads of sense to lock in a price of $1.30-1.50/gal. (30-50% premium) for 25 years at that time. How much more investing in energy efficiency with the same type of time-frame.

  4. Laggards are thinking that energy efficiency is all about changing “a” light bulb. OK some may want to change a few more, depending on how expensive the light bulbs are.
    Some want to go a bit further and maybe even put up a solar panel, or maybe even a bunch more ~ as long as the government or utility will pay for most of the investment.
    A building gets it’s roof covered in solar panels, so that it can generate 50% of the electricity it needs? Is that a good investment? It is if someone else paid for it. Who in the end pays for it? This works great in some parts of the country and not so good in other parts.
    Well maybe these others can do wind. Wind is good, as long as there is wind. Myself I do not like being in windy conditions for too long. It is just irritating, so much nicer when the wind dies down. Oh, Oh, now there is no more electricity being generated.
    And the wind was blowing where the solar panels were all laid out. Dang, now those solar panels need to be cleaned, so that maximum energy gains can be realized.
    We have those people in this country that do not mind this type of repetitious labor. We just have to teach them not to spill or waste to much water doing so.
    Energy Laggards ~ What are we going to do with them?
    There must be a better, more efficient way to produce electricity without all these challenges and still be as energy efficient as solar and wind, 24/7, with out producing all the emissions, and can also conserve water and maintenance and jobs to try and keep these systems working, RIGHT?
    How about natural gas? Natural gas can be consumed to almost 100% efficiency. The technology that can make the use of this fuel so efficient has no moving parts to wear out. It requires little or no maintenance. It requires little or no electricity to operate, and it CREATES water during it heat recovery process, and this water can be utilized.
    In CO2 reduction numbers, light bulbs can’t be changed or turned off fast enough to keep up.
    Laggards are not thinking beings. All forms of energy efficiency are important!

  5. Efficiency IS a no-brainer and offers a solid ‘kitchen table’, dollars & cents benefit that most folks simply aren’t aware of. I’m an efficiency geek and am currently well into a deep energy retrofit (utilizing a variety of solutions) to the home we purchased ~18 months ago. In addition to doing the right thing for my community (ie. creating jobs), my Country (reducing dependence on oil & coal), and my kids & future generations (reducing my carbon footprint) … I’m getting a ~5% ROI on the money I’ve invested with no risk! If energy prices go higher, my ROI gets even better. I don’t know of many other investments with such solid returns and no-risk . And I’ve actually lowered my overall ROI by including some items with lower ROI’s (ie. windows). The simplest, most inexpensive EE steps often produce the best ROI (ie. caulk)! A barrel/kW saved is a barrel/kW earned!
    To the points above about solar: my PV system returns me 10+% and will pay back in ~8-10 years! And yes, I took advantage of federal tax credits and a subsidy from my power company … but they were MINORITY investors. Their help incented ME to pony up the majority of the $$. These incentives by the government provide the very same benefits to the entire Country that I mentioned enjoying personally above: creating jobs, making us more independent (thus safer) and helping to preserve a healthy planet for future generations.

  6. Greetings! I know this is kinda off topic however I’d
    figured I’d ask. Would you be interested in exchanging links
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    My website covers a lot of the same topics as yours and I feel we could greatly benefit from each other.
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