Utility Nightmares: Distributed Generation and Halving Electricity Consumption

While many utility executives attribute much of their predicted market challenges to the rise of photovoltaics and net metering, they actually have much more to worry about.

In a 2013 survey of global utility companies by PricewaterhouseCoopers, the results revealed that the utility industry leaders anticipate major changes to their business model in the near future. Ninety-four percent of international industry representatives surveyed predict that the power utility business model will be either completely transformed or significantly changed between today and 2030, while only 6 percent expect that the utility business model will stay "more or less the same."

In North America, 40 percent of respondents believed that utility companies' means of making a profit will see major changes over the next two decades. A strong majority — 82 percent — of North American respondents also said future energy needs will be met by a mix of traditional centralized generation and distributed generation, which feeds power from a mix of sources.

But while renewable on-site energy generation offers a major challenge to the electric utility business model, the lower capital cost energy efficiency approaches, will be the hardest hurdle. Not only because the initial capital costs are lower, the payback is faster, and the energy savings are huge. In fact just four effiency options can cut building electricity use by 50 percent, and there are many more options than what I cover here.

Smart Thermostats and Controls: 10 Percent Reduction

The city-owned electric utility, Austin Energy, (Austin, Texas), gave away 90,000 programmable thermostats over a dozen years, at $250 a piece, totaling $19 million, the largest thermostat giveaway in the U.S. Each thermostat unit had a radio controller that gave Austin Energy the ability to change the home's temperature., which wil help Austin Energy work toward a goal of shaving 800 megawatts off its peak load by 2020. A researcher at Lawrence Berkeley, said even the most perfectly managed thermostat can't reduce a typical home's energy usage by more than about 10 percent.

Since then, as David Ferris at EE News pointed out, the big boys have jumped into the market. Lowe's, a national home improvement chain, rolled out a $299 package that includes a front-door keypad, thermostat and door-opening sensors that can all be managed with an app. Comcast Corp. has a thermostat that it claims can lower a home's energy use even if the dweller never touches it. Home-security companies Vivint Inc. and Alarm.com are selling connected thermostats, as is ADT Corp., which thinks temperature control is key to its expansion into smart home networks. Most significantly, Google Inc. recently bought Nest for $3.2 billion, the second-largest acquisition by one of the world's largest tech companies. Ferris noted, “By comparison, Google paid only half as much for YouTube, the world's leading platform for online video. In the words of John Steinberg, a co-founder of EcoFactor, a Nest competitor, "Google wouldn't have paid $3.2 billion just to get a thermostat company."

Lighting: Minimum 10 Percent Reduction in Building Energy

But there’s more. A lighting technology revolution is underway with both LED lights, computerized lighting controls, and solar daylighting (the technology that uses lenses and reflectors to bring in full spectrum light without the heat gain).

EIA reports that early 40 percent of total U.S. energy consumption in 2012 was consumed in residential and commercial buildings, or about 40 quadrillion British thermal units, and over a third of that (34.6 percent) was for lighting in buildings.

EPA’s Energy Star states that LEDs use at least 75 percent less energy than incandescent lighting, saving on operating expenses and reducing maintenance costs becayse they last 35 to 50 times longer than incandescent lighting and about 2 to 5 times longer than fluorescent lighting — no bulb-replacements, no ladders, no ongoing disposal program. And for solar daylighting, the results are even greater.

The U.S. Department of Energy (DOE) goes even further, stating LED efficiency is as good as or better than fluorescent lighting. The DOE estimates that switching to LED lighting over the next two decades could save the country $250 billion in energy costs over that period, reduce the electricity consumption for lighting by nearly one half, and avoid 1,800 million metric tons of carbon emission with over 20 LED studies.

Solar Water Heating (And Others): Minimum 9 Percent Reduction in Building Energy

The Energy Information Administration (EIA) also reports that 17.7 percent of our energy is for heating water. And solar water heating should meet 50-80 percent of that water heating load, according to the DOE. Waste heat from geothermal heat pumps or cogeneration and CHP systems can reduce that even further, meaning even more cost-effective options for consumers.

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