The Cost of a Negawatt

As the world debates climate change, renewable energy, and the smart grid, one of the words that keeps creeping into discussions is “negawatt”.  Negawatt is a term coined by Amory Lovins of the Rocky Mountain Institute and is the idea of reducing demand for electricity through energy efficiency to lower peak demand or to decrease the need of building new power plants.  Each negawatt ‘created’ by efficiency improvements reduces the need for a megawatt of capacity.  If a home owner previously used 900 watts but reduced their demand to 700 watts, they could be said to have ‘created’ 200 negawatts.

Negawatts by individuals who are conscious of their energy usage can use energy-efficient lights and appliances as well as moderately decreasing their air conditioning usage.  Individual negawatt creation can decrease overall electricity demand dramatically if the public will adopt the practice.  With the electricity demand increasing, utilities must either build new power plants or incentivize reduced energy consumption.  The cost of building new power plants is very capital intensive and, in the case of fossil fuel-based facilities, environmentally detrimental.  Due to these high costs, utilities have been encouraging their customers to adopt energy efficient practices to offset energy demand increases in hopes of not needing to build new power plants.  Some utilities will offer credits for customers who purchase energy efficient appliances while others offer reduced electricity rates for the ability to remotely control the air conditioning in users homes.

Companies have started adopting these tactics as the world has become more aware of the consequences of our energy usage.  Many large corporations are already taking steps to reduce energy consumption in order to save money.  However, as the low-hanging fruit is all rounded up, it will fall on the public and the policy makers to continue the energy efficiency trend and encourage further efficiency increases by creating some form of economic benefit.  Energy efficiency is an important factor in our long term energy outlook.

However, negawatts present a conflict of interest for the energy industry because as a business, it’s a major goal to consistently grow demand for one’s product. In this case, they will be flattening out their customer demand and possibly even decreasing it over time. Therefore, the negawatt movement will require a change in the basic economics of the energy industry.  Current negawatt production is generated due to individual action and subsidies, or the fact that we are only grabbing the ‘low-hanging fruit’.  As we become more efficient, negawatt production will become more expensive.  Changes in policy and the economic structure will need to take place in order to continue with the negawatt movement.   It will require the education, motivation, and pressure from the public on issues involving our energy future.

Sources:

Energy Efficiency: How Everyone Can Generate Negawatts”. http://www.automation.com/content/energy-efficiency-how-everyone-can-generate-negawatts?x=1&pagePath=00000000,00000478,00003752

McComb’s Sustainable Business Summit 2010, Energy Sustainability Panel.  Brewster McCracken, Audrey Parker , Robert King, Kenneth Mercado, Manuel Arancibia.




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5 Comments

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5 responses to “The Cost of a Negawatt

  1. It is important to recognize the mission of the energy industry when considering the growth of the negawatt movement; however, we should also think about other reasons why negawatts are beneficial to both industry and consumer. In 2009, Wired Magazine addressed the issue of negawatts and megawatts in an article summarizing the importance of negawatts in regard to energy demand. By promoting negawatts, the energy industry could better meet demand in both a cold Minnesota winter and hot Texas summer (or any situation in which one grid would have to handle such extremes). While negawatts may not appear to be the most friendly to business growth, they may help to ensure that customers have any energy at all during those peak-demand moments, and that is something we can all appreciate.

  2. bhgully

    Additionally, if we develop policy based on this concept of negawatt – particularly quantifying it – we will need an ongoing assessment of what level of consumption (megawatts) we would be at given zero efficiency improvements, to compare to. Which sounds intuitively prone to failure. But this is no doubt an important perspective to consider as conservation and efficiency is undoubtedly a path we need to take as far as we can…

  3. wgarwood

    Interestingly their is already a nacent industry built around the negawatt concept. Business that retrofit manufacturers, reatailers, and other end commercial users with smarter metered electrical systems. Other than creating systems to use lighting more efficiently, I have wondered what exactly these “retrofits” entail. Some digging on Lime Energy’s website yielded this list of service:

    Energy Procurement and Efficiency Audits
    Energy Master Plans
    Technical & Financial Analysis
    Lighting Upgrades
    HVAC System Optimization
    Cogeneration
    Solar Generation
    Measurement, Verification & Monitoring
    Demand Response
    Rebate Procurement

  4. cgrosvenor

    I really appreciate this post because last summer I interned with Austin Energy’s Green Building program, which Dr. Webber actually mentioned in class this morning. While I worked there, I was sort of able to see the internal conflict of interest that you mentioned, because while Austin Energy is making money selling kWh, the Green Building program is campaigning to see reduced demand in both the commercial and residential sectors. It is fair to say that the Green Building program incorporates many “sustainable living” goals into their star rating program that don’t directly affect AE’s profits, like encouraging recycling and bike racks, but they do look at almost everything people use electricity for, from efficiency of appliances to lighting fixtures and HVAC units.

    Although AE’s business model is about selling kWh, there was constant talk at AE even outside the Green Building program about how to meet peak demand in the summer, even with additions being added at Sand Hill. With that in mind, I am disinclined to think that we will see a truly decreasing demand any time soon, if ever, considering the growing population (at least around here). It just seems that demand is always growing faster than the rate at which we can improve the efficiencies of renewable energy sources and collection methods, and certainly faster than we can figure out how to properly store energy from wind and solar. That’s not to say that this conflict of interest doesn’t exist; it definitely does. I would like to see a resolution that involves utilities broadening the scope of their services and creating a new business model that encompasses profit-yielding services (beyond selling kWh) that specifically help reduce demand, especially in extreme climates like Texas. For example, The Austin City Council recently passed the Energy Conservation Audit and Disclosure Ordinance
    , and AE could increase profits (and create jobs) by selling services that help customers comply with this ordinance, rather than encouraging home and business owners to go through third-party consultants, and in the meanwhile AE could be more pro-active about reducing peak demand. That way, everyone’s a winner right?

  5. jorourke

    Increased energy efficiency (or negawatts) is an enormous energy resource and should be emphasized more in policy because it clean, cheap, secure, and plentiful. Increased efficiency is clean because it means that less energy will be used, thereby reducing emissions from extraction and combustion of fuel. It also can be regarded as cheap because there are many widely-available techniques to increase energy efficiency, such as installing florescent bulbs in place of incandescent ones, which require an upfront investment which is paid back over the life of the bulb. Additionally, energy efficiency is a secure energy resource because it does not require the importation of foreign fuels. Finally, energy efficiency is a plentiful energy resource. A 2009 McKinsey Report entitled Unlocking Energy Efficiency in the U.S. Economy quantifies the potential for economically- and technologically-feasible energy efficiency measures in the U.S. The report claims that with an upfront investment of $520 billion from now until 2020 in energy efficiency measures, end-use energy consumption in the U.S. in 2020 could be reduced by 23% of projected demand, thereby abating up to 1.1 gigatons of greenhouse gases annually and saving $1.2 trillion. These measures are technologically and economically feasible right now and include installing new installation and buying more energy-efficiency appliances. The McKinsey report recommends creating programs to educate general consumers about the benefits of energy efficiency through product-labeling schemes, such as Energy Star, and creating a source of loans for residential and commercial retrofitting projects, such as the program in place in New York through which the state loans up to $13,000 to individuals or $26,000 to businesses for energy efficiency upgrades. Energy efficiency (i.e. the negawatt movement) should be of significant interest to policymakers because efficiency is a huge energy resource that can be realized in the short term with reasonable payback periods.

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