There Must Be A Smarter Way To Promote Energy Efficiency

I have come to the conclusion that it is intrinsically illogical for to expect that energy and utility companies will actually want consumer be energy efficient. Why would they? Don't they sell us electricity for a price? The last time I checked, revenue = price x quantity. So to increase revenue the supplier must increase either price or quantity or better still both.

So let's see if I can explain this. Power companies cannot just increase prices unilaterally. They have pesky regulators who must agree the price that they are allowed to charge consumers. And you guessed it, they typically ask for a higher rate based on the the cost of production.

Now if there is only limited things you can do to get a price increase approved, that leaves you with quantity as the only other thing to do to increase revenue. (let's leave profit to another post for the moment). So let me try to explain it another way. If quantity consumed is one of the two things that increase your revenue, why would you want to reduce consumption? Sure I acknowledge that it is never only one single factor to be considered in this discussion. Governments and utility companies will remind us that in order to ensure reliable and stable supply, they have to build power plants to meet peak demand and boy have you seen the price tag for one of these babys.

But fact is that with all things considered, there really isn't too much real motivation around for utility companies to reduce demand for their power. Thomas Friedman in his book Hot, Fat and Crowded explains quite simply that the current model we have to day is an "eat as much as you want" model when it comes to energy consumption.

The problem is that we have left it to energy companies to promote energy efficiency ---duh! Let me restate the scenario here. Mr utility company, we would like you to undertake to promote energy efficiency so that demand for the only product (which by the way is a commodity) you sell will fall and so will your revenue.

If I were a cynical person (which I am not) I could be forgiven for thinking that the power companies really do not care about the consumer's energy consumption. They actually would love to sell you more power in the way that any business would like to get a bigger share of your wallet. The people with the biggest motivation for doing something about energy efficiency is the consumer - yeah that's you and me. I am questioning whether utility companies should be delegated the responsibility for both promoting energy usage efficiency as they do not really stand to get as much benefit.

Which leads me to the whole point of consumers putting solar panels on their roofs. By doing so you, the consumer suddenly become a producer. You are actually competing with the utility companies. Not only are you competing with them but by doing so you are actually reducing demand for the electricity they supply to you and in the process reduce their revenue.

So we are all left with this conundrum. Getting consumers into the renewable energy game is not only desirable but essential if we are to reduce our dependency on fossil fuels. But our existing model really does not provide the necessary motivation for such as change. It is time for a new model that shifts the focus to the consumer who has the right motivation for being energy efficient when it hits our back pockets.