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.

Changing The Energy Generation and Distribution Model At The Community Level

Now that the talk around Emission Trading Schemes has subsided or at least taken off the political agenda for the time being, perhaps it is time to reflect a little about energy costs. It is fast approaching winter down in the southern hemisphere and we have all been notified by the energy utilities to expect costs increases of 20% or there about. No real explanation of the cost increases have been given.

Our energy generating model is has remained basically a centralised system with electricity being generated from large power stations, be it coal fired or nuclear and hydro electric dams. While the government has introduced incentives for home solar generated electricity, the problem seems to me that it is a very insular approach. Electricity generated is stored individually for a home which is fine. But why are we not investigating a community network based approach. For instance when new apartment blocks are being built, why are the roofs not lined with panels with storage in the basement. Or for that matter when a new housing estates are opened up why not make provision for a storage facility to store the collective power generated for that community.

While it may be argued that the technology has yet to catch up with commercial reality, I have not found any organisation looking to change the source of power generation. Every initiative wind or wave power still seems to be based on the same old "produce it in one place" and distribute it to where it is required. Not only does this result in higher infrastructure costs for the distribution. Think about it if we could turn every housing estate into a micro power generation facility, the longer term utilities distribution cost would also end up lower. 

Perhaps with the cost of power and utilities now rising, other more localised means of clean power generation may become more economically viable and better for our environment.