CWEB.039/March.30.1999
Public-purposes funding represents a new wave of institutionalized financial support for energy conservation and renewable energy--a major element of electric industry restructuring plans around the country, including California and Montana.
In the rest of the Northwest, however, the public-purposes wave is far offshore. A statewide funding provision for conservation/renewables is years away in Washington and Idaho--at the soonest. It may be nearer in Oregon, where restructuring legislation with public-purposes provisions is under active consideration.
In the absence of public-purposes funding, Northwest conservation and renewables resembles a patchwork quilt. Overall utility conservation investment has fallen sharply since the mid-1990s, partly in anticipation of industry restructuring and retail competition that hasn't materialized in the non-Montana Northwest. Yet a few utilities still avidly pursue energy-saving and green-energy initiatives, and a number of existing and emerging avenues look favorable in practice and prospect. So does public opinion and public policy.
Why Public Purposes?
The Northwest has pursued energy conservation and renewable energy in its electric system for at least the past 20 years. The landmark Pacific Northwest Electric Power Planning and Conservation Act of 1980 explicitly encouraged conservation and renewables development, and since then regionwide conservation by utilities, businesses, local governments and others have saved more than 1,200 average megawatts at an average utility cost of 2-2.5 cents per kilowatt-hour, with "substantial" environmental benefits, according to Northwest Power Planning Council figures. The peak conservation years were 1993 and 1994, after the Council in its 1991 conservation and power plan called for the acquisition of 1,500 aMW by the year 2000. From 1991 through 1994, the Council reported, regional utilities spent about $950 million building this "conservation power plant."
As the 1990s progressed, however, a competitive market for wholesale electricity took shape, and bulk power prices began to drop substantially. Retail competition looked to be the next frontier. Many utilities in the low-cost Northwest reacted by trying to keep electric prices as low as possible. Conservation and renewables investments, with their short-term expenses and long-term benefits, have been frequent casualties, a trend documented in separate studies over the past year by the Northwest Energy Coalition and Washington state energy agencies.
Intrinsic Value
Yet the general utility retreat from energy conservation and renewable energy does not signal those pursuits have lost their intrinsic value. The Council, in its fourth and most recent regional plan, found 1,535 aMW of energy savings were available regionwide over 20 years at an average levelized cost of 1.7 cents/kwh. Council member Tom Karier of Washington recently called that "a very cost-effective value based on current and projected electric prices." If fully achieved, the plan noted, those efficiencies would save regional consumers $2.3 billion on future electricity bills.
Energy efficiencies continue to provide a host of specific benefits as well. Weatherized homes, for example, result in lower energy bills and greater comfort for the people who live in them. For businesses and industries, applied efficiencies can offer such advantages as reduced operations and maintenance expenses, greater employee productivity and improved industrial processes--plus, of course, lower power bills. Renewables such as wind and solar, meanwhile, generate non-polluting electricity.
A ringing endorsement of "efficient, environmentally sound power" came in November from the (now former) chairwoman of the Washington Utilities and Transportation Commission, Anne Levinson. In a speech at an Energy NewsData conference, Levinson acknowledged that abundant energy supply and low prices have undercut the conservation rationale developed after the energy crises of the 1970s. But she cited "other critically important reasons that should motivate us," including climate change mitigation, easing competing resource demands in the Northwest, and the prospect that public-sector energy efficiencies can free up government funds for other pressing needs.
Despite the region's leadership and accomplishments in conservation and renewables, "Today we seem paralyzed by the dreaded FUD: fear, uncertainty and doubt," she said. There are valid reasons: restructuring, competition, new technologies. "And none of them is a sufficient excuse to pull back from our regional commitment to an energy system that is least cost and environmentally sound over the long term," Levinson said. Neither a totally free market nor stringent regulation will produce optimum results, she added.
"Strong growth in our region gives us a unique opportunity to 'grow green,'" Levinson concluded. "In so doing, whether through efficiency or renewables investment, we can stretch the value of our current energy system, build a hedge against future instability in energy markets, and build on the substantial economic benefits that the 'clean energy' industry already provides the state."
Public Support
Levinson also cited Washington's 1994 state energy strategy and its calls to implement all cost-effective conservation, minimize environmental damage, cultivate energy-supply diversity and lead by example through public-sector efficiencies. "I think these principles are still sound and broadly supported by the public," she said.
Many others agree. "We've always assumed there is a significant amount of support for public purposes," said Jason Eisdorfer of the Citizens' Utility Board of Oregon. "It's one of those benefits people like to see through their electric company. . . I do believe that if the public knew what utilities were doing with conservation funding, there would be more of an outcry."
Bonneville Power Administration recently examined a number of opinion-gathering exercises sponsored by utilities, government agencies, academics, public-interest groups and others, to gauge popular sentiment on public purposes. "My instincts were right," said BPA vice president for energy efficiency Terry Esvelt. "There is a huge level of support for conservation and renewables . . . Three-fourths of the population, a very strong majority of the public, believes this is something utilities should be doing. We cannot ignore this."
Esvelt believes BPA's research further validates a need for competitively neutral public-purposes funding by states, as envisioned by the Regional Review in 1996. The Review steering committee recommended that during a 10-year transition to a competitive energy industry, the region annually devote 3 percent of electricity services revenues--which equals about $210 million in 1995 revenues--to cost-effective conservation, renewable resource development and low-income weatherization. Most of these funds should be retained by local utilities. "The goal of the Steering Committee's recommendations is to provide for maximum local control in the implementation of conservation, renewables and low-income energy services, while establishing an effective minimum standard that ensures stable funding for these purposes," reads the committee's final report.
Public-purposes funding also is an important element of restructuring elsewhere in the country. A September 1998 report from the American Council for an Energy-Efficient Economy found that 16 of 20 states restructuring through legislation, regulatory order or plans (the Review) explicitly support efficiency programs, while 16 of the 22 "most active" restructuring states offer funding and/or policy backing for renewables. "The risk that these 'public benefits' of a regulated electricity system would be jettisoned in the move to competition has been widely recognized in those states which have thus far proceeded to implement electric restructuring," wrote author Martin Kushler. Public-purposes funding levels range from .07/kwh to .4 cents/KWh.
Among Northwest states only Montana has restructured, with 2.4 percent of annual utility revenues earmarked for public purposes.
The Market's Role
Still, not everyone is enamored with public purposes. Many industrial electricity customers, for example, consider it a tax by another name. "I think that there are a number of people interested in getting funding and making sure that conservation, renewables and low-income weatherization actually happen," said industrial consultant Noel Shelton of ESI. "I can understand people pushing it. I hope they can understand us pushing back. If we can't get something that works for us, then we just see this as an additional tax on industry that's already having a hard time. The pulp and paper market is way down. The metals market is way down." Industrial firms, he noted, seek cost-effective efficiencies in technologies and processes as a matter of course: "If you don't buy those efficiencies you're so inefficient you can't compete."
Eisdorfer fundamentally disagreed with the public-purposes-as-tax line of thinking. He sees such funding as "correcting a subsidy" for energy sources that don't include internalized environmental costs, and as necessary to follow state policy in pursuit of cost-effective efficiencies.
Members of Industrial Customers of Northwest Utilities acknowledge public purposes as a valid part of restructuring, according to executive director Ken Canon. "I don't know they would agree [3 percent is] the right number. It might have been the right number when the [wholesale electric] market was at 15, 16 mills. Now the market's up, and the market will drive more things to be cost-effective."
The open marketplace, indeed, represents another path in the pursuit of greater energy efficiency and more renewable energy, along with the somewhat complementary avenues of utility/government programs and public-purposes funding.
But the market by itself won't capture all potential cost-effective efficiencies, according to Stan Price, executive director of the Northwest Energy Efficiency Council, a trade group of the region's efficiency businesses. "It's an old story, but the difficulty in understanding first-cost versus life-cycle-cost economics represents a major market hurdle in every end-use sector," he said via e-mail. "Lack of information and even misinformation about energy-efficient products and services is still prevalent among both end-use customers and even design and engineering professionals. If you add other distortions in the market that frequently occur in the manufacturer-distributor-retailer chain, it is easy to see why the current market 'undersells' energy-efficient products and services."
Efficiency businesses, Price said, are "probably the most affected group in the region by the dramatic cutbacks in efficiency spending by electric utilities." Utility funding has helped overcome market barriers and contributed to building a substantial private-sector efficiency industry. He calls public-purposes funding "vital" to NEEC members and other firms: "We need public-purposes investments to help us develop new markets for our products and services and transform existing markets so they will function with a greater degree of energy efficiency."
Some people believe that in a wholly competitive electric industry, the market barriers to energy efficiency will disappear. "I haven't found those arguments to be terribly persuasive," said K.C. Golden, assistant director of the energy division of the Washington Department of Community, Trade and Economic Development. "There are some good ideas to overcome market barriers in better and cheaper and more effective ways," he said, and the Northwest Energy Efficiency Alliance is a prime example.
"There is a high degree of interest in whether there's a market for this stuff," said Esvelt. For renewables, green power offers a potential market. In conservation, he cited a movement among investor-owned utilities to form energy services subsidiaries. "There is the opportunity for an active marketplace here. We've always said conservation makes sense purely on economic terms" from utility and consumer perspectives. "The challenge is there's still market imperfections."
The Power Council's plan offers this estimation: "Of the $2.3 billion in savings that can be expected if all cost-effective conservation is developed, approximately $1.7 billion falls into the category of savings that seem unlikely to be produced through near-term utility commitment or, in the long run, by a competitive electricity market." At the same time, an addendum to the Council plan cites the Review's "preference for relying on market forces wherever possible to achieve the region's goals for developing conservation and renewable resources. This implies that, to the greatest extent possible, the restructuring of the electricity industry should be done in ways that complement or encourage the development of competitive markets for energy-efficiency services and renewable resources."
Canon advocates a customer-oriented model. "I think public purposes, that whole concept, needs to evolve the point where it is really focusing on what the customer wants, and in doing so trying to package it so it's not just electric conservation, for example, but selling all the other advantages that come along with it. For 15 to 20 years we've sent out vast sums of money for people to do things . . . and they don't have an inherent understanding of why it's good other than it's a vast sum of money. We've trained a generation of consumers, much like the car industry trained a generation of consumers, to wait for rebate checks."
Things Are Still Happening
As the policy debates continue and electric markets evolve on their own, a number of Northwest initiatives show solid performance or good potential in the ongoing quest for increased energy efficiency and renewable energy.
"A variety of different things are going on all over the place to keep the fires burning and keep movement going forward," said Rachel Shimshak of Renewable Northwest Project. "There are opportunities for both conservation and renewables to be part of people's future . . . The bad news is that public-purposes investment has declined dramatically across the region, with only a few exceptions among public[ly owned] utilities. The opportunities to restore some meaningful investments exist. Restructuring legislation is one of them, but there are others."
"Too often we look around the bend and forget the success we've had," said Esvelt. He, along with many others, cites the Alliance and its market transformation work since its 1996 formation. "That's an example of voluntary, collaborative efforts that are really exemplary. There's almost nothing like it in the rest of the country. We ought to pat ourselves on the back for making a huge stride in an important area."
Current Alliance ventures, if successful, are projected to save 450 aMW over 10 years at a cost below 1 cent/KWh, according to executive director Margie Gardner. The Alliance has received all its $65 million funding from BPA and the region's major IOUs. With the uncertainty of public-purposes funding it earlier envisioned as a financial source, the Alliance plans to seek additional utility money for coming years.
Another regional initiative is BPA's proposed wholesale rate discount for conservation/renewables activities undertaken by customers, which has drawn praise from Levinson and others as an innovative approach. Esvelt considers the discount a valuable tool for utilities, but he acknowledges its limitations. "I'm not sure the rate discount by its nature as an incentive can solve everything. If the states came in [with public-purposes funding] they've got much more latitude than Bonneville."
Also operating at a four-state level is the Regional Technical Forum, which the Council expects to launch in the near future as a means to establish standard protocols to verify and evaluate energy savings, track and assess regional progress towards conservation and renewables goals, and suggest improvements for more effective conservation and renewables development.
Although overall utility conservation and renewables investment is demonstrably and substantially down, individual Northwest utilities continue to actively seek efficient and renewable energy use in ways too numerous to mention here (see the Con.WEB archives for many examples).
There is even a public-purposes funding model: Avista Utilities' 1.5-percent rate surcharge to fund demand-side management and low-income programs. This arrangement "provides a stable, predictable source of conservation funding while eliminating concerns about capital budgeting, accumulation of increased regulatory assets, uncertain future regulatory treatment of capitalized investment, and future competitiveness in an era of retail wheeling," the utility wrote last summer in seeking a surcharge extension. It also "maintains continuity in the promotion and support of energy efficiency, provides for long-term resource diversity, recognizes the timing of resource needs, promotes the transformation of consumer markets to energy efficient choices, and provides customer value." Avista's Bruce Folsom concluded: "We would highly commend it to other utilities and the state."
Governments tacitly support public purposes through policies, laws, building energy codes (which BPA reports will have saved 190 aMW in public-power service territories from 1982 through 2003) and financing tools such as Oregon's popular Business Energy Tax Credit.
And in the renewables realm, the region's first commercial-scale wind-energy projects have recently come to fruition: Vansycle Ridge is spinning out electrons in northeastern Oregon and the Wyoming Wind Energy Project, as of mid-March, was very close to commercial operation. The Bonneville Environmental Foundation, meanwhile, is working to foster both the demand and supply sides of renewable energy in the region.
These may not be the best of times for Northwest conservation and renewables, but neither are they necessarily the worst--with or without public-purposes funding.--Mark Ohrenschall [Ben Tansey also contributed to this report]
Stymied in its plans to take administration of demand-side management programs away from investor-owned utilities, the California Public Utilities Commission on March 18 formally rescinded a solicitation for independent program administrators.
The action means that IOUs--including Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric--will continue to supervise their own spending programs through 2001. After that, however, the commission "is opposed to administration by utilities," said commissioner Joe Neeper. The commission would prefer a legislatively mandated non-profit organization to take control, Neeper said--if there is still a role for DSM in the post-restructuring future. Electric and natural gas efficiency programs in IOU territories are allocated about $375 million per year through 2001 but not beyond, according to the CPUC.
In the meantime, however, "We find that continuing interim utility administration over the next three years is the most viable option for maintaining progress towards our market transformation and low-income assistance goals, while affording us the time needed to carefully explore and implement organizational alternatives for the future," the order concluded.
The independent administrator plan was scuttled by a veto of Assembly Bill 2461 last year by then-Gov. Pete Wilson. The request for proposals process for an independent overseer got caught up in protests by state employee unions, even though the CPUC thought it had reached a satisfactory agreement allowing it to proceed. Commissioners now think those snags have been cleared. The new order will open a second phase of the case to take proposals for how to proceed in the post-2001 period.
Regulators also signaled some dissatisfaction with the effectiveness of the advisory boards for energy efficiency and low-income programs. Neeper promised to closely monitor the functions of the boards and issue rulings if needed to keep things on track. Commissioner Dick Bilas noted the increased interest by legislators on competitive bidding for DSM programs, and said he will file a concurring opinion related to that matter.
Efficiency Dissatisfaction
A day before the PUC decision, a state Senate subcommittee hearing revealed widespread dissatisfaction among consumer representatives, environmentalists, municipalities and energy services companies with the current state of California energy-efficiency programs. Utilities meanwhile appeared indifferent.
"Ratepayers are paying $250 million a year. We think there are no effective programs. Ratepayers are putting subsidies in and not getting anything back," said Lenny Goldberg, a lobbyist for small-consumer groups. The money is going to "national/regional initiatives" that provide programs like refrigerator rebates in large geographical areas. "It needs to be decentralized," he said, a point echoed by a number of other speakers who believe energy efficiency has fallen through the cracks in a post-restructuring environment.
The efficiency situation is particularly challenging in the service territory of San Diego Gas & Electric, which has transmission limitations and soon-to-be-cheaper electricity when the utility's rate freeze expires this summer. Consumers could have an incentive to forego conservation and even waste energy, potentially making the transmission constraints worse. "The public-policy interest is not having a cheap energy environment where people are indifferent to consumption," said state Sen. Steve Peace.
Although utilities now earn profits from administering efficiency programs, SDG&E representative Mike Murray said the utility has no preference for a new efficiency program administrator after 2001.--Arthur O'Donnell and J.A. Savage
A new wrinkle in Bonneville Power Administration's proposed wholesale rate discount for energy conservation and renewable energy initiatives looks like a major blemish to the Public Power Council.
As a way to expand the discount's influence in promoting additional conservation and renewables activities, BPA recently announced it would require its customer utilities to certify their discount-qualifying spending is above what they would have invested without the discount.
"We are intending to make this half-a-mill discount [.05 cents per kilowatt-hour], which translates to about $30 million each year, truly incremental," BPA energy efficiency vice president Terry Esvelt told the Northwest Power Planning Council's power committee March 16. "The challenge is it's never quite possible to determine exactly incremental from what . . .
"We are trying to honor the leadership of the local constituencies that are represented by our public utilities, and have them tell us when they're submitting their materials for the discount that the money that they're representing qualifying for the discount is truly incremental." BPA administrator Judi Johansen "felt very strongly this $30 million was intended to be an incremental investment on top of what the region would have done otherwise," Esvelt said.
This proposed discount feature emerged after BPA received a letter from Council members and state energy officials requesting, among other things, a $40 million annual discount amount. Some other stakeholders, such as the Northwest Energy Coalition and Northwest Energy Efficiency Council, were skeptical the $30 million discount structure would leverage much new efficiency and renewables.
"It was our intent that the C&R discount be a vehicle to increase utility investments in public purposes," Johansen wrote in a March 2 response to the Council members and state energy officials. "While there seems to be no certain way to measure an increase in spending for a time period so far in the future, we do want to provide a structure that supports that end."
However, BPA's certified-new-spending plan received a hostile reception in early March from the 21-member PPC executive committee. "Their dissatisfaction with the idea is pretty vehement," said PPC's Kristi Hansen, mentioning first the difficulty in determining new public-purposes investments. "Utilities make conservation decisions in their territories that make sense," she said. "This additional requirement is not necessary from their perspective."
Esvelt told the Council committee he had heard "there was much teeth-gnashing" and "not very much happiness" among PPC executive committee members about this discount feature. BPA hasn't previously offered any similar contractual provision, to Esvelt's knowledge. "It embraces a lot of questions," said Council member Tom Karier, calling the incremental spending plan "fairly innovative."
Renewables, Low-Income Backstop
Although Esvelt said BPA wouldn't add $10 million to the annual discount--"We examined that and concluded we really didn't feel we could"--he outlined to the Council committee a plan to backstop regionwide spending on renewables and low-income weatherization.
"To the degree utilities didn't invest their own monies [on renewables and low-income weatherization] to the percentage of the $30 million contemplated by the Regional Review, Bonneville will make up the difference with supplemental spending in year two with its own money, on top of the $30 million, and so on, moving through time . . . We do anticipate this will be more than a $30 million program. It's not clear how much more, depending on what the utilities do with their own money." The Review-recommended percentages of the $30 million would allocate about $6 million to renewables and $4 million to low-income weatherization.
Low-income weatherization providers worry about funding continuity, noted Council staffer Dick Watson, and the backstop provision wouldn't offer any help until 2002. "We share that concern," said Esvelt. "We think we need to do something fairly proactive to manage a good outcome here." BPA also is mulling solutions to a more immediate issue: the end of BPA's current weatherization-funding contracts with Northwest states this September. "I don't have all the answers yet," said Esvelt. "We're still working on it."
Esvelt also reaffirmed Bonneville's plan to add $15 million to the discount in good revenue years, which Johansen's letter indicated would likely occur at least once during the 2001-2006 rate period for which the discount would be offered. This money would be available on a 2-to-1 ratio of customer spending to discount dollars. BPA is still working to define a good revenue year to trigger the extra funding, Esvelt said.
Johansen's letter also minimized a concern among some stakeholders that the discount could foster non-cost-effective conservation. "BPA believes that it has built in several C&RD features that will facilitate power customers' investing their money in conservation within regional cost-effective limits," she wrote. These include caps on administrative and advertising expenses, limits on discount-eligible system upgrades, and the elimination of or constraint on discount-eligible measures "that are clearly not cost-effective. In sum, these considerations limit the likelihood that any customers will exceed the cost-effective limits, and across all customers, conservation investments are expected to be well below the cost-effective limits on average."
Johansen also cited "strong evidence" public-power utilities have previously spent BPA conservation funds wisely when they have had management responsibility, as shown by flex and other special contracts, and collaboratives such as the Conservation and Renewable Energy System (CARES) and the Oregon Municipal Energy and Conservation Agency (OMECA). All have delivered savings below 1.5 cents a kilowatt-hour, she wrote.
BPA's initial 2001-2006 rate proposal--including the conservation/renewables discount--should be released later this spring, perhaps by May. A preceding workshop will outline the major features.--Mark Ohrenschall
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PacifiCorp's would-be corporate partner has pledged to invest $60 million over five years to develop 50 megawatts of additional renewable energy resources, contingent upon a successful merger.
ScottishPower's commitment pertains to wind, solar or geothermal resources, according to a March 9 PacifiCorp news release, which didn't specify the nature or location of potential new renewable projects. Neither PacifiCorp nor ScottishPower officials could be reached for additional comment.
ScottishPower also promised to offer a "green resource" tariff giving customers a choice to pay somewhat higher prices for power generated from wind, solar or geothermal resources. Other pledges by the Scotland-based corporation include a $100,000 contribution to the Bonneville Environmental Foundation and consideration of expanding PacifiCorp's Blundell geothermal project in Utah.
The $60 million/50 MW renewables investments are dependent upon the extension of the system benefits charge and renewables incentive portion of PacifiCorp's current alternative form of ratemaking (AFOR), an increase in the AFOR cap on renewable resources, and the new renewables meeting AFOR cost-effectiveness standards.
This development level would mean the combined company would generate 5 to 10 percent of new renewable energy in the United States, with about 1 percent of retail customers, according to the news release. PacifiCorp already is majority owner of the 41.4-MW-capacity Wyoming Wind Energy Project, which as of mid-March was close to starting commercial operation.
ScottishPower made no specific pledges on energy efficiency, although the news release noted the company spends about $5.1 million each year on efficiency initiatives in its native United Kingdom.
ScottishPower's environmental commitments received cautious praise from environmental and citizens groups. The Natural Resources Defense Council, Renewable Northwest Project, Oregon HEAT and the Land and Water Fund of the Rockies issued a joint statement saying they are "encouraged" by the environmental and consumer proposals included in ScottishPower's merger testimony filed with state regulators in PacifiCorp's service territory.
"It was a very positive first step," said Rachel Shimshak of Renewable Northwest Project. She praised the new renewables commitments--suggesting ScottishPower should consider solar or geothermal, since PacifiCorp already has a wind venture--and the green resource option for customers. "We're anxious for them to come forward with some additional conservation," Shimshak noted.
None of the four organizations has taken an official position for or against the proposed merger, which was announced in December and is subject to approval by the Federal Energy Regulatory Commission, state regulators and shareholders of the two companies.--Jude Noland and Mark Ohrenschall
A home furnishing store near Seattle has made energy efficiency part of its strategy to become an environmentally sustainable retail business enterprise.
The IKEA store in suburban Renton pursues a broad environmental agenda that recently earned it an Evergreen Award for Pollution Prevention from the U.S. Environmental Protection Agency. This award honors Northwest firms demonstrating "uncommon leadership in pollution prevention and sustainable business practices," according to EPA. Ten firms in the region have earned this distinction.
IKEA's local practices include lighting efficiencies, rebuilding damaged furniture for resale, and a Christmas tree "recycling" 
program. On the corporate level IKEA follows a policy adopted in 1991 to "strive to minimize any possible damaging effects to the environment which may result as a consequence of our activities." The company is, for example, working toward the exclusive use of wood certified as sustainably harvested, and the elimination of waste now destined for landfills.
"IKEA is obviously a successful enterprise that is aware of its environmental impacts and continuously applies innovative solutions to minimize those impacts," said EPA's Region 10 administrator Chuck Clarke, in a news release announcing IKEA's award. "They are a clear example of how environmental protection and a thriving retail business can go hand in hand."
Indeed, the Renton IKEA has recorded average annual revenue growth of 20 percent, "huge" for retail, according to Todd Swan, who spearheads the store's environmental initiatives. "Every program I've started has been implemented on a sound revenue" basis, Swan said.
An example is the IKEA Green operation. Tucked in a corner of the store's covered parking area, it repairs unsalable damaged solid wood and pressboard items or remakes them into new products: desks, tables, shelves, boxes, toys. IKEA Green has reduced the store's throwaways by 40 percent, while accounting for 7 percent of sales revenue. "It is profitable; very profitable," according to Swan,
Corporate Philosophy
As a business IKEA naturally pursues profits. It also accepts environmental responsibility for its operations, which include more than 140 stores in 28 countries, along with a vast supply and distribution network.
"IKEA took the first step to creating a business less harmful to the environment several decades ago--without really knowing it," according to the company's Web site. "Right from the start we set out to be as economical as possible in our use of resources. This meant never using more material than was absolutely necessary and concentrating on self-assembly furniture packaged to save on costs for storage and transportation." Now, " . . . we're moving towards a way of thinking based on the philosophy that everything we take should be used, reused and recycled, either by ourselves or nature, in such a way that causes the least possible harm to the environment. And just as important: that we stop waste and use the earth's resources more efficiently so that everyone can share in them."
The company has adopted an environmental action plan known as Green Steps, patterned after The Natural Step framework for business sustainability. The four guiding questions, according to an EPA fact sheet: 1) Is the company systematically reducing its dependency on mining and non-renewable sources? 2) Is the company reducing the use of long-lasting, unnatural substances? 3) Is the company reducing its encroachment on nature and its functions? 4) Is the company reducing unnecessary use of resources? These imperatives have led IKEA to pursue such goals as labeling all products with environmental information (including material source and recyclability) and requiring suppliers to carry full loads.
Energy
"Energy reduction is the topmost highest priority IKEA has in terms of its environmental goals. It's the most tangible, easy-to-measure thing to track," said Swan, who includes transportation along with other forms of energy, including electricity.
IKEA Renton collaborated with Puget Sound Energy on lighting upgrades saving 278,717 kilowatt-hours annually and reducing demand by 60 KW, according to Puget's Al Dunlap. IKEA replaced fluorescent T-12 lamps with T-8s and electronic ballasts throughout the store, altogether retrofitting 541 fixtures. Puget's $11,539 rebate helped drop IKEA's payback from 3.7 years to 2.7 years, Dunlap said. "It was a nice project; a good payback for them, a lot of energy savings for us." He described IKEA's then-facility manager Dale Temple as "really up on conservation. He was looking for any opportunity he could to save energy."
A new HVAC system with five rooftop condensers has improved the store's energy efficiency as well, according to Swan.
IKEA also has engaged in a corporate form of market transformation. EPA's Clarke told this story (as related in a fact sheet) at the Evergreen Award ceremony in December: IKEA founder Ingvar Kamprad learned that compact fluorescents contain "fairly significant" amounts of mercury. He challenged his suppliers to devise a comparably priced and quality CFL with less mercury. One met the challenge, reducing mercury to one-fifth the previous level. And IKEA, Clarke said, now sells these lamps "at a very reasonable price. This is the sort of positive environmental impact a giant like IKEA can make."
Above and Beyond
Swan believes IKEA goes "above and beyond" most other companies in its environmental commitments, although a recent survey found 70 percent of IKEA customers don't view the company as environmentally responsible. The company wants to change what it considers a false impression.
Customers, he said, demand environmental responsibility from companies like IKEA. But there are other compelling reasons to aspire to it. For example, eliminating landfill trips will save money and energy (embodied and actual), and reduce product costs. "I can't think of a reason not to do it," said Swan. "It's a win-win deal."
He acknowledged IKEA enjoys a "great freedom" to pursue environmental goals, as a privately held corporation not answerable to shareholders. Nevertheless, he believes any firm can follow a path toward environmental sustainability. "It's all with the strength of leadership, giving environmental policy some teeth," considering long-term benefits and not strictly short-term costs.
Swan believes a "tidal wave" of environmentally sustainable business practices is just forming, and firms that ignore it will suffer economic consequences.
"It is not enough to be friendly to the environment, we must adapt to it," reads IKEA's Web site. "IKEA, you and people everywhere must search for new and economical uses of our precious environmental resources to adapt ourselves to the forests, lakes, air and mountains. Not the other way around."--Mark Ohrenschall
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Energy efficiency has helped Washington state consistently reduce its total energy consumption relative to economic production over the past two decades, while overall energy use continues to grow, according to the state's 1999 Biennial Energy Report.
"Washington's economy is becoming less energy intensive, as improved technology and greater productivity allow us to squeeze more work out of every unit of energy," wrote K.C. Golden, assistant director of the Energy Division of the Washington State Department of Community, Trade and Economic Development, in a letter accompanying the new CTED report. "Despite these gains," he added, "Washington's energy consumption is growing at nearly 3 percent a year because of population growth, increased economic activity, and growing demand for vehicle travel."
Energy Indicators
The report's energy indicators--which relied on publicly available data from the federal Energy Information Administration and other governmental sources--illustrate the strikingly different trends in energy consumption and energy intensity.
They also confirm energy efficiency has contributed to reducing energy intensity, although exactly how much is uncertain. "We know energy efficiency programs work," said CTED's Arne Olson. "We probably have . . . at least a rough idea of the magnitude of their contribution, but we certainly can't tell with any precision. The fact energy intensity is going down is certainly an indication something is happening" with efficiency initiatives.
Overall, the report notes, "End-use energy consumption in Washington was 63 percent higher in 1995 than in 1970. Most of the increase occurred in the transportation sector, where energy use has more than doubled since 1970. Transportation now accounts for more than half of the state's energy consumption." Industrial-sector energy use--second behind transportation--rose 3.1 percent annually from 1985 to 1995, while commercial and residential energy consumption stayed essentially level.
Still, the report finds, "Washington continues to produce more goods and services per unit of energy consumed, despite growth in total energy consumption." This energy intensity index (1980=1) fell from about 1.10 in 1977 to about 0.85 in 1995, dropping consistently through the years. "This is due to a number of factors, chief among
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| Source: 1999 Biennial Energy Report |
Residential, commercial and industrial energy consumption have all declined on an energy-intensity basis since the 1970s.
Residential: "[Non-transportation] Energy consumption per Washington household has declined by more than a third since peaking in 1972, suggesting an improvement in household energy efficiency," the report finds. "Despite larger houses and the recent proliferation of electricity-using appliances, electricity consumption per household declined by 14 percent between 1985 and 1995." The energy intensity index (1980=1) dropped from about 1.25 in 1970 to about .90 in 1995. Inflation-adjusted residential energy bills shrank as well, from 1983 to 1995. "Improvements in household energy efficiency and fuel switching to less expensive fuels have offset higher electricity prices," according to the report.
Energy codes and utility programs such as Super Good Cents probably made a difference in residential energy intensity, according to Alan Mountjoy-Venning of Washington State University Cooperative Extension Energy Program. But their contributions can't be proven from the report.
Commercial: In the commercial sector, energy intensity actually grew rapidly from the late 1970s to 1985, then fell sharply over the next 10 years. The index (1980=1) rose from about 1.03 in 1977 to nearly 1.25 in 1985 and then dropped below 0.80 by 1995. "Increased productivity and improvements in the efficiency of buildings, lighting and equipment have played a major role in declining commercial sector energy intensity," the report says.
"I do think the commercial energy code had a lot to do with some of those declines, just as I think the residential energy code had to do with that decline," said Mountjoy-Venning.
Electricity is the energy source of choice in the commercial sector, accounting for more than 60 percent of end-use consumption. Total commercial electric use has increased fourfold since 1970, with the proliferation of computers, printers, photocopiers and other electricity-using equipment.
Industrial: Long-term leanings are hard to find in industrial energy intensity, according to the report. This measure is down somewhat, from 1.20 in 1970 to about 1.05 in 1995 (1980=1), but the trend line resembles an especially rugged mountain range. "Both energy consumption and industrial production are extremely volatile, making it difficult to discern underlying trends," the report notes.
Other Findings
The indicators also reveal electricity is by far the most expensive energy source in Washington, despite being inexpensive compared to elsewhere in the country. "Real fossil fuel prices have declined significantly since the early 1980s, but average electricity prices have remained constant," the report notes. It cost about $11 (in 1992 dollars) per million Btu from electricity in 1995; the next-most-expensive energy source was petroleum, at less than $6.
On the environmental front, "Washington's increasing reliance on fossil fuels has led to steady growth in emissions of carbon dioxide, the principal greenhouse gas," the report says. Petroleum use for transportation is the main source of CO2 emissions in the Evergreen State.
Another section of the report lists recommendations from the 1994 state energy strategy, and their current status. It acknowledges the "less aggressive" pursuit of energy efficiency by utilities, but it also mentions such existing and emerging initiatives as BPA's wholesale rate discount for conservation and renewables, the Regional Technical Forum, the Bonneville Environmental Foundation and the Northwest Energy Efficiency Alliance's support of energy-efficient building practices and building operator training.
"It's a mixed bag," said CTED's Julie Palakovich. Some energy strategy recommendations became quickly obsolete, others were completed and still more remain in progress. "The energy strategy is still a living document," she said. "Some agencies do use it as one of [their] planning guides, which is a good sign. We are looking at ways to revise it, in the next year or two."--Mark Ohrenschall
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Idaho homes can be rated on their relative energy efficiency through a state program designed to inform home-buyers and, ultimately, help raise residential efficiency standards.
The GemStar home energy rating system began in earnest a year ago and has led to efficiency assessments on about 20 residences in southwest Idaho. Now it is expanding to Idaho Falls through the municipal utility.
GemStar's initial efforts, however, have encountered a formidable barrier. A very strong housing market--Idaho ranked third among the 50 states in population growth percentage from 1990 to 1997, while its non-farm employment jumped 52 percent from 1987 to 1997--has limited support among building professionals for above-code energy efficiency in general and home energy ratings in particular.
"The market is very good right now for selling homes," said Bill Jeppesen of Eagle, ID-based Craftsman Homes, an avid GemStar participant. "There's a lot of [builders] who don't feel they have to take extra steps to work with GemStar and really come up with a product that's beneficial energy-wise for people."
Ditto for real estate agents, said Ingo Stroup of the Idaho Department of Water Resources Energy Division, which developed GemStar. "We're finding most realtors uninterested because of the current building boom in southwest Idaho. Homes are selling fast and they don't have a concern" about energy, for which Idahoans pay among the lowest average electric rates in the nation.
GemStar emphasizes the greater comfort and reduced energy bills of highly efficient homes. The rating system assesses a home's major energy-related components to derive a rating: one star (poor), two stars (not so hot), three stars (OK), 3-1/2 stars (good), four stars (efficient) and five stars (very efficient). Idaho's minimum required efficiencies, embodied in the Idaho Residential Energy Standards, equal two to 2/1-2 stars, according to Stroup, while homes built to Model Energy Code guidelines would earn three or four stars.
GemStar thus educates consumers about energy efficiency. "The average home-buyer doesn't understand heat loss and building dynamics," said Stroup. "They look at the trim work and carpet." He would like GemStar to expand statewide and, in time, help raise efficiency standards. Idaho is a patchwork of at least six different residential energy codes, by Stroup's count. Eventually he wants MEC (20 to 30 percent more energy efficient than IRES) to serve as the statewide minimum. "I believe the rating system is a tool in helping that goal . . . We do need the backing from the building industry," he added. "When we talk their tune--consistency, ease of adoption or compliance, free training, technical assistance--they do seem to come around."
GemStar Nuggets
IDWR examined several other home energy rating systems before deciding to create its own program. The others "just didn't allow enough spread in the rating between an efficient and non-efficient home," explained Stroup.
GemStar evaluates the building envelope, including insulation levels and windows; heating/cooling equipment; and air-distribution system (ducts). The envelope and ducts are tested to measure air leakages. GemStar also can provide recommendations on efficiency upgrades.
"The most significant differences in these homes from standard construction are the air sealing of the building envelope, the sealed duct systems, and the downsizing and efficiency of the heating system," Stroup said in IDWR's Idaho Currents October newsletter, referring to six Boise residences built to GemStar specifications.
GemStar rating software is nearing completion, 
developed for IDWR by Seattle-based Ecotope. It "implements the rating procedures of the GemStar program," according to Ecotope's Michael Kennedy. It calculates building load based on an envelope description and estimates efficiency performance of the heating/cooling and duct systems. Each component is independently judged and then a combined weighed rating is created. Kennedy said Sunstar also allows inputs for improvements to system components and ducts, and evaluates their cost-effectiveness.
Trained energy professionals now gather data for GemStar through on-site inspections. The data is then translated via computer program into star ratings, according to Idaho Currents.
Builder, Utility Perspectives
Jeppesen, whose firm built the six above-noted Boise homes, is described by Stroup as the leading GemStar builder. "I was hoping I could provide an energy-conscientious product for people when they're purchasing homes so they would be able to really enjoy a nice, comfortable home without having to pay a ridiculous price for heating and air conditioning," Jeppesen told Con.WEB.
His common energy-efficient features include blow-in insulation and extensive caulking. He also uses WATTSUN residential energy load calculation software to determine optimum sized heating and air-conditioning systems, "rather than go for the larger size that's really not necessary." Jeppesen figures his five-star GemStar homes reduce energy costs at least 30 percent compared to IRES--and cost him about 20 percent more. "I have kept my prices pretty much at the same overall price on homes," he said. "My personal profit has dropped because of the cost and the time factor involved . . . I'm able to walk away knowing they were really built efficiently and really keyed into energy conservation. It's been beneficial to me mentally," he said.
Jeppesen views energy efficiency as a long-term asset for a home and its owner(s), as well as a hedge against inevitably rising electric prices. He rues the lack of energy concern among other Idaho builders. "Whatever they have, as long as it's looking nice and clean, it will sell. I don't agree with that philosophy . . . I always tell them, it's too bad you're not getting involved with this now. If you were, you'd be many steps ahead of everyone else."
In Idaho Falls the municipal electric utility is launching GemStar as a free customer service program, according to customer service manager Van Ashton. A utility staffer will rate homes as requested by homeowners, builders or others. "We're really uncertain what kind of demand we will have," said Ashton, although he suspects GemStar will start slowly and gain momentum, similar to Super Good Cents. "We really don't see any energy-saving benefits to it, initially," he continued. "We see it as a stepping-stone to perhaps some other programs we can do in the new construction area," such as promoting efficient electric heat pumps.--Mark Ohrenschall
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Collaboration and innovation mark a new Oregon venture promoting energy-efficient refrigerators for low-income multifamily housing.
Portland General Electric, the Oregon Office of Energy and Bonneville Power Administration have joined in a novel pilot program testing the market for efficient apartment-sized refrigerators in low-income rental housing--without direct rebates to landlords, who typically have little financial incentive to install energy-efficient appliances. Portland General buys the refrigerators
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| Randy Hansell of PGE (left) points out the EnergyGuide label to Dave Poynter of All Weather (right). (Photo courtesy of PGE) |
PGE's John McLain acknowledged some skepticism about the potential in this particular market, but, "We've got a good start," he said. As of late March the utility had sold 11 units since the pilot launched earlier this year, and McLain's colleague Randy Hansell is optimistic all 234 units it plans to buy will eventually sell. A bigger program could follow if the pilot succeeds.
The key, according to McLain, is promoting the benefits of efficient refrigerators, primarily low maintenance for landlords and increased tenant income. For unsubsidized energy efficiency programs, he said, "You have to ask the question . . . 'Why do people buy this stuff?' Energy is part of it, but there are other benefits besides energy. If you take the time to listen to your customers, you'll find there are other reasons they're going to do this."
Background
The refrigerator venture did not arise directly from the utility's request for proposals for innovative efficiency programs (see Con.WEB, Jan. 28, 1998), but McLain said there is a connection. "The RFP process shook the tree a little bit" and PGE subsequently began to field unsolicited ideas, including OOE's late 1998 offer of a $50,000 loan to buy efficient apartment-sized refrigerators in volume for low-income housing. The energy office had $50,000 set aside to finance a refrigerator pilot program, according to conservation administrator Bill Nesmith, and found PGE "pretty interested" in operating such a venture.
Portland General liked this partnership and risk-sharing approach. BPA, meanwhile, agreed to donate warehouse storage and associated labor for the refrigerators. "Suddenly we had three participants
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| A new refrigerator installed in one of the apartments at Johnson Creek Commons. (Photo courtesy of PGE) |
The per-unit energy savings are welcome--each refrigerator in the pilot exceeds federal efficiency standards by 31 percent--but Portland General considers the pilot educational in nature, a gauge of a challenging market for efficient products. "What we're trying to learn is: What are the real barriers to overcome and how do we overcome them?" Hansell said.
Portland General arranged to buy refrigerators through an existing venture for efficient refrigerators in low-income housing involving the New York City Housing Authority, the U.S. Department of Energy and manufacturers. "We talked to manufacturers to allow us to piggyback onto that contract," said McLain. "OOE tuned us into that as part of the networking they have."
The Maytag Magic Chef units use an average of 437 kilowatt-hours annually, Hansell said, compared to 636 KWh for comparable 15-cubic-foot refrigerators built to minimum federal efficiency standards. A combination of compressor, insulation and sealing efficiencies account for the lower energy consumption.
PGE uses the OOE loan as capital to buy the refrigerators, and as they sell the cash replenishes what essentially functions as a revolving loan fund. The first shipment of 144 refrigerators came in at $345 apiece, some $50 lower than average minimum-efficiency 15-cubic-foot units, according to Hansell.
Sales Pitch
Even at the reduced price, Hansell acknowledged, the efficient fridges are a tough sell to owners of low-income housing, both public- and private-sector.
One apparent factor is that tenants of low-income housing usually pay their own electric bills and thus landlords don't directly gain from energy savings--although McLain said the new fridges give tenants "a better chance of paying their rent" because they have more money available. "Most people who run low-income housing have a social-benefit flavor to their philosophy," he added, and they like helping tenants.
PGE also emphasizes the low-hassle, low-maintenance advantages of the new refrigerators, and the well-respected Maytag brand name. Landlords generally buy used or less-expensive models, which require more frequent repairs or replacement. Another potential incentive for landlords is Oregon's Business Energy Tax Credit, which Nesmith noted makes the refrigerator purchase more financially attractive.
"What we're really going after is the older units," some of which consume up to two to three times as much energy as the Maytag models, according to Hansell. Portland General strongly encourages--but does not require--landlords who buy the efficient refrigerators to decommission their old energy-guzzling models, and get them out of the market altogether. In any case purchasers must arrange to remove their old models and pick up and install new refrigerators.
After the pilot ends PGE will evaluate things and decide whether to look into an expanded program, which Hansell said could even be extended statewide or regionally, although the logistics would be more complex. The program's structure conceivably could be applied to other appliances and non-low-income markets, McLain believes. "Is there a market? All kinds of ideas can come from that. People will pay for it, if you find the benefits, energy and non-energy benefits."--Mark Ohrenschall
Entries are open for the 1999 Architecture + Energy Awards: Building Excellence in the Northwest.
The competition--administered by the American Institute of Architects/Portland Chapter and sponsored by the Northwest Energy Efficiency Alliance--honors the successful integration of architectural design and energy-efficient technology, according to an AIA/Portland news release. This is the seventh year for the awards.
Completed commercial buildings in Idaho, Montana, Oregon and Washington--both new construction and major renovation projects--are eligible for the competition, which will be judged by a panel of jurors from architectural, engineering and lighting-design firms across the country. Entries will be judged on energy performance, treatment of energy-related elements, climatic-responsive design, resource efficiency and creativity.
Deadline for entries is June 4. An awards presentation and workshop will take place June 25 in Portland.
For more information contact AIA/Portland: phone, (503) 223-8757; e-mail, aeprogram@aiaportland.com; or on the Web, at http://www.aiaportland.com/a+enw/call4entries.htm.
B.C. Hydro has honored 24 British Columbia entities for outstanding achievements in energy efficiency.
The seventh annual Power Smart Excellence Awards were presented March 11 to a broad range of companies and public-sector agencies that "have gone that extra mile to lead the way in energy-efficient design, customer service, community involvement and environmental stewardship," according to a B.C. Hydro news release. The awards honored work in the residential and business sectors.
Power Smart, introduced by the utility a decade ago, has led to annual energy savings of more than 285 average megawatts, according to B.C. Hydro.
The spring 1999 catalog of books, videos and software for sustainable design and construction is available from Eugene-based Iris Communications.
The catalog features more than 150 titles covering a broad range of topics relevant to residential and commercial buildings, including energy-efficient construction, passive solar heating, daylighting, landscaping, material and equipment selection, building operation, ecological design and community planning. Most of the titles are intended for building professionals such as architects, contractors, engineers and consultants, according to an Iris news release.
For more information, contact Iris: phone, 1-800-346-0104 or (541) 767-0355; fax, (541) 767-0357; mail, P.O. Box 5920, Eugene, OR 97405; e-mail, iris@oikos.com; or on the Web, at http://www.oikos.com/catalog.
Builders who voluntarily incorporate energy-efficient practices into the design, construction and marketing of homes are eligible for the national EnergyValue Housing Award.
Awards are presented in affordable, custom, factory-built, production and innovative home categories, within hot, moderate and cold climates. The program is presented by the NAHB Research Center, a non-profit subsidiary of the National Association of Home Builders, in partnership with other entities. Previous winners include South Wall Builders of Missoula, MT and West Slope Panel Homes of Victor, MT.
Entries for the 2000 EnergyValue Housing Award are due May 17 of this year. For more information visit the EVHA Web site; send an e-mail to evha@nahbrc.org; or call 1-800-638-8556, ext. 753.
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