CWEB.66/June.28.2001
An ambitious set of proposals for relatively quick, substantial and cost-effective energy conservation is circulating around the Northwest, facing an uncertain implementation.
Plug and Play, as these energy-saving ideas are collectively known, could save 326 average megawatts of energy and cut peak demand by 426 MW over three years, according to a recent summary. Levelized utility costs range from 1 cent per kilowatt-hour saved to 4.9 cents/KWh, with most proposals under 4 cents/KWh and many below 3 cents/KWh. Total price tag is estimated at nearly $500 million.
"There's a lot more support for efficiency in concept than there's been for a while," Plug and Play architect Fred Gordon told a Northwest Energy Efficiency Council forum June 5 in Seattle. Yet, "A lot of people are running around not sure what to do about it . . . There's got to be some way to use this new political energy to do low-cost [efficiency] that will actually help with the energy crisis."
Gordon and colleague Dave Hewitt of Pacific Energy Associates have identified 12 separate programs under the Plug and Play heading. The most promising, in terms of total potential savings, target compact fluorescent lamps, early retirement of refrigerators, accelerated commercial and industrial lighting retrofits, commercial building tuneups and maintenance, and industrial efficiency acceleration. Others focus on small commercial/industrial retrofits, Energy Star clothes washers and other consumer products, manufactured housing, vending machines, commercial/industrial air conditioning, grocery store refrigeration and light-emitting diode (LED) traffic lights.
Plug and Play has been introduced to utilities, Bonneville Power Administration, the Northwest Energy Efficiency Alliance, NEEC members, the Northwest Power Planning Council, the Northwest Energy Coalition and others. It has received a generally favorable conceptual response, according to Gordon. Still, it's unclear how and to what extent this wide-ranging initiative might be accomplished.
Many of the listed energy-saving activities are already in progress by utilities, BPA, the Alliance and others, although not to the extent proposed in Plug and Play. Meanwhile, questions have arisen about resources available, as well as whether the energy crisis will last long enough to justify such a campaign.
"We've got a lot of interest and a lot of struggle about what people are really supposed to do," Gordon told Con.WEB in late June. PEA is developing a "next steps document" to help clarify potential roles, he said.
Plugging into Plug and Play
Gordon and Hewitt prepared an April 26 report titled "Plug & Play: Efficiency Options to Address the Northwest Energy Crisis." They did so under contract to the Alliance, "to briefly summarize and explore potential opportunities to address with efficiency programs the near-term energy and peak-supply crisis in the Pacific Northwest," according to the report's summary. The chosen programs represent a "clear opportunity to do more than current initiatives will accomplish," and promise "[w]ith a concerted effort, significant savings within one year and substantial savings within three years.
"The initiatives could benefit, focus, and complement current efforts by state governments, utilities, and others to promote efficiency in a broader context," the report summary said.
Gordon described Plug and Play's original design as "largely incremental" to other efficiency efforts. Some of the identified activities are under way in some form; compact fluorescent lamps, as one example, are the subject of a regional coupon campaign. "The CFL market is looking really good, but it's not at the level we're suggesting . . . A lot more could be done through focused efforts."
For many Plug and Play programs, Gordon said, "The critical mass of getting more savings is going to come from coordinated efforts and joint marketing."
The proposed Plug and Play initiatives cover a variety of electricity uses with a variety of tailored energy-saving strategies, including marketing, target-setting, collaborations, financial incentives, program additions, informational resources, studies, efficiency standards, direct installations and technical assistance. Levelized utility costs range from 1 cent per kilowatt-hour saved for industrial motors to 4.9 cents/KWh for commercial/industrial air conditioning rebates. All but one other program falls under 4 cents/KWh, and many are below 3 cents/KWh.
Program Summary
Following is a summary of Plug and Play proposals, potential energy and peak savings, levelized utility costs and total capital required, from a recent update:
Compact fluorescent lamps (57 aMW, 46 MW peak, 2 cents/KWh, $65 million); early retirement of refrigerators (68 aMW, 68 MW peak, 3.2 cents/KWh, $84 million); commercial/industrial lighting retrofit acceleration (49 aMW, 81 MW peak, less than 2 cents/KWh, $100 million); commercial building tuneups and maintenance (39 aMW, 80 MW peak, 1.1-2.1 cents/KWh, $4-$7 million); small commercial/industrial retrofits (20 aMW, 33 MW peak, 4.2 cents/KWh, $73 million); and industrial efficiency acceleration (motors: 5 aMW, 9 MW peak, 1 cent/KWh, $4 million; compressed air: 15 aMW, 24 MW peak, 1.5 cents/KWh, $2 million; process: 34 aMW, 34 MW peak, 1.9 cents/KWh, $45 million).
Also: Energy Star clothes washers and other consumer products (9 aMW, 8 MW peak, 3.7 cents/KWh, $30 million); Super Good Cents manufactured housing (5 aMW, 4 MW peak, 1.6 cents/KWh, $13 million); VendingMi$er (8 aMW, 8 MW peak, 2.9 cents/KWh, $15 million); commercial/industrial air conditioning rebates (7 aMW, 21 MW peak, 4.9 cents/KWh, $37 million); grocery store refrigeration case retrofits (6 aMW, 5 MW peak, 3 cents/KWh, $15 million); and LED traffic lights (5 aMW, 5 MW peak, 2.7 cents/KWh, $6 million).
Total energy savings amount to 326 aMW, 426 MW peak, at a cost of $493 million to $496 million. "Savings and cost estimates represent the midrange of likely outcomes; actual results could vary by 10 [percent] or more in all cases," the report said. "Where numbers are particularly uncertain, a conservative estimate was used or a range was provided. Where possible, costs and savings are based on consensus assessments by the Regional Technical Forum and program experience in other regions."
Plug and Play Issues
Plug and Play will require several things, Gordon told the NEEC forum: new and enhanced utility and Alliance efficiency technical help and incentives; coordinated marketing and public relations, including the governors; cooperation from industries and trade allies; significant investments from customers; and quick decisions. Some of the proposed initiatives need a lot of collaboration, he noted, and some can be accomplished more quickly than others.
One uncertainty involves resources available for Plug and Play, financial but also human. "It's an interesting conundrum," said Power Council conservation manager Tom Eckman. "Everybody wants to do more [conservation]. They're running so fast trying to do more that it's hard for them to get together to think about doing more together." He said limited utility staff and a "decimated regional infrastructure" for conservation constrain the development of Plug and Play.
"Much of what's on the sheet is being done to a greater or lesser extent by utilities, but they're not doing it in a coordinated fashion necessarily," Eckman said. "To the extent we can get leverage from coordinated activities, we ought to try to." The Council will work to "shepherd" Plug and Play, he added.
Eckman and Gordon both said Plug and Play has received generally favorable reviews from people in utilities, regional energy entities, energy efficiency businesses and others introduced to the basic ideas. "They're all scratching their heads on how to make it work," Eckman said.
Timing, and specifically the duration of the energy crunch, is another issue. What happens when all these new natural gas-fired power plants start operating in the next three years, wondered NEEC member Paresh Parekh at the June 5 forum. "Is this going to be a same situation as before: forget the energy crisis, forget about conservation?"
Gordon responded that no one truly knows the future of electricity prices, but, "It's probably not going back to where it was two years ago. If it's much higher, this stuff is going to be looking pretty good. The price of [natural] gas drives the price of power. The price of power is going to drive conservation to be very attractive to utilities, even if there are a lot of gas plants." Later, he described Plug and Play as "an insurance policy" and "a hedge against uncertainty" for a volatile energy future.--Mark Ohrenschall
Bonneville Power Administration has found widespread utility interest in its energy conservation initiatives.
BPA's energy conservation and renewable energy wholesale rate discount doesn't officially kick in until the new five-year rate period begins Oct. 1, but as of mid-June more than 30 Northwest utilities planned to start early with discount-qualifying activities. Bonneville also is assuring utilities that any BPA load reductions they make to help lower the upcoming wholesale rate increase will not reduce their discount eligibility.
Meanwhile, BPA's Conservation Augmentation program has expanded to include utility offerings for commercial lighting, VendingMi$er installations, compact fluorescent coupons and more. The original ConAug approach inviting utilities to propose energy-saving initiatives to BPA had resulted as of mid-June in 23 projects expected to save slightly under 3 average megawatts; another 20 projects with potential savings of 12 aMW were under negotiations. Still, the Northwest Energy Coalition believes this effort has underachieved in failing to attract proposals from large publicly owned utilities with considerable conservation potential in their service territories.
BPA's acting energy efficiency vice president John Pyrch declared himself "real pleased" with the progress of these various initiatives. "Many utilities are getting on board with programs to help support load-reduction activities" to lessen the rate increase. "It reinforces our desire to get conservation ramped up and moving quickly." BPA continues to plan to achieve 220 aMW of programmatic energy savings over the upcoming five-year rate period, Pyrch noted.
Conservation/Renewables Rate Discount
BPA's conservation and renewables rate discount will offer utilities credits on their wholesale power bills for undertaking qualifying new activities. This .05 cents per kilowatt-hour discount will be part of BPA's rate structure come Oct. 1, but in February the federal power marketing agency began allowing customer utilities to get a jump on C&RD work.
"I have 33 utilities that have notified us they are starting early," Mark Johnson, BPA's C&RD program manager, told Con.WEB on June 15. Although he didn't identify the individual utilities, their BPA loads range from 1.5 aMW to 400 aMW. Altogether these C&RD early adopters account for some 2,170 aMW of BPA load, of which 1,440 aMW, or roughly two-thirds, come from so-called load-following utilities that depend entirely on BPA power.
"We haven't asked them specifically how much and what they're going to do" for the discount, Johnson said. "They have told us they're doing things this summer, and a lot of them are trying to make it part of their 10-percent load reduction" sought by BPA to reduce the wholesale rate increase.
Utilities that start discount-qualifying initiatives before Oct. 1 will not receive any additional funding beyond the amount allowed under their BPA net requirements forecast, according to the C&RD Web site.
BPA also recently announced some policy clarifications for the discount.
First, utilities that shrink their Bonneville load to help lower the rate increase will not lose any discount eligibility. "Bonneville felt that asking customers to reduce their actual load and to increase their energy conservation efforts would send the wrong message," according to a June 1 C&RD program update. "Customers should not lose conservation funding as a result of doing the right thing."
Utilities that spend 3 percent or more of revenues on conservation and renewables, and that raise retail rates, can keep their exemption from certifying C&RD qualifying activities as incremental. Otherwise, Johnson said, utilities in this situation would likely need to spend considerably more money to reach the 3-percent threshold for claiming this exemption. "Bonneville felt that a literal interpretation of this requirement would be a disincentive for [utility] customers who have actively pursued conservation in recent years, despite a lack of Bonneville funding," according to the program update.
The program update also lists additional deemed savings values for residential windows and insulation upgrades for weatherization. Johnson said BPA may add more deemed savings values for C&RD qualifying measures in the coming months, particularly in the commercial sector. "Beyond that, we're trying to make sure as few things as possible change between now and October," he said.
BPA's load-reduction exercise also will shrink the regional discount amount below the $40 million annual figure earlier projected, Johnson said, although the precise number remains uncertain.
Conservation Augmentation
BPA's Conservation Augmentation is intended to help fill the gap between available power supplies and anticipated loads from fiscal year 2002 through FY 2006. "BPA has reserved at least 150 aMW of the augmentation portfolio for conservation purchases that can meet the augmentation criteria," the ConAug Web site reported. That equals 10 percent of the minimum 1,500 aMW additional resources BPA anticipates it will need for the coming five-year rate period.
ConAug began as an initiative seeking utility proposals for energy-saving activities. This Invitation to Reduce Load through Conservation (IRLC) had resulted in eight signed agreements with utilities and 23 separate projects in progress, BPA's Tim Scanlon told Con.WEB on June 15. "This was a program to be kicked October 1 of this year. This is pretty accelerated implementation."
These 23 projects represent "a real mix" of residential, commercial and industrial conservation activities, he said. They are collectively forecast to save slightly under 3 aMW, at a cost of $6 million-plus. Another 20 contracts under negotiations could save 12 aMW for about $19 million; those include some large and lower-cost industrial energy efficiency activities, Scanlon said.
The Northwest Energy Coalition, however, believes the IRLC initiative has fallen short. "Given the high cost of market power and BPA's aggressive effort to avoid buying it, ConAug's progress is disappointing," wrote NWEC's Nancy Hirsh in the Coalition's Report newsletter from May. She cited the absence of proposals from BPA's largest public-power utility customers along Interstate 5 in Oregon and Washington, "whose service territories have the greatest potential for conservation." The big stumbling block, in her view, is BPA's requirement that participating utilities reduce their power take from the federal agency for ConAug energy savings. "Because they buy only a portion of their power from BPA, these partial requirements utilities see greater benefits in doing conservation on their own . . . Utilities have very little incentive to reduce load on BPA, because BPA's rates are cheaper than market purchases."
Scanlon said Bonneville had received one IRLC proposal for a large conservation project from a partial-requirements customer willing to reduce load. "That's a breakthrough for us," he said, acknowleding the importance of collaborating with large public-power utilities: "So much of the conservation potential lies in their service areas."
Additional ConAug Ventures
In addition to the IRLC, Bonneville has placed several other new conservation initiatives under the ConAug heading. These include a compact fluorescent lighting coupon program (see Con.WEB, April 30, 2001), a VendingMi$er installation initiative (see Con.WEB, May 30, 2001) and a limited standard offer for commercial lighting.
Pyrch said 64 BPA customers had signed up for the CFL coupon venture as of June 26.
Meanwhile, Bonneville had offered the commercial lighting limited standard offer to 42 utilities as of June 25; 15 had signed up and most of the rest are likely to participate, according to BPA's Steve Fucile. This program offers rebates for qualifying lighting system retrofits in commerial buildings, such as switching to T-8 lamps with electronic ballasts, compact fluorescent fixtures or light-emitting diode (LED) exit signs, or installing new energy-efficient lighting fixtures, occupancy sensors or programmable setback thermostats. Measures must show at least a 25-percent wattage reduction to earn rebates, which range from $7 to $200 apiece.
In addition, Pyrch said nearly 70 utility customers have joined the VendingMi$er program. Scanlon called this "our flagship rate mitigation effort. There are more savings from this one activity, installation of VendingMi$ers, in the short run than any other initative that we've put out to date."
BPA is also collaborating with the U.S. Army Corps of Engineers and the U.S. Bureau of Reclamation to replace incandescent light bulbs in Northwest dams with compact fluorescents. More than 12,000 CFLs have been delivered for installation, according to Pyrch.--Mark Ohrenschall
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Bonneville Power Administration has chosen seven proposed Northwest wind-energy projects with 830 megawatts in capacity for potential power-purchase agreements.
If eventually realized, these wind ventures would make BPA the largest wind-power supplier in the nation and increase America's total wind capacity by about 20 percent, according to the U.S. Department of Energy. They are also touted as competitive in cost with other new energy resources.
BPA announced June 25 its intention to sign pre-development agreements for seven prospective wind ventures, five in Washington and two in Oregon, all but one near the eastern end of the Columbia River Gorge. These were selected from BPA's recent wind energy solicitation that brought in 25 wind proposals totalling more than 2,600 MW capacity.
Environmental reviews and a study of wind-power's impact on the regional energy system will help determine Bonneville's eventual purchases from these proposed projects. Nevertheless, "We wouldn't start them if we didn't think they were good projects and there was a good chance of completing them," BPA renewables program manager George Darr told Con.WEB. "The projects themselves look viable at this point."
They were selected largely on the basis of cost and transmission availability, according to Darr. First-year weighted average energy costs for the seven proposals are below 3 cents per kilowatt-hour, excluding other power services, he said.
"Bonneville has structured a business arrangement that makes economic sense to both the ratepayers in the Northwest and the wind energy developers," said U.S. energy secretary Spencer Abraham in a DOE news release. "As a result of this process, Bonneville will be assured a long-term source of competitively priced power, while the developers will be assured of a stable, reliable rate of return on their investment."
Darr said BPA plans to finish pre-development agreements later this summer with the four developers: SeaWest WindPower, Zilkha Renewable Energy, Columbia Wind Power and Pacific Winds. Subsequent environmental reviews should take at least a year, after which BPA could sign power-purchase contracts. One of the seven potential wind projects could be operating by late 2002, he said, and the others are anticipated to start by late 2003.
Wind-Energy Gold Rush
BPA in February issued a request for proposals for 1,000 MW or more of output from new wind plants, as part of its quest for about additional power to serve its wholesale customers. (See Con.WEB, Feb. 28, 2001 for more on the RFP.) By the April 20 deadline, Bonneville received 25 proposals adding up to 2,600-plus MW of capacity and nearly 850 aMW of energy. "I think what our RFP did was create a gold-rush mentality in the Pacific Northwest" for wind-energy developers, Darr said at the time.
From these proposals Bonneville selected seven to pursue, four from SeaWest (totalling 505 MW capacity, according to the company) and one apiece from the other three developers. "These were the ones that met the cost test and didn't have some other problems that eliminated them from considerations," Darr said. "Transmission constraints were a huge consideration. A number of projects in Montana were proposed to us but there was no way to get the power out, no existing capacity east to west."
Three of the selected ventures would be located in Washington's Klickitat County, and one apiece in Columbia and Benton counties, also in Washington. The two proposed Oregon projects would be sited in Wasco and Gilliam counties. "Most are clustered on either side of the east end of the [Columbia River] Gorge," Darr said; that's the general location of several existing and/or planned wind projects as well as BPA transmission lines.
The seven proposed ventures range in capacity from 50 MW to 150 MW, with projected energy outputs all under 50 aMW. "Every one has expansion potential," Darr added.
The developers have all secured lease arrangements with landowners, and at least one developer has started gathering additional wind-resource data and studying local bird populations. "Most of these are at the front end" of the development process, Darr said. However, based on known information, "There's nothing that would scare us off from an environmental standpoint."
Another major consideration for BPA is a recently launched study assessing the effects of intermittent wind power on the regional energy system. "That is just critical," said Darr. "If it turns out there are large adverse impacts or costs we haven't accounted for, that will definitely affect how much we buy." Hydropower is the "bread and butter" of the Bonneville system, and BPA officials want to know any potential problems with incorporating large amounts of wind-generated power. "What I'm seeing from my own management is enthusiasm tempered with some caution about how these [wind] projects would affect the system," Darr said. He also mentioned a "parallel study" seeking ways to improve near-term forecasts of wind plant output.
Another uncertainty for the seven projects involves the federal production tax credit for wind energy, now 1.7 cents/KWh, which expires at year's end and has not yet been extended. "These guys are relying on the tax credit" in formulating their energy costs, Darr said. "I strongly suspect that if the tax credit is not renewed, none of these projects would go forward." --Mark Ohrenschall
The energy crisis has led to widespread shutdowns and curtailments among Northwest industries, but it has also kindled increasing interest in energy conservation.
"When you have a crisis that really hits the newspapers like it has, specifically since December, it captures management's attention," said Ken Canon, executive director of Industrial Customers of Northwest Utilities. "I think the uncertainty that it has created has . . . focused more attention on industrial conservation."
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A number of industrial companies, including Hewlett-Packard in Oregon and The Boeing Co. in Washington, have already recorded significant energy savings in recent months. Many others are intent on pursuing efficiencies: a June 13 industrial conservation teleconference presented by ICNU and the Northwest Food Processors Association attracted nearly 200 participants at 11 regional sites.
"I'm here to tell you [energy conservation] is worth the effort, and you may be able to achieve more than you think," Mark Steele of NORPAC Foods told the teleconference. "We know the economy's not in great shape. We're getting by with the help of cheap power, but it's clear this advantage may go away. We need to become more efficient to survive in a global market. Now is a critical time to do something about energy use."
Industrial plants around the Northwest collectively use a lot of energy, typically accounting for about one-third of the region's total electric load.
Industry also represents a potentially bountiful source of conservation--a bounty made more compelling with the energy crisis, although tempered by the reality that higher power costs also jeopardize the continued existence of many industries. The Northwest Power Planning Council reports that roughly half of the region's industrial energy load now sits idle. Energy efficiency is no panacea for struggling manufacturers, even in energy-intensive industries.
Still, energy conservation measures can help industrial plants slash operating costs, boost productivity, enhance operational efficiency and improve competitiveness. They can also help an industrial company's environmental performance and image.
But industrial energy conservation can also be quite challenging. It must compete with other internal priorities and, as a major barrier, regional energy costs that in many places remain low enough to make efficiency investments a difficult economic proposition. And industrial plants vary substantially in their operations, making standardized conservation approaches more difficult.
Industrial Energy Ranges
The Northwest is home to a great range of industries, from aluminum to steel to wood products to food processing to chemicals to computer chips to airplanes, and more. Their collective electricity consumption amounted to about 7,000 average megawatts in 1999, roughly one-third of the region's power, according to Terry Morlan, economic analysis manager for the Power Council's Power Planning Division.
But industries are quite different in their energy use.
"Energy does vary depending on companies," said ICNU's Canon. "Some are very electrically intensive. For some, it's 1 percent of production cost. For others [energy] may exceed 30 to 40 percent of production costs. The flip side is true on the natural gas side, where for some industrials natural gas is not an energy source, it's a feedstock . . . a basic raw material. I think that energy does vary in importance, but I think there's not an industry out there that would say that energy is unimportant, especially among my membership, 43 customers. They're all voluntarily spending money to participate in ICNU because they do have an interest in electrical energy." Canon described his membership as "the manufacturing fabric that underlies the Northwest economy," representing much of the region's non-aluminum industrial base and typically consuming more than 2,000 aMW.
Another distinction among industries and energy lies in the relative age of certain types of businesses. "There are industries in different stages of growth," said project coordinator Blair Collins of the Northwest Energy Efficiency Alliance. Industries in mature markets often regard operating costs, such as energy, as vital to competitiveness, while many fast-growing younger industries are likely to focus more on production.
In the wood products industry, studies have shown that electricity "can be as low as 3 percent of the cost of goods sold in manufacturing lumber, and up to 15 or 20 percent of the cost of goods in the highly refined materials," according to industrial consultant John Vranizan of Carroll, Hatch & Associates. "The more you manufacture, the more electricity becomes an element."
Boise Cascade Corp., as one example, uses considerable energy to make its paper and wood products. "Energy is a major operating expense," Norm Beckert, the company's purchasing director, told Con.WEB in early 2000. "It is the number three cost after fiber and labor," accounting for 15 percent of the Paper Division's manufacturing costs. (See Con.WEB, Feb. 25, 2000.)
At Seattle's Birmingham Steel, "Energy costs really have a tremendous impact on our competitiveness," vice president/general manager Ray Lepp said at a recent Association of Washington Business environmental conference in Seattle. "It's an integral part of our process. We use a significant amount of energy to melt scrap and roll it into rebar, angles, merchant bars, things used for construction. We consume an average of 32,000 megawatts of power a month. It's our second-highest cost and it gets a lot of focus." Recent conservation measures at Birmingham Steel have cut energy consumption per ton of steel production by more than 10 percent, he said.
Industrial Energy Conservation Potential
But while energy use clearly differs among industrial companies, one common thread is the possibility to reduce consumption of electricity, natural gas and other sources. That applies even for industries in which energy represents a small fraction of operating costs, according to commercial/industrial operations specialist Doug Finley of Portland General Electric.
"What I try to get them to focus on is that . . . [energy] might be the highest controllable cost they have," he told Con.WEB. "They can do something about it, as opposed to other parts of their business where they can't."
The Power Council's 1998 power/conservation plan identified 225 aMW of average cost-effective conservation available regionwide over 20 years in new industrial facilities, and 335 aMW in existing industrial plants (excluding aluminum smelters). These 560 aMW of prospective efficiencies have an average levelized cost of 1.5 cents per kilowatt-hour.
ICNU's Canon questions these figures, calling them "abstract technical potential for a hypothetical industry. It doesn't take into account the industrial stock we have in this region, the way each one of those facilities is very different, they're always changing, they're always making improvements." He also thinks the 20-year planning horizon is unrealistic.
Nevertheless, at the recent industrial conservation teleconference, Canon said, "Most plants have energy conservation opportunities."
Debate about industrial conservation potential is longstanding, according to Gil McCoy, an industrial energy engineer for Washington State University Cooperative Extension Energy Program. A "quick and dirty" audit of an industrial facility might uncover potential energy savings of 8 percent if these easily identified energy-saving measures are installed. "If you go in, take the plant apart, measure a lot of data, not be constrained to low-payback items, shut the plant down and rebuild to really be among the energy-efficient leaders within that particular industry, then maybe you can get 30 to 35 percent," he said. "The key, though, is that's our theoretical potential; developable, doable is closer to 8 percent."
Price-Driven Conservation Interest
Industrial conservation potential is also tied to economics, McCoy said. "Historically, industry has been pretty unwilling to invest in [efficiency measures] with less than a two-year simple payback, sometimes one year, occasionally three." But those payback limits are effectively stretched as energy prices rise, making more conservation cost-effective.
A number of people familiar with this subject see increasing demand-side attention by Northwest industrialists.
"I think that the current situation has many companies taking a fresh look at how they use electricity and natural gas," consultant Chris Robertson told Con.Web in January. "Clearly the price signals are being given to people . . . That tends to concentrate one's mind." His recent work with the microelectronics industry led to the conclusion that power reliability is the main energy concern, but also that "these companies do have significant opportunities for efficiency improvements. Those vary depending on which plant it is and what company it is."
Power Council conservation manager Tom Eckman also sees energy prices as the major reason for increasing industrial conservation interest. "Energy, not just electricity, is a much more important input all of sudden, economically," he said.
A big jump in electric bills caused officials of Tredegar Film Products in Tacoma to look more closely at energy conservation, technical supervisor Steve Ryczek told Con.WEB shortly after Tacoma Power added a 58-percent surcharge on industrial customer bills. "It's just getting hot," he said of conservation. Tredegar employees were turning off computers and lights when not in use, and the company also was exhausting warm air into a warehouse to reduce natural gas consumption. High intensity discharge lighting was under investigation, as was running some equipment at night. "We're taking these initial steps to see where it goes," Ryczek said in January. More expensive efficiencies, such as installing more variable-speed drives on motors, would likely follow.
Tacoma Power's industrial rate increase is among the highest in the region stemming from the energy crunch. But not all utilities have substantially boosted their retail rates, Canon noted--yet. "While we've talked a lot about increasing prices, it's more in the future, getting closer every day," he said. "In some ways that discussion has given people the opportunity to get kind of a jump start on doing some things now that can moderate the price increases coming this fall."
Conservation: No Panacea for Struggling Industries
For some industrial companies facing big increases in energy bills from their utilities or market prices, shutdowns or curtailments have been the response. The vast majority of the region's aluminum smelting capacity is closed, and several other plants, including Georgia-Pacific in Bellingham, WA, have also shut down.
Even industrial companies that have improved their energy efficiency are feeling the squeeze. Birmingham Steel's electric rate from Seattle City Light was 53 percent higher in June than a year ago, Lepp said, and will rise to 69 percent in July and likely higher still in the fall. "These kinds of increases are more than we can sustain," Lepp told the AWB environmental conference. "We're really concerned about the viability of our plant."
Tacoma Power has three large industrial customers that switched to market-based pricing three years ago, energy services account executive Steve Craig told Con.WEB in November. "They're all coming back into the fold on Oct. 1. They've had their fun with the open market and the grass is not greener on the other side." These firms can't conserve their way out of the energy crisis. "For those three customers, current energy prices far outweigh any types of efficiency projects they can do," he said.
Consultant Noel Shelton sees many industrial companies struggling to survive--but he also noted that efficiency is ingrained in their operations.
"I don't think that conservation is the focal point of their planning right now," he said in early January. "They're trying to figure out how to stay in business. They're energy-intensive; doing things more efficiently is part of a way of life . . . Any time you can do something better, at a lower cost, a lower operating cost, you certainly want to do that." Industrial companies use a lot of energy because that's the nature of their processes, not because they enjoy sucking up kilowatt-hours, he said. "In a competitive market, you do have to make improvements in your process because even in a mature industry, there are continual advancements. And you have to incorporate those; otherwise, you're left behind."
In Montana, some 1,000 industrial jobs have been lost in recent months, according to Don Quander, an attorney representing numerous Montana industries. That includes workers at Columbia Falls Aluminum Co. and Montana Resources, a mining company. Several more industrial firms "are pretty good prospects to be shut or curtailed this summer . . . Actually, most of Montana's industry is really on the brink."
Skyrocketing market prices have affected Montana "in some ways almost more dramatically than California," he said. "The impacts are severe for a state this size." The 2000 census counted Montana's population as 902,195.
Energy conservation by itself won't keep these industries afloat. Still, Montana industries have taken advantage of the self-directing conservation credits available through the state's universal system benefits program. "Last year, industrial customers claimed $2.6 million in USB credits," virtually all of which "went to conservation or efficiency projects of one kind or another," said Quander. And industries continue to search for ways to shrink their kilowatt-hour consumption.
"I do think in the long run most of them feel . . . for the next couple of years, [conservation] can be part of the solutions for their facility," Quander said. "I don't know of a one that hasn't done either external or internal audits and reviews of energy to find ways to be more efficient. They're all taking that pretty seriously. Those that manage to get through the situation will be leaner and more efficient than in the past. The economics of [conservation] projects look very different . . . Right now, the challenge for most of them is literally to stay in operation the next six months or so." --Mark Ohrenschall
A number of new laws relating to energy efficiency and renewable energy were added in Northwest states this year.
Washington will require investor-owned and publicly owned utilities to offer green power to retail customers, and schools and state agencies to conduct energy audits and install cost-effective conservation measures. Legislators and Gov. Gary Locke also agreed to lower the threshold for a state sales and use tax exemption for renewable energy sources, from 200 kilowatts to 200 watts.
However, to the disappointment of clean energy advocates, state lawmakers failed to pass statewide standards for efficiency investments and renewable energy resources.
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In Montana, an omnibus energy bill passed by the Legislature and signed into law by Gov. Judy Martz includes an extension of the state's public-purposes funding program through 2005 and a requirement for retail green power offerings by regulated utilities. Montana lawmakers and Martz also established a power pool supplied partly with conservation, endorsed tax breaks for some conservation measures and renewable resources, and created a revolving loan fund for alternative energy systems. Another law calls for state agencies to assess energy-saving potential in buildings and finance certain conservation measures with bond proceeds.
And in Idaho, state entities can now engage in energy saving performance contracting for state-owned buildings under a new law approved by legislators and signed by Gov. Dirk Kempthorne.
Washington Bills
Three energy bills were signed into law by Locke on May 8. The most substantial, Engrossed House Bill 2247, includes provisions for green power offerings by utilities and state facility energy conservation, as well as streamlining of the regulatory process for siting power plants and creating tax incentives for industrial self-generation.
"I am pleased that most of the energy package that I proposed last fall survived the legislative crucible to become EHB 2247," said Locke in a news release. "The bill balances the need to promote energy efficiency with the development of renewable and traditional energy sources."
Statewide Standards
Notably missing from Washington energy legislation this year are statewide standards for efficiency and renewables.
Locke had proposed a diversity portfolio standard requiring all Washington utilities to meet 5 percent of their load with a combination of conservation and renewables by 2007, and 10 percent by 2012, said Locke's energy advisor Dave Danner.
Meanwhile, the Northwest Energy Coalition had pushed for what it called a "CARE Package." The key components were a system benefits charge requiring Washington utilities to spent at least 3 percent of their retail electric revenues on conservation, renewables and bill-payment assistance, and a renewables portfolio standard mandating minimum non-hydro renewables loads of 5 percent by 2003, 10 percent by 2005 and 20 percent by 2015.
However, attempts to create statewide criteria for utility conservation and renewables failed, largely on philosophical grounds in the evenly divided Legislature, numerous sources reported. (There are 49 Democrats and 49 Republicans in the House; Senate Democrats outnumber Republicans 25 to 24.)
"The Republicans just felt that was too much intrusion, telling businesses, utilities in this case, how to do their business," said Al Aldrich, Snohomish PUD government affairs director.
Indeed, "I was very opposed to more government regulation," Rep. Larry Crouse, co-chairman of the House Technology, Telecommunications and Energy Committee, told The Seattle Times. The newspaper also quoted lobbyist Kristen Sawin of the Association of Washington Business: "If alternatives and renewables are truly cost-competitive, we will see the market go that way. Why create a state program?"
"What the Republicans objected to was that this was a government mandate on private industry," Danner told Con.WEB. "Our response was if we had diversified our portfolio and had made conservation investments years ago, we could have avoided many of the problems that we faced this year. We would have had a hedge against a low water year and volatile natural gas prices."
NWEC's Danielle Dixon said the final legislation "could have been worse," but she also believes it could have been much better. "We missed a significant window of opportunity to really move the state forward on a clean energy path, with restoration of investments in energy efficiency and diversifying our portfolio of resources." She observed "a lot of stakeholders and legislators backing into traditional philosophical positions" in a "very partisan" atmosphere on energy issues.
Also disappointed in the legislative outcome was Stan Price of the Northwest Energy Efficiency Council. "Painfully absent from this legislation is support for energy efficiency," he wrote in NEEC's April newsletter. "A curious outcome since the need for conservation tops every public pronouncement by policy makers when describing the solutions to our current energy predicament . . . If Washington does pursue this more expensive and risky path of building its way to electricity supply sufficiency (without rationalizing that investment by aggressively pursuing efficiency) and its inevitable consequence on rates, it will be interesting to see how attractive the state's business climate remains in the face of losing its historic place as an area with low electricity costs."
Some utilities did favor a statewide approach, including Snohomish PUD, with reservations. "Early on we supported the renewables portfolio standard in the governor's bill," said Aldrich. "We were doing a little bit of squabbling on the details," including seeking some allowance for the PUD's "considerable conservation efforts in the past. The public policy direction going toward a portfolio standard made some sense. We're always cautious about infringements on local control," he said, calling that "our ideological frog in the throat."
EHB 2247 ultimately included energy elements "considered to not be very controversial," Aldrich said. He and Danner both said legislators realized they needed to act on energy in some fashion.
Green Power, State Conservation, Sales Tax Exemptions
The retail green power provision reflects the compromise nature of the final bill. Republicans had heard about growing public support for renewables and increasingly favorable economics, according to Aldrich. "Part of their argument was, if that's the case, why wouldn't this stuff get a nice growth curve on its own?"
Starting in January 2002, each Washington IOU and public-power utility "must provide to its retail electricity customers a voluntary option to purchase qualified alternative energy resources." These are defined as produced by wind, solar, geothermal, landfill gas, wave or tidal action, wastewater treatment gas, some biomass and "qualified hydropower" that is fish-friendly. Utilities have choices on how they arrange for and offer these renewables, although the law states that all costs and benefits must be borne only by participating customers.
"I do expect it will result in the growth of renewable resources over the next several years," said Aldrich. "If it doesn't, we've all got to go back and rethink some of our assumptions on the dynamics of renewables."
A handful of Washington utilities have offered retail green power programs, including Benton PUD, Orcas Power & Light, Tacoma Power and PacifiCorp. Snohomish is among utilities with green power in its overall system mix; its portfolio includes 10 megawatts of BPA wholesale green power, along with landfill gas, hydro and cogeneration resources. "It probably means that we'll just end up reconfiguring and pulling some of those out of our total resource mix and offering it as a separate package," Aldrich said.
NWEC's Dixon believes this retail green power requirement "could be significant, or it could lead to not much happening at all. It depends on the success of utilities and environmental groups to work together." Renewable energy consultant Tom Starrs sees a mixed future for this provision. "As a practical matter, some of the more progressive utilities will take their obligations seriously and actually do something . . . and customers will respond quite favorably. Others will not take it seriously."
Another piece of EHB 2247 requires state agencies and schools (that have not already done so since 1997) to conduct energy audits in their facilities and implement cost-effective conservation, preferably through energy saving performance contracting. Danner called this provision "one of the very good things we got out of this session." He said the state Department of General Administration has estimated potential energy savings for Washington schools at $500 million over 20 years--"That's money we're now spending on energy costs that we could be spending on education"--and $75 million for state government facilities.
The law also states that new state-owned or state-leased buildings larger than 25,000 square feet of usable space shall be designed based on total life-cycle costs, and specifically, energy consumption analyses must include at least one alternative meeting the sustainable design guidelines in the LEED [Leadership in Energy and Environmental Design] silver criteria developed by the U.S. Green Building Council. "Just having them consider it is a monumental step," said Danner.
A separate bill, HB 1859, expands the sales and use tax exemption to smaller-scale renewables, now defined as 200 watts or larger, down from 200 KW or larger. This covers wind, solar and landfill-gas applications, as well as fuel cells. It "basically accommodates the smallest potential generating facility, all the way down to individual single-panel solar systems," said Starrs. "Reducing that size limit is very important," as it will reduce by up to 9 percent the total installed cost of qualifying systems. This sales/use tax exemption has already benefitted the commercial-scale wind-energy industry in Washington, Starrs said. "I've had developers tell me it's a significant factor in their planning."
Montana
Montana's public-purposes funding, known as the universal system benefits program, gained additional time through the passage of House Bill 474. The USB now runs through Dec. 31, 2005; the previous expiration date was July 1, 2003. The bill also earmarks at least 6 percent of USB funding for irrigated agriculture energy efficiencies. (See Con.WEB, May 30, 2000, for a story on the USB program ).
"There's always the concern that [USB funding is] a tax on consumers," said John Hines of the Northwest Power Planning Council's Montana office. "I think it was generally recognized by the legislators that these sorts of things are . . . real necessary all the time, and more necessary when we're in an energy crisis." Various proposals surfaced during the legislative session to change the USB, he said, but the only significant alteration is the irrigation efficiency piece.
HB 474 also includes a provision requiring a regulated utility to "offer its customers an opportunity to purchase a separately marketed product composed of power from renewable resources"--biomass, wind, solar or geothermal.
Another approved bill, HB 645, sets up a power pool "to make electrical energy available for resale through the conservation efforts of the customers contracting to become members of the electrical energy pool." Generated or supplied power also is eligible for this utility-administered pool.
"The intent of it is to provide for customers in the existing default supply, under the rate freeze . . . an incentive to conserve, to use energy more efficiently, to curtail power," said Hines. "Those kilowatt-hour savings will be sold to this demand exchange" and then to customers "at a rate significantly lower than the market."
Martz also signed HB 12, authorizing bond proceeds to fund certain identified energy conservation improvements in state facilities. Other new Montana laws create a revolving loan fund for residential and small business alternative energy systems, and provide tax breaks for certain residential conservation measures and geothermal installations, other renewable resources, and certain commercial-scale wind-generated energy on Indian reservation lands.
Idaho
Idaho state agencies can engage in energy saving performance contracting under House Bill 251, passed with only one dissenting vote in the Idaho Legislature and signed by Kempthorne on March 28.
This legislation is "very positive" for state facilities, said Ken Baker of the Idaho Department of Water Resources Energy Divison. It allows performance contractors to be selected based on qualifications, not simply low bids, he said. This should prove especially beneficial for public higher education facilities. "Universities will probably look at this first," said Baker. "They have so much deferred maintenance this will help take care of."
At the Idaho Energy Conference in November, physical plant director Darrell Buffaloe of Idaho State University lamented his statutory inability to do ESPCs for conservation projects. "Idaho State University wants to get involved in it as soon as we can," he said.
A statement in the bill called ESPCs "an affordable way for the Department of Administration, a university, or other public building manager to make investments in new energy-efficient equipment. The upgrades are made now--with no up front capital--and are paid for later through the energy savings that result. The benefits are immediate, getting new equipment expertise from energy service professionals, ongoing maintenance services and the ability to accomplish many projects all at once. Best of all, these savings can be guaranteed." This may create a net benefit for the state by financing capital improvements through energy savings instead of the general fund, the statement noted. --Mark Ohrenschall
More Information:
I had the opportunity to spend three weeks in Spain recently. My family was marking four birthdays, and my son has been there since last July attending school, so we decided to take advantage of having a personal tour guide/translator and make our first international family trip.
Geographically, this gave me the opportunity to leave the Northwest and California energy problems far behind, and I hoped that mentally I'd be able to do the same. The Western energy crisis does not get the same coverage in Europe as it does here; in fact, other than a rather complete report on ScottishPower's latest financial numbers, I was lucky to see a short energy story of any kind only once every four days or so.
But, energy bozo that I am, I couldn't help but notice things electricity related. And what most surprised me were the energy efficiency and demand-side management strategies that have been implemented in many places, apparently with the acceptance of the average Spaniard.
CFLs Everywhere
Just about every hotel and hostal in which we stayed had installed compact fluorescent lights. At one of the paradors--government-operated hotels in restored historic buildings--the hallways were equipped with motion sensors, so when no one was about the lights were out. Similarly, light switches in the hallways of the smaller and less upscale hostals were equipped with timers that automatically switched off lights after a minute or so. They could be turned back on with another touch of a switch if one needed more time; switches for doing so were placed strategically down the hallways. Restaurant servicios (rest rooms) were also equipped with the timed light switches.
Individual rooms in almost all the hotels had master light switches by the entry door, so the guest upon leaving could turn off all the lights with one touch of a switch. Two recently remodeled hotels took that concept even further: on the wall just inside the guest room was a key-card holder--similar to the device that unlocks the room door--for handily storing the key card (don't they always seem to get buried under something on the bed or dresser anyway?)--and for turning on the room lights. If you didn't park your key card there, the lights wouldn't work.
It also seemed that most hotels had low-flow toilets, plus those obligatory notes about conserving water by reusing the towels. One hostal turned the heat off in the afternoons--energy saving, yes, but not appreciated during our stay, as we got caught in a rainstorm and could have used a warm room for drying.
We spent most of our trip in the north of Spain, arriving in Madrid and heading to the northwest corner of the country, La Coruna, then east to San Sebastian and down to Barcelona. While Barcelona and Madrid are tourist meccas, many of the places we visited were off the regular tourist route, especially in early May; so I like to think we got some idea of how people actually live--in other words, the DSM tools we saw were not necessarily for well-traveled tourists but for the average Spaniard, too. In fact, when I initially complained about the dark hallways at one hostal, my son informed me that hallways in Spanish residential buildings, including his, are equipped with the timed lights, and that everyone is used to it.
Wind Turbines Galore
We did a considerable amount of driving during our trip. But the countryside was beautiful, and I saw a lot of wind turbines. Spain seems to be dotted with them--not the tall turbines of Vansycle Ridge, but short ones with big, slowly revolving blades. I understand Spain also has considerable hydroelectric resources, but we did not see much evidence of that, other than some high-voltage transmission corridors.
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I have to admit I didn't do much digging to find out more about Spain's energy supply or utility industry--I was, after all, on vacation, so my comments here are based purely on my observations. But the prevalence of DSM really made me think . . . Is this something the average American might also accept?
After my return to energy crisis central, my Energy NewsData colleague Ben Tansey told me about his recent stay at a Doubletree Hotel in downtown Portland, where upon checkout he discovered a $3 energy surcharge had been tacked on his room bill. Ben said the desk clerk at the hotel got defensive when asked about it, so I called Doubletree's parent company, Hilton, to find out more. Corporate communications vice president Kathy Shepard confirmed that Doubletree and other Hilton properties have added such surcharges to cover rising energy costs. Shepard said the hotels first implemented the surcharges in California in March, but in April the company extended them to 14 other states, including Oregon and Washington.
She added that the surcharge is temporary, and that all revenue collected goes directly to cover the higher energy costs the hotels have been paying--primarily natural gas, since retail electric rates in much of Washington and Oregon, at least, have remained relatively stable.
In earlier days, I wrote about the efficiency improvements Red Lion Hotels & Inns had made on its Northwest properties. Doubletree now owns Red Lion, so I asked Shepard about that. She told me that Hilton has had an ongoing conservation program and recently received an Energy Star award from the U.S. Environmental Protection Agency. The company has switched most lighting in its properties from incandescent to fluorescent, consolidated laundry operations to reduce energy use, and tried to consolidate occupancy on certain floors to avoid using more HVAC energy than necessary.
I told Shepard about the occupancy sensors and key-card devices I'd seen in Spain. She had seen them, too, in overseas hotels, but said, "I don't think we're there yet." She also pointed out that it could be expensive to retrofit large hotels with such devices, but thought we might see them used more often in new properties or remodels.
I hope we do.
I also hope--but doubt--we will see more of the Smart Cars that are the rage in Spain and other parts of Europe. DaimlerChrysler's Smart Car was the subject of a recent Newsweek article, as well as a report on National Public Radio, indicating the super-efficient, super-small vehicles are at least getting additional attention here.
Language Barriers
I realize, of course, that spending three weeks in Spain does not make me an expert on energy matters there, or on anything else Spanish. In fact, for much of our trip, I must confess to feeling very, very stupid--partly because of jet lag, but also because my one year of community college Spanish equipped me to understand little more than gracias and buenos tardes. Thank goodness my fluent son was there to be smart for me. If someone said something I didn't understand, Devon could translate it, and then it would all be clear. Having a personal translator made me feel much more secure.
Now that I am back on the energy crisis front lines, I find myself once again feeling stupid. Although I have spoken the energy language for more than 20 years and used to think I was fluent, I can no longer make sense of what's happening in the industry, regionally and nationally. Nor can I--or anybody else, for that matter--seem to come up with any workable solutions to the chaos created by the imbalance of supply and demand, and the industry's inability or refusal to learn from past mistakes.
I find myself once more wishing for a personal translator who can make it all comprehensible. So far, I haven't found one, so I guess I'll have to keep muddling through--or book another trip to Spain. --Jude Noland
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