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TCL&P and the Three-Dollar Car

Blog Archive | April 15, 2010 | By Jim Dulzo

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Spraying foam insulation into an electrically heated building’s outer walls can generate a lot of negawatts.

The most crucial thing Traverse City Light & Power folks asked us about our new special report, 20-20 by 2020: A Clear Vision for Clean-Energy Prosperity, was its call for helping customers cut their energy consumption by 20 percent in just 10 years.

“How can you guarantee that we’ll be able to do that,” they said, “when it depends so much on getting people to change their behavior?”

It’s a fair and important point: If an efficiency campaign fails, and the company finds itself facing more energy demand that it planned for, we get every utility guy’s nightmare: People shivering in the dark…a serious thing this far north. It could really mess up the company.

Depending on people to change their behavior can be very risky, for sure. In fact, TCL&Ps concerns about this remind me of something my brother, who works for Toyota, said about marketing the high-efficiency Prius hybrid. At his office, they call the Prius a “three-dollar car.” It sells quite well, but when gas goes above three dollars, it sells like wildfire.

In other words, people do respond strongly to price signals.

However, we are not suggesting that TCL&P double its low electric rates to get people to buy a high-efficiency refrigerator or keep their house at 62 degrees all winter.

How about a different approach: paying people to cut their power bills?

Here’s what I mean: While making its pioneering renewable energy plans, TCL&P considered building three $30 million, continuous 10 megawatt, biomass-burning power plants. What if they built just one, and gradually spent the other $60 million on cutting 20 megawatts out of base load demand? In other words, what if TCL&P spent big bucks on making negawatts (see my column), not new megawatts?

To do the math, you need to know about TCL&P’s customers: How many heat with electricity? How big is the summer air conditioning load? How big is the city’s heating, cooling, and lighting load? How much goes to streetlights? How much goes to car dealership lot lights? How much to big, industrial ovens?

In other words, where are the biggest opportunities to save megawatts and build up that precious supply of negawatts?

What if TCL&P said: Here’s $2 million dollars. Whoever makes the plan that saves the most megawatts for two mill - maybe a big bakery, maybe an efficiency company like the one cutting Benzie Central High’s power demand - gets the money.

What if TCL&P told landlords: We’ll replace your tenants’ electric water heaters with this new GE model that cuts electric use in half compared to current models? Today, those things retail for $1,500, but bulk purchase would force prices way down. But, even at retail, $2 million buys 1,300 heaters. How many megawatts would that save everyday? What landlord - or homeowner with a clunky heater-would say no?

What if TCL&P paid for injecting foam insulation into the outer walls and attics of the draftiest electrically heated homes? If it cost $4,000 per home, $2 million would cut demand from 500 very inefficient, electrically heated homesalmost in half.

Could TCL&P painted every flat roof in town with highly reflective white paint for that money? Nobel Prize physicist and U.S. Energy Secretary Steven Chu says white roofs are really the berries for cooling out building HVAC systems on hot days. How many megawatts would that save?

And what if, as Ann Arbor is doing, Traverse City replaced all street, traffic, office, and yard lights with new-fangled LEDs-the next wave in high-efficiency? It would cost a fat bundle, maybe more than $2 million, but eliminate huge demand compared to standard bulbs, and large demand compared to fluorescents.

So, spending $10 million on all of the above, do we permanently save 20 megawatts-or generate 20 million negawatts?

For doubters, I’m gonna say, “No! Turns out we only saved 10 megawatts! Darn!“

Here’s the kicker: Even if it works out to just five megawatts, it’s still a good deal: That’s still half the output of a new, $30 million plant, about one third the cost of building it. And we’re not even talking about plant operating expenses.

Careful comparisons only strengthen the case. Thirty million probably does not include interest on the plant construction loan, and costs like new transmission lines, fuel, operation and maintenance, ash disposal, and more.

Utilities often look at new plants as 20-year investments; once the things are paid off, they practically print money. Homeowner and businesses, however, look at efficiency as two-to-five-year investments; they want their money back fast.

Putting the efficiency bucks on the utility’s books, not its customers’, changes the equations drastically, because it becomes part of that 20-year timeline, right next to the plant loan pay-off, for fair comparison. But, not even counting capital costs, what does 20 years of fuel, operation and maintenance, and ash disposal cost for just five megawatts of power? Probably not much more than $10 million.

Now, the profit-minded among us, including yours truly, might ask: How the heck would TCL&P stay in business while giving stuff away to reduce its sales?

That’s why next, we’ll look at the fine, mysterious arts of financing and decoupling. Meanwhile, are you at least kicking the tires on that three-dollar car?

Jim Dulzo is managing editor of the Michigan Land Use Institute. Reach him at jimdulzo@mlui.org.

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