Negawatt market

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A "negawatt revolution" would involve the rapid deployment of electricity-saving technologies, such as heat pumps. Outunit of heat pump.jpg
A "negawatt revolution" would involve the rapid deployment of electricity-saving technologies, such as heat pumps.

Negawatt power is investment to reduce electricity consumption rather than investing to increase supply capacity. In this way investing in negawatts can be considered as an alternative to a new power station and the costs and environmental concerns can be compared.

Contents

Negawatt investment alternatives to reduce consumption by improving efficiency include:

Negawatt investment alternatives to reduce peak electrical load by time shifting demand include:

Note that time shifting does not reduce total energy consumed or system efficiency; however, it can be used to avoid the need to build a new power station to cope with a peak load.

Origin and development

A negawatt-hour is a unit of energy saved as a direct result of energy conservation measures, such as reducing the use of heat or electricity. The concept was developed after Amory Lovins authored an article published in the March 21, 1985 issue of Public Utilities Fortnightly arguing that utility companies will sell less electricity and more efficiency by marketing 'negawatts'. In Lovins' opinion, utility customers don't want kilowatt-hours of electricity; they want energy services such as hot showers, cold beer, lit rooms, and spinning shafts, which can come more cheaply if electricity is used more efficiently. [2] Lovins credited the term to a typo in a document by the Colorado Public Utilities Commission in which the word "megawatt" was misspelled. [3]

Negawatts are a form of encouragement to motivate consumers to conserve energy. [4] Lovins considers the concept of conservation "a change in behavior based on the attitude 'Do Less to Use Less.'" He makes a distinction between conservation and efficiency by defining efficiency as "the application of technologies and best practices to eliminate waste based on the attitude, 'Do the same or more with less.'" [5]

Cost for negawatt power can be calculated using cost-effectiveness analysis or CEA. For energy efficiency investments a CEA calculation produces the value of saved energy or negawatts in $/kWh. Such a valuation allows comparing the price of negawatts with price of energy such as electricity from the grid or the cheapest renewable alternative. Specifically, Tuominen et al. have suggested using the dynamic generation cost type[ clarification needed ] of CEA for energy efficiency investments as it includes the best accounting for the time value among the various CEA methods available. [6]

Lovins sees negawatt markets as a win-win solution to many environmental problems. Because it is "now generally cheaper to save fuel than to burn it, global warming, acid rain, and urban smog can be reduced not at a cost but at a profit". [2]

Lovins explains that many companies are already enjoying the financial and other rewards that come from saving electricity. Yet progress in converting to electricity saving technologies has been slowed by the indifference or outright opposition of some utilities. [2] A second obstacle to efficiency is that many electricity-using devices are purchased by people who won't be paying their running costs and thus have little incentive to consider efficiency. Lovins also believes that many customers "don't know what the best efficiency buys are, where to get them, or how to shop for them". [2]

In 2003 in France under the guide of Thierry Henry 14 scientists wrote "Le manifeste Négawatt." [7] Megawatt and negawatt seem to be reminiscent to the larger concept of ecological footprint, and by following this line of thought toward compatibility and comparability a second frame of concept seems appropriate: the impact in another frame or setting where units or numbers can not be compared (see paradigm shift).[ clarification needed ] See association négaWatt.

Market

Lovins has advocated a "negawatt revolution", arguing that utility customers don't want kilowatt-hours of electricity; they want energy services such as hot showers, cold beer, lit rooms, and spinning shafts, which can come more cheaply if electricity is used more efficiently. [2] Lovins defines the negawatt market as a way to reduce the gap between the cost of making and saving electricity. [8]

The negawatt market can be thought of as a secondary market where electricity is allocated from areas of less use to areas of greater use. [8] This would be a secondary market, due to the fact that it would reallocate electricity from one consumer to another within the already existing energy market. Some feel that to establish a viable market, legislation and cooperation between primary producers, distributors, traders and consumers, may be required. This proposal would encourage the market to have legislative regulations, while still allowing the market to work within itself to set prices and allocate resources. [9]

A negawatt market would allow "demand side resources" to participate in wholesale energy markets. These markets are commonly referred to as a demand response. Demand response can be defined as "enrolling large users of energy in programs to lower their usage in return for compensation, which helps take pressure off the grid" [10] This market would help take pressure off the grid because electricity could "be treated as a commodity just like copper or sowbellies," and therefore traded to areas that need it more than others. [11] As any commodity, negawatts would have to be "tradable across time and space" to be an effective market. [12] Being able to trade negawatts across time and space would allow for an international trading system. To create a market for negawatts, energy companies will need to put more focus toward energy efficiency. [13] This shift in focus would require a new "business structure that will thrive in the 'negawatt market'", which has not yet been developed. Market possibilities are being implemented internationally, implying that one day an official negawatt market will become a reality. [14]

Implementation

Government implementation

Negawatt power is being implemented in many states in the U.S. and is emerging as an international strategy to reduce energy consumption. "Test negawatt auctions began in 1999 in Connecticut and Georgia and more than a dozen utility exchanges were in existence" in 2000. In an effort to move toward energy efficiency, New York has created programs "supported through Energy $mart, which is run by the New York State Energy Research and Development Authority (NYSERDA), with money from a small surcharge on utility bills." [15] Negawatt power is implemented in California as well as Texas. "Some Texas congressmen and energy companies are trying to help California avert blackouts and utility price shocks this summer with [...] 'negawatts'. [16]

On January 1, 2009, the states of South Australia and Victoria (Australia) became the first in Australia to offer "householders energy efficiency incentives programs delivered via local electricity retailers." [17]

The British transmission system operator incentivizes off-peak use. [18]

Private implementation

The negawatt market is being used by governments and companies. Aluminum manufacturers in the Pacific Northwest shut down their power plants and sold the unused energy because selling the negawatts was more profitable for the company than selling the aluminum product. This was possible because "The smelters hold power contracts with the federal Bonneville Power Administration that contain clauses allowing them to market the electricity." [16]

The Associated Electric company in rural Missouri is implementing the usage and spreading the knowledge of negawatts by performing energy audits at their customer's homes to show them where they could be saving electricity. Rebates are being given to help customers pay for more energy-efficient, Energy Star appliances. Keith Hartner, the CEO of Associated Electric Cooperative Inc., feels that negawatts are generating savings for their customers and for the company as well: “The goal of this program is to save money not only at the generator but also at the meter for the members.” [19]

Individual households can practice negawatts through using energy-efficient lighting and Energy Star appliances as well as simply reducing standby power. The resulting savings sometimes offset the investment in new high efficient light bulbs and appliances. These efficiencies can offset a portion of the cost of a residential photovoltaic system. Negawatts reduces the overall size of the photovoltaic system required for the household, because they are consuming less electricity. This results in a faster payback period for the photovoltaic system. The City of San Diego has created a negawatts initiative called "Reduce then Produce" to promote this idea. [20]

Advantages

Cost

The most noteworthy advantage in creating a negawatt market is the cost incentive. As many will say, "The cheapest watt is the one that's never created." [21] In this market, the consumers who increase their home efficiency, or decrease their energy consumption, can earn money by selling the saved electricity. This is similar to an emissions trading or a cap-and-trade system, in which the energy that is not used can be bought from the consumers who saved the energy and sold to those who need to purchase the extra energy. Providers of electricity can encourage consumers to sell back their unused energy, or negawatthours, especially during peak hours. A major question that electric companies need to ask themselves is whether it is less expensive to pay consumers to reduce consumption for a few instances a year or to build and maintain a side-supply resource that would only be used a few times a year. Many argue that the "cost of foregone consumption is less than the cost of increasing the supply of electricity." [8]

If a consumer conserves a substantial amount of energy then there can even be an allowance for a tax deduction. According to the Negawatt Power Solutions Group, [22] a "building that achieved a 50% energy cost reduction may be eligible for tax deduction up to $1.80 per square foot." [23] Negawatts can help alleviate some of the costs of constructing new, efficient buildings. "The negawatt revolution now provides a way to cut construction costs, capture big returns on capital in renovations, [and] dramatically cut operating expenses." [24] Existing buildings can be made more efficient by renovating the insulation to cut back on electricity used for heating, installing more efficient light fixtures, and an upgraded HVAC design. Renovating a building to be more energy efficient will cost less than creating entirely new, more efficient buildings.

Reduction of national energy dependency

The reduction of the amount of energy that a region emits can slowly separate a nation from a high energy consumption of oil. The desire to become a less energy-dependent country may promote behavioral changes and a different societal outlook on energy usage. These potential societal perspective changes could lead to an overall more sustainable country. The reduced consumption of energy would also produce less greenhouse gases, which could have positive outcomes on the economy, political parties, and interest groups, such as environmentalists. According to Lovins, improvements in energy efficiency and conservation, due to a change in behavioral attitudes, have a huge potential to reduce a country's "long-term energy needs," such as the United States. [5]

Local deregulation

Some conservatives claim that the negawatt market could help nations or states have a deregulated electricity system. This would allow a nation or a state to experiment with "electricity deregulation," in which "demand reductions could be purchased with a minimum of disruption to businesses, workers and the economy." [16] In the United States, for instance, the negawatt market could assist California with rolling blackouts by making more power available from consumers who choose to conserve energy or increase their negawatts. California could achieve the goal of deregulation by allowing a deficit area to "purchase an emergency supply from anywhere within with West" [16] in which "the ultimate purpose of deregulation was to allow competition in the electricity market and consumer choice of electricity providers." [25] Negawatt power would allow the consumers in a country's economy to decide how the energy will be distributed: essentially benefiting regions that hope to have a deregulated electricity system.

Drawbacks

Difficulty in creating a negawatt market

Currently, there is no way to precisely measure the amount of energy saved in negawatts; it can only be theoretically determined based on the consumer's history of energy use. Visualizing has a very important role in “enabling residents to understand and manage their energy use,” which serves as a form of encouragement for consumers to conserve energy. [21] Without the visualization of the energy use, it is difficult to conceptualize negawatts because the consumer cannot see a precise value of the amount of saved energy. Smart meters are becoming a more developed technology to measure energy usage, but "consumers are calling on state regulators to move cautiously on smart meters, citing complaints in some states that the meters are raising electric bills rather than lowering them." [26]

Some municipally owned utilities and cooperatives argue that negawatt power "lets consumers treat electricity as a property right rather than a service [...giving them] legal entitlement to power [that they] don't consume.” [16] This would indicate that consumers would treat electricity as a property, not a service. Some people, including the senior vice president Joe Nipper from the American Public Power Association, oppose the idea that people would receive money for power that they did not even spend.

Electricity price caps may also need to be implemented in order for the emerging negawatts market to function correctly. [16]

Expense of efficiency

Saving energy by the negawatt and creating a negawatt market can present several drawbacks for manufacturers and electricity providers. Manufacturers are less inclined to make energy-efficient devices which meet a specific standard, such as Energy star's standard, because of increased time and cost, while receiving minimal profit. Overall, electricity providers may not want customers to use less energy due to the loss of profit. Some even argue that producing energy-efficient products, such as light bulbs, actually simulate more demand, “resulting in more energy being purchased for conversion into light." [27]

Customers may also be less inclined to buy products that are more energy efficient due to the increase in cost and time spent. "Even when the information is known and, despite the overall long-term cost-saving potential, the price of energy is too low...for individuals to justify the initial cost of energy efficiency measures." [28] Not only are energy efficient devices more expensive, but "consumers are poorly informed about the savings on offer. Even when they can do the sums, the transaction costs are high: it is a time-consuming chore for someone to identify the best energy-saving equipment, buy it and get it installed." [29]

The technology used to measure the amount of energy that a consumer uses and saves, known as smart meters, grid systems, or energy dashboards, require time for the consumer to understand. Some argue[ who? ] that people need to have access to “simple yet effective information systems to help users understand their energy without having to become technology experts.” [21]

See also

Related Research Articles

<span class="mw-page-title-main">Amory Lovins</span> American energy policy analyst

Amory Bloch Lovins is an American writer, physicist, and former chairman/chief scientist of the Rocky Mountain Institute. He has written on energy policy and related areas for four decades, and served on the US National Petroleum Council, an oil industry lobbying group, from 2011 to 2018.

<span class="mw-page-title-main">Distributed generation</span> Decentralised electricity generation

Distributed generation, also distributed energy, on-site generation (OSG), or district/decentralized energy, is electrical generation and storage performed by a variety of small, grid-connected or distribution system-connected devices referred to as distributed energy resources (DER).

<span class="mw-page-title-main">Energy conservation</span> Reducing energy consumption

Energy conservation is the effort to reduce wasteful energy consumption by using fewer energy services. This can be done by using energy more effectively or changing one's behavior to use less service. Energy conservation can be achieved through efficient energy use, which has some advantages, including a reduction in greenhouse gas emissions and a smaller carbon footprint, as well as cost, water, and energy savings.

<span class="mw-page-title-main">RMI (energy organization)</span> American sustainability organization

The Rocky Mountain Institute, commonly abbreviated to RMI, is an organization in the United States co-founded by Amory Lovins dedicated to research, publication, consulting, and lecturing in the field of sustainability, with a focus on profitable innovations for energy and resource efficiency. RMI was established in 1982 and has grown into a broad-based institution with over 600 staff and an annual budget of $120+ million. RMI's work is independent and non-adversarial, with an emphasis on market-based solutions.

<span class="mw-page-title-main">Soft energy path</span> Investment in renewables and efficiency

In 1976, energy policy analyst Amory Lovins coined the term soft energy path to describe an alternative future where energy efficiency and appropriate renewable energy sources steadily replace a centralized energy system based on fossil and nuclear fuels.

Energy demand management, also known as demand-side management (DSM) or demand-side response (DSR), is the modification of consumer demand for energy through various methods such as financial incentives and behavioral change through education.

<span class="mw-page-title-main">Demand response</span> Techniques used to prevent power networks from being overwhelmed

Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until the 21st century decrease in the cost of pumped storage and batteries, electric energy could not be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. There are limits to what can be achieved on the supply side, because some generating units can take a long time to come up to full power, some units may be very expensive to operate, and demand can at times be greater than the capacity of all the available power plants put together. Demand response, a type of energy demand management, seeks to adjust in real-time the demand for power instead of adjusting the supply.

The Texas electricity market is deregulated, meaning that there is competition in the generation and distribution of electricity. Power generators in the Texas Interconnection, managed by the Electric Reliability Council of Texas, participate in an energy-only electricity market and are compensated only for the electricity they produce. The wholesale generation market was deregulated in 1995 and the distribution market in 1999, with Texas Senate Bill 7. This replaced the prior system in which power was generated and consumed locally by the same utility with one in which retail providers contracted with generators across the state.

In energy conservation and energy economics, the rebound effect is the reduction in expected gains from new technologies that increase the efficiency of resource use, because of behavioral or other systemic responses. These responses diminish the beneficial effects of the new technology or other measures taken. A definition of the rebound effect is provided by Thiesen et al. (2008) as, “the rebound effect deals with the fact that improvements in efficiency often lead to cost reductions that provide the possibility to buy more of the improved product or other products or services.” A classic example from this perspective is a driver who substitutes a vehicle with a fuel-efficient version, only to reap the benefits of its lower operating expenses to commute longer and more frequently."

The electricity policy of Ontario refers to plans, legislation, incentives, guidelines, and policy processes put in place by the Government of the Province of Ontario, Canada, to address issues of electricity production, distribution, and consumption. Policymaking in the electricity sector involves economic, social, and environmental considerations. Ontario's electricity supply outlook is projected to deteriorate in the near future due to increasing demand, aging electricity supply infrastructure, and political commitments, particularly the phase-out of coal-fired generation. Policymakers are presented with a range of policy choices in addressing the situation, both in terms of overall system design and structure, and specific electricity generating technologies.

<span class="mw-page-title-main">Efficient energy use</span> Energy efficiency

Efficient energy use, sometimes simply called energy efficiency, is the process of reducing the amount of energy required to provide products and services. For example, insulating a building allows it to use less heating and cooling energy to achieve and maintain a thermal comfort. Installing light-emitting diode bulbs, fluorescent lighting, or natural skylight windows reduces the amount of energy required to attain the same level of illumination compared to using traditional incandescent light bulbs. Improvements in energy efficiency are generally achieved by adopting a more efficient technology or production process or by application of commonly accepted methods to reduce energy losses.

<span class="mw-page-title-main">Smart grid</span> Type of electrical grid

The smart grid is an enhancement of the 20th century electrical grid, using two-way communications and distributed so-called intelligent devices. Two-way flows of electricity and information could improve the delivery network. Research is mainly focused on three systems of a smart grid – the infrastructure system, the management system, and the protection system. Electronic power conditioning and control of the production and distribution of electricity are important aspects of the smart grid.

The environmental benefits of renewable energy technologies are widely recognised, but the contribution that they can make to energy security is less well known. Renewable technologies can enhance energy security in electricity generation, heat supply, and transportation. Since renewable energy is more evenly distributed than fossil fuels at the global level, the use of renewable energy technologies can also lead to decentralized and self-sufficient energy systems and reduce energy dependencies among countries.

<span class="mw-page-title-main">Electricity pricing</span>

Electricity pricing can vary widely by country or by locality within a country. Electricity prices are dependent on many factors, such as the price of power generation, government taxes or subsidies, CO
2 taxes, local weather patterns, transmission and distribution infrastructure, and multi-tiered industry regulation. The pricing or tariffs can also differ depending on the customer-base, typically by residential, commercial, and industrial connections.

There is a large array of stakeholders that provide services through electricity generation, transmission, distribution and marketing for industrial, commercial, public and residential customers in the United States. It also includes many public institutions that regulate the sector. In 1996, there were 3,195 electric utilities in the United States, of which fewer than 1,000 were engaged in power generation. This leaves a large number of mostly smaller utilities engaged only in power distribution. There were also 65 power marketers. Of all utilities, 2,020 were publicly owned, 932 were rural electric cooperatives, and 243 were investor-owned utilities. The electricity transmission network is controlled by Independent System Operators or Regional Transmission Organizations, which are not-for-profit organizations that are obliged to provide indiscriminate access to various suppliers to promote competition.

<span class="mw-page-title-main">European Movement for Efficient Energy</span>

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In public utility regulation, decoupling refers to the disassociation of a utility's profits from its sales of the energy commodity. Instead, a rate of return is aligned with meeting revenue targets, and rates are adjusted up or down to meet the target at the end of the adjustment period. This makes the utility indifferent to selling less product and improves the ability of energy efficiency and distributed generation to operate within the utility environment.

Energy Reduction Assets (ERAs) are revenue streams that are created by tracking the unspent portion of traditional energy usage.

<span class="mw-page-title-main">Home energy upgrades from public utilities</span> HVAC and power improvements to residences offered by service providers

Home energy upgrades from public utilities are added home energy efficiency and renewable energy features planned or installed by public utilities. Help from a public utility can make it easier for a homeowner to select, install or operate climate-friendly components. The utility might assist with coordinated use of utility-supplied energy, building features, financing, operating options and neighborhood supplied energy.

Integrated resource planning is a form of least-cost planning used by the public utilities. The goal is to meet the expected long-term growth of demand with minimal cost, using a wide selection of means, from supply-side to demand-side. For example, for an electric utility the US law defines IRP as a planning process that evaluates the full range of alternatives, including new generating capacity, power purchases, energy conservation and efficiency, cogeneration and district heating and cooling applications. The methodology requires the utility to be able to influence all aspects of the supply chain from production to consumption, so in the US it is used by many vertically integrated (non-deregulated) ones. IRP effectively ends with deregulation. The deregulated utilities still can engage in the IRP, and some interest returned in late 2010s.

References

  1. ↑ "Get back to using energy as efficiently as possible". Ontario Clean Air Alliance. Retrieved 2022-10-20.
  2. 1 2 3 4 5 Lovins, Amory B. (September 1990). "The Negawatt Revolution" (PDF). Across the Board. XXVII (9): 23. Archived from the original (PDF) on 2012-02-22. Retrieved 20 May 2020.|
  3. ↑ Lovins, Amory B.; Lovins, L. Hunter (1989). "Drill Rigs and Battleships Are the Answer! (But What Was the Question?)". In John K. Evans (ed.). The Oil Market in the 1990s. Routledge. doi:10.4324/9780429313271. ISBN   9780429313271. S2CID   214356249.
  4. ↑ Bartram, Rodgers, & Muise (2010).
  5. 1 2 Knickerbocker. (2001).
  6. ↑ Tuominen, Pekka; Reda, Francesco; Dawoud, Waled; Elboshy, Bahaa; Elshafei, Ghada; Negm, Abdelazim (2015). "Economic Appraisal of Energy Efficiency in Buildings Using Cost-effectiveness Assessment". Procedia Economics and Finance. 21: 422–430. doi: 10.1016/S2212-5671(15)00195-1 .
  7. ↑ "Manifeste Négawatt; réussir la transition énergétique - Thierry Salomon - Yves Marignac - Marc Jedliczka -". Archived from the original on 2012-04-26. Retrieved 2011-12-05.
  8. 1 2 3 Rochlin, Cliff (2009). "The Alchemy of Demand Response: Turning Demand into Supply". The Electricity Journal. 22 (9): 10–25. doi:10.1016/j.tej.2009.09.004.
  9. ↑ Fotopoulos, (2007).
  10. ↑ Gulyas, (2008).
  11. ↑ Lovins, Amory B.; Fickett, Arnold P.; Gellings, Clark W. (September 1990). "Efficient Use of Electricity". Scientific American. Retrieved 17 May 2020.
  12. ↑ Lovins, (1989). "The negawatt revolution-solving the co2 problem."
  13. ↑ (2010, May). Generating "negawatts".
  14. ↑ Weinberg, (2001).
  15. ↑ "Clean Technologies - Energy Efficiency | Alliance for Clean Energy New York, Inc". 2009-01-05. Archived from the original on 2009-01-05. Retrieved 2023-01-04.
  16. 1 2 3 4 5 6 Jim, (2001).
  17. ↑ Energy Matters. (2008, December 31).
  18. ↑ "National Grid raises discounts for off-peak electricity use". BBC News. 2022-10-20. Retrieved 2022-10-20.
  19. ↑ McCarty, (2008)." Archived 2019-05-05 at the Wayback Machine "
  20. ↑ CCSE Press Releases (2011), " Archived 2011-12-13 at the Wayback Machine "
  21. 1 2 3 Bartram, Rodgers, & Muise, (2010). P. 8-14.
  22. ↑ "NegaWatt". Archived from the original on 2011-07-11. Retrieved 2010-12-04.
  23. ↑ NegaWatt Power Solutions Group. (2009). " "NegaWatt". Archived from the original on 2011-07-11. Retrieved 2010-12-04."
  24. ↑ "A Sustainable Californian Future" . Retrieved 2023-01-04.
  25. ↑ "2005 Initiative Analysis: The Repeal of Electricity Deregulation and Blackout Prevention Act (version 2)". www.lao.ca.gov. Retrieved 2023-01-04.
  26. ↑ Peters, (2010). "Consumers wary of smart meters."
  27. ↑ The Economist, (2010). "Energy Conservation: Not Such a Bright Idea."
  28. ↑ (2010). "Generating "negawatts"."
  29. ↑ Economist, (2008). P. 78.

Works cited

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