The Utility of The Future

girlwplantReducing consumption of electricity and natural gas means lower customer bills, healthier air and water and fewer greenhouse gas emissions. That’s why I believe that energy efficiency must be at the center of our nation’s energy policy. And utilities, like PSEG, are uniquely positioned to deliver those benefits to our customers, our country and the next generation.

The cheapest, cleanest energy is the energy you don’t use. Energy efficiency is by far the cheapest method of reducing greenhouse gas emissions. Unleashing the full power of energy efficiency would save consumers billions of dollars nationwide—mitigating if not entirely offsetting the cost impact of necessary upgrades to our systems.

The environmental benefits of energy efficiency are equally impressive.  The U.S. Environmental Protection Agency estimates that energy efficiency improvements can achieve 23 percent of its carbon reduction goal for the nation through the year 2030.

Unfortunately, energy efficiency has been the forgotten option. The U.S. ranks 13th among the world’s 16 largest nations in energy efficiency, ahead of only Russia, Brazil and Mexico.

Why? The research points to a variety of factors – consumers lack information about the benefits of efficient products, have limited resources (money or time) available for energy-related investments, or are skeptical about whether energy savings will materialize and justify their investment.  In other words, energy efficiency just isn’t a priority for most people or businesses – even when it makes strong economic sense.

Utilities can help close the energy efficiency investment gap. Companies like mine are patient investors that can put to work our energy expertise, our brand and customer relationships and our commitment to serve the entire population.

PSE&G’s New Jersey experience illustrates the potential utilities have to close that gap. We have invested about $300 million, are helping customers reduce their energy bills and recently received approval
to invest an additional $95 million. Our hospital program is helping 34 facilities save more than $11.5 million a year in energy costs. That’s money that can be put into updating the cardiac care equipment or the 40-year old HVAC system.  In addition, we helped make the air a bit cleaner.  It’s also money that a hospital CEO is unlikely to invest in energy efficiency in the face of investment choices he is faced with to save people’s lives. It’s just a fact of life.

Chiller installation at Morristown Memorial Hospital

Chiller installation at Morristown Memorial Hospital

Our energy efficiency efforts are a great source of pride and frustration. We have made a difference in the communities we serve – making tens of millions of dollars available to provide better medical care. And at the same time we are confronted with the reality that these are isolated successes, that enormous potential of energy efficiency goes ignored.

Making that potential real is a role that’s tailor-made for a utility. We have the ability to bring newer, cleaner energy options to all through our robust relationships and delivery systems.

But, it will require utilities and regulators to embrace new ways of thinking and new business models. Most electric utilities are still financially rewarded when customers use more energy. That made sense 50 years ago, but it is precisely the wrong incentive today.

Companies like mine will need to work together more closely with customers than ever before – looking at ways utilities can play a major role in expanding access to energy efficiency.

When a utility invests in energy efficiency, it creates a dynamic where even if rates go up, bills come down. New rules can help make this happen by incenting utilities to invest in energy efficiency improvements to help our customers reduce their bills, much as we have traditionally invested in pipes and wires to provide them with reliable energy. That means there has to be a formula that makes up for the revenue that we lose as a result of energy efficiency in order to cover the cost of investment in the electric grid.

We need to make it a win-win-win.  A win for the customer with lower bills.  A win for the environment with cleaner air and a win for the utility so that the utility will do more energy efficiency.

The utility of the future must be aligned with the needs of our customers and the larger society around us. We believe that means providing energy in ways that lower customer bills and better safeguard the environment. Energy efficiency is an unmatched opportunity to accomplish both.

I’d like to start a dialogue on this subject.  What are your thoughts?

ALL_BLOG_IzzoRalph Izzo,
Chairman, President & CEO
PSEG

10 thoughts on “The Utility of The Future

  1. With energy options in regards to suppliers, I wish I could opt to have PSEG be my supplier. Also, a nice incentive wold be to offer employees solar options for their homes, sharig the green cresdits with the company or trading them directly for stock. I have worked at Salem/Hope Creek for over 25 years and livce in Salem County.

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  2. There are few things more important to America’s future than our energy policy direction. It is gratifying to know that some of the industry’s leaders are thinking about the future and working on policy to secure our energy future. Lower costs and an improved environment would seem to be a welcome argument with public policy makers.

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    • Our weather pattern is changing, which poses new challenges to maintaining reliability. The three worst storms in our company’s 112 year history occurred in the last five years. Last year, we embarked on a new effort, called Energy Strong, to harden our systems and improve resiliency against future storms.

      Among other measures, this involves upgrading 250 miles of gas pipes located in flood zones and lifting off the ground and fortifying 29 electric facilities that were left under water by Superstorm Sandy or Hurricane Irene.

      At the same time, reliability has become more important than ever to our customers. We are seeing an ever-increasing dependence on electricity in our customers’ lives – and an ever-increasing demand for reliability. The average home has 25 electric appliances and devices, virtually all needing to be plugged in or recharged. Everything is becoming much more electrically connected and thus the need to maintain higher degrees of reliability.

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  3. As a PSE&G customer since 2001, I have always had a wonderful experience with PSE&G. I want to sign up for Green Mountain Energy, one of the best renewable energy company in the country, as my electricity supplier but doesn’t seem to be available. Any possibility in the future?

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  4. Ralph, if you do it right, efficiency gains can result in greater generation and consumption of electricity as replacement for other energy sources. Just look back on what happened to coal demand after James Watt’s improvements to Thomas Newcomen’s “atmospheric engine”. Watt’s introduction of the separate condenser boosted steam engine efficiency by a factor of about four. This made use of the new engine economical in a multitude of new applications, and though each engine accomplished four times as much work per ton of coal, the number of engines in use grew by orders of magnitude. If today we could introduce electric surface transportation that was a hundred times more efficient than the electric cars currently offered, and didn’t even require the initial consumer purchase, then the adoption rate of this new transportation mode would dwarf the efficiency gain and electricity demand would rise by offsetting massive quantities of refined petroleum fuels. This will be a ” win-win-win”. The USDOT has invited me to give a presentation this July at the Office of Freight Operations and Management. Why should PSEG not learn more? Didn’t PSEG used to be Public Service Electric, Gas, and Transport? And as an operator already of both underground (gas) and electric distribution systems, would PSEG not be well positioned to at least pilot an electric powered underground “capillary” guage small format parcel transport network? (Such a network could save energy, congestion, accidents, emissions, time, and petroleum, by moving small payloads without the necessity of operating a car!). What are your thoughts?

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    • Thanks Robert for the comment and question.
      While we are always looking for new opportunities to grow our business in ways that provide public benefits, which is why we actively promote the use of electric cars. We have to be mindful our own capabilities. While proud that our history includes transportation, we have not been active in that space for several decades. Building and managing an underground electric transportation system would be beyond our expertise and competencies.

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      • By that reasoning, how did PSEG ever get started in nuclear power? They didn’t have nuclear experience before they began nuclear operations. They didn’t have solar experience before building solar, either. Without having the experience of building and managing a new transportation utility, how can you know in this case that you cannot provide a valuable new public service and profit by it… without even trying to learn anything about it? Is this what Ralph meant by saying in this very article that PSEG would need to “embrace new ways of thinking and new business models”?

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  5. Information is Power. Some business out there knows details about me, out of hundreds of million of people on their database, so they can sell stuff to me why can’t this be done by the utility companies. The Utility of the Future should know all the details of individual customer loads. All customer Main Service Panel should be smarter so different loads can be monitored. Link these data to customer computers and PSE&G. With all these detailed information, it is easy to implement any energy related solutions.
    And what about SOLAR Energy. I think we now have all the technology that are needed, to know everything about solar energy. We should be able to determine in advance the energy generated by solar farms and residence with solar panels at anytime of the day, base on weather patterns, cloud formation, panel surface angle to the sun etc. If PSE&G has this information it can optimize it’s energy delivery portfolio in the area and a lot more.
    I

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