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.
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?
Ralph Izzo,
Chairman, President & CEO
PSEG
