Making Energy Efficiency a Sustainable Business

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The right regulatory treatment is critical to the success of energy efficiency business models.

Written by Dennis Wamsted

Renewables may be in the limelight today, but the real story is the potential offered by energy efficiency. That, at least, was the conclusion of the executives participating in Wednesday's 10:30 am Critical Issue Forum, "Making Energy Efficiency a Sustainable Business."

"It seems like it has taken 100 years" to get state regulators to approve the company's energy efficiency proposals, confessed Jim Rogers, chairman, president and CEO of Duke Energy. But in reality it has just been three years, and the programs' potential is enormous. "We have no idea what is possible yet," he said.

Lisa Wood, executive director of the Institute for Electric Efficiency, which was established last year as part of the Edison Foundation, pointed out that one early estimate by the Electric Power Research Institute put the possible savings at some 400 billion kilowatt-hours over the next 20 years. While this amounts to more than 10 percent of last year's consumption, this is not even a "stretch goal," Wood told the audience.

For efficiency to truly take off, however, changes are desperately needed in the way utilities are regulated, the four panelists agreed. Ralph Cavanagh, co-director of the energy program at the Natural Resources Defense Council, summed up the panel's attitude: "The business model for the utility industry is broken and needs to be fixed-as quickly as we can."

While calling for speed, Cavanagh acknowledged that the changes almost certainly would take longer than some would like, since they must be done state-by-state. But he said he was optimistic about the eventual outcome.

One state where the business model has been changed is California, and Debra Reed, president and CEO of San Diego Gas & Electric, a unit of Sempra Energy, said utilities can prosper in this environment. SDG&E's rates have been decoupled since 2003, and yet it still has been in the top quartile for earnings in the past several years, she pointed out.

"I am almost a zealot on energy efficiency," Reed said. It is the common-sense option for utilities — cheaper than any generation option and with no emissions. "We need a lot of zealots," she concluded.