Sometimes the system works. Sometimes public policy encourages responsible yet profitable action by the private sector, and that private sector action can lead to benefits for customers and the environment. The recently proposed energy efficiency program by Ameren, in the State of Missouri, might just become an example of that, despite the conservative figures.
Ameren Missouri has submitted its new energy-efficiency programs to regulators. If approved, the utility expects to invest about $135 million over three years and anticipates that investment will yield customer energy savings of more than $260 million over 20 years. The utility has been investing in energy-efficiency programs since 2009. The last three-year plan that began in 2013 has been regarded as a success.
For the 2016-2018 plan, Ameren provides energy saving options ranging from energy-efficient lighting to HVAC replacement rebates and more for residential and business customers. The program, referred to as ActOnEnergy, also has included utility-installed energy-efficient equipment in low-income tenant housing.
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Customers save money, but successful efficiency programs also mean the utility can avoid or put off the time and expense of building new power plants.
The enactment of the Missouri Energy Efficiency Investment Act (MEEIA), which went into full motion in 2011, gives utilities an incentive to provide successful energy saving programs. The law, as Ameren sees it, treats investments in energy efficiency in much the same way it treats investments in the infrastructure necessary for delivering power, and allows for cost recovery.
These programs are also available to Ameren customers in Illinois, as a result of SB 1592, the electric rate relief and reform law. This law and the subsequent programs provided $1 billion in refunds to Illinois electric customers. It also required Illinois utilities to reduce overall electric usage by 2 percent of demand by 2015, and supply 25 percent of their power from renewable energy sources by 2025.
The policy and legislation has encouraged Ameren and other utilities to create programs, which create cost saving opportunities for their customers, while reducing the impact of power provision on the environment. However, the utility, which serves 1.2 million customers, said “energy efficiency is becoming increasingly important, especially in light of federal plans to reduce carbon dioxide from the power sector. However, it is also becoming increasingly hard to achieve energy savings”.
“It is fair to say that the ‘low hanging fruit’ is harvested first and additional savings become incrementally more difficult and costly to achieve,” Ameren continued in the PSC filing.
The utility pointed out that its latest three-year plan does not save as much energy, for money spent, as did its previous three-year plan. The new plan spends almost as much, 90 percent, yet achieves only 54 percent of the energy savings.
“This is not by any means an indication of a decrease in Ameren Missouri’s commitment to energy efficiency,” the utility said. “Instead, it is a manifestation of a dynamic marketplace that has already seen significant evolution from three years ago.”
Several factors are making it harder for utilities to achieve their own energy savings goals. These include federal appliance standards that are separately driving down home energy use.
Lower energy costs also impact the cost-effectiveness of energy efficiency programs. When energy costs are high, there is a greater gap between what it costs to produce energy and what it costs to save energy. Today’s lower power and natural gas costs diminish the gap and make energy efficiency savings look less impressive.
“This market price decline impacts the cost effectiveness of energy savings and can cause previously marginal measures to no longer be worth offering based on economics,” the utility said.
Whilst this does not represent a perfect system, it is a step in the right direction for customers and the environment. In addition, as similar models are reproduced across the world, it creates huge opportunities for the smart building, energy efficiency and renewable energy sectors.
Creating this type of energy policy with defined short-term targets that technology providers can depend on, will create the stability needed to further develop such technology. It all starts with the right policy, a system of incentives and penalties that keep utilities profitable and encourages the widespread deployment of smart / energy efficient technology.
Once the policy is in place, the creativity of the utilities and the technology providers comes into play. Ameren is showing just such creativity, its customers can also save money by signing up for its Power Smart Pricing (PSP) program. Although not technically a part of the company's Act on Energy program, PSP also encourages efficiency. Launched in early 2007, it has saved customers an average of 15% on the supply portion of their electricity bills.
PSP changes the way customers pay for electricity. Under Ameren's standard residential rate, the price you pay per kilowatt-hour only varies between summer and non-summer months. Participants in the PSP program pay wholesale market prices, which fluctuate hourly, instead of the traditional averaged flat rate. Customers can manage their electricity costs by taking simple actions to conserve energy during hours when prices are higher. Participants have more control over electricity use, and consequently, more opportunity to save. The program also eases stress on the electric grid, especially during high demand periods, leading to more reliable service, lower carbon emissions, and less negative impact on the environment.
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Though progressive policy, new technology, creative pricing and reduced pollution levels, energy efficiency can benefit all parties, not least the “smart” technology industry.