61 & 39: Making Sense of U.S. Energy Efficiency

About a month ago I read a recent utility industry survey revealing that 95% of utilities anticipate their regulatory model changing over the next 10 years.  Some 57% believe it will change significantly. 

‘No kidding.” I sneered.

In plain English it means their industry model is shifting beneath their feet, as is ours.  How and can they make money, or even continue to exist?

‘Welcome to our world,” I thought.

Another article put forth that as the utility sector (again, like us) responds to a dramatically changing energy market, they (too) must adapt to remain viable and profitable.  Slowing ‘demand growth;” growth in energy efficiency (read: less energy sales); distributed generation (taking utilities out of the supply business); and a change in ‘generation mix” (i.e., coal and nuclear losing to natural gas); topped out the list of a dozen factors.

Distributed generation, as one example, brings considerable implications to the historical utility model, and could be a huge growth market for us if we can get the right technology to market.  Do the math on kilowatt hours average use for American households, convert it to Btus, and back into the gallons.  All of the sudden you gain back gallons lost to efficiency.  For utilities, recent industry reports claim that the United States is now installing one solar photovoltaic system every four minutes, and if market growth continues at the current pace the solar industry here could be installing a system every minute and twenty seconds by 2016.   This is perhaps more of a problem for the utilities in the short term than for us (save our loss of oil and propane sales to solar) ‘ if the utilities are not selling the kilowatts that’s a problem for them.  In a net metering environment where the utilities must buy back power from end-users (at higher rates than usual), that’s another problem for them.  Such pressure will force things to happen, and, directly, this will generate problems or opportunities for us.

Consider that 61% of energy is wasted by the U.S. economy each year according to a report by Lawrence Livermore National Laboratory released last year.  Given a slight reduction in total annual [energy] consumption, the US still wastes more energy than it uses. Another way of looking at this is that the United States is 39% energy efficient.

So, on the energy supply side, here are the choices:  Make money by selling BTUs, and/or make money by saving BTUs.

Consider Google’s $3.2 billion genuflect to the latter by way of its purchase of Nest.  In one svelte swoop, ‘home energy management” (a.k.a ‘HEM”) has become a household term and energy and business pundits are now describing Google as an energy company. 

Google’s Nest Learning Thermostat, selling for $249, and marketed with the tagline:  ‘The thermostat, reimagined by Nest,” is said to program itself in about a week. It creates a personalized schedule based on the temperature changes  made by the customer, and ‘continually adapts to your changing life.”  The ‘Auto-Away” capability claims that after you have left the house, the unit senses your absence and automatically adjusts the temperature to avoid heating or cooling an empty home.  If you want to know if you are saving energy when you change the temperature, the Nest ‘Leaf” appears on the device when you dial in a temperature that is energy efficient. Change the temperature from anywhere using your smartphone, tablet or laptop. You can also adjust your schedule and check your energy history.   ‘It guides you in the right direction,” says Nest.

Using my house in Vermont as an example, NEST claims the use of its thermostat could save me the following in a year’s time:  $60 to $931, depending on fuel type.

The unit has high geek appeal, looks like it belongs on the bridge of the Starship Enterprise, and uses 802.11b/g/n @ 2.4GHz and-or 802.15.4, all at @ 2.4GHz.  Bandwidth is less than 50MB/month upload and 10MB/month download (for software updates mainly).  Who thought the thermostat could ever be sexy?

At last count there were some one hundred and fifteen million households in the United States, and it is fair to say that most of them have a thermostat in one form or another.  In terms of Google’s ability to reach the energy consuming household in the United States the numbers are staggering, and they can sell savings and their hard product to oil, propane, electricity and natural gas users. 

The U.S. HEM market is poised to grow to more than $4 billion by 2017, up from $1.5 billion last year according to a recent GTM Research report. 

Things are happening.  All Aboard!

Shane Sweet is an energy and management consultant with clients in the heating oil, propane and motor fuel sectors. He served the industry as President & CEO of the New England Fuel Institute ‘NEFI” from 2007 to 2011, and as Executive VP/Director and Lobbyist for the Vermont Fuel Dealers Association ‘VFDA” from  1993 to 2007.


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