Market Transformation: Getting the Most Out of Every kWh,

and Why It Matters

Excerpted from Powering the People 2011

Prepared byRobert Marritz

ElectricityPolicy.com

July 2011

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Market Transformation: Getting the Most Out of Every kWh, and Why It Matters The US economy is getting a boost from energy efficiency at every level,

through innovative technology, standards, policy, and compelling

economics. But we’re still a long way from where we need to be. Moderator: Gregg Easterbrook, author of Sonic Boom, and Contributing Editor to Atlantic Monthly,

The New Republic and The Washington Monthly.

Panelists: Susan Story, President and CEO, Southern Company Services, Inc.,

John D. McDonald, Director, Technical Strategy and Policy Development, GE Digital Energy,

Claire Fulenwider, Executive Director, Northwest Energy Efficiency Alliance, and

Ralph Cavanagh, Co-Director, Energy Programs, Natural Resources Defense Council.

Gregg Easterbrook: We have a very

distinguished panel today and I want to

encourage audience questions from those who

are here and from those watching via webcast

around the country. Let‟s start at the top with

the presidential question. The President has

stopped talking about greenhouse gas

emissions and has begun to talk about clean

energy mandates. Are they one and the same?

Ralph Cavanagh: They are not one and the

same, Gregg, but happily there are numerous

clean energy solutions that also reduce

greenhouse gas emissions. First and foremost

is the one that I think is the central subject of

this panel, which is energy efficiency. It‟s nice

having Claire Fulenwider here as the

representative of one of the premier regional

energy efficiency acquisition bodies in the

country.

I believe it was the Northwest that pioneered

the concept of energy efficiency as a clean

energy resource – as the functional equivalent

This discussion is an edited version of a Market Transformation discussion

featured at The Edison Foundation’s

“Powering the People” conference,

held in Washington, D.C., in March.

We thank Lisa Wood and the

Institute for Electric Efficiency for

the opportunity to present this

valuable information.

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of a power plant. Today, as Claire knows, the

Pacific Northwest has, in 30 years, displaced

the equivalent of ten giant coal-fired power

plants. They have also cut the region‟s electric

bill by more than two billion dollars a year.

That‟s a pretty good story.

Easterbrook: So clean energy sources are the

same thing as greenhouse gas regulation?

Susan Story: When you talk about clean

energy, it‟s more than greenhouse gases.

Clean energy is how we provide electricity –

and I agree with Ralph that energy efficiency is

a long-overlooked component of that – but it

also includes traditional generation that we can

do cleaner: 21st century coal, new nuclear,

renewables.

bout energy efficiency: It‟s not just

what happens in customers‟ homes –

it‟s also one of the results we expect to

get from a smarter grid. One of the

components that people don‟t think about

with Smart Grid is how much we can save in

terms of transmission line losses and actually

get more energy efficiency from the grid.

When we talk about a clean energy portfolio,

from the Southern Company‟s standpoint,

everything has to be on the table. We need a

diversified portfolio. We don‟t want to put all

our eggs in one basket. It‟s all important.

Ralph and I agree that technological advances

will provide a lot of the answers. And I think

that what we define as a clean energy portfolio

today may be very different in five years,

based on technology.

Easterbrook: Technological advances in

conservation or in production?

Story: In everything – in production, in the

grid. EPRI [the Electric Power Research

Institute] has said that we can probably save

four to six percent just from efficiencies in

transmission and distribution. Then you look

at customers‟ homes and all that we can save

there. And we can be more efficient in the

production of electricity. Technological

advances in efficiency go from end to end.

Easterbrook: Claire Fulenwider, there is a lot

of emphasis on avoiding building new power

plants. But don‟t we want new power plants,

because they are cleaner than the ones they

replace?

Claire Fulenwider: They are, but we don‟t

necessarily want new power plants. What we

do want is to get more productivity from the

energy we have – to maximize the benefits

from what we produce and reduce the unit

cost of that production. If we can get more

productivity from the plants that we have,

that‟s cleaner. If we look to zero waste, or

minimal waste, we will have less greenhouse

gas emissions. They are related; they‟re not

equivalent.

Easterbrook: John McDonald, I assume

General Electric wants to build new, advanced

power plants, right? That‟s your piece of this

puzzle, right?

John McDonald: There is really a balance

within GE. One aspect of GE is how we can

make power plants more efficient with a total

optimization strategy. There‟s a lot to be

gained from that.

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nother side is the business that I am in

at GE implementing more energy

efficiency – both on the grid side, as

Susan said, where we have a

tremendous opportunity to reduce losses.

[FERC] Chairman Wellinghoff has said that if

we can improve the efficiency of the

distribution system by just a couple percent,

we would avoid building 42 new coal-fired

power plants. There are tremendous savings

there. We have the communications

technology now, which was an obstacle

before, to blanket a wide geographic area for

distribution system improvements.

But there‟s also energy efficiency on the

consumer side. Getting on the consumer side

is new for us, and there‟s real potential for

savings there.

Easterbrook: John‟s boss, [GE CEO] Jeff

Immelt, has said that the US energy

production industry is stuck in the year 1935 –

that very little change has happened. Yet we

see other industries changing so fast that you

can‟t keep track of them. Why is change in

energy so slow?

Story: I don‟t agree that it‟s slow. The

Southern Company has been investing in a

smart grid for 20 years. We‟ve put smart

devices on our transmission lines, and in some

of our distribution substations for decades.

And we continue to invest. Are there things

that we could move faster on? Absolutely.

But I don‟t agree that we‟re stuck in 1935.

The energy efficiency services we provide to

customers, the technology to reduce SO2,

NOx, and other emissions – those are real

advances.

Left to right: Moderator Gregg Easterbrook; Panelists:

Susan Story; John McDonald; Claire Fulenwider (partially

obscured); and Ralph Cavanagh.

Easterbrook: Well, what year do you think

we are in? 1985? What year is power

production in?

Cavanagh: Let‟s not limit it to power

production! For example, Gregg, the

illustration I thought you were going to use –

the „30s would be great if we were talking

about incandescent light bulbs, which of

course are 125 year-old technology. But GE,

Sylvania, and Phillips have now rolled out the

first significant improvement in incandescent

technology in 125 years. The spur for that

was the Federal Lighting Efficiency Standards,

adopted by large bipartisan majorities in 2007,

which some have been questioning recently. I

think that‟s a rather wonderful illustration of

just how effective standards can be.

hat kind of innovation, that kind of

retooling, is part of what a 30-year

tradition of standards has brought us.

That‟s a tradition that was begun by Ronald

Reagan, as governor of California, when he

authorized the first state efficiency standards.

That was followed up by then-President

Ronald Reagan when he signed the National

Appliance Efficiency Act of 1987.

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Easterbrook: We‟re talking about

two separate things here. We have

efficiency standards for products

like light bulbs, air conditioners,

and so on. And we have state and

possibly federal level portfolio

standards for utilities. Are these

things in conflict? Do they have

anything to do with each other?

Fulenwider: I think they work

together very closely, or at least they have the

potential for that. Federal standards are now

on a very compressed schedule; there are

probably 80 standards that need to be

promulgated within the next 18 months to

meet the required time frames. Those

standards, once implemented, will greatly

assist utilities in meeting the efficiency

components of their portfolio requirements.

Easterbrook: Eighty standards? What‟s the

range, Claire?

Fulenwider: It involves equipment in the

home, appliances for residential and

commercial building applications.

Cavanagh: Almost everything in your house

or your office has been improved over the

past 30 years by efficiency standards at both

the state and federal level.

Fulenwider: This gets to your comment that

the industry‟s response is slow. Part of the

reason efficiency is projected to meet 85

percent of new demand in the Northwest

[over the next 20 years] is that efficiency is

ever changing. Every time we buy a new piece

of equipment, it‟s more efficient.

A timeline of NEEA’s market transformation initiatives

and benchmarks. Since 1997, the region has saved enough

energy to power more than 450,000 homes each year.

Easterbrook: In the next ten to 20 years,

where is the focus going to be? On individual

homes, or on businesses and factories?

McDonald: It‟s going to be in two places.

Market researchers say that in the next three

years there‟s going to be a drastic shift in

Smart Grid spending from metering to the

distribution system, with much more of a

focus on efficiency and reliability. So one

focus is on the grid itself, and the other is on

the customer side.

laire mentioned standards. I am

working with George Arnold [Deputy

Director of Technology Services,

National Institute for Standards and

Technology] and Paul Centolella

[Commissioner, Public Utilities Commission

of Ohio] on the NIST Smart Grid standards

effort. I chair the governing board for NIST.

The elements of the Smart Grid have to be

able to communicate with each other

seamlessly. To that end, we‟ve identified 25

key standards and 50 additional standards – so

there are 75 existing standards before we write

anything new – that govern everything from

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the power plant to the home. We now have a

mechanism in place so that, when we identify

a gap and need a new standard, we can get that

done in six months, eight months, or 12

months, where the normal time frame had

been four or five years.

Story: Before we talk about standards, you

have to look at technology. The utility

industry, working with the EPRI, has been

working on technologies that don‟t get a lot of

play. In the customer‟s home, for example,

there‟s a tremendous amount of work that‟s

been done in lighting – it goes well beyond

compact fluorescents and LEDs – and in

heating, geothermal heat pumps and ground-

source heat pumps.

ne of the companies I‟ve been

working with focused on systems for

two schools that are nearly identical,

down to having the same footprint. But one

turned out to be 54 percent more energy

efficient than the other. They actually saved

that much on their HVAC system, because

they went with ground-source heat pumps.

That‟s technology that the utility industry has

been a big part of. Another area that EPRI is

involved in is large industrial drying and

curing. They are doing research on a UV

drying system that is over 80 percent more

energy efficient than existing electro-

technologies. Those improvements have a

huge impact on energy efficiency and savings.

Fulenwider: Forty percent of the energy we

use in the United States goes into commercial

buildings. There are three primary

components of that 40 percent. There‟s the

shell or envelope; there‟s the equipment – the

stuff in it; and almost half of that 40 percent

depends on the behavior of the people in the

building. I think we‟ll need to have a huge

focus on how we retrofit existing buildings

and make them more alive, more effective,

and more efficient.

Easterbrook: Claire, when you say

“behavior,” do you mean people‟s habits?

Turning lights off?

Fulenwider: Yes, but lots more than that. It

means how we think about and interact with

what we‟re using. It‟s about technology that

makes that interaction more interesting and

effective.

Easterbrook: Do individual power users

actually get interested in these issues? Or do

they just care whether their bill goes up or

down?

Fulenwider: I‟ll give you a classic market

transformation example. In the Northwest

we‟ve been working on an initiative called

“Continuous Energy Improvement,” which

works with CEOs and corporate officers of

large industrial facilities and through trade

associations. It‟s not until you (1) get CEOs

to incorporate energy management integrally

in corporate planning and get company-wide

goals set, (2) get those goals applied to systems

and processes and (3) install them in

performance goals and behaviors within a top-

to-bottom system that can deliver energy

efficiency – its cost savings and its

performance improvements.

Cavanagh: There is an important subtext

here. If we‟re correct that there‟s enormous

importance going forward around energy

efficiency – if I can prolong the happy

sensation of NRDC and Southern Company

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being in full agreement for just another

moment. And if it is true that utilities are a

partner in this – and I agree with Susan that

they are, and that we need to integrate utility

initiatives, efficiency standards, all of the tools

that Claire has described for a more efficient

future – it would be nice if the business model

of America‟s electric utilities didn‟t rely on

increases in throughput to deliver value to

shareholders. An important part of the

conversation going forward – and an

important part of why there is an Institute for

Electric Efficiency at the Edison Electric

Institute – is increased attention to how we

align shareholder and customer interests in a

more efficient electricity future.

Easterbrook: That leads naturally to the next

question. Suppose consumers and businesses

really got religion on energy efficiency – really

got interested in the technology – and US

power consumption went down significantly,

what would happen to the current utility

structure?

Cavanagh: Let‟s remember the electric

vehicle panel earlier today. You had utility

CEOs from Detroit, Los Angeles, and

Portland, Oregon, all of whom had one thing

in common: They have no financial interest

whatever in increased electricity sales. That‟s a

straightforward regulatory adjustment, one of

many that are under review now at the state

level.

Your first question, Gregg, invited us to

assume that all of the consequential decisions

about our energy future are made in

Washington, D.C. This is an illustration to the

contrary. The most important decisions about

the business models for utilities going forward

will be made by state regulators and by the

elected boards of publicly owned utilities.

This is a critical thing they have to grapple

with. The answer to your question had better

be that, at minimum, these utilities are not

worse off if everyone gets religion on energy

efficiency and we get a lot more work out of a

lot less electricity. That shouldn‟t make

Susan‟s shareholders worse off if all of that

comes to pass.

Story: One thing we do agree on, absolutely,

is that people need to use every kilowatt-hour

more efficiently. But does that mean an

absolute reduction? Consider electric

transportation: That‟s more kilowatt hours,

but less gasoline and diesel.

eople say “If you are regulated you

can‟t be innovative.” But let me tell

you what I think drives innovation. If

we have more efficient lighting, more efficient

HVAC, and every kilowatt hour our

customers use is more efficiently used than

before, then we will have less revenue unless

we find new electro-technologies that are also

more efficient than the energy they replace.

We prefer to encourage people to use every

kilowatt-hour more efficiently. We want to

have new technology that, for instance,

reduces waste in industrial processes, and

buildings that are more energy efficient.

But it should be incumbent on utilities and our

employees to look for innovations and

processes for the betterment of society and for

our customers, which also can produce new

revenue streams for us, while encouraging the

more efficient use of energy. I think that is a

much better business model than decoupling.

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Ralph Cavanagh: The fundamental utility business model

is at stake.

Fulenwider: If efficiency is contributing to

the replacement of a power plant, I believe

that the utilities ought to be able to capitalize

that investment in rate base and earn a return

on it, the same as they can on a power plant.

McDonald: We‟ve talked about both

technology and standards. I really think the

success of what we are doing with smart grid

is a three-legged stool. It‟s technology,

standards, and policy. We could have a very,

very good technical solution, but if policy

doesn‟t promote the utility investing in it, it is

not going to be implemented. We need to

look at what policy changes are needed at the

state and federal levels so that utilities can

conserve but still be made whole at the

bottom line. It‟s true that we have more and

more load, and customers are using more and

more electricity, but there needs to be major

conservation efforts. We can free up a lot of

the distribution infrastructure we have in

place, but utilities are not incentivized to do

that today except in a few states.

Easterbrook: Most of these decisions are

made at the state level, not in Washington.

But if you take President Obama at his word,

he is interested in making these decisions at

the federal level. Should decisions like these be

made federally instead of at the state level?

Cavanagh: None of us has heard President

Obama say that he wants to usurp state

regulation over utilities. He‟s talked about

some policy goals like a clean energy standard,

but that‟s different from what we are talking

about here. We are talking about the

fundamental business model of the American

utility system. Most of those decisions now

are made at the state level, and there has been

no serious proposal to change that. That

debate has been joined in every state in the

country. I think it is among the most

important discussions that are going on at the

moment.

don‟t know what the future of energy

consumption will be. In 2008 and 2009

electricity use actually went down 5

percent – two years in a row, and for the first

time since World War II. Many of us found

that astonishing, and we certainly don‟t want

to repeat the [economic] circumstances that

caused it to happen. But neither do I want the

industry to have a rooting interest in selling

more kilowatt-hours. My hope is that the

rooting interest of the industry is in providing

reliable and affordable service, with

continuous improvement in environmental

performance. Let the kilowatt-hours fall

where they may.

The problem is that if your financial health is

tied to increased throughput – to increased

sales, which is still true for two-thirds of the

states – that, I think, supplies an inappropriate

rooting interest in the commodity. What

Susan was talking about was really a service

business; a technology business; a business

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about delivering wonderful services to people

that they want and that make things better.

That‟s not a commodity business. We ought

to get out of the business model that invites us

to think of electricity as a commodity business.

Story: One thing, though, is that the states

are very different. Believe it or not the state of

Alabama is very different from the state of

California. They‟re different even over our

service territory – Florida, Mississippi,

Alabama, and Georgia. Ralph, you are right –

more efficiency, it‟s good for the environment,

etc. But at the end of the day it‟s about the

customer. In the Southeast, where we serve,

47 percent of our customers have a household

income of less than

$40,000 per year. So

even with technology –

and as an engineer I

love technology – at

the end of the day it

comes down to

providing what our

customers can afford

for how they need to

live. How much money can they spend on

electricity when they are trying to send their

children to school? – and so on. That has to

be a central part of the discussion.

Easterbrook: If it‟s about the customer, let‟s

take an audience question on that subject. “In

five years, half of US households will have

smart meters. How will this benefit the

average customer?”

Story: At the Southern Company we have 3.3

million smart meters deployed. We will be

almost 100 percent deployed next year. Our

cost-benefit calculation was based strictly on

meter-reader reduction and taking trucks off

the road. We were able to justify the entire

capital investment that way because we have

some very rural areas to serve and eliminating

the cost of fuel, etc., was a big saving.

Everything we do beyond that – in terms of

data, energy efficiency, and energy

management – is icing on the cake, and that‟s

why we didn‟t have a backlash to the smart

meter investment from our regulators. Our

customers benefit because they get service

faster, there are fewer meter-reading errors,

and the cost for that part of our business is

actually going down slightly.

Easterbrook: Those things sound nice, but

they don‟t really sound

like game changers.

They aren‟t going to alter

my perception of how I

use energy or pay for it.

Is there anything in the

pipeline, John, which

would alter my

perception of the utility?

McDonald: What Susan said is a starting

point – getting the infrastructure in place. The

smart meter, and two-way communications

upstream. If the business case is strong in

itself, then everything else is gravy.

Where the real benefit to consumers is, in

addition to the utility operating more

efficiently with smart meters and better

communications, is in implementing demand

response. One of the transformative

programs that we have been doing for 20 or

30 years involves direct load control. The

utility sends a signal directly to customers‟ load

– the air conditioner, pool pump, electric

We should want utilities to get out of

the business model that invites us to

think of electricity as strictly

a commodity business.

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water heater, whatever –dropping that load for

a short period of time. It lets the utility trim

its peak when system costs are high, and they

in turn credit the customer who saves some

money.

ith smart meters we can do much

more. We can collect information

that‟s much more refined. We can

show customers their usage and time of use

and give them the tools to manage their use.

Pilot programs have shown 15 to 20 percent in

reduced energy use, on

average. To complete the

picture you would need

dynamic, time-sensitive

pricing – time-of-use

rates – sending that

information to

customers, who are able

to program how they use

energy depending on their needs and the

different prices. If they have an electric dryer,

for example, when should that be running?

Cavanagh: One caution on this, Gregg. The

average U.S. electric bill is about $3 a day. I

think we have to be careful not to overstate

how much effort people will be willing to

make to more carefully manage $3 a day. If

the smart meters pay for themselves in terms

of reduced operational costs for the utility

system, then state regulators have the easiest

decision imaginable.

My sense is that the kinds of grid upgrades

that John is talking about will require

significant capital investment. It will be a

good investment from a national perspective,

but will require some up front authorization.

It won‟t be an effortless move into improved

grid technology. It‟s probably important for

someone like me, who has historically been a

skeptic of big utility capital investment, to say

that I think this is a time when utility capital

investment, in general, is the friend of the

environment, not its opponent. I hope that

state regulators will look at the whole suite of

options we have been discussing and the

possibility that what in many cases are century

old technologies could use upgrades.

There is also a reliability case to make about

the importance of grid

upgrades that I would

encourage my friends in

the industry to make

more aggressively. For

most people it is not

about more ability to

manage their $3 per day

electricity cost, but the

assurance that the lights will be on more of the

time, and that they will come on quicker when

they go off, because the utility will have a

much better sense of what is going on in the

system. As John McDonald said, we will have

a much better ability to manage the system

and consumption in a more granular way.

Easterbrook: Will we see environmentalists

and activists supporting new power lines and

increases?

Cavanagh: You are seeing environmentalists

and activists supporting it.

Easterbrook: I know in Colorado this

actually happened, but…

Cavanagh: Not just in Colorado. In

California, environmentalists and activists are

supporting new power lines and new power

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This is a time when

utility capital investment,

in general, can be the friend

of the environment, not its foe.

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generation. Because, Gregg, you are right: In

most cases new generation is vastly cleaner

than the dirtier incumbents that it‟s replacing.

All I ask, as we think about power generation,

is that we treat energy efficiency as a resource

on equal terms with power generation – and

that we adopt a principle that the Southern

Company and NRDC now embrace – which is

to promote development of all cost effective

energy efficiency as a system objective.

Wherever we can replace generation with

lower cost energy

efficiency we ought to

do it.

Easterbrook: We‟re

supposed to be

thinking about the

future here – building

new power lines and

making the grid

smarter. That looks like a big capital

investment in a business model very similar to

what we have today – just more efficient.

What are the next big steps?

Story: I agree with what [EPRI CEO] Mike

Howard said – that energy storage absolutely

changes the game. It changes things in terms

of renewables, in terms of power system

operations generally.

hat next big step is part of our

planning, and also that of other

utilities. Our planning says we may

have 10,000 entries into our distribution

system right now from distributed generation,

mostly solar rooftops on homes and buildings.

What‟s it going to look like at 100,000? Or

200,000 or 300,000?

Electric transportation: How will this affect

our distribution grid? Our engineers are

working to determine when the penetration of

EVs will be at the point where we have to

upgrade the system.

Looking forward, things could be very

different, so now we need to build optionality

into our investments. We have to do a good

job of preserving options for that next step.

McDonald: Adding renewables into the grid

does make things much more complex. We

have a distribution

system that we designed

for one-way power flow

from source to load, and

now we‟re putting

renewables in, so we will

have a two-way flow of

information and even of

power. This introduces

safety issues, protection issues, and even

potential congestion issues at the distribution

system level. Until now we‟ve only seen this

at the transmission level.

e are looking at new applications in

energy management systems, with

generation-transmission control.

We also need a new distribution management

system – which we have never needed before

– to manage increased complexity.

When load increases on the system today and

frequency drops, automatic generation control

software just ramps up units. Now we will

have the option of demand response as a

negative generator, and renewables, so we

have many more resources to optimize. We‟re

working on new software optimization

programs for energy management systems.

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Our engineers are working now

to determine when EV penetration

will require us to upgrade the

distribution system.

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Easterbrook: If the technology changes fast,

will the regulatory framework have to change

equally fast? We think of the regulation of the

power industry as something that changes only

very incrementally over long periods of time.

But in a lot of industries, technology has

accelerated rapidly. Could this happen in the

power sector?

Fulenwider: Part of what we were talking

about is market transformation – not just in

distributed generation, but also in terms of

how consumers use power. It‟s really “life

after the rebate” that represents market

transformation

for the consumer;

that‟s where

efficiency is

incorporated in

what they do – or

don‟t do.

here‟s a

very fine line between vision and

hallucination. Part of what we‟re

looking for here is how to make the business

case to the commercial establishment, the

industrial establishment, and within the home,

so that energy efficiency isn‟t some intellectual

exercise where someone has to sit down and

do all these calculations and say, “ I could save

35 cents over the month! Gee, honey let‟s

hurry up and jump on that one!”

It‟s more a case of “I can do something better,

faster, more efficiently, easier – and by the

way, I‟ll have a little extra money to spend.”

Easterbrook: We have a question from

someone in the audience. “If energy

efficiency makes economic sense, why does it

need to be mandated?”

Cavanagh: Gregg, I think that probably is in

part for me, as the representative of the

“nanny state” trying to suppress individual

choice. I think what we have here is a 30-year

history of recognizing one straightforward

proposition that everyone involved in energy

efficiency knows: There are pervasive market

barriers even to very fast payback

opportunities. If you have to go after each

one at retail, reach out and try to persuade

every individual customer, you will deny

society huge economic and environmental

benefits.

I think that‟s

the argument

that

persuaded

Ronald

Reagan. Did

we really want

to go out and

try to persuade every American that the 125

year-old incandescent bulb, which wastes 90

percent of its energy as heat, makes no sense.

Or did it make more sense to set a

performance standard – not to choose a

winner, but to challenge the industry to do

better? Standards are a proven part of the

arsenal – not all by any means. We want

integrated tools. We want incentives, too. We

don’t want to do this all by mandates, but

performance standards as part of the solution

– that‟s a 30-year American success story.

Story: I take a bit of a different view. I

believe there are instances where standards

may be appropriate, but I think a mandates

approach is in some ways an easy way out, in

that we don‟t necessarily have to show value.

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There are market barriers even to very fast payback

opportunities. If you have to try to persuade every

customer, you will deny society huge benefits.

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ne of our subsidiaries has had a

program for 10 years that has four

different pricing models and

encourages customers to do things like do

your water heating at night, use your

dishwasher at night, etc. We had focus

groups, and we asked, “Why do you

participate in the program?” We had 95

percent satisfaction on the time-of-use pricing

program from customers based on the facts

that (1) they saved money and (2) it‟s good for

the environment. Number one was always

that they saved money. What that told us is

that we need to develop programs to help

customers save money. Most people welcome

the opportunity to save money in a way that

they don‟t feel like they have to sacrifice.

Claire Fulenwider recounts successes in the Northwest.

That‟s why I like the term energy efficiency

more than conservation; “conservation”

meant sacrifice to our focus group; “energy

efficiency” said to them that they are using

electricity “smarter” – something most will

choose to do. I think it‟s incumbent on us to

tell customers, “This is good – and it‟s a way

that you can save money.”

Easterbrook: Let me ask you a final

question. In our time several industries have

been rapidly transformed by unexpected

technological development. Telephones are

the most obvious example. Is there some X-

factor out there, some coming technology in

any aspect of power that‟s going to transform

the industry? And I don‟t mean solar or wind.

Is there something else coming?

McDonald: No pressure, right? The

question we really hear a lot is “what will be

the next killer app?” And I think we need to

look in two time frames. In the near term it‟s

going to be the distribution system, because

we have the technology today. We don‟t

always have the policy motivator, although the

business case is one of the strongest: It‟s

efficiency, reduced losses, and greater

reliability. New applications that we‟re

working on now involve integrating voltage

and reactive power in ways we haven‟t done

before, which increases the benefits.

n a longer time period, three or four years,

it‟s what we are doing in the home with

the consumer, and with commercial and

industrial customers. Policy has to support

that, and the technology isn‟t all there yet. GE

is a big company but no matter how big you

are, Smart Grid is bigger. We have five people

working full time just to look at other

companies to build an ecosystem of partners

for us, because there are gaps in what we do.

What makes it complicated for the customer is

that it‟s not just one company, but a number

of companies that need to come together to

develop an integrated solution.

Easterbrook: So GE still won‟t admit that

they‟re perfecting the Mister Fusion device at

their laboratory! [laughter] Our time is up.

Thank you, panelists! ■

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For more information contact:Institute for Electric Efficiency701 Pennsylvania Avenue, N.W.Washington, D.C. 20004-26961.202.508.5440www.edisonfoundation.net/iee