Ten innovations that will reduce the amount of energy we consume

By REBECCA SMITH
October 16, 2006; Page R1

America is facing a crisis when it comes to electricity. But also a tremendous opportunity.

The forces that put us here look grim. Energy prices are high, supplies are
increasingly tight, and anxiety is growing about climate change. But that
dark outlook is driving consumers, utilities and public officials to
finally take advantage of innovations that could radically reshape the
nation's power consumption without lowering the standard of living.

Some are technological fixes, from more-efficient light bulbs to
variable-speed motors that use less energy when the load on them isn't as
heavy. Others involve public policy. States are rewriting their building
codes with an eye on conservation, and Washington is trying to lay down
efficiency standards for more household appliances and electronic goods.
Utilities are joining the effort as well, offering consumers rebates for
buying efficient appliances and urging customers to use electricity more
wisely.

The good news is, "we haven't found a major use of electricity for which
there aren't great opportunities for savings," says David B. Goldstein,
director of energy programs at the Natural Resources Defense Council and a
recipient of a MacArthur Foundation award for his work on
appliance-efficiency standards.

Of course, we've all heard revolutionary promises like these before. But
the promises seem to fade as each crisis recedes. So what makes this time
different? Forces are converging to make the prospect of big change much
more achievable.

Most urgent, of course, is the skyrocketing demand for electricity -- and
the tightening supply. Many parts of the country set new records for
electricity use in July and August, which sent a warning signal to
officials that they have little time to act. Conservation seems a much more
feasible solution than quickly building dozens of new power plants to add
generating capacity -- especially if reducing emissions is a goal. The fact
that the nation's energy bill totaled $296 billion last year, up nearly 50%
from 1993, also provides impetus.

We've also gotten smarter about saving energy. New technology makes it
possible to build more-efficient hardware without breaking the bank. And
public officials now have much better data to draw on when they plan
conservation efforts. They know what's worked in the past and can build on
that success.

BUILDING MORE PLANTS

Some experts expect a transformation more profound than any since the
1973-74 Arab oil embargo. As a result of that six-month crisis, U.S.
electric utilities largely weaned themselves off oil and shifted to coal
and nuclear fuel for their power plants. The federal government set
efficiency standards for automobiles and appliances, and building codes
were revised. But much is left to be done. After all, 80% of U.S. buildings
were built before 1980.

At the very least, the current push should produce considerable savings for
consumers and unmistakable environmental benefits. "If you consume a lot
less energy, it solves a lot of other problems," says Peter Darbee, chief
executive of PG&E Corp., the San Francisco utility that serves one in 20
Americans.

Indeed, James E. Rogers Jr., chief executive of Duke Energy Corp. and
president of the utility industry's leading trade group, the Edison
Electric Institute, calls energy efficiency the "fifth fuel." By that he
means that it's an alternative to coal, natural gas, hydropower and nuclear
fuel.

Here's a look at 10 innovations capable of making a big difference
immediately and in coming years:

1) LET THE LIGHT SHINE

Lighting was the first market for electricity, and it's still one of the
costliest. But because lighting is ubiquitous, it tends to get less
attention than other big power burners like air conditioners. And that
means some tremendous improvements in lighting have gotten overlooked.

Technology has improved conventional lighting systems, making them much
more efficient. Take compact fluorescent bulbs, which have bases so small
they can fit inside a standard screw socket. These bulbs can often cut
lighting costs by 75%, and they last at least eight times as long as
regular incandescent bulbs. Many even offer a soft white light that mimics
incandescent light.

The bulbs are readily available in stores, and prices have dropped
substantially recently. Sales volume has increased, and many utilities are
offering rebates that cut the cost of 24-watt fluorescent bulbs that
produce as much light as 100-watt incandescent bulbs to $1 or $2 apiece.

If each U.S. household replaced one regular bulb with a compact
fluorescent, according to the Environmental Protection Agency, consumers
would collectively save more than $600 million a year. The energy saved,
meanwhile, would be enough to light seven million homes, and the
greenhouse-gas reductions from power plants would be equivalent to taking
one million cars off the road.

Then there's LED, or light-emitting-diode, technology, which is based on
semiconductors. This method already has slashed power use dramatically for
many cities as a replacement for conventional traffic lights. Typically, an
11-watt LED unit in a traffic light replaces a 140-watt incandescent unit,
producing a 92% energy saving.
Image

Now LEDs are poised to sweep into more industrial applications, such as
supermarket refrigeration cases. For now, white LED light is more difficult
to make, and thus far more costly, than colored LEDs. But lighting experts
say they expect the price to drop enough in the next couple of years to
permit broader use of white LEDs.

Meanwhile, a host of new methods are being adopted by consumers and
companies, such as systems that "harvest" daylight, concentrating it and
shooting it indoors so that buildings don't need to use as much artificial
light. Nature's Lighting, of Park City, Utah, manufactures solar dishes,
lined with mirrors, that sit on flat roofs and project sunlight through
skylights into buildings. Diffusers distribute the bright light.

Mike Basch, a founder of Federal Express who's now chief executive of
Nature's Lighting, says warehouses, auto makers and big-box retailers have
been especially keen on the systems, which employees like because of the
full-spectrum light.

At Wal-Mart Stores Inc., electricity is the leading expense after labor
costs, exceeding $1 billion a year. So the retailer has been perfecting
harvesting techniques to channel daylight into stores through prismatic
skylights that concentrate the light without radiating heat. Sensors
automatically adjust the store's fluorescent lights up and down in response
to the amount of natural illumination available.

Wal-Mart now uses the system at nearly all of its stores, representing 330
million square feet of floor space. The systems cost about $200,000 per
location and pay for themselves in two to three years through reduced
electricity and cooling costs. "It's a pretty sophisticated setup," says
Charles Zimmerman, Wal-Mart's vice president in charge of the initiative,
who adds that Wal-Mart will gladly share its equipment specifications with
anyone who wants them.

2) MORE-EFFICIENT HARDWARE

The past few years have seen tremendous advances in the energy efficiency
of hardware. For instance, new developments in industrial motors promise
huge savings for businesses. Currently, the motors represent 67% of
industrial energy use, according to Clark Gellings, vice president of
innovation at the Electric Power Research Institute in Palo Alto, Calif.
But older motors waste lots of power because they constantly switch on and
off.

Now many companies are turning to variable-frequency drives. Instead of
constantly turning on and off, the drives "let motors change speed in
response to the load on them," says Mr. Gellings.

MGM Mirage, the big casino and hotel operator, is installing 22 of the new
variable-speed drives on refrigeration units at its Las Vegas properties.
The $4 million retrofit will pay for itself through reduced energy costs in
about 2ˆ years and thereafter will save the company about $1.6 million a
year.

Big gains also are being realized in air conditioning. New federal
efficiency standards took effect in January for central air-conditioning
units used by homes and businesses; the least-efficient units sold must be
at least 30% more efficient than last year's least-efficient models. In
industry parlance, that's a 13 SEER, short for seasonal energy efficiency
rating, versus a 10 SEER, the standard that had been in effect for 14 years.

According to the Department of Energy, the higher standard will save a
total of 4.2 quadrillion British thermal units, or "quads," of energy from
2006 through 2030 -- enough of a saving that utilities will be able to
forgo building 40 new power plants nationally. Consumers, meanwhile, will
save about $1 billion by 2020.

The saving might even be more pronounced than that. Many central-air units
can achieve ratings in excess of 14 SEER at only slightly greater expense
-- and manufacturers say consumers are very interested. One reason may be
utilities like Austin Energy, a city-owned utility in Austin, Texas, which
is offering a 20% rebate on air conditioners with SEER ratings of 14 or
greater.

3) SMARTER SENSORS

Manufacturers are designing their products to be more intelligent, using
advanced sensors to better control energy use and drive down operating
costs. Sensors selling for a few dollars can save thousands of dollars over
the course of a few years. And more companies are taking advantage of the
technology.

For example, custom-sensor maker Kavlico Corp., of Moorpark, Calif., is
seeing robust sales for semiconductor-based controllers used in commercial
refrigeration equipment. Sensors tell a controller when to begin the
defrost cycle in the freezer case, replacing automatic timers that put
equipment through unnecessary heat-up-and-cool-down cycles.

The new controllers "result in a 25% to 30% reduction in power use," says
Scott Farrenkopf, general manager of Kavlico, a unit of Schneider Electric
of France. He says auto makers and equipment makers are ordering more
custom-tailored sensors for systems designed to improve fuel economy and
energy efficiency.

4) BETTER MEASURES

Consumers, meanwhile, are getting better tools for tracking energy use
around the house with tools that are inexpensive and readily available.
Eric Bier, a retired group-home administrator in San Diego, got concerned
about his rising home utility bill. So he bought a device called a
Kill-A-Watt meter, made by P3 International Corp. of New York.

He plugs the gadget, which cost about $40, into a standard wall outlet.
Then he plugs various other devices into the meter, and it tells him how
much power they're consuming. By multiplying this kilowatt-hour reading by
his local utility's rate, he can easily figure out the monthly cost of
operating the device in question.

Mr. Bier was surprised at the results of a recent home test. He learned
that his new computer and accessories were using 242 kilowatt-hours of
electricity a month, costing $48.50, because he never turned them off. Once
he began shutting them down at night, the monthly cost dropped to about
$18.80 a month for 94 kilowatt-hours of energy. On the other hand, his
Roomba vacuum cleaner, from iRobot Corp., provided a pleasant surprise,
vacuuming 8,960 square feet of floor space automatically each month for a
total of $1.17 in electricity. "Considering how much work it does, it's a
baby," he says.

Tom Lynch, director of sales and marketing for P3 International, says sales
of the meters took off last winter. Sales in the first quarter of 2006
exceeded sales for all of 2005, he says, lifted by consumer worries about
high utility bills.

5) SETTING STANDARDS

The federal government sets minimum standards for energy efficiency on more
than a dozen products, including dishwashers, refrigerators, water heaters,
room air conditioners and electric motors. From 1990 to 2000, these
standards saved consumers approximately $50 billion in energy costs,
according to one federal estimate.

The EPA, meanwhile, puts its own Energy Star labels on about 40 products,
generally identifying the 25% of products in each category that are the
most energy-efficient. In 2005, consumers with Energy Star products saved
an estimated $12 billion, as well as enough electricity to power 11 million
homes, according to the EPA.

But there are some glaring omissions in the EPA standards, and closing
those gaps will bring more savings in coming years. For instance,
television sets. The government doesn't impose an efficiency standard on
TVs, and the Energy Star label identifies only TVs with low power
consumption in "standby" mode -- in other words, not turned on. (Any device
with a remote control is never really shut off, unless you unplug it.)

The call for a standard has grown louder as electricity use by televisions
has boomed in recent years. Television screens have exploded in size, and
add-on devices have proliferated, from satellite dishes to programmable
set-top boxes. Some families now spend more money powering
home-entertainment systems than they do refrigerating their food.

The International Electrotechnical Commission, which prepares standards for
electrical and electronic technologies that often are adopted by
governments, is working on common metrics to measure TV electricity
consumption. After the IEC concludes its work, some efficiency information
may begin appearing on sets in early 2008, the government says. Meanwhile,
the EPA says it's considering Energy Star labels that would look at total
power consumption by TVs instead of just power use in standby mode to give
consumers a valuable tool to use when buying a new television.

The push for better disclosure is receiving some resistance from the
electronics industry. The Consumer Electronics Association encourages
voluntary labeling, but opposes mandatory efficiency standards for goods
like TVs because "the industry has so many products and they change so
fast," says Brian Markwalter, the group's vice president of technology
standards.

Activists argue that the speedy evolution of products makes new standards
more urgent. "Energy use has changed, and it's time for labeling to catch
up," says Chris Calwell, principal in Ecos Consulting in Portland, Ore., a
firm that specializes in energy issues.
Image

6) NEW BUILDING CODES

All states have building codes for health, fire and safety. But 40 also
have codes for energy efficiency. The rules require, for example, at least
minimal amounts of insulation in new buildings. The Department of Energy
estimates code changes saved consumers $4.7 billion in lower electric bills
between 1991 and 2005.

Now some of the 10 states that don't have statewide energy-efficiency
codes, including Mississippi and Alabama, are considering adopting them, in
part because they're facing lots of hurricane-related rebuilding.
Meanwhile, several states that already have efficiency codes are
considering adopting the latest version of a model code, released last
winter by the International Code Council, a membership organization that
creates the building codes often adopted by governments.

Experts say the latest version is shorter and less complex than the
previous one; for instance, it divides the nation into eight climate zones
instead of 19. At the same time, the new rules set more-ambitious goals for
energy savings. The code hasn't yet been certified by the Department of
Energy, but many states are moving ahead to consider it anyway.
Energy-efficient building codes are expected to reduce primary energy use
in the U.S. enough to save consumers $10 billion annually by 2010.

7) INCENTIVES FOR UTILITIES

Most utilities earn higher profits as energy use rises; that's the way
their rates are structured. So conservation efforts undermine their ability
to make money and get reimbursed for their costs.

But many states have changed that pricing scheme to remove the disincentive
for utilities to sponsor energy-reduction programs. California and some
other states assess a larger proportion of a utility's costs in basic
service fees, not volumetric charges based on the number of kilowatt-hours
of power consumed.

In July, dozens of utilities, big energy users and regulators pledged to
attack the rate-structure problem in states where it still exists and
promote energy efficiency through resource planning, giving conservation
more attention. Rather than build a new 500-megawatt power plant, for
example, states would see if they could cut demand by 500 megawatts more
cheaply and without environmental harm.

Utility regulators from more than half of these states have endorsed this
National Action Plan for Energy Efficiency. The industry is engaged because
most state regulators are confronted by "new plant proposals and rising
rates" that they would prefer to avoid, says Diane Munns, a utility
commissioner from Iowa and a leader of the effort. If the plan were adopted
nationally, U.S. energy bills could be reduced by $20 billion annually,
according to the EPA, a proponent of the effort.

Meanwhile, the California Public Utilities Commission is considering
creating special monetary incentives for utilities that promote
conservation. Says Michael Peevey, president of the commission, "I want to
see utilities get a return on energy efficiency comparable to what they'd
get for putting steel in the ground."

8) VARIABLE PRICING

One of the more ambitious conservation efforts utilities are trying out --
both on their own and at the urging of regulators -- is a new kind of
metering. Sophisticated electric or gas meters monitor how much energy is
consumed by individual customers, taking automatic soundings several times
a day instead of monthly.

This makes it possible for utilities to charge different prices by time of
day or season. Regulators might use higher rates when the electric system
is stressed or when fuel prices are especially high to suppress demand so
fewer power plants need to run. Mr. Peevey of the California Public
Utilities Commission says some consumers balk at the idea, "but when people
understand this is the more environmentally sensitive option, they are
supportive."

Nationwide, about 6% of electric customers have the meters in place,
according to a recent study by the Federal Energy Regulatory Commission.
Pennsylvania, Wisconsin, Connecticut, Kansas, Idaho and Maine have the
highest usage rates, ranging from 14% to 53%.

California soon will make the list with a massive remetering project
expected to cost about $3 billion. Five million customers of Southern
California Edison, a unit of Edison International, will receive new meters
beginning in 2008, for example. The meters will be two-way communication
devices, able to send the utility instantaneous readings as well as talk to
other devices like smart thermostats, which allow remote control of
temperature settings. This will let consumers better control energy use --
for example, by cutting use at periods of grid stress or especially high
prices.

9) REBATES

Many utilities also offer rebates on energy-efficient appliances and
equipment, trying to permanently reduce demand by getting obsolete
equipment retired. When New York offered a $75 bounty for old air
conditioners in 2002, 160,000 units were turned in, saving enough juice
over 10 years to equal a full year's output from a large power plant.

California, where consumers pay about $20 billion a year in electricity
charges, has committed to spend $2 billion of customer funds on
energy-efficiency programs from 2006 through 2008, a record expenditure for
any state. Elsewhere, states are considered aggressive if they get
utilities to spend the equivalent of 1% to 2% of electricity revenue on
energy-efficiency programs.

PG&E's Pacific Gas & Electric utility will spend $974 million and expects
to permanently cut demand by 600 megawatts, eliminating the need for one
large power plant and 30 to 50 years of fuel. About 250 megawatts of
reductions will come from lighting alone.

Some of these efficiency programs involve big rebates. GMH Capital Partners
LP, a real-estate investment firm, bought a big apartment complex in
Richmond, Calif., last year. It spent $327,428 rejuvenating the nearly
20-year-old structure, installing new lights, water heaters and
heat-reflecting roofing materials. The expected annual energy savings:
$112,000, most of which will be realized by renters at the 1,008-unit
complex.

For its trouble, GMH got a rebate check for the full amount of the
equipment and installation. The local utility, PG&E, made the move because
most property owners won't do expensive retrofits if renters reap the
savings. "It's a tough market to crack," says Beverly Alexander, vice
president of customer energy at the utility.

10) CUSTOMER-RESPONSE PROGRAMS

Getting customers to trade up to energy-efficient equipment permanently
reduces energy use. But there are ways to temporarily cut consumption,
particularly among big energy users. These "demand response" programs will
be more visible in coming years, especially in places like New England that
are having trouble getting new plants built.

Early programs paid big energy users to reduce energy use, sometimes
forcing them to curtail production. One current approach cuts consumption
more painlessly, with the help of controls that dim lights or cycle air
conditioners and pumps when requested by the utility.

In response to a directive from Congress, the Federal Energy Regulatory
Commission recently surveyed the electric-power industry and found existing
demand-response programs can cut consumption by 37,500 megawatts when
activated, equivalent to the output of 75 big power plants.

In July and August, when U.S. electricity markets set new records for
energy use, the outfit that runs the high-voltage electric grid in the
mid-Atlantic region got big energy users to cut their usage in exchange for
payments. This benefited all consumers by cutting wholesale power costs by
about $650 million.

Many experts think that well-designed programs, backed by the right
technology, can easily cut peak energy use by 5% to 10%. In fact,
California did better than that in the 2000-01 energy crisis.

Jon Wellinghoff, a member of the Federal Energy Regulatory Commission, says
consumers "easily could save billions of dollars annually" with only a
modest expansion of existing programs and no impact on productivity. What
you need, he says, is "a willingness to try new things."

Some utilities seem willing to go down that road. Rick Green, chief
executive of Aquila Inc., a Kansas City, Mo., holding company that owns
utilities in five Midwestern states, says utility executives gradually are
becoming convinced they can't build their way out of the current situation,
as they did in the past.

He says one employee in Colorado recently told him that when he talks to
conservationists, "I don't say 'no' anymore. I say, 'Yes, if...' "

URL for this article:

http://online.wsj.com/article/SB116042661219387273.html

Copyright 2006 Dow Jones & Company, Inc. All Rights Reserved

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Working at the Crossroads of Environmental and Human Rights since 1990
PO Box 7941
Missoula Montana 59807
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