Energy Efficiency – Policy and Implementation

There are several government programs already in place that have the effect of promoting energy efficiency. One such program would be the plethora of state-based Renewable Portfolio Standards (RPS), which typically include a carve-out for a certain percentage of the goal to be met through energy efficiency measures. This means that rather than investing in renewable energy technologies to meet 100% of the RPS goal, utilities may also reduce the total amount of energy consumed in their service area as part of the effort to reduce total greenhouse gas emissions. Many utility companies promote that option by offering rebates or incentives to businesses and homeowners for upgrading their appliances or lighting to more efficient models. The US government also mandated that manufacturers and importers may no longer produce or supply 40 or 60 watt incandescent lightbulbs as of January 1, 2014, however there are numerous loopholes to that law such as slightly modifying the wattage of the bulb (http://www.theverge.com/2014/1/1/5263826/the-incandescent-light-bulb-isnt-dead). The idea here was to force individuals and businesses to switch from highly inefficient incandescent bulbs to more efficient halogen, CFL, or LED lightbulbs.

I think that if the Federal Government was really serious about promoting energy efficiency, they would institute a nation-wide “buy back program” where the government would provide a rebate incentive to individuals and businesses to trade in their older and more inefficient technologies for more efficient, but also more expensive ones. There could also be tax credit incentives offered to homeowners who upgrade their insulation and windows, improving the envelope of their homes and substantially reducing the energy required for heating and cooling. Tax credits such as these have been offered in the past but expired for any improvements not implemented before January 1, 2012 (http://www.irs.gov/uac/Tax-Credits-Available-for-Certain-Energy-Efficient-Home-Improvements).

As a business opportunity, a company could assist individuals and businesses in claiming these buy-back incentives while also providing the equipment and installation of the new upgrades. A large company can leverage their purchasing power to obtain better prices on this equipment than a typical homeowner could find on their own. The company could also manage the paperwork and rebate process for the customer to make it an easy “one stop shop”. Then the company would take possession of the old equipment and could recover scrap value or revenue from parts, enhancing their bottom line. A truly comprehensive business offering would also include the installation of insulation and window upgrades and the related tax credit forms. A homeowner could receive one quote for all of their energy efficiency needs and receive professional assistance with obtaining the appropriate tax credits and rebates.

Marielle Martin – Lesson 3

The government has the ability to impose policy to incentives and disincentives certain behaviors. When it is a public goods issue, as this one is, imposing these policies is justifiable. A carbon tax is a large scale measure, being heavily analyzed at the present. Dale Jorgenson, and economist who studies the relationships between energy, policy, and environment, spoke in an interview about the tax. He (2014) noted that “a tax of $30 per metric ton of carbon dioxide is equivalent to a tax of 24.4 cents per gallon of gasoline”, which would “raise about $150 billion in revenue for the United States” (Shaw). The article also estimates the world’s yearly costs of climate change impacts to be around $1.6 trillion dollars (Shaw, 2014). With that in mind, the tax is actually hugely discounted to what we actually ‘owe’ the planet. In addition to the carbon tax, policies providing tax credits, grants, or home and business certifications based on energy use thresholds, high efficiency, or low emission/renewable energy source use could be applied. The metrics for these policies may be difficult to accurately measure though, as people have the ability to use a variety of energy options – only some of which require metering/grid connection that is monitored. As a last resort option, government policy could take a glance back in time to the 1970s. Oil economics and foreign power plays resulted in gasoline rationing in the United States. It’s a drastic measure, but there may be a day when such drastic measures are once again necessary. This type of government policy would surely ruffle some feathers over the issues of ‘freedom’ and ‘market economy’. It would span a much more diverse range of energy options to place restrictions on and have social implications on issues like income, standard of living, and access to alternatives.

To develop a business that works through government policy for energy efficiency, I would want to first identify where policy may be viable. I would be inclined to work on designing, building, or installing a measurement technology that could be used in policy aimed to incentivize household efforts for efficiency and minimizing consumption. As I mentioned above, measuring the metrics for which incentives would be rewarded can be difficult, so the prospect of policy only matters if the tools to provide the policy exist. In the hands of private business, innovative solutions for measuring a household’s energy use – even down to the type of energy – may be possible. In the UK, government is promoting smart meter installation in all homes and businesses by 2020 to increase energy conservation (Morris, 2014). The technology developed by Smart Metering Systems monitors gas and electricity consumption, sends the information to energy companies, and provides users with real consumption measurements (Morris, 2014). Smart Metering Systems’ profits have risen by 24% since government promotion began – proving that certain policy has the opportunity to create positive change (Morris, 2014). In addition to the initial energy conservation that users proactively achieve from smart meter installation, policy implementation to reward conservation efforts (by tax credit, grant, etc.) based on energy consumption ‘brackets’ would further increase energy conservation. For example, lower levels of energy consumption would correspond to higher levels of tax credit off of energy spending. The “kilowatt not used is the best of all” would definitely apply for a business working with government policy to conserve energy.

Shaw, Jonathan. (2014, September-October). Time to Tax Carbon. Harvard Magazine. Retrieved from http://harvardmag.com/pdf/2014/09-pdfs/0914-52.pdf

Morris, Jessica. (2014, September 2). Smart Metering Systems Rise on U.K. Energy Savings Plan. Businessweek. Retrieved from http://www.businessweek.com/news/2014-09-02/smart-metering-systems-rises-on-u-dot-k-dot-energy-savings-plan