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Could better efficiency prevent a whole power plant?

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  • Many WV coal counties losing revenue

    Many WV coal counties losing revenue

    Monday, August 8 2016 10:15 AM EDT2016-08-08 14:15:05 GMT

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.

Energy efficiency, it is often said, is the cheapest energy resource. 

That's easy enough to understand. Less obvious is the idea that electric utilities — which make their money by selling electricity — would be the best ones to promote the efficiency measures that reduce our use of it. 

"That's because they're the ones who are using our money, paid through electric rates, to provide us with electricity," explained Energy Efficient West Virginia Coordinator Cathy Kunkel. "If saving energy is a cheaper way of meeting our need for electricity than building new power plants, it makes sense for the utilities to make those investments."

States across the nation have been putting this idea into practice through Energy Efficiency Resource Standards, or EERS, that require utilities to reduce demand for their product by given levels over time. 

Now, a draft bill would create an EERS in West Virginia, to be administered by the state Public Service Commission. Energy Efficient West Virginia is shepherding the bill.

How an EERS Works

An EERS creates savings for ratepayers in two main ways. 

One is direct: It reduces routine electricity use by promoting such measures as better home insulation and more energy-efficient appliances. That cuts the number of kilowatt-hours on the monthly bill. 

The other, less direct, reduces peak demand. Utilities do this by getting industrial facilities or households, where smart grid technology is in place, to commit to cutting back during highest-demand periods, such as hot August afternoons. That cuts the number of megawatts of generation capacity the utility has to be prepared to fire up — putting off the need for expensive new generation to be constructed.

Both reduce power line use and so reduce transmission and distribution investments.

The draft EERS bill proposes that West Virginia's utilities should cut both routine and peak demand by 15 percent from the 2011 level by 2027, starting with 0.5 percent by the end of 2014 and ratcheting down from there. 

Efficiency as a Virtual Power Plant

Cutting demand wouldn't mean that, no matter how much need should arise for their product, the utilities would have to meet it with less and less total electricity. The trick is to see efficiency not as subtractive from demand, but as additive to supply.

Just as investment in, say, a natural gas power plant adds a certain number of megawatt-hours per year toward total demand, the energy saved through investments in efficiency adds a certain number of virtual megawatt-hours toward total demand. 

Consider FirstEnergy's 2011 power sales in West Virginia of 15,200 gigawatt-hours. 

Under the draft EERS, FirstEnergy would have to virtually "generate" 0.5 percent of that, or 76 GWh, in 2014 through investments in efficiency — that's the amount of power generated by the Longview power plant outside Morgantown in about 4.5 days. By 2027, the requirement would rise to 15 percent of 2011 sales, or 2,749 GWh — the amount Longview generates in just over 5 months. So 14 years from now, the efficiency investments would save FirstEnergy alone nearly half a power plant.

The utility would have to take other steps to shave those same percentages from peak demand. 

Would it be worth it? Study after study shows that energy efficiency really is the cheapest generation source: 1.7 cents to 4 cents per kilowatt-hour, according to a recent report from Optimal Energy, compared with 5.5 cents/kWh for an advanced natural gas plant and up to 10 cents/kWh for a conventional coal plant. A recent proposal from Appalachian Power to purchase existing coal-fired generation capacity estimated the cost at just over 6 cents/kWh.

And just like a real power plant, the virtual power plant of efficiency creates jobs — nearly 80,000 jobs across Appalachia by 2030, according to a 2009 Appalachian Regional Commission study. Optimal Energy estimated that aggressive programs to increase efficiency could create 19,500 jobs in West Virginia by 2016. 

"There's not many things out there that could create this many jobs as well as pass savings on to every resident that uses power out there," said Delegate Mike Manypenny, D-Taylor, who has been involved with similar legislation in the past.

Is it Worth the Cost?

AEP and FirstEnergy subsidiaries and utilities across the nation already are meeting EERS targets in other states.

They're offering grants and rebates to customers to encourage them to install compact fluorescent light bulbs and upgrade appliances. They're paying for home energy audits that identify and install efficiency improvements.

Although West Virginia's utilities have committed to some similar measures, the targets are modest.

"FirstEnergy's plan in particular is extremely weak relative to what is required of them in other states and what would be required by this bill," Kunkel said — "half a percent over 5 years, compared with EERS targets in Pennsylvania and Ohio of 1 percent and 0.8 percent in just the first 2 years."

FirstEnergy responded by pointing out that more aggressive, mandated programs cost ratepayers more money.

"Our West Virginia energy efficiency programs cost the typical residential customer … just 12 cents per month," wrote spokesman Todd Meyers in an e-mailed response. "In neighboring Maryland, FirstEnergy's Potomac Edison residential … surcharge runs nearer $2.93 per month. Not all customers are happy paying that."

AEP subsidiaries also are meeting tougher standards elsewhere than what they've committed to in West Virginia, acknowledged Mark Dempsey, vice president of external affairs of AEP's Appalachian Power.

Dempsey too noted that it costs money, and referenced more pressing spending priorities: paying off the fuel costs from a spike in coal prices several years ago, for example, and investing in equipment needed to meet environmental standards.

"There really wasn't head room for anything else," he said.

The fundamental point remains: Additional generation costs more than the efficiency programs.

Is Legislation Needed?

The PSC could set aggressive standards on its own, Kunkel said. 

"But they don't seem to be doing it. I think having direction from the Legislature is helpful, especially in something that is a relatively new area for West Virginia."

Manypenny said all but seven states have established either Energy Efficiency Resource Standards or Integrated Resource Planning — the subject of another bill to be introduced in the coming session — or both. 

"So everybody is seeing the writing on the wall and they're starting to move towards this," he said. 

It is not yet clear who will sponsor the bill.

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