Serving the industrial customer: Emerging directions for utility-related energy efficiency services

The electric utility industry, and utility energy efficiency services, are going through a radical transformation. Traditional regulated monopoly utilities and traditional utility DSM programs will soon be history. In their place will emerge a much more dynamic market. The market is likely to be dominated by price considerations, but quality of service, and providing extra value to the customer will also be important. It is in these latter areas that energy efficiency services will play a significant role. In this market, many new services are starting to emerge including customized packages of services (combining energy efficiency, power quality, pollution prevention, and/or productivity enhancement), engineering assistance, cogeneration and power house management, end-use pricing, and motor and compressed air system management. The variety of these services are likely to grow as boundaries between utilities, power marketers, and energy service companies blur, and all of these players seek to offer power as well as other value-added services. However, market-based efficiency services are unlikely to serve all customers, or to address many barriers inhibiting investments in cost-effective energy saving technologies and practices. In particular, the market is unlikely to adequately serve small customers, including small industrial customers. Add the market-alone is unlikely to bemore » able to transform highly diffuse markets, such as electric motors and distribution transformers, where the actions of thousands of customers are needed to prompt significant change. To fill this gap, some but not all states are likely to offer a variety of programs including market transformation programs (primarily targeting generic equipment such as motors, compressors and transformers that are used by many customers), bidding and standard offer programs, technical and financing assistance (primarily for small- and medium-sized customers), and research, development and demonstrations. The dominant theme of these programs will be market transformation--reducing the barriers inhibiting efficient goods and services, so that in the long term these efficient goods and services become normal practice without continued intervention in the market. In this market transformation context, R and D, education, financing, and other initiatives will all play a role. These public benefit programs will be funded with small public benefit charges on distribution service, just as similar programs are funded through electric and gas rates today. In addition, in some limited geographic areas where distribution capacity is tight, energy efficiency services will be offered to all customers to reduce energy use and demand and defer the need for distribution upgrades. Such programs will be offered where the cost of the programs are less than the cost of distribution upgrades that can be deferred.« less