By default I am enmeshed in energy issues, given that I sit on the board of the Snohomish County Public Utility District, which purveys electricity and some water to over 300,000 customers in Snohomish County and Camano Island. During my initial campaign for office in 2002 I pushed what I called ‘The Goal.’ In fine, the PUD would continue to meet the electricity demands of its customers with no net increase in aggregate load. Since the utility is adding customers each year, to achieve The Goal per-customer consumption would necessarily have to fall. That could occur only through steadily increasing energy efficiency.
Well, after being in office for nine years and a quarter, the utility has fallen short of meeting that challenge. Not for lack of trying, mind you, as each year the PUD acquires record amounts of conservation. But instead of declining per-capita consumption, we are seeing just the opposite. Here’s a graph showing annual per-customer consumption in the residential sector.
Moreover, total residential consumption (aggregate load) is moving further away from The Goal. The utility is connecting new customers and the average customer is using more electricity than before. The combination manifests itself in rising aggregate demand.
But I have not given up hope. I believe that The Goal is still possible. However, to do so will require a new paradigm in approaching conservation. I suspect that it will have something to do with taking a long view. I’ll focus on one example, the light bulb.
Humans tend to be an impatient lot. We would prefer to have something today rather than defer gratification. I’ve got money in my pocket. Where shall I spend it? Business owners, in particular, focus on the short term. They want a rapid return on their investment. So they’re typically unwilling to take the long view.
The PUD, on the other hand, can afford to take the long view. We’ve been operating for more than half a century; I expect that it will be around for many decades to come. Moreover, the PUD is a public, non-profit institution with access to tax-exempt financing. We should not be constrained by short-term considerations that inflict our customers.
Let me give you an example of the difference. It’s about a light bulb. Not your ordinary incandescent, mind you. This bulb would set you back $50. Manufactured by Phillips in Wisconsin, the bulb received a Department of Energy prize for lighting innovation.
The Washington Post quickly denounced both the award and the bulb, the latter deemed “too costly.” The newspaper included a graphic that purported to demonstrate that buying incandescent bulbs would be cheaper, even over the long run. The super-efficient, 10-watt bulb, which will last 30 years, would cost the buyer $5 more than had he purchased a series of incandescents.
There is a big problem with the arithmetic, however. The Post got it wrong, decidedly so. The Post assumed an electricity rate of one cent per kilowatt-hour. Yet, the national average retail rate is about 12 cents/kWh. (The PUD rate is about 8.4 cents.)
A corrected version of the Washington Post lightbulb cost comparison shows $50 LED bulb over $100 cheaper than incandescents.
Instead of costing the consumer $5 more, the bulb would actually save $100.
Yet, who wants to spend $50 on a bulb, even if it will last three decades and save you $100? Heck, the bulb would outlive me. If most people had the same attitude, the Phillips bulbs remain on retail shelves. Enter the PUD.
Suppose there are 300,000 residential PUD customers and each has an average of 10 light bulbs. That’s a total of 3 million bulbs. Suppose further that the average wattage is 60 and that each bulb is on for five hours a day. (The assumptions are just for discussion purposes and don’t reflect actual data, which I don’t have in front of me.) We’ll also assume that the retail rate is eight cents per kilowatt-hour.
3,000,000 bulbs x 60 watts x 5 hours = 9 million watt-hours, or 900,000 kilowatt-hours
900,000 kWh x $0.08/kWh = $72,000 per day
Now let’s suppose that all these bulbs are replaced with super-efficent Phillips bulbs.
Three million bulbs @ 10 watts each running five hours a day = 150,000,000 watts, or 150,000 kWh/day. At eight cents/kWh, the daily total would drop to $12,000, for a savings of $60,000/day.
A 60-watt incandescent bulb lasts about 5,000 hours. The new Phillips bulb stops working after 25,000 hours, or five times as long. Thus, we’d need to buy five incandescent bulbs for every Phillips bulb.
Suppose the incandescent bulb costs 53¢. Right now the Phillips bulb would set you back $50. You’re not likely to shell out that kind of money for a light bulb. If you bought 10, you’d be out $500. For that you could purchase almost 1,000 incandescent bulbs. But bear with me.
If you purchased the Phillips bulb you would have saved $57.65 over its life, assuming it’s on five hours a day and that you’re paying the PUD’s retail rate of just over eight cents a kWh.
Again you say, “Meh.” I still don’t want to pay $50 for a bulb, even if it lasts longer and saves me money.
Now let’s expand our focus again. We’ll look at all 300,000 PUD customers to see the cumulative effect of everyone using the new Phillips bulb instead of incandescents. (By the way, the Phillips bulb is superior to existing LED and CFL bulbs in color rendition and sustained output over time, factors relevant to receiving the award.)
If the PUD bought 3 million Phillips bulbs it would cost $150 million. Buying five times as many incandescent bulbs would run $7,950,000 (assuming 53¢ ea.). But the savings lie in electricity consumption.
This may seem odd, but if the PUD (or its customers) invested $142 million in Phillips bulbs (over and above what the incandescent bulbs would cost) it would save a net of $173 million. That’s because customers would pay only $63 million for electricity (over the life of the Phillips bulb) whereas they would pay $378 million if they all continued to use 60-watt incandescent bulbs.
How difficult it would be for the utility to convince all 300,000 customers to buy the Phillips bulbs. Not going to happen. But why couldn’t the PUD buy the bulbs on behalf of its customers and figure out a way to ensure that they’re all installed?
After all, one way of thinking about a public utility is that it is the customers. Everything it does, from buying wholesale electricity to maintaining its fleet, is for customers. In exchange, customers pay a rate for each unit of electricity they consume. So, if the PUD bought all those bulbs the costs would be paid by the customers, just as they pay for the utility’s trucks and PUD employees’ desks.
In the long run all this makes sense. The customers—as a whole—invest the money and get a guaranteed return, expressed in lower electric bills. The PUD could borrow the money, and since interest rates are so low, the total debt service wouldn’t be much more than the initial capital.
The ThinkProgress article linked above mentioned that the Phillips bulb will last 30 years, which means that whoever ran the calculations assumed about two hours a day for the bulb, whereas I’ve used five hours to get a bulb-life of about 14 years. So, every 15 years, or 30, the PUD would sell low-interest bonds, buy millions of bulbs, and save the community millions of dollars a year.
Customers may think short term. The PUD doesn’t have to, and really shouldn’t. Indeed, it can afford to take the long view, which benefits its customers.
Still a long way to go before realizing The Goal. But I’ve described one place to start.