Thoughts from Kansas

The question of how to cut our production of carbon dioxide grows more urgent every day, and the focus tends to be on new sources of energy. Increased efficiency tends to get lost in the mix, even though it's the easiest and most readily implemented approach.

Improving the carbon efficiency of buildings by 25% would produce one of seven "wedges" of carbon reduction needed to let atmospheric carbon dioxide level off. Doubling fuel efficiency of cars from 30 to 60 miles per gallon would have the same effect.

Carbon efficiency can be boosted many ways, from simple steps like turning off the lights and reducing the heating/cooling when a building is empty (at night for a business, in the middle of the day for a home), or replacing incandescent bulbs with compact fluorescent lightbulbs. More efficient building techniques, adding insulation, using geothermal heat pumps, and solar water heaters can all do additional work to improve the carbon efficiency of a building, not to mention saving money in the long run.

Of course, saving money in the long run tends not to be a great incentive. The human brain tends to discount future benefits more quickly than it ought to. Whether this is a remnant of our days as hunter-gatherers or some other trick of the mind, it is a difficult barrier to overcome. Simple economic analysis of compact fluorescent bulbs shows that they really do save money in the long run, both because of their longevity and their lower power drain. The only thing keeping them from taking over the world is that they cost more up front.

While the difference in cost between a CFL and an incandescent may be small for the average consumer, the difference in the bottom line for power companies would be substantial if everyone switched to more efficient lightbulbs, or if people installed more insulation or timed thermostats. On its own, that wouldn't matter, but most states make utilities responsible for promoting energy conservation and efficiency. Needless to say, this puts the companies in something of a quandary. The more successful they are with that mandate, the less money the company makes.

The problem can be illustrated with a look at power company obstruction of a bill that would give Californians an incentive to install solar water heaters on their roofs:

"It's a noble effort," said Avis Kowalewski, vice president for Western Regulatory Affairs at Calpine Corp., which owns 22 gas-fueled power plants in the state. "But this bill could cost our company alone between $14 million and $18 million over 10 years."

The major objection Calpine and other utilities are raising is that the incentives for building owners would be paid for with a surcharge on natural gas. If your heart, like mine, is bleeding for Calpine Corp, pause for a moment. Residential users would pay an extra 13 cents a month on average. Buildings with solar water heaters cut their gas bills by 25%, far outweighing the surcharge. The 5% reduction in statewide use that bill proponents predict might well reduce gas prices enough to mitigate the surcharge, even for Calpine and other industrial users. But corporations are often less interested in thinking long-term than your average consumer.

The adverse incentive faced by power companies and gas utilities in this case are the same as those we encounter in any efficiency campaign. It is hard to create a market in efficiency. That problem is only made harder when abdicate creation of that market to the people running the market in more power usage – wasteful or not.

The solution is for the government to take the mandate for efficiency upon itself, regulating the market to privilege efficient use and to make a watt used inefficiently more expensive than a watt used efficiently.