Meeting the challenges of energy efficiency: An industry veteran’s perspective
Energy efficiency has delivered huge benefits over the last 40 years. However, the imperative to achieve deep carbon reductions, combined with a more distributed and dynamic energy grid, creates a need for even greater levels of efficiency targeted to where and when it is most required.
Meeting the challenges associated with delivering more energy efficiency as a low-cost and flexible resource will require both policy and program design, delivery, and evaluation changes.
Val Jensen understands these issues well. Val is a 40+ year industry veteran with a wealth of knowledge around EE, distributed energy resources, and electrification. Most recently, he ran strategy and policy at Exelon Utilities—and prior to that, he led customer operations at Commonwealth Edison. Val is helping to evolve the services and capabilities we offer to utilities, particularly in areas where many are struggling to find solutions: building operational resilience, enriching energy efficiency and distributed energy resource programs, improving customer engagement, and developing innovative rate and regulatory strategies.
We sat down with Val to discuss what energy-efficient programs can do in the face of an uncertain future. This interview has been edited and condensed for clarity.
Q: How are utility executives currently thinking about the purpose of energy efficiency?
A: There are probably a couple of different perspectives. In the first case, the utility executive sees energy efficiency as both an opportunity to build a close relationship with customers, as well as a way to explore an evolution of the utility business model away from one based strictly on moving kilowatt-hours to one based on delivering energy service to customers. In the second case, energy efficiency might be viewed more as a compliance activity; something that needs to be done to align with regulations or statutes. In this case, the utility wants to do as best they can to deliver on that responsibility, but maybe aren’t looking to transform the business. Overall, I think the industry as a whole is migrating towards that first group of executives that sees EE as an opportunity either to strengthen relationships or to lead their business in a new direction.
Q: What have the impacts of the COVID-19 pandemic been on the utilities industry?
A: Most companies seem to be doing well in terms of getting the actual job done. This is an industry that in many ways is built to respond to crises. I think the impact is felt in the communities that they serve. It seems virtually every utility is navigating through huge uncollectable payment problems now as millions more customers have lost jobs. Local economies are just not doing well. And when economies aren’t doing well, people aren't using electricity, and more struggle to pay for what they use. So, I think the top-of-mind questions are, first, how to help those who struggle to pay in the near-term, and second, how can the traditional payment process be reinvented to make it easier for cash-strapped customers to pay big large monthly bills—developing micro-payment options, for example. An unrelated but huge question is how will COVID affect the long-term structure of energy demand? Will the huge loads represented by central business districts and office parks return, or have we finally seen the massive and permanent shift to telecommuting that people have been talking about for years? The answer has a significant impact on utility revenues, customer rates, and energy efficiency potential.
Q: What other aspects of the business will have to change in the coming years?
A: For probably the last five years, major utilities have been worried the residential sector was going away as an energy efficiency target. But with so many people moving home to work now, we might see a large new set of possibilities for energy efficiency in the residential sector. So, as the commercial sector gets harder to deal with, maybe there are fresh opportunities on the residential side.
Q: What would a formula for successful collaboration look like in the future, and how could utilities achieve it?
A: The secret to collaborative success, I think, is simply to have an honest conversation. Policymakers and stakeholders all have a set of perfectly legitimate (and in many cases noble) objectives they're trying to serve. And if you begin as a utility by trying to understand those, you're going to find that you and your company share a lot of those objectives. So, the key to success is recognizing that a lot of our objectives are, in fact, shared. Another key is recognizing the legitimacy of the other side's perspective, and using that shared understanding to build pragmatic solutions.
Q: What do utility executives have their attention on when it comes to DERs? What’s the number one challenge they’re facing?
A: Utility executives think their business is selling kilowatt-hours; customers think the utility’s business is keeping the lights on. Utilities, at a very high level, are worried about DER adoption undercutting their view of the business and stepping between them and their customers. There’s also the question of how it will impact individual systems. Utilities in places like Nevada, California, Hawaii, and Arizona are facing the real challenge of how to integrate high levels of distributed generation on a system never designed for it. At the end of the day, every CEO wants to be able to answer three questions affirmatively: (1) Did I keep the power on; (2) Did I give my customers the best service I could; and (3) Did I meet my fiduciary responsibility to investors. The growth of distributed energy resources and the way a utility addresses that growth can affect a CEO’s ability to answer yes to all three questions, which is why DERs and associated policies and business models are so compelling.
Q: What really needs to be the focus of utilities in regards to DER?
A: This is a gross simplification, but I think utilities should stop wondering how DER is going to impact the answers to those questions and instead develop a strategy that uses DER to ensure that the answer to each is “yes.” Distributed energy resources are not a fad or a trend, they are the reality produced by technology that continues to improve at an increasing rate.
For a variety of reasons, the DER policy debate seems to revolve around the question of the value of DER to the grid. I don’t think this is the right question. To me, the right question is how can the grid be engineered to ensure that the distributed energy resources that customers and society prefer can, in fact, be accommodated. The grid exists only to enable customers to do things with electricity. The grid has no inherent value except insofar as it enables some set of transactions. If customers want those transactions to include those related to distributed energy resources, then we need to make that possible. At least theoretically, we know that by removing a constraint to DER deployment on the distribution grid, considerable economic value can be unlocked for customers and communities. So, the short answer to the question is that we need to think differently about DER.
To hear more from Val on the future of energy efficiency and how utilities can position themselves for success as the industry evolves, read his paper: “Energy efficiency evolution: New opportunities for utility programs.”
