D - 4 Utility Rebates Explained
Your electric and gas utilities will pay you to reduce your energy use. They will pay you to pay them less.
Electric and gas utilities will often pay part of the cost of buying and installing new appliances, lighting and temperature control equipment in residential, commercial, government and industrial buildings. These programs are usually structured to encourage faster adoption of new technologies, but sometimes they provide incentives to replace particularly old technologies.
Puget does this. Systems for which Puget offers incentives for upgrades include lighting, insulation, heating/ventilation/air conditioning (HVAC), water heating, and several others. See their website or call their Energy Advisor, 1-800-562-1482, for more details.
From 2007 - 2010, I managed a similar energy conservation program at Seattle City Light. Before that, I managed conservation programs at Florida Power & Light and Texas Utilities. At City Light, we usually paid about 30% of the cost of energy systems upgrades. There were a few instances in which we paid the full cost. Over ten years, we reduced energy use in City Light’s service territory by over a billion kilowatt-hours, equivalent to removing around 10,000 single-family homes from the grid.
Here’s why. Utilities must provide reliable energy for the few hours a year during which they need to operate near their capacity. Peak demand for an energy utility can be six times minimum demand, or three times average demand. Peaks are usually weather-driven. In the northwest, peaks usually occur on cold winter mornings, and in the southeast, peaks usually happen on hot summer afternoons.
Peaks may last only 20 - 200 hours a year, but they have disproportionate effects on infrastructure requirements and fuel use. Large power plants must be built, even though they will often operate under their capacity. Small power plants must be built and maintained, even though they will only be used for a few hours a year. Electric and gas transmission and distribution grids must be sized for peaks, rather than average use.
Peak energy is expensive. It can cost a well-managed utility over 100 times its retail rate to buy and supply electricity during system peaks. There are many reasons for this. Just one, as an example: For two-hour peaks during ten hot summer afternoons in August, a southern utility might have to build a power plant that would be capable of operating 8760 hours a year, and then operate it for only 20 hours a year. The utility would, however, have to pay the full cost of the plant, and would have to pass that cost on to consumers through retail rates.
If electric customers used exactly the same amount of energy they do now, but used it consistently throughout each 24 hour day, 365 days a year, utilities would need fewer power plants, smaller transformers, and smaller transmission wires. Power plants would operate closer to their design capacity more often, and could stop operating entirely during some hours. Utilities offer energy efficiency rebates to capture cost savings from flatter total loads, even when doing so reduces energy use during non-peak hours too.
Incentive programs must be approved by regulators. Before approving new programs, regulators check to be sure that rebates, which are paid on behalf of individual customers, are structured to reduce costs to all customers by more than the costs of the programs.
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