The way that Americans produce and consume energy is at a major transition point. We’ve seen the emergence of powerful, parallel trends: a dramatic expansion of natural gas production, steadily growing renewable sources, growing concerns about climate change, reliance on foreign oil, and the health effects of burning coal, and new ideas for improving energy efficiency. Together these trends mean that our energy use over the next few decades will look very different than it does today.
Oklahoma is well-positioned to be a leader of this transition, with resulting huge benefits for our health, environment, and wallets. At the same time, we face a serious long-term challenge of ensuring our resources do not fall short of our needs or become prohibitively expensive.
A looming deadline for Oklahoma is 2020. In that year or soon after, OG&E expects rising demand to require construction of an additional fossil fuel plant, at a cost of billions of dollars to ratepayers. Oklahoma’s other major utility, PSO-AEP, expects major new power generation capacity to be necessary by 2019.
Fortunately, there are proven strategies that we can use to continue living within our means and push back the need for costly new power plants. Discussion about energy tends to focus on flashy new technologies like hydraulic fracturing (fracking), solar panels, and electric cars. However, the most cost-effective, accessible way to achieve our goals is more mundane – doing more with the energy we already have.
Energy efficiency makes good economic sense. It costs about one-third as much to save a kilowatt-hour through a customer energy efficiency program as it does to generate a new one at a power plant. As U.S. Secretary of Energy Steven Chu put it, “Energy efficiency isn’t just low-hanging fruit; it’s fruit lying on the ground.”
Governor Mary Fallin agrees. As stated in the Governor’s energy plan, “Energy efficiency itself may be the cheapest and quickest method to reduce energy costs and emissions. Energy efficiency leverages all energy resources, and as a resource state, Oklahoma is well-positioned to benefit greatly from this leverage.”
Even though Oklahoma has relatively low average electricity rates (16th lowest out of all 50 states plus the District of Columbia), our average monthly electric bill puts us in the middle of the pack (24th highest). The gap is largely due to Oklahoma lagging behind on efficiency, as seen in our ranking of 47th worst in the most recent ACEEE state scorecard.
So what stands in the way? First of all, average consumers do not have the resources or knowledge to make up-front investments needed for higher efficiency. In particular, low-income seniors and working families are most likely to live in older homes with less efficient appliances but least able to do something about it. From Governor Fallin’s energy plan:
Inefficient energy use based on poor building construction or a poor choice of fuel options disproportionately hurt the elderly and low-income groups that do not have the resources or capabilities to rectify the situation. Those two groups not only end up paying an unacceptable percentage of their income on energy, but they are also oftentimes, without any choice on their part, stuck with the most expensive life-cycle energy cost option. Only those who have greater resources and knowledge can afford higher up-front costs to ultimately save more energy over a product’s useful life.
Oklahoma could combat this problem by updating the state’s default building code. In Oklahoma, local governments have control over building codes, but the state has established the 2003 International Energy Conservation Code (IECC) for jurisdictions that do no adopt their own. However, the 2003 code has grown increasingly out of date. By updating the statewide default to the 2009 IECC, we could save an estimate 14 to 15 percent in energy costs for new buildings, or about $270 a year for an average new house at recent fuel prices, according to the Building Codes Assistance Project.
Local governments can be encouraged to go even further, since the IECC has been updated as recently as 2012. At the least, we can offer public education and training for those in the construction industry who want to improve their work to the latest standards. We should also expand existing programs and subsidies for weatherizing inefficient homes and incentivizing the purchase of more efficient appliances.
On the utility side, Oklahoma is already making strides with advances with smart-grid technology that enables consumers to receive a great deal more information about their power usage. OG&E in particular has been a leader on this issue with major pilot projects in Oklahoma City and Norman, and they are now rolling it out to their entire coverage area. PSO is conducting smaller pilot projects in Owasso and Tulsa.
Smart meters are most valuable when used in conjunction with time-of-use pricing to encourage households to shift some energy-intensive activities to times of day when overall usage is lower. While the same amount of energy may be used, this reduces the peak so that there is less need for expensive capital investments to increase peak capacity (i.e. build a new power plant).
Time shifting is especially well-suited for Oklahoma wind power. The wind blows hardest at night, but if no one uses the power generated at that time then it goes to waste. So if, for example, households began running dishwashers and washing machines at night to take advantage of time-based pricing, they could save money while taking more advantage of non-polluting, renewable resources.
Another powerful way to benefit consumers is net metering, which allows small power producers (like a home with solar panels on the roof) to sell energy back to the grid if they produce more than they consume. Time-of-use pricing net metering, and other reforms have already been endorsed in Governor Fallin’s energy plan. Governor Fallin and other state leaders can do more by informing Oklahomans of what’s at stake and publicly calling for action.
The leaders who can do the most to ensure that Oklahoma aggressively pursues these reforms are the elected members of the Corporation Commission. Oklahoma’s utilities are private corporations, but their inner workings are heavily influenced by the state. Most importantly, the Corporation Commission decides whether to allow power rate increases and what percentage return the utilities’ investors can receive. The Corporation Commission can make it clear that no rate increase will be allowed if these utilities do not aggressively pursue all cost-effective energy efficiency measures.
There is certainly much more they could be doing. The best-performing states have been reducing their energy usage by 1 to 2 percent per year through efficiency, whereas Oklahoma has only achieved about one quarter of a percentage point per year. We need to get up to about 1 percent saving per year to forestall the need for a new power plant. Any lawmakers or regulators who want to return money to Oklahomans should make energy efficiency a high priority.