The Andlinger Center’s external advisory council includes power players in the energy industry such as Ralph Izzo, CEO of PSEG, the parent company of Public Service Electric & Gas, New Jersey’s largest provider of electric and gas service — serving nearly three out of every four people in the state. His company supplies energy in a mix that is about 40 percent nuclear, 25 percent coal, 20 percent gas, and 14 percent renewable energy of various kinds.
In a white paper published last month, Izzo laid out his vision for the future of energy production, emphasizing the importance of energy efficiency while criticizing current programs that support home solar power production:
The fact is energy efficiency is less costly and more impactful than renewables. Yet, while we set aggressive goals for renewables, we have only taken baby steps in the area of energy efficiency.
It is estimated that energy efficiency can deliver similar benefits as solar or wind at one-tenth the cost. We believe energy efficiency must be the centerpiece of a comprehensive effort to build a sustainable energy future in New Jersey.
The cheapest kilowatt remains the one saved. Even if you don’t believe in the impact of climate change, you should care about how energy efficiency can lower your utility bill. It just makes economic sense. Moreover, if society’s goal is lower emissions, then energy efficiency — improving lighting, replacing old heaters and coolers, and even just caulking windows — is the most cost-effective tool we have to fight climate change and thus safeguard the well-being of future generations. A report by the consulting firm McKinsey found that by reducing demand, efficiency improvements could move the world about 25 percent toward the ultimate goal of avoiding the worst impacts of climate change.
Since 2009, PSE&G has invested $300 million in energy efficiency programs, achieving annualized electric and gas savings that could power 30,000 homes and provide enough natural gas to supply 6,500 homes throughout the year. We have brought the benefits of energy efficiency to institutions like hospitals, thus benefiting the broader public as well. To date, we have made energy efficiency improvements at more than 30 hospitals, saving them over $11.5 million a year in energy costs.
But we could do much more, working with technology providers who are creating new devices every day to help consumers monitor their energy use and turn appliances and devices off and on by a schedule that suits their lifestyles.
If energy efficiency is so beneficial, why aren’t customers doing it on their own? Because it takes effort. Scores of research studies have documented the barriers to customers investing in energy efficiency: most consumers lack information about the benefits of efficient products, have limited resources available for energy-related investments, or are skeptical about whether energy savings will actually materialize and justify their investment. It takes a programmed approach to make it easy.
A utility, with its network and strong customer relationships, can be the ultimate sales channel for new, clean energy products and services — increasing customer awareness and facilitating their use with easy installation and training.
While we set aggressive goals for renewables, we have only taken baby steps in the area of energy efficiency.
If New Jersey could reduce energy consumption by 2 percent, it would put $130 million in the pockets of New Jersey consumers, and eliminate the emission of 1 million tons of carbon emissions this would be equal to taking 200,000 cars off the road. That is the amount the most energy-efficient states — Massachusetts and Rhode Island — are now achieving.
Utilities are effective at leveraging their assets — their brand, bill, data, capital, and customer relationships — to remove barriers to investing in energy efficiency.
It’s time for new, creative and bold thinking about the role of the utility — with the goal of making energy efficiency as universally available as electricity and gas are today. It’s a clear win for customers and the environment at the lowest cost possible.
Cleaner Energy: Renewables. Even with a comprehensive Energy Efficiency effort, our customers will still need supply for light, warmth, and comfort. The cleanest supply options available are low- and zeroemitting power resources such as nuclear energy and renewables. Both need some level of support to compensate for the lack of a price on carbon. This should not be surprising.
Nor should it prompt undue concern. All forms of energy receive some subsidy. However, it is important to look at the design of a subsidy (in terms of who gets it versus who pays for it) to maximize the kilowatts produced for every subsidy dollar — and ensure fairness.
New Jersey is a leader in the dramatic growth of renewable solar energy around the country — and with increased investment, great progress has been made in bringing down the cost of solar energy, though more remains to be done. Utilities can play a critical role in making sure the benefits of solar reach all customers by building community-based, larger scale programs. In New Jersey, PSE&G has installed 27 community-based, larger-scale solar projects totaling more than 75 megawatts, which feed into the local grid and provide clean electricity to all of our customers.
Larger solar facilities generate energy at 50 to 60 percent of the cost of rooftop solar.
While the sun’s energy is free, producing electricity with it is not. There is a cost to renewables in New Jersey. The three main subsidies for solar are the Investment Tax Credit (ITC), a federal program that gives back a third of the construction costs; Solar Renewable Energy Credits, or SRECs, a state program that pays solar owners for every megawatt produced; and net metering, which allows solar owners to sell energy at significantly above the wholesale cost. The SREC price in September in New Jersey was around $230 a megawatt-hour, which equals 23 cents a Kwh. With the energy priced at three cents, this makes the all-in cost of solar around 26 cents a Kwh. Last month, the average cost of energy from natural gas was around three cents and nuclear 2.5 cents. Even with the drop in panel costs, solar energy, for all of its advantages, remains 5 to 10 times more expensive than traditional sources of electricity.
The ITC is paid for through taxes; SRECs are ultimately funded by charges on energy bills. So we have a situation where all of our customers, including lower income customers, are paying the subsidies but the benefits of solar go to a narrow few — and a utility — with its network and strong customer relationships — can be the ultimate sales channel for new, clean energy products and services.
Solar power customers have on average twice the average annual income. The median annual income in New Jersey is $70,000, but the median income of those with net metering is $107,000. While the gap is narrowing a bit, those with solar have incomes two times the national average — raising the basic issue of fairness.
Moreover, those who have solar panels on their roofs make greater use of the grid — they put energy onto the grid during the day and at night, and on cloudy days take it off, while not paying their share to maintain the grid. That’s another policy issue in terms of fairness that eventually must be addressed as solar penetration increases.
We are not against subsidies for solar — all energy sources receive some subsidies. However, we believe it’s important for our customers to get the biggest bang for the subsidy buck and ensure that the results are fair. In many cases, that means building more community-based grid solar solutions like the ones deployed by utilities.
This becomes even more important as solar becomes a larger part of the energy mix. The answer to the energy needs of the future is a combination of rooftop and community solar balanced with Energy Efficiency programs.
We need a new regulatory framework that facilitates longterm infrastructure modernization programs and incentivizes utilities to sell less electricity and create energy efficiency programs as well as incentivitzes utilities to partner with new companies to innovate and offer energy-saving products that lower bills and provide cleaner air.
No small challenge. But if we get it right, we have the opportunity to create a model for our nation — and without exaggeration, for others around the world.