Cutting CO2 One Refrigerator at a Time

old_refrigerator

Energy efficiency is everybody’s favorite strategy for reducing carbon-dioxide emissions. But conservation programs are not always economical.

by James A. Bacon

Earlier this month Dominion Virginia Power launched an initiative to encourage residential customers  to turn in old refrigerators kept in the garage. If you have a clunker that is at least 10 years old and has a capacity of at least 10 cubic feet, Dominion will pick up the appliance, recycle it and pay you $50 in the bargain. By  swapping an old fridge for a new energy-efficient model, you could shave up to $100 per year off your electric bill.

Sounds so simple. But there is more to this story than meets the eye, and it provides a glimpse into an under-appreciated question — the extent to which energy efficiency can substitute for new electric power plants in achieving Virginia’s CO2 reduction targets under the Environmental Protection Agency’s Clean Power Plan.

In its 2015 Integrated Resource Plan, Dominion predicated its options for investing in electricity generation and distribution upon the assumption that it will be able to achieve more than 3,000 Gigawatt hours of energy savings through Demand Side Management (DSM) programs by 2030. That savings will eliminate the need to build 611 Megawatts of generating capacity, equivalent to about 3.4% of the power company’s current generating capacity of 17,500 megawatts.

But some environmental groups contend that Dominion should invest more aggressively in energy efficiency to achieve the draft targets set by the Clean Power Plan. “Virginia has a large amount of untapped potential when it comes to energy efficiency,” contends the Natural Resources Defense Council in a 2014 issue brief. The state ranks 47th among the 50 states for energy efficiency. “Other states have been able to achieve significantly higher levels of low-cost efficiency, to accrue substantially more customer and energy benefits. Virginia can do the same.”

Power companies and environmentalists can argue back and forth over whose analysis is the most valid but in Virginia, the State Corporation Commission calls the shots. Power companies must make a business case for a particular energy efficiency initiative and persuade the SCC, which gives great weight to the impact of on rate payers, that the cost of implementing the plan is less than the cost of building new electric-generating capacity. In a recent ruling involving the garage-refrigerator program, the SCC took a harder line than either Dominion or the environmentalists.

A seemingly strong case can be made for recycling the old fridges.Refrigerator efficiency has improved dramatically in the past 20 years,” said Ken Barker, vice president of technical solutions at Dominion in a press release announcing the roll-out. “Homeowners oftentimes don’t realize how much their old refrigerators may be impacting their energy bills. We not only want to educate our customers on this lesser-known source of wasted energy, we want to help them do something about it.”

Roughly 60 million refrigerators are at least ten years old nationally, and Energy Star models are more than 15% more efficient than those built in conformance with 2009 regulations. The fact that refrigerators kept in garages are exposed to extreme heat makes energy efficiency an even more important consideration. Swapping an old fridge for a new one could save up to $100 per year.

Most studies of consumer behavior, says Dominion in its 2015 Integrated Resources Plan, indicate that consumers expect payback on their energy-efficient investments within 10 years or less. By handling the pick-up and recycling and paying the $50 incentive, Dominion hopes to improve the payback from making an upgrade.

Last August the company filed a petition with the SCC for approval to implement the garage-refrigerator initiative and two other demand-side management programs. A second was a home-improvement program for the poor and elderly, and a third targeted small businesses. In each case, Dominion sought approval to operate the programs for five years.

The SCC was not entirely cooperative. Ruling in April, the commissioners approved the refrigerator program but for only three years on the grounds that its cost-effectiveness was unproven. They said the program should be evaluated over three years before being extended. The SCC also limited the program budget to 50% of the original proposal, or about $4.8 million. The commissioners followed similar logic for the poor and elderly home-improvement program, limiting it to three years and $15.2 million.

The SCC nixed the small business program entirely, declaring that Dominion had not developed it sufficiently. “The lack of detail regarding important elements of the program,” stated the commissioners, “calls into question the accuracy of the Company’s cost/benefit analyses offered in support.”

“We are particularly sensitive to the impact on the bills of customers not participating in the programs, for whom the program costs represent net increases in their monthly bills,” explained the SCC in its final order. In a separate order on an Appalachian Power Co. request, the SCC elaborated: The conservation program “represents an involuntary wealth transfer (i.e., cross-subsidy) from one set of [the Company’s] customers to another.” Non-participants “will pay higher rates with no equal and offsetting monetary benefit.”

Energy efficiency programs vary widely in cost, just as different forms of electric generation do. According to Dominion’s 2015 IRP, costs range from nearly as low as $16 per megawatt hour for a non-residential energy audit program to $158 per megawatt hour for a residential home energy check-up program — and even more for other programs.

Under Virginia’s regulatory structure, energy efficiency programs have a high hurdle to overcome before the SCC will declare them to be in the “public interest.” Not only are Virginia power companies entitled to recover the cost of administering an energy-efficiency program, they normally are entitled to recover revenue lost from electricity not sold.

That helps explain why the SCC is skeptical that energy efficiency will contribute much toward Virginia’s attainment of the Clean Power Plan. In comments submitted to the EPA last fall, the SCC staff wrote: “The Virginia SCC Staff is unaware of any electric energy efficiency resource deployable in Virginia that both (1) has a cost less than its associated avoided variable operating costs, and (2) is scalable to a level that would meet the Proposed Regulation.”

The refrigerator recycling program is a case in point. The program is expected to save about 2,700 megawatt hours of electricity annually, according to Dominion spokesperson Daisy Pridgen. That’s about 7.4 megawatt hours daily, less than one megawatt per hour — a tiny fraction of the total energy-efficiency savings that Dominion is aiming for, and an even smaller percentage of what environmentalists say is possible. It would take dozens of such programs to avoid the cost of building even a single power plant.

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26 responses to “Cutting CO2 One Refrigerator at a Time

  1. Where does the fifty bucks come from? Who provides the $50 that is paid to the consumer who surrenders an old fridge? The stockholders or the ratepayers? The answer is kind of discernible in your copy, but you have to hunt for it….but we do, right? It’s my 50 bucks paying somebody to surrender their fridge….maybe its my 5 cents and 5 cents from 999 other customers. There is a brand new energy star fridge in my kitchen and I didn’t ask 1000 people to pay me to get rid of the old one, which was making noises like a un-lubricated Studebaker.

    The SCC is dead right to be hard nosed.

    I do remember some legislative testimony from another utility, however. It once had a similar program to reward people who bought energy-efficient fridges, but they discovered the old ones were put in the garage and filled up with beer. So consumers will do what they will do….

    The best thing really is for people to be made aware of what energy is costing them — people will take steps to save money (if not to save the planet) but only if they have the information.

    • Yes, the cost of the energy-efficiency program is passed on to rate payers. That’s why the SCC regards the refrigerator program as a transfer of wealth from one set of rate payers to a different set. Apparently, the SCC prefers to treat all rate payers the same. But, then, it has to balance that imperative against other mandates, like the General Assembly goal of achieving 10% energy efficiency savings by 2020.

      I agree with you that the best approach is to educate consumers what energy costs them. But even educational programs cost money and must be charged to someone.

  2. wait a minute… not a peep from Bacon about govt bureaucrats deciding what a business should do or not?

    If Walmart can decide what energy improvements to make and how to allocate costs between investors and customers – why do we need govt bureaucrats deciding that for other corporations?

    I seriously question the folks at SCC having that level of power unless they have a staff that has the same qualifications of Corporation CFOs. I see the SCC as the roadblock to more better energy efficiency… now..

    Steve asks – where does the 50 come from?

    it comes from you. Dominion, in effect, is taking the 50 as an up front investment to save money downstream. right?

    Is this much different than the govt giving you an energy credit for some things?

  3. Geez, Bacon, it is NATURAL Resources Defense Council. It’s like misspelling “Dominion” as “Godzilla” and not realizing it!

  4. Well, in this case there is no proof it will work and this apparently is a three-year experiment with our money. As I said, a consumer who has a second fridge in the garage may swap an old one out for a new one, or someone may get a new fridge for the kitchen, but there is no proof that will mean that North Anna 3 or some giant solar farm won’t need to be built in the future. Consumers want things and get what they want. Five years ago I wasn’t plugging in three or four hand-held devices every day to charge.

    The difference between WalMart and Dominion, Larry, is if WalMart does something that raises its prices too much, I can shop somewhere else. Dominion is a government-protected monopoly. And again, I don’t think the SCC would have cared what it did about its own internal energy efficiency. In this case all customers are being taxed (albeit minutely) to provide a benefit to a subset of customers.

    A few years ago they did something similar with CFL light bulbs and I was aware of it, went to WalMart and bought a box of subsidized bulbs. And I thank the rest of you who paid for them!

  5. all things equal – Dominion is a better judge of how to implement programs to reduce the need for more power plants – than Govt bureaucrats.

    The bar for the SCC should not be for them to decide if they agree or not with Dominion – they should have to demonstrate that it increases costs to all ratepayers.

    what Dominion is doing is fundamentally no different than Walmart.. they’re making similar calculations based on business processes…and how does SCC claim to have more/better expertise?

    This appears to be yet another flip-flop on Bacon’s part as he has argued vociferously that bureaucrats requiring certificate of needs have no business doing that.

    double standard?

    • Larry, I’m not flip-flopping on anything. This story was reporting, not commentary. I wasn’t making value judgments. I was telling the story straight. I can understand the confusion because I combine commentary and reporting on the blog, and it isn’t always clear when I’m doing one and when I’m doing the other.

      Here’s one clue: When I structure the blog post as an article with a headline and a sub-head, and I promote it in the slider at the top of the blog, it’s an article, not commentary.

    • Dominion is entitled to recover the costs of its energy efficiency programs through the rate it charges to all customers. So the costs of such programs should have no impact on its bottom line– they are simply a passthrough charge toall customers included in the electricity rate.

      So one could make the argument that Dominion may have other incentives besides program effectiveness when making such suggestions. The largest incentive may be political pressure from special interest groups that have the governonor’s ear. Also, the EPA has made energy efficiency one of the component requirements in its Clean Power Plan. So the Dominion proposed plan is intended for compliance purposes, at a minimum.

      The problem that the SCC has with the plan is that while the costs of the plan get charged to all customers through the rate process, the energy savings and the rebates accrue to the benefit of only some rate payers.

      From the article above, I would assume that Dominion failed to provide enough details to convince the SCC that the plan would reduce consumption enough that it would reduce the need for future capital investments in generating capacity (which would be born by all ratepayers.)

      • I guess I would say that if a program saved Dominion from having to build another 1.3 billion plant – all ratepayers would benefit

        Dominion could, instead, sell power like HOT lanes work. They could set the basic rate for the lowest consuming users then charge more for using more and charge even more than that if you are using more power at peak hour use and Dominion has to ..essentially pay more for than they’re selling it at … that’s everyone subsidizing the higher users.

        or you could achieve the same effect by encouraging people to use less.

        such measures are fairly common where electricity costs 50 kwh to generate.

  6. 15 year old stainless steel big box reefer. $1500 new
    Total DIY repairs. $175
    10 year old smaller stainless steel reefer to replace the big box that wouldn’t fit in the new house. $1200 new
    Total DIY repairs. $130
    Brand new energy efficient stainless steel equivalent reefer to replace the 10 year old. $1900.
    Recycle two units. $100
    Now why would I spend 1800 bucks to have less reefer? You dope heads gotta be smoking something.

    • Simply brilliant!

    • I’m a guy who looks for the yellow EnergyGuide Label because the real cost of something is not only it’s purchase price but how much it costs to operate it.

      so when we bought our fridge – we passed on several other models that we liked to end up with a more plain jane model that promised much less energy use.

      Same thing with CFC and LED lights… they cost a bunch up-front – but pay for themselves and then some – over time. We just replaced flood lights under the roof eaves with LEDs not only for less energy use but so we don’t have to get on ladders to replace them – for quite some time (we hope).

      We are now considering on-demand water heaters and we already have a box on our current water heater than allows REC to defer heating until outside of peak hour. We usually clothes in cold or warm water and are considering a more modern washer that wrings out more water – so less energy to dry is needed.

      We’re not doing this to be “green” … I like the idea of “green” but also with respect to money! 😉

      We’re doing it primarily to cut our electricity use and in turn the amount of money spent…

      and you can be sure – if we lived in one of those places that has to import fuel to burn to generate electricity at 50 cents a kwh (compared to 11 or 12 cents) – that we’d be using even more energy efficient products.

      cutting electricity use – no matter what you think about CO2 – definitely cuts mercury deposition which is a potent pollutant that gets into the food chain which we end up ingesting… ourselves..

      Conservation used to be a keystone principle for Conservatives.. but like a lot of other things – it’s gone by the wayside these days and now more and more energy use is apparently considered – inevitable and “good”.

      and here’s the thing –

      If I and many others save too much electricity – it will put Dominion in a bind in terms of paying debt off for it’s generating plants – and when that happens – Dominion will seek a rate increase to pay for their stranded assets – and all the folks who saved will have to pay more anyhow – essentially subsidizing the folks who don’t save and shielding them from taking their fair share of the impacts of energy use.

      This is why I’d support stepped up costs for increased use – as well as peak-hour pricing for folks who use more power during peak power demand periods.

      I think the SCC is dead wrong – to make low cost alone the primary criteria rather than electricity use… mercury pollution and stranded costs as more important. We need a cost structure that provides basic electricity at low cost – but when folks want more – they should have to pay the full costs of “more” instead of spreading it out to all users including those trying to keep their use down.

      The pricing structure should be more like what we do for water… or now – HOT lanes..

      you want more – you pay more – and others who don’t want more don’t pay more.

  7. …hmm I could use a new frig. A few years ago I got $350 off a nice new high efficiency washing machine, with Virginia state eco-discount. The washer was on sale for $500 at Home Depot. My best deal ever, however, I made an unrelated mistake slightly underpaying Va. taxes that year, so I assure you Va. is net positive on my account.

    • I still question the apparent SCC criteria of the lowest price for all ratepayers which essentially means that conservation is punished and excessive use rewarded, because all ratepayers will pay the same rate – and those conserving will essentially be paying for those not.

      That approach actually will increase the need for more plants and more pollution and thus explains the SCC’s reactive posture to CPP while Dominion’s much less so.

      SCC staff is essentially making policy choices that I think inappropriate and beyond their legitimate purview.

      A rate structure should provide a basic allocation for median usage then apply surcharges for higher than average use and additional surcharges for higher peak hour use – because higher use – results in more pollution and more need for additional capital facilities.

      Further – even the most frugal ratepayers get drug into sharing higher capital costs for additional plants as well as regulatory issues over pollution that results in adding pollution equipment or closing plants.

      what we should adopt, is the same paradigm we use for municipal water usage and now HOT Lanes.

      Each person pays a share – tied to their use. If they use more – they pay more.

      Right now the rates are essentially set to force everyone , no matter how much they conserve – to help pay for increased capital costs and pollution costs caused by higher use.

  8. Well gee, I don’t have a problem saving electric. I got those expensive Led lights, which I seldom turn on. I got LED TVs too, which I seldom watch. I do have two very old reefers, which were top of their yellow chart way back when. But I really have to do something about those two car sized ACs my wife likes to run when she is home during the day. They really kill me in the summer, when I turn them on. But it’s ok I guess for an energy wasting Mcmansion. I have to dig around the couch to find enough change to pay my 80 bucks a month for power, at least until the AC bill comes due. See, I used to work aircraft carrier flight decks at night. I’m used to not having any lights on. Or AC, once my wife leaves for work.

  9. That’s 80 IF I don’t turn on the AC. Then it goes up to about 200. My house alternates big bills between electric and natural gas. Depends on the season, one goes up the other goes down. Spring and fall I really make out.

    Back in Hillbilly land, our old farm house had a coal burner kitchen stove, a pot belly in the main/sleeping room, and we ran two oil lamps. Tin roof, clear spring, big shade tree, a coal seam just up the hill, and a nice front porch for banjo playin and such. Didn’t need money for the house. 🙂

    • sounds like you have a big house or one that needs more insulation…!!

      grandad had a hillbilly house, wood stoves.. front porch… not electricity, etc.

      • Abt. 4000 sq. ft. when I bought it.

        After the bottom fell out of the housing market, it shrank down to 3200. heh…

        Sometimes I think we all might have been better off living in the sticks. The way things are these days an employer pays us so we can pay someone else. Gets tiresome always being the middle man. (in the navy we had a different name for that, but I’m trying to keep it clean.) 😉

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