Group wants energy czar: Coalition believes utilities slow to climb on efficiency bandwagon

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Chris Maher’s crews at Thermo-Scan Inc. have been plenty busy inspecting for drafts and puny insulation in many of the 14,000 new homes built each year in the metro area.

Even so, the principal at the Carmel firm can’t help wonder about the vast potential to make the hundreds of thousands of existing homes and businesses more energy efficient-if only homeowners had a little more incentive. Utility companies, he says, have relatively few dollars budgeted to coax customers to install more efficient furnaces or other improvements.

“Their main focus is to sell energy, not save it,” said Maher. “It may very well be time for an independent agency to take over.”

Maher reflects the vision of an emerging coalition of businesses, labor and consumer groups known as Partners For Sustainable Energy, which wants the state to create a sort of energyefficiency czar to administer grants now doled out mostly by the utility companies.

This czar also would encourage economic development. Utility customers, the thinking goes, would spend money on everything from Indiana-made geothermal systems to new windows. And a portion of the money they saved through lower bills would turn over again in the economy through the purchase of consumer goods or new investment by business.

The czar could further boost what, in effect, is the state’s energy efficiency industry by encouraging the deployment of solar panels, wind turbines or biomass generators that burn gas from crops or animal waste.

“We should capture that side of the energy economy,” said Grant Smith, executive director of Citizens Action Coalition and a leader of Partners for Sustainable Energy.

Lately, the loose-knit Partners has been bending the ears of state leaders, including advisers to Gov. Mitch Daniels. The group hopes the potential for economic development will get their attention more effectively than past appeals focusing on environmental benefits.

Brandon Seitz, policy director for Lt. Gov. Becky Skillman, said the idea is worth considering as part of the overall goal of meeting future electric demand.

“It’s going to involve not only new energy production … but also the idea we’re going to need to conserve and be more efficient,” he said.

Seitz said the administration already has a great deal of interest in generating electricity from biomass-a natural for an agricultural state.

Partners for Sustainable Energy also might get a more sympathetic ear as natural gas prices remain sky high and utilities detail expensive plans to build new coal-fired power plants to meet a projected 3,130-megawatt shortfall by 2010.

“Energy efficiency is cheap. Cheaper than building power plants,” Smith said. He said a recent study estimated energy efficiency could meet 29 percent of the state’s electric demand and more than double the projected megawatt shortfall.

Smith is skeptical of gloom-and-doom predictions of a shortfall in the first place. He said utilities fail to mention the availability of power from the wholesale market and from independent “merchant” power plants.

Efficiency’s insufficiency

But to hear utility companies and some business interests, Smith’s group is darting at windmills.

They say Partners’ energy-conservation goals are worthy but disagree on how to fund them. They also say conservation alone won’t eliminate the inevitability of more coal plants.

The state’s largest electric utility, PSI Energy, has run models of what would happen if energy efficiency doubled. It also plugged in the costeffectiveness of alternative energy generation.

PSI acknowledges efficiency efforts over the last 15 years have shaved more than 150 megawatts off peak demand, reducing the need to build a peaking plant. Even so, “We’re not going to be able to not build any more power plants, in my view … If this was the answer to keeping our rates competitive we would be all over it,” said Kay Pashos, president of Plainfield-based PSI.

The utility’s current efficiency incentives range from rebates of up to $200 for customers who install heat pumps or geothermal systems to a program that helps low-income residents obtain energy-efficient refrigerators.

The vice president of energy and environmental policy at the Indiana Chamber of Commerce questions whether businesses will see a quick-enough payback to invest in retrofitting more efficient devices.

“A lot of that has been done. A lot of the juice has been squeezed out of the orange already,” the chamber’s Vince Griffin said.

But coalition backers say many businesses simply haven’t thought enough about efficiency, let alone about technological advances in the field.

“A lot of people, when they hear ‘energy efficiency,’ think, ‘We should turn off

the air conditioner for the afternoon,”’ said Kevin Marshall, director of residential marketing at International Brotherhood of Electrical Workers Local 481.

His members attending a high-tech training center near Indianapolis International Airport have been learning how to install photovoltaic solar panels. The cost of solar has fallen in recent years, Marshall said, so much so that some businesses have begun to install them.

A close look at the gently arching canopies above fuel pumps at a halfdozen BP stations around the city reveals an array of solar panels. They generate enough to run the lights and some equipment inside the stations.

In a more conventional move, Columbus-based Cummins Inc. shaved $200,000 from its annual electric bill by installing more efficient motors at some of its Indiana manufacturing plants.

One Indiana business has a big stake in these kind of efficiency efforts.

About 200 workers assemble geothermal heating and cooling systems at Fort Wayne-based Water Furnace International. The systems tend to run a few thousand dollars more than traditional units because of a loop buried underground to capture the earth’s heat. The firm claims that higher upfront costs are more than offset by lower utility bills.

So far, most of the systems purchased are for new construction, by builders who make efficiency a selling point, said Phil Albertson, vice president of sales for Water Furnace’s Noblesville office.

“The builder is saying to himself, ‘Do I want to put in an additional $3,000 in crown molding or do I want to put in a geothermal system?'”

Thus the need for incentives.

“Businesses might be hesitant on an upfront investment. But if they had some help it might not be such a barrier,” said Tim Maloney, executive director of the Hoosier Environmental Council.

Higher bills either way

Paying for those incentives is where the coalition is likely to encounter the most resistance.

Smith suggests one approach could be to tack on a fee to customers’ utility bills. This could raise $140 million a year, he said, based on how some other states with efficiency programs have structured their fees.

“You’re actually talking about raising people’s rates,” he concedes, “but decreasing their costs substantially.”

A proposal to create a sustainable energy institute was part of a bill introduced last year by State Rep. Scott Pelath, D-Michigan City. It didn’t get a committee hearing.

The problem, said the chamber’s Griffin, is that “no matter how you slice it, it is another tax or fee on business.”

A number of energy-intensive manufacturers are on razor-thin margins as it is, he said.

But Smith said businesses haven’t seen anything yet in terms of higher electric bills, once companies like PSI and Cincinnati-based parent Cinergy build new power plants and more pollution control devices to comply with tightening pollution laws.

Between a new coal gasification plant Cinergy is contemplating for southern Indiana and pollution modifications at existing plants, customer bills could jump upwards of 17 percent.

PSI’s Pashos said it isn’t that utilities haven’t tried efficiency and alternative forms of generation. The utility has a small hydroelectric generator in Southern Indiana, a wind turbine along Interstate 65 near Lafayette and an array of solar panels in Bloomington. While they’re good test beds for the technology, “they really aren’t cost effective. But they’re getting a lot closer.

“Again, it comes down to, pure and simple, cost-effectiveness.”

Smith counters that building coal plants contributes little, if anything, to building the state economy.

It’s not about cost, he says, “it’s all about political will.”

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