Negawatts vs Megawatts

The energy industry is going through an exciting phase. The “energy issue” is a big one and there are many different solutions to the issue. In the environmental field there is a growing call to move towards renewable energy however, some of them have been advocating for conservation for a long time. Traditionally conservation has a negative annotation to it. It may mean “sacrifice” or decreasing our standard of living.

However, a more interesting and sexier concept is Negawatts and its associated technologies and systems.

From the Rocky Mountain Insitutte :

[Amory] Lovins invented the concept of “negawatts”, so that utilities and governments could compare the cost of conservation measures against the cost of increasing power production. Negawatts represent power saved from one application that is made available to another application. For example, a compact fluorescent light bulb uses about a fourth as much energy as a standard incandescent bulb to put out a similar amount of light. Replacing one 100 watt bulb with one 25 watt compact fluorescent therefore “generates” 75 negawatts of saved energy to use somewhere else.

In a Keynote address in 1989 to the Green Energy Conference titled “The Negawatt Revolution” Amory Lovins suggested the importance of energy efficiency and the importance of creating a negawatt solution.

He suggested a “soft energy path” which is a combination of energy efficiency and renewable energy as a way forward to solve the energy issue.

Robert Wilder, CEO of WilderShares which manages two clean energy devices suggests that “Energy efficiency is a sleeping giant,”. He says, “It doesn’t have the sexy allure of solar power or huge wind. But we have Saudi Arabia-sized oil reserves under our feet in America through energy efficiency.”.

The Economist in a recent May 31st article suggests that energy efficiency measures will have a negative abatement cost and will increase economic growth.

The result is a testament to economic irrationality. The measures below the horizontal line have a negative abatement cost—in other words, by carrying them out, people and companies could both cut emissions and save money. At a macroeconomic level they would boost,rather than reduce, economic growth.

The Economist provides an explanation on why there is less interest and investment in the energy efficiency measures.

Economists trying to explain this apparent irrationality suggest that the savings are too small and the effort involved in change too large. People find their electricity bills too boring to think about; within companies, those responsible for keeping bills down may not have the
authority to spend the necessary capital. Another explanation is the agency problem: that the developer who would have to pay higher capital costs up front will not be forking out for the electricity bills. Besides, people buy houses not because they have good insulation but because they have pretty views.

However, that is changing. As suggested a previous article; constant feedback mechanisms can make a difference in increasing conservation.

The importance of Negawatts comes thorough when there is a great increase in demand (peak demand) in some periods across the country. For example, due to the hot summer months in South Australia combined with one of the highest per-capita uses of residential air-conditioners in Australia; some 20% of South Australia’s energy production capacity is utilized only on 4 days of the year. This increases costs for the utilities as well as consumers. In fact, South Australia has the “most peaky demand profile of any of the Australian states – driving high energy wholesale and network costs.”

The question for the utilities is this? Is it better to create a ‘negative watt’ of energy or create a ‘mega watt’ of energy by buying power at the time of peak demand or in the long run; build a whole new power plant. If the financial benefits for negawatts beat megawatts then demand-response, energy efficiency and other methods will gain prominence.

What this all means is that there is a financial benefit to supply demand management technology. New technologies and companies funded by VCs are coming up to create energy efficiency solutions to the market (atleast in the US).

Red Herring has been reporting on a lot of them:

Consumer Powerline: Starting next week, Consumer Powerline will begin handing out checks to its customers for the energy they saved this year. The amount will reach $8 million this year, up 60 percent from last year, with $2 million to $3 million reaching customers next week and the remainder being distributed in the fall, the company said Friday.

The payouts stem from “demand response,” a process in which utilities avoid blackouts by paying customers to use less power when the electric grid is squeezed. The utilities can buy negative watts, or “negawatts,” at the same rate of electricity at those peak hours, avoiding the far higher cost of outages.

“[Demand response] is absolutely growing because electricity markets are becoming more volatile,” said Mike Gordon, president of Consumer Powerline. “Throughout the U.S., regulators are saying, ‘We’ve got to expose people to the real volatility of energy prices. We’ve got no choice.’”

Negawatts for Positive Returns : The concept is one of a number of new ideas sparking a surge of new money into a once obscure niche of the clean energy market. Four so-called energy-management startups have announced venture capital funding since March, already surpassing last year’s total.

In May, energy-management startup Prenova raised $11 million, and Broadband Energy Network raised more than $2 million. Fat Spaniel raised $3.5 million in March. Comverge raised $5.5 million in April. “The technology, the business models, and the managers—the entrepreneurs—are all getting better,” says Nicholas Parker, chairman of the Cleantech Venture Network

And in a recent spate of funding,

Comverge: Comverge, an energy management company, soared 24 percent Friday in its Nasdaq trading debut. The company offered 5.3 million shares at $18 per share to raise $95.4 million in its initial public offering. Shares settled $4.31 higher at $22.31 by close of trading from the offering price. Comverge’s IPO marks the first public offering of a company focused on electricity grid management and comes after energy startup EnerNOC in February filed to go public.

Powerit Nabs: Powerit Holdings, which develops technology that automatically shuts off unnecessary energy use in industrial buildings, announced Thursday it received $7.1 million in funding from a group of VCs led by @Ventures and Expansion Capital Partners.

The funding reflects interest in energy-saving technology that curbs watts or generates “negawatts.” Companies such as EnerNOC and Comverge, which sell energy monitoring technology that signals when unnecessary usage can be shut off, recently enjoyed successful debuts on the public market.

The Negawatt revolution is a market driver conservation mechanism which will create a positive and sustainable solution in the long term.

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2 thoughts on “Negawatts vs Megawatts

  1. Pingback: Save-a-Watt « World is Green

  2. Pingback: Amory Lovins on Energy Efficiency « World is Green

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