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Feature Article – The Power Sector of the Future – A Case Study in Policy Strategy

oikosPenn had the pleasure of cosponsoring the EES seminar series at Wharton School of Business at University of Pennsylvania. The following is a short blog on the presentation ofBrian Kauffman, Executive Director, KEEA that took place on Nov. 13th, 2013

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Brian framed the presentation in the form of a traditional case study. Setting up the case study, Brian introduced the backgrounds to include the falling demand growth in energy and electricity, the increase in growth of alternative intermittent energy generations including wind, solar, and other renewables, increase in distributed generations such as mini-power generators, and the decrease in the pricing of natural gas. So with these four cause, how is the future of the power sector affected?There are many players in the industry. Stakeholders including advocates, utilities, investors, policymakers, and regulators all shapes the power sector. Besides the stakeholders there are also the builders as well as the users. Technology, operation, and education also takes part in the industry. How can one person use energy more efficiently?  Why should a person use energy efficiently? Brian points out four direct and indirect effects: saving money, creating jobs, deliver environmental benefits, and pronouncing market failure in private markets. In the recent decade, energy efficient resource standards have slowly been adapted into policies and regulations. 15 states have some form of energy efficiency standards; some use the “all cost effective” energy regulations while other have spending caps on energy efficiency.

So with all these players and the background to the case, where does KEEA come in? Brian explains that KEEA is a trade association based in Philadelphia with 67 various business members. In Pennsylvania, an energy efficiency standard was pass in 2008 broken down into two phases. KEEA’s position in this case is to try and create a win-win situation on both sides of the table, the regulations and the business. As an association, KEEA brings together various players listed above in meetings and conferences to share knowledge and to initiate potential ideas into drafts and finally into reality.

So what is the future in the power sector? From current projections, there is a positive growth in energy efficiency up to 2025 which is when the studies expanded the projections to. Various studies on different policies around the nation as well as various spending taking place shows that the growth in the market will result in dramatic energy savings. Currently there is a nationwide saving of 18.4 TWh which is higher than the annual energy use in New York City with a potential growth of saving ranging from 20.6 to 41.6TWh depending on the various scenario. With this, Brian suggest that although the demand for energy will increase, the overall use of energy will decrease.

Near the end of the talk, Brian finally touches on the sensitive topic of the effect of climate change on the power sector and on energy efficiency. To describe what KEEA expects new policies and regulations in the power sector is, Brian uses the metaphor of chairs. There are chairs that are just there for someone to sit on while there are chairs that goes beyond its intended function and provide comfort and relaxation. With the perspective of climate change from the current government and that of the president’s office, the general expectation is that there will be a cap on power plants over emissions before the end of the president’s term. Projections as to how this regulation will affect the power sector have been made and the results are promising. These studies suggest an overall saving of 7% or 480TWh of energy saving by 2020.

To conclude the case, Brian pose the question of either approaching the future of the power sector with either the traditional economic approach or through climate change. It is no longer just a matter of setting a policy but to frame, maintain, weight, and segment the policy to bring about THE FUTURE of the power section.

Keystone Energy Efficiency Alliance naming after the keystone State of Pennsylvania. For more information on KEEA please refer to the link: http://energywisepa.org/keea