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Paying it forward: energy efficiency in New England

by Jim Merriam, Director of Efficiency Vermont

I’ve often noted that energy efficiency is like a power plant. It’s an odd concept to wrap your mind around – but the impact is real, and it provides big benefits to Vermont and New England.

Powered by efficiency

As you can imagine, generating electricity and moving it to where it is needed can be quite costly. When you use efficient products and equipment in your home or business, it has the immediate effect of lowering your electric bills. Over time, though, the impact of that efficiency adds up to even bigger benefits. Ultimately, it reduces the need for our state to build new power plants and transmission lines. In effect, our homes and businesses are all one big power plant: one that generates savings every single day.

How big is that energy efficiency power plant? As of 2012, it accounted for 12.3% of the Vermont’s electric requirements – or enough to power the entire city of Burlington for 12 years.

Multiplying the benefits of efficiency

As it turns out, energy efficiency is not just a valuable resource for Vermont: it benefits our entire region, in ways that generate even greater dividends for our state. Here’s how it works:

It takes a lot of planning to operate an electric grid.ISO-New England, the entity that is charged with overseeing the system for the six New England states, needs to ensure that there is always enough power being produced and transmitted to meet demand.

That means they need to accurately predict how much electricity the entire region will need, not just for tomorrow, but for several years into the future. Then they need to line up enough supply to meet that need. If this doesn't work, we all end up with problems like brownouts and blackouts – not to mention costs that are higher than they should be.

How do they go about addressing these big planning challenges? Think of it as an auction.

The forward capacity market story in a nutshell

  • Vermont homes and businesses lower their energy bills by investing in efficiency
  • Efficiency Vermont measures and verifies those energy savings, and bids them into the Forward Capacity Market
  • ISO-New England pays Vermont for being efficient, and helping to stabilize New England’s power grid
  • Forward Capacity Market proceeds are used to tighten up more homes and businesses, decreasing their heating energy costs and spreading the benefits even further

All of New England’s power providers are invited to participate in the Forward Capacity Market by offering bids on how much electricity they can supply – or reduce – in the future. They determine how much they can provide to the grid, enter the auction, and are paid a guaranteed price. There is a catch: if providers are not able to live up to their obligations when the power is needed, they face substantial penalties. This is why it is so important to track and measure all the great work that is being done on energy efficiency: if we can’t verify those savings they don’t count in the auction.

This market-based mechanism of rewards, penalties, and verification helps ensure the predictability and reliability of New England’s power grid – and it’s another way Vermont’s work on energy efficiency really pays off.

Why? Because, as it turns out, efficiency is the second largest source of power bid into the auction from Vermont. In effect, efficiency is Vermont’s second largest power plant.

I’ll talk more about this in future posts. In the meantime, please feel free to share your thoughts and questions in the comments below – and think of a power plant next time you change out your lighting, upgrade an appliance, or take other steps to lower your electric usage.

You are what keeps Vermont’s energy efficiency power plant cranking along!


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