Why we never need to build another polluting power plant

When I worked at the Department of Energy in the mid-1990s, we hired Nelson, who had recently retired from Dow, to run a "return on investment" contest to reduce DOE's pollution. As they were at Dow, many DOE employees were skeptical such opportunities existed. Yet the first two contest rounds identified and funded 18 projects that cost $4.6 million and provided the department $10 million in savings every year, while avoiding more than 100 tons of low-level radioactive pollution and other kinds of waste. The DOE's regional operating officers ended up funding 260 projects costing $20 million that have been estimated to achieve annual savings of $90 million a year.

Economic models greatly overestimate the cost of carbon mitigation because economists simply don't believe that the economy has lots of high-return energy-efficiency opportunities. In their theory, the economy is always operating near efficiency. Reality is very different than economic models.

In my five years at DOE, working with companies to develop and deploy efficient and renewable technologies, and then in nearly a decade of consulting with companies in the private sector, I never saw a building or factory that couldn't cut electricity consumption or greenhouse-gas emissions 25 percent to 50 percent with rapid payback (under four years). My 1999 book, "Cool Companies," detailed some 100 case studies of companies that have done just that and made a great deal of money.

There are many reasons that most companies don't match what the best companies do. Until recently, saving energy has been a low priority for most of them. Most utilities, as noted, have little or no incentive to help companies save energy. Funding for government programs to help companies adopt energy-saving strategies has been cut under the Bush administration.

Government has a very important role in enabling energy savings. The office of Energy Efficiency and Renewable Energy at the U.S. Department of Energy has lots of (underfunded) programs that deliver savings every day. Consider, for instance, Chrysler's St. Louis complex, which recently received a DOE Save Energy Now energy assessment. Using DOE software, Chrysler identified a variety of energy-saving measures and saved the company $627,000 a year in energy costs -- for an upfront implementation cost of only $125,000.

The key point for policymakers now is that we have more than two decades of experience with successful state and federal energy-efficiency programs. We know what works. As California energy commissioner Art Rosenfeld -- a former DOE colleague and the godfather of energy efficiency -- put it in a recent conversation, "A lot of technology and strategies that are tried and true in California are waiting to be adopted by the rest of country."

So how do we overcome barriers and tap our nearly limitless efficiency resource? Obviously, the first thing would be to get all the states to embrace smarter utility regulations, which is a core strategy of Barack Obama's plan to reduce greenhouse gases. But how does the federal government get all the states to embrace efficiency?

We should establish a federal matching program to co-fund state-based efficiency programs, with a special incentive to encourage states without an efficiency program to start one. This was a key recommendation of the End-Use Efficiency Working Group to the Energy Future Coalition, a bipartisan effort to develop consensus policies, in which I participated. The first year should offer $1 billion in federal matching funds, then $2 billion, $3 billion, $4 billion, and finally stabilizing at $5 billion. This will give every state time to change their regulations and establish a learning curve for energy efficiency.

This program would cost $15 billion in the first five years, but save several times that amount in lower energy bills and reduced pollution. Since the next president will put in place a cap-and-trade system for greenhouse gases, the revenues from auctioning the emissions permits can ultimately be used to pay for the program.

We should restore a federal focus on the energy-intensive industries, such as pulp and paper, steel, aluminum, petroleum refining and chemicals. They account for 80 percent of energy consumed by U.S. manufacturers and 90 percent of the hazardous waste. They represent the best chance for increasing efficiency while cutting pollution. Many are major emitters of greenhouse gases other than carbon dioxide. A 1993 analysis for the DOE found that a 10 to 20 percent reduction in waste by American industry would generate a cumulative increase of $2 trillion in the gross domestic product from 1996 to 2010. By 2010, the improvements would be generating 2 million new jobs.

For these reasons, in the 1990s, the Energy Department began forming partnerships with energy-intensive industries to develop clean technologies. We worked with scientists and engineers to identify areas of joint research into technologies that would simultaneously save energy, reduce pollution and increase productivity. The Bush administration slashed funding for this program by 50 percent -- and keeps trying to shut it down entirely.

Indeed, conservatives in general have cut the funding or shut down entirely almost all federal programs aimed at deploying energy-efficient technologies. Conservatives simply have a blind spot when it comes to energy efficiency and conservation, seeing them as inconsequential "Jimmy Carter programs."

I recently testified at a Senate Environment and Public Works Committee hearing on nuclear power and spoke about how alternative technologies, particularly energy efficiency, were a much better bet for the country. Senator George Voinovich (R-Ohio) said this was "poppycock," and then asked all the pro-nuclear witnesses to address the question, "If nuclear power is so uncompetitive, why are so many utilities building reactors?"

Voinovich apparently has forgotten about the massive subsidies he himself voted to give the nuclear industry in 2005. He seems to be unaware that states like Florida allow utilities to sharply raise electric rates years in advance of a nuclear plant delivering even a single electron to customers. If you could do that same forward-pricing with energy efficiency, we would never need to build another polluting plant.

Although he is a senior member of the Senate and a powerful voice on energy and climate issues, Voinovich doesn't seem to know the first thing about the electricity business; namely, that a great many utilities have a huge profit incentive to build even the most expensive power plants, since they can pass all costs on to consumers while retaining a guaranteed profit. But they have a strong disincentive from investing in much less costly efforts to reduce electricity demand, since that would eat into their profits.

The next president must challenge the public service commission in every state to allow utilities to receive the same return on energy efficiency as they are allowed to receive on generation. That single step could lead the country the furthest in solving our ever-worsening climate and energy problems.