"Build-and-Burn" dominated the thinking of the electric power industry in the 50’s, 60’s and 70’s. As the economy boomed and population increased, the means to cover increasing electricity demand was to build more power plants. Since the early 1980’s, however, power construction began to slow. Utility companies did not want the financial risk and public backlash of the long lead times and expense of building new power plants. By the early 1990’s, some utility companies had implemented impressive energy efficiency programs in efforts to reduce their own costs by cutting demand for electricity. Public Service Indiana (now Cinergy) took out an add in the Indianapolis Star in 1992 stating:

"Building just one power plant costs millions of dollars. And that not only costs us money. It also costs you money in what you have to pay each month for electricity. But there’s a smarter way to handle the growing demand for electricity. Namely, make it grow slower (i.e. energy efficiency). Over the next twenty years or so, the savings on energy bills here in Indiana could add up to as much as $300 million. That’s about two dollars saved for every one dollar the program will cost you and us to implement."

What happened? In the mid-1990’s the utility industry and government began discussions about electric deregulation. In preparation for deregulation, utilities cut their workforces by a third, stopped properly maintaining the local distribution system, and eliminated about $1.7 billion in energy efficiency investments nationwide. They did this to become, in their words, "more efficient." That is, there was no more incentive for them to invest in energy efficiency. With the advent of deregulation, only electric sales became important. "Becoming more efficient" meant increasing profits at the expense of service and public benefit programs such as energy efficiency.

Deregulation of wholesale rates is wreaking havoc on the electric utility grid. The result of neglect of the transmission and distribution systems has been more blackouts that last longer than historically was the case since the workforce has been gutted.

In response, the mantra from big utility interests is once again "build-and-burn." This time it isn’t large coal-fired power plants but gas-fired combustion turbines. As of February 2000, roughly 170,000 Megawatts (MW) were on order in the United States - about 23 percent of our energy generating capacity. However, this is not about filling a need for consumers but making big bucks at the expense of consumers. This is speculation, not sound investment. Many will go bankrupt and put local communities at economic risk. They will also negatively impact local air quality and some of these plants, depending on design, may use up to 6 to 10 million gallons of water a day. The increase in demand for natural gas will almost assuredly increase ratepayers’ heating bills in the winter.

Despite the push to deregulate the utility industry, retro-style energy policies may fail under the glare of public scrutiny. That same glare is also shining light on the substantial benefits of energy efficiency. In addition to its beneficial economic and environmental impacts, energy efficiency can also enhance system reliability since it reduces demand and thus the strain on the distribution system. Currently, hundred of billions of dollars are saved each year by the U.S. economy because of energy efficiency. Billions more can be saved if the proper public policies and programs are put in place.

For example, rather than investing billions in central-station power plants, public policies should be designed to promote distributed power. Fuel cells, photovoltaic (solar) systems, and natural gas-fired micro turbines would also improve system reliability since they are installed where the power is needed. Fuel cells can be installed in homes, hospitals, banks, and office buildings. Solar panels installed by residential and commercial customers could help defray peak summer demand. The philosophy of distributed (or decentralized) power is that the most reliable power is the closest power. Energy efficiency and distributed power would also reduce costs for upgrading the distribution system.

Given the state of the transmission and distribution systems, the rush to build more power plants makes no sense. Since 85 percent of outages are due to distribution and transmission system failure, it makes more sense to focus our efforts on reducing demand and deploying power sources that are less polluting and improve reliability.

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