Energy Deregulation Explained

If you live in one of the dozen or so states that has voted to deregulate the supply of electricity to its citizens, you probably pay more for your power than necessary. Energy deregulation means that you can choose who supplies electricity to you so power producers have to bid to earn your business. In states like mine (IL), the local utility was required by law to send out letters to all its customers informing them that they had the option to purchase power from alternate Retail Electric Suppliers (RES). What the utilities did not say in the letter was that choosing to select an alternate RES would probably save them 20-30% on their power bill.

Electricity generation is a huge and rather complicated business so you might not be aware that your local electric utility (who you pay each month) may not be the same company who actually generates the energy you are paying for. We don't have the choice in local utility companies but we do have the option to choose from different producers. In my case, ComEd is the local utility that delivers power but other companies supply electricity to me through ComEd. Opting for an alternate RES won't change anything about the quality of your electric power or the service receive--you just pay less for it.

States like TX, IL, OH, PA, NY, CT, MA, RI, NJ, DE, MD, and Washington D.C. are deregulated electricity markets 

I recently enrolled with an alternate RES through a local company. My wife and I live in a small condo so we use relatively little electricity (only 3,869 kWh last year). Most homes use significantly more energy than this, but I still save over $100 a year after signing up. Many businesses like restaurants or convenience stores use 250,000 kWh or more in a year so these companies see thousands of dollars in savings each year going with an alternate RES. I still receive a single bill from ComEd but the portion under Electricity Supply Services is now a single line item with my new kilowatt-hour (kWh) rate listed along with how much we used last month. I was told this is the same for corporate account holders too.

I encourage you to read up on energy deregulation and decide if choosing an alternate RES makes sense for you. Let me know if you have any questions about my experience.

Water heating is bigger than ever

A lot has changed in energy since the 70's, but we still use a lot of it.

We do have a bit of good news on the residential energy efficiency front.  The average American home uses just about the same amount of total energy as it did 30 years ago despite a rising standard of living and more plug-in creature comforts than ever before.  It's actually trending down on a per household basis.

I see two problems with this however.  First of all, we have a whole lot more homes today than in 1978.  We're around 115 million households today where we were only at 68 million in the 1970s.  While flat or even slightly declining per household energy consumption is great, 47 million new households means that we're using a lot more energy on the whole than ever before.

Where we use energy in our homes--1978 and today.

The second problem I see with this data is highlighted in the two pie charts above.  Where we use energy has shifted rather dramatically.  Due to key improvements in building technology and code, space heating accounts for much less of our homes' energy budget.  Air sealing, insulation, and mechanical system efficiency enhancements have worked.  This was low hanging fruit though and further total efficiency gains are going to be harder to achieve.

Take a look at the water heating portion of the chart.  20% of our residential energy goes to heating up water for showers, cooking, and cleaning.  This is a very predictable energy load that is completely unrelated to any other mechanical system in the house or to the quality of the building envelope.  As we look to make further cuts in per capita and total energy consumption, the water heating load is an excellent place to focus.

Germany has far less sun & far more solar than the US.  No one thinks the Germans are flaky environmental nuts either.

This is where solar water heating can make a big impact.  We have more than enough sun anywhere in the US to offset the water heating energy requirement with existing solar collector technologies commercially available today. Despite the cyclical ups and downs on the prices of specific types of energy, energy efficiency strategies enacted today will pay for themselves over the long run.

The answer to our energy problems rises every morning.

Why propane users need to investigate solar

Propane is a dominant heating fuel in rural parts of the US. Propane users typically purchase a large volume of fuel all at one time. It would not be unusual for them to have to write a check for $1250 1-2 times per year.  What this means is that like with a solar water heating system, they are pre-paying for the fuel they use to heat their home and domestic water.  Unlike with natgas and electricity customers, it's not great a leap for propane consumers to understand how a solar water heating system would benefit them in the long run since they can't spread payments out over time.  Additionally, propane customers tend to come from agricultural communities were communities tend to have a longer view of financial prudence.

To give a little flavor of the economics, I modeled a 2 panel, 70 gallon tank system pitched at 30 degrees facing due south in Des Moines, IA.  Using a solar water heater with propane back up tank, the homeowner would save about $450/year in water heating costs (using $2.50 per gallon for propane).  Switching to an electric back up tank with the same solar system, would save this homeowner about $500/year.  Either system would reduce the home's greenhouse gas emissions by about 1.3 tons of CO2.  Even with only the federal tax credit, this system would have a 10-year payback or 6.5% rate of return.  If propane prices go up to $3.50, the payback is cut to just over 7 years.  If your state has any additional incentives, you'll see paybacks as low as 5 years. 

A couple of good resources for propane related information would be Build With Propane and this propane supply outlook paper.

Save now and save later with solar. With a solar system, you fix your energy costs today and hedge against rising prices tomorrow.