From the CEO
If I had a dollar for every time someone has said to me ‘we need to think differently’ I would very possibly be tanning and not typing…
Put simply, we resist thinking differently because it hurts our brains. Even in the face of clear evidence that old ways of thinking aren’t working, sometimes we persist because the alternative is so unsettling.
And then you encounter someone who saw the same pieces on the board but seems somehow to be playing chess when you’re stuck with checkers. That’s what happened to me at our recent Foresighting Forum, and I’ve been busting to tell you about it.
Twenty years ago, the US state of Oregon established an independent energy trust on a dauntingly simple premise. Rather than thinking of energy architecture in traditional terms as two systems - supplier and consumer - stapled together at a meter, they would instead conceive of it as a single, unified system underpinned by least cost production.
This changed way of thinking allowed for a whole-of-system question: is it cheaper to increase efficiency or capacity? The result (drumroll): it’s much cheaper to increase the energy efficiency of homes, businesses, industry and agriculture than it is to generate and distribute more energy to cover the inefficiency.
Every year since, the Energy Trust of Oregon (ETO) has assessed how much efficiency is available in each supplier’s patch and how much it will cost the supplier to get it from consumers via paid audits, upgrades, incentives, consumer energy resources, appliance replacements, etc. This efficiency dividend then becomes the ‘first fuel’ in the cost stack that each supplier takes to their pricing regulator.
The result: an investment of $US2.6 billion in direct support to 4.2 million residents has removed the need for what would have been higher capital cost in generation and distribution. Oh, and consumers reduced consumption by ~20% (against a national increase of ~15%) and, in the process, saved $US10.6 billion from their bills.
What was required for this highly successful and universally popular process to work? Three factors stand out:
- There’s a recognition that energy efficiency is a measurable economic resource with a discernible value all along the supply chain - i.e. everybody can win.
- Direct investment in efficiency and an entity to deliver it - when supported by a pricing mechanism that encourages it - avoids reliance on behavioural nudges and consumer engagement, i.e. it takes the burden off consumers and places it with an organisation focused on delivering efficient outcomes.
- Many of the greatest efficiency gains are in the homes of economically vulnerable people (Our research shows time and again housing stock is least efficient for people on low incomes) so, wonderfully, their efficiency dividend is the most valuable for suppliers and thus the incentive to assist vulnerable consumers is highest.
This is precisely what thinking differently looks like. My profound thanks to our friends Michael Colgrove and Amber Cole from ETO for flying over to Sydney to show us all what is possible.
Anyone for a game of chess?
Brendan
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