3 Reasons Why Utilities Offer Energy Efficiency Incentives

Did You Know That Utilities Across The Country Are Offering Cash Energy Efficiency Incentives?

How To Claim "Free Money" Through Utility Incentive Programs

There are many types of utility incentives available to home owners and commercial businesses.  The incentive programs from the utility is typically a direct cash incentive for upgrading to a more energy efficient system.  Each state and or utility offer different programs (I listed each State in another post on incentives).

There are incentives available for lighting, motors, lighting control systems, solar, wind energy, windows, and on and on.  There are a lot of options that qualify for cash incentives. 

The cash incentives can make a real difference in how attractive the project is.  The lower the cost of an improvement, the quicker the payback will be. 

Simple payback is determined by the cost of the improvement vs. the anticipated savings over time. 

The lower the cost of improvement, the quicker the payback to the end user. 

Why Are Incentives Offered?

Most of the utilities will list that the reason they are doing this is that "it's just right for our families".  While that is a good reason, utilities and public companies rarely do things that are "just right", and instead make their decisions based on money.  There's nothing wrong with that, but here is what I think is going on. 

There are 3 reasons they are offering incentives:

1. Demand On The Aging Electrical Grid

There is a great deal of documentation on the status of the nation's electrical grid.  It seems as though the "close our eyes and hopefully nothing will happen" is not a realistic approach to fixing the problem.  We as consumers now "consume" many more electronics. 

It seems like we are constantly plugging in Ipods, smart phones, Nooks, Laptops, and Flat Screen TV's. 

The demand in continually rising on an outdated system.  Since it takes an act of God to get new power capacity in place, it only makes sense to motivate people through incentives to reduce the amount of energy they consume. 

2. The Government Says So

In Michigan, the Renewable and Energy Efficiency Act dictated to the utilities that they were pretty much going to do this. 

I find it interesting that the states mandated this right around the time of President Obama signing into law the stimulus act. 

While I don't have the proof of the timing, but it seems to be much more of a priority since that time. 

3. Energy Efficiency is Cheaper Than Building Power Plants

The utilities have figured out that for every $1 paid out in energy efficiency incentives, they save about $9 compared to the cost of building a power plant to generate that amount of energy that the efficiency incentive offset. 

That is a bit of a long winded sentence...but we are discussing utilities! If you didn't follow that, which I don't know that I even did...I will put it another way. 

By paying you $1000 in cash incentives, they don't have to spend $10,000 to build the capacity that would be required if they didn't pay you the $1,000.

We had a perfect example of this right here in the middle of Michigan.  Consumers Energy won't build new $2.3 billion coal-fired plant in Bay County. This project had been in the plans for over 4 years.  While I am sure that the recession did play a part, they are actually reducing the demand for their product through incentives. 

I noted in a earlier blog last year titled Learn How to Find Energy Efficiency Incentives that in 2010, Consumers Energy reduced 124,700,000 Kilowatt/Hours in 2010 with a budget of $11,300,000. 

The budget for 2011 at the time was set at $36,000,000, so that number of reduction would likely be much higher (should see those numbers soon). But don't wait too long to act, these programs are very popular and run out of money fast. 

Learn More About How Energy Efficiency Can Help Your Business

There are a lot of benefits of exploring energy efficient strategies for your business. We wrote a FREE E-Book called, Business Owners Guide To Energy Efficiency.  We talk about incentives, annual savings, Energy Policy Act of 2005, maintenance savings and productivity improvements.  Download it here....