How to Control Your Energy Costs

Posted April 04, 2016

The Four Levers to Control Your Energy

Many consumers are becoming increasingly frustrated with their energy options both at home and work. Current energy options are often expensive, outdated, and extremely confusing to understand: which begs the questions, what are your alternatives?

Most of us believe that we honestly do not have much choice; we just get our bill in the mail and pay it every month. Increasingly, however, we actually do have alternatives. As technologies become more advanced and smart grids start to become a reality, these options are becoming more attractive. In general, when thinking about this problem, it is helpful to visualize the four main elements, or “levers”, that you can pull to try to control your energy usage.

  1. Consumption: How much energy you use
  2. Generation: How much energy you produce
  3. Storage: How much energy you store
  4. Price: What you pay for your energy

While some of these levers, such as generation and storage, may seem beyond the reach of the average consumer, they are becoming an increasingly important part of our solutions moving forward. Furthermore, with advances in smart grid technology, we will all eventually begin to have these four levers at our disposal; and things start to get really interesting when these levers intersect. Of particular interest are how you can store the energy you generate at home, how you can buy and sell electricity off of the grid, in real time, based on market prices, and how you can optimize your energy usage to match energy prices in real time. These abilities are quickly becoming possible, and will begin to change how we interact with the energy grid on a daily basis.

This article is meant to be an introduction, for a more in depth analysis of each of these levers see our other articles.

Consumption

The most obvious lever is how much energy you use. This is - rightfully - the lever that most people are concerned about and at the end of the day, this is the most sure-fire way to lower your energy costs. At first, it may seem daunting to look for ways to reduce your energy usage, especially since most of us do not want to significantly change our lifestyles. The good news is that most of the energy we use each day is used on only a few household tasks.

  • Heating and cooling: Roughly 45% of the energy we use at home, this is definitely the single most important item to address
  • Water heating: In addition to space heating, water heating is 15% of our usage at home; installing a new, more energy efficient water heater can greatly reduce your energy usage
  • Appliances: Roughly 13% of our usage, you can reduce your appliances’ energy usage by installing new, more energy efficient refrigerators, washers and dryers; and often government grants are available to lower installation costs
  • Lighting: This category is probably the most well-understood by consumers, and it consists of roughly 12% of your total energy usage; installing more energy efficient light bulbs can reduce your usage by up to 80% in this category

Beyond these four main energy categories, all of your other electronics and toys generally do not account for more than 15% of your total usage. Consequently, if you want to significantly impact your energy consumption, these categories are where you need to start. Naturally, there are two main problems that most of us have with new energy saving products, (a) they cost a lot of money and (b) we cannot be certain if the energy savings they promise will actually arise.

With regards to the first problem, installing new appliances, lighting, and heating costs thousands of dollars. Even if these upgrades pay for themselves after 10 years of energy savings, most consumers do not have that kind of money laying around. Luckily, some companies are willing to pay the full cost of installing all kinds of energy saving products into our homes and business, and in return they will collect a percentage of the resulting energy savings.

As for the second problem, it is difficult to trust sales brochures when they all promise energy savings of around 30%. This problem is more difficult to solve, but there are companies that have created a system which transfers risk from consumers to service providers. They will pay to install the products in your home, guaranteeing that the savings will be sufficient to pay off their investment within a few years., This set-up ensures that companies do not over promise and under-deliver, as their revenue stream is directly tied to how well your new products save energy. If all goes well, it is a win-win situation. If not you still retain any energy savings, while the companies in question shoulder any losses and risks.

Household Usage Breakdownl Template

Generation

While producing enough electricity to go completely off the grid is not realistic for most of us, generating a portion of our electricity needs is definitely feasible. As grid electricity costs continue to rise, and the costs for renewable energy systems continue to fall, more people are choosing to invest in energy generation. The most common methods to generate your own energy are:

  • Solar: Solar is quickly becoming the most popular source of renewable energy; although its current share of total energy generation is still fairly small, as costs continue to fall the number of solar installations is increasing globally
  • Wind: While most current wind installations are constructed by large companies building wind farms, some individuals continue to install small wind turbines in their homes and businesses
  • Hydro: Not as common as the other two renewable sources, but small hydro electric systems can be installed that allow you to generate electricity from adjacent rivers in your property
  • Micro Combined Heat and Power (CHP): Less well-known, but a fairly economical option today in areas with low natural gas prices; CHP allows you to burn natural gas to produce both heat and electricity on your property

The payoff for these systems will vary depending on the tax incentives available from your federal or regional government and your local utility. Before installing any of your own systems, it is important that you contact your local utility first to understand their net-metering policies, which allow you to sell excess electricity back to the power grid, as every utility has different rules.

Alternatively, you could have a 3rd party install the generation system on your property. A variety of companies are now willing to pay for the full cost of installing the system in your property, and they will then earn a return on their investment by selling the electricity back on the grid. This allows you to reap the benefits of a reduced electricity bill, without the need to pay the large up-front sum to install the system.

Cost of Solar Installation

Storage

Most of us do not yet have batteries installed in our homes or businesses and are not likely to do so in the coming years, but utilities and some large companies are starting to view battery installations as a real potential energy solution.

With recent announcements - such as the unveiling of the Tesla Powerwall in 2015 - batteries are beginning to gain a lot of market and media attention, and rightfully so. Even though renewable energy is gradually comprising a larger portion of our energy mix, it will never be able to meet all our needs unless we find a way to store electricity in a cost effective manner to compensate for variable generation rates due to inconsistent sunshine, wind, or water levels. As our ability to store electricity improves, a future with 100% renewable energy becomes increasingly feasible.

For your home and business, there are three main ways that batteries can, and are, being used today:

  • Back-up power: Often referred to as an Uninterruptible Power Supply or UPS, batteries can offer a few hours of electricity to allow houses to remain powered during a power outage
  • Solar panel storage: For those of us with solar panels or other renewable energy sources at home, batteries are a good way to store excess daily electricity generation for use during the night
  • Off-Peak storage: For those of us in markets with Time-of-Use pricing, batteries can be used to store electricity during off-peak hours for use during the day

On larger scales, battery storage methods are also being used to help manage frequency and demand fluctuations in the grid, but this generally requires several Mega Watts (MW) of storage capacity and so is far beyond what any homeowners or small business would have installed.

For most of us batteries and other methods of storage are still not an economical purchase, as the cost of the battery is more expensive than the savings generated; however, these costs are dropping steadily. In the coming decade batteries are going to become an increasingly important part of the energy solution for our homes and businesses.

Tesla Powerwall

Price

This option is not talked about as much as the others above, but many of us do have the ability to leave our default supplier and choose a different provider for our energy needs. This can allow us to change the price for our energy without changing how we use our energy. Depending on where you live, this can lead to fairly significant savings to your energy bills without requiring any upfront investments or major changes to your home or business.

In general, your utility (or default energy supplier) will charge a fixed rate for your electricity. This rate might be changed every few months, or could also be broken out in to Time-of-Use rates in some markets. Regardless, retailers in your industry will often offer a wide variety of pricing options, but the most common options available are:

  • Fixed rate: A fixed number of cents per kilowatt hour (kWh) that you consume
  • Fixed payment: A fixed dollar amount per month regardless of how much you use
  • Variable rates: A rate per kWh that fluctuates each month depending on market prices

In most markets, the majority of large businesses have decided to leave their default supplier and have chosen to buy their electricity and natural gas from an alternative retailer. As a result, these large businesses are paying approximately 20% less for their electricity and 33% less for their natural gas than homeowners and small businesses. So why is it that usually only large businesses are choosing alternative energy suppliers?

Unfortunately, it is because in many markets homeowners and small businesses simply do not have access to the same low rates as larger businesses. On their own, they do not use enough energy to get the same offers. This is why EnPowered is working to group homeowners and small businesses together so that they can also get access to these lower commercial rates.

Although this is not an option available to all of us, it is one that is worth exploring in your market. It is the quickest solution for your home or business and can lead to up to 30% in savings.

Alternative Pricing Options

As more companies begin to enter the energy industry and offer unique products and services, it is becoming easier to take charge of your energy to lower your costs and your total usage. In the next four articles, we will dive deeper into each of the aforementioned levers to give you additional insights into how you can control your energy costs