What price motivates customers to save energy?

May 29, 2008
By Elisa Wood May 29, 2008 “Are we there yet?” We’ve heard that refrain often over the last couple of years. No, not from our kids in the backseat of the car, but from energy observers wondering exactly how much price pain the consumer will take before cutting back significantly on use. Two reports circulating […]

By Elisa Wood

May 29, 2008

“Are we there yet?” We’ve heard that refrain often over the last couple of years. No, not from our kids in the backseat of the car, but from energy observers wondering exactly how much price pain the consumer will take before cutting back significantly on use.

Two reports circulating this week indicate that we have arrived – or at least we are close.

Americans drove their cars 4.3% fewer miles in March 2008 than they did a year earlier, according to the Federal Highway Administration. This is the first time since 1979 that we took to the road less in March. While a 4.3% drop may not sound like much, it amounts to 11 billion miles, and represents the largest decline since the FHWA began reporting monthly statistics in 1942. http://www.fhwa.dot.gov/pressroom/fhwa0811.htm

It appears the specter of $4/gallon keeps the key out of the ignition. AAA reports that average unleaded gasoline prices hit $3.952/gallon on May 29, up from $3.197 a year ago. Prices already have topped $4 in several states, among them California, Connecticut, District of Columbia, Hawaii, Illinois, Michigan, Rhode Island, Washington, Wisconsin and West Virginia. http://www.fuelgaugereport.com/sbsavg.asp

Meanwhile, on the electricity front, a recent study by Carnegie Mellon University researchers found that charging power generators even a modest price for carbon dioxide emissions would motivate changes in consumer behavior and power plant operations. The study comes as several states in the Mid-Atlantic and Northeast prepare for a carbon cap-and-trade program set to begin next year. Congress is eying similar national rules.

The report, published by Environmental Science & Technology, says that consumers would likely reduce consumption of electricity at a price as low as $35 per metric ton for CO2. This is lower than prices posted by Point Carbon for European trading May 28, which was €26.20 per metric ton or about $40. http://int.pointcarbon.com/Home/Market%20prices/Methodology/category745.html.

In addition, at $35 per ton for carbon, we may see changes in the way that grid operators dispatch power plants. They may start giving preference to lower emissions generators. While power prices would rise, “consumers would pay more attention to their energy consumption or switch to more energy efficient appliances,” said M. Granger Morgan, Lord Chair Professor in Engineering in the Department of Engineering and Public Policy at Carnegie Mellon. http://www.tepper.cmu.edu/news-multimedia/tepper-multimedia/tepper-stories/co2-pricing-study-reveals-consumption-efficiencies/index.aspx

No one wants to see high energy prices – the economic ramifications are enormous. But the good news is consumers appear to finally be saying “Ouch,” opening more doors for plug-in hybrids, energy efficient appliances, green construction and other energy savings approaches.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free Energy Efficiency Markets Newsletter and podcast.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

Twitter: @ElisaWood

LinkedIn: Elisa Wood

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