Guest Interview With Harvey Michaels - Lecturer and Principal Investigator for Energy Efficiency Strategy at MIT Department of Environmental Policy and Planning

1. For decades you have been a well-known energy efficiency and demand response entrepreneur. Now you’re on the faculty at MIT. Tell us a little about the transition.

Let me start with what I do now, which I really enjoy. For the last five years at MIT I’ve had the opportunity to teach (and learn from) talented and motivated students interested in energy efficiency and DR careers. We explore the practice methods and opportunities of the field, with a focus on innovation. I’m somewhat dissatisfied with how slow our industry has been  to achieve its full potential, and my hope is that these students will help drive us forward. So, in our classes we consider together how to break through the barriers and constraints. With research funds provided by the government and the utility industry, students are supported to research business and program strategies to achieve higher societal, economic, and carbon benefits.

We have current focal points of: the connection of building efficiency and climate policy; advanced technologies including “intelligent buildings” and behavior-based efficiency; energy bill disclosure and community efficiency program models; and new business model and financing approaches.

I also participate at times in the MIT Energy Initiative, led until very recently by Ernest Moniz, now Secretary of Energy, and the high-achieving MIT campus Efficiency Forward program. Most rewarding has been advisory roles in related thesis topics, student-led energy conferences, White House/DOE case competition teams, and energy startup prize competitions.

2. Some who know you might say that you were there at the birth of Demand Side Management. How did you get involved in DSM?

Xenergy (now part of DNV/KEMA as well as Con Edison Solutions), opened its doors in the 1970’s as an energy efficiency consultancy, originally conducting energy audits (perhaps inventing them), managing retrofit projects, and programming energy management control systems. I joined in the late 1970’s and developed a practice area supporting electric utility demand planning. Our first client, Rick Sergel, then Director of Forecasting at New England Electric System and eventually CEO, asked for our help in 1979 with NEESPlan, an important early vision of utilities having influence over customer efficiency and demand response.

In the 1980’s Amory Lovins, the Conservation Law Foundation, and others offered energy regulatory testimony arguing that energy efficiency could displace the need for new power plants. At Xenergy, we conducted several of the early planning studies (Rhode Island, California, Michigan, New York, Florida) that were ordered as a result, designed efficiency and DR programs, became an implementing contractor, and eventually a leading evaluator. Several planned power stations, especially nuclear power, RIP largely as a result of these projects.

In the 1990’s, after a period as President of Xenergy, I cofounded a building energy software startup which is now Aclara Software (originally Nexus). Dan Delurey, Executive Director of ADS, was my Chief Marketing Officer. We were among the first doing online customer engagement systems for utilities on efficiency, dynamic pricing, and customer service. We also developed load settlement systems, AMI data management, and a variety of data analytics.

I’m proud that both companies continue to innovate and are doing well. But it is also rewarding that the economy is investing in new companies, ideas, and approaches: from startups to the investments of industrial giants, to the newest members of ADS, we continue to see exciting and promising directions.

3. What do you see as most important regarding efficiency in the year ahead?

I see the year ahead being a critically important one for the future of energy efficiency. Utility ratepayer funded efficiency has reached almost $8 billion/yr, up from $3 billion just 5 years ago.

I think that federal policy may be needed to support its continued growth, and perhaps help create a link between this perpetual efficiency funding source and climate policy. Evidence continues to grow that greenhouse gas emissions must be reduced in developed countries by 5% per year. Efficiency opportunities which pay for themselves with energy savings can easily address over half of what we need to do between now and 2050; it is impossible to accomplish the carbon reduction goal without energy efficiency. With growth and improvement, this regulatory-based efficiency funding system represents a strong potential partner to US federal climate policy.

4. What are the opportunities and challenges for DR?

I don’t draw a major distinction between efficiency and DR. Efficiency benefits have always been time-dependent. I use the distinction more to identify a natural progression towards Efficiency 2.0: cutting-edge grid and building technologies; as well as towards effective integration of efficiency, demand management, electric vehicles, and distributed generation.

It has been a frustrating period – we haven’t moved forward to install technologies that are certain to benefit us, from controllable thermostats to advanced meters. And even where we have put meters in place, we’ve been slow to offer dynamic pricing options. I hope we are ready to enter a period of faster innovations, supporting a trend towards greater, technologically advanced, and less expensive efficiency and DR attainment.

At the same time, we need creative, fact-based consensus-building on related aspects of Utility of the Future – decisions on paradigms for distribution infrastructure, regulatory models, and energy market design.

5. Can you give an example of a Utility of the Future issue?

One question is of market access and openness, especially on the demand-side. An example of that paradigm is FERC Order 745, which requires FERC-regulated markets to be open without discrimination to individual customers and business entities offering any grid-stabilization benefit for which there is a market. This allows an innovative supplier of energy efficiency and/or demand response to go into business with a minimum of barriers to entry.

State-regulated electric distribution utilities most typically directly select and manage their efficiency programs and service providers, and are responsible for goals to be achieved and costs incurred. If the philosophy of FERC Order 745 were applied, there would be a market price for efficiency and demand response, open to any provider. With this model, you can more easily see an innovator breaking into the mix of options, and alternative programs designed by communities and social networks competing with our typical approaches. The odds are we’ll get a lot more innovation sooner with a democratized approach to efficiency program management.

6. Where do you think that innovative energy efficiency strategy and policies can take us?

The total energy use in all buildings could be dramatically reduced: I agree with the President’s 2013 State of the Union Address which offered a US goal of a 20% reduction in all electric and gas use by 2030 through a 50% reduction in building energy waste. This goal makes economic sense, as the cost to upgrade homes and buildings to save energy is much less than the cost of energy no longer needed as a result.

With innovations in policy, business models, media tools, and technologies, I am certain that these deep efficiency gains could be achieved across all homes, buildings, and communities, delivering on the promise of efficiency to create huge benefits to our economy and environment.