Over the course of its existence, the University has planned, designed, built and operated its facilities with one very large assumption - that energy is free. In other words in the past there has been no incentive to control consumption. This, fortunately is quickly changing. As we approach the end of another academic year, the university is preparing to implement a program of individual billing for energy consumption at the college level. The change is scheduled to begin on 1st July. This has far reaching implications for our campus, from services, administration, and operations to residential and academic programs.
Historically, the University has paid the freight on our energy bills at the campus level from one administrative account. This has meant that no single entity had any incentive to conserve or even think about its energy consumption, excepting highly motivated individuals who acted out of the goodness of their hearts. But a dependency on altruism is precarious – i.e. it doesn’t work. From 2003 to 2008, our campus energy bills increased nearly 270%. This dramatic increase in our energy costs has burdened our campus with about $90 million dollars in debt. Because of recent concurrent increases in per unit energy costs it is somewhat problematic to pin the jump only on a lack of effort in conservation, but the facts remains – we have had no conservation program and per unit cost increases are modest compared to the 270% growth rate. Comparatively, our use of energy is third highest amongst all Big 10 campuses. Last year, we spent $70 million dollars on energy, releasing over half a million tons of CO2.
The current plan for encouraging conservation includes metering usage and ceding control of energy budgets to colleges (and eventually departments). Some may argue that colleges should not be in the business of managing their facilities, that their expertise lies elsewhere – i.e. educating the next crop of world leaders. In our opinion, we must get a handle on energy consumption by any means possible, and this is a step in the right direction. It distributes critical information on how and what is being used back to the users and if processed correctly, can create incentive for conservation by allowing the colleges to keep any monetary savings generated. But clearly, the success of such a program depends entirely on the incentive structure.
For example, during his visit last week Amory Lovins, Director of the Rocky Mountain Institute and a critical thinker on energy issues described a school district in New Orleans, where such a program was initiated. Within a year of starting the program, they had generated $50,000 in savings for one of their schools. A new superintendent however, questioned an incentive structure of that paid students for ‘something they should be doing anyways‘ and canceled the program. With the incentive removed the savings soon disappeared.
One excellent result of the billing program discussion has been that many campus units have been seeking out alternative ways to raise capital for energy conserving projects. This has lead to a discussion on the efficacy of utilizing student sustainability and energy fees to reduce energy consumption and costs through the establishment of a revolving loan program where student monies would fund projects but be ‘paid back’ with the energy savings the projects produce. The idea is modeled after Harvard’s Green Campus Loan Fund that has loaned out around $11.5 Million and generated over $4 Million in energy cost savings to date. The student Sustainability Committee – the organization that oversees the distribution of student energy and sustainability fees, is in the process of developing a pilot program involving three potential sites: Campus Rec, the College of LAS and the Department of Animal Sciences. Each project would receive an energy loan form the students with the promise to return the investment over time as savings in energy accrue. After the initial capital is returned the entity keeps all future savings. With many energy projects currently able to pay back in less than 2 years, this idea has generated much interest. In our opinion, the campus should consider a similar model using the energy component of the Deferred Maintenance funding pool, much of which is derived from the student paid AFMFA fee.
The campus, instead of building on student innovation and expanding such a much needed program, has repeatedly attempted to thwart it. From using artificially low utility rates (the campus uses 0.075 per kwh, while the cost of commercial power is closer to 0.100 per kwh) to increase payback times, to engaging proposals for the campus to keep ½ of any savings generated (thereby reducing probable activity by at least ½), to openly opposing student involvement, the campus seems bent on placing barriers to success.
These barriers reduce the incentive to act. It is well known that one of the only ways to get people to pay attention to energy conservation is to increase its costs. If for example, half the savings that units achieve is held back, it changes a three year payback project that’s a no-brainer into a 6 year payback project that is much more difficult to finance. Similarly when utilities rates are low, pay backs increase. In fact, the most effective way to obtain additional revenue would be to impose a surcharge on the utility rates, or charge units at market rates further increasing the motivation to reduce energy use.
As we noted, its all about incentives. We know that many budget priorities exist. But energy conservation represents one of the best investments available. Returns can exceed 25% on simple energy conservation investments (we challenge the UI Foundation to match its potential!). The campus needs money to pay down the utilities deficit. But this should not come at the expense of reducing conservation projects. The colleges and departments weren’t responsible for the current energy budget deficit and our collective message should be, “Hands off our Savings!.”