A QUIET revolution in the way the nation plans for its future electricity needs took place in Holyoke earlier this month, when the operator of the region's power grid held an auction for the cheapest ways to meet demand until 2011. The big winner was conservation.
The recent auction by the nonprofit Independent System Operator New England was the first in the country in which bidders could propose ways to cut demand and increase efficiency, instead of just increasing supply.
The auction proved that it can be cheaper for a system to arrange, for instance, for big power users to ease off the air-conditioning on the hottest days than for the system to look to other options, such as the construction of new peak-power plants that burn costly natural gas.
Looking ahead to 2010 and 2011, the ISO had decided it needed about 1,800 new megawatts of capacity - enough to power about 1.3 million homes. As a result of the auction, 600 megawatts of that will come from new power plants, but almost 1,200 megawatts will come from projects that reduce demand. In addition to agreements by major users like supermarket chains to reduce their power consumption during peak periods, these bids included gains in energy efficiency, such as through insulation and improved appliances. Other successful bidders were projects in which companies, universities, or other institutions build their own generating units that typically supply heat as well as power.
New England already benefits from 1,366 megawatts - or "negawatts" - of demand-side resources. The new bids would almost double that. For consumers, the inclusion of more conservation resources means lower utility bills, especially at a time when increasing global demand has pushed up the cost of oil and natural gas. For the environment, these reductions in power demand mean less pollution, particularly in the carbon dioxide emissions that are the biggest contributor to global warming.
Conservation makes particular sense in New England, which has some of the highest electricity rates in the nation. But other parts of the country, which rely on cheap but dirty coal for power, could also benefit from an open auction for new resources, especially if Congress were to tax carbon emissions or mandate a cap-and-trade system for carbon.
The regional ISO plans another auction in December, and others after that. At some point, most of the easy gains from conservation could be exhausted, and new generating capacity, whether from renewable or non-renewable sources, could become more cost-effective. But for now, New England is leading a revolution in using the market to squeeze waste out of its power grid.
