Efficiency now ahead of US carbon rules:utilities

By Bernie Woodall and Eileen O'Grady

HOUSTON, Feb 15 (Reuters) - U.S. utilities are focusing on energy efficiency to lessen the need to build new power plants while they await what they see as inevitable carbon regulation, executives said at the four-day CERA conference in Houston that ended on Friday.

Uncertainty over the form and cost of regulation of carbon dioxide emissions has many utility executive hedging their bets on new power plants while consumer conservation programs are viewed as a safe way to give consumers more tools to control energy consumption in the face of rising costs.

Conservation programs are the "fifth fuel," according to Duke Energy (DUK.N) Chairman Jim Rogers, and "should be 'job one' while the politicians debate."

Duke is the third-largest consumer of coal in the United States and is also third in the country in carbon dioxide emissions. If if it were a nation, Duke would rank 41st among the 192 in the United Nations in carbon emissions, Rogers said.

International Energy Agency Executive Director Nobuo Tanaka told reporters in Washington on Friday that U.S. utilities, in addition to consumer conservation programs, need to improve efficiency at power plants.

Donald L. Evans, chairman of Future Holdings Corp, parent of leading Texas power generator Luminant, said escalating power prices will make it easier for utilities to convince customers to save power.

"I don't see prices coming down in the near future, so I think there will be incentives for people to look to conserve energy and be more energy efficient," Evans said.

Utility and state energy regulators often see energy efficiency as the proverbial "low-hanging fruit" that can be gotten with much less expense and effort than building new plants and transmission lines.

Most U.S. utilities have "demand-response" programs that call on certain customers -- mainly big industrial users -- to curtail power when needed to keep reliable electricity delivery. And a growing number of them have "smart grid" efforts that now or soon will give customers price signals that will cut off big appliances when the grid is stressed.

Jone-Lin Wang of CERA's global power group said the value of energy efficiency programs is higher now that cost of construction is at such a premium. CERA this week debuted a power index that shows that since 2000 the cost of building a power plant increases about 130 percent.

But she said some may be painting too rosy a picture on the value of energy efficiency in staving off power plant construction.

"People are overly optimistic about what we can do (with) energy efficiency," Wang said.

Utility executives also said they hoped that the form of U.S. carbon regulations will soon take shape. CERA officials told conference attendees that it is unlikely that any carbon regulation will be in place until 2009.

Evans said utilities want U.S. officials to get on with the task.

He reminded industry players that they had largely ended acid rain by lowering sulfur dioxide, and that the same could be done to lower CO2.

"Let's get something in place and see what happens," Evans said. (Editing by Christian Wiessner)