Energy Savings Roundtable: New Initiatives: Cost or Investment?
Fuel. It was a relatively cheap commodity. Although in 2007, the cost for Wisconsin's commercial fuel went up — distillate oil, 7.3%; residual oil, 6.1%; electricity, 2.9%; natural gas, 3.1% — the real price of electricity (the major energy expense in the commercial sector) was 21.3% lower than its 1980 price when adjusted for inflation.
However, experts warn, that is about to change. The real cost is about to spike in real time, in real dollars. You know what that means: Ouch! As an example, when the real price of gasoline in Wisconsin spiked 9.1% higher in 2007 over 2006 — a record-breaking increase — some area companies were hit so hard that they went out of business.
Penny wise, pound foolish: What to spend to save on energy is a common business conundrum. At the same time, during a recession in which many companies are thinking quarter-to-quarter, some may be asked (or mandated) to invest in new technologies that may or may not produce an ROI over years instead of months. Is it the best time to invest? What can or should your Dane County company do now? How might you best cope with an energy cost spike during a recession?
To help answer your questions, IB comprised a panel of experts to predict what's coming to Wisconsin businesses, and what, in their best opinion, is a good investment today.
Read on as they share insights.
Our Expert Panel
Todd Stuart | Wisconsin Industrial Energy Group
Executive Director of the Wis. Industrial Energy Group, a nonprofit association of large energy consumers that advocates for policies that drive affordable, efficient, and reliable energy. WIEG is the premiere voice of state rate-payers and an engine for business retention and expansion.
Charlie Crave | Crave Brothers' Farm, near Waterloo
As one of the state's largest cheese producers (1,000+ cows), this family farm has retrofitted a dairy barn to use manure to create all energy for the farm and many other entities. The Wisconsin Technology Fair will be held on the farm this July, with 80,000-100,000 visitors expected.
Bryant Moroder | Sustain Dane, M-Power
Through Sustain Dane, a cooperative private/public/not-for-profit effort, the City of Madison and its growing list of partners — MG&E, Alliant Energy, and others — continue to strive to achieve their citywide goal to reduce emissions of carbon dioxide (CO2) by 100,000 tons by 2011.
Barb Siehr | Alliant Energy
As Vice President-Energy Delivery Customer Service, Siehr helps Alliant provide utility customers in the Midwest with electric and natural gas services. Alliant Energy also participates in a variety of efficiency programs to assist customers in reducing energy use.
Ken Williams | Focus on Energy Group
Focus on Energy works with eligible Wisconsin residents and businesses to install cost-effective energy efficiency and renewable energy projects. It provides information, resources, and financial incentives to help implement projects, control costs, and source locally.
Stimulus Package: Opportunity?
JODY GLYNN PATRICK [IB]: Our focus is energy savings, though we've left the word "savings" to your interpretation. Let's open with Wisconsin's stimulus package and its implications for energy initiatives. Comments?
WILLIAMS: From the Focus perspective, we're very excited about the package. I think it gives us a lot of opportunity to continue the work that we've been doing. I think the industry in general is trying to get in front of the curve and figure out what's going to happen with it and plan in advance. We do know there are funds coming through the Office of Energy Independence, and also block community grants. We have been working hard to try to come up with ways to support both community and state programs. Also, the federal Department of Energy will be putting together programs, we believe, for large industrial customers. We think there are opportunities there.
IB: How might Alliant Energy benefit?
SIEHR: Well, with impact for business, we're in the process of an Automated Metering Infrastructure [AMI] Project that's worth about $95 million at the WP&L site, covering residential, commercial, and industrial customers. AMI provides what's been available to large customers for years — real-time energy usage information. Industrial customers tend to have energy managers and be very aware of what they use and when they use it. [With AMI], small commercial or residential customers would be able to see immediately what energy was used or was about to be used.
That AMI Project is part of the Smart Grid Infrastructure mentioned a lot in the stimulus package. There are things like accelerated depreciation on installation of meters — certainly a tax benefit and a customer benefit. Ultimately, the customer will pay less for that AMI Infrastructure: No more estimated meters or meter readings each month. You know when or if your power goes out. You really don't have to call; we know that you're out, which is a small thing, but important. But the benefit is on the energy efficiency or demand-side management piece to really manage how and when they use energy.
STUART: In this state at this time, there are a lot of details still up in the air. Not many people know what's even in there. There was a ton of money for large customers originally in the House version of the bill, but about $500 million was stripped out in the Senate version. That said, there probably will be another stimulus bill or there's going to be a cap-and-trade bill or a renewable mandate bill. Some of that money will probably reappear at another point this year … maybe.
But what we do know is there's about $50 million coming back to the state right now for state energy grants. A lot of that is probably going to be used by the university, but it could come as community-type grants.
One idea is for some of these projects that really don't fit the general or the usual criteria for Focus on Energy, you could apply that money to those things that fall out of the traditional measurement-and-verification type activity. In theory, some of that $50 million could be coming for large companies. A lot of it may be just coming for communities or smaller businesses. There is stimulus money for renewable R&D things. It's not just biomass, which could help our paper industry. And there are some loan guarantees for big, renewable projects. We might have a better idea in a month what's really in there and how it could impact our economy in the state.
IB: Charlie, you've retrofitted the farm and are providing energy now; could you further develop or expand your program?
CRAVE: Well, we're somewhat set for now, but as the industry develops and some of these metering devices come into play, I would like to see biogas production. I'd like to see that incorporated more with programs that the utilities might provide. It's a green power, and while the wind doesn't blow and the rivers don't flow with 98% reliability, biogas on dairy farms is about 98% reliable. So there are some opportunities.
But I'd like to see a friendlier policy that would work towards the betterment of all of society so that we can help the utilities meet their peak power needs or emergency grid needs. The further electricity is produced away from the end user, the more lines and infrastructure are required. But with smaller generators throughout communities, we need a little smaller diameter wires and we're realizing more of those BTUs that are used in producing that power. I think it's going to take somewhat of a mind-shift, a management shift, and perhaps some stimulus shift.
SIEHR: If you think about the power grid right now, it truly was designed to go one way. When you add the different decentralized types of generation-linked biodigesters, it does take technology like the Smart Grid so that you know the power is flowing both ways. If there was an outage two miles beyond your farm and you have a tech working on the line, normally you work together to shut the system down. With someone generating power in a place that's not perhaps as well-known, you have a safety factor where the power starts flowing when the line tech thinks the line is dead.
This Smart Grid infrastructure helps that happen very easily, safely, and economically as well. Hopefully, with some of the stimulus money, there's really something there to help that happen.
IB: Bryant, now turning to M-Power, you're future-oriented. What in the stimulus package might specifically help you accomplish goals?
MORODER: Well, certainly I think where we hope some of the money ends up going is to local governments to work on their own infrastructure. We've been working with the City of Madison, and somewhat the County of Dane, in looking at their sustainability footprints, and the opportunities for savings within the city already achieved are quite significant. And I imagine throughout the state's municipalities, infrastructure has been left for too long. Same with school districts.
As a taxpayer, you want your government to run as efficiently as possible, and the potential for upgrading or refurbishing some of these buildings to be energy efficient, and really save the municipality tens of thousands of dollars is right there for the taking. So I really hope some of the stimulus money gets funneled down into that.
I think one aspect of the stimulus that we haven't seen yet is the area of water conservation. Around the office, we talk a lot about "E equals H2O." Oftentimes, people don"t make that equation — how much energy it requires to move water. You talk about moving energy over distance, how much that requires; water is the same exact thing. And what we've yet to see in this stimulus package is for water conservation and savings, either at the industrial or even the household level. There is a significant amount of opportunity there as well.
Water Supply: Next Crisis?
MORODER: Unfortunately, I think it is. I mean, we look at energy right now — top of mind, obviously, is energy prices and the variability there — and try to diversify our portfolio of energy sources. But there's only really one kind that we can depend on, and that's fresh, clean water. There are studies that indicate by about 2025, 40% of the world's areas will be water-scarce resources.
We're here in the Great Lakes region, fairly blessed with water, but we're already experiencing some water limitations. Look at Waukesha's challenges. We don't have to look beyond our country; consider the southwest, the southeast, places like Georgia where if you, as an organization or household, don't show a water use reduction, you're going get fined. And water rate trends are ticking up, up, up. We're talking a five-fold increase in some places, if not more.
A lot of businesses depend on water for their operations. That's a cost they're going to incur, and if they're not thinking about it now, they're going to be thinking about it in the future. So, absolutely, the "next energy" is water.
We promote water conservation technologies as part of our educational activities, and awareness and receptivity to those technologies has been quite significant in just a short period of time. As people are talking to their friends and relatives across the country, they're beginning to understand why this issue is going to be here in the not-too-distant future.
IB: Is water conservation now integrated into commercial building design?
MORODER: LEED has done a pretty good job of putting in water conservation as part of the criteria. So, certainly, new buildings are thinking about water conservation more, but it's mostly happening on the coasts. But as things happen on the coasts, they generally gravitate towards the center of the country. So, it's really just sort of a matter of time for us.
STUART: This actually is coming on strong in the Milwaukee area. A number of articles recently envision an infrastructure for water technology and research, with a research hub in Wisconsin along the eastern side of the state, in the Milwaukee area. We've seen UW-Milwaukee, Milwaukee Mayor [Tom] Barrett, and a number of state politicians from that area really coming together in a strong bipartisan effort to make this a cluster and a strong economic driver going forward.
It's exciting. We've seen a cluster of water companies in the state — ITT, Siemens, Pentair, Badger Meter, and A.O. Smith — leading this effort. And it's nice to see this strong economic cluster developing in Wisconsin.
CRAVE: Some of this would really be old technology. Some of us have said for years, "What if we had a cistern and captured water off our roofs, used it for non-potable uses, etc.?" But yet, even some of the things we've done on the farm … when it comes time to spend, are you ready to drop another $20,000 or $50,000? And when homeowners are making the biggest decision of their lives, that extra $50,000 is a pretty tough one to swallow. So maybe we need to think about some old technology in a modern way, such as maybe a suburban type of cistern. Or, instead of having storm sewers go to a storm sewer, they go to a cistern. Or some other concepts that might make it friendlier financially.
Water Conservation Challenges
IB: How do we collect the rainwater or process the fresh water we do have access to?
CRAVE: One of the challenges we had on the farm: we just put in a new shop, and we know we have a wash bay in there. What if we had a cistern? Well, ice is pretty darn tough on collection systems. We talked about it for quite some time, and finally said, "Just forget it, because we have dust in the air from feed." It takes somewhat of an emboldened attitude to say, "My company or household is going to step up, and we're going to really do this." Again, a difficult pill to swallow.
But people were building cisterns 150 years ago. Another example — we build houses with dishwashers, and yet how many times do we say, "If I can just put them in the sink here, I'll be done in three minutes" — instead of using how much water? It's going to take not only an attitude change, but a real commitment.
WILLIAMS: I don't think the barriers for water conservation are much different than those for energy conservation, although the additional barrier is probably awareness in this area. I'm from California; we were very aware of water and conservation. But energy conservation barriers, which applies to all conservation, are basically time and money. All business customers, whether small businesses or large industrial ones, are looking for expertise. [There is] the time element [and] someone who can come in and tell them where the opportunities are. Then, they want financial help to make that cost benefit work.
Starting with the large industrial customers, last year we started staffing grants because we realized that companies are focused on their core business. If it's a cheese manufacturer, it wants to manufacture cheese. Companies don't want to look for opportunities to save water or energy as a primary concern. They want to get those rolls of cheese out there. So we are funding a person for large industrial customers to actually go in and find and implement energy-saving projects.
We are about ready to roll out another level this year, where we're going to expand that to all businesses basically. So if you're a metal caster, or even a smaller business, and you don't have the need for a full-time position, we'll fund a consultant to come in and help you find the energy savings. And that's something you might take advantage of. You'll see the RFP out on the street pretty soon.
Moneywise, Focus provides grants that cause energy-savings projects to happen that otherwise would not. It's always looking at the payback. With energy-savings projects, particularly as the price of the commodity varies, sometimes it's a good payback, sometimes not so good. We look for projects where we can provide a bit of a lift to get that payback.
For someone looking to put the money into another ton of cheese output or save on an electrical bill, sometimes it actually becomes more advantageous to put that money toward the electrical bill. And in this economy right now, where production is waning in some industries, it's actually a better time for our program because people are looking to cut operational costs instead of necessarily creating production for an economy that's not going to create the demand.
MORODER: Other barriers to water conservation are building codes and restrictions. There are a lot of people and organizations out there wanting to do rainwater harvesting, greywater re-use. One of the very few using greywater indoors is the Urban Ecology Center in Milwaukee, and they had to jump through hoops and hoops to get permits to do this. It's a great system; works really well, saves them a lot of water. But organizations wanting to be innovative and to start doing some of the water conservation techniques right now face rules and regulations preventing that.
Also, there just aren't a lot of vendors in the business of providing the equivalent to solar panels and the other energy efficiency technologies. It's changing quickly in other parts of the country, but not here in the Midwest.
STUART: I can reinforce a couple of points. I think some of the barriers that were identified are traditional and always come up — capital, having the money to do it. What I'm really stunned by is what I'm hearing: that for Focus on Energy, the budgets and the targets have so far looked like they're on track this quarter. I thought things would fall off a cliff with the economy.
Question: Are those projects ones that were going forward in the pipeline anyway from before [the recession], or is it that companies are looking forward, knowing that their energy prices are going to explode in the next two years? Or is it because they have carbon strategy goals? Is sustainability becoming a driver itself? I don't know, and I think we'll find that out over the next few months. But it's interesting that these projects are still going forward right now. That's great to hear.
But capital is always a barrier. I think the manpower and staffing — what you mentioned is a great idea and I'm pleased to hear that's going forward. Payback is always a big issue.
To echo Bryant, there are some regulatory issues I try and address at the state level. The one at the federal level, that I can't do much about, is the New Source Review. I think some of these large companies might do some things internally for energy efficiency, but are worried about triggering millions in retrofitting their entire facility. And if the federal government is really serious about energy-efficiency projects and some of these energy bills, they may want to look at that.
One other thing though: corporate culture is very big in keeping some of these projects on track. A lot of times, it's not because it's a water issue or an energy issue, per se. It's about keeping an assembly line running. And if it's not your core business, you have to have a commitment from up top. Sometimes it's not always there because they may not see it as making widgets. So they really have to have a corporate commitment, and the time and effort necessary to get it done.
WILLIAMS: Quickly to support that, we see projects all of the time where we can justify a payback which is below what they've given us for their threshold for projects. But if they have a choice between the energy project or increasing market share in a growing economy, we're going to increase market share.
STUART: Market share, survival, global competition — that's what's competing for capital.
What Should Business Expect?
SIEHR: Alliant's done this Shared Savings Program, which is very similar to what you're doing on the industrial side, for the past 25 years, and it ebbs and flows. It really is very interesting and it follows business cycles. I asked my staff, "What's happening between the end of '08 and '09 and are projects going forward?" Those that were in the pipeline are going forward, but others are becoming more viable. I think that old expectation, "It's got to have a two-year payback or I'm not going to do it" is somewhat going by the wayside. Interest rates are low, and we've helped buy down those loans and guarantee savings, working in partnership with Focus and several different customers.
As projects and equipment become commercially viable and affordable, people have more interest. But I do agree that if you're Kohler Co., for example, and energy is a huge part of the product you produce, you have a much more focused interest on that energy product. If you were GM in Janesville, and your energy usage — from an electricity perspective — really lights your factory and may not be as intensive as gas, for example, you're happy if you save money. You'd like to do a project, you might like to be a good citizen, but when times get tough, if it's not commercially viable, it's tough to do.
But looking forward with cap-and-trade and all of the cost projections going north, I think energy is no longer as cheap as it was before, and it becomes much more motivating to do these kinds of projects. People aren't dumb; they're planning for the future, and I think that's why a lot of what you're seeing is going forward.
STUART: The two companies you mentioned are the types of companies I represent.
Some that are so energy intensive, at a million or two million bucks a month, it's one of their top three costs. And the other, it's more of a bill they pay, more incidental to the business model they have. What I keep telling them, though, is that the traditional ROI is probably about to change.
I think you're going to have double-digit increases. Maybe not this year because natural gas prices have fallen off a cliff, but going forward, energy is going to be very, very expensive. I think you're going to see double-digit increases for a long time. What does that do to your ROI?
I think some of these projects that had a three- or five-year payback before — that you'd never look at — now you should take a look at again and factor in what these high energy costs are going to do to you. [Then] these projects are going to look a lot, lot better.
SIEHR: It's interesting. Until wind turbines became commercially affordable, available, and reliable, it was "fun" to put a couple up. I knew a couple of farm customers that had wind turbines in the '80s; when the blades few off and killed one of the cows, that was sort of the end of the wind business. But in all reality, they didn't generate what they should have and they weren't as commercially viable. Now that they are, even individual businesses like Lands' End and others want to do something that's green. They want to make that investment. And it becomes workable — not only for utilities, but even small businesses. Biodigesters and wind — we'll see more of that to try and control demand and energy efficiency. People are a lot more interested from both the economic and the "being green" perspectives.
Government's Role in a Wisconsin "Business Energy Strategy"
MORODER: We're talking about sustainability and moving beyond just the practice, into a strategy now. Look around the world. At the global marketplace, we're losing ground. Look at what Germany is doing with renewables. Look at Toyota, where they were ahead with the Prius and the hybrid, and what the repercussions have been for the American or domestic automakers.
The numbers are starting to come out now for those businesses that embraced sustainability. A recent financial analysis states that16 of the 18 industry leaders in sustainability, or leaders in industry that were focusing on sustainability, are outperforming peers now on the stock market.
In terms of the energy efficiency opportunities, those are apparent. But consider the more intangibles — things like employee productivity. When your company "goes green," you create a lot of motivation and excitement around what you're doing, not only for your company but for the future. Certainly the numbers now demonstrate that when you create a green building and a green culture, productivity significantly increases. And then, as we get into issues of attracting the new workforce, younger people are looking for companies that are going green. Another recent statistic revealed that about 92% of those entering the workforce want to work in green companies. So businesses are now embracing this strategy.
Parts of our country have taken a leadership role. Portland, Oregon, Chicago, certainly places in California. [In] Wisconsin, it's happening in sectors; Milwaukee and the water conservation issue. We've got very progressive energy policies and history, and organizations doing a lot of things around energy conservation, but as a strategy we need to think about how the Wisconsin economy gets ready for this, and what businesses can do to prepare, and some of this is the groundwork for that. It has be a collaboration. It has to be government at all levels.
STUART: Personally, I like to see more of the federal role because I represent companies with facilities all around the world, and we need a level playing field. We can't get too far afield with some of the other states that we're competing against because we have sister facilities all over.
Wisconsin is the number one paper maker in the world. We are number two [behind Indiana] per capita for manufacturing, and that's a double-edged sword for our economy. We're number three for foundries. We are among the highest states in the country for coal-fired generation. We have 60 to 70% coal, and we have among the highest electric rates in the Midwest right now.
We have to be very careful about what we do as a state going forward, because we're a very manufacturing-dependent economy, and some of these industries are hurting badly right now. Some of them are dying. Paper in particular, but anything automotive, too. These foundries employ a lot of people at wages that are much higher than the per-capita income in the state. And the problem is, we lost probably 130,000 jobs since about 2000 in manufacturing. The service sector has picked up that slack, but it pays a lot less. You're seeing these jobs bleeding to other states and other parts of the world — China, India. It has really hurt our state economy.
And that's why I prefer that some of these things are done at the federal level to have a level playing field. We just have to be very careful what we do. Energy policy now, more than ever, is wrapped up in environmental policy. Air issues and water issues now are driving energy issues. I concentrate on electricity and natural gas, but we're finding these things are all linked. And again, that's why I urge caution going forward because these are billion-dollar decisions.
CRAVE: Last fall, I visited folks in Germany directly involved in agriculture. It's really unfortunate; they can hardly afford to raise potatoes because the cost of rent has gone up so high. Why? Because farmers are raising corn for silage so they can put it into their digester systems and produce green power because the electric grade is mandated at a high rate. While Germans may say, "Yeah, we're producing green power," they're importing their food from Poland because they can't afford to raise potatoes or sweet corn right there in their own backyard.
We do have to be very cautious of some of these programs because they are double-edged swords. And it's coming back to really hurt some well-established and good standard operating procedures in agriculture. While we're saying it's green, there's a number of farmers who think nothing of loading up a load of manure and traveling 15 or 20 miles on a daily basis with their tractor to spread the manure because there's no way they can come up with a land base close to home — a top-rated, good sustainable livestock operation, or a neighboring field, to take their potato waste to. It's trucking. So we have to be cautious because we can really lose quite a bit.
One thing affecting the Wisconsin dairy industry is that with the larger farms such as ours, we have more crop farmers — cash croppers — in the vicinity perhaps more willing to talk to us now because of the higher cost of energy. So we were able to take our digested manure, which offers a premium fertilizer value, and perhaps make some deals with some neighboring farms to provide fertilizer, rather than truck it a greater distance.
Another thing mentioned — corporate culture. We have to decide, are we going to produce more or work on saving energy. We could have doubled the size of our dairy farm for the money invested in the digester — and earned a much better return. But we're landlocked; that's part of the issue. We feel it's the right direction to go with rising energy prices down the road, too, but it's kind of hard to spend that money today figuring on a return several years down the road.
One of the other challenges also is somewhat of a social culture. We can all think back to the old joke, "Save money, shower together." Well, a modern take on that might be, "Save money on your energy, learn how to operate a cistern; learn how to use smart equipment in your house; learn how to commute or choose a career where you can commute on your bicycle or fewer miles." These require a personal culture shift.
Problem Solving Mode
WILLIAMS: I think we're in a great place here in Wisconsin to solve these problems. Bryant mentioned collaboration: I look around the table at everyone representing groups and companies that we've collaborated with. Look at the unique opportunity. This is how these problems are going to be solved: This roundtable is representative of what's going on out there on a daily basis to attack these problems.
SIEHR: That brings to mind the whole education component. You can put a thermostat in your house giving 263 different colors to tell you if your energy is more expensive, if this would be a good time to use your energy, a good time not to use your energy. I sit at a lot of community roundtables where somebody is trying to build a transmission line or whatever, and younger people will say, "Oh, I'm not shutting off my air-conditioner. I'm sorry. I am not going to sit in the hot and the humid." Percentage-wise, it's probably 70/30. People still want to be comfortable.
California has been ahead of everyone else. And when you give people opportunities to move their demand as opposed to just conserving: Keep your house cool at night when it's cheaper to do so versus during the day. Don't shut it off; turn it back on. The more you can educate and offer information, the smarter choices people make, which ultimately requires less building of power plants and infrastructure or whatever. The more educated you are, the more you can do things that oftentimes are not all that expensive.
But the big question is: Do you mandate it or do you allow people to educate themselves, and then ultimately make some good choices?
IB: What is the entry point for energy savings? And what is a company owner looking at realistically in the next six months?
WILLIAMS: It is confusing. There are a lot of tax incentives; the Focus office, the utility companies all have offers and programs. We really are working together trying to communicate that.
I'd like to think an entry point is Focus on Energy, but Energy Conservation Wisconsin has a user-friendly web page to help people get to the right resources. And another entry point is through our trade ally network. Contractors, electrical contractors, and HVAC contractors are talking to their customers. They have information on our programs and utility programs.
We're trying to get the state to a place where when anyone calls a contractor and says, "I'm thinking about this project — a lighting project, an addition to my building," that we already talked to that contractor and they know our programs and incentives and they can propose a project that includes our expertise.
SIEHR: Yes, everyone is aware of what everyone else is doing and there's really a partnership to help. So no matter where you go, your chance of getting referred to the appropriate program or organization is very strong throughout the state. We all meet as utilities together. No matter where you go in the door, you'll come up with what you need for your particular business.
IB: Charlie, you're hosting a technology fair?
CRAVE: July 21, 22 and 23rd, we are the host for Wisconsin Farm Technology Days. This year's event has three themes: food, fuel, and future. So we'll be focused on the capture of natural energy through the crops, calves, cows, manufacturing the milk into cheese — and we're focusing on gathering energy and our value-added products off of the manure as well. And, of course, a manure digester is just one step in the direction of capturing energy. You can get involved with algae production, fish farms; there's no limit to what can be done. So some of those features will be highlighted. It's just not vendors lined up; the Wisconsin show is the only one with a real educational component.
But one reason that attracted me is that it allows me to focus on my core business — the production of agricultural products — while they bring their expertise to the table. Once you see what's involved, there are people that can really make these projects move.
SIEHR: The Internet facilitates information, too. Information is power; if you look at some of the new policy coming out of Washington, and cap-and-trade and carbon capture, the latest projection is that just for a residential customer, it has the potential to add $1,300 a year [cost].
Multiply that times huge numbers for commercial and industrial customers, and it becomes something, just like health care, that begins to drive a lot of cost. You have to be very, very careful that you're prepared — which is hard right now because you don't know what's going to happen — but whatever you can do at this point to work through a more efficient way of using your energy can only be of benefit, both from green and true business perspectives.
MORODER: I was going to talk about the entry point, and that's just measure, measure, measure. You've got to understand where you are right now to understand where you're going and how you're getting there. Not only what you're using, but how much you're paying for it. I was in Milwaukee a few months ago in a room full of about 70 plumbers. Someone asked the question, "How many of you know the water rates?" Not a single person raised their hand, yet they deal with water on a daily basis.
Obviously, they may not have a direct incentive for water savings, but still it helped me understand better, when we set out to do these things, how important it is to understand where you are right now. Last week, I heard Phillips Plastic, a Wisconsin-based company, saved $1.1 million by investing $1.4 in one year. The energy efficiencies achieved underscores what's potentially out there. The Phillips' advice: "measure, measure, measure." They track everything they do to understand where the opportunities are.
IB: Todd, your customers most clearly are paying dearly and wanting the best rates. Sometimes that will be resisting a mandate, and sometimes it will be arguing for progress, correct?
STUART: Exactly right. We have global competition and the folks I represent often pay a million dollars a month in electricity; small changes affect them greatly. Electricity rates in this state have roughly tracked health-care cost expenditures and increases. Most people do understand health-care costs and say it is one of the top issues. Only until the last year or two has energy had that attention, even though the increases in this state have averaged about 7% a year for the last decade. We've gone up about 60% over the last decade, so it's gone up double the rate of inflation here in Wisconsin.
We try to keep the costs down for industrial customers to keep jobs here in the state. It's a bit of a losing battle. We already know what's coming is going to be expensive. Whether or not we address global warming, it's still going to be incredibly expensive to deal with the mandates we have for renewable power. To clean up coal-fired electricity, we're doing a lot of retrofits right now at a cost of billions, and it's going to have double-digit rate pressure right there. If you add in the cost of carbon, that's about a 20% increase almost overnight. Internally, we need to do as much energy efficiency as possible just to survive. Externally, we need to focus the debate to help manufacturers survive.
We have energy managers and purchasing managers, so we're a little different that way. Our entry point is our own companies, but we do look to focus on energy. We do look to companies like Alliant with Shared Savings, and our account manager works to make sure you're on the best tariff, that you're using energy in the most efficient way. And there are a lot of free energy audits right now. From either Department of Energy or Focus on Energy, you can get an audit for free. You can get a big list of what you can do, and you can rank them in order of cost and payback. We've got to get the low-hanging fruit, but it's hard. Everybody's in survival mode right now, quarter to quarter, so it's hard to invest in the future.
MORODER: Do you look at it as a challenge and a cost, or as an opportunity and an investment? The cost of inaction is probably a lot more than the cost we're going to see in the near term. So we have to look at the big picture and see the repercussions of the things we've done. Then okay, we understand, we've learned from that. Now, let's make that transition in such a way that we can maintain businesses that provide such vital importance. Even the environmental community is coming around to [realize] that it's very important that these businesses are here. They're the catalyst for the change that we seek for the globe and for our community. Our approach has been to show examples and models of what's worked somewhere else, because it's not like we're inventing the wheel here.
It's a matter of us learning and improving on that, and making it a best practice for our businesses here.