Mar 092011
Authors: Emily Johnson

CSU’s Mechanical Engineering Department and the U.S. Department of Energy’s National Renewable Energy Laboratory are developing a new model for utility companies to profit financially by selling less energy.

“The utility companies have operated on the traditional business model of build a widget for the lowest cost, then sell it for the highest cost,” said Michael Callahan, NREL senior project leader.

Callahan said utility companies are motivated to sell more electricity to make more money, but they aren’t necessarily encouraging customers to use less energy.

“That’s the complete opposite of energy conservation, though,” he said.

Callahan has teamed up with researchers at CSU and other key members of the community to lead a study evaluating various renewable energy options that will still generate the financial gains that utility companies will be happy with.

Hoping to be a neutral third party between utility companies and the public, the goal of the study is to develop alternative business models that would create a solution for all involved, including utility companies who want a profit, customers who want a deal and the environment that needs a break.

Though developing tangible energy conservation ideas like rooftop solar installations is an important component of the project, Callahan said it’s also about financial and policy analysis.

“We need to develop incentives for utility companies to promote energy conservation instead of more energy use. We’re just getting started,” Callahan said. “We’re figuring out what’s already been done and what are the hurdles. By September, we hope to have the model built for estimation revenues and expenses.”

Though Ray Duthu, a mechanical engineering graduate student who is part of the research team, humorously refers to himself as “just the grunt worker” on the project, he plays an important role in the process.

“The goal is to create some sort of tool set to replicate what utilities are doing, using different variables,” he said. “We need to come up with some different packages.”
Duthu doesn’t consider his research to be particularly “earth-shattering” but it is intricate.

“We know how much it costs to replace a light bulb, but what are all the other factors to consider? What are all the costs and benefits?” he said.

Thomas Bradley, assistant professor in the Department of Mechanical Engineering, said that the team has dual goals: to understand the financial conditions that utilities operate under and to propose ways to reform utility business models.

“There are lots of creative ways to come up with such business models,” he said. “Also, in general, we all benefit from conservation because it makes our society more efficient, less costly and less polluted.”

Staff writer Emily Johnson can be reached at

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