Oh, Behave!

That could actually serve as the informal motto of the energy industry. Getting individuals and businesses to change the way they interact with their thermostat has become one primary goals of utilities, regulators and energy start-ups. To spur adoption of renewables, incentives have to be properly calibrated.

But what works. One of the most successful companies so far in bringing behavioral dynamics to energy is OPower. It sends notes to individuals about their energy consumption in their utility bills. On average, the system-backed up by complex software and reams of survey data-gets individuals to reduce power consumption by around 2 to 3 percent. In Europe, CityBin has managed to boost recycling in a similar manner.

I've been collecting suggestions on ways to change the dynamics between utilities and consumers. Are they possible? Sure. Practical? That's a debate. Solar leasing sounded kooky at one point too. Nonetheless, here they are. If you have suggestions, please send them along.

1. Sell Energy by the Square Foot. Rather than sell energy by the kilowatt hour, utilities could charge consumers by the size of their house, suggests Karl Rabago, vice president of distributed energy services at Austin Energy. Let's say its 10 cents a square foot. An apartment dweller in New York City might see a discount while homeowners in the South would avoid the onerous utility bills of July jacked up by air conditioning.

In exchange, utilities would gain the right to control the house to some degree: install new insulation, replace an old refrigerator. The utility gets to take energy hogs off the grid and the consumer gets a remodeled house.

And individuals do respond to incentives: Austin Energy has 100,000 customers on a plan now that allows the utility to shut off their air conditioners for 20 minutes on 14 days of the year to curb peak power. In exchange, the homeowners get a new thermostat.

"Nothing will get better if we continue to do the spin-the-meter model," he said.

Rabago had another suggestion too: allow utilities to increase the cost of kilowatt hours by the distance it has to deliver it to the consumer. Providing service to distant communities costs money, after all.

2. High Feed-in Tariffs for Crazy Energy Concepts. Tidal and wave power, osmotic pressure gradients and space-based solar all have potential. The problem is that few want to invest in them because of long development times and an uncertain payoff.

If utilities offered extraordinary feed-in tariffs, the economics could suddenly become intriguing, theorizes Dan Adler, president of CalCef. At the same time, the output from some of these devices would likely remain low for years, limiting the potential burden on state budgets. I can hear the fuel cell companies cheering Adler's name already.

3. Insurance Companies Replace the Feds. This one comes from Paul Frankel at CalCef's innovation fund. In the past year, banks have often agreed to fund solar, wind and other projects only after federal and state loan guarantees. Unfortunately, governments only have so much money.

Instead, why not require renewable developers to take out performance policies with insurers. It would add to the cost of projects, but make renewables more palatable politically. It could also accelerate the pace of projects because insurers can fire out a policy more rapidly and with more frequency than some agency can craft a loan program. Suddenly, the financial giants would be lobbying for green.

4. Don't Own Appliances or Lights. Instead of having businesses or landlords own and maintain their own heaters and air conditioners, HVAC systems could be owned by a third party or a city. Cold or hot air could then be sold as a service. Consumers, ideally, would see lower bills and the municipality and third party provider would have a huge incentive to install the most efficient appliances it could.

This has begun to take place. Skyline Innovations and Metrus Energy conduct retrofits on commercial sites and keep title to the solar thermal water heater and other appliances. The fees charged to the consumer are less than they would have paid for power and both companies say they can turn a profit on these contracts. Meanwhile, utilities in Southern California will deploy ice-powered air conditioners for reducing peak power in part through title shifting.

It could also work in lights. Once LED bubs drop to $20, utilities could give them away for free to curb peak power, argues Alan Salzman at VantagePoint Venture Partners.

6. Retrofit Instead of Default. Architecture 2030 came up with this one. Commercial real estate owners in danger of defaulting could get deductions for retrofits. "Commercial building owners could trade or sell these tax deductions to investors, who would provide the infusion of capital over a three-year time span. The capital would be invested in putting our highly skilled construction workers back on the job, retrofitting these properties. Property values would rise while energy bills decline," says this article on the Huffington Post, which itself coined the "don't pay people" business model.

There are a few hurdles here. Personally, I favor bringing back the PACE program for commercial properties not in danger of foreclosing. Either way, there seems to be interest in figuring out ways to retrofit without the pain of paying it up front.

7. Feed-in Tariffs for Electric Cars. Giving a utility the ability to extract power from electric cars during a peak power event sends shivers down the spine of auto makers. It would accelerate the age of the battery and, potentially, wreak havoc with warranties. Consumers also likely don't want to see their car depreciate to benefit Southern California Edison.

So pay them 50 cents a kilowatt hour. Consumers would acclimate to the idea rapidly. Warranties could be shifted from being calculated in years to number of charges.

8. Make Cars a Fringe Benefit. In Israel, employees at big companies like Intel get cars as a fringe benefit. That's one of the big reasons Better Place will deploy its network of swapping and charging stations there. An employer guarantees a nice sized market and the employee has been happily deprived of choice. Electric cars flourish. It also involves less paperwork than trying to let car makers give instant discounts based on the upcoming tax credits on electric cars.

9. Pay Fleet Owners for Openness. Who can afford to build propane, CNG or ethanol pumps? Not gas station owners. A ethanol pump might cost $150,000. But Wal-Mart and Target can because they want to run trucks and forklifts on alt fuels. If they get a direct per-gallon subsidy for letting the public gas up, finding a station for your flex fuel car wouldn't be so tough.