How $mart: Winning Big with Energy Efficiency in Kentucky’s Coal Country

Originally published in December 2014.

No one can deny it anymore: the coal industry in Appalachia is in sharp decline. And unlike historical booms and busts in the industry, this time the downturn appears to be permanent.

Reasons include resource exhaustion, competition from natural gas, and the impacts of tightening environmental and health regulations. One thing is certain: the collapse of the coal industry is worsening hardships in a region with some of the deepest pockets of poverty and distress.

As coal production leaves Appalachia, so too do the jobs that have for decades been the backbone of the region’s economy. Eastern Kentucky, one of the areas suffering most from the coal industry’s collapse, has lost more than 7,000 jobs in the last two years.

How Smart

But there is a silver lining. The severity of the crisis means a large segment of the population in Appalachia is open to new ideas for the region’s economy.

“The issues we face in Appalachia are the issues we face as a globe,” says Justin Maxson of MACED (Mountain Association for Community Economic Development), the Kentucky-based group working to create economic alternatives in the Appalachian region.

“The issues we face in Appalachia are the issues we face as a globe.”

How$mart, a project of MACED, is creating jobs, reducing energy consumption, and saving money on monthly electric bills for some of the people who need it most. The on-bill financing program makes energy-efficiency upgrades in homes in four regions served by rural electric cooperative corporations (RECCs) in Eastern Kentucky.

How$mart addresses the primary barrier households face when they want to make energy efficiency improvements — finding the upfront cash to pay for a retrofit. The program allows customers to make payments for efficiency upgrades with part of the energy savings generated by the upgrades.

Bringing Energy Savings Home

One sunny autumn day before the backdrop of a blue sky and the rolling vermilion-tinged hills of Johnson County, Kentucky, Bruce Davis of Big Sandy RECC utility cooperative and Chris Woolery of MACED arrive at the home of Garland and Judith Howard to conduct an energy audit.

How$mart addresses the primary barrier households face when they want to make energy-efficiency improvements.

“Garland, how are you, brother?” Davis calls as they unload their equipment in front of the Howards’ home.

“Well, I’m pretty good,” comes Garland’s reply from inside the house.

Big Sandy RECC utility co-op was established in 1940, and serves around 13,000 members in counties throughout the region. “We do live in the poverty pocket,” says Davis, “A lot of folks with electric furnaces and mobile homes and high bills…we’re really wanting to help our folks save money.”

When MACED brought How$mart to the table, Davis says it just clicked. “The theory behind the How$mart program, as far as letting your energy savings pay for the amount of money you spend doing energy measures — we thought it would be a perfect opportunity to help our customers save energy, and thus, save money,” Davis explains. “The reason we chose to work with MACED is they have the same goals we do — they want to help people, and we want to help our people.”

Judith Howard saw an article in the RECCs’ statewide magazine, Kentucky Living, about the How$martKY program, and decided to do an efficiency audit and upgrade on their home. “We’ve been thinking about it for quite a while,” says Howard, “We knew we were losing energy somewhere — the house is so cold in the winter.”

Saving Big

How$martKY has completed energy-efficiency upgrades at 162 homes in Appalachian Kentucky, generating an average $100,000 in annual electric bill savings. The program saves an average of 5,400 kWh of electricity a year, which equals an average of $612 in yearly savings per How$martKY customer.

Four RECCs in eastern Kentucky — Big Sandy RECC, Fleming-Mason Energy, Grayson RECC, and Jackson Energy — have teamed up with MACED so far, and two other co-ops have made commitments to join the program.

How$martKY’s energy-efficiency upgrades have generated an average $100,000 in annual electric bill savings.

MACED’s initial goal was to complete 350 retrofits a year via seven or eight energy cooperatives. So they were surprised last year by inquires from Transmission and Generation, a conglomeration of 16 member co-ops interested in adopting How$martKY as a primary vehicle for energy efficiency throughout their entire system. This meant reimagining How$martKY to achieve 1,000 or more retrofits per year.

Recently, the Kentucky Public Service Commission (PCS) approved a tariff that makes How$martKY a permanent program. This paves the way for RECCs across the state to join How$martKY, which PSC says has “encouraged energy conservation, lowered consumer bills, and will result in reduced future [energy] demand.”

Sometimes the best ideas are generated in a time of crisis. How$mart just might be one of those ideas that shapes the way we transition to a new, sustainable energy economy in the nation.