GE's Smart (and Subsidized) Appliances

GE's Smart (and Subsidized) Appliances

New smart appliances from GE will do great things. They will save energy, reduce greenhouse gases, curb  demand for power on the utility grid, generate “green jobs” in America and -- oh, I almost forgot -- clean your clothes, wash your dishes and keep your ice cream from melting.
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They will also be financed, in part, with your tax dollars, if, as seems likely, the company has its way. Incentives for manufacturers like GE that make super-efficient appliances are already part of the Waxman-Markey climate-change bill awaiting action in the U.S. Senate. As GE explained it, the government would provide "awards" to best-in-class appliances of $75 per dishwasher, $200 per refrigerator and $300 per water heater, paid directly to the manufacturers. As I read Section 214 of the bill (and I could be wrong, since it’s not easy reading), the government would also pay retailers who sell best-in-class appliances.

Did you know that the government was going to subsidize appliance manufacturers? Me neither.

Last week, GE executives came to Washington to talk with government officials and reporters about their smart appliances. When combined with a smart electricity meter, a smart grid and distributed renewable energy, GE’s water heaters, washers, dryers, dishwashers, refrigerators and stoves would help enable the company to provide zero net energy homes by 2015. That’s very cool. (Here are details from GE.)

While appliances are not the most exciting or profitable of GE’s businesses -- the company tried, without success, to sell off its appliance business a couple of years ago -- GE does have a history of innovation in the business. GE gave us the first self-cleaning oven, the first fully automatic clothes washer and the first refrigerator that dispensed ice and water through the door (which saves energy along with wear and tear on the biceps muscle).

At a D.C. newsmaker event, Jim Campbell, the president and CEO of GE’s Consumer & Industrial division and a 30-year veteran of the appliance business, said:
"I think Smart Grid-enabled appliances will usher in another revolution ... a revolution in which these appliances will enable us to use energy more wisely ... and help reduce greenhouse emissions.  And, in the process ... GE and other manufacturers will lead the way to a new era of U.S. technological leadership ... and the thousands of jobs that go with it."
How would the smart appliances work? Aside from being more efficient, they would talk to the utility grid and use less electricity when prices are highest -- assuming, that is, that utilities adopt time-of-day pricing so that the amount they charge for electricity better reflects their actual costs. As a practical matter, this would mean that smart appliances would power down or delay operations to avoid using power during the daytime in summer when air conditioners operate and utility companies bring on their most expensive generation units to meet peak demand.
Image Courtesy of GE
For example, a dishwasher could hold off running until late at night when rates go down. The defrost cycle of a refrigerator, which uses lots of energy, could also be automatically postponed until evening. Dryers could operate with less power, as could a new GE product, a Hybrid Heat Pump Water Heater that will be available later this year. (If you want to know more about the water heater,  see this. Or watch these videos of GE appliances.)

Of this new water heater, Campbell said:
"Currently there are about 60 million homes in the United States with an electric tank water heater.  If even ten percent of those water heaters were replaced with this new Hybrid Heat Pump Water Heater… we could save as much energy as generated by 40 coal-fired power plants annually."
The water heaters will cost about $1,500 apiece (compared to $500 or more for a basic water heater today) but they are expected to generate average energy savings of about $250 a year. Since they have a 10-year lifespan, that’s not a bad deal.

So there’s no doubt that these appliances deliver substantial benefits. Let’s hope millions are sold. The question remains, does GE need a subsidy from your tax dollars to bring them to market? A couple of observations to put that question in context:

First, the state of Kentucky and the city of Louisville are already providing subsidies to GE to manufacture the water heaters. As a GE news release said this spring:
"Up to $17 million in incentives from the state and metro government will be made available for the design and construction of the new energy-efficient hybrid electric water heater and for several other investments that the Company will make at Appliance Park over the next several years, which will total over $69 million ... Kentucky also will provide funds to train employees for the new jobs and will exempt from sales tax certain materials purchased to construct new facilities."
GE’s unions also chipped in, approving a temporary wage freeze  to make the Louisville facility “more competitive and attractive than other manufacturing locations that were under consideration.”

Second, this is one of a plethora of targeted subsidies aimed at getting us closer to a clean-energy economy. GE is well-positioned to capture its share. GE makes wind turbines and solar panels, which get federal tax credits and are helped by state-mandated renewable energy requirements. (Of course, GE is in the heavily-subsidized low-carbon nuclear business and it wants to get into the business of “clean coal,” for which massive subsidies await.) GE also makes smart utility meters, a key part of the smart grid, which has been allocated $11 billion under the 2009 federal stimulus package.

So every step of the way, taxpayer dollars come into play.

I asked Jim Campbell why GE needs the incentives to make smart appliances. He told me the company has been developing smart appliances on its own but that the Waxman-Markey incentives would accelerate their deployment. And, as we all know, there’s no time to waste when it comes to curbing greenhouse gas emissions. What’s more, GE’s Louisville-based appliance business is getting squeezed by weak demand and low-cost foreign competition.

“We’re in a very tough market right now,” Campbell said. “The appliance industry is down double digits.”

Fair enough. But I thought the appeal of a cap-and-trade scheme is that it would set a price on carbon and then let the market decide which are the most efficient ways to reduce emissions. Obviously, there’s a lot more deciding going on than we were led to expect.