The Value of Energy Efficiency - Past and Future
- Aug 23, 2021 8:30 pm GMT
Energy efficiency is at an inflection point
For decades, energy efficiency programs have delivered significant environmental, economic, and societal value. They have transformed markets for lighting and appliances, created green jobs, improved the health and safety of buildings, and reduced energy bills for consumers. However, the value of efficiency is changing as opportunities for programs to capture low-cost energy savings from lighting diminish and states increasingly focus on decarbonization goals.
For many, the continued value of energy efficiency is clear. However, spending on energy efficiency programs has flattened since ramping up to about $6 billion per year in 2011. And in some states, stakeholders are questioning whether energy efficiency has run its course.
With the Biden administration’s “Build Back Better” jobs and infrastructure plan in the works and the potential for billions in spending to combat climate change, energy efficiency is poised to play a central role in economic recovery from the Covid-19 pandemic – and it should. The federal goal to retrofit more than two million homes, commercial buildings, and schools, could mean big investments in energy-efficient, healthy, and resilient buildings.
At VEIC we are exploring the past and future value of energy efficiency – and how efficiency can evolve to support economic recovery and the clean energy transition. In 2017 we commissioned Synapse Energy Economics, Inc. (Synapse) to undertake a two-part study that examined:
- The utility costs and benefits of energy efficiency from 2010 to 2016
- The projected utility costs and benefits from energy efficiency from 2016 through 2030
The study quantified costs and benefits of electric energy efficiency as a utility system resource, on par with supply-side energy sources.
The findings indicate that maintaining or increasing levels of energy efficiency provides net benefits in every state and transmission region in the country. And that’s before factoring in the significant value of energy efficiency in terms of carbon reduction, health, and other non-energy benefits.
Value of energy efficiency – past and future
Synapse found that energy efficiency programs saved a total of more than 160,000 GWh per year in 2016, resulting in net savings of more than $4.1 billion nationally from reduced spending on electricity generation, transmission, and distribution. Despite the proliferation of energy-consuming products in daily American lives, energy efficiency has reduced total annual electricity sales by 4.1%, flattening load growth. Based on an analysis of US Energy Information Administration (EIA) data, the utility cost of saved energy (COSE) has averaged about 2.5 cents/kWh on a levelized (lifetime) basis, significantly less than electricity supply alternatives.
To quantify the value of energy efficiency to the utility system through 2030, Synapse modeled three different energy efficiency scenarios: No Future Efficiency; Steady Efficiency; and Progressive Efficiency. Based on the modeling, Synapse found that energy efficiency will continue to result in substantial value to the utility system through 2030, even if it costs more to deliver due to changes in the lighting market. National net benefits of energy efficiency are $5.5 billion under a Steady Efficiency scenario and $9.7 billion under a Progressive Efficiency scenario. Notably, every state is expected to experience bill savings from energy efficiency in 2030: average annual bill savings of $64 for residential customers in 2030 in the Steady Efficiency scenario and $147 for residential customers in the Progressive Efficiency scenario.
The Synapse analysis tells us that energy efficiency should continue to be the “first fuel” as we transition to a cleaner energy system. And, significant efficiency potential remains untapped. To capture this potential, energy efficiency programs and services need to adapt.
VEIC is working with utilities and program administrators to embrace next-generation strategies that not only reduce energy use, but support decarbonization of the energy system. Key strategies include: Updating energy efficiency goals and regulatory frameworks to align with decarbonization goals; diversifying portfolios beyond lighting savings; advancing networked and connected strategies; and coordinating delivery of efficiency, demand flexibility, and electrification.
And looking ahead, energy efficiency can play a central role in jobs and infrastructure investments, to support clean energy, health, equity, and economic recovery goals. VEIC has previously demonstrated the health benefits achieved through energy efficiency, such as reduced rates of asthma and chronic obstructive pulmonary disorder (COPD), through partnerships with the health care sector. More recently, we delivered a successful initiative to improve indoor air quality through HVAC and ventilation upgrades in Vermont schools, as part of the state’s Covid-19 response.
The future of energy efficiency is bright – both as a resource to a clean and resilient utility system and as a cornerstone for healthy buildings and communities.
What opportunities do you see on the horizon for the energy efficiency industry? We’d love to chat about how we can help you get there.
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