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The Value of Energy Efficiency - Past and Future

Posted to VEIC in the Energy Efficiency Group
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Emily Levin's picture
Principal Consultant VEIC

Lead the Energy Programs team at VEIC, working with utilities, program administrators, and state energy offices to design leading-edge building decarbonization policies and programs. We advance...

  • Member since 2021
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  • Aug 23, 2021
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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:

  1. The utility costs and benefits of energy efficiency from 2010 to 2016
  2. 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.

Opportunity awaits

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.

Dig into the Synapse analysis and more on these strategies on our website.

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.

VEIC
VEIC provides high-impact energy solutions that decarbonize buildings, transportation, and utility grids, today.
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Matt Chester's picture
Matt Chester on Aug 23, 2021

 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.

This is so encouraging to read, but also so frustrating because there will still be detractors who don't recognize the value of such an investment. How do you reach the audiences that are resistant to such programs? Is it just more about putting these numbers in front of them, or is there some wider education strategies still needed? 

Emily Levin's picture
Emily Levin on Aug 24, 2021

Great question. For regulators and utilities, a lot of it has to do with getting the business model and performance incentives right to make them care about energy efficiency, and we have to get better at modeling the value of EE in integrated resource plans. Getting these numbers in front of them is a good start.

Dennis Roberts's picture
Dennis Roberts on Aug 25, 2021

Very good article! America and the world have mistakenly put the emphasis on renewable energy. Let's correct that now to the benefit of all!

Sid Abma's picture
Sid Abma on Aug 25, 2021

Hi Emily. I think the commercial and industrial market has to look to increase it's natural gas energy efficiency. The residential market has proven with the condensing boilers and water heaters that natural gas can be consumed to near 100% energy efficiency. These larger natural gas consumers can also operate as efficiently. The Sidel SRU series of Flue Gas Condensers was developed and has been in use for near 40 years. Instead of allowing hot combusted natural gas exhaust to vent out of the chimney into the atmosphere, the heat energy gets transferred from the exhaust into water that can be used for building space heating or has heated domestic or process water or even be used to heat the hotel or universities swimming pool. Fight Climate Change and vent cool exhaust. The US DOE states that for every 1 million Btu's of heat energy that gets captured from the exhaust and is utilized, 117 lbs of CO2 will not be put into the atmosphere. Then there is the Water. In every 1 million Btu's of combusted natural gas are 5 gallons of recoverable distilled water, and this water is very usable. To get at this water the heat energy has to be removed from the exhaust. The cooler the exhaust temperature is lowered, the greater the volume of water that will be created.

Your thoughts?  Have A Fantastic Day!

Jim Stack's picture
Jim Stack on Aug 26, 2021

Energy efficiency will never hit a peak and have less to offer. Just as LED lighting has reduced energy by 10 times . Adding better insulation can help any home. That includes outsulation. Windows are terrible and can be improved. Heat pumps have also jumped up in efficiency. There is no end to the opportunities. 

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