Energy Efficiency

Published on March 25th, 2014 | by Silvio Marcacci


US Energy Efficiency Programs Cost 2 Cents Per Kilowatt-Hour Saved

March 25th, 2014 by  

America’s most comprehensive study of energy efficiency costs has found programs paid for by utility customers cost just two cents per kilowatt-hour (kWh) of power saved.

The new study from Lawrence Berkeley National Laboratory (LBNL), “The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs,” puts a price tag on the cost of saving energy through various types of efficiency programs from 2009-2011.

Until now the program administrator cost of saving energy (CSE) has not been comprehensively studied at a state or national level, let alone the impact of stimulus funding, but this report could be the first step in better understanding the value of energy efficiency programs.

Energy Efficiency’s $0.021 Cost of Saved Energy

LBNL’s report represents the most comprehensive look yet at the cost of U.S. utility-run energy efficiency programs. Analysts sought out data from all 45 states currently running utility customer-funded energy efficiency programs, and were able to secure information from over 1,700 individual electric and natural gas efficiency programs in 31 states primarily from 2009 through 2011.

Their findings reveal an incredible return on investment for energy efficiency spending. A total of $5.3 billion dollars was spend on efficiency programs and returned a first-year total of 32,749 gigawatt-hours (GWh) gross savings, with 353,595 GWh projected lifetime gross savings.

Based on these totals, LBNL reports the average levelized CSE of energy efficiency programs is just $0.021/kWh, with a first year CSE of $0.16/kWh. Residential efficiency programs spent $1.5 billion and had the lowest CSE at a national level, with $0.018/kWh, and efficient lighting rebate programs represented at least 44% of total 109,929GWh gross lifetime savings.

Commercial and industrial (C&I) efficiency programs spent $3.2 billion, with a slightly higher CSE of $0.021/kWh, but returned far greater lifetime gross savings of 219,476GWh. Customized efficiency programs addressing multiple facets of energy use made up 38% of all efficiency spending.

Major Regional Differences Due To Program Newness

The CSE differences may have varied between types of efficiency program, but even greater differences were seen on a regional level. Energy efficiency programs in 7 Midwest states had the lowest average levelized CSE at $0.014/kWh, followed by 11 Western states at $0.023/kWh, 4 Southern states at $0.029/kWh, and 9 Northeast states at $0.033/kWh.

Even though only four Southern states were included in the study, LBNL’s analysis synchs with another recent report that found a 387% return on investment for energy efficiency in the Southeast US.

LBNL researchers noted interesting differences in the regional breakdown of lifetime energy savings compared to expenditures. For instance, Midwest programs reported around 20% more forecast savings on $1 billion in spending while Western programs predicted 75% greater forecast savings on $2 billion in spending than the savings forecast for Northeast programs’ $1.9 billion in spending.

Several factors may factor into the Midwest’s leadership, most notably the relative newness of energy efficiency programs or efficiency building codes across the region, which allow states to achieve significant savings from low-cost measures. Compare this trend to the Northeast, where states have been consistently been running efficiency programs for years and have well-established savings requirements. In addition, higher labor costs in the Northeast may have factored into higher CSEs.

Even Lower Future CSE Estimates?

While results may have varied across regions and efficiency sectors, this report adds to the litany of resources outlining the value of energy efficiency programs for energy consumption reduction goals. While this is the most exhaustive estimate of efficiency costs and benefits to date, LBNL notes actual CSE may be even lower today due to updated appliance and lighting standards.

The researchers also note that with additional program reporting, energy efficiency programs could become more valuable to state regulators or grid operators as the costs of implementation versus potential savings to overall demand become better understood.

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

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About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.

  • Matt Golden

    I think it is interesting that Mass, the state rated as number 1 in EE by ACEEE, is also by the far the most costly per kWh saved. If you know the MASS Saves program, you also know it is the most top down programmatic in the country (program does audit, fixes industry pricing, etc.).

    In a market, the price will drop with volume and competition. But these numbers seem to show that as EE scales up, the cost of program delivery is actually going up.

    Maybe ACEEE needs to rethink its metrics!

    • A Real Libertarian

      That’s probably because all the low-hanging fruit has been picked.

      • Matt Golden

        That is the obvious thought, but they are not going deep on each retrofit… really just scratching the surface with savings that average under 15% as I understand it from their M&V (I am talking about the res retrofit portion), and while they have done more than most States, they fall into just the early stages of early adopters based on the adoption lifecycle. If they are already getting more expensive, we are in trouble.

        Mass has the least market based model for residential energy efficiency in the entire country (at least at a State level). They conduct all the audits and scope all the work through the program, and essentially set prices with industry. The market is essentially filling orders.

        Perhaps a more probably reason is simply that whenever you have a monopoly in a market, where there is no real transparency or competition, prices tend to go up as the market increases… not down.

  • Ronald Brakels

    Improved efficiency along with rooftop solar have resulted in decreased demand for electricity in Australia. And I’ll mention this has been occurring while Australia’s economy has been strong. So I think it’s quite possible for demand for grid electricity to decline in the US for similar reasons. I don’t expect it to be as dramatic as in Australia due to different circumstances, but demand for grid power in the US has been pretty flat over the past few years and may soon start to decline, with improved efficiency playing a vital part in this.

    • Bob_Wallace

      If one compares usage between the most efficient states and least efficient it looks like there’s a lot of cutting that’s going to happen.

      A lot of efficiency is in the pipe. Replacement TVs and appliances are already in the stores. As people replace worn out units they’ll automatically buy more efficient because that’s the choice. And a lot of people are going to not be able find incandescent bulbs when they go shopping.

      • Ronald Brakels

        I presume the US won’t have the same massive hike in grid electricity prices as Australia (aren’t you lucky?) but, as you’ve mentioned, other pieces are in place. You’re a bit behind on incandescent lightbulbs, but appear to be ahead on LED lights.

        • Bob_Wallace

          I don’t see anything that is likely to drive prices significantly higher. Perhaps there will some ability for utilities to stick customers with the cost of failed thermal plants in regulated districts. And some people in regulated districts are getting their pockets picked for new nuclear builds.

          We’re actually seeing some price drops (or at minimum normal increases being minimized) thanks to renewables.

          Here’s the difference in price increases for the states that have at least 7% wind and the ones that have less.

          • Ronald Brakels

            Thanks for that. Here in South Australia we used to have the highest wholesale electricity prices in the country due to our lack of cheap coal, but our wind and solar have dropped them by a few cents a kilowatt-hour. Despite this, electricity retailers have of course continued to increase prices because they can. I think the moral is – Don’t do what Australia did with electricity privatisation and transmission infrastructure and don’t do what California did.

          • CaptD

            Ronald Brakels – CA is still “doing it” to its ratepayers!

            CA Utility Regulators are far to cozy with the Utilities they regulate, which is why CA now has some of the highest Energy rates in the USA while also having some of the Worlds best weather!

            As Solar (of all flavors) prices come down and/or ratepayers acquire an eVehicle we will see a major shift away from total dependency upon Utility supplied Energy, which the Utilities are now trying every trick in the book to prevent, and if not that, then to SLOW the conversion process down until it becomes glacial!

            Two things they are now doing are:

            1. N☢T paying a fair value for all the residential Energy when it is put into the Grid (which the Utility of course controls) using the difference to increase their own shareholders returns.

            2. To greatly increase their basic GRID FEES which are already billed separately. so that they will continue to have their hand deeply inside everyones pocket! The rational that they are using for this is that the connects costs must reflect the actual costs to the Utility for everything associated with providing the Grid to each customer, and conveniently leaves out all the money mentioned in #1…

          • Ronald Brakels

            I’m afraid I’m familiar with those sorts of things here in Austalia. Increases in distribution costs have doubled the price of electricity for households in Australia and feed in tariffs have been greatly reduced with some people getting nothing for feeding clean solar electricity into the grid. Queensland now has no set feed-in tariff for most people in the state. It was 8 cents but now it’s up to the electricity distributers to give what they feel like. (A victory for liberty! The freedom of electricity retailers has been increased!) There is still a tariff for regional Queenslanders. It is 6.3 cents. (5.7 US cents). And they pay about 26 cents (23.4 US) for grid electricity or more if supply charges are included. All up I paid a hair under 48 cents a kilowatt-hour on my last electricity bill. That’s about 43 cents US.

          • CaptD

            Ronald Brakels – As ever more rate paying customers go Solar, our Utilities are shifting their profit making focus on increasing the THEIR GRID’s value so that they can start milking everyone even more for operating and maintaining it! This will become a never ending make work project that will keep raising what energy costs, since even a basic GRID connection will need to become very expensive “to keep rates fair for everyone”…

            This is even a bigger rip off than them providing Energy to the GRID, since it is the Public’s Grid not the Utilities and every 5 years the contract for operating and maintaining it, should go for bid, since that would insure the lowest possible costs to ratepayers!

            The biggest threat to the Utilities is the addition of Batteries to residential Solar because then they will lose the income stream from private generation that is put into the grid but paid out as a tiny fraction of its value to the Utility!

            The next big battle will be in building regulations that will be put into place to make it very hard for people to NOT be connected to the GRID and /or to store their own energy!

          • Bob_Wallace

            Utilities deserve to make a fair profit from owning and operating the grid. In most places there is some degree of public control over how much utilities can charge so we shouldn’t be concerned about overcharging.

            A connection to a fairly priced grid and the ability to purchase backup power is likely to be much cheaper than operating a generator. And many people who may be able to install panels and batteries will not be able to use a generator.

            The grid will endure. There will be a rough period while utilities deal with legacy thermal plant closures. But once we get through that process there will be a new version of the grid. The grid will have wind, hydro, tidal, geothermal, biomass generation and will likely be able to provide cheaper storage than what will be available for end-users.

            Some people will likely add some storage in order to use their own solar power during the late afternoon/evening and early morning peaks, but many/most people will not.

          • CaptD

            Bob – I not against the Utility making a “fair” profit, but as we have seen in SoCal, the Utilities idea of “fair” is resulting in record profits for their shareholders! The CPUC is enabling that “mindset” to continue by:

            1. Not calling these Utilities out for continually requesting additional rate increases!

            2. Not requiring that the Utilities paying all energy producers (including themselves) the same rates, which would allow homeowners to not only payoff their own solar installations much faster but also reduce the need for building additional generation!

            BTW: I agree that most will not use their own generators unless there is an outage of some sort!

          • Bob_Wallace

            I’m not going to argue that utilities are always fair or never gouge their customers. But over time we tend to get them under control.

            There are likely to be a lot of problems during the transition from the age of large thermal plants to the age of renewables. People who have money invested in thermal plants are not going to accept large losses gracefully.

          • A Real Libertarian

            “every 5 years the contract for operating and maintaining it, should go for bid, since that would insure the lowest possible costs to ratepayers!”

            The lowest possible costs would come from government ownership of the grid.

          • CaptD

            A Real Libertarian – The Gov’t. (NSA) would LOVE to RUN the Grid but would we want them too?

            Also, the Utilities would not want to give up their FAT cash cows…

            The Grid and the Internet Highway are not like Interstate Highway System!

          • CaptD

            Bob – Great chart, is it yours or do you have a link for who produced it?

            It would seem to indicate that installing Wind ASAP would really help drive Energy rates own about 7%, which is a huge change!

          • Bob_Wallace
          • Ronald Brakels

            In South Australia wind and solar have dropped wholesale electricity costs by over a third. Mayby by half once inflation is taken into account. This is great for Australia, but a small subset of Australians aren’t too happy about it.

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