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Energy Efficiency

Published on April 30th, 2014 | by Silvio Marcacci


How 26 States Created 85% Of America’s Energy Efficiency Savings

April 30th, 2014 by  

Most policy analysis agrees energy efficiency is the cheapest way to reduce consumer power bills and cut emissions by lowering overall electricity demand, but if you really want to get a sense of how powerful efficiency can be, you’ve got to compare the states with ambitious policy to those without.

Just over half the US states have energy efficiency resource standards (EERS), but those 26 states represent nearly all of the electricity savings secured nationwide in 2012, finds Energy Efficiency Resource Standards: A New Progress Report on State Experience, a recent report from the American Council for an Energy Efficient Economy (ACEEE).

But if there were any doubts about the potential for energy efficiency to decarbonize our economy, consider these states are exceeding their goals, while costing utility customers far less than generating power from fossil fuels.

20 Million Megawatt Hours Of Energy Efficiency Savings

Texas was the first state to set an EERS in 1999, and since then, 25 other states have joined suit and set long-term energy efficiency targets. ACEEE broadly defines EERS as policy setting mandatory energy savings targets for utilities and efficiency program administrators.

And the aggregate impact of these targets? The 26 EERS states aimed to save more than 18 million megawatt hours (MWh) of energy in 2012, but they achieved over 20 million MWh – equivalent to 85% of America’s total energy savings in 2011 or enough to power around 2 million homes for an entire year.

These gains haven’t been uniform, but they’ve been close. 15 states exceeded their electricity savings targets in 2012, six others cut power use 90% or more, and just one state met less than 80% of its target. All of those numbers are improvements from 2011, when 13 exceeded their targets, six passed 90%, and two failed to reach 80%

Potential To Save 6.2% Total US Electricity Sales By 2020

If this trend continues, the 26 EERS states could become a major factor in managing America’s power sector. Assuming all targets remain in place (consider anti-efficiency legislation pending in Ohio) through 2020, their combined annual electricity savings will equal 6.2% of overall US electricity sales.

Long-term policy stability also benefits utilities, according to ACEEE. Multiyear targets provide regulatory certainty beyond annual planning, encourage utilities to consider efficiency as a similar resource to generation, and allow testing of new programs to fine-tune approaches as target savings levels increase.

Combined, the report suggests EERS could be the rare win-win-win for the climate, customers, and utilities alike. “Energy efficiency is a cost-effective and reliable resource that deserves to be a significant part of every state’s energy portfolio,” said Annie Downs, ACEEE state policy research analyst. “Setting energy efficiency targets is smart policy that encourages utilities to help their customers save money…instead of spending even more money building unnecessary new power plants.”

Those cost savings have been well documented. A recent study from Lawrence Berkeley National Laboratory found utility customer-funded energy efficiency programs in 45 states pegged the average cost saved energy at $0.021 per kilowatt-hour (kWh) saved, while a report from ACEEE analyzing programs in 20 states estimated the cost of energy efficiency was $0.028/kWh saved – both roughly 33%-50% less than building new generation.

How Can Other States Follow Their Lead?

So what can the outsized success of these 26 states teach the rest of America? To start, ACEEE suggests states encourage success by encouraging changes in utility business models. EERS targets alone don’t always work, but when paired with penalties or incentives, utilities achieve greater return on investments. Most states use a carrot approach offering a rate of return or financial award, while a few assign penalties for missing targets.

Regulatory reforms can also help encourage energy efficiency success, like program-cost recovery where utilities can recover investment costs by treating them as capital expenses, decoupling “lost” revenue from fixed costs independent of power sold on market, or performance incentives providing a risk-adjusted financial gain to meet growing power demand through increased efficiency instead of new generation.

Either way, the lesson is clear – regulators must overcome the fundamental challenge of utilities viewing energy efficiency as a threat to their profits instead of an asset to help reduce the need for new investments.

“Opponents of energy efficiency savings targets ignore the costs of building new power plants, which are paid for through charges on utility bills,” said Martin Kushler, ACEEE senior fellow. “Because saving energy through efficiency improvements is much cheaper than building a new power plant, energy efficiency programs end up resulting in lower utility bills for customers.”

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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.

  • spec9

    No wonder why the South and Mountain-West states whine so much about energy prices . . . . they waste so much of it!

    • Haha

      • LookingForward

        I have an idea how Obama can solve this problem, I don’t understand why he hasn’t done this before, why doesn’t he set a minimum capacity/new capacity and efficienty goal for each state?

        For example:
        Say for the end of 2015 each state has to have 100MWh of New Renewable Capacity and use 1 TWh less energy (100MWh equivelant), in 2016 200MWH NRC and 2 TWh, in ’17 400MWh NRC and 4TWh, in ’18 600MWh NRC and 6TWh, in ’19 800MWh NRC and 8TWh.

        From 2020 onward growth may stabilize, with minimal NRC of 1 GWh and 10TWh less energy use, untill 20% renewable capacity and maximum energy efficienty per state is reached. If a state reaches 10% below the price of grid parity with incentives for a renewable source, NRC growth of that source, with a minimum of 1GWh anually, should continue till atleast 20/25% of that source is reached and incentives may drop anually keeping them 10% below the price of grid parity. When a renewable source reaches grid parity without incentives, NRC growth of that source, with a minimum of 1GWh anually, should continue till atleast 33% and incentives may stop.
        Stopping incentives will save government money to put it to better use for other (renewable) sources that need it more.

        This might be a good way to slowly introduce all states to renewables and efficienty, let people see they have other benefits and are not just an enviromentalists dream.

        If this was made reality that would mean minimum annual growth of 50GWh by 2020 for the US and alot more people would be introduced to renewables and efficienty (right now I think a big problem is lack of information), the way things are going this will allready happen. I don’t think this is to much to ask.

        What do you think Zach?

        • Bob_Wallace

          “why doesn’t he set a minimum (new) capacity and efficienty goal for each state?”

          Is there any legal basis for a president to do this?

          Right now some states are getting geared up to fight new EPA regulations which will flow from yesterday’s Supreme Court decision on pollution flowing over state lines.

          • GraceAdams830

            If federal government can figure out how to get more efficiency and renewable energy out there with carrots rather than sticks or just mandates, it might help. I personally favor a carbon tax with revenue devoted to giving states incentive to improve efficiency and add renewable energy and also buy some fossil fuel reserves as mineral rights to appease our too big to fail fossil fuel firms.

          • Freel

            Most countries that are educated as well as the US charge 200-300% more than we do for electricity. It is not due to cost of production, it is due to taxes. If US power cost 2 or 3 x as much, do you think there would be much interest in efficiency? BTW they also charge 2-3x as much for gasoline, but they provide lower electric rates or other incentives for EVs.

          • Bob_Wallace

            An extreme example, gasoline is now over $10/gallon in Norway. And Norway it an oil producing country.

            Norway has very high vehicle import taxes but has given a waver for EVs, making Teslas comparatively cheap compared to other luxury cars.

          • LookingForward

            especially since, you can drive a Tesla and other EVs for free 😛

          • LookingForward

            indeed, good point.

          • LookingForward

            good idea, but let them stop subsidizing fossil fuels first, if that won’t happen, you can forget about carbon tax

          • GraceAdams830

            Our ten too big to fail oil firms and at least 2 maybe as many as 6 coal mine owning firms are part of the new nobility. That new nobility of the super-rich too big to fail firms in all industries very much OWNS the nation including the government. With a top-down command performance economy like the former USSR, it would be easy to see how to replace our present mix of electric power with all renewable energy over 30 years (approximate expected service life of wind turbines and solar power systems). The free market has been either a legend for many years or a myth from the beginning. MIC firms already live in a top down economy. Our oil firms are pissed at being displaced by Algae Systems already–they want to be MIC firms. I personally feel that federal government buying fossil fuel reserves as mineral rights is about all the subsidy fossil fuel firms deserve–but being a realist, I suspect it would be much easier to buy all the fossil fuel reserves first, and THEN once the subsidies become irrelevant take away the subsidies. Why fight for something you can buy.

          • LookingForward

            didn’t know that the government bought mineral rights from oilcompagnies, is logical.
            But the government is in transition it selve when it comes to oil, they could buy it and then sell the part they don’t use later for higher price, but that costs money now. Which the gov still can’t afford.

          • GraceAdams830

            Carbon tax is needed for BOTH prohibitive tariff effect AND REVENUE to pay for buying fossil fuel reserves to keep them from being burned and to get in the good graces of the fossil fuel firms which have way more political clout than our entire government does. Connecticut (one of those 26 states) taxes electricity and uses most of the tax to finance both improvements in efficiency and renewable energy capacity (mostly solar–but it hopes to also help invest in offshore wind up off the coast of Massachusetts.).

          • Bob_Wallace

            Allcaps are not needed. Use strong arguments, don’t shout.

          • GraceAdams830

            I shout both audibly and with allcaps when I get really upset. I also get diarrhea when I get really upset. Carbon tax is needed for revenue to pay for both renewable energy to replace fossil fuel and fossil fuel reserves as mineral rights to placate fossil fuel firms to make replacing fossil fuel politically feasible.

          • Bob_Wallace

            That’s fine. Shout and poop away, then clean it up before you hit the Send key.

            (I have to control the crazies. I can’t have a rule for them and not enforce it for everyone.)

          • LookingForward

            energy security, democraty (let people choose for them selves, when they have all the info), (longterm) economic growth, peoples health, stopping pollution faster, to name a few.

            But like I said, the way things are evolving, it won’t be long before this happens anyway, more and more people learn about it and see the difference anyway.

            This would jumpstart it faster in those states that aren’t paying attention.

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