Exactly How Much Do Energy Efficiency Measures Cost? New Studies Provides The Answer

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Energy efficiency measures are often touted as an effective way of reducing greenhouse gas emissions, of lessening new project investment needs, and of reducing reliance on imported fossil fuels, but to what degree are these assertions true? How much do the implementations of such measures themselves cost?

A number of recent studies — from the American Council for an Energy Efficient Economy (ACEEE), Lawrence Berkeley National Laboratory (LBNL), and the Environmental Protection Agency (EPA) — have provided some possible answers to these questions, and helped to quantify things enough that future decisions can be more easily made.

Energy efficiency lbnl

The graph above does a good job summing up the recent LBNL study — showing that, on average, energy efficiency program costs are running around 2.4¢ per kilowatt-hour (kWh) of electricity saved (over the lifetime of the implementation). That means that energy efficiency is pretty clearly the cheapest “source” of electricity out there currently (where possible/available).

Notably, recent ACEEE studies have found slightly higher costs — with an average of 2.8¢ per kWh of “saved” electricity being determined by a recent review of energy efficiency programs in 20 different states.

Energy efficiency

Here’s more via a new fact sheet from the ACEEE:

In the documentation accompanying the Clean Power Plan, EPA estimates that energy efficiency programs will cost program administrators 58 cents up front per kWh saved in the first year for low savings levels, with costs declining to 46 and then 35 cents as programs ramp up (we have updated these values to 2014$). These figures compare all the costs to the kWh saved in just one year and not to savings over the entire lifetime of the efficiency measures. Translating to cost per kWh saved over the lifetime of the measure, the figures work out to 7.5 cents/kWh saved initially, ramping down to 6 cents/kWh and then 4.5 cents/ kWh.

The EPA costs are derived from a 2009 ACEEE study, but EPA doubled the costs for the initial savings and then reduced them by 20% and 40% as savings reached 0.5% of sales and 1.0% of sales respectively. EPA argues that initial costs will be higher, even though the ACEEE analysis it used includes several states that were just getting started and therefore include start-up costs.

…To us, it appears that the agency wanted a relatively high cost in order to show that even if costs are high, energy efficiency is cost effective. In our view, based on the data summarized above, EPA is overly conservative. Most likely, energy efficiency will cost program administrators under 4 cents per kWh saved, much less than a new power plant.

Even using the EPA’s arguably inflated figures, all of the accumulated data to-date should make it clear that the implementation of energy efficiency programs is often a more cost-effective means of boosting electricity supply than the development of new power plants is.

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James Ayre

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

James Ayre has 4830 posts and counting. See all posts by James Ayre

20 thoughts on “Exactly How Much Do Energy Efficiency Measures Cost? New Studies Provides The Answer

  • I switched to LED lights throughout most of the house stuff that is still using older style bulbs aren’t used much and will be replaced when they die. When we buy appliances we make sure they have decent ratings. The AC/Heat pump isn’t that old either. We still use a huge amount of power thanks to computers need to really find a way to reduce the power load from those at some point.

    • LEDs are a no-brainer at this point.

      Doing a superinsulation retrofit is much more of a pain which is probably why people don’t do them. Well worth it though.

    • I have a SSD in my computers now making turning them off any time they are not in use a no brainer. Boot up only takes seconds. If you have server needs that require your computer to be on 24/7 than thats a different problem.

    • Aside from the SSD point made by another commenter, you could also look at your usage case. If peak performance is not essential, consider undervolting your CPU and/or GPU.

    • Can you make due with a laptop? They draw much less than a desktop.

  • Agree with the article, but watch out for the law of dimnishing returns. Better get the best solution immediately rather than stepwise, because every further step is more expensive and less efficient. For example, get directly led lights rather than buy CFL “in the meanwhile”. If you insulate the home, put 20cm insulation rather than 10.

    • Absolutely. A half-assed job is a mistake with efficiency retrofits.

      • As long as you have a solid concept a step-wise solution may work and does not overburden your budget.

        Doing things in the wrong order hurts.

    • Adding attic insulation is not invasive and most older homes could benefit from additional insulation. It is not overly costly either. When doing renovations I take the time to remove drywall to upgrade insulation and vapour barrier but I understand most people don’t want to go to that depth.

      The Ontario government has brought back energy retrofit grants which was a wild success last time and hopefully will be again. Any incentive to help motivate people to upgrade the efficiency of their homes is great and as proven by this article is a very efficient use of money.

  • And these cost/benefit analyses leave out so many much more valuable benefits, like reduced health care costs from reductions in pollution; better quality of life; personal comfort; increased worker productivity and decreased absenteeism; the list goes on and on.

  • Interestingly the wind alternative comes in second but in a range from visually looks between $0.035/kWh to $0.07/kWh, which is strange because the US average unsubsidized wind PPA for 20 years as per 2014 was $0.035/kWh with design lifetime cost still lower.

    Besides that I consider Negawatts much more appealing than wind turbines because really everything can be much more efficient. The average European uses about half the amount of raw materials so without real sacrifice US citizens could go a little leaner on nature.

    Fully implemented LED lighting can reduce the global electricity consumption by 33% distributed with direct savings on lighting around 90% corresponding to 20% of global electricity consumption plus 90% on displays corresponding to 4% and 7% gained from reduced air-condition electricity consumption and reduced systemic electricity consumption in computers, pads, phones, televisions etc.

    Better light sources and displays will just be part of everybody’s ongoing replacements so I find it difficult to understand why they claim the very high cost per saved kWh.

  • In 1974 in Phoenix, AZ we bought a tract house. In those days there was no insulation. The walls were block with 3/4″ furring strips to allow drywall to be attached directly to the block. When we ordered the house we had the furring strips enlarged to 1-1/4″. It only cost like $50. Before the drywall was nailed on we filled the space with 1″ styrofoam insulation. Although only an R6, there are better insulators now. With the styrofoam being sandwiched between drywall and cinder block there was no problem with out-gassing. Anyway, the point is that that house has been saving energy for over 40 years and paid for the up front cost many, many times over. It is a shame that nation-wide building standards have not been implemented decades ago and that people are short sighted enough to say that they won’t live in the house long enough to recoup their expenditure. We need to start thinking in terms of the life of the dwelling, not just how long the current occupant may live in it.

    • Another interesting thing might be to require documenting the heating and cooling efficiency of a house, so people have it staring them in the face, especially when it’s bought and sold.

      • That’s great idea, just like buying an appliance. It would encourage people to modernize their home just like redecorating their home to make it more sale able.

      • This is already a legal requirement in both the UK and France when a house is sold. I don’t know how effective this is, but at least the buyer gets documentation if they want to use it.

    • It is hard to have good nation wide pwrscrpitive building standards for insulation. There’s so much variation in climate, pest, and structual issues.

      Economic construction of superinsulated walls usually can’t be done in the field, but could be done prefab. However there are zillions of institutional obstacles to making this happen. Performance standards aren’t good either. Title 24 in California is more of a paperwork exercise than anything else.

  • Why is low income 7x res and 5x commercial. The low income housing stock is the least efficient so should have a lot of low hanging fruit. Is it that it takes a lot of kick-back to get land/slum lords to do it?

  • The strange and rather sad finding, which I’ve seen elsewhere, is that the low- income programmes are comparatively ineffective. It’s not clear why. One possibility is that they have tended to emphasise boiler replacements, which are often needed for safety, over more cost-effective insulation and weatherising.

  • The electricity producing power plants are only 30 to 45% energy efficient. That means that 55% to 70% of the energy they consume is wasted.
    Let’s focus at having them operate at over 90% energy efficiency. There is so much that can be done with all that exhaust, instead of blowing it into the atmosphere.

    • Just replace them. We won’t be pumping CO2 into the atmosphere and having to worry about all that wasted energy.

      Go for cheaper wind and solar….

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