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Published on April 1st, 2016 | by James Ayre


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

April 1st, 2016 by  

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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About the Author

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.

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