Renewables may generate more headlines, but energy efficiency is, on average, more cost effective for utilities Maggie Molina, Senior Director for Policy, ACEEE

January 27th, 2019

Market Leadership

Recent data from Lazard shows that prices for renewable electricity declined in 2018, continuing their downward trend. However, this data overlook another critical clean energy resource. Energy efficiency–the kilowatt-hours we avoid by eliminating waste–remains, on average, our nation’s least-cost resource.

Efficiency delivers a host of other benefits. It improves electric grid reliability and resilience, can target savings where and when needed the most, creates jobs (energy efficiency employs 2.25 million people in the US today), spurs economic development, reduces customer utility bills, makes homes and buildings more comfortable, and reduces harmful pollution.

What do the data show?

ACEEE research published last summer shows that energy efficiency programs cost utilities, on average, about 3.1 cents per kilowatt-hour nationally. Lawrence Berkeley National Laboratory (LBNL) has found similar results in an analysis of 2009-2015 program year data (with a few differences in approach). It has also examined the total cost of efficiency programs, including participant costs.

The average cost of efficiency to utilities is still generally less than that of wind or utility-scale solar. Overall, energy efficiency and clean energy continue to come in at a lower cost per kilowatt-hour than more traditional resources.

How big are efficiency investments?

Investments in energy efficiency can have a big impact. Those made between 1990 and today have helped us avoid building the equivalent of 313 large power plants and have delivered cumulative savings of nearly $790 billion to customers nationwide. The need and opportunity for efficiency as a utility resource will continue in the coming years as states and utilities will need to meet evolving goals.

For example, investments in transmission and distribution have grown significantly over the past decade. This trend means higher costs for customers. Energy efficiency can help keep these costs in check by serving as both a broad-based resource and a distributed energy resource that meets specific time and locational needs on the grid. Efficiency also has a large role to play in reducing emissions and meeting aggressive climate goals for many states and cities.

The good news: Utilities are increasing efficiency investments, helping their customers use energy more efficiently, and meeting demand by saving energy rather than generating it. A recent LBNL analysis projects, in its medium case scenario, that utilities will increase efficiency investments from $5.8 billion in 2016 to $8.6 billion in 2030, a jump of more than 45%.

But will this, or even the LBNL study’s high scenario, be enough to meet states’ growing energy and climate policy needs? Not likely. New and refined policy tools will be needed, such as the next generation of energy efficiency resource standards, utility business models aligned with efficiency, and financing options that help businesses and households leverage public and ratepayer funding to drive deeper savings. Check out the ACEEE State Policy Toolkit, which can help state policymakers and regulators increase use of our nation’s least-cost energy resource.

A version of this post was originally published on the ACEEE website

The American Council for an Energy-Efficient Economy (ACEEE), a nonprofit, 501©(3) organization, acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors. We believe that the United States can harness the full potential of energy efficiency to achieve greater economic prosperity, energy security, and environmental protection for all its people.