By - Jim Vess

Cost of energy efficiency programs vary widely across the U.S., Lawrence Berkeley study finds

Energize Weekly, July 18, 2018

Utilities across the country are investing in energy efficiency programs, and the average cost of saving a kilowatt-hour in these programs is 2.5 cents—though there are sharp regional differences, according to a Lawrence Berkeley National Laboratory study.

The study is the most comprehensive effort to quantify the costs involved in energy efficiency programs to curb customer demand that are operated by investor-owned utilities and financed through customer charges.

As the cost for generation resources, such as wind, solar and natural gas, has fallen, the question of the cost effectiveness of energy efficiency programs has been raised, the Lawrence Berkeley researchers said.

“Over the 2009 to 2015 period, we have witnessed continuation of the expansion in reliance on efficiency programs as a core electricity resource,” the researchers said. “At the same time, we found that many program administrators do not provide a complete picture of the impacts or costs of efficiency investments at the program level.”

Programs range from rebates for energy efficient appliances and lighting, to energy audits to technical assistance, and they cover residential, commercial and industrial customers.

Cost data for programs was analyzed for 116 investor-owned utilities in 41 states. The average cost for programs between 2009 and 2015 was 2.5 cents for each kilowatt-hour saved. The researchers calculated the costs of the programs over their lifetime, amortized them and discounted them to the first year of operation.

There were significant differences among regions and customer classes.

The average cost to save a kilowatt-hour was 3.3 cents in the Northeast and less than half that—1.5 cents—in the Midwest, where the use of energy efficiency programs is more limited, and there are bigger gains to be made. The South and West average costs were comparable to the national average.

In the Northeast where states have had robust energy efficiency programs for years, additional gains become more expensive to obtain.

Five states had average costs exceeding 4 cents a kilowatt-hour. Four of these were in the Northeast—Connecticut, Vermont, Massachusetts and New Hampshire.

The study said these four states had “relatively high electricity prices, extensive histories in pursuing energy savings and strong policy commitments” including statutory mandates to run efficiency programs and meet set targets.

“Thus, they tend to have greater market saturation for efficiency measures and have mined more of the lowest cost savings opportunities,” the study said.

The average cost for a kilowatt-hour of electricity in the U.S. is about 10.4 cents, according to the federal Energy Information Administration. It is 17.24 cents in Connecticut and 16.48 cents in Massachusetts, making each kilowatt-hour saved that much more valuable.

Programs aimed at the residential sector, excluding low-income programs, averaged 2.1 cents a kilowatt-hour. Residential lighting rebate programs cost 1.1 cents and were a key driver in the sector accounting for 45 percent of its lifetime savings.

Appliance and consumer electronics rebate programs were more costly at 2.9 cents a kilowatt-hour and were responsible for about 10 percent of lifetime savings, the study said.

The most expensive initiatives are the so-called behavioral feedback programs, which seek to change customer behavior and consumption through information and social cues. The cost of these programs averaged 6.6 cents a kilowatt-hour.

Programs for low-income households were the most expensive at 10.5 cents a kilowatt-hour, but also dealt with issues such as old wiring, asbestos removal and the poor condition of dwellings before efficiency measures could be installed.

The average cost for programs that targeted commercial, industrial and agricultural customers was 2.5 cents. Common types of programs include rebates for installations of energy efficient lighting, retrofits of heating and cooling systems, and building efficiency into new construction.

More states are allowing commercial and industrial customers to opt out of utility efficiency programs or choose self-directed program options. Where this has been allowed, between 10 and 30 percent of a utility’s load is no longer efficiency programs.

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