What does the future hold for utility electricity efficiency programs?

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Highlights

  • In this study, we project future spending from electricity efficiency programs funded by utility customers in the U.S. to increase to $8.6 billion in 2030 in the medium scenario, about a 45 percent increase relative to 2016 spending. In the high case, annual spending increases to $11.1 billion in 2030 and remains relatively flat in the low case ($6.8 billion in 2030).

  • Our analysis suggests that electricity efficiency programs funded by utility customers will continue to impact load growth significantly at least through 2030 with incremental annual savings to increase to 28 and 38 terawatt-hours (TWh) in 2030 in the medium and high scenario respectively.

  • Several factors are critical to the future spending and savings trajectory of customer-funded efficiency programs: (1) impact of declining costs of electricity supply options, (2) Federal standards and building codes will moderate savings opportunities for utility programs, (3) state leadership drives institutional frameworks for energy efficiency, and (4) program portfolios will need to evolve to continue capturing cost-effective electricity savings.

Abstract

This study develops projections of future spending and savings from electricity efficiency programs funded by electric utility customers in the United States through 2030 based on three scenarios. Our analysis relies on detailed bottom-up modeling of current state energy efficiency policies, demand-side management and integrated resource plans, and regulatory decisions. The three scenarios represent a range of potential outcomes given the policy environment at the time of the study and uncertainties in the broader economic and state policy environment in each state. We project spending to increase to $8.6 billion in 2030 in the medium scenario, about a 45 percent increase relative to 2016 spending. In the high case, annual spending increases to $11.1 billion in 2030 and remains relatively flat in the low case ($6.8 billion in 2030). Our analysis suggests that electricity efficiency programs funded by utility customers will continue to impact load growth significantly at least through 2030, as savings as a percent of retail sales are forecast at 0.7 percent in the medium scenario and 0.98 percent in the high scenario.

Introduction

Voluntary energy efficiency programs have been funded by utility customers for more than 30 years and currently are offered in nearly every state. Electricity demand has been largely flat in many states for the past ten years, in no small part due to electricity efficiency programs funded by utility customers. Appliance and equipment energy efficiency standards are also having a big impact, along with tighter building codes, tax credits, and finance programs. These programs have a ripple effect on investment across the electricity sector, with impacts on the future of generation, transmission and distribution system decisions. For example, in recent years, there has been a wave of power plant retirements, as generators are squeezed between low natural gas prices, declining costs of wind and solar, environmental and other regulatory costs, and nearly flat demand due to energy efficiency gains.

Spending on programs funded by electric utility customers grew by about 20 percent between 2011 and 2016, reaching ∼$5.8 billion. Spending and associated energy savings have fluctuated over time with state goals, energy prices and market trends, among other factors. A key question for policymakers, regulators, utilities and customers is the likely role of electricity efficiency programs going forward. Have program administrators captured most of the “low-hanging” fruit of low-cost efficiency technologies? Can energy efficiency continue to play an important role as utility resource and grid needs evolve?

Given these challenges, several recent studies have argued that traditional energy efficiency strategies need to be honed and refreshed (Nadel, 2019) and that energy efficiency needs to be redefined to focus more on energy optimization (e.g., obtain the greatest value from low-cost, emissions-free energy sources when and where they are available) [Sliger and Colburn, 2019]. In this study, we provide a forward-looking (to 2030), bottom-up assessment of the potential impact of existing and likely policies and market conditions that promote or constrain future spending and savings for electricity efficiency programs funded by utility customers in all U.S. states (Goldman et al., 2018).

Section snippets

Approach

The study includes three scenarios (low, medium and high cases) for 2030, with updated projections of spending and savings for interim years (2020 and 2025). The scenarios represent a range of potential outcomes given the policy environment at the time of the study and uncertainties in the broader economic and state policy environment in each state. We reviewed relevant state statutes, regulatory commission decisions, and filings of electric utilities (investor-owned utilities, rural electric

Electricity efficiency program spending and savings: national overview

Spending on electricity efficiency programs (in nominal dollars) is expected to increase in all three scenarios between 2016 and 2030. Projected spending by program administrators includes both administrative costs and incentives. In the medium case, we project that it will increase to $8.6 billion in 2030 compared to ∼$5.8 billion in 2016, an increase of more than 45 percent (see Table 3). Projected growth in program spending tends to be front-loaded with increases concentrated in the first

Discussion

It is important to identify for policymakers, utility regulators, utilities and other program administrators the key issues and challenges ahead that contribute to uncertainty in forecasting future pathways for energy efficiency. These include factors that are largely external to program administrators and state regulators (e.g., broader market forces and conditions) as well as policy choices and regulatory and program practices. We highlight several factors that may be critical to the future

Acknowledgements

The work described in this report was supported by the U.S. Department of Energy and the U.S. Environmental Protection Agency under Lawrence Berkeley National Laboratory Contract No. DE-AC02-05CH11231.

Charles Goldman is a staff scientist in the Energy Analysis and Environmental Impacts Division at Lawrence Berkeley National Laboratory (LBNL) since 1982. He has published ∼175 reports and articles on utility resource planning, energy efficiency and demand response policy, programs, and technology analysis, competitive bidding for supply and demand-side resources, and energy service company (ESCO) industry and market trends. He earned a master of science degree from the University of California

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Charles Goldman is a staff scientist in the Energy Analysis and Environmental Impacts Division at Lawrence Berkeley National Laboratory (LBNL) since 1982. He has published ∼175 reports and articles on utility resource planning, energy efficiency and demand response policy, programs, and technology analysis, competitive bidding for supply and demand-side resources, and energy service company (ESCO) industry and market trends. He earned a master of science degree from the University of California Berkeley, Energy and Resources Group.

Sean Murphy is a researcher in the Electricity Markets and Policy Group at Lawrence Berkeley National Lab. His research focuses on utility-administered energy efficiency programs, the Energy Services Company (ESCO) industry, and property-assessed clean energy (PACE). Sean holds a B.S in Environmental Engineering from Johns Hopkins University.

Lisa Schwartz is a program manager in the Energy Analysis and Environmental Impacts Division at Lawrence Berkeley National Laboratory (LBNL) and leads the energy efficiency research team in the Electricity Markets and Policy Group. Previously, she was Director of the Oregon Department of Energy and also worked at the Oregon Public Utility Commission where she led work on resource planning and acquisition, distributed generation, renewable resources, demand response and advanced metering infrastructure.

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Charles Goldman, Sean Murphy, Ian Hoffman, Natalie Mims Frick, Greg Leventis and Lisa Schwartz are researchers in the Electricity Markets and Policy group at LBNL

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