Utility-sponsored energy-efficiency programs have always seemed like a contradiction to me. Obviously, power companies make money by selling electricity, so encouraging customers to install energy-efficient lightbulbs and high-efficiency appliances seems similar to a candy company providing weight-loss counseling.
Of course, most utilities that offer energy-efficiency programs don’t have a choice. Many states have implemented policies that require power companies to promote energy efficiency. Texas was the first to adopt an energy-efficiency resource standard (EERS) in 1999, but at least 23 other states have established EERSs since then. And a handful of other states have policies on the books to encourage energy efficiency, even if they haven’t mandated reductions.
A Successful Energy-Efficiency Initiative
Minnesota implemented its EERS in 2007. It requires utilities to develop plans to achieve energy savings of 1.5% of average annual retail sales each year. The “Conservation Improvement Program” (CIP), as it’s called, is designed to help Minnesota households and businesses use electricity and natural gas more efficiently—conserving energy, reducing carbon dioxide emissions, and lessening the need for new utility infrastructure.
CIP is funded by ratepayers and administered by electricity and natural gas utilities. The Minnesota Department of Commerce, Division of Energy Resources oversees CIP, ensuring ratepayer dollars are used effectively. Currently, 140 of Minnesota’s 213 electric and natural gas utilities are covered under the statute requiring CIP programs.
Typical utility programs for residential customers include such things as energy audits; rebates on high-efficiency heating, cooling, and water-heating appliances; rebates on efficient lighting products; and air conditioner cycling programs. Similarly, commercial and industrial customers are often offered rebates on high-efficiency boilers, chillers, rooftop units, motors, drives, lighting, and lighting control systems. Building recommissioning studies and manufacturing process improvements are also sometimes offered.
In an effort to inform future utility program strategies related to Minnesota’s CIP, the state commissioned a study led by the Center for Energy and Environment (CEE), which teamed with Optimal Energy and Seventhwave to conduct the analysis, with participation from a broad range of energy stakeholders in the state. Results were published in a 136-page report released in December. It shows that Minnesota is having good success with its program—electric utilities, as a whole, have met or exceeded the state’s 1.5% energy savings goal each year since 2011—but how long can that go on? Once every household has installed LED lightbulbs and high-efficiency appliances, the savings become harder to come by.
There is an infamous quote (which some say is apocryphal, but I still love it) attributed to Charles H. Duell, who was the commissioner of patents in the U.S. from 1898 to 1901. He is credited with saying, “Everything that can be invented has been invented.” If true, he obviously didn’t have a creator’s mind, and couldn’t have imagined we’d be walking around with smart phones and making fun of him on a thing called the internet.
I guess my point is that new efficiency improvements are undoubtedly on the horizon. It’s unlikely the world will ever stop innovating and the cost for new products that today seem outrageous will very soon become economic. That’s just the way it works.
Minnesota’s review found that every dollar spent on CIP returns four dollars to the state’s economy. That’s a pretty good return on investment. While the report says Minnesota currently has some of the lowest-cost and best-performing conservation programs in the country, all other states with EERSs are pocketing benefits too.
Furthermore, the study found that meeting or exceeding, on average, the current CIP goal of 1.5% for electric utilities in the 2020–2029 timeframe is doable. Although achieving savings targets is likely to require increased spending, it can still be done cost-effectively, according to the report.
The study suggested that the largest energy savings in Minnesota could be achieved by focusing on households that use electric resistance baseboards as their main heating source. The solution in this case is replacing baseboard heat with cold-climate, ductless, mini-split air source heat pump systems. Other significant savings were identified using smart thermostats; Energy Star-rated clothes washers, refrigerators, and freezers; and insulation upgrades.
Utilities Benefit Too
A report produced by the American Council for an Energy-Efficient Economy details some of the benefits electric utilities obtain through efficiency programs. It says the payback goes beyond traditional avoided costs of energy to include other economic returns, including a reduction in overtime. Among the benefits are:
■ Avoided marginal cost of energy produced.
■ Avoided cost of generating capacity.
■ Avoided or deferred construction of additional transmission and distribution assets.
■ Avoided ancillary services (that is, spinning reserves) required to operate.
■ Avoided cost of compliance with existing and future environmental regulations.
■ Value of energy or capacity market price mitigation or suppression resulting from reduced customer demand.
■ Value of cost savings to a utility stemming directly from energy-efficiency programs, that is, reduced arrearage carry costs, insurance premiums, and costs of reconnection.
■ Value of a reduced cost of compliance with renewable portfolio standards as electricity sales decrease.
In other words, utilities reap many rewards. They should quantify and include all the power system benefits of energy-efficiency planning to ensure consideration of all cost-effective measures and programs. In the end, efficiency benefits us all, and more importantly, conserving resources is the right thing to do. ■
—Aaron Larson is POWER’s executive editor.