From Coal to Caulkers: Energy Efficiency Can Help Meet the Supply Needs of AMP-Member Communities

American Municipal Power’s (“AMP”) semi-recent decision to cancel its proposed coal-fired power plant in Meigs County, Ohio gives Ohioans an opportunity to trade one of the most expensive and risky sources of electricity – coal – for the cheapest and cleanest source: energy efficiency.

The cancelled facility would have supplied 81 municipal electric utilities in Ohio and neighboring states. The stated purpose of the facility was to reduce member utilities’ reliance on the wholesale market for electricity. Energy efficiency programs can address the same need for less money and with greater speed than any generation option.

We usually judge the cost effectiveness of energy efficiency programs by comparing their cost to the expected price of electricity from the generating unit that will most likely be built next (usually a combined cycle gas unit). But energy efficiency programs stack up well even against retail electricity prices, which reflect the operating costs of generators already operating and all the costs of getting electricity from where it is produced to where it is consumed. Energy efficiency programs generally cost 3 cents per kWh of saved energy. According to the Energy Information Administration, industrial customers have paid an average 6.99 cents per kWh of electricity in 2009.

California is certainly the state most associated with aggressive pursuit of energy efficiency. But other places have done an exemplary job of deploying energy efficiency. In the Pacific Northwest, wholesale power is often provided by the Bonneville Power Administration (BPA), which runs dams along the Columbia River. There, the Northwest Power and Conservation Council plans and evaluates energy efficiency programs that help the BPA meet the region’s electric power needs.

Since 1980, implementing the Council’s plans has saved the region the equivalent electricity production of two Grand Coulee Dams. In 2008, the energy efficiency programs in the Pacific Northwest saved enough electricity to power the entire state of Idaho and all of Western Montana. And these electricity savings have cost an average of only 3 cents per kWh.  The Council’s actions since 1980 have met half of regional load growth. In the next version of the Council’s plan, energy efficiency is projected to meet 90% of load growth.

Vermont has seen similar results from aggressive energy efficiency programs. There, programs that increase efficiency are delivered by one statewide provider, the Vermont Energy Investment Corporation (“VEIC”). Energy efficiency resources were delivered in 2008 at a cost of 3.1 cents/kWh. Impressively, in 2007 and 2008 the savings from energy efficiency programs more than offset projected load growth: the state’s use of electricity actually declined by deploying cost effective energy efficiency.

There’s no reason why Ohioans and residents of municipal utilities served by AMP shouldn’t see similar benefits from energy efficiency.

Ohio certainly has the potential. A recent study by the American Council for an Energy Efficient Economy estimated that Ohio could reduce its electricity use by 33% below its projected 2025 consumption by deploying cost effective energy efficiency programs at an estimated average cost of 3 cents per kWh.

To access this potential, AMP and its member communities need to aggressively deploy energy efficiency programs. AMP is already working with VEIC, of Vermont efficiency fame, to develop a suite of programs that could be deployed in these communities. But the plan has been “forthcoming” for a while now.

As AMP-served communities rethink their energy future after AMP’s decision to cancel its coal plant, they should look first to energy efficiency: the cheapest and cleanest source of electricity.