State of the Energy Efficiency Industry: The Utility Story

America’s electric and natural gas utilities are now investing more than $7.5 billion annually in programs to help customers use energy more efficiently, according to the latest comprehensive survey. The electricity savings, alone, from the latest year of U.S. utility investment, exceed the annual production of eight giant coal-fired power plants. The report also covers Canadian utility investments, which reached an all-time high in 2015 (the U.S./Canada total for the year topped $8.2 billion, counting only utility contributions, and $8.7 billion including supplementary sources like the Northeast’s Regional Greenhouse Gas Initiative).

The recently released Consortium for Energy Efficiency’s (CEE) 11^th Annual Industry Report serves as a reminder of the importance of this vital source of clean energy investment. Independent research has affirmed repeatedly that the cost of programs to avoid energy use—such as weatherization and rebates for highly efficient appliances—typically cost less than half as much as alternative sources.    

The report tracks both the annual investment in energy efficiency programs (about 90% of the total) and other “demand side management” (DSM), such as incentives to reduce stress on grids by moving customers’ energy use to off-peak periods, in both the United States and Canada. 

Energy efficiency—all the ways we can get more work from less energy—has for decades been the cheapest and largest contributor to meeting our growing economy’s energy needs. The most important single source of North American efficiency investment is our electric and natural gas utilities and every year CEE reports on progress across the United States and Canada. CEE exhaustively surveys the entire utility industry, and its latest report is a compelling overview of progress and prospects.

Highlights include:

• Total U.S. utility investment in energy efficiency and DSM for 2015 (the most recent year with complete data) was about the same as the previous year, but up 17 percent over the past five years (adjusted for inflation). Preliminary indications are that 2016 expenditures were about the same as those for 2015.
• Electricity sector investment dominates energy efficiency funding, accounting for more than 80 percent ($6.7 billion), although natural gas industry trends are positive and annual investment there exceeded $1.2 billion for the first time in 2014 and 2015 (these numbers reflect both utility investment and supplementary funding from sources like the Regional Greenhouse Gas Initiative). About $750 million of the U.S. electric and natural gas utility funding specifically targeted low-income households in 2015.The breadth of participation in energy efficiency programs is impressive, involving more than 320 utility and non-utility administrators of utility-funded initiatives in all 50 states, the District of Columbia, and nine Canadian provinces.
• Although methodologies for calculating savings are not completely consistent, a conservative assessment for the North American electricity sector’s programs alone yielded annual savings from the 2015 programs exceeding 23 million tons of carbon dioxide emissions. This is particularly impressive in that utility customers didn’t have to increase their spending to achieve those reductions, which were a dividend from programs that reduced utility bills.

While investing $7.5 billion in U.S. utility energy efficiency programs is significant, we can do better; today’s programs don’t tap anywhere near all cost-effective savings. Adding more of a very good thing here would mean lower energy bills, reduced power plant pollution, and more jobs.