Major U.S. utilities investing up to US$4.80/MWh of retail electricity sales in energy efficiency programs, report finds; energy savings ranging from less than 0.1% of total retail sales on the low end to nearly 2% on the high end
November 10, 2011
– National Grid Subsidiaries and PG&E Lead in Efficiency Spending and Savings, While United Electric Coop. Service and Southern Company Subsidiaries Lags Their Peers
A new report comparing the energy efficiency programs of 50 electric utility companies shows wide disparities in how much money U.S. utilities are investing in energy efficiency programs, and how successful those programs are at saving energy.
Major utilities, such as National Grid subsidiaries Massachusetts Electric and Narragansett Electric, and Pacific Gas & Electric (PG&E), are investing up to $4.80 per megawatt-hour of retail electricity sales in energy efficiency programs, according to data furnished by utilities to the Energy Information Administration (EIA). That’s nearly 50 times more than some utilities spent in the same year, including United Electric Coop Service in Texas, and Southern Company subsidiaries Alabama Power and Georgia Power which all spent less than $0.10 (10 cents) per megawatt-hour of retail electricity sales in 2009.
The 50 utilities evaluated in the report achieved energy savings ranging from less than 0.1 percent of total retail sales on the low end to nearly 2 percent of total retail sales on the high end. The 10 highest-ranked utilities all achieved energy savings equal to 1 percent or more of their annual electricity sales.
“Energy efficiency provides multiple benefits, from job creation and energy bill savings to air pollution emission reduction benefits. This benchmarking report illustrates that while some utilities are aggressively pursuing energy efficiency, other utilities need to ramp up their efforts,” said Dan Bakal, director of Electric Power Programs at Ceres.
The report further shows that state policies that remove unintended disincentives for a utility to pursue energy efficiency are major drivers of utility spending, particularly for regulated, investor-owned utilities. Among the 50 utilities studied, there was a general positive correlation between the strength of state efficiency policy and the level of investment and savings; though there were exceptions to the trend.
Ohio, for example, passed an energy efficiency standard in 2008 requiring the state’s investor-owned utilities to achieve savings of 1 percent of annual electricity sales by 2014 and 2 percent by 2019. Ohio Power, a subsidiary of American Electric Power, and Duke Energy Ohio demonstrated strong performance in 2010, achieving 140 percent and 280 percent, respectively, of their statutory targets. By contrast, Ohio Edison, a subsidiary of FirstEnergy Corp., claimed to achieve only 60 percent of its 2010 statutory benchmark. Moreover, Ohio Edison’s savings were largely due to programs that already existed before the efficiency standard was passed, while AEP and especially Duke launched new programs.
“The three policies necessary for utilities to aggressively implement energy efficiency programs include a commitment to pursue all cost-effective energy savings, decoupling of utilities’ financial health from increases in electricity use, and performance-based financial incentives for utilities to achieve energy efficiency gains,” said Ralph Cavanagh, Energy Program Co-Director, NRDC.
Energy Efficiency Initiatives Help Utilities Comply with Clean Air Standards
The report examines more recent utility efficiency programs that are not reflected in the EIA’s 2009 dataset and found that many states and utilities have been expanding their investments in energy efficiency, though it is still an underutilized resource. In fact, total ratepayer energy efficiency spending in the U.S. is projected to increase from $5.4 billion in 2009 to $12.4 billion by 2020. For example:
TVA set a goal in 2010 to lead the Southeast in increased energy efficiency by achieving 3.5 percent of its electricity sales in energy efficiency savings by 2015.
PacifiCorp has completed a new resource plan for its multi-state service area that includes Utah and Wyoming. By 2020, energy efficiency and load management measures and programs are projected to provide about 13 percent of system capacity and 11 percent of energy within the company’s total resource mix.
These companies, and others like them, are expanding energy efficiency programs to diversify their strategies to lower overall energy demand while providing cleaner, low-carbon electricity. In this paradigm shift, many U.S. utilities are also retiring aging power plants and fuel switching to cleaner energy sources. These initiatives will help the utilities more readily comply with new air pollution emission standards and foreseeable climate regulations.
The Benchmarking Energy Efficiency report analyzes 2009 data submitted by electric utilities to the EIA, focusing on energy efficiency expenditures and energy savings. Utilities were selected to represent a broad cross-section of the nation’s utilities based on a range of factors including geographic region, total electricity deliveries and electricity rates, ownership type and regulatory structure. The report provides detailed summaries of company-by-company expenditures and energy savings.
Comparing efficiency programs of utilities that operate in different states and policy regimes presents considerable challenges even though state level oversight of utility energy efficiency programs is robust. Factors that confound comparisons between utility efficiency programs include differences in measuring and accounting for energy savings; regulatory structures; geographic region of operation; customer composition; electricity rates; and utility energy efficiency program implementation experience.
Nevertheless, “Benchmarking efficiency investment levels and energy savings provides valuable information that utilities, regulators, consumer groups, and environmental advocates can use to assess the effectiveness of a states’ energy policies to harness low cost efficiency resources” said Sam Krasnow, Federal Program & U.S. Outreach Director, ENE (Environment Northeast).
Best and Worst Ranked Utilities
Utilities joining Pacific Electric and Gas and National Grid subsidiaries in the top 10 for energy savings include Southern California Edison, Nevada Power, Idaho Power, Seattle City Light, Salt River Project, and Interstate Power & Light. Rounding out the bottom 10 were First Energy subsidiaries Metropolitan Edison and Ohio Edison, Southern Company subsidiaries Georgia Power, Alabama Power and Mississippi Power and Duke subsidiary Duke Energy Indiana.
The report was released by:
Ceres is a national coalition of investors and environmental groups working with companies to address sustainability challenges such as climate change. Ceres directs the Investor Network on Climate Risk (INCR), a network of 90-plus institutional investors in the U.S. that collectively manage nearly $10 trillion in assets.
M.J. Bradley & Associates, LLC. provides strategic and technical advisory services to address a range of energy and environmental matters, including energy policy, regulatory compliance, emission markets, energy efficiency, renewable energy, and advanced technologies. Our multi-national client base includes electric and natural gas utilities, major transportation fleet operators, clean technology firms, environmental groups and government agencies.